Some Year End Tax Moves

Some Year End Tax Moves

Before we get to December when I do the final tax planning session with all of my clients, we should begin thinking about the moves we’ll need to make to legally, I repeat legally, to end up in a reasonable taxation position. This is an almost impossible task, given the fact that the tax laws haven’t been passed yet for this year.

And with what’s going on in Congress, they may never get anything passed.

So it should be noted that all of this is subject to change. If Congress and the President do decide to sign something into law, then everything I’m about to say could change in an instant.

That being said, here’s a few things to consider.

Cash Basis Taxpayer

If your company is on the Cash Basis, then any deductible expenses written out of your check book that will clear, whether they went through the account or not, can be deducted on your 2023 income taxes. You’ll be taxed on any cash increases left in the business that are a result of normal operations.

Accrual Basis Taxpayer

If your business is on the accrual basis, then writing every check in your checkbook won’t help you because we’re going to expense your Accounts payable at the end of the year anyway.

Speaking in general terms, the difference between your beginning and ending accruals will make all the difference. The only balance that matters is the ending balance on 12/31/2023. Whatever happened before then will be relatively irrelevant.

As assets increase, so will your net income. If assets decrease, so will your net income. Consider this when handling your Accounts Receivable and Inventory.

Liabilities work in the opposite direction. As liabilities decrease, your net income will increase. If liabilities increase, then your net income will decrease. Consider this when thinking about your payables.

Tax Loss Harvesting

If you have losers in your portfolio or money that has stagnated, harvest your losses before the end of the year. Don’t procrastinate.

If, on the other hand, you have a stock that is currently sitting at a loss that you think might be going somewhere. consider selling it and buying a similar investment that will put you into a similar position. Many equities have more than one common stock which makes this possible.

Be careful of the Wash Sale rules. You’ll need to hold onto your investments a minimum of 30 days before the loss is deductible.

Donations

If you have a worthy cause in mind, then make your donations prior to the end of the year. If you don’t have a worthy cause in mind, consider me. Make that check payable to Chris Amundson. You won’t get a tax deduction, but you’ll make me feel a lot better.

There’s much more to discuss, but the time to begin thinking about year end tax planning is now. We’ll talk more when doing your actual tax planning.

Let me leave you with this.

We’ve had some not-so-great results in the markets recently. This week, both the S&P and the Nasdaq entered correction territory where they were both down over 10% from their most recent highs.

The GDP and Inflation numbers came out yesterday and it looks like our economy is again growing with Inflation going in the wrong direction. Rather than things slowing down and Inflation coming under control, it looks like we’re moving back up.

Most economists agree that the Fed won’t raise interest rates again this year. The market has already raised yields on Treasuries to a point where that’s probably unnecessary.

In other words, the market is so afraid of the future, that they’re doing the Fed’s work for them.

I’m tired of being a harbinger of bad news, but things don’t look so rosy right now. It’s time to plan for the worst, while hoping and praying for the best.

Horde your cash like a Viking King. Cut the fat. Make sure that your products and services are profitable. Be careful starting new ventures. You don’t want to be in the middle of a new project and get caught with your pants down if the economy takes a major swing for the worse.

Be conservative. The worst thing that will happen is that it’ll put your new projects off for a few months. If things get bad, it could save your business.

And know that I’m right there with you. If you need to talk to someone, you know my number.

We’re all going to get through this. Let’s get through it together.

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Sincerely yours,

Chris Amundson

President

Accounting Solutions Ltd.

773-267-7500

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Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

www.SalarySolutions.net

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