Local accountants and small business specialists are offering a few end-of-year tax tips.
Stockman Kast Ryan accountant Cheryl Solze says keep first things first.
“No matter if you’re an existing business or a new one, the first thing you need to do is project income through the end of the year,” she said. “That way, you know about tax breaks you can use at the end of the year — and you can be prepared if you need to make changes in 2012.”
Taking some time to settle accounts now can open path to saving money this year — and to making sure they’re on track next year.
Time is running out for some opportunities. Businesses can choose to write off 100 percent of the cost of new equipment, but only until Dec. 31.
“For instance, if you think your profit is going to be about $10,000 and you buy a piece of equipment for $20,000, then you can take 100 percent depreciation in 2011, and not have a tax bill,” she said.
However, this is the last year owners can take full depreciation in a single year. In 2012, they’ll only be able to take 50 percent of the depreciation.
Other business decisions include when to bill in the last month. If cash flow isn’t a problem, billing too early might create a larger-than-expected tax bill.
“Business owners could decide to bill on Dec. 31, so that money comes in January,” Solze said. “That will make your tax bill smaller, and give you cash if January is a typically slow month for business. It’s one way to make sure your tax bill is manageable.”
Of course, businesses are still operating in a climate of uncertainty, she said.
“One of the huge unknowns out there is what — if anything — Congress will do to change the tax picture during December,” she said. “One of the big things is the payroll tax exemption that we had this whole year. We don’t know if that will continue.”
Businesses face one big change on the state level. Those businesses in one of El Paso County’s four enterprise zones will need to get certification when they buy new equipment in 2012. This year, they only have to state they are in the enterprise zone to receive 3 percent off their taxes for any new purchases.
“It’s a big, big change,” Solze said. “And it’s one few businesses really know about. But next year, before they purchase new equipment, they will need to get that certification from the enterprise zone offices. In fact, we’re recommending everyone in the enterprise zones get pre-certified before the end of the year.”
But the end of the year is about more than just getting ready for taxes. It’s about making sure the business is prepared for the new year.
Online marketing consultant Matt McGee recommends taking some time in December to update the company website.
Small things — like updating company information and staff listings to reviewing email routing and testing contact forms — are important. But McGee also recommends reviewing outgoing messages, updating copyrights and privacy policies
“Outdated or broken links make your site look stale,” he said. “It’s also a source of frustration for customers who click on links that don’t work. Check all links on your site to make sure they’re accurate and up to date.”
Review password protected areas, update passwords — particularly if staff has changed during the year. And, finally, review the domain registrar to make sure contact information is current. That way, business owners won’t miss any updates or renewal notices.
Solze says the new year might be the time to consider a new structure for businesses.
“If you are a sole proprietor business, then it could be time to consider forming a S Corp,” she said. “Again, it’s something that could make a difference to the bottom line.”
That’s because Single business owners must file business taxes with their personal taxes. In addition to paying personal income tax, they also pay a business tax rate that could be as high as 15 percent, Solze said.
“In an S Corporation, they file separately,” she said. “It significantly lowers the tax rate for the business, but there is some cost because the taxes are filed separately.”
It’s also a good time of year to consider buying a car or truck for the business, Solze said. Again, because of the first year bonus depreciation of up to 100 percent, the entire cost could be deducted from 2011 taxes.
There are also benefits in section 179 of the tax code, for businesses that buy trucks or heavy SUVs.
“For instance, if you buy a heavy SUV and use it solely for business — even if it’s used — you can expense $25,000 of the cost immediately. The remaining money could be eligible for first-year regular depreciation. And the rest would be recovered in future years.”
Basically, every business should take the opportunity to go over books and gather receipts. And then, they should talk to their tax professional.
“We look at every business individually,” she said. “They’re all unique, and the tax code is complex. Even small businesses should occasionally talk to a tax professional or accountant. There could be some hidden items they are unaware of that make a difference to their profit margins.”