Quick Tax Hacks to Save Money This Year

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Nobody wants to pay more taxes than they need to.  And in spite of the corporate tax cuts of two years ago, the booming economy might have you paying more to Uncle Sam than you really want to.  Nobody expects that there will be any changes in taxes for next year, so how do you save yourself money this year? There are a few things you can do that might help you with your 2019 Tax Year.

The secret sauce is to reduce or defer your taxes for this year.  What does that mean?

  • Defer income till next year.
  • Increase tax-deductible expenditures this year.
  • Purchase items that you can expense this year.
  • But – BIG BUT – keep in mind your cash flow.  Don’t leave yourself cash short at year-end just to save a bit of tax money.  

There are a few cautions here. 

  1. It’s important to know if your tax filing status is Cash Basis or Accrual Basis – that makes a big difference in what will have an impact on your taxes.
  2. Capital expenditures – these will be depreciated, so the full amount of those expenditures won’t impact your taxes this year.
  3. Talk to your accountant.  He knows your personal and business tax situation, and will give you specific advice.

Here are some suggestions of what you might be able to do: 

If you’re on a Cash Basis

  • Any cash you receive in 2019 and deposit into your account is considered income.  So, don’t chase your customers to pay their bills till after January 1st
  • Shipping orders won’t hurt you, since income is based on when you get paid. 
  • Any money that you spend in 2019 will increase your expenses for the year, so you want to accelerate your payments. 
    • Make as many payments as you can before December 31st.  Entering AP items without paying them does you no good.  Buying inventory has no impact on your taxes, unless you pay the invoice before year-end. 
    • Renew your association memberships and pay their dues now.
    • If you pay for things with your credit card, you get the expense in 2019, but you won’t have to pay the credit card till 2020.  So, accelerate those charges.
    • Pay your month’s rent before the end of the year.  Hey, even pay an additional month’s rent if you’d like.
    • Pay off the monthly insurance payment plan for your company insurance.
    • Pay your company’s health insurance premium a month early.
    • Run your first payroll of 2020 early and pay your year-end bonuses before the end of the year.
    • Make Charitable Contributions now that you planned to make in 2020.

If you’re on an Accrual Basis

  • Delay those last shipments till after the first of the year.  That pushes income till 2020.
  • Enter all of the AP items that you can before the end of December.  Ask your suppliers to invoice you early. It doesn’t matter if you pay them, they just need to be entered into AP.
  • Buy additional office supplies, small office furniture, etc. so that the cost is posted in 2019, and enter those invoices before year-end.
  • Pay your bonuses to your employees and maybe even run your first payroll of 2020 a bit early to get that additional expenditure posted in 2019. 
  • Make Charitable Contributions now that you planned to make in 2020.

 If you’re confused about what it means to be on an Accrual or Cash basis, send me an email at lchester@cfosimplified.com, or call me at 224-436-1600, and I’ll be more than happy to help you understand the implications of each accounting method to both taxation and to your company financial reporting. 

Regarding your tax obligations for this year, It might take a little creativity and some thought, but I’m sure that you can find even more ways of deferring income and accelerating expenses to save yourself tax dollars in 2019.

 

 

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