Consider a few new wrinkles then preparing your 2008 returns. A CPA offers practical tips without interruption depreciation, vehicle costs, and other items
By Karen E. Klein
The conventional enlarged views adhering yearend tax planning is to accelerate deductions and defer income. But 2008 may subsist the year conventional wisdom gets upended. CPA Michael Hanley, of Merl & Hanley in Smithtown, N.Y. offers seven tips to keep in take notice of over the next six weeks.
1. Book a tax-planning meeting or phone call with your accountant to devise a yearend strategy specifically with a view to your firm. Why the need for fine-tuning? Some small companies’ revenues are below the horizon for 2008, not for the reason that their business has declined but because pinched customers are profitable their bills more slowly, Hanley says. That means superadded revenue will drop in as late payments during in good time 2009—just when tax rates may go up under a new Presidential administration, he says. "Some companies may have the equivalent of 10 months of income this year, and 14 next year. That means they may not want to defer additional income into 2009," he says.
2. Take favorable opportunity of bonus depreciation. For qualified assets placed in service in 2008, you may claim an extra 50% deduction in addition to normal depreciation and deductions available under the Internal Revenue Code’session Section 179. The Section 179 "expensing" deduction allows a business to write opposite the full cost (for better reason than depreciating it from one to another several years) of certain business estate, including machinery, vehicles, gear, and computers, up to a settled dollar level. For 2008, the greatest deduction limit was increased to $250,000, Hanley says. Note that the asset must be "placed in service" in 2008: That means you can’t deduct the cost of a computer system you’ve ordered but that won’t be operating in your office until January. "If you need a piece of equipment, make the purchase and get it working now," Hanley says. "People looking to win their sales quotas for the extreme point of the year are definitely going to be offering some good deals."
3. If you have a vehicle that you use both for work and business, increase your pursuit driving and decrease your exterior driving to get the greatest in quantity out of the tax withdrawal for personally owned vehicles. "If you’ve driven a total of 10,000 miles by the end of the year, and 6,000 were business miles, while 4,000 were personal miles, you can suppose 60% of the other vehicle expenses, like oil changes and maintenance, being of the kind which a trade deduction," Hanley says.
Alternatively, you can choose to take the standard mileage degree as being 2008. That was 50.5¢ per mile for the first half of 2008 and 58.5¢ per mile in favor of the inferior half. (Only small business owners that file Schedule Cs, such as sole proprietors, are allowed to prefer which way to take their vehicle deductions, Hanley points out.)
4. If your company operates on the accrual lowest part for tax purposes, fix your employees’ premium amounts before Jan. 1, but pay them early nearest year. Generally, the bonuses aren’t taxable to employees until 2009, goal they can have being deducted upon the body your congregation’s 2008 return so long being of the kind which they’re announced in 2008 and paid by Mar. 16, 2009, Hanley says.
5. If you’re doing major renovations at your business location, make sure you schedule repairs and maintenance jobs separately, Hanley says. "Capital improvements aren’t deductible as profession expenses, like basic repairs are. Instead, improvement costs are added to the ‘basis’ of the property for levy purposes." Lumping every one of the work into individual project could cheat you out of 100% deductible avocation expenses.
6. Keep detailed records of collection efforts that will support any deductions you take for disappointing obligation that becomes worthless in 2008. If you can’t get individual of those pinched clients to pay up, you can write the amount off provided you can seem you made a good-faith exertion to collect the debt. That means keeping records of telephone calls, letters, and other efforts you’ve made to get the money, including hiring a collection service (BusinessWeek.com, 7/11/08).
7. If you’ve had a good year and you need to increase your deductions for 2008, consider rescheduling function trips planned for forward next year into December, Hanley says.
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