Top six tax tips

1. Update Your Books:

It is important to have a complete grip of your accounts as part of your year end tax strategy. Your financial situation needs to be accurate and up-to-date. So, go back to your accountant and get a thorough revision of your books. A little precaution before hand can definitely be a big help. .

2. Update Your Income:

Any income your company receives during the first week of January as opposed to December cuts your tax bill. Every cent earned up to December 31st 2005 has taxes paid in April 2006; whereas income deferred to January 2007 will not owe taxes until April 2007. Any deferral strategy will depend on your profit and losses for the year and your corporate legal structure. Any charitable donations in 2007 should be pushed to 2006 to avail tax deduction. Depending upon the new tax rates applicable, deferral of income can make new sense for sole proprietorships, partnerships, LLCs, and S corporations. Make sure that your cash flow can handle deferrals.

3. Managing Expenses:

In order to take maximum advantage of tax deductions this year, make sure that you purchase the business items now. If there is a need for goods and services in the first quarter of the New Year, buy them now if cash flow permits. Some of the important items in this list could be: Office supplies: Stock up on fax paper, printer cartridges, stationary and other office items. Pay Bills Early: Pay your bills before the New Year in the areas such as cell services, subscriptions, rent insurance and utilities. Equipment purchases: If new office equipment is required, consider buying now. You'll have to decide whether an immediate write-off is best or spread out the depreciation over the years. Consult with your accountant to examine the circumstance and company structure to maximize your deductions. In addition, your equipment will have to be in your office by the year end. Other items: This category includes prepayment of subscriptions, travel bookings, equipment repairs, and maintenance.

4. Check up your Inventory Write offs:

You need to check up on your inventory depreciation value and write offs. The inventories which are old and obsolete can be an added advantage for you now. A lowering in the market value of the inventory can provide you a reason for deduction. So start a check up of your inventory now!

5. Saving Plans can Also Help

Make payments to your savings or retirement plan or start one before the year end to reduce your income for this year. Check the contributions limit for your type of plan. Each kind of saving plan, specially the government bonds are a good idea as part of your savings procedure. Less income leads to lesser deductions.

6. Incorporate your Business:

One reason many sole proprietors and partners incorporate their businesses is because of the tax advantage of the incorporation. The best known of these tax advantages is the small business tax deduction. Through this, the income of the qualifying corporations is taxed at a special reduced rate. However, incorporating your business as a tax strategy can be of help only if your business has grown enough for incorporation to be worthwhile. You not only need to have a significant income to offset the costs of incorporation, but you need to be prepared to leave enough of your business earnings in the corporation to benefit from corporate tax deferral. Sometimes, people are under the impression that running a small business can give you a good tax break. But this is not always the case. There is the whole business of collecting and remitting taxes. So, when it comes to business taxes, ignorance is definitely not bliss. You need to be aware of all the ins and outs of business taxes. Otherwise, you could end up paying severe penalties. S,o take care of the above tips and have a complete risk free -" least" tax year. Thomas & Alex can help you reduce your tax anxieties. Our expert tax resources can help you to better process your tax.