2011 Year End Tax Planning
Monday, December 19th, 2011Dunwoody/Atlanta/Alpharetta CPA: 2011 Year End Tax Planning
What you don’t tax plan for today will make your tax bill higher when you do your 2011 Personal Income Tax Return. As the end of 2011 approaches, it is that time of year again when we need to take a look at your financials to do some tax planning for the year. I have recapped below a list of the items we will need in order to properly evaluate and plan for your year-end taxes as well as address any year-end tax planning ideas.
As the end of calendar year 2011 approaches, it’s time to think about what can be done to minimize the amount of taxes paid to the IRS by your business. Although tax planning should be a year-round process, there are several year-end strategies you can take, particularly if you are an S Corporation.
Here are some things to think about as the end of the year approaches:
• There is still time to set up a qualified retirement plan. Whether you are just getting started or have been in business for years, selecting amongst the varied retirement plans requires the skill of a surgeon and the grace of an artist. To learn about the different types of qualified/tax deductible http://www.hiscpa.com/retirement-planning.html
• Please be sure to turn in an expense report and obtain reimbursement by years-end for any business expenses you might have incurred personally such as business mileage on your personal vehicle. Vehicle expenses are perhaps the most discussed while still being the least understood of all the tax code sections. Read how this section of tax law can be made simple so that all might understand. See http://www.hiscpa.com/autos.html
• Try to keep your inventory as low as possible on December 31st. Since you are taxed based on the value of your goods in stock, it makes sense to minimize your inventory.
• Accrual-based taxpayers may want to consider delaying end of December billing until early January. Since income is recognized when it is billed, you can delay the tax effects from 2011 until 2012.
• For the same reason, it makes sense to book all tax-deductible expenses and accounts payable before the end of 2011, rather than waiting until next year. This includes your personal expense report for December. Cash-based taxpayers must pay these expenses, while accrual-based taxpayers need only to receive and enter the bill.
Additional Year End Planning Tips
If you have kept track of your business mileage, the rate for the first half of 2011 is 51 cents per mile, and for the second half, the rate is 55 cents per mile. Please keep in mind IRS rules state that you must have kept a log of the miles you have driven to take this deduction.
Although not directly related to 2011 tax deductions, small business owners should take additional steps to ensure the success of their businesses in 2012. If you expect a big change in your 2012 income, you should consult with an accountant now to minimize the tax impact. If you are a subchapter S corporation, you should plan to have the annual meeting of your Board of Directors as close to the new year as possible.
While this generic tax advice can be helpful to any small business, there are probably some specific steps your business can take to reduce taxes at the end of 2011. We have helped many small businesses in Atlanta and North Georgia minimize their tax liabilities and increase their profitability. We would be happy to sit down with you and discuss your situation. Please feel free to call or contact us.
Top Mistakes Taxpayers Make
Avoidance of these common mistakes will greatly assist you in the proper preparation of your tax return, will help you avoid unnecessary IRS tax penalties and interest, and help you keep your tax bill as low as legally possible. See http://www.hiscpa.com/tax-top-ten.html
Determining Filing Status and Dependents
The first step in filing your personal Federal tax return is to determine your correct filing status and the number of deductions you can claim. It sounds simple, but it can make a difference in the amount of tax you pay. Visit http://www.hiscpa.com/personal-returns.html
Determining Your Adjusted Gross Income (AGI)
The first page of Form 1040 is used to calculate the taxpayer’s adjusted gross income. While many people think of their income as what is reported on form W-2, there are some other additions (and possibly some deductions) that have to be made as well. To learn more http://www.hiscpa.com/agi.html
Claiming Itemized Deductions on Your Tax Return
Itemizing deductions on your personal return can result in paying a smaller tax. However the rules on what can be deducted and what can’t are fairly strict. Use this guide to determine what’s deductible. To understand these deductions http://www.hiscpa.com/itemized-deductions.html
Corporate Income Tax Returns