Nine Year-End Tax Tips
Year-end is around the corner.
You still have time to minimize your 2014 taxes if you act quickly. You can save real money with some serious tax planning this month, hundreds if not thousands of dollars.
As a general rule, you want to maximize or accelerate deductions and minimize or defer income. That means recognizing expenses/deductions in 2014 and recognizing income in 2015.
Here are nine year-end tax tips for golf pros. You may want to consult your tax advisor (or call us) to make sure you are taking the right steps.
1. Tax Withholding – If you are behind in your taxes for 2014, it’s better to make up the shortfall through additional withholding taxes rather than a fourth quarter estimated payment.
The government counts withholding taxes as having been paid evenly throughout the year regardless of when they are paid. If you pay off your 2014 taxes via a January 15, 2015 estimated tax payment, you may be subject to late payment penalties. This is an easy way to save taxes!
So if you are under-withheld this year, ask your club to withhold a larger amount in your last paycheck. Alternatively, if you receive a year-end bonus, the club could withhold more money from your bonus check.
Otherwise, you could have your spouse increase his or her withholding at their job at the end of the year assuming you are filing a joint return as most married couples do.
2. Alternative Minimum Tax (AMT) – If you pay relatively low taxes because of large deductions, you may be subject to the AMT. Certain factors could trigger an AMT liability. These include deductions for state or local income taxes, large capital gains, real estate taxes, or business expenses.
The AMT can be very tricky. Certain usual deductions may not apply. I suggest you discuss this issue with your tax advisor.
3. Lesson/Golf Shop Income – If you have a choice, ask your Club to put off your final payment for your 2014 lesson and golf shop income until January.
4. Bonus – If you get a bonus from your club, ask that it be paid next year. Otherwise, use your bonus as an opportunity to catch up on under-withheld taxes, as I noted above.
5. Payables –Be sure to pay your vendors this year. These deductions will save you tax dollars now, rather than a year from now.
6. Retirement Plan – If you don’t have a retirement plan (IRA or 401K) yet, set up a plan of your own this year. You can wait until April 15 of next year to make your first contribution and still get a deduction for this year’s taxes.
7. Capital Gains and Losses– Remember, you can deduct a maximum of $3,000 a year for investment losses. That means offsetting losses by realizing gains may be a more effective tax strategy.
If you have realized gains in your investment portfolio (separate from your retirement plan), consider selling underperforming holdings at a loss to offset your gains. At the same time, consider selling holdings that may have hit their peaks. You can offset those gains with your realized losses.
8. Deductions – Prepay your January mortgage payment in December, so you can deduct the interest included in that payment this year. Pay your final state estimated tax payment before year-end as long as you are not subject to the Alternative Minimum Tax (AMT).
Make charitable donations prior to year-end. Also, many people don’t realize this, but if you charge deductible expenses on a credit card, you will get the deduction this year even if you pay the credit card bill in 2015.
9. College Savings Plan – For golf pros with young children, 529 Plans are a good way to save for college education. Contributions are generally deductible for state tax purposes. The income earned in the account is tax free as are the distributions (as long as they are used to fund education costs).
For many more tax savings tips, see our newly updated year-end tax planning letter on our webiste at www.hermancpa.com.
Call me if you have any questions or wish to discuss your tax situation further. I’d be happy to do so without any charge or obligation. And again, we work with Pro’s throughout the country, so please consider calling us even if you are not in our backyard!