A present to yourself: Early tax prep

taxesinsideIt might pay to think a little about your taxes now instead of in April.

Mike Gracik, a principal at the Keiter Stephens accounting group, is advising clients to see what expenses they might need for the first couple of months next year – office supplies or vehicle repairs, for example – and buy them now in order to qualify for deductions this year.
“Most clients I talk to say they had a better year in 2008 than they will have in 2009,” Gracik said. “There may be more tax benefit by prepaying those costs this year.”

As 2008 comes to a close, business owners should also be getting their paperwork in order.

Sheila Clark, director of operations for Peoples Income Tax, said businesses “really need to be able to provide good solid records to their preparers and accountants. Otherwise, they could be delayed and face penalties and [lose] interest if their returns are delayed.”

One of the most common mistakes Clark sees is failure to submit information on cash expenses and big purchases, such as vehicles, to tax preparers. With a month left in the year, now is a good time to make sure everything is documented, she said.

It might also behoove companies to make large purchases that could qualify them for a Section 179 expense deduction, Clark said. The Economic Stimulus Act of 2008 raised the deduction from $125,000 to $250,000, but only for 2008.

Owners looking to take advantage of the deduction will need to fill out IRS Form 4562 and submit it with their tax return. Gracik said. The Section 179 deduction is set to drop back to $125,000 next year.

For those that exceed the amount allotted by the Section 179 deduction, there is an additional 50 percent deduction available for the first year of depreciation on business purchases. Gracik also said there might be tax deductions available if an owner plans to offer simplified employee pensions or profit sharing. Companies can take the deduction this year and not have to make contributions until fall 2009.

Ryan Losi, an accountant and director of business development at Piascik & Associates, said companies might be able to take larger deductions than in past years on charitable donations, employee bonuses and vacation pay, environmental cleanup, and energy efficient commercial property, such as electric vehicles.

You can read more of Losi’s tips here.

Here are some links to give you a head start on tax season:

Extensive information on the Section 179 expense deduction and more information on how to take advantage of bonus deductions

Virginia Department of Taxation
(for businesses)

IRS Form 4562

A quick guide to preparing business taxes

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