With just a few weeks left before December 31st, these year-end tax tips can help any small business save a few bucks

1. Make a Donation
It is the holiday season, do a charity and yourself some good and make a donation. Not only is making a donation a great thing to do for your community, but you can take a deduction that could lower your taxes. Be sure when you make your charitable donation that you get a receipt from the organization. And also talk to an accountant if you donate a service or time to charities as your time is usually not deemed "deductible".

2. Start a retirement plan:
Making payments to a retirement plan will reduce your taxable income for this year, thus lowering your overall tax bill. If you haven't already started an IRA (Individual Retirement Account) or contributed your maximum amount this year, now is a great time to do so. The maximum you can contribute to a Traditional or Roth IRA is $4,000.00.
A SEP IRA (Simplified Employee Pension) allows small business owners to make IRA contributions for themselves and their employees of up to $45,000.00 in 2007.
A SIMPLE IRA (Savings Incentive Match Plan for Employees) allows employees to contribute up to $10,500 in 2007. (that amount increases to $13,000 for employees 50 and older) The great benefit to business owners with this plan is that you are only required to match if your employee contributes to the fund first.

3. Pay Expenses Early:
Pay for items now that your business may need soon. Pre-paying January and even February bills if your cash flow will allow it can reduce your taxable income, thus lowering your tax bill. Some great examples of what you may want to think about paying early are:

  • Lease or rent payments - on office space, equipment, tools
  • Equipment purchases - plan to buy new computers, phones, cars, etc, don't wait until January
  • Utilities/Bills - pay for your January utilities, internet connection, phone bills, insurance premiums, etc. in December
  • Bonuses - if you plan to pay your employees bonus or incentive pay, pay them before year end

4. Defer Income:
Depending on your cash flow needs and the structure of your business, you may be able to defer payments made to you over the next few weeks, until January thus lowering your taxable income in 2007.

5. Portfolio Deductions:
If you or you business invest funds in the capital markets, take steps to minimize your capital gains and take full benefits of any capital loses. Capital loses in excess of capital gains can be use to offset up to $3,000.00 in ordinary income for the individual tax payer.

While we can never and should never avoid paying taxes, taking steps over the next few weeks to reduce your 2007 taxable income can save you money on next years tax bill. As always consult your accountant or tax professional to decide which steps may be right for you to take to lower your tax bill.

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