This year, many of our business clients are starting to hear us say, "You've had a better year than last year! Now let's talk about what steps you can take to reduce the amount of profit-sharing payments (tax) you will owe the IRS."
Since it's that time of year that we like to go shopping, here are some "tax saving shopping tips" for business owners:
• Need a new vehicle? (Warning: Don't do trade-ins!) If you buy a new 6,000-pound or larger truck (or SUV), you can potentially write off the entire purchase in 2011. (Less than that size is not a great tax move. Congress says they want everybody to buy environmentally friendly, smaller, more fuel efficient cars, but then turns around and penalizes you if you do. Go figure!)
• Need new equipment in the next four or five months? Buy it before the end of 2011 (and put in service) and get potentially a 100 percent write off in 2011.
• On the cash basis of accounting? (Most small businesses are.) Pay all outstanding bills before the end of 2011. Also, consider telling your customers it's OK to wait until January to pay the bills they owe you (assuming you are not desperate for the cash now).
• Consider making a contribution to your company's profit-sharing plan. You have to set it up before the end of 2011, but can defer making the contributions until later in 2012. (SEP-IRAs have better delays in setting up.)
• Non-business owners (who think they are going to owe tax in 2011) can do some tax planning as well. (If you think you will owe more tax in 2012, then reverse all of the following ideas.)
• Make your January mortgage payment in December. (Get proof from your mortgage company that it received it so it shows up on your annual 1098.)
• Pay your first-quarter 2012 property tax bill in December.
• Make your planned 2012 charitable contributions in December.
- If you think you will have enough medical expenses already in 2011, consider prepaying for any upcoming scheduled medical events (birth, surgery, etc.). Usually, you can get a discount from the medical provider as well for doing that.
• If your employer doesn't have a retirement plan, make an IRA contribution. You don't actually have to make the contribution until 2012. (Special rules on the exact time apply)
• Prepay your kid's college tuition for January 2012 in December. (Make sure the college knows so it can report it on its annual 1098 to you.)
• Any large purchases (cars, motorcycles, etc.) can create a large sales tax deduction (assuming you are already itemizing). The catch: You must make the purchase before the end of 2011.
Will Rogers once said, "If you don't learn to laugh at trouble, you won't have anything to laugh at when you're old."
• Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.
• Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.
