by Stephanie Salmon, CPA

Now is an opportune time to take action! Reviewing your options for proactive tax planning before yearend will help minimize your tax liability and with higher taxes just around the corner, you’ll be rewarded for the effort.  Here is a punch list of tax savings:

Pension Plan Strategy – Many retirement plans must be established before yearend to be eligible for 2013 even if the contributions aren’t made until later in 2014. And some businesses will qualify for a pension start-up credit.

Increase Basis - If you own an interest in a partnership or S corporation that may report a loss for 2013, you may need to increase your basis in the entity so you can deduct the loss. Proper planning can help avoid loss limitations or phantom income from the repayment of debt.

Hire Veterans - If you are considering hiring any new employees before year end, consider hiring a veteran eligible for the work opportunity tax credit (WOTC). The credit is offered to employers for hiring veterans in 2013 and ranges from $2,400 to $9,600, depending on various factors (such as the veteran’s term of unemployment and if he or she has a service-connected disability). The WOTC is set to expire for veterans hired after December 31, 2013.

Purchase Equipment - New business equipment and machinery that you place in service before year-end will qualify for the 50% bonus first-year depreciation allowance.  It could also qualify for the Section 179 deduction for up to $500,000 of newly acquired items. Without congressional action, the 50% bonus deduction expires and the Section 179 deduction drastically declines to $25,000 after December 31, 2013.  So now is the time to invest in new business assets for the largest possible immediate business deduction.

Purchase a Large Vehicle for Business - Heavy SUVs and trucks rated at more than 6,000 pounds (gross [loaded] vehicle weight) will produce greater tax benefits if purchased in 2013. There are several favorable depreciation and expensing rules set to expire, and depending on the percentage of business use, writing off most of the cost of the vehicle this year is possible.

Reimbursements for Business Expenses – Cash basis taxpayers will benefit by completing expense reports for travel, meals, entertainment, tools, home office costs… and have their business issue a payment before yearend to ensure a 2013 deduction for those expenses.

There are a number of end of year tax strategies businesses can use to reduce their tax burden for 2013. Please contact us for a customized tax plan to meet your needs.