2011 Year-End Tax Planning for Businesses
If your business is a cash-basis taxpayer (if you aren't sure, ask me) and you believe that your 2011 and 2012 profits will be about the same, then pay all of your January bills in December to pull the tax deductions into this year. Paying by credit card by 12/31 counts as paying this year, even though you will pay the credit card bill next year. (Note: only works with bank credit cards, not retail cards, such as your Office Depot or Staples card.)
If you need to make a major equipment purchase (including autos) you might want to do so before the end of the year. 100% bonus depreciation is available in 2011, but is scheduled to fall to 50% in 2012. Bonus depreciation is superior in many ways to the Section 179 writeoff.
To qualify for enhanced writeoffs for improvements to retail space and restaurants, your expenses must be paid by 12/31/11. This tax break is scheduled to expire at the end of this month.
If you are thinking about setting up a retirement plan, remember that 401(k)s, including the new "solo 401(k)" must be set up by 12/31. SEP-IRAs can be set up later.
Consider putting your spouse on payroll so that you can contribute for him/her also.
If your business is losing money in 2011, the government may owe you a refund! A net operating loss carryback may get you a refund of taxes paid in prior years. There's still time to apply for refunds if you lost money in 2008 - 2010, too. Contact me for more information.
Also, if your LLC, partnership, or S corporation will lose money in 2011, be sure that you have sufficient basis to be allowed to deduct the losses. This is especially tricky for S corporation owners.
If your S corporation had a good year, be sure you have paid enough salary to the officers to avoid the IRS' hot audit target.
Tax items of general business interest:
The deadline for filing 2011 Forms 1099 will be here soon. Are you missing any legal names, addresses, or tax i.d. numbers? If so, ask your contractors to give you a signed Form W-9 right away.
The IRS has announced that the standard mileage allowance will remain at 55.5 cents per business mile in 2012.
Print a hard copy of your 2011 business calendar. This will help to document your business-related meals, travel, and car mileage. I just don’t trust the electronic version to be uncorrupted and available two years from now.
If your business involves maintaining an inventory, count your inventory as close to January 1st as possible. This often involves helpers and pizza!
Pack up your 2010 business records and mark the boxes “Destroy 2015.” See my document retention page for information about what to keep and for how long.
You may also want to look at these pages:
Bess Kane, CPA
Burlingame - San Mateo - Foster City CPA Since '88
Answers to many of your tax questions can be found here
If you have a tax question that you think other people would be interested in, send it to me. If I use it in my Tax News Blog or on my General Tax Info Page,I'll send you a Starbucks card!
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