Today’s tip is a list of last-minute tax savers for businesses:
1. Prepay expenses using the IRS safe harbor. IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months. See Treasury Regulation section 1.263(a)-4(f).
2. If you are cash basis you must generally report any revenue you receive before the end of the year in income for 2018. But you can postpone billing customers until after 12/31/2018. Customers, clients, and patients generally don’t pay until billed.
3. If you are going to have a need for office or other equipment soon, go ahead and buy it and place it in service before year end. Since bonus depreciation is now at 100%, along with increased limits for section 179 expensing, buy your equipment and machinery and place it in service before December 31 and potentially get a 100% deduction of the cost in 2018.
4. Go back through your 2018 records and make sure you are claiming all legitimate deductions and have the documentation needed. If you have not tracked your business mileage or documented your travel and allowable meals expenses like you should, now is the time to go back and get that done. Yes, certain business meals cans still be deducted – see Notice 2018-76.
5. Remember that charges to your credit cards can create deductions on the day of the charge. This is true if you are a sole proprietor or you operate as a corporation and the credit card is in the name of the corporation. But if you operate as a corporation and the credit card is in your personal name, your corporation needs to reimburse you before 12/31 to create the 2018 deduction at the corporate level.
But the biggest recommendation is to get with your tax advisor before year end – not just to see if you can take advantage of the strategies mentioned above, but also for all those other new provisions under the Tax Cut Jobs Act. For you business owners – make sure you do not miss out on the new 20% Qualified Business Income deduction.
Stay tuned for some more tax saving tips next Tuesday or give us a call.