Taxes

Maximize Tax Savings with Good Bookkeeping

Posted on August 30th, by Janice in Business Taxes No Comments

pen calculatorBookkeeping is one of the most powerful tools when it comes to maximizing tax savings. It’s where the activity gets captured and when done properly, it can capture additional tax savings.While bookkeeping is often viewed as a necessary evil, it has the ability to give your tax strategy a boost in many different ways. Here are just a couple of those ways:

#1: Bookkeeping Captures What is Often Missed
When I look at a new client’s tax return, I often find that deductions are missed or understated. The most common are:

• Home office
• Travel
• Vehicle
• Meals & entertainment

These deductions are missed or understated because there is no system in place to capture the information. Bookkeeping is this system.

Let’s use the home office as an example. Some of the expenses related to a home office include:

• Mortgage interest
• Property taxes
• Utilities, including water, gas, electric, sewer
• Pest control
• Security
• Association dues

While many people capture some of these expenses, it’s rare to see all of these expenses captured. Most people capture the big items – mortgage interest and property taxes – but usually miss the smaller items. These smaller ones can really impact the tax savings because these expenses create permanent tax savings.

The expenses listed above are all paid personally. Keeping a set of books for your personal finances can really pay off in the form of additional tax savings. Any time you pay a bill that relates to the occupancy of your home office, code it accordingly in your personal bookkeeping.

Doing bookkeeping for your personal finances can also help identify expenses you may not have thought to include as part of your home office or other tax deductions.

#2: Bookkeeping Captures the Timeline
A very powerful form of permanent tax savings comes from how you pay yourself from your business. Many times there is a delicate balance between distributions and salary and using the right amount of each is what creates permanent tax savings.

This makes distinguishing the two very important – especially given that these amounts will be scrutinized if audited.

Your bookkeeping documents two key factors related to distributions and salary:

• The amount
• The timing

Your bookkeeping is a fantastic tool to track how much you have paid yourself in distributions and how much you have paid yourself in salary. Even more important, is the timing of your distributions and salary.Think about when you pay your employees. Is it a set period or is it whenever you feel like it? Of course, it is a set period. The salary you pay yourself should also follow this pattern. Your bookkeeping captures this pay period pattern, helping to support your salary as part of the company’s normal payroll.

Now, think about how large corporations pay their shareholders. Typically, dividend distributions are quarterly or annually. Your distributions should follow a similar pattern. Your bookkeeping provides documentation of the actual timing of your distributions which is very important in your tax planning.

Good bookkeeping is a necessity if you want to maximize your tax savings. This includes bookkeeping for your business, as well as, bookkeeping for your personal finances.

A Better Way to Reduce Taxes

Posted on August 6th, by Janice in Taxes No Comments

tax

“I know there has to be a better way.”

This was a line in a form submitted to me a couple years ago and it still sticks with me.

The person was inquiring about how my team and I may be able to help this person reduce their taxes.  This person shared that they were paying a lot in taxes and that their current tax advisor gave them the following advice:

1. Increase their withholding (so they pay in more taxes throughout the year)

2. Make less money (so they have less money in their pocket at the end of the day)

This is the worst advice I’ve heard and sadly it wasn’t the first time I had heard it – I still hear it at least once a month.

There are so many things wrong with this advice:

When your advisor’s solution is to make less money, you need a new advisor.

Your tax advisor should be leading the way with new ideas to reduce your taxes and put more cash in your pocket.

No country has a 100% tax, so making more money still means you are making more – even after taxes.

There is always a way to reduce your taxes, regardless of your situation.

As I like to put it, if you want to change your tax, change your facts. Your advisor’s role is to tell you what facts need to change and why. Your role is to make those changes happen.If you are willing to change your facts, there is always a way to legally reduce your taxes.

Change your taxpayers, change your tax

There are legal ways to add taxpayers to your tax strategy. With additional taxpayers come additional tax brackets – many of which have a nice set of low tax brackets that you can legally use. These additional taxpayers could be an entity, your children or other family members.

