With the Tax Extenders now behind us, we now enter crunch time for tax planning for both businesses and individuals. With a little over two weeks left in the tax year and many people planning on vacations before the end of the year, there is precious little time left for taxpayers to lower their tax bills for 2014. Here are a few last minute tips, suggestions, and reminders for taxpayers:
- For taxpayers on the cash basis of accounting (which includes individuals), remember to pay any deductible expenses prior to 12/31/14. These include:
- 4th quarter estimated tax payments for state income taxes
- Real estate taxes
- Trade or business expenses incurred but not yet paid
Please note that these payments do not need to have cleared the bank, but rather just have been mailed by 12/31/14. Be sure to keep proof of mailing for these items.
- As hinted above, businesses on the cash basis should try to have as little in their bank accounts at year-end and to pay as many deductible expenses as possible. This acceleration of payments will allow you to take the deduction in 2014 rather than waiting 2 -3 weeks and having to wait a full year to get the tax benefit.
- Complete any gifts to family members by December 31, 2014. The IRS allows gift exclusion for each taxpayer of up to $14,000 per recipient, per year.
- Complete any charitable donations planned, such as holiday donations to local organizations of either cash or goods. Be sure to save your receipts!
- Start saving and planning cash flows so that you can pay any retirement contributions, such as IRA’s and SEPs, by the tax filing due date.
In order to minimize your tax bill for 2014, timing of deductions is a tested and true strategy to help lower your tax bills without severely impacting your personal or business cash flow.
From everyone at Cerini & Associates, we wish you a happy holiday season and a Happy New Year!
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.