Year-End Tax Planning For Business- Toscano & Ardito CPA, serving North Andover MA, Portsmouth NH and all New England

Year-End Tax Planning For Business

December 2007

If you have a stake in a business or professional practice, you need to keep an eye on that entity's tax bill, too. Again, year-end moves can pay off:

· Accelerate expenses. Write checks before year end to pay for deductible items. You can claim 2007 deductions even though the checks might not be cashed until 2008. You might pay for office supplies, phone service, subscriptions, rent, insurance, or utilities. If you're short of cash, charge deductible business expenses on a credit card before year end. That will create 2007 tax deductions even though the payments won't be due until 2008.

· Delay your invoices. If your business or professional practice uses the cash method of accounting, don't be in a hurry to send out bills. Even if you perform income-producing services in 2007, you won't have to recognize taxable income until you collect. If that occurs in January or February, it's 2008 income.

· Buy business equipment. If you have a business or a professional practice, you probably can take advantage of the "expensing" election permitted under Section 179 of the tax code and claim a full first-year write-off for equipment you buy. In 2007, you can expense up to $125,000 worth of business property. The $125,000 limit applies to taxpayers that purchase no more than $500,000 worth of equipment per year. Above $500,000, you lose the benefit of expensing, dollar-for-dollar.

For equipment to be expensed in 2007, it must be placed in service this year, no matter when you pay for it. On the other hand, if equipment is placed in service in December and your obligation to buy is solid, you can qualify for a 2007 write-off even if you don't pay until January.

· Investigate your inventory. Dispose of goods that have been damaged or have become obsolete. The products current value may be deductible.

· Write-off worthless debts. If you use the accrual method of accounting, you can deduct bad debts in the year they become uncollectible. Before year end, make collection calls and send letters, then keep records to show no payments were likely to result.

(Information provided courtesy of the AICPA)

Toscano & Ardito, P.C.
40 Bayfield Drive
North Andover, MA 01845
Tel. 978-688-2880
Fax 978-688-2759

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