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TechnoratiIt is that time of year again when we need to take a look at your financials to do some tax planning for the year. I have recapped below a list of the items we will need in order to properly evaluate and plan for your year-end taxes as well as address any year end tax planning ideas. As the end of calendar year 2008 approaches, it's time to think about what can be done to minimize the amount of taxes paid to the IRS by your business. Although tax planning should be a year-round process, there are several year-end strategies you can take, particularly if you are an S Corporation.
Here are some things to think about as the end of the year approaches:
• Try to keep your inventory as low as possible on December 31st. Since you are taxed based on the value of your goods in stock, it makes sense to minimize your inventory.
• Accrual-based taxpayers may want to consider delaying end of December billing until early January. Since income is recognized when it is billed, you can delay the tax effects from 2008 until 2009.
• For the same reason, it makes sense to book all tax-deductible expenses and accounts payable before the end of 2008, rather than waiting until next year. This includes your personal expense report for December. Cash-based taxpayers must pay these expenses, while accrual-based taxpayers need only to receive and enter the bills.
• There is still time to set up a qualified retirement plan, depending upon the type. A defined-benefit plan can be a good way to reduce taxes while preparing for your retirement.
• Please be sure to turn in an expense report and obtain reimbursement by years-end for any business expenses you might have incurred personally such as business mileage on your personal vehicle.
Additional Year End Planning Tips
If you have kept track of your business mileage, the rate for for 2008 is 50.5 cents per mile driven between January 1 and June 30, and 58.5 cents per mile driven between July 1 and December 31. Keep in mind that you must have kept a log of the miles you have driven to take this deduction.
Although not directly related to 2008 tax deductions, small business owners should taking some additional steps to ensure the the success of their businesses in 2009. If you expect a big change in your 2009 income, you should consult with an accountant now to minimize the tax impact. If you are a subchapter S corporation, you should plan to have the annual meeting of your Board of Directors as close to the new year as possible.
While this generic tax advice can be helpful to any small business, there are probably some specific steps your business can take to reduce taxes at the end of 2008. We have helped many small businesses in Atlanta and North Georgia minimize their tax liabilities and increase their profitablity.
Please forward to me a recap of your year to date financial statements and payroll check stubs along with a projection of the rest of the years profit. Also please foward an estimate of what you anticipate the rest of the years profit to be, dates and amounts of estimated taxes to both the IRS and state, and be sure to let me know of any substantive changes in your tax situation so that I can advise accordingly.
Please be reminded that both the IRS & States/Georgia assess penalties and interest for late payment and that an extension to file is not an extension to pay. To discuss this and other tax planning ideas please feel free to call me today.
John Dillard is an author and Certified Public Accountant. To See how he takes Christ along with him to work visit www.HisCPA.com and for his latest book Overcoming Life's 9/11's: Job's Journey visit www.John-Dillard.com "Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!"
