Wednesday, November 2, 2011

7 Tax Savings and Financial Planning Ideas for your Business

#1)   Any Accounts Receivable that need to be written off? 
(does not apply to Cash Basis Taxpayers)
#2) 100% Bonus Depreciation
Bonus depreciation has been boosted to 100% for qualified investments made
in 2011. This reverts back to 50% in 2012. 
Unlike Section 179 expensing, it is not limited to use by smaller businesses
or capped at a certain level.
Bonus depreciation is not limited by the size of a taxpayer's investments in
qualified property and it can generate net operating losses. Keep in mind that bonus depreciation applies only to new property and is not exempt from certain 
uniform capitalization rules as is Section 179 expensing.
#3)   Section 179 up to $500K (for Federal Returns) in 2011.  
Planning on purchasing any assets for the business in the near future?
Some assets purchased in 2011 may qualify for a special depreciation allowance.
Qualifying property includes tangible personal property and up to $250,000 of real property. 
The deduction for up to $250,000 of real property includes qualified leasehold improvement property (improvements to an interior part of a nonresidential
building that is conditional to a lease and used exclusively by the lessee),
qualified restaurant property, and qualified retail improvement property.
This provision is only for 2011.
Please note that in 2012, the dollar limit for Section 179 expensing drops to $125,000.
#4)   Timing Strategies.
Any expense items that can be accelerated into this year?   
Any income items that can be deferred to next year?
#5)   Considering hiring your children?   
In 2011, first $5,800 earned by each child is tax free and not subject to kiddie tax.
A child's wages, which is earned income, is always taxed at their tax rate. 
This may help a child toward earning half of their support and thus might help their 
unearned income (interest, dividends, investment, etc.) to avoid the kiddie tax.
If applicable, a child must have earned income to contribute to a traditional or Roth IRA.
#6)   Basis in Partnerships, LLCs, or S Corps?
If a loss is expected in a Partnership, LLC, or SCorps, 
do you have enough basis to deduct the loss?
Consider increasing your basis. 
#7)   Retirement Accounts.  
The matching of the employees' contribution is generally a deductible expense.
Several types of retirement plans are available to businessess and business owners.

7 Tax Savings and Financial Planning Ideas for your 1040

#1)   Qualified Energy Efficient Home Improvements.
Plan to make any qualified energy efficient home improvements in 2011?
If so, you could be eligible for a credit equal to 10% of the cost of qualified
energy-efficient property or improvements up to a maximum of $500.
Keep in mind though that credit amounts may differ based on the improvement made.
Examples include: insulation reducing heat loss/gain, exterior windows & doors,
storm windows & doors.
There is a $500 lifetime limit. If you received over $500 in these tax credits from
2006-2010, you are not eligible for 2011 and beyond.
#2)   Health Savings Accounts (HSAs).
Are you covered under a high deductible health plan (HDHP)? 
Are you not covered under any other non-HDHP, except Permitted Non-HDHP
If so, HSAs can achieve tax savings in two ways: First, funds inside an HSA
can be withdrawn at any time for medical expenses. Thus the HSA can be used
to accumulate tax-free income for use later in life. Secondly, HSAs can be
used to pay for current medical expenses. For people with few medical expenses,
HSAs have the effect of getting a deduction up-front rather than as an
itemized deduction which may have little or no tax impact.
Contributions to HSAs are generally deductible.
For 2011, the maximum deductions for contributions are $3,050 for individual
coverage, $6,150 for family coverage, and $1,000 for catch-up contributions.
#3)   Coverdell Education Savings Accounts  (Sec. 530 Plans)
Contributions are not deductible to currently save taxes.   
But if you plan to give money to help pay for the qualified education expenses to
someone under 18 (or a special needs beneficiary), this account grows tax free
and future earnings would be tax-exempt.
You can contribute up to $2,000 for 2011. 
Contributions for 2011 can be made up until 04/15/12.
#4)   Retirement Accounts   (must have earned income of up to contribution, etc.).
2011 Maximum Allowed SEP Contribution is up to $49,000. 
Under 50, 2011 Maximum Allowed Simple IRA Contribution is up to $11,500.
Over 49, 2011 Maximum Allowed Simple IRA Contribution is up to $14,000.
Under 50, 2011 Maximum Allowed IRA Contribution is up to $5,000.
Over 49, 2011 Maximum Allowed IRA Contribution is up to $6,000.
#5)   Consider converting to a Roth IRA in 2011.
Switching a traditional IRA to a Roth requires paying tax on the converted amount,
but that can be a fabulous tax-saving investment because all future earnings
inside the Roth can be tax-free in retirement. 
In 2011, there are no Modified Adjusted Gross Income (MAGI) limitations.
#6)   Other Timing Strategies
Any expense items that can be accelerated into this year?  
 (ex: taxes, interest, contributions, etc.)
Any income items that can be deferred until next year?  
 (ex: bonuses, other income, etc.)
Bunch expenses in one year if doing so puts you over the thresholds on Sch A.
(ex: contributions, medical, misc, etc.)
#7)   Any Investment Interest Expense?
Does any interest classify as Investment Interest Expense?
If so, you can deduct this expense if you itemize your deductions on Sch. A.