Smart Yearend Planning - Tax Deductions
There are three main areas we need to keep in mind as the year ends:
1 .
Taxes
2 .
Corporate formalities
3 .
Planning for next year
Revisit the idea of converting your 10 largest expenses.
This is an ongoing process that should be done at least twice the first year .
It’s not realistic to expect you will convert all of your biggest expenses the first time around because it’s too big of a task—this is a habit needing to be developed over time .
Our largest expenses, habits, and businesses all change over time .
As your life evolves, so should your deductions, so keep current .
Strategy: upstreaming income.
the goal of upstreaming income is to shift income from this tax year to the next tax year .
Whatever your operating account balance is on December 31 will get added, as of January 1, to your last year’s income .
If you have a $50,000 balance, for example, going into the next year, that’s taxable income .
You therefore should upstream the money, making it no longer taxable for that year .
This strategy is applicable if you have an S Corp, partnership, limited partnership or sole proprietorship .
How to upstream income
Upstreaming income is accomplished by setting up a new entity such as a management company with a different yearend than your business .
a business’s income can then be shifted out of the 2018 tax year to 2018 .
You will want a contract and invoices to reflect this agreement between your business and management company .
Move the $50,000 balance to your management company with a June 1 yearend, for example .
The money should be moved ideally at least on a monthly basis, not just once at the end of the year .
I recommend taking five to 10 checks out of your checkbook and put them in a file for the upcoming year .
In January, if you find out you had some expenses you missed—it’d be a lot better to have a check in sequence that you can write from December.
There are three main areas we need to keep in mind as the year ends:
1 .
Taxes
2 .
Corporate formalities
3 .
Planning for next year
Revisit the idea of converting your 10 largest expenses.
This is an ongoing process that should be done at least twice the first year .
It’s not realistic to expect you will convert all of your biggest expenses the first time around because it’s too big of a task—this is a habit needing to be developed over time .
Our largest expenses, habits, and businesses all change over time .
As your life evolves, so should your deductions, so keep current .
Strategy: upstreaming income.
the goal of upstreaming income is to shift income from this tax year to the next tax year .
Whatever your operating account balance is on December 31 will get added, as of January 1, to your last year’s income .
If you have a $50,000 balance, for example, going into the next year, that’s taxable income .
You therefore should upstream the money, making it no longer taxable for that year .
This strategy is applicable if you have an S Corp, partnership, limited partnership or sole proprietorship .
How to upstream income
Upstreaming income is accomplished by setting up a new entity such as a management company with a different yearend than your business .
a business’s income can then be shifted out of the 2018 tax year to 2018 .
You will want a contract and invoices to reflect this agreement between your business and management company .
Move the $50,000 balance to your management company with a June 1 yearend, for example .
The money should be moved ideally at least on a monthly basis, not just once at the end of the year .
I recommend taking five to 10 checks out of your checkbook and put them in a file for the upcoming year .
In January, if you find out you had some expenses you missed—it’d be a lot better to have a check in sequence that you can write from December.
Smart Yearend Planning Tax Deductions
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Reviewed by Henda Yesti
on
June 28, 2018
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