Year-End Business Tax Moves
Profit Ability Article Highlight

As 2005 draws to a close, most business owners are looking to improve their tax situation. Some simple ways to do so are listed below. Please feel free to call or e-mail our offices for assistance with any of these.

• Last minute equipment purchase: Your company can purchase and fully deduct up to $105,000 of new equipment as long as it is on the books as of December 31, 2005. Use the Section 179 expensing election.
• Bad debts: Face the music on some of your deadbeat customers and classify them as "uncollectible" so your company can take the loss in 2005. Remember that bad debts cannot be estimated but must be specifically identified to be deducted.
• Abandonment losses: If your company is holding on to equipment it no longer uses, you can abandon it by year-end and obtain a deduction for the remaining tax basis on it. This is an especially useful rule for disposing of computer equipment because it becomes obsolete faster than the IRS depreciation schedules allow.
• Inventory write-downs: If your company has inventory that is losing or has lost value, take advantage of that depreciation by documenting the loss as of year-end.
• Expense acceleration: This obvious tax move involves purchasing supplies, making repairs and any other items you can before year-end to get them on the 2005 books.
• Establish retirement accounts: Save on your tax bill by establishing and funding various forms of retirement accounts by year-end. Keoghs, SEPs, 401(k)s all can help your company reduce its tax bill.
• Get on the FSA bandwagon: This great tool allows employees to cover medical costs with pretax dollars. The company also wins because it saves employment taxes on account fundings. There are two ways to enhance your company's tax position using FSAs. First, you can establish and fund an FSA before year-end. Second, if your company already has an FSA, consider taking advantage of the new IRS provision allowing employees to spend account funds two and a half months after year-end. It is necessary to make a specific plan amendment to take advