Should you go for it in the 4th quarter?
That's not a football question. It's one many small business owners are asking as we head into the fourth quarter of 2015. With information from the first three quarters, SMBs can develop a game plan for the rest of year.
Your business earnings from the first three quarters should give you an idea of how much you will make for the entire year. With that information, you may be able to adjust your estimated taxes accordingly — paying more if you anticipate a better final quarter and vice versa.
Or, you could go in another direction and determine whether projections for the fourth quarter warrant buying or leasing a new vehicle or equipment for your business. But don't chase deductions for equipment you don't really need. Conversely, you may want to sell off some of those assets if your bottom line dictates that.
Some of your fourth quarter could go into planning for 2016. For example, based on your end-of-year projections and the needs of your business, is now the time to add staff or budget contractors for next year?
Tax planning also means looking to see if you are structured in the most tax efficient manner possible and ensure you have made all the proper elections before the clock strikes midnight on Dec. 31.
Of course, much of your tax preparation considers things beyond business that do impact how much you might pay. Typically, we ask clients to fill out a survey where they check off boxes for things that occurred during the tax year, such as:
• Marry or divorce
• Have a baby (or adopt)
• Earn income from stock options or employer stock
• Buy or sell your home
• Make gifts of more than $14,000 to any one person
• Start or invest in a new business
• Close or sell a business
• Hire contractors or employees for your business
• Start using your home for business
• Start using your car for business (other than driving to or from work)
• Increase or decrease your business income
• Start receiving IRA or retirement plan distributions
• Reach age 70½
• Buy or sell stocks, bonds or mutual funds
• Buy, sell, or exchange investment real estate
Checking off any of these boxes as “yes” typically means you would benefit from a tax planning session or two to optimize your tax benefits. These planning sessions typically begin the conversation about deductions and how many SMBs leave viable deductions on the table. For example, your business has an office on Main Street. Yet you work from your home about 50 percent of the time. In some cases like this, the business owner won't deduct anything for their home office. That's why it's so important to strategize and plan now so you can “go for it” in the most effective way possible over the rest of 2015.
Paul Dion CPA is the owner of Paul Dion, CPA (www.PaulDionCPA.com), based in Millbury. For a free copy of his book, “The Ten Most Expensive Tax Mistakes … That Cost Real Estate Agents Thousands,” contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292.
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