YEAR-END TAX TIPS FOR BUSINESSES
Six Tax-Optimizing Tactics to Consider Before January 1
Montpelier, VT-With 2008 fast coming to a close, many area businesses are actively working on preparing tax filings for what has been an economically volatile year. This year, Congress has enacted important changes to the tax laws that provide opportunities for businesses to reduce their income tax burden for the year. Now is the time to review some possibilities for action before year-end.
The following six tips from the Vermont Society of Certified Public Accountants can help your business make the most of these time-sensitive tax opportunities (and don't forget maybe the most important tax tip: organize your records and tax files before meeting with your accountant. It'll save your CPA time, and you money):
1. Can you defer income until early 2009? If you are a cash basis taxpayer, any payments your company can receive during the first week of January as opposed to December will help to reduce your 2008 tax bill. Every cent deferred until January 2009 will not owe taxes until April 2010. There are other considerations, and not every taxpayer benefits from this approach, so be sure to discuss this strategy with your CPA before making a decision.
2. Would it make sense to accelerate expenses? It might. You may want to purchase the everyday items your business will require in the near future to maximize deductions for this year. If you can see a need for goods and services in the first quarter of the 2009, you may want to buy them now.
3. Depending on your anticipated income tax rates for next year, deferral of income or accelerating expenses can make the best sense for many sole proprietors, partnerships, LLCs, and S corporations. However, be sure your cash flow can handle the delay in receiving income. In addition, you would want to consider any potential tax rate changes due to the recent election.
4. Are you a business owner who does not already have a company retirement plan? For some plans it is already too late to set up a plan for 2008, but others can be started now, or even after 12/31/08. This may be a good time to discuss setting up a plan for 2009, with your CPA, as a part of your year-end planning.
5. Have you heard about the Economic Stimulus Act of 2008? It includes a provision that allows business to write off 50% of the cost of many new assets placed in service in 2008. The remaining 50% is deducted over several years under the normal depreciation rules. Used assets do not qualify for this break. There are also special opportunities for faster write-offs of some leasehold improvements made to the interior of commercial property. Ask for details.
6. Are you in need of office furniture, equipment or other personal property for your business? Consider placing them in service prior to 12/31/08 and take a section 179 deduction on them. The Section 179 deduction allows a business to deduct up to $250,000 for years beginning in 2008. There are limitations and details that are relevant, so you should ask the questions soon.
The Montpelier-based Vermont Society of Certified Public Accountants (VSCPA) was first incorporated in 1933, and is a 501(C) 6 registered not-for-profit. Today, the VSCPA's 700 members - representing over 90% of all CPAs in Vermont - work in public practice, business and industry, government and education. The VSCPA's mission is to promote, protect, and represent the interests of its members and the profession while fostering the highest ethical standards. To learn more visit: www.vtcpa.org.