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Year-End Tax Planning for Businesses

Below, the tax accounting professionals at bgr CPAs provide year-end tax planning tips for businesses. To speak with a qualified tax CPA regarding your year-end accounting, contact bgr CPAs! 

  1. Deferring income to the next taxable year is a time-honored year-end planning tool. Expectations are that the new tax bill will significantly lower corporate tax rates.
  2. You may benefit from accelerating income into 2017. For example, you may anticipate being in a higher tax bracket in 2018, or perhaps you need additional income in 2017 to take advantage of an offsetting deduction or credit that will not be available to you in future tax years.
  3. You can accelerate business deductions into 2017 by analyzing your business accounts receivable and writing off those receivables that are totally or partially worthless. For non-business bad debts (such as uncollectible loans), the debts must be wholly worthless to be deductible, and will probably only be deductible as a capital loss.
  4. In general, if you are paying a bonus to employees, you may accrue that liability and deduct that amount if all the events are satisfied that fix that liability even though you pay the bonus next year. Generally, you will accelerate the bonus deduction into 2017 while your employees will report the income in 2018 if they are cash method taxpayers. Furthermore, any compensation arrangement that defers payment will be currently deductible only if paid within 2 ½ months after the employer’s year-end.
  5. Eligible small businesses ($50 million or less in gross receipts) may claim the research and development tax credit against alternative minimum tax liability, and the credit can be used by certain qualified small businesses against the employer’s payroll tax (i.e., FICA) liability.
  6. If you purchase equipment, you may make a “§ 179 election,” which allows you to expense (i.e., currently deduct) otherwise depreciable business property, including computer software and qualified real property. Air conditioning and heating units placed in service during tax years beginning in or after 2016 are eligible for this deduction. You may elect to expense up to $510,000 in 2017 of equipment costs (with a phase-out for purchases in excess of $2,030,000 in 2017), and the deduction is subject to a business income limit.
  7. For property acquired and placed in service during 2017, the bonus depreciation percentage is 50%.
  8. Expenses attributable to using the home office as a business office are deductible if the home office is used regularly and exclusively. If you have been using part of your home as a business office, we should talk about the amount of any deduction you can take because an IRS safe harbor could be used to minimize audit risk.
  9. If your business suffers net operating losses for 2017, you generally apply those losses against taxable income going back two tax years. Thus, for example, the loss could be used to reduce taxable income—and thus generate tax refunds—for tax years as far back as 2015. Certain “eligible losses” can be carried back three years; farming losses can be carried back five years.
  10. For C corporations reporting on a calendar year, the 2017 filing deadline is on or before April 15th. For C corporations reporting on a fiscal year other than one ending June 30, the filing date is the 15th day of the fourth month following the close of the taxable year. For June 30 fiscal year C corporation filers, the filing deadline remains the 15th day of the third month following the close of the taxable year (September 15). Effective for returns for tax years beginning after December 31, 2016 and before January 1, 2026, there is generally an automatic six month extension for calendar year C corporations, and an automatic seven month extension for fiscal-year C corporations with a taxable year ending on June 30. For partnerships and S corporations reporting on a calendar year, the filing deadline is March 15th, and for partnerships and S corporations reporting on a fiscal year, the filing deadline is the 15th day of the third month following the close of the fiscal year.