Of course, you don’t just want to give your income away solely to reduce your taxes. But, there are many situations when it can work with your tax goals, wealth goals and personal goals.

Change your wealth strategy, change your tax

Changing where your income comes from will change your tax. Certain types of income come with tax benefits whereas other types of income come with the highest tax rates. These are just two examples – both of which can provide huge tax savings and, like I said, these are just two examples.

There is a better way!
The best person to reduce your taxes is you. You are in control of all your facts and that is the key to reducing your taxes.

To do this, you’ll need education and a strategy. A good tax advisor can provide these. With these in place, there is a better way.

 If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or email us for an appointment to get started today.

Does Your Tax Strategy Assume You Want to Retire Poor?

Posted on June 15th, by Janice in Business Taxes No Comments

pen calculator#1 Most Tax Planning Assumes You Want to Retire Poor
When I speak at a seminar, I ask how many people plan on retiring poor.It may not surprise you that no one raises their hand. It surprises me because the tax planning they have done works best if they retire poor.

This is because most tax planning focuses on tax deferral. Tax deferral means you are opting not to pay tax now and will pay the tax in the future.The most common example of tax deferral is the advice to maximize the contributions to your retirement plan.

Most retirement plans work like this:

– The money you contribute is deductible.
– The money you receive as a distribution when you retire is taxable.
– The tax is deferred until a later date.

What’s the problem with this? The deduction is at your current tax rate while the distribution is taxed at your future tax rate.If you plan on retiring rich, you will be in a higher tax rate when you retire. This means you are deferring your tax into a higher tax rate.

Example: If you are currently in a 25% tax bracket, and are in a 40% tax bracket when you retire, you are deferring your taxes into a higher tax bracket.This type of tax planning works best if you plan on being in a lower tax rate when you retire.

Example: If you are currently in a 25% tax bracket, and are in a 15% tax bracket when you retire, deferring your taxes works much better.If you plan on retiring rich, deferring your taxes will ultimately increase your taxes. Instead of deferring your taxes, create a tax strategy that focuses on permanent tax savings.

You may be wondering why tax deferral is such popular advice then? Because it’s easier than creating permanent tax savings. Creating permanent tax savings requires a much better understanding of the tax law.

#2 Your Taxes Keep You from Your Dreams
Taxes steal our time. In an average lifetime, no matter where you are in the world, taxes are stealing an average of 20 years of your life. That’s a prison sentence!

The average person spends 30% to 50% of their income on taxes.What if you were able to reduce your taxes (legally, of course) by 10%? Or 20%? Or even 30% or 40%?

You would keep more money in your pocket. You could then use this money to build your wealth.The result is more time – whether it’s an early retirement or not having to work as much.

#3 Following the Tax Law Can Improve Your Business and Investing
There are thousands of incentives in the tax law, in all countries, to encourage businesses and investors.Governments need businesses and investors to succeed. Governments want people to be employed. Governments want people to have housing. Businesses and investors help the government do this.

Governments are highly motivated to help businesses and investors succeed, so the tax law is written to help businesses and investors do just that. When looked at this way, the tax law is really an instruction book for businesses and investors.

The closer you follow the tax law, the more successful your business and investing becomes and the more money you’ll make in your business and investing.

Janice S. Vanderbilt, Vanderbilt CPA Group

Treat Your Small Business Like a Real Business – Hold Annual Meetings

Posted on June 1st, by Janice in Business Taxes No Comments

imagesBy Janice Vanderbilt

People get into big tax trouble with their business because they don’t treat it like a “real” business.    

Annual meetings are an important example of this.A public company holds an annual meeting with its shareholders (owners). During these meetings, many things are discussed, including:

  • Informing the owners of previous and future activities
  • Reviewing and approving financial statements and budgets
  • Declaring dividends
  • Approving vendors

A public company keeps a written record of each meeting – these are the meeting minutes.

