With the holiday season in full bloom, and the New Year right around the corner, most businesses have fallen into that ‘Friday afternoon’ stage of the year. It’s time to reflect, retool, restock, and revel (although you may want to do your reveling after work!)
I want to add one more word to that, re-check. As in re-check all the ways you can lower your tax bill in 2007. Because there’s still time to do such, and, despite the airwaves being crammed with year-end tax advice, there are two very simple tips that are often overlooked.
Here they are (please note, these are valid if your business is on cash-basis accounting, as opposed to accrual basis accounting):
(1) Accelerate Expenses:
Deductible expenses, that is.
Pay all of your outstanding bills – including any near-term expenses like travel, maintenance, and prepaid subscriptions. In other words, get the vehicles fixed this week, and buy airline tickets for May’s convention now (you’ll probably get a better deal anyway.)
Pay beginning of the month bills early. Even the bills you have slated to be paid the first week of January. This can include recurring bills, like rent, phone, utilities, etc.
Now is the time to stock up on Office Supplies. Hey, you’re going to need them anyway- may as well get them now.
Lastly, you can purchase equipment. Depending on what you buy, you may get an immediate write off in 2007 or, alternatively, spread out the depreciation over five years.
(2) Defer Income:
Just like pulling some 2008 expenses into 2007 can lower 2007 taxes, pushing some income into 2008 can have the same effect. If you have some receivables not deposited yet, waiting until 2008 (next week) to deposit them defers the taxes owed on that income a full year.
Many businesses can utilize both of these strategies. In fact, you can even make it fun for someone. Imagine saying this: Joe, you don’t need to make that deposit this week. Instead, how about doing a little shopping?
Hey, saving taxes, and perhaps a “boss of the Year” nomination – what’s not to like?