Tis The Season: Business Tax Planning Guide to Prepare for Your 2017 Federal Income Tax

tax planning chicagoWith the 2017 tax season around the corner, it is the time of year where we at Accounting Solutions Ltd. witness a familiar yuletide pattern among entrepreneurs in Chicago. Is is important at this time of year to try to alleviate any excess taxes in the upcoming season. As we dedicate ourselves to providing premium accounting and bookkeeping services to Chicagoans and their respective businesses we have compiled a list of ideas that will help you make some serious changes to your upcoming federal income tax bill. If you are seeking more information, feel free to give us a call. Our experts will help to make managing your business and your taxes a lot easier. So here is our list of things to do that can help.
Reducing your income as a Cash Basis Taxpayer: If your business files it’s return on a cash basis, then restricting your cash may help to reduce your income tax. Please realize that cash basis accounting works a lot like a check book. Generally income is counted when you make a deposit and expenses are expensed when you pay a bill. Make sure to pay as many of your deductible expenses prior to December 31st. Increasing your deductible expenses will reduce your taxable income for the period.
Increasing your income as a Cash Basis Taxpayer: Tax planning can work in the other direction as well. If you know that your are going to need to go to a bank to ask for money in the short term, you may want to increase your income rather than reduce it. If this is the case, then increasing your cash by December 31st will help you. If you can hold off on paying some of your bills until January, you will reduce your deductions. Also make sure to make all of your deposits are made timely. This may add to your eventual income tax bill, but it may also mean that you will be able to expand your business by acquiring the necessary financing.
Reducing your income on an Accrual Basis: Restricting your cash and paying all of your bills by December 31st will not help you if your business is on the accrual basis. Your income is based on your receivables and your expenses are based upon your accounts payable. This time of year, you need to weed through your receivables to write any bad debt expenses that are allowable. If you carry an inventory, reducing it’s value is important. If you have shrinkage, spoilage, inventory which has been cannibalized or is no longer sale-able, then write it off thus increasing your expenses. This in turn should reduce your taxable income.
Increasing your income on an Accrual Basis: If financing is a consistent issue, then increasing your income may be necessary. You can do this by increasing your income. Make sure to invoice your jobs timely and fill up your warehouse. Generally as assets increase so do your profits. It may add to your income tax bill, but it may also make your financing possible.
Tax planning can be difficult, but it is also necessary to insure your long term success. If your accountant is not advising you properly, then maybe its time for a change. We would love to help. If you have any further questions, feel free to give us a call or come in for a free consultation. Get your planning done now so that you can focus on the holidays and your families at this festive time of year!
Chris Amundson