The topics of a typical annual meeting directly relate to a tax strategy which makes the meeting minutes an extraordinary tool to protect your tax savings. This is why it is so important to treat your business like a big public company when it comes to annual meetings and minutes.

How meeting minutes can protect your tax strategy
Meeting minutes are an ideal place to document the activity in your tax strategy, such as:

  • Your salary
  • Your bonus
  • Your distributions (dividends)
  • Loans to/from your company from/to you or your other companies
  • Investments purchased
  • Investments sold
  • Travel expenses
  • Vehicle expenses
  • Use of your home office

Just to name a few!

Who should have meeting minutes?
When you think of meeting minutes as being a tool to protect your tax savings, then every company should have meeting minutes. It doesn’t matter if the company is an LLC, partnership, corporation or even a sole proprietorship.It’s always a good business practice to have an annual meeting. It’s a great time to review the past year and focus on the upcoming year. This falls right in line with the company approving your salary, bonus and/or distributions. Have a discussion about why the amounts are appropriate and document that in your meeting minutes.

An annual meeting is the ideal time to document activities the company has done and intends to do. For example, if one of those activities is to purchase real estate, the discussion can address if the real estate will be held long-term and rented, or fixed up and sold, or perhaps the company has something else in mind.

Two terms that commonly come up during a tax audit are “intent” and “facts and circumstances.” A tax auditor wants to know what a taxpayer’s intent was and what the facts and circumstances were for a particular transaction. Meeting minutes are one of the most effective ways to document these items.

What if your company is just you?
You may be wondering how you conduct your meetings if your company is just you. While you may be the only owner, you may have employees who should participate or you can invite members of your team of advisors to participate.

If you haven’t been holding annual meetings in your small business, now is the time to make the change.  Annual meetings will help you manage your business and will help you stay out of tax troubles.

 

Deducting Business Expenses: Expensed vs. Capitalized

Posted on March 31st, by Janice in Business Taxes No Comments

printerBusiness owners, including real estate investors, often come across this situation:

You make a purchase of property for your business – maybe it’s a printer, tablet, appliance or furniture – and the question becomes: is this a cost that can be expensed right away or does it have to be capitalized?

If a cost is capitalized, it means the expense (depreciation) is taken over a number of years which is usually less desirable than expensing it all at once.

The general rule is that costs must be capitalized if the useful life is more than 12 months.  This can become a bit impractical in real-world application.

Fortunately, the IRS has released much needed guidance on when costs for property must be capitalized. This new guidance is effective for tax years beginning after December 31, 2013.

With this new guidance comes an important opportunity that allows businesses (which includes real estate investors) to immediately expense certain property that would otherwise have to be capitalized.

This can mean big tax savings but action must be taken now in order to take advantage of this opportunity.

How to Qualify for this Tax Opportunity
To qualify, businesses must have “non-tax accounting procedures” in place at the beginning of the year.

The purpose of these accounting procedures is to indicate that amounts paid for property that are less than a specified dollar amount or that have a useful life of 12 months or less will be expensed.

The amount that can be expensed depends on whether the business has an Applicable Financial Statement (AFS).  An AFS includes financial statements filed with the SEC or provided to a federal or state government or agency (other than the IRS) and certified audited financial statements.

Businesses with an AFS must have written accounting procedures and can expense property that costs up to $5,000 (per item) if it is in accordance with their written accounting procedures.

Most businesses do not have an AFS.  For those businesses without an AFS, they must have accounting procedures and can expense property costing up to $500 (per item) if it is in accordance with those procedures.  At this point, the procedures for these businesses do not need to be written. However, we strongly recommend that all businesses put their accounting procedures in writing.

The following is a sample procedure:

It is the policy of the business to capitalize assets that cost $500 or more individually. All capitalized assets will be depreciated based on the appropriate depreciation rules. Assets that cost less than $500 individually will be expensed in the period purchased.

Once the above is in place, the business must follow this procedure when recording costs to purchase property.  This then qualifies the business to make an election on their tax return to have these items treated the same way on its tax return.

