| Someone recently asked me what they could do now | | | | other items that will need to be replaced soon this |
| to make tax time easier for this upcoming tax season. | | | | year to reduce your taxable profit. |
| The best thing you can do is to think about taxes | | | | In addition, if you itemize your tax deductions, make |
| before then year ends. Most people wait until the tax | | | | sure you pay all mortgage payments, property tax, |
| filing deadline before they ask how they can reduce | | | | medical expenses, etc. this year, even if they aren't |
| their income taxes. Unfortunately, once 2008 ends, | | | | due til next year, to help increase your tax deductions |
| there's very little you can do to minimize your taxes | | | | for this year. |
| for 2008. | | | | 3. Contribute the maximum amount to retirement plans. |
| To start your tax planning, you should review your | | | | As a home based business owner, you have several |
| income, deductions and tax withholding before the | | | | retirement plans to choose from. You can setup a |
| year ends. Which means you need to get your | | | | traditional IRA, a SEP IRA, a Simple IRA, or even a |
| bookkeeping caught up! You should use a software | | | | 401K. The maximum contribution amounts vary based |
| program, such as QuickBooks, Quicken Home and | | | | on the retirement plan, but these plans allow |
| Business, or spreadsheets to keep track of your | | | | contributions from $5,000 up to $45,000 per year. |
| income and expenses for your business. | | | | Contributing to a retirement plan is a great way to |
| Once your bookkeeping is caught up... do you expect | | | | maximize your retirement savings and to minimize your |
| your home business to have a profit or a loss this | | | | taxes at the same time. |
| year? | | | | 4. Give to charity. Although charitable donations don't |
| If you have a profit, here are some tax planning tips to | | | | reduce your business income, they do reduce your |
| help minimize your home business taxes this year: | | | | taxable income if you itemize your deductions. Gifts of |
| 1. Defer your income. If you have a home based | | | | cash or goods are a great way to help reduce your |
| business and it looks like you'll have a good profit this | | | | tax bill this year. |
| year, consider invoicing your clients in January instead | | | | On the flip side, if you expect a larger profit next year, |
| of December, to defer the income to next year. Or, | | | | or if you expect to jump into a higher tax bracket next |
| just wait until the end of December to send invoices. | | | | year, it's best to report as much income this year, and |
| Any money you receive in January will go on your | | | | to defer as many expenses as possible till next year. |
| 2009 tax return, not 2008. | | | | Either way, year end tax planning can really help |
| 2. Accelerate expenses. Do you need to purchase | | | | minimize your taxes. But you have to make it a point |
| any inventory? What about supplies? Does your | | | | to review your taxes before the year ends. Once |
| computer need to be replaced? If you've got a profit | | | | 2008 is gone, so are your tax planning opportunities for |
| for 2008, consider purchasing inventory, supplies or | | | | 2008. |