Before The Parties Begin And The New Tax Laws Go Into Effect After Midnight on December 31st, Here Are 3 Moves Worth Considering

December 21, 2017 1:42 PM | Anonymous

1. Take Advantage of Expiring Deductions
Currently, sole proprietors and home-based businesses are allowed to deduct business expenses if they total more than 2% of their adjusted gross income. In some instances, employees can also deduct unreimbursed expenses.

Such expenses include a home office, depreciation on a personal computer required for the job, membership dues to professional organizations and subscriptions to trade magazines.

All of those deductions disappear from 2018 through 2025 under the new tax bill, so you probably want to move as many of those expenses as you can to 2017, such as by becoming a member of the LA Latino Chamber of Commerce before December 31st.

2. Pay Your Vendors Now
If you have the money in the bank, pay for purchases you made or services you used in 2017, before 2018. This provides you with additional deductions, and you’ll start 2018 with less debt. Here’s what Xero, the accounting software company, recommends: “Pay your vendors and contractors in full by year end. For vendors this is straightforward. For contractors, you may have to submit a W-9 form — check with your accountant. You will also need to give each contractor a 1099-MISC form by 31 January.”

Xero also reminds small businesses that before year-end they should: “Decide on employee bonus payments and withhold the required tax. If you decide to reward your employees with bonuses, don't forget about tax. Bonuses are subject to income tax withholding, FICA and FUTA taxes — just like regular pay.”

3. Put Off Or Accelerate Income
A long-standing rule of year-end tax planning is to “accelerate deductions, delay income.” Why? It reduces your 2017 taxes. This year that’s particularly important, with the possibility of a new tax bill that alleges to reduce taxes on pass-through income (the kind most small businesses have).

According to Quickbooks: “If your business income is higher than normal, you may want to think about sending out invoices for December projects in January. In addition, you may want to make equipment purchases or other business expenses this year if it will keep you from reaching a higher tax bracket."

Consult a tax professional before making any decision, but keep in mind that you have less than a week to sort out which moves to make.

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