Reduce your business’ tax burden for 2015
Posted On: 11-6-2015 | Posted By: By Kristyn Caldwell
What can your business do before the end of the year to minimize taxes? Find some suggestions below that can help reduce your business tax burden for 2015.
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YEAR-END TAX PLANNING TIPS FOR INDIVIDUALS. As the end of the year approaches, it’s time to begin thinking about what steps you can take to reduce your 2015 personal income tax bill and how to best plan for future tax years. It’s best to start thinking of this now, before the holidays approach, to allow time for your tax professionals to help you complete any necessary work.
TAX PLANNING FOR HIGH-INCOME EARNERS. Between now and the end of the 2016 election cycle, one theme we will likely hear from all candidates is the need for tax-code simplification. The reason is simple: tax law is complex, and that complexity is magnified for those individuals with high incomes.
NEW LAW CHANGES SOME TAX RETURN DUE DATES. A number of tax return due dates were changed by provisions of a federal law extending highway funding. While that might seem like an odd bill for tax changes, it became law of the land on July 31, 2015, when President Obama signed the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the Act).
As we know, Congress has not yet been able to pass certain tax extenders that help provide tax breaks for businesses. Currently expired business tax breaks include Section 168 bonus first-year depreciation, increased limits for Section 179 expensing, and the Section 41 research and development credit. We don’t know when or if Congress will extend these provisions. As we continue to wait for Congress, your business can take some proactive steps to help position the business for a better tax situation by the end of the year.
To help reduce taxes for 2015, generally businesses will want to accelerate deductions into this year and delay income until next year. It is important to note your business’s tax accounting method. Depending on whether your business operates on a cash or accrual method, appropriate tax planning strategies might differ. Listed below are suggestions to discuss with your WK tax advisor.
Defer income to 2016
- A cash-method business could delay invoices so that payments are not received until 2016.
- An accrual-method business could hold off on providing goods or services and product shipments to customers until after January 1.
Accelerate & maximize deductions into 2015
- Purchase and/or place large orders of inventory or supplies needed for 2016 in 2015.
- If repairs are needed for vehicles or equipment, have them done before year-end.
- Pay bonuses by year-end for cash basis organizations; those on accrual basis have 2 ½ months to pay bonuses and still deduct them in 2015 (with restrictions).
- Take advantage of Section 179 expensing; currently, the maximum deduction for 2015 is set to $25,000 – the amount is phased out dollar for dollar after property subject to Section 179 exceeds $200,000.
Businesses that have income from domestic manufacturing and other domestic production activities can take advantage of Section 199 domestic productions activities deduction. The deduction equals 9% of the smaller of:
- the taxpayer’s “qualified production activities income” (QPAI) for the tax year, or
- the taxpayer’s taxable income (modified adjusted gross income, for individual taxpayers), without regard to the Section 199 deduction, for the tax year.
If you are considered a small employer – less than twenty-five full-time employees – you may qualify for the Section 45R credit. This helps pay for qualified small employer’s health insurance premiums whose average annual wages are less than $50,000 and that pay at least half of employee health insurance premiums.
Please be aware that every business is unique, and you should only employ tax strategies that make sense for your situation. Please contact your WK advisor at (573) 442-6171 or (573) 635-6196 to help with your year-end planning and other opportunities to help decrease your tax liability for 2015.