23 Ways to Cut Your 2008 Business Income Tax Bill

I previously blogged how to cut your 2008 individual income tax bill. I could hear the comments as I was writing: what about my business? Well, never fear! Following are some last minute suggestions to help save on your 2008 tax bill.

But first, a word of caution: Just as with individual tax considerations, there are a lot of phase-outs, caps and other restrictions that may apply for businesses. This is further complicated by the structure of your business – are you a sole proprietor? LLC? Partnership? S corporation? C corporation? There are significant differences in tax structure that will limit (or expand) your tax-trimming options.

The best course of action is to always check with your tax professional for more information.

  1. Pay your outstanding bills. Business expenses paid for calendar year taxpayers by the end of the calendar year are deductible. So pay this week instead of the next. This includes utility expenses, rental expenses and other accounts payable.
  2. Don’t be an aggressive bill collector – this week. If you can wait a couple of days before seeking payment on receivables, do. This doesn’t mean that checks which you’ve already received can be deferred. It can’t. But if you can wait to be paid in January, you won’t have to report that income until 2010.
  3. Buy a new desk – or other office furniture. In 2008, you may be able to deduct 100% of expenses for furniture instead of depreciating it.
  4. Pick up those new tech toys you’ve been ogling. Suggestions include the iPhone, Blackberry, Fujitsu scanners and my personal favorite I’ve yet to buy: the new MacBook. Tech toys can make your work life more productive. And you can save at tax time to boot!
  5. Pay your January rent. See tip #1.
  6. Order new tax and accounting software. You’re going to use it in a few months, why not pay for it now and deduct the cost for 2008?
  7. Reorder business cards and letterhead. It’s deductible. You know you’ll need it. And if you’ve ordered before, you already know how much it costs. Why not pay for it when you order?
  8. Buy a new car for the business. You can write off a new car – either as a deduction or depreciated expense – for 2008.
  9. Throw a year end party. What a great perk! It’s a wonderful morale booster for staff. And it’s tax deductible. A true win-win!
  10. Pay professional dues – such as license and bar dues – now. Most professional organizations start sending out reminders now. Take advantage of them.
  11. Sign up for that advertising service (Yellow Pages, etc.) you’ve been putting off. Advertising related to your business is deductible as a miscellaneous expense.
  12. Improve your web site. Your web site is your calling card. It’s the first impression that many folks have of your business. Does it send the message that you want? Updating or improving your site is deductible.
  13. Pay year end bonuses now. Don’t wait until the first week of January. Cut the checks now.
  14. Donate to charity. Cash, check or credit card payments made by the end of the year to a qualified charitable organization may result in a charitably deduction. Get a receipt!
  15. Buy calendars and calendaring systems now. Sure, you can get great deals by buying in 2009 – but think of how much more you can save in 2008 by claiming it as a tax break?
  16. Upgrade your electronic phone directory or have other maintenance work done.Office improvements are deductible. If there’s something that’s been bugging you – make the call today, not next week.
  17. Buy plane or rail tickets now. If you know you have a trip coming up – a planned conference or client visit, for example – why not book it now?
  18. Buy pre-paid Wi-Fi cards. If you travel often and find yourself scrambling for connectivity, why not be prepared? You can buy pre-paid Wi-Fi cards from T-Mobile and other providers in increments of $10 and $20 and pay now rather than later (and thus, get the deduction now). Most reputable providers do not have cards that expire for at least a year.
  19. Sign up for “coffee of the month” or other delivery services. I love these kinds of services. As a small business owner, I often find that I forget to order the little things that matter in an office, like coffee. If you pay upfront for a quarter or year of deliveries, you’re all set. No more last minute rushing about – and you get the tax deduction.
  20. Prepay postage. We swear by our Dymo postage printer. Unlike annoying services like Pitney Bowes (don’t get me started), you can frontload your Dymo/Endicia account with one click of the mouse. At our office, postage is one of our most significant expenses. Charging up the postage account is cost efficient and there’s no stamps to store.
  21. Prepay for professional services that bill on a project basis. Many professional service providers – from lawyers to IT consultants to PR firms – will pitch based on a set fee. Pay as much as you can upfront to maximize your 2008 deduction. Be careful and read the small print.
  22. Order office supplies. Pens and paper don’t go bad. Assuming you have the storage space, why not make an extra order? An added bonus? Most office supply companies are running great specials right now.
  23. Hire a tax professional. This is simply one of the best investments that you can make. Yeah, it sounds self-serving, but I’m totally serious. It may not save you money immediately – but it will in the long run.

Of course, don’t let the tax tail wag the dog. Only spend money that you have. Don’t throw money that you don’t have away just to save on taxes. Be smart and don’t overextend your business.

And I’m sure there are lots of other good tips out there. Tell us how you save in your small business!

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

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