Year End Planning
When the end of the year arrives everyone is scrambling to get their finances in order. The following is a brief guide to make the end of your year less painful.
Organization
The more organized you are the easier your life will be later. Make sure to get your books in order. Organize all of your records. Separate all of your personal expenses from your business expenses. Put your expenses into an Excel or Quicken file for quick reference.
C Corporation
Put a C corporation in place. A C corp. serves as a management company. That’s where you can convert your personal expenses into business expenses. A simple example would be taking a tax deduction from your child’s tuition expenses. Structure your corporation’s year end so it occurs in June. This gives you six months after the December 31 yearend to upstream income and stagger it over your entities.
Alternative Minimum Tax
Alternative minimum tax is triggered when your schedule A deductions get to a point where they exceed a federally mandated limit on where your deductions can go. If your being hit by alternative minimum tax convert schedule A expenses to schedule C expenses. Also have your accountant look at your taxes in two ways. Calculate your taxes with alternative minimum tax in place and then let him recalculate your taxes without taking all of the deductions you are entitled to on schedule A. Many times you are better off without a certain deduction and not being hit with alternative minimum tax.
Tax Deductions
Make sure to take what you are entitled to as far as your home office deduction. Not only can you take the square footage of the office, but you can take the square footage leading to that office. Usually this is a hallway or a common area. If an office is upstairs then this would also include the square footage of the stairway.
Also, consider converting your cars to business expenses. You can convert them as advertising expenses, marketing expenses, or corporate perks. There is a lot of money to be saved with this simple deduction.
