After a crazy year, it’s time to start thinking about tax season. Especially with the chaos of 2020, it can be hard to get everything together and prepared for the upcoming tax season. Crossroads Tax Advisors, a Greenwood accounting firm, offers some tips and tricks so you can make sure you’re set when the tax deadline hits.
Prepay Some Expenses
There are yearly costs that you know you’re going to be paying every year. If you want to maximize your deductions this year, prepay some of those before December 31st hits. If you rent a space for your practice, you’re allowed to pay up to ten months of rent ahead of time and deduct it this year.
You don’t necessarily have to use up your cash flow to get the tax benefits. Anything you charge on a credit card can still be expensed this year. For any lab or supply bills that you experience regularly, you can send the vendors you use a pre-paid tab for next year that’s able to be deducted this year instead.
Look Into Cost-Segregation
Do you own your own office building? If not, have you done any renovations or tenant improvements to the building that you rent? This may lead you to a tax break. Even if you haven’t done anything, you still get a standard depreciation deduction for commercial real estate. It factors depreciation for materials over 39 years, but you can accelerate the deterioration for certain materials.
Review Business Entity Structures
Usually, dental practices start off as a Sole Proprietor (Schedule C) for taxes. This is done until the practice proves its revenue ability. Sometimes practices are still filing as C-Corps, which were beneficial during the Reagan administration under their tax plans. However, filing as an S-Corporation is usually the most beneficial today.
This change can be made at any time throughout the calendar year. It can also be made retroactively, so you can really implement it at any time. Your Crossroads CPA can help you go over your payroll tax savings potential for both this filing year and next year to help you decide if a change needs to be made.
Factor in Equipment Purchases
If you’ve purchased new or used equipment for your business this year, you most likely can write it off. A Section 179 deduction allows you to expense up to a million dollars on equipment purchased. Bonus depreciation can also help you speed up expensing this equipment.
Your Greenwood Accountant
We’re here to talk you through every step of the tax process. Call us or request to talk to an advisor online.