Year-end tax moves for small businesses

A couple of weeks ago, I posted some moves to make regarding your taxes, investments, retirement, gifting and general financial details by Dec. 31.

I soon heard from readers asking for some moves to consider this month in connection with their small businesses. I'm glad all y'all asked!

Since I focus on individual, not business taxes, I asked for some year-end suggestions from more businesses-oriented folks. 

Small Business Tax Strategies recommends that business owners:

• Stock your shelves. If you buy everyday supplies for your business during the last shopping week of the year you can deduct the expenses on your 2011 return. It doesn't matter, say the newsletter's editors, if you don't actually use the supplies until 2012.
• Postpone business invoices. If your business uses the cash method of accounting, you don't have to pay tax on amounts your business has billed until you actually receive payment, even if you performed most or all of the work this year. Invoices sent the last week of the year aren’t likely to be paid until next year.
• Get new equipment up-and-running. Your business can claim a generous Section 179 deduction of up to $500,000 in 2011, but only for qualified property acquired and placed in service before Jan. 1, 2012 (assuming your business uses the calendar year for tax purposes). Take items "out of the box" if you intend to deduct the cost this year. And note, says SBTS, unless new legislation is enacted, the maximum Section 179 deduction will drop to $134,000 next year.

Several tax pros who are on Twitter and Facebook also offered some timely advice.

Jeff Haywood, a CPA and fellow Texan and Twitterverse denizen @jeffhaywoodcpa, also recommends that business owners consider purchasing equipment before the end of the year.  He elaborates on this and other actions — control your income, bill payment timing, retirement account contributions — in his own eponymous blog's year-end tax moves post.

Trish McIntire, an Enrolled Agent who tweets as @mactax and blogs at Our Taxing Times, says every business owner should talk to his or her tax pro before making major purchases so that they know the rules for all the special depreciations.

A personal aside: Talking to your tax pro before Dec. 31 is good advice for individual filers, too.

As for the crucial job of record keeping, which you'll need to substantiate any claims on your return, Trish suggests businesses look into scanners. The devices are cheap, she says, and you can scan in the thermal paper receipts while they're still legible. And don't forget to annotate them.

Tax documentation also is on the mind of The Wandering Tax Pro, known to his friends as Robert D Flach or @rdftaxpro on Twitter. RDF says keep your records current. It's much easier, he notes, than catching them up in big chunks months later.

Heather LaBeau dropped me a note at the ol' blog's Facebook page to say that her personal pet peeve when it comes to records is mileage. "I'm tired of asking [client] for mileage," she says.

So Heather's clients, and everyone else who uses a car for business, one of your 2012 tax resolutions should be to keep track contemporaneously of your business trips. Your tax pro, the IRS and you when you see how the correct mileage claim can produce a smaller tax bill will be happier.

Tim Randle, familiar to Twitter followers as @Randletr, has another form of transportation in mind. He suggests that businesses buy an airplane.

"The plane idea is actually really good for those that already fly," says Tim, noting the immediate depreciation of up to $179,000.

"I want an old, small one to hedge my own consumption," he adds. Don't we all, Tim. Don't we all.

These should keep you busy for the next couple of weeks. But we're all open to more tax-saving suggestions.

If you've got some more year-end tax tips for small business owners, we'd love to hear them. Just drop a note in the comments.

You also might find these items of interest:

• Accounting for your income in the proper tax year
• 2011 pension plan contribution levels
• Home office tax pros and cons