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YEAR END TAX PLANNING AND PREPARATION FOR BUSINESSES - Tax Tips for 2008

Now is the best time to start thinking about your year-end tax planning for your business. These tax strategies can be put into effect by the end of the year and some as late as when the tax return is due. Planning now will save you money and reduce your tax liability not only with your federal taxes but also with your state taxes. Here are tax tips that will help you accomplish your goal.

DEFER YOUR INCOME INTO 2009

If you don't receive payment until the first week of January for cash basis tax returns and don't bill until January for accrual basis tax returns, you have effectively deferred your income. This works well if your 2009 income is equal to or less than it was for 2008. If not, you are delaying the inevitable and potentially putting yourself in a higher tax bracket for 2009.

ACCELERATE DEDUCTIBLE EXPENSE INTO 2008

Anything charged on your business credit card December 31st and prior is deductible in 2008 even if it is paid in 2009. You can also write a check on December 31st that you would have normally paid in January. You may want to get a confirmation receipt from your post office to prove you mailed those checks in 2008. This works well if your 2009 income is equal to or less than it was for 2008. If not, you are delaying the inevitable and potentially putting yourself in a higher tax bracket for 2009.

OPEN A RETIREMENT PLAN ACCOUNT

See SMALL BUSINESS RETIREMENT PLANS for an example of what you can do with that available profit tax deferred until retirement. This is a fantastic option for those who have the cash and want to contribute money into their personal retirement account and deduct that contribution from their corporate earnings. Does it get any better than that?

SELF-EMPLOYED HEALTH INSURANCE PREMIUMS

Self-employed individuals are allowed to claim 100% of the amount paid during the taxable year for insurance that constitutes medical care for themselves their spouses and dependents as an above-the-line deduction without regard to the 7.5% of AGI floor.

BUY EQUIPMENT AND SOFTWARE BEFORE YEAR END

If you are in business and purchase equipment you may make a "Section 179 Election," which allows you to expense (i.e. currently deduct) otherwise depreciable business property. In general, you may elect to expense up to $250,000 of equipment costs (with a phase-out for purchases in excess of $800,000) if the asset was placed in service during 2008 due to the 2008 Stimulas Act. In addition, careful timing of equipment purchases can result in favorable depreciation deductions in 2008 for bonus depreciation.

NOL CARRYBACK PERIOD

If your business suffers net operating losses in 2008 you may apply those losses against taxable income going back two tax years. Thus, for example, the loss could be used to reduce taxable income—and thus generate tax refunds—for tax years as far back as 2006.

GET ORGANIZED

If you haven't already done your accounting and reconciled it to your bank statements, you have some catching up to do. Knowing where you are at financially is the true measure of your performance. It allows you to make better business decisions and to be more successful financially.

TAX PLANNING FOR YOUR INDIVIDUALS

Go to YEAR END TAX PLANNING FOR INDIVIDUALS for what you can do to prepare your personal taxes for year end.

These are just some tax tips you should consider when thinking about your year-end tax planning for your business.

This article was intended to provide general information about year-end tax planning. It does not contain all the rules and exceptions that may apply to your situation. If you have further questions regarding year end tax planning, I can be reached at www.dgoodmancpa.com.

About the Author

Dianne Goodman, CPA, FCPA - Specializes in servicing Small Businesses and Individuals. Visit www.dgoodmancpa.com for relevant and current information on a variety of financial and tax issues focusing on small businesses and individuals or call at 1-888-851-1975.

CONTACT INFORMATION:

Dianne Goodman, CPA, FCPA
Comprehensive Small Business Solutions, PC
505 323-2307
1 888-851-1975 toll free
www.dgoodmancpa.com