So here are some last-minute easy steps to take now to lower your taxes next April. Most of the following apply to those who run their businesses on a cash, rather than accrual, basis:
1. Size up your likely bottom line for 2008. Run a quick P&L – or profit and loss or income statement – to figure out whether you made a profit this year and how much of one.
2. Forecast (or more likely, guess) what your 2009 income is going to be. Take a look at your market, your industry, your own plans and get a general sense of whether 2009 is going to be a growth or down year for you.
3.Option A: If 2008 is profitable, especially if it’s likely to be better than 2009, follow the basic law of year-end tax planning and “accelerate expenses and delay income.”
Option B: If 2008 was unprofitable, or it’s been profitable but 2009 is going to be much better, then turn that basic rule of tax planning on its head and “accelerate income and delay expenses.”
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Photo by gossamerLL.