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Perspective Financial Focus

Tax Tips for the End of 2009

With year-end rapidly approaching, tax planning should be reviewed by business owners with their tax or financial advisors to address possible ways to reduce tax liabilities. Here are a few tips to consider for the last three months of 2009.

  • Certain business assets acquired in 2009 may qualify for the Section 179 deduction that enables a business to write off the entire cost in the year of acquisition. If a business has a need to acquire qualifying assets, consideration should be given to purchasing before year-end to obtain the tax benefit of this deduction.
  • Timing the purchase of business assets can be a way to save taxes in future years as well. If 2009 is a down year for operating performance but future years look to improve, consideration should be given to deferring asset purchases. Planning the Section 179 deduction, the special (bonus) depreciation allowance, and/or utilizing available depreciation methods can help maximize tax savings.
  • For businesses and individuals that incurred an operating loss in 2008, there is an available one time election to carry back the loss for up to five years and recover taxes paid in prior years. This may entail filing amended returns if the 2008 tax returns have already been filed.
  • Individuals operating a business or thinking of starting a business should look closely at the benefits of incorporation. There are several types of legal entities that can be utilized for businesses and using the right type of entity is a critical decision. Incorporation can protect your personal net worth and afford liability protection in addition to possibly providing tax savings.

Whether or not a business has a need to consider possible tax saving techniques, the fourth quarter of the year is a good time to meet with tax and/or financial advisors to review the overall financial structure and operating performance of the business. This can be helpful in identifying possible tax savings ideas as well as making the year-end close and tax return preparation processes go as smooth as possible.