Sunday, December 9, 2007

Home Business New York City-Year End Tax Tips For Home Businesses

Home Business New York City-Year End Tax Tips For Home Businesses

Someone recently asked me what they could do now to make taxtime easier for this upcoming tax season. The best thing you can do is to think about taxes before thenyear ends. Most people wait until the tax filing deadline beforethey ask how they can reduce their income taxes. Unfortunately,once 2007 ends, there's very little you can do to minimize yourtaxes for 2007.

To start your tax planning, you should review your income,deductions and withholdings before the year ends. Which meansyou need to get your bookkeeping caught up! You should use asoftware program, such as QuickBooks, Quicken Home and Business,or spreadsheets to keep track of your income and expenses foryour business. Once you're bookkeeping is caught up... do you expect your homebusiness to have a profit or a loss this year? If you have a profit, here are some tax planning tips to helpminimize your home business taxes this year:

1. Defer your income. If you have a home based business and itlooks like you'll have a good profit this year, considerinvoicing your clients in January instead of December, to deferthe income to next year. Or, just wait until the end of Decemberto send invoices. Any money you receive in January will go onyour 2008 tax return, not 2007.

2. Accelerate expenses. Do you need to purchase any inventory?What about supplies? Does your computer need to be replaced? Ifyou've got a profit for 2007, consider purchasing inventory,supplies or other items that will need to be replaced soon thisyear to reduce your taxable profit. In addition, if you itemize your tax deductions, make sure youpay all mortgage payments, property tax, medical expenses, etc.this year, even if they aren't due 'till next year, to helpincrease your tax deductions for this year.

3. Contribute the maximum amount to retirement plans. As a homebased business owner, you have several retirement plans tochoose from. You can setup a traditional IRA, a SEP IRA, aSimple IRA, or even a 401K. The maximum contribution amountsvary based on the retirement plan, but these plans allowcontributions from $4,000 up to $44,000 per year. Contributingto a retirement plan is a great way to maximize your retirementsavings and to minimize your taxes at the same time.

4. Give to charity. Although charitable donations don't reduceyour business income, they do reduce your taxable income if youitemize your deductions. Gifts of cash or goods are a great wayto help reduce your tax bill this year.

On the flip side, if you expect a larger profit next year, orif you expect to jump into a higher tax bracket next year, it'sbest to report as much income this year, and to defer as manyexpenses as possible 'till next year.

Either way, year end tax planning can really help minimize yourtaxes. But you have to make it a point to review your taxesbefore the year ends. Once 2007 is gone, so are your taxplanning opportunities for 2007.

About The Author: Kristine A. McKinley, CPA, and CFP,specializes in helping home based and online business ownersunderstand and minimize their income taxes. For more tax tipsfor home based and online businesses, please visithttp://www.onlinebi ztaxtips. com

Home Based Business New York City

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