Moving Words – Check-up Time
Timothy Brady
“The way to get started is to quit talking and begin doing.” -Walt Disney
It’s time for that annual business check-up, and much like the annual physical for which many of us go to the doctor, the purpose of your business insurance and tax checkup is to investigate how your company can save on taxes and ensure your business risks are reasonable and affordable. Let’s look at two critical areas.
Number One: As you’re preparing your tax returns for 2023, it’s extremely important to review your business tax strategy for 2024. Sit down with your CPA/Tax preparer and look at what you anticipate your taxable earnings for 2024 will be. Doing so will prepare you by having a set plan, so you can accelerate expenses or delay income at the end of 2024. If you’re a cash-basis taxpayer, you could boost deductions by declaring and paying bonuses throughout the year. Plan so you can spread the costs of major repairs throughout 2024 rather than waiting for the last few months of the year. Spread out buying new tires for your equipment earlier in the year. (Note: with the way prices of new tires are increasing monthly, purchasing and storing them could save you both in the tires’ cost and reduction of your taxes.)
Look into the “Section 179″ rule that allows you to take an immediate tax deduction for most purchases of business equipment. By deducting the full cost immediately instead of depreciating it over several years, you’ll cut this year’s tax bill. Or it might be time to make that big ticket purchase of those needed trailers so you can get the first-year depreciation on your 2024 tax return. The revised Section 179 rule for 2024 deduction limit for qualifying equipment purchases is $1,220,000, and the phase-out threshold is $3,050,000. In 2024, bonus depreciation is 60% for equipment placed into service from January 1, 2024, through December 31, 2024.
This is also a suitable time of year to make sure you’re using the most appropriate form of business — whether it’s sole proprietor, S or C corporation, LLC, or partnership. Has your CPA explained any recent changes to the tax laws that will affect you and your business? Have them detail the best strategy as to where those changes will have the lowest impact on your taxes, or how you can take advantage of other changes to reduce your tax bite.
Number Two: Review your business insurance coverage. Risks change each time you add or remove a piece of equipment, expand or reduce the areas you service and whether the number of your employees and/or contractors fluctuates. Have you added a new warehouse or office in another state? What are the insurance requirements for auto liability or Workers Compensation Insurance in the new state? All these questions (along with many others) need to be asked at least several times a year. Ask lots of questions when an insurance policy is up for renewal; any time your risk environment changes by adding or subtracting personnel, equipment or locations, and then at year’s end to make sure you’re moving into the new year with the right levels of insurance coverage. Don’t just automatically write a check to renew your insurance policies when they come due. Instead, sit down with your insurance agent every year. Review your business operations, focusing on any changes. Discuss the types of risk that could arise. Ask about new developments in business insurance. Use your agent’s ability to identify risk areas and also suggest suitable coverage.
Invest the time each year reviewing these two critical areas – because if they’re ignored, that non-action can cost you significantly.
“Well done is better than well said.” -Benjamin Franklin