The Bottom Line
Businesses that take advantage of this new opportunity will be able to immediately expense items that would otherwise have to be capitalized.

To take advantage of this new opportunity, businesses need to do the following:

#1 Document the accounting procedure for the business by January 1, 2014.

#2 Follow the accounting procedure when recording purchases of property in the bookkeeping for the business.

#3 Make the election on the business tax return.

If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or call us for an appointment to get started today.

Big Tax Savings When You Purchase New Equipment For Your Business

Posted on March 30th, by Janice in Taxes No Comments

officeFurnitureBusiness owners, including real estate investors, often come across this situation:

You make a purchase of property for your business – maybe it’s a printer, tablet, appliance or furniture – and the question becomes: is this a cost that can be expensed right away or does it have to be capitalized?

If a cost is capitalized, it means the expense (depreciation) is taken over a number of years which is usually less desirable than expensing it all at once.

The general rule is that costs must be capitalized if the useful life is more than 12 months.  This can become a bit impractical in real-world application.

Fortunately, the IRS recently released much needed guidance on when costs for property must be capitalized. This new guidance is effective for tax years beginning after December 31, 2013.

With this new guidance comes an important opportunity that allows businesses (which includes real estate investors) to immediately expense certain property that would otherwise have to be capitalized.

This can mean big tax savings but action must be taken now in order to take advantage of this opportunity.

How to Qualify for this Tax Opportunity
To qualify, businesses must have “non-tax accounting procedures” in place at the beginning of the year.  This means by January 1, 2014 for calendar year taxpayers.

The purpose of these accounting procedures is to indicate that amounts paid for property that are less than a specified dollar amount or that have a useful life of 12 months or less will be expensed.

The amount that can be expensed depends on whether the business has an Applicable Financial Statement (AFS).  An AFS includes financial statements filed with the SEC or provided to a federal or state government or agency (other than the IRS) and certified audited financial statements.

Businesses with an AFS must have written accounting procedures and can expense property that costs up to $5,000 (per item) if it is in accordance with their written accounting procedures.

Most businesses do not have an AFS.  For those businesses without an AFS, they must have accounting procedures and can expense property costing up to $500 (per item) if it is in accordance with those procedures.  At this point, the procedures for these businesses do not need to be written. However, we strongly recommend that all businesses put their accounting procedures in writing.

The following is a sample procedure:

It is the policy of the business to capitalize assets that cost $500 or more individually. All capitalized assets will be depreciated based on the appropriate depreciation rules. Assets that cost less than $500 individually will be expensed in the period purchased.

Once the above is in place, the business must follow this procedure when recording costs to purchase property.  This then qualifies the business to make an election on their tax return to have these items treated the same way on its tax return.

The Bottom Line
Businesses that take advantage of this new opportunity will be able to immediately expense items that would otherwise have to be capitalized.

To take advantage of this new opportunity, businesses need to do the following:

#1 Document the accounting procedure for the business by January 1, 2014.

#2 Follow the accounting procedure when recording purchases of property in the bookkeeping for the business.

#3 Make the election on the business tax return.

 If you want to learn more about how to take advantage of these tax strategies, sign up on our web site or email us for an appointment to get started today.  

Do You Have the Right Tax Advisor?

Posted on February 13th, by Janice in Blog Taxes No Comments

taxThe real question most people want answered is this: Is my tax advisor doing everything (legally) possible to reduce my taxes?

Without the right tax advisor, most people have the following thoughts about taxes:

  • Taxes are a necessary evil
  • There is no way I will ever understand my taxes 
  • All my hard earned money goes to pay my taxes

What is scary about falling into this type of thinking is it can lead to overpaying your taxes.  The perceived complexity of the tax code plays right into how most people are taught to think about taxes – that they are just too complicated to even try to understand.

Because of this, most people don’t bother to understand how their taxes work. This can lead to dangerous results – like not knowing if their taxes are overpaid, underpaid or legally minimized.

