Pittsburgh, PA: 6 Year End Tax Saving Ideas For Cash Basis Businesses

I perform tax prep and planning, as well as IRS and state civil tax representation for Pittsburgh and vicinity, as well as the rest of the Commonwealth of PA. The time is now to make your last-minute tax moves for 2022. Not a whole lot can be done after December 31st. 

1. Prepay rent using IRS Safe Harbor Rules

The tax rules allow you pay up to 12 months in expenses in advance without challenge, adjustment or change by the IRS

Example: Your rent is $3000 per month and you would like a $36,000 (or less) deduction for 2022, so on Friday December 30th you mail a check your landlord for up to $36,000. He receives the money on Tuesday January 3rd. You deduct the up to $36,000 in rent in 2022, the year you paid it. He claims it in 2023 the year he receives it. 

You get a tax deduction in 2022, and the landlord gets his/her rent in advance a win-win.

A couple of thoughts on this strategy, get your landlord in the loop so this goes down without a hitch and he/she isn't caught off guard thinking the payment was a mistake. Also have proof. send the payment certified mail, make this move difficult to challenge in the case of an audit.

2. Don't bill your clients till next year

Usually, people don't send money until they receive an invoice.

Example: Phil, a dentist, usually bills his customers and insurance companies at the end of each week. This year he stops billing his customers in December and mails them out in January 2023. He just postponed paying taxes on his December 2022 income until 2023. 

3. Buy Office Equipment

Sadly, 2022 is the end of the 100% Bonus Depreciation that was ushered in by the Tax Cuts and Jobs Act in December 2017. Next year, you will only be able to take 80% of bonus depreciation.  

So, if you were looking for a new copier, mainframe, desk, chairs or other expensive equipment, buy it now.

Planning note: A large equipment purchase, while be great for expensing a large item will negatively impact your QBI Deduction (Qualified Business Income)

If you or someone you know needs tax planning and preparation services or IRS representation for IRS correspondence letter, feel free to contact me by phone at (412) 684-4285 or by email at chalas@vennwealth.com

                                                   Christian Halas

                                                   Halas Consulting

                                        Phone and Fax: (412) 685-4285

                                        Email: chalas@vennwealth.com

                                       Website: www.halasconsulting.com

Stay tuned for Part 2 of this two-part Series, coming soon.