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last-minute tax breaks

Last-Minute Tax Breaks for Small Businesses

The most effective tax strategies are employed across the whole year. It’s simply difficult to maximize or even qualify for many credits and deductions without a full 12-month window to work with.

But a few last-minute tax breaks can help you wrangle at least some savings out of the final two months of the year.

We typically recommend that businesses work with a tax specialist when targeting certain tax breaks. For one, a tax professional is going to be well-acquainted with all the ways your business can lower its tax obligations. They’ll also be familiar with the specifics. Namely, the thresholds you’ll need to meet to qualify for those tax breaks so the IRS doesn’t come calling.

But for now, if you’re looking for ways to save on your 2021 taxes, read on as we highlight a few strategies.

5 Last-Minute Tax Breaks

Fund Your Retirement: One of the easiest last-minute tax breaks is also one of the most beneficial to you personally, and that is to ramp up your contributions to a 401(k) or other retirement account. You can contribute up until Dec. 31, 2021, and still have the contribution qualify for deduction on your 2021 taxes.

Stop the Presses: Well … at least if you still do paper billing. If your business’s financial year is the same as the calendar year, consider pulling the brakes on billing customers temporarily. Why? Because if they don’t pay you until 2022, then it doesn’t count as income in 2021, and thus you don’t have to pay taxes on it until next year.

Charge It: If you’re a Schedule C taxpayer (sole proprietor or single-member LLC) or you’re a corporation with a corporate credit card, you’ll want to consider making any necessary late-year purchases with your credit card. That’s because you deduct anything you spend on the credit card the moment you make the charge. (Note, if you have a corporation but a personal credit card, you must make the charge and be reimbursed by the end of the year to deduct those expenses.)

Build Your Business: Need a couple new desks and chairs? A better computer? Maybe you even need a vehicle to keep your company going. You can deduct 100% of the cost of these and any other qualified section 179 expenses in the very first year those assets are placed into service. Also covered are improvements to a building’s exterior.

Prepay Expenses: This last-minute tax break is the ultimate example of having to spend money to save money. An IRS Safe Harbor rule allows you to prepay certain expenses up to 12 months in advance — and actually take the deduction for them within the previous year. For instance, let’s say you lease a business vehicle. Near the end of 2021, you could pay for up to 12 months of the lease ahead of time. Then you could reap the deduction for those payments on your 2021 taxes.

The Best Way to Save on Your Taxes

You could put together a tax-savings strategy on your own. But it’s a complicated and time-consuming task that, if done wrong, could get you in trouble with the IRS. We recommend having a tax pro in your corner instead.

McManamon & Co., for instance provides creative, innovative and proactive tax advice that keeps small and midsize businesses on Uncle Sam’s good side. Reach out to us at 440.892.8900 or contact us online today.

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