Category: Tax Planning

With the new year just around the corner, now is a good time to review some of the key tax moves you should make before 2025.

Pay your third quarter 2024 estimated tax. Generally, the estimated taxes for the third quarter are due on September 15. However, since that due date falls on a Sunday, you have until Monday, September 16, to pay this year. You can pay electronically or use a Form 1040-ES mail voucher. Mailed payments will be on time if the envelope bears a U.S. Postal Service post no later than Sept. 16, 2024.

File your 2023 business tax return if your calendar-year partnership or S corporation requested a six-month filing extension. Small businesses filing Forms 1065 or 1120-S late can face hefty penalties. The IRS charges a minimum penalty of $235 (for 2023) for each month or part of the month the return is late multiplied by the number of shareholders or partners. This due date is also September 16, 2024.

Maximize retirement plan contributions. If you can contribute more to your 401(k) plan you have until the end of the year to do so. Or, if you qualify by income, you have until April 15, 2025, to make the 2024 maximum IRA contribution of $7,000. If you are age 50 and older, you can add another $1,000 in catch-up contributions.

Review your business structure with your tax and business advisor to see if a different structure might be more tax-effective, especially if you have not done that in some time.

Wherever possible, maximize deductions before year-end. If your business has the cash, stock up on supplies or equipment you’ll need soon anyway.

Consider whether to defer income to 2025 or accelerate it to 2024. Deferral is the usual strategy. But accelerating may make sense if you have carryover tax credits to use or expect a higher income in 2025 and want to even out taxes.

Don’t trash furniture and equipment you’re no longer using. Instead, donate it to a nonprofit organization so your business can claim a charitable deduction for the gift.

Tax planning isn’t limited to year-end and your review at the start of a new year. Being proactive and reviewing your tax strategy mid-year can give you a competitive edge and set you up for success come the 2024 tax season.

WHAT TO LOOK AT

During the summer months, review your deductible business expense records. Every expense you document — travel, meals, entertainment, office supplies, equipment, etc. — can reduce your taxable income. Check out your contributions to tax-advantaged retirement accounts. Can you increase them? By doing so, you can benefit from potential tax deductions and credits.

Make sure you get your business’s quarterly tax reports filed and paid to the IRS. Assess your business’s financial situation and estimate income for the rest of 2024. Estimating your tax liability and making timely payments helps you avoid any tax surprises.

MAXIMIZE DEDUCTIONS AND CREDITS

Consider organizing a summer team building event or a client appreciation outing. The costs associated with these activities may be deductible. Keep detailed records and receipts to substantiate these expenses.

If you have a legitimate business reason to travel somewhere that might mix well with a family vacation, you may be able to deduct your individual business-related expenses, but not the family’s.

Business renovations and improvements are often best done during the summer months. Consider whether this summer is the time to tackle those projects. Before starting, make sure you understand which expenses — energy efficient improvements, for example — qualify for tax deductions or credits. You could reduce your potential 2024 tax bill.

ESTIMATE YOUR TAX LIABILITY

One common mistake business and personal taxpayers make during summer, and any other season’s, tax reviews is underestimating their potential tax liability come year-end.

Underestimating income can result in an underpayment and possibly penalties. Relying only on online tax calculators or generic tax advice can lead to oversights and missed opportunities for tax savings. That’s why many tax experts recommend you secure professional guidance.