The start of the year often comes with a lingering sense of dread, especially if you’ve missed the December 31 deadline for certain tax deductions. But don’t panic—there’s good news. Even after the ball has dropped, there are strategies to reclaim some of your tax savings.
In this guide, we’ll explore actionable steps you can take to soften the blow of missed deadlines and regain lost ground, particularly if you’re self-employed or a small business owner.
1. Contribute to a SEP-IRA (Yes, You Still Can!)
For the self-employed and small business owners, a Simplified Employee Pension (SEP) IRA offers a powerful way to save on taxes—even after December 31. Contributions to a SEP-IRA can often be made up until the extended tax filing deadline, giving you extra time to act.
Why It Matters:
- Generous Limits: Contribute up to 25% of your net self-employment earnings, subject to IRS caps.
- Extended Timelines: If you file for an extension, you have even more time to establish and fund a SEP account.
Pro Tip: Not sure if a SEP-IRA or another plan, like a Solo 401(k), is the right fit? Consult with a financial advisor or CPA for tailored guidance.
2. Last-Minute Contributions to a Traditional IRA
If you’re not self-employed, there’s still an opportunity to reduce your taxable income. Traditional IRAs allow contributions up until the tax filing deadline (usually April 15), provided you meet eligibility criteria.
Key Benefits:
- Potential Tax Deduction: Depending on your income, contributions might be deductible.
- Tax-Deferred Growth: Contributions grow tax-free until withdrawal.
Remember: Specify the prior tax year when making your deposit to ensure the contribution counts toward your intended deduction.
3. Audit Your Books and Catch Hidden Deductions
Messy bookkeeping can cost you significant deductions. Now’s the perfect time to clean up your records before filing.
Quick Checklist:
- Reconcile Accounts: Ensure bank balances align with your financial software.
- Gather Receipts: Every small expense adds up. Don’t overlook seemingly minor items.
- Categorize Expenses: Ensure every dollar spent is in the right bucket (e.g., home office, marketing).
- Verify Contractor Payments: Have all necessary 1099 forms on hand.
Accurate records not only maximize deductions but also protect you in case of an audit.
4. Revisit Year-End Business Purchases
Did you buy new equipment or tools before the year ended? To claim deductions for the prior year, items must have been placed in service by December 31.
If You Missed the Deadline:
- Carry Forward: Deduct the cost in the following tax year once the items are in use.
- Depreciation Options: Explore Section 179 or bonus depreciation for higher first-year deductions.
Tip: Plan your purchases strategically next year to avoid missing out again.
5. Consult a Tax Professional for Catch-Up Strategies
A skilled tax advisor can uncover opportunities you might not see on your own. Whether it’s unused credits, additional retirement vehicles, or strategic extensions, their expertise can make a significant impact.
What a Tax Pro Can Do:
- Identify overlooked deductions.
- Recommend optimal retirement contributions.
- Help you decide if filing an extension is beneficial.
Bottom Line: Guessing can be costly. Enlist professional help to navigate these waters.
6. Set Yourself Up for Next Year’s Success
Avoid the same pitfalls next year by implementing systems to streamline your finances.
Actionable Tips:
- Automate Tracking: Use software that categorizes expenses in real-time.
- Schedule Reminders: Mark key dates like quarterly tax payments and retirement contribution deadlines.
- Mid-Year Check-Ins: Meet with your CPA before the year-end rush.
Prevention is always better than cure—start building better habits now.
Take the Next Step with Confidence
Missing the December 31 tax deadline isn’t the end of the world, but it’s a wake-up call. Whether you’re cleaning up your bookkeeping or making last-minute IRA contributions, the goal is to maximize your tax savings and reduce stress moving forward.
Need Expert Guidance?
At JS Morlu, we specialize in helping busy professionals and small business owners navigate the complexities of tax deadlines and deductions. Contact us today for personalized advice and strategies tailored to your situation.
Don’t Wait—Act Now! Let’s work together to recoup what’s possible this tax season and set the stage for smoother sailing next year. Schedule a consultation today.
