The year is rapidly coming to a close. But before we say goodbye to 2013, there are a few things you should spend your money on now and ways to manage your money in preparation for the new year.
Figure out how much you want to spend before the end of the year and work from there.
“At this time of year, you should be looking at whether you are going to be showing a capital gain or loss for the year. The best thing to do is sit down and find the number as to where you situate (whether and how much you are gaining or losing),” says Alex Parker, CEO of Brand Strategix. “After you know your ‘magic number,’ then list out the most strategic expenses you could make which would be tax deductible.”
For example, if you have $20,000 to get rid of, spend it on something that you will get the best return, says Parker. Maybe additional office space (using the money to cover a few months of rent) or advertising. “I have advertising to bring in more leads for may salespeople to close,” he notes.
“Another crafty way to kill three birds with one stone is that if you are looking for publicity, find a way to donate to a charity (a tax deduction) that you can tie in with your business so that it is seen in the public eye (virtually guaranteed press coverage), which will also boost your sales because of the additional press coverage and increased positive perception of your company in the public eye,” suggest Parker.
Adds Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, “Plan and make donations to nonprofit organizations of money, unneeded vehicles, clothing and household items, or stocks or other investments. You want to take advantage of any contributions you have made, or can make, to lessen your tax burden. If you itemize, every contribution matters.”
Do it now so you have time to get your deduction. If you wait til the last minute, you may not have time to obtain any needed appraisals or valuations to list these contributions accurately, per IRS guidelines,” says Gallegos. “Also, many people have plans to make contributions, but don’t make them far enough in advance of Dec. 31 that they are received and logged in time to count for 2013 deductions.”
If you don’t have one already, set up an emergency fund. It should cover six to nine months of expenses. “You must continue to build it each month –and December is no exception. One of the best ways to avoid credit card debt is to have a savings fund for emergencies. Even just a few hundred dollars can make the difference between charging and not charging an unexpected expense. Start socking away any extra cash in a savings account where you can access it if needed, but where you won’t be tempted to spend it otherwise,” advises Gallegos.
Also, take a look at your retirement savings. “This is key all year-round, but make sure you’ve saved as much as you can under whatever retirement savings plan you have at this time of year to maximize tax benefits,” says Gallegos.
The end of the year is prime time to organize all your receipts and data. “Make sure you find all possible deductions and credits to help ensure you won’t make last-minute mistakes in doing your return,” explains Gallegos. “Waiting til the last minute almost guarantees you’ll miss some tax deductions, meaning your burden will be larger at the end of the year – and next April.”
You can also take the time to estimate your tax obligations. “To get an estimate, obtain a copy of last year’s tax form and complete it with 2013 data. If you purchase tax return software, you can use that. Or go to the IRS website and download the form,” says Gallegos. “If you are afraid that you will not be able to meet your tax obligations (or owe back taxes), the time is now to seek help from tax debt relief specialists who are skilled in dealing with the IRS.” By estimating tax, it eliminates any surprises on what you’ll have to pay.
“It’s easy to be surprised with tax obligations if anything in your tax-related life has changed (that includes not only work, but additions to your family, kids leaving home and more),” says Gallegos. “By not knowing ahead of time, you run the risk of not having the money to pay your tax bill (or making a plan to do so). And penalties for not paying taxes owed with a filed return are much less than the penalties for not filing a return at all.”
Think about things you need and use money to purchase those items. If you need new equipment, get it before we ring in 2014.
“Buy machinery, vehicles, electronics, business software, office equipment, machines, office furniture, and many other types of tangible equipment,” advises Mike Brown, president of the equipment finance division at Washington Federal. Why now? Because at the end of 2013 there will be major changes to the 2013 bonus depreciation rules. “Under Section 179 of the US Tax Code, a business can deduct the full purchase price of new or used equipment bought (and put to use) during the 2013 calendar year. This offer is only good through 2013 and will expire at the end of the year,” explains Brown. The 2013 deduction limit is $500,000–good on new and used equipment, as well as off-the-shelf software. The limit on equipment purchases is $2,000,000.
Make a plan and spend your year-end money wisely.