Don’t wait to make these 5 moves to decrease tax expenses

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Chop, chop

Actually, you shouldn’t be reading this right now. You should have been reading this in June — if I’d written this back then. Now is kind of late. It’s already December and the time for tax “planning” is a little behind us.

But OK, here we are. And what you need to do is take some quick actions, immediately, if you want to decrease tax expenses this year.

What actions? Try these.

Get cozy with your accountant

First and foremost, meet with your accountant. Hopefully you’ve already done this earlier in the year. And if you haven’t …


Your accountant should take a look at your most recent year-to-date financial statements and be fully versed in your transactions throughout the year. Your accountant is best positioned to make the right recommendations for you. Be brave and trust the professional.

Check your balances

Next, clean up your balance sheet. I know you think that guy who bought that stuff from you in February is still good for it. But here’s the truth: he’s not. Sorry. And I know the pallet of stuff you bought at auction back in 2010 was an awesome deal and you were going to make a killing. But, sadly, no — you won’t. We all make bad deals and we all have deadbeat customers.

Write off bad receivables. Dispose of bad inventory. Clean up your balance sheet and take the tax deduction now. It’s painful but at least you can get some benefit.

Write-offs can decrease tax expenses

Buy equipment. The Section 179 (or accelerated depreciation) deduction was made permanent a couple of years ago, so take advantage of it. Many companies can buy up to $500,000 of capital equipment and take an immediate deduction for it.

By the way, you don’t have to pay for it immediately.

Finance it — interest rates are relatively low, and bankers are eager to lend money to people with collateral. Put it into service, and then take the deduction immediately.

Up your R&D game

Re-visit R&D. The research and development tax credit was also made permanent a few years ago. Its calculation was changed and expanded to many smaller and larger companies.

You don’t have to be a pharmaceutical or research company to take advantage. If you’re working on new products, testing new devices or sending out samples, you might be eligible for the credit.

The calculation, which takes into consideration the costs of your employees, contractors, materials and all the associated overheads, can be a little complicated. You might want to consider an accounting firm with expertise in the exercise. But a credit is valuable — you can apply it to the past or to the future.

Look toward retirement

Finally, max out your retirement plans. Make sure you’re socking away as much as possible in your IRA, 401(k) or SEP. If you have employees, I hope you’ve got a 401(k) plan.

They’re inexpensive and will encourage your people to put money away for retirement.

Not enough Americans are saving what they need, and the onus could fall back on you, the employer, to kick in some assistance. So get them to save. Oh, and more they save, pre-tax, the more you can save, too. There’s that added benefit.

The year’s not over but the clock is ticking. It’s your money, so make your moves now.

Gene Marks
Gene Marks writes a daily column for the Washington Post on business and public policy. He also writes weekly for Forbes, Entrepreneur Magazine, Inc. Magazine, and periodically for The Huffington Post and Gene also regularly appears on Fox News, MSNBC, Sirius XM Radio and ABC radio. His work reaches hundreds of thousands of business owners and executives each week. Gene is a Certified Public Accountant and runs the Marks Group PC - a 10-person technology and management consulting firm located near Philadelphia. He spent nine years with the international firm KPMG, most recently as Senior Manager. Gene speaks frequently to business groups so they can better understand the trends affecting their businesses and - most importantly - the actions they should take to continue to grow and profit.