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New Business: December tax moves to consider for your business

December 03, 2014

2014 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 if necessary. When you have losses in your Subchapter S corporation, the amount you can deduct on your personal tax return may be restricted. That's because losses are limited to your basis. Injecting capital or making a direct loan to your business before year-end can help increase your basis.
  • 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 2014 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.
  • Pay health insurance premiums. When you own more than 2% of your S corporation, premiums you pay personally for your health and long-term care insurance must be reimbursed to you in order to get the most benefit. When accounted for properly, premiums are included on your Form W-2 as wages, and are deductible on your individual income tax return whether you itemize or not.
  • 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.