It doesn't seem possible that it's August already (you sent in your second quarter payroll tax report, right?). The end of the tax year is fast approaching and it's time to review your business taxes to make corrections and enact strategies to minimize taxes. Some tune-up tips to consider:
Go back to the basics of tax planning
As William Perez, Guide to Taxes, says, remember that your tax planning goal is to (a) minimize income, (b) maximize expenses, and (c) take advantage of tax credits.
1. Buy new or used equipment and software
With increased Section 179 deductions in 2011, you can claim a tax deduction for the entire cost of new and used equipment and software.
2. Improve facilities
The tax laws usually don't consider real estate in the Section 179 deduction section. But for 2010 and 2011 you can deduct up to $250,000 of qualified improvement costs for certain kinds of real property: interiors of leased non-residential buildings, restaurant buildings, and interiors of retail buildings. If you need to make improvements, do them now, because the tax break won't be available after 2011 unless it is extended by Congress.
3. Buy More New Equipment
In addition to the Section 179 depreciation expense deductions mentioned above, you can also claim up to 100% bonus depreciation on the cost of new (not used) equipment and software. You must place it in service (start using it) by December 31, 2011. This tax break also applies to vehicles, and it also expires December 31, unless the Congress decides to extend it.
4. Carry back Net Operating Losses (NOLs)
Because the economy is still unstable, the tax laws are more flexible in allowing you to carry back net operating losses. You can carry back NOLs for more years, to offset gains in those years. This one's tricky, so check with your tax advisor if you think you will have a loss in 2011.
5. Capture Travel Costs
With the IRS standard mileage rate increased to 55.5 cents beginning July 1, make sure you are capturing every mile driven for business purposes. All of those miles driven should be logged as they are driven, because the IRS may not allow the deduction if you can't show "contemporaneous" records.
6. Record Business Startup Expenses
Whether you are in the process of starting a business, planning to start a business, or just opening your business, all of your startup costs should be recorded so you can take advantage of higher startup expense deductions. For tax years after December 31, 2009, the tax code allows up to $10,000 as a deduction for start-up expenditures, but requires a dollar-for-dollar reduction of the $10,000 deduction if startup expenditures exceed $60,000.
Review all Business Expenses, Look for Possible Deductions
Check this article on Business Tax Deductions A to Z to see what you might be able to take advantage of. For example, look at parking tolls, coffee and beverage services in the office, taxi and bus fares, casual labor and tips, business magazines and books you bought. Those little costs can add up to big savings at tax time.
Read more about Small Business Tax Planning Tips
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