Last, Last Minute Tax Actions

[Janet Behm]

1) Buy Supplies in Advance (to increase expenses and offset income)
How much disposable equipment do you expect to use in 2021? Order it now so the cost is deductible in 2020 if you need to offset income. Buy what you think you'll need for the coming year, as long as you have the space to store it. This is especially easy to do with software, information courses, or other subscriptions that you know you want to keep.

A word of caution: Under a 12-month rule, you cannot deduct prepaid expenses that run more than the end of the year following the current year. For example, if you prepay a three-year subscription to a trade journal, the cost is deductible over three years (not just one).

2) Work Now, Bill Later
Instead of sending an invoice immediately so you'll receive payment this week, consider waiting until next week. This will ensure that payment is received in 2021, and taxes on the income are deferred for another year. However, it may make sense to adopt the opposite approach -- bill immediately to receive the income this year.

3) Get Ahead On Other Vendor Costs
You may have bills piled up that are not due until 2021. If you pay them now, you can deduct the expenses in 2020. Don't have the funds in your bank account at the moment? Consider putting the expenses on your business credit card if the vendor or other party allows it. Costs charged to credit cards before the end of the year are deductible this year even though the credit card bill isn't due until 2021.