If you itemize your deductions (that means you file the long form), there are some simple things you can do to reduce your taxes.  It's important to remember that if you don't itemize, none of these suggestions will make a difference on your tax return.  For most people, if you own a house, you probably itemize, if not--you probably don't.

 

First, make sure you pay all your state and local taxes before the end of the year.  These are things like real estate taxes and the personal property taxes on your car.  You deduct the taxes in the year that they're paid, so if you're late--you can't deduct them until next year.  On the other hand, if you forgot to pay those taxes on time last year, you can deduct both your 2008 and 2009 taxes on this return.

 

The same advice goes for charitable donations.   Like your taxes, any contributions you make before the end of the year go on your 2009 tax return.  Contributions to the food pantry count as well.  And, it's not a bad idea to clean out your closet and make a donation to the Good Will or Children's Home Society.  (Okay, as I was writing this, the Vietnam Veterans of America called so I'll include them on the list too.)  When donating clothes, you need to make a list of the items donated and their approximate value.  A good guide to donating clothing and their values can be found at the Goodwill website:

 

If you donate over $5,000 worth of items, you must have a written appraisal from the organization if you intend to claim the deduction.  Please, be realistic about the value of your donations.  Three bags of used underwear is just not worth $1,000.

 

 If you claim mileage, this is my tip for you, it's called "The Rose Bowl Rule".  On January 1,  during the Rose Bowl,  go out to your car and check the odometer.  Write your mileage down on your calendar.  Of course, your New Year's resolution will be to keep a better mileage log.  Remember, the IRS tends to audit mileage and your log is your only defense.  Your log will have the date, the miles driven, and what the business was.  For example:  11/17 - 17.4 miles, training meeting.  11/19 - 3.8 miles, sales call-Mr. Jones.  It doesn't need to be fancy, one of those 17 cent notebooks from Walgreens is perfect.  If you've got the mileage log App on your I-Phone, use that.  Like Nike says, just to do it.  It all starts with the Rose Bowl.  Don't forget.

December is when most small businesses close their books.  Before you finish off your Quick Books for the year, make sure you reimburse yourself for things you didn't pay out of your business account.  For example:  last week I went to the Post Office to mail a present to my son.  While I was there, I remembered that I needed stamps for my business too, so I just paid for them with my personal card.   I always tell people not to do that, but it happens. 

 

Anyway, you need to write  an expense report and reimburse yourself from your business account before the end of the year.   You do this the same way as if you were working for a large company and turning in an expense report.  Make a list, attach the receipts, and make the check payable to yourself (not a credit card.)  File the expense report with your regular business receipts.   

 

One last thing:  times are kind of tough,maybe you don't have enough money in the business account to reimburse yourself.  That's okay, make the report anyway.  Instead of writing a check, you'll call it a "loan from shareholder".  It's an accounting way of saying you paid for it out of your own money.  You still want to be able to claim those expenses on your tax return.  If you need help with this, just give me a call, I'll talk you through it.