2019 Year End Tax Letter

End of the Year Tax Tips

As we head towards the end of the year, I have a few tax tips that might save you a few bucks in taxes and also keep you out of trouble. Here you go:

Business Deductions

For business owners, you may consider accelerating deductions at the end of the year.  What this means is that you should pay all of your outstanding bills that are due by the end of December and also pre-pay certain expenses such as insurance (up to a whole year) and rents (call me for details on limitations). For businesses that have a need for equipment such as office equipment, computers, furniture, and possibly an automobile, you may want to consider making those purchases by the end of December and put them into use; you will be able to deduct those purchases this year.

Defer Income

Some business owners may have the opportunity to defer income from this year to 2020. If you think that you are looking at a large tax bill this year, you could consider moving income from 2019 to 2020 by delaying your end of the year billing to the first week of January. You may also consider not collecting on some customer payments over which you have some control.

Retirement Plans

If you have a retirement plan either through your employer or if you are a business owner and have a retirement plan through your business, you may want to maximize your retirement contribution for 2019. If you have the opportunity to make a year-end contribution to your 401k plan for 2019, which is a maximum of $19,000 with an additional $6,000 contribution if you are over the age of 50, then I would make sure that you have your 401k salary deferral set up by December 31st.

Charitable Contributions

For taxpayers eligible to itemize their deductions or who will be close to that threshold, you may consider making some year-end donations to your favorite charity. Cash donations must be made by December 31st. Cash donations can also be made by credit card. As long the charge hits your credit card by December 31st, you can deduct the donation this year even if you don’t pay-off the credit card balance until 2020. For cash donations, make sure you get a written receipt from the charity if the donation is in excess of $250. If less than $250, then a canceled check will suffice to substantiate the deduction. You may also consider making some non-cash contributions as well. This includes clothing, furniture, appliances, vehicles, toys, and even stocks and securities. Make sure you get a receipt for all of your non-cash contributions, and I also recommend that you take digital photos of what you are donating to support that the property you are donating is in good condition.

Estimated Tax Payments

For taxpayers required to make quarterly estimated tax payments, do not forget to make your 4th quarter estimated tax payment to either the IRS or the California Franchise Tax Board. Failing to do so could result in paying some estimated tax penalties as well as additional interest. For most taxpayers, the 4th quarter payments are not due until January 15th, but you may want to consider making the payments by December 31st.

Please call my office or email me to schedule an appointment if you have further questions about your 2019 year end tax plan.