Although it's getting late in the year, small business owners still have time to reduce their 2009 tax bill.

The bottom line of tax planning for small businesses is minimizing taxable income and maximizing deductible expenses. Unless you expect a higher tax bracket in 2010, consider deferring income until next year. You might wait until January to mail out sales invoices or to ship sold goods. This might sound counter-intuitive, but remember, income deferred to January will not be reported on your tax return until you file for 2010.

The flip side of reducing taxable income is increasing your deductions. Try to accelerate business expenditures planned for next year into 2009. Stock up on supplies or take a business trip earlier than planned. If you need to purchase major equipment, consider buying before year-end. Up to $250,000 can be written off in 2009 for new and used business equipment acquired and placed in service before December 31. First-year 50% bonus depreciation can also be taken on new equipment purchases made in 2009.

Accrual-basis businesses can reduce taxable income by writing off bad debts, as long as there is adequate documentation. Identifying obsolete inventory might also score a deduction. One of the surest methods for cutting business taxes is a qualified retirement plan. If you already have a plan established, be sure to contribute the maximum allowed for 2009.

Your business may already qualify for some deductions but lack one thing: proper accounting records. For instance, the business use of your personal vehicle is deductible, but only if you keep detailed records. You may also be eligible for a home office deduction. But without documentation, you could lose the write-off.

Finally, do a quick review of your estimated tax payments before year-end. This will tell you where you stand, and possibly save you tax underpayment penalties to boot.

A little year-end planning could pay big dividends come April 15. Give our office a call today to discuss tax-cutting strategies for your business.

© copyright 2009