Year-end Strategies to Cut Your Business Taxes

The end of the year still presents opportunities to cut your company's tax bill. The financial position of your business should be clear enough by this time to identify tax-saving strategies that fit your company's situation. Some year-end strategies to consider:

• Make equipment acquisitions. A certain amount of 2001 equipment purchases can be immediately deducted, rather than depreciated over several years. If you're looking for more business deductions in 2001, accelerate your planned equipment purchases to fully utilize the expensing option available this year.

• Establish a retirement plan. There are several types of retirement plans that can be established by year-end or even until your 2001 tax return filing deadline. If you are a business owner who is significantly older than other company employees, certain plans will allow you to contribute more for yourself than for your employees.

• Review your benefits package. Fringe benefits can help you attract and retain good employees and cut your taxes. While adding a new benefit this late in the year may not significantly reduce your 2001 tax bill, you can get a jump on next year's taxes by establishing a plan now.
  
  For example, a medical reimbursement plan allows employees to use pre-tax dollars to pay for items not covered by insurance. Amounts spent through this type of reimbursement plan are not subject to FICA tax, which reduces the company's payroll taxes.

• Review meal and entertainment expenses. Generally, business meals and entertainment costs are only 50% deductible, so many businesses simply combine these expenses into one account and deduct half. But some of these expenses are 100% deductible, including meals provided to employees at company picnics and holiday parties, meals directly related to company business meetings or training sessions, and food and beverages furnished for employees on the business premises.

• Review customer receivables for bad debt write-offs. Accrual-basis businesses can deduct accounts receivable in the year they become uncollectible. If there is a question regarding uncollectibility, you can, at a minimum, write off the collection agency's fee once the receivable is turned over to them.

• Check the status of estimated tax payments. If it appears that your business has paid in too little in estimated taxes to date, make an adjustment in the fourth quarter payment to minimize any underpayment penalty. If enough has already been paid in, consider eliminating the last quarter's payment.
  
  Owners of "pass-through" entities, such as partnerships and S corporations, can adjust their income tax withholdings from wages before year-end.

For a review of year-end moves that could reduce 2001 taxes for your business, give us a call.

Related Information:
        2000 Year-End Tax Planning - For Businesses
        Consulting Services
        Selecting a Tax Advisor
        Services Available
        Small Business Services
        Tax Cutting Ideas - December, 2000
        Tax Services
        Withdrawing Money From An S-Corp

© Copyright 2001 Raymond S. Kulzick. All rights reserved. 011230.

This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance. Read Disclaimer.