As the end of the year approaches, it’s time to identify tax planning moves you should make before December 31st. The first step in the process is to engage our firm to make a projection of this year’s income, along with expected tax deductions and tax credits.
With proper planning, you may be able to pass business losses through to your personal tax return — and use them to offset income from other sources.
With the projection in hand, we can advise you how various year-end planning strategies will affect your tax bill.
For example, if the projection shows that you will have a taxable loss from your S corporation, you may need to inject some cash into the company in order to have sufficient basis to deduct the entire loss on this year’s return.
Reason: S corporation shareholders cannot deduct corporate losses that exceed their “basis” in the stock they own. Basis is equal to the amount of your investment in the company, with some adjustments.
By taking the necessary steps now, you can reduce your tax bill. If you wait until it’s time to prepare your tax return, it will be too late.
The first step involves putting together a projection that shows your current tax situation. Contact us. We’re ready to help.