With the right tax advisor, the thinking changes to:

  • Taxes help me stay in touch with the performance of my business and investments
  • I know exactly what I need to do to legally reduce my taxes 
  • My tax savings can supercharge my wealth building

Thinking about taxes differently is not the same as being a tax expert.  You don’t have to be a tax expert.  You’ll want a tax expert on your team.  This is where the right tax advisor comes into play.

Below are a few key qualities I think every tax advisor should have.  (I’ve shared this list before and I’m sharing it again now because I think this is essential information).

#1 Your Tax Advisor Should Ask You Questions (Lots of them)
If you have to ask all the questions, then you have the wrong tax advisor.

It is a necessity for your tax advisor to ask you a lot of questions.  Questions enable your tax advisor to understand your situation and goals.

Here are just a few examples of questions your tax advisor should ask you:

  • What is your role in your business or investing activities?
  • What is your family’s role in your business or investing activities? 
  • What are your personal and professional goals? 
  • How do you track your expenses (not just your business and investing expenses, but ALL of your expenses)?

Remember, taxes are based on facts.  The more your tax advisor understands your facts, the more opportunity there is to change your tax.

#2 Your Tax Advisor Should Reduce Your Taxes…Legally
I have been asked more than once if the tax strategies I use are legal.  That is one of the easiest questions I ever get to answer – Yes.

The question indicates that there are tax advisors who will reduce your taxes by cheating.

Your tax advisor should know the tax law well enough to know how to be creative within the law, without having to bend any rules.

If your facts don’t fit within the law, then your advisor should be able to tell you what you can do differently so your facts do fit within the law.

#3 Your Tax Advisor Should Increase Your Tax Awareness
Your tax advisor should be excited to share new information with you about how to reduce your taxes and provide you with a clear understanding of the tax rules.

Understanding the rules doesn’t mean you have to be an expert on the tax rules.  Your tax advisor should be the expert.  Understanding the rules simply means you know what to look for so you can identify potential opportunities and discuss them with your tax advisor.

You are the one who is best able to identify potential opportunities because you are the one who is in the day-to-day activity of your business or investing and that is where the opportunities are.

While your tax advisor can identify some opportunities after-the-fact, the results are much better and faster if you are able to identify them as they occur.  And quicker results most likely mean you can start reducing your taxes sooner.

This is why it’s important for your tax advisor to increase your tax awareness – once you know what to look for, it is much easier to identify your tax saving opportunities.

#4 Your Tax Advisor Should Prepare Your Tax Return
One more item to mention here is to never use a tax preparer who isn’t also your tax advisor. You may otherwise get great advice that is never used and lose out on great tax savings.

On the flip side of that, your tax advisor shouldn’t only prepare your tax return.  Your tax advisor should be able to help you create and implement sound tax strategies, in addition to preparing your tax return.

Remember: The more passionate your tax advisor is about reducing your taxes, the lower your taxes will be.

 

Tips for Making Your Tax Return Preparation a Smooth Process

Posted on January 30th, by Janice in Taxes No Comments

calculator1You’ve probably already started receiving letters or emails labeled “Important Tax Return Documents”.  While it may seem a little early to start thinking about your tax returns that are not due for a few more months, it’s the ideal time to start planning for a smooth tax return preparation process.

Here are some tips to get you started:

#1 Contact your tax advisor now
Map out the steps and timeline for your tax return preparation with your tax advisor.  Find out when you need to have information to your tax advisor and when you should expect your tax return to be completed.  Most importantly, get a list of the information you need to provide.

#2 Clean up your bookkeeping
Accurate bookkeeping can be one of the biggest obstacles in the tax return preparation process.

For starters, make sure your balance sheet accounts have been reconciled through the end of the year.  For example, if you have a mortgage, makes sure the mortgage balance that shows on your balance sheet agrees to the mortgage statement received from the lender.

Review your balance sheet and profit & loss statement.  While you may not be an expert at financial statements, you’re likely to catch something that is blatantly wrong.

#3 Note any changes to your entities
Did you add an entity last year?  Or maybe you removed an entity, or perhaps the ownership of your entity changed.  This information can have a major impact on your tax return preparation.

#4 Identify major purchases or sales of property
If you purchased a rental property, a new piece of equipment, a new business vehicle or something along those lines, have the details of those purchases available.  Then do the same for any sales of property.

#5 Gather up your documentation
When it comes to permanent tax savings, the 3 most important words are: Documentation, Documentation, Documentation!

Proper documentation increases the accuracy of the information you provide to your tax advisor. This helps your tax advisor do more for you because they have good information.

Proper documentation also provides the support the government will want to see if you are audited.

Best of all, when you keep proper documentation, you do a better job of identifying all of your deductions so it’s a great way to reduce your taxes.

Documentation may include:

  • Receipts
  • Meeting minutes for your businesses / entities
  • Loan documents between you and your businesses / entities
  • Agreements between you and your businesses / entities
  • Mileage logs

Activity logs (particularly in the U.S. for those who claim “real estate professional” status)

#6 Make a list of your questions.
As you are gathering your tax return information, you are going to run into questions for your tax advisor.  Start writing down those questions and keep a running list.  Then when you meet with your tax advisor, you’ve already got your questions ready and won’t forget any.

Start today.
The small things add up. Identify one small thing you can do today to pave the way for a smooth tax return preparation process. It can be one very small thing. For example, start a folder (either a paper one or an online one) and put all the tax documents you are receiving in that folder.  Then, build on that every day.

If you enjoyed this article, you might also like “Maximizing the Benefits of an LLC in Your Tax Strategy”.

 

Best Ways to Write Off Meals and Entertainment Expenses

Posted on December 20th, by Janice in Taxes No Comments

saladMeals and entertainment expenses are one of my favorite types of deductions because they can eliminate tax. By turning your current non-deductible expenses into legal tax deductions, you are effectively eliminating tax by permanently reducing your taxes with these deductions.

This permanent tax saving strategy only works when the meals and entertainment expenses are protected by keeping proper documentation.

One thing you can always count on during an audit is a request for documentation supporting deductions for meals and entertainment expenses.

The government has found that these deductions are heavily abused and are an easy way to generate additional tax revenue, not to mention additional revenue from penalties and interest.

While I’m focusing on a U.S. tax perspective, the concept applies in most developed countries.

You don’t have to spend a lot of time reading U.S. tax cases to find one where meals and entertainment expenses were disallowed specifically because of improper documentation. Here are a few examples from tax cases:

Example 1:
The taxpayer’s business meal expenses did not satisfy the substantiation requirements because they did not include the taxpayer’s relationship to the parties involved or specify the business purposes of the meals.

Example 2:
The taxpayer’s meals and entertainment deductions were disallowed because the taxpayer couldn’t provide anything to tie the deductions to specific copies of receipts, checks, or other documents. Plus, in the few records the taxpayer did provide, there were duplications and other irregularities in the records making them unreliable altogether.

Example 3:
A spreadsheet listing the numbers the taxpayer put on his return was insufficient to substantiate or use to reconstruct business expenses for meals and entertainment.

This means that even if a meal or entertainment expense is perfectly legitimate, it can be disallowed if the documentation is not proper.

How to Protect Your Deductions for Meals and Entertainment Expenses
Here is a checklist to use for each meal and entertainment expense to make sure these deductions are well protected:

____ Amount of each separate expense

____ Description of each separate expense

____ Date of expense

____ Location of expense

____ Business purpose of expense

____ Names and business relationship of the people involved

How to Simplify Your Documentation
It may seem like quite a bit for each and every meal and entertainment expense, but here are a few ways to make this process very simple:

Get a receipt. The first 4 items – amount, description, date and location – are usually printed on the receipt. Then simply write the remaining 2 items – business purpose, names and business relationship on the receipt.

Scan your receipt. I always recommend scanning your receipts so you have an electronic copy. Many receipts tend to fade in just a year so your documentation could disappear. A scanned copy won’t fade and can help reduce the clutter of receipts.

