Smart Moves for the Season

Tax time may be a few months away, but if you act on these four tips before year-end, you can maximize deductions and your income.

1. Make big purchases now. Every penny you spend in 2007 will reduce your taxable income, so purchase items now that you’ll need later. Stock up on office supplies, from printer paper to pens and pencils. And for a bigger bang for your tax buck, now is the time to replace that old copier or purchase new machinery. While you’re at it, pay bills that are due in January early (as long as they’re for expenses incurred in 2007) so you’ll have less profit to tax.

2. Give to charity. After you replace a computer or coffeemaker, donate the old one to a women’s shelter or other local charity that is qualified to accept tax-deductible donations. Just be sure to obtain a bank record or receipt from the organization verifying the offering. Keep in mind that if you took advantage of accelerated depreciation and have already fully written off an item, you can’t claim a further deduction for it.

3. Contribute to a retirement plan. If your business already has a retirement plan, contribute the maximum amount possible. Be sure to check with your financial planner or consultant to determine your contribution limit and deadline. If your company hasn’t set up a plan, starting a profit-sharing or 401(k) plan by December 31 allows you to make tax-deductible contributions for 2007 into the new year.

4. Defer income. If your business has adequate cash flow for year-end and the beginning of 2008, hold off on sending invoices until January. Payments due the first week of 2008 are not taxable until April 2009.

Remember, these are only general guidelines. Check with your accountant or tax adviser to determine which moves are best for your business.

This article is for general information purposes only. The information may not apply to all businesses and all situations and is not intended as advice for specific businesses.

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