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Need More Deductions for 2012 Income Taxes?

If 2012 has been a good year for your company, consider taking action this month to reduce your tax burden.

It’s been a 1-step-forward-2-steps-back kind of recovery, but the economy is showing signs of improvement. If your company’s income has increased because of that, you may be feeling some apprehension about how that will affect your income taxes this year.

You still have all of December to incur some expenses that will offset some of your financial good fortune and give you additional deductions for your 2012 taxes. Here are some ideas:

Invest in needed property or equipment. The 2009 American Recovery and Reinvestment Act increased the Section 179 deduction to $500,000 for the 2010 and 2011 tax years. It dropped to $139,000 for 2012, and unless Congress changes it, the 2013 limit will plummet to $25,000. Aditionally, Section 179 is considered to be an non-recurring, tax-deferral item which does not affect financial statement profits… so you get the tax benefit with reducing you economic profit used by banks and investors to determine success.

Clean up your accounts payable. If you’re a cash-based business, pay your outstanding bills before the 31st.

Anticipate your office supply needs for 2013. Even if you have only a few employees, those calendars, printer accessories, countless reams of paper, light bulbs, cleaning equipment and supplies and other inexpensive necessities can add up. Stock up this month.

Donate. Cash, inventory – it’s all good. Charitable donations not only give you a deduction, but they also enhance your company’s profile in the community.

Don’t forget about taxes you paid in 2012. How about real estate tax on your company’s property? Sales tax on business purchases?

Delay year-end income. If you can, push some accounts receivable into 2013.

Give generous bonuses. If you operate on an accrual basis, they don’t have to be paid until the middle of March, but you can claim them on your 2012 taxes.

Comb your books for overlooked expenses. There are so many legitimate deductions that you may not catch all of them. Did you pay for commissions? Business gifts? Promotion? Business association dues? Insurance premiums? Casualty or theft losses? I can supply you with some guidelines here.

Above all, keep good records of these activities. Do a year-end internal audit. Ask your employees who claim a lot of expenses to go back through their reports and look for any glaring omissions.

You don’t have time to do anything major that will affect your 2012 tax obligation, but you might be surprised at how the little things can add up. So resolve to start earlier in 2013. As an Accountant and Registered Tax Return Preparer, I’ll be happy to work with you on tax planning year-round, so we can minimize any tax-time surprises. Please keep in mind that is always easier to proactivelly affect your tax liability when action is taking BEFORE the year is over… After year’s end, there are still a few decisions that could still affect taxes, but much more limited.

Hector Garcia, RTRP
QuickBooks ProAdvisor & Registered Tax Return Preparer
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