YEAR END TAX PLANNING AND PREPARATION FOR BUSINESSES – Tax Tips for 2004
Dianne Goodman, CPA
|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 IRS taxes but also with your state taxes. Here are tax tips that will help you accomplish your goal.
DEFER YOUR INCOME INTO 2005
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 2005 income is equal to or less than it was for 2004. If not, you are delaying the inevitable and potentially putting yourself in a higher tax bracket for 2005.
ACCELERATE DEDUCTIBLE EXPENSE INTO 2004
Anything charged on your business credit card December 31st and prior is deductible in 2004 even if it is paid in 2005. 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 to prove you mailed those checks in 2004. This works well if your 2005 income is equal to or less than it was for 2004. If not, you are delaying the inevitable and potentially putting yourself in a higher tax bracket for 2005.
OPEN A RETIREMENT PLAN ACCOUNT
See http://www.dgoodmancpa.com/smallbusinessretirementplan.htm 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?
BUY EQUIPMENT AND SOFTWARE BEFORE YEAR END
You can deduct up to $100,000 in equipment and software purchases for the year under Section 179 depreciation expense. This includes sport utility vehicles, pickups and vans with a gross vehicle weight rating over 6,000 pounds. However, businesses should be aware of the change due to the American Jobs Creation Act of 2004. Certain sport utility vehicles (SUV’s) are limited to $25,000 if they were placed in service after October 22, 2004.
These are just some tax tips you should consider when thinking about your year end tax planning for your business. If you have a specific question about your particular situation, e-mail me at firstname.lastname@example.org and I will help you muddle through the tax planning issues you may have.
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.
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Dianne Goodman, CPA
Comprehensive Small Business Solutions, PC
1 866-531-3035 toll free
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Dianne Goodman, CPA –Specializes in servicing Small Businesses and Individuals. Visit www.dgoodmancpa.comfor relevant and current information on a variety of financial and tax issues focusing on small businesses and individuals or call at 1-866-531-3035.
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