Introduction to Year-End Tax Strategies

     Checklist for Individuals

>>Checklist for Businesses

     Checklist for Payroll & 1099 Reporting

If you’re on the cash basis, defer income by delaying invoicing customers.  Note that “constructive receipt” determines when income is received, which includes anything received, in hand or via the mail.

Also for cash basis taxpayers, pay expenses before the end of the year, whether by mailing the check or through the use of credit cards.  Don’t forget to consider interest on loans and any State/County taxes.

Take a physical inventory count and consider items that are obsolete or damaged.  If your business produces, purchases or sales merchandise, you must have an accurate accounting of each year-end inventory to compute the cost of goods sold.

Purchase non-inventory supplies and do any needed repairs and maintenance by year-end.

Pay your children for their time spent working in your proprietorship business.  They can each earn up to $5,150 without having to file and pay Federal or Idaho taxes ($1,840 for Oregon), and your business gets the deduction!  Remember that payroll reports and W2s need to be filed.

Buy equipment by December 31 to take advantage of the business property expensing option (Section 179 expense) up to $125,000 in 2007. You don’t have to pay cash; financed purchases qualify if the asset is received and put into service by year-end.  Section 179 phases-out when $500,000 or more in total assets have been purchased.  Vehicles under 6,000 pounds do not qualify for the Section 179 expense. SUV’s over 6,000 pounds are limited to $25,000 of allowable Section 179 expense.

If you want a Keogh, Profit-Sharing or Pension Plan, it must be set up by year-end.  You will have until the tax return deadline in 2008 to make contributions to these plans.

Set up an employee benefit program (i.e. AgriPlan/BizPlan) to take a 100% tax deduction on your Proprietorship (Schedule C or F) for family health care expenses.

If you are considering maximizing owner profit-sharing contributions or C Corporation owner compensation, you need to have your accounting up to date and accurately estimate year-end net taxable income, as well as make any corresponding or related transaction by Dec. 31.

If you plan to incorporate your business, you need to do this before you begin operating in the next year.  Contact your legal counsel ASAP to get this started.

 
Circular 230 Disclosure:  This is to advise you that, unless expressly stated, nothing in this communication (including any attachment or other accompanying materials) was intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding any federal tax penalties, or for promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to anyone.