Year-end Tax Tips
The first,
and most important, step is to talk with your tax adviser. Tax laws are
complicated and each case is unique. Only your own advisor can properly
counsel you.
If you’re
a cash basis taxpayer, pay invoices due in January early – prior to year
end. Put off revenue where possible. Every cent earned up to Dec. 31, 2006
has taxes paid in April 2007; whereas income deferred to January 2007, will
not owe taxes until April 2008. Of course, any deferral strategy will depend
on your profit and losses for the year and your corporate legal structure.
However, the Democratic Congress may work against you if President Bush
doesn’t hold the line. If you've had a bad year--you have no profits or are
in a low tax bracket for 2006--reverse this and accelerate income and delay
expenses.
Depending
on your accounting methods, you may wish to check inventory for goods that
have been damaged or have become obsolete. The drop in market value of the
inventory can provide your company with added deductions.
Small
businesses get to take a big deduction for all or part of their computers,
furniture, office equipment and other so-called "personal property"
purchased through the end of 2006. You can deduct up to $108,000 worth of
computer hardware, software and other business purchases in 2006. The end of
the year is also a good time to update your minutes book and memorialize
decisions of the owners, directors and managers. This is good “preventative
maintenance” for your business entity.
