End of year tax is dreaded by every individual.As it starts approaching, individuals start strategizing, planning how to handle their federal tax bill. Every year, local and state tax deductions double in amount causing distress to many people.
Most taxpayers have no idea about necessary steps that should be taken to improve their tax position. By hiring professional tax preparation services in Washington DC it is possible to maximize the benefits and minimize the awful burdens under the new tax law.
Mentioned below are 10 steps that you should take before planning the end of year tax.
You can easily increase your cash flow by finishing up open jibs. However, it is advisable to wait till the end of the year, preferably December to send out invoices for the work done. Then you can wait for another week or so for the funds to translate into tax deferral for the whole year.
Step#2: Accounts Receivable
If your company or business is into cash method of accounting, it is advisable to settle up all your outstanding receivables and payments before the last date of the year. In this way, you cannot only deduct the payments in the year before but also preserve a good credit card score and record. Hire new business consulting services in Washington DC so that they can give you sound advice on taxes.
Step#3: Capital Investment
It is imperative that you upgrade your office equipment like computers, Phoebe,machinery, and furniture. Write off the cost and if profitable expense up the equipment placed by the end of the year instead of disparaging the total over several years.
Step#4: Stockup Supplies
Bulk purchase your supplies and pile up the copy pear that you will use in the New Year to deduct their cost now.
Step#5: Distribute Profits
If the last year has been a good year for your company or business and you have made the homogenous amount of profit then try to pay out the earnings in the form of New Year bonuses to your staff. Also, take a considerable amount of deduction.
Step#6: Save For Your Retirement
You have a considerable amount of time until the last day of the year to set up a qualified retirement plan or other profit sharing plan for the upcoming year by signing up the legal paperwork and important documents with a financial institution. In this way, you have extended due date till next year to complete contributions to the plan that will be deductible on coming year returns.
Step#7: Charitable Donations
Business owners can provide sustainable aid to many organizations that give shelter to storm or earthquake victims through cash donations. For example, if you have a leave-based donation program foryour staff, and they forgo sick leave, vacation Pay and personal days leave, then you can donate these funds to earthquake victimsfor a charitable contribution deduction.
Step#8: Slow Movers
If you have an inventory that just won’t sell, then you can take a write-down by removing them completely from your inventory account. Moreover, you can donate those inventory items for charitable contribution deduction. Businesses and large corporations can take enhanced deductions for donations of inventory items like computers, machinery, and peripherals donated to libraries and school.
Step#9: Estimated Tax
By overpaying estimated tax, don’t amok an interest-free loan to the government. Many corporate owners should reconsider their fourth installments of the year and the tax due on the last day of the year. All corporate owners should do the same for their estimated taxes due inJanuary of next year and must consider hiring complete tax preparation services before the end of the year.
Step#10: Get Ready For New Year
No doubt tax laws that become effective from New Year present numerous new opportunities for tax savings. For instance, if you own personal commercial space and make some energy-saving improvements on it, you can easily deduct them at per square foot. Also, many home building contractors can qualify for a tax credit for building energy efficient home.