|
Click above for link to
New York State's
Most Wanted Fugitives
Click above for link to
FBI Home Page
Click above for link to
Homeland Security
Click above for link to
latest NY area weather
Click above for link to
New York City
Office of
Emergency Management
Click above for a link to
New York State
Emergency Management
Office
Click above for a link to
Nassau County
Office of
Emergency Management
|
Year End Tax Strategies and planning tips
for Small
Business and Individuals.
By
Gary J. Schwartz, C.P.A.
As the end of the tax year
approaches, it is most important and useful for both small business and
individual taxpayer's to make the most out of taking the bite out of tax time.
To lower your tax bite, it is wise to take certain steps at year end. Numerous
strategies exist to help you, including reviewing professionally developed
year-end tax checklists, performing a marginal tax rate analysis to ensure that
you won't be pushed into a higher tax bracket unnecessarily, and postponing
income and accelerating deductions (or vice versa).
Year-end tax planning and also
investment decision - making may sometimes result in substantial tax savings.
Year-end tax planning primarily concerns the timing and the method by which you
report your income and claim your deductions and credits. The basic strategy for
year-end planning is to time your recognition of income so that it will be taxed
at a lower rate, and to time your deductible expenses so that they may be
claimed in tax years when you are in a higher tax bracket.
In essence, you should try to
accomplish the following:
1) Recognize income when your
tax bracket is lower
2) Pay deductible expenses when
your tax bracket is higher
3) Postpone the payment of tax
whenever possible
A marginal tax rate analysis
involves understanding the difference between your marginal tax rate and your
effective tax rate. If you know the rate at which your next dollar of income
will be taxed, you may be able to engage in planning that will prevent you from
being pushed into a higher tax bracket unneccessarily.
Year-end tax planning for small
business is slightly different than it is for individuals. The result is the
same but the strategy is a little different. For instance, any payments your
company can receive during the first week of January as opposed to December cuts
your tax bill. Income earned up to December 31 has taxes paid in April of 2005;
whereas incomedeferred to January 2005 will be paid out in 2006. Purchase items
your business will require during the immediate future to maximize deductions
for the current year. Also, if you need to purchase office equipment or other
types of capital expenditures consider purchasing them and benefit by the lump
sum depreciation method or take advantage of additional accelerated depreciation
on capital purchases.
Another year end tip includes
reviewing your ending inventory. Depending on your accounting method, damaged or
obsolete inventory denotes a drop in the market value and can provide your
company with added deductions. Finally, maximize contributions to a retirement
plan or initiate a new plan and take full advantage of the various plans
available that give rise to lowering your income tax burden and preparing for
the years ahead.
These tax saving saving tips
that were discussed briefly are just a few basic ways in which almost every
taxpayer can easily help to reduce tax liabilities with minimum effort. Aside
from the do's and don'ts of tax savings, I can't stress enough the importance of
planning and implementing the necessary guidelines within the tax boundaries for
the benefit of every taxpayer. Don't wait until year end to find out that you
have a tax burden or you were unaware of tax strategies. Let everyone's New
Year's resolution be focused to include that anticipated tax planning and
business strategies puts you in control of year end suprises.
Gary J. Schwartz, C.P.A.
Phone: 516 766-8482
Fax: 516 766-1278
| ![[Company Logo Image]](_borders/logo.doc.jpg){kind=logo}
MBFAA
