Before the year is through and you put away all the Christmas decorations, stop and consider your bottom line – your business bottom line. Your goal is to decrease your taxable income and lower your overall tax bill.
Here are 5 easy steps cash based businesses can take now that may help:
- 1. Pay any and all outstanding bills – If you have stacks of bills on your desk that you have set aside until after the holidays to pay – don’t! Pay your bills now. If you write the checks on or after January 1st you may not be able to claim the expense on your 2009 tax return.
- 2. Consider buying new equipment – The IRS will again allow you to expense as much as $250,000 worth of new equipment purchases before depreciation comes into play. Take advantage of this opportunity. Even upgrading your software or purchasing a new printer can lower your taxable income for the year. Remember the equipment must be for business and not personal use.
- Purchase any needed supplies – A jewelry designer has orders for 50 sets of earrings to be delivered in early February. Don’t wait until January to buy the supplies you know you will need. Purchase them before the end of the year and expense them on your 2009 tax return.
- Pay employee bonus’s – Employee bonuses are often based on total income earned for the year or other revenue goals. This is a great incentive, but write the check on December 31st so you can record the expense in 2009.
- Invoice after the 1st of the year – If your business is cash based, meaning you don’t accrue income using accounts receivable and you only recognize income when the cash is received, wait to invoice clients until January 1st. This will allow you to recognize the income in 2010 rather than 2009.
These are just a few ideas to get you started. As always, please consult your accountant or tax advisor as these strategies may not be best for all individuals and/or small business. You are also welcome to contact me directly with any questions at lindseypatrick1 (at) yahoo (dot) com I would love to speak with you.
