If your business’ fiscal year correlates with the calendar year, tax season preparation should already be well under way. Before 2016 brings new beginnings and new books, you should talk with your accountant or tax preparer. There may be certain items you can take care of now that will benefit you this tax season.
What do business owners need to be aware of for this tax season?
As a business owner, you need to visit your accountant to review the business year. First, go over any updated taxes or regulations. Your accountant should be up-to-date on everything. Then review your tax situation to see if you need to make capital purchases or prepay any expenses to reduce your income tax liability.
For example, this year Section 179 still allows businesses to deduct the full price of same-year equipment purchases from their taxes. However, in 2015 this limit was reduced from $500,000 to $25,000. There is also a $200,000 investment limit and businesses can no longer take bonus depreciation. This change may impact your ability to invest in significant improvements for your business.
Also, be sure to ask for your accountant’s advice before making capital purchases for tax reasons.
What precautions do businesses need to take when it comes to making year-end purchases?
It’s common for farmers to buy equipment at the end of the year to reduce taxes. However, it’s best not to borrow money for this if it cannot be paid back within the fiscal year. If you cannot afford to use cash income from the current year’s operating cycle, it may become a burden for your operation the following year or longer.
What’s the best advice when it comes to tax preparation?
Start early. Make a pre-tax appointment with your accountant to determine whether to take more income or to include more expenses in this tax year. This will also prepare you for meeting with your loan officer, as all of this year’s income and expenses will be compiled.
Do banks ever talk directly with accountants?
With the consent of the business owner, bankers are usually happy to talk with accountants. Sometimes you may need more explanation or clarification for tax purposes. And It never hurts to ask for a second set of eyes for a couple minutes.
Start planning for tax season today so you can get assistance and save as much money as possible when you file. It’s well worth the early effort.
This article contains the author’s opinion on the subject. Plains Commerce Bank and its employees hereby specifically disclaim any personal liability for loss or risk incurred as a consequence of the advice or information presented in this letter.
Please consult with your appropriate advisor on all matters pertaining to tax requirements.