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Ever have an accounting, tax, QuickBooks or cash flow management question and didn't know who to ask? Now you can Ask An Expert! Send your questions to askexpert@eclconsulting.com and we will print the question and the answer in our newsletter! No question is too big or too small. |
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Remember to schedule your FREE meeting with us to see how we can save you time and money!
(520) 241-0371
info@eclconsulting.com
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Greetings!
At this time of year, many small business owners are wondering if there are any ways they can further reduce their tax owed before December 31st. In this edition we have included four tips to help you make the most of the last few weeks of 2008. |
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4 Tips for Lower Tax
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As we move toward the end of the year here are several tips to better manage your expected tax liability for 2008.
1. Conduct a Year End Review
Schedule a meeting or remote session with us to look at your income, expenses and anticipated tax for the year to date so you can have the tools to plan for reducing your tax before year end.
2. Accelerate Deductions
Accelerating your deductions means paying some taxes and expenses before year end to get the most benefit rather than spreading out the cost for several years.
Why should I accelerate my deductions?
In the case of tax benefits that are phased out if you have more than a
certain level of adjusted gross income (AGI), a strategy of deferring
income and accelerating deductions may also allow you to claim larger
deductions, credits and other tax breaks for 2008.
Example:
You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (Form
1040, line 38). So if your adjusted gross income is $100,000 and you are claiming itemized deductions then you can only deduct the portion of your medical expenses that exceeds $7.500 (7.5%). Paying medical bills in the current year may increase your deductible expenses beyond the 7.5% limit and allow you a to take advantage of the deduction in the current year.
Note: In most cases, credit card charges are considered paid in the year of the charge regardless of when you pay on the card. This, however, does not apply to store revolving credit cards. For example, If you charge expenses on a Wal-Mart store credit card, the deduction cannot be claimed until the bill is paid.
3. Defer Income
Depending on whether it's better for you,
tax-wise, to delay or accelerate income, you can decide to bill clients or
customers sooner (before year-end) or later (after the year-end) to accomplish
your tax planning goals.
Why should I defer income?
Deferring income into 2009 is an especially good idea for taxpayers who anticipate being in a lower tax bracket next year, generally because of much-reduced income or much-increased deductible expenses.
Note: It may pay to accelerate income into 2008 if your marginal tax rate is much lower this year than it will be next year.
4. Increase Withholding
If you have a sum of income coming in that is not covered by withholding taxes (1099 earnings, other self employment income), increasing your withholding before year-end can avoid or reduce any estimated tax penalty that might otherwise be due. On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment. Call us for additional support regarding estimated taxes.
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New AZ Dept. of Revenue Rule |
Effective on January 1, 2009, Information Return penalties will change. If you are filing Form A1-R, Form 165, Form 120S (when the S Corporation is not subject to tax), or Form 99, you need to be aware of these changes. The penalty for failing to file, filing late (including extensions) or filing an incomplete Information Return is $100 for each month, or part of a month, that the failure continues, up to a maximum penalty of $500.
Additional information on the penalties is available in the instructions for the forms or from Taxpayer Information and Assistance at 602-255-3381.
If we are currently processing your information returns we will be following up with you in January to ensure we receive all necessary information far in advance of the deadlines for filing so we can ensure you avoid these penalties. Have questions about information returns and which ones you need to file? Contact us at askexpert@eclconsulting.com | |
Have you enjoyed this newsletter? Have any suggestions for things you'd like to see covered? Let us know by emailing askexpert@eclconsulting.com.
Each issue will cover different topics and have different features, so watch for us each Tuesday.
Remember, we provide accounting and cash flow solutions for successful companies -- yours!
Eli Larriva
ECL Consulting, LLC
(520)241-0371
info@eclconsulting.com
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