End of Year Tax Tips You Don’t Want to Miss
With the holidays quickly approaching, Taxes may be the last thing on your mind. However, with the year coming to a close, a little foresight now can help your tax situation in 2012 when you file your returns. Depending on your current state of affairs, there are different tax provisions you may want to consider, some of which need to be taken by the end of this year.
Make Tax Payments on Time
The interest and penalties are rarely worth the benefit of paying your taxes late, so make sure all taxes are paid when due.
File All Returns
Some people believe that if they skip filing a tax return that the IRS will not notice and that will delay the collection process. The IRS can file substitute returns, and almost always these are for more tax then you actually owe. It is best to file all returns when due and if they are already late, get them done as soon as you can.
Section 179 Deduction
Typically, small businesses write off their property or assets a little at a time over the life of the asset, through depreciation. However, Section 179 of the Internal Revenue Service Code allows business owners the choice to deduct the full purchase price on qualifying equipment in the year it was purchased, as a one-time deduction. The deduction limit is set at$500,000 with an investment limit of $2 million (anything over $million is reduced on a dollar-for-dollar basis).
Generally, when a business has more allowable tax deductions than taxable income, the result is a net operating loss. Net operating loss can be used to recover past tax payments or reduce future tax payments. A NOL can normally be carried back over two years with an amended return and if the carry-back does not use up the loss, the remainder can be carried forward for a 20 year period. Notably, it is important to keep in mind that state tax codes will often differ from federal tax code on this issue.
Sale or Acquisition
Perhaps you are selling your existing business or acquiring another company to help your business grow. If this is the case, there are some key tax considerations that can have a major impact on the amount of taxes you will owe. Give us a call and we can discuss the tax implications.
Sell loser stocks
If you have investments that are currently worth less than you paid for them, and that are held in taxable brokerage firm accounts, you can sell them and deduct the ensuing capital losses against any capital gains from earlier in the year.
Make charitable donations such as cash, goods, or appreciated stock to increase your 2011 deductions, and make sure you have all the necessary documentation.
- If you foresee large business expenses in early 2012, see if you can move them up and get the expenses into the 2011 tax year.
- Contribute the maximum to your 401K, SIMPLE or IRA accounts.
- Make energy saving home improvements that qualify for tax credits.
- Consider tax breaks that expire at the end of 2011 including classroom expense deductions (teachers can deduct up to $250 for books, supplies and other expenses related to their classroom), mortgage insurance premiums deductions (this is scheduled to be the last year), and tuition deductions (up to $4,000 in tuition can be deducted, and amounts paid in 2011 for classes starting in early 2012 can qualify for a deduction on your 2011 tax return).