Before you know it, 2011 will be over. Are you doing all you can to minimize your taxes now? Here are a few tips for you:
1. If profits are good, consider purchasing needed fixed assets before year-end: computers, software, vehicles, etc. You must buy them and put them into use before the end of the year to take the tax write-off. You may be able to write off 100% of the cost (up to $500,000) under U.S. Tax Code section 179 if you have the net income to offset the deduction.
2. If you are using cash basis of accounting and profits are good, pay all the bills that you can before the end of the year but still leave the cash flow you need to start the year. If you use accrual basis of accounting, you will book the expense when you incur it (generally when you receive a bill dated for the current year).
3. Postpone billing your customers until after the first of the year so that additional revenue is not received this year.
4. Consider opening and contributing to a Simple IRA, SEP IRA or other retirement plan.
5. If you are an S-Corp or an LLC electing an S-Corp designation for tax purposes, balance the amount you pay yourself with the amount of profit distributions you are taking (you pay income taxes and social security and medicare taxes on wages but only income taxes on distributions).
6. Pay down credit card and loan accounts to reduce the amount of interest you will have to pay.
7. If you track inventory, be sure to do a physical count of your inventory and adjust your book value to actual. Be sure to take out damaged and obsolete inventory.
8. If you use your personal car for business purposes, remember you can deduct the cost of mileage using the current IRS rate (for 2011, the rate is $.51 for mileage from January 1-June 30 and $.555 for mileage from July 1-December 31). You must track the mileage, you can’t just guess!
9. Claim the health insurance tax credit for small employers. If you qualify, you can claim a tax credit that can potentially cover up to 35% of the cost of providing health insurance coverage to employees.
10. Make sure your bookkeeping is up to date and all bank accounts, loan accounts and credit card accounts have been reconciled through December 31.

For information about what expenses are a tax deduction, click here.
Consult with your CPA or tax consultant for more information and congratulations on a good year!