We are living in uncertain times. All year Congress and the Trump Administration have been jousting over topics that will affect every taxpayer in America. From healthcare to tax reform, few years in recent memory have entered the fourth quarter with so many unanswered questions. Effective year-end planning involves much more than just thinking about taxes. From business planning to estate planning, a good strategy at year end is one of the smartest investments you can make. Here are six things to consider (three for your business and three for you individually) as the end of the year comes marching in.
For your business:
1. Heed the general rule of tax planning: slow down income and speed up deductions. Even with the uncertainty around the Trump Administration’s tax plan, it seems likely that businesses will see lower rates in the future. This likelihood makes this most basic of rules even more important. Bring in as many deductions as you can during the higher rate years because they will be more valuable. Push income into those lower rate years because you won’t have to pay as much tax on it.
2. Review partnership agreements because the IRS might be coming. There are new rules about the audits of partnerships coming soon. The IRS is going to be getting more aggressive on these audits, and there are a lot of things to think about. You might want to amend your partnership agreement now to get you ready. Call us to discuss how this will affect you and your business.
3. Protect yourself from being called a hobby. The IRS is relentless in their pursuit of businesses they think are really hobbies. The danger to you is the loss of valuable deductions on your tax returns. There are some easy things you can do to protect yourself. Be sure you have good documentation (including time logs and receipts) and a business plan to prove your profit-making motivation.
For you and your family:
1. Build your retirement nest egg. Start thinking about how much you want to contribute to your retirement plan. Not only could you get a tax deduction (depending on what kind of plan you have), but you will be building the security of your future. Luckily, many plans allow you to make the decision at the time you actually file your tax return in 2018. Talk to us before the end of the year to find out when you would have to make the contribution in order to get the benefit. Keep in mind some plans do have limits on the amount you can contribute. Additionally, some kinds of plans, like ROTH IRAs, provide tax savings beyond the year you contribute the money.
2. Leave a lasting legacy. The end of the year and the holidays are a great time to consider charitable giving and the gifting of assets to your heirs. If you have a cause you feel passionately about, giving generously will allow you some tax deductions. Additionally, if you have some appreciated property you want to pass to your heirs, gifting a portion of it could be the best way to do so while also saving on tax later on.
3. Avoid surprises with your estate documents. No one likes to think about their will or the beneficiaries on policies like life insurance, but it is very important to keep those things current. Life changes happen to all of us, and if we don’t keep these documents updated in a timely manner, our family might be caught by surprise at the wrong time. Keep in mind that any policy with a named beneficiary (like your life insurance) is passed to that person – no matter what your will might say.
We know the end of the year is an especially busy time for everyone. The holidays are starting soon, and we will all be merrily spending time with friends and family. Taking the time to check off a few easy planning ideas will pay you dividends in the new year. Give us a call at 210.733.661 or shoot us an email at office@atkgcpa.com so we can help enhance your prosperity this year and for many more years to come.
Written by: Brandon Howard
