In American folklore, Santa Claus has his naughty or nice list, guiding the delivery of appropriate presents (or lumps of coal).
You've probably got your own to-do list this time of year. It may or may not include tax matters. As a business owner in the Bay Area, however, it's important to be reminded of what you need to do now to make tax planning and filing as painless and productive as possible in the New Year.
Here's a checklist to get you started.
You may enjoy practicing charity all year round, as the reformed Scrooge did after his close encounter with the ghost of Christmas future. But if you itemize your tax deductions, the end of the year is a particularly good time for charitable gifts because it can save you money on your taxes for the year.
The IRS has specific guidelines on the documentation needed to take a deduction for a charitable contribution.
Maximizing your 401(k) contributions can improve your financial picture in more than one way. It helps you put away money for the future and can also save you money when you file taxes next year. The tax-savings come because 401(k) contributions are deducted before your tax bill is determined.
If you can afford to make an increase in your 401(K) contribution, you may therefore want to do that. In 2016, the maximum 401(k) contribution amount is $18,000. People over 50 can put in an additional $6,000, which is considered a "catch up" contribution for tax purposes.
Business equipment purchases
Under Section 179 of the Internal Revenue Code, it is possible for a business owner to immediately deduct asset purchases up to a certain amount, rather than depreciating the acquisition expenses over a period of years.
In recent years, there has been considerable uncertainty about the amount that can be deducted and when it is advisable to do so. If you are a business owner and have made or are considering substantial equipment purchases, it makes sense to discuss your situation with a tax attorney so you don't miss out on tax breaks.
Adjusted filing deadlines for partnerships
In the past, the deadlines for filing partnership tax returns were due at the same time as individual returns. That date of course is generally April 15.
In 2015, however, Congressional legislation moved the filing date for partnership returns to March 15. If you are in a partnership, the filing season will therefore be coming sooner than in the past. With the deadline moved forward, it's a good idea to consider what you need to do to get your partnership return filed.
Take a tip from Santa
In short, as the holidays approach, it's worth taking a tip from Santa and making a list or two. Making such a list for taxes should make filing easier and might very well save you some money.