| The year is almost over and tax season is looming on | | | | supplies (stationary, paper and the like) as well as |
| the horizon. What can you do before December 31 to | | | | bigger ticket items like office equipment (computers, |
| reduce this year's tax bill? Plenty. | | | | printers, fax machines, etc). |
| First, you must get the big picture. Assuming you've | | | | With regard to office equipment, keep in mind that you |
| been faithfully tracking income and expenses during | | | | can take advantage of the Section 179 deduction on |
| the year, it's time to print out an Income Statement | | | | assets purchased by 12/31. This means you can avoid |
| (aka Profit & Loss Report or P&L) and see | | | | the quagmire of depreciation rules and simply deduct |
| where you stand. | | | | something like a computer in the same way you |
| If you don't have all your 2008 transactions input into | | | | deduct paper clips - it is fully deductible in the year of |
| your bookkeeping software program, it's critical that | | | | purchase rather than expense it via depreciation over |
| you get that done right away, otherwise you'll end the | | | | several years. |
| year without knowing what the numbers look like, and | | | | In addition to supplies and equipment, you can also |
| you'll miss out on a great tax-saving opportunity. And | | | | increase expenses in 2008 by pre-paying expenses |
| you'll also enter 2009 without a clue as to what your | | | | that are not due until 2009. Here are some examples: |
| tax situation looks like. If you've got a balance due on | | | | advertising, utilities, rent, and insurance. Perhaps you've |
| the 2008 return, the sooner you realize that, the better. | | | | received a bill for these items in 2008 but payment isn't |
| Once you've got your Income Statement in front of | | | | due until January. Go ahead and pay it now. |
| you, compare the bottom line to 2007. Was 2008 | | | | One final comment: Keep in mind that if you wait until |
| better or worse than 2007? If you had a better year | | | | 2009 to make these purchases, you'll get the same |
| and are showing an increase in profit, you still have | | | | deduction and the same resulting tax savings |
| time to do something about it. | | | | (assuming you're in the same tax bracket). So what's |
| There are only two ways to reduce taxable income: | | | | the benefit? Timing. Think of it like this: I have $350 and |
| reduce sales or increase expenses. Now that 2008 is | | | | I'd like to give it to you. When do you want it? Now or |
| just about history, there's not much you can do to | | | | later? Probably now, right? |
| reduce sales (and why would you want to do that | | | | Well, if you have $1,000 to spend on business |
| anyway?). But you can increase expenses during the | | | | deductions and you are in the 35% tax bracket, the |
| last few days of the year by making additional | | | | IRS has $350 it would like to give you. When do you |
| purchases, assuming the cash is available to do so. | | | | want it? This year or next year? It's up to you, but |
| So make a list of legitimate business items that you | | | | good business sense would say to take it now. Get |
| were planning to buy in 2009, and buy them in 2008 | | | | the money a year earlier and use it to your advantage. |
| instead. This would include smaller things like office | | | | |