Year-end tax strategies for accrual-basis taxpayers

This article organizes the original guidance on year-end tax strategies for accrual-basis taxpayers into clear sections for easier reading and reference.

Overview

This opening section presents the main context from the original post.

The last month or so of the year offers accrual-basis taxpayers an opportunity to make some timely moves that might enable them to save money on their 2016 tax bill.

Record and recognize

This section keeps the original guidance focused on record and recognize.

The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2017. This will enable you to deduct those expenses on your 2016 federal tax return. Common examples of such expenses include:

• Commissions, salaries and wages,
• Payroll taxes,
• Advertising,
• Interest,
• Utilities,
• Insurance, and
• Property taxes.

You can also accelerate deductions into 2016 without actually paying for the expenses in 2016 by charging them on a credit card. (This works for cash-basis taxpayers, too.) Accelerating deductible expenses into 2016 may be especially beneficial if tax rates go down for 2017, which could happen based on the outcome of the November election. Deductions save more tax when tax rates are higher.

Look at prepaid expenses

This section keeps the original guidance focused on look at prepaid expenses.

Also review all prepaid expense accounts and write off any items that have been used up before the end of the year. If you prepay insurance for a period of time beginning in 2016, you can expense the entire amount this year rather than spreading it between 2016 and 2017, as long as a proper method election is made.

This is treated as a tax expense and thus won’t affect your internal financials.

Miscellaneous tax tips

This section keeps the original guidance focused on miscellaneous tax tips.

Here are a few more year-end tax tips to consider:

• Review your outstanding receivables and write off any receivables you can establish as uncollectible.
• Pay interest on all shareholder loans to or from the company.
• Update your corporate record book to record decisions and be better prepared for an audit.

Consult us for more details on how these and other year-end tax strategies may apply to your business.

Related Resources

These resources connect the article topic with related Bowers service pages and approved professional reading.

• Tax Services
• Audit & Assurance
• Client Accounting & Advisory Services
• Business Strategy & Growth
• Harvard Business Review
• Accounting Today

FAQ

The questions below summarize the main points already covered in the article.

What is the main focus of Year-end tax strategies for accrual-basis taxpayers?

The article focuses on year-end tax strategies for accrual-basis taxpayers and organizes the original guidance into sections for easier review.

What topics does the article cover first?

The article begins with record and recognize and then continues through the remaining points in the original post.

Which additional areas are included?

Additional sections include look at prepaid expenses, miscellaneous tax tips.

Does the post include action items or reminders?

Yes. The original post includes listed items that have been kept in list format for easier scanning.

Was the original post wording changed?

The revision keeps the author wording and updates the structure so the post is easier to read online.