How to Reduce Taxable Income

Posted on October 20, 2015

1


You Don’t Want to Wait Until Tax Season to See What You Could Have Done to Reduce Taxable Income

reduce taxable incomeWhen you reach the downhill slide of the year, it may be tempting to let things remain undone in finishing up the year’s reviews. One area that you should not allow to slide, however, is planning how to reduce taxable income for your business.

October is the perfect time to talk with your accountant about the financial decisions you should address before the end of the year. You have an idea of how your business has performed this year, while still having time to make some changes if it will benefit your taxable income.

Here are a few strategies to discuss when considering how to reduce taxable income:

Tax rates: The volatility in Congress makes it difficult to keep up with tax rates each year. Talk with your accountant to see how this year’s laws impact your business. There may be opportunities for you to defer income and accelerate deductions, but depending on what happens with tax rates, you may make different decisions.

Big purchases: When discussing how to reduce taxable income, making anticipated purchases before the end of the year can be a great strategy. Don’t spend money on a big purchase just to reduce your income, though. It should be something that you will use and that has a good return on investment, but does not affect your cash flow in a way that chokes other necessary spending activities or paying down a line of credit.

Retirement plans: Talking about contributions to a retirement plan is a critical part of any discussion about reducing taxable income. While retirement plans, such as 401(k) profit sharing plans and defined benefit plans can be an effective way to defer income, the paperwork must be completed by year-end.

Business insurance: Add a discussion about business insurance, a critical decision that can protect you in a crisis and keep you from losing your business. Such crises include an employee lawsuit or theft that can shut down your business or make it difficult to survive. There can be a lot of change in your industry in a single year, so make sure you have the protection you need. Don’t simply renew your insurance, but evaluate your needs each year.

Determining how to reduce taxable income can slip under your radar, but you don’t want to wait until tax season to see what you should have done. Schedule a time to talk with you accountant now, while you still have time to make important decisions that can optimize your tax return.

If you are looking for a qualified tax accountant, give Bert Doerhoff, CPA, a call. At AccuBiz, we work with small to medium size businesses looking for ways to improve their business planning through strategic tax planning. Call us today to set up your first appointment.

Advertisements