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Eight Moves to Make Before December 31 to Lower Your 2023 Taxes

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With just four weeks left until we say goodbye to 2023, you may feel that there is not much you can do to impact your business and personal taxes come spring of 2024. However, even with just a month left, there are several things you can do to help lower your overall tax burden for this calendar year:

1. Don’t Overlook Any Deductions!One of the biggest ways you can save is to reduce the amount of income your business takes in. Whether a self-employed independent contractor or corporate owner, it is critical to lower your taxable profit. Even if you feel like you have a handle on all your potential deductions, spend time with your accountant or other tax professional to review expenses and projects during the year to make sure everything is accounted for.

2. Review Your CreditsHand in hand with deductions (which lower your taxable business income) are credits, meaning a dollar-for-dollar credit against any taxes you may owe once all calculations are complete. While you won’t be claiming any tax credits until you file your return in 2024, December is a great time to review all credits available in your industry, especially any new or expiring credits, so you have a handle on what might be available to reduce your tax burden come filing time.

3. Examine Ways to Top Off Your Charitable GivingMany companies make an ongoing charitable giving program part of their corporate culture. Year-end is a perfect time to examine whether you can ‘bump up’ your giving with an additional cash or merchandise donation right at the end of the year to knock down taxable income.

4. Pre-Purchase 2024 ExpensesSimilar to the concept of reviewing your accumulated deductions, be sure to also look forward into the new year. Are you anticipating the need to buy new equipment or is a multi-year license or renewal coming up for payment? Consider pre-paying those expenses before December 31 to enjoy additional tax benefits for this year’s return.

5. Consider Putting Family to WorkIf your business is extra busy in December (think retail, hospitality or dining), this could be the ideal time to throw some hours to your kids or even your spouse. If you need extra help but don’t want the expense of more payroll and business taxes that come with adding employees, look at the option of having family members work for your business, even just temporarily. Spouses and children have different requirements when it comes to payroll and unemployment taxes, allowing you to potentially squeeze in a bit more revenue with less tax costs.

6. Defer Income to JanuaryWhile it may seem counterintuitive, you might want to ask customers to not pay you right now. If you have accounts receivable that are due in December, seek out ways to potentially have that payment deferred to January — again, to lower your taxable income in 2023. Of course, the customer likely wants to pay you to reduce their taxable income, but if they are in need of cash flow, they may be agreeable to delaying payment so they can hold on to cash this month.

7. Examine Potential Bad DebtsAs much as every company wants to be paid by customers and clients, sometimes it just doesn’t happen. Maybe a client has been downsizing to the point you know they are not going to make it and you might someday be lined up with other creditors in a bankruptcy proceeding. End of year is a good time to consult with your accountant and review any potential outstanding invoices that just probably aren’t ever going to get paid. It may hurt to swallow that dollar figure, but converting that into an ‘unrecoverable bad debt’ may help lower your overall taxes.

8. Look to the FutureWhile there may not be enough time to complete this task before the end of the year, examine your business structure for possible tax savings moving forward. US Census data shows nearly three quarters of all small businesses in the country are Sole Proprietorships — Are you one? There may be tax savings to switch to an S Corp, C Corp or LLC in the new year. Book some time with your tax advisor in December during this traditionally slow time to review options for changes in the new year.

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