It never fails. You have the best of intentions to organize and clean up your business files and paperwork before the end of the year but then you get caught up in holiday festivities, family gatherings, cookie-making parties and the like, and organizing for the new year gets put on the back burner. Yet with valuable business tax breaks set to expire after December 31, 2013, you ignore these legal tax write-offs at your own peril.
Don’t Miss an Asset Based Financing Tax Write Off
Whether you used asset based lending, factoring receivables, or another form of commercial finance to purchase new business equipment, 2013 is the last year you will have for a maximum deduction value of $500,000 (per Section 179 of the IRS code). It is suggested that small business owners take advantage of this generous limit for asset based lending and purchasing while they still can. In 2014, NBCNews.com reports that the limit will shrink to a mere $25,000.
Avoid the “I’ll just write off the expense” mentality for December 2013. Most companies use one commercial lending option or another (factoring accounts receivable or invoice factoring services) to help manage their working capital or to cover the costs of major purchases. Yet during this time of year, some businesses make the mistake of racking up expenses thinking they can just write them off. This is faulty thinking and a common mistake small business should avoid, however, as a dollar spent does not equal a dollar to deduct in most cases. Most accountants advise not to spend more than they normally would just for the sake of writing it off on your taxes. Of course, costs associated with company holiday parties more than likely are deductible so you don’t have to be a scrooge. But you don’t have to overspend or make a major purchase in hopes of getting a tax break either.
Factoring For Small Business to Help with the New Year
So before you ring in 2014, sit down (advisable with your accountant) and put together the income and expenses you’ve been tracking over the year. This will help you plan for your taxes and minimize unpleasant surprises. It might also be a good time to talk with your numbers’ experts about using financial options such as invoice factoring, working capital financing, or other alternative small business financing options to improve your business cash flow for 2014.