If you don’t get a receipt, then document all of the items listed above (either write them down or type them up) and then attach support for the payment. Here are a few examples:

If you paid by check, attach a copy of the check and your bank statement showing it cleared your bank account.

If you paid by debit or credit card, attach a copy of your bank or credit card statement showing the debit or charge.

If you paid by cash, try your best to get a receipt. Otherwise, make sure your documentation is precise and make sure a very small percentage of your expenses fall into this category of paid by cash and no receipt.

Important Final Tip
Don’t force it! If a meal or entertainment expense doesn’t meet the business purpose requirement because it was a personal expense, then don’t deduct it.

If an auditor finds personal expenses being deducted, then all of your other expenses will be heavily scrutinized, putting your legitimate deductions at risk for the slightest reason.

If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or email us for an appointment to get started today.

Start Your Year-End Tax Planning Now

Posted on December 3rd, by Janice in Taxes Uncategorized No Comments

tax formsNow is the time to start your year end tax planning.  This is an important time in a tax strategy because once the year has ended, some tax opportunities are lost forever.

Here is a checklist to keep your year end planning on track.

#1 Meet with your tax advisor.
Hopefully you are meeting with your tax advisor throughout the year!  This time of year you want to have a discussion that is focused on year-end tax planning.

#2 Have your annual meeting and create your annual meeting minutes.
Meeting minutes are an ideal place to document the activity in your tax strategy. All the items on this list should make their way into your annual meeting. Make your annual meeting and minutes part of your year-end planning.

#3 Add an entity
Entities are one of the greatest tools to reduce taxes. Knowing the right time to add an entity and knowing the right entity to add can save as much as $10,000 per year in taxes. However, the entity needs to be in place in order for the tax savings to occur.

#4 Change how an entity is taxed.
When I create a tax strategy with a client, it’s not uncommon for an entity to be created knowing that once it reaches a certain level of income, an election will be made to change how the entity is taxed. Missing this election or not making it at the ideal time can be a very costly tax mistake.

#5 Make sure your salary is on track.
Optimizing how you take money out of your entity is an effective way to reduce your taxes. Now is the time to make sure the amount of salary you receive from your entity is on track. If changes need to be made, there is still time left in the year to make those changes without having to do one big adjustment at the end of the year.

#6 Make sure your distributions are on track.
Just like salary, distributions play a huge role in reducing your taxes. You’ll want to make sure your distributions are in line to support your tax strategy.

#7 Make sure your loan and interest payments are on track.
It’s very common to make or take a loan to or from your entity, or to have loans between your entities. Make sure the loan and interest payments are paid in accordance with the loan document.

If you don’t have loan documents, you’ll definitely want to get those in place.

#8 Check the documentation for your deductions.
Documentation is a great way to successfully get through an audit. It is also a great way to increase your tax deductions because proper documentation leaves less room for deductions to get missed.

This includes documentation for travel, meals & entertainment, home office and vehicle.

#9 Check your log for your vehicle.
Your mileage log documents how many business miles versus total miles you have year-to-date. It’s an important piece of documentation to properly support your vehicle deductions.

#10 Check your log for your real estate hours.
If you claim real estate professional status in the U.S., your real estate hours need to be documented. A log detailing the date, times and activity is the best way to do this.

#11 Get reimbursed for your business expenses.
If you have paid for any business expenses personally (this includes your own business) and have not been reimbursed, it’s time to submit that expense report and get paid. These expenses are easy to forget about and that means the tax deduction could get missed.

And, if your business doesn’t have a policy in place to reimburse you for these expenses, it’s time to get that in place too.

#12 Get your bookkeeping current.
Bookkeeping impacts every item on this list. This is why it is so important to make sure your bookkeeping is current before the end of the year is here – current means it is done through the end of last month, or last quarter.

If you want to learn more about how to take advantage of these tax strategies, call us for an appointment to get started today!