Fall is just beginning, but it’s not too early to think about year-end tax planning. As the end of the year approaches, it’s time to identify moves small business owners can make before December 31st.
The first thing to do is to make a projection of this year’s income, expected tax deductions, and tax credits. Once the projection is complete, various year-end strategies will be evident.
For S corporations, if the projection shows that a taxable loss is going to occur, some cash may need to be injected into the business in order to have sufficient basis to deduct the entire loss on this year’s return.
This is because S corporation shareholders cannot deduct corporate losses that exceed their basis in the stock they own. Basis is equal to the amount of your investment in the company, with some adjustments.
By taking the necessary steps now, small business owners often can reduce their tax bill. Waiting until it’s time to file taxes will be too late.
Remember, the first step involves putting together a projection that shows the current tax situation. Contact Filler & Associates for help with this critical beginning.