Dec 01, 2016
By Rhonda Andrews, Partner at Terry Lockridge & Dunn
2016 is winding down, but you still have time to wrap up business tax strategies before December 31. Here are five to put on your list.
Make capital contributions. When you have losses in your Subchapter S Corporation, the amount you can deduct on your personal tax return may be restricted. That is because losses are limited to your basis, which includes your investment in the business stock and certain loans. Injecting capital or making a direct loan to your business before year-end can increase your basis and keep your losses deductible.
Review inventory. Remove obsolete, unsalable, or damaged items to reduce your year-end inventory balance. Donating inventory to qualified charities may result in an enhanced deduction.
Establish a retirement plan. December 31 is the last day to set up certain retirement plans in order to take a deduction on your 2016 return. What if you like the idea but will be a little short of cash this month? In some cases, you can wait until the due date of your tax return, including extensions, to make the actual contribution – and still claim a deduction in the current year.
Update corporate minutes. Document the reasons for business decisions, such as why you chose a salary level, or your approval of an expense reimbursement plan.
Put assets to work. In order to claim depreciation deductions for assets you purchased during 2016, the assets must be "placed in service" by the end of the year. What does "placed in service" mean? The rules say assets are considered placed in service when the assets are ready and available to be used for a specifically assigned function. The exact date can differ depending on the asset.Feel free to contact Rhonda Andrews at firstname.lastname@example.org to learn more about how we can help you achieve your business goals.