Dwight Pugh is a CPA with Smith Pugh & Seal LLP, 470 Ashley Ridge Blvd., Shreveport.
Even though it is 2014, there are still a number of things businesses can do to help reduce their tax liability for 2013. Below are a few of the more common items:
- Depreciation: Businesses want to carefully consider their depreciation options. Section 179 allows you to write off up to $500,000 of qualified capital expenditures. This amount is reduced once your capital expenditures exceed $2,000,000. Bonus depreciation is also available. This allows 50% of the cost of a new asset to be written off in the first year. These deprecation options can significantly reduce your taxable income for 2013.
- Write Down of Inventories: Businesses may want to claim a write down of regular for sale inventory items to market value if that is below cost. If so, they should consider 2014 sales at the reduced prices prior to filing their 2013 tax return.
- Installment Sale: If a business had an installment sale in 2013 and will be in a much lower tax bracket in 2013 than in 2014, they may want to elect out of installment sale treatment. Taxpayers have until the filing of their return to make this decision.
- Dividends: If a C corporation or personal holding company is facing accumulated earnings tax or PHC tax, they may want to consider paying dividends to eliminate or reduce these amounts. Any dividends paid before March 15 can be included on the 2013 return.
- Write Off Bad Debts: Companies should review their accounts receivable balances for any accounts that are uncollectible. Uncollectible accounts should be written off and the deduction taken on the tax return.
- LIFO Conversions: Last in-first out inventory valuation conversions do not have to be done before Dec. 31. Businesses have up until the due date of their return to do these conversions.
As the above points illustrate, the passing of Dec. 31 does not mean that a business’ tax liability is etched in stone. Numerous opportunities exist for reducing their tax liability. Businesses should consult a tax professional before acting on any of these items.