As a business owner, you’re probably looking for ways to reduce your tax obligations. With only a couple weeks left in the 2010 tax season there are a number of legal methods you can use to reduce your 2010 taxes that you will owe.
The end of the year is the perfect time to review or create a business budget. It doesn’t matter whether you’re running a small business or an extremely large corporation – every business should have a budget. It is effective in managing your cash flow and when you compare actual monthly revenue against your monthly budgeted amounts, you’ll always know whether your business is succeeding or in danger of failing. Should your actual revenues fall short of what you budget for, you know you need to reduce expenses. Meeting with an account to budget revenues and expenses for the coming year is a good strategy for year end business planning.
To reduce taxes you owe, check with an accountant or tax professional for details or how to apply the following tax deductions to your situation:
Business Equipment – on federal taxes, you can deduct the cost of new equipment for your business up to $500,000. For larger businesses, you can also take depreciation of 50% of spending over $2,000,000 and normal depreciation on the rest. Not all states have matched these amounts, so it’s possible you can’t take the same deduction on your state taxes. In that case, you will need to keep two sets of records for depreciation – one for federal requirements and one for state tax requirements.
Set Up Retirement Plans – if you are self employed and do not yet have a retirement plan, open one before the end of 2010 and take a deduction for your contribution. Depending on your particular business, you may be eligible to open a 401(k), a KEOGH plan, Roth IRA, or SEP’s. The deadline for opening a SIMPLE IRA is in October, so if that’s something you’re interested in make sure to plan for it now for the following year.
Business Supplies – you can deduct the cost of eligible supplies for your business. If you know you’re going to need printer paper, ink, pens, and other office supplies – stocking up at the end of the year will reduce your taxable income and help lower what you owe.
Corporation Dividends – you can possibly reduce risk of tax on accumulated corporate earnings by issuing dividends.
Defer Income – depending on your business legal structure, you may be able to defer payments your company receives in December to January to reduce the current year tax bill. You might send some of your December invoices out a bit later so the money is received in January rather than December, for example. Make sure your business can handle the delayed cash flow.
Charitable Donations – if your business intends to make charitable donations which are also qualified tax deductions, consider making them before the end of 2010 rather than waiting until 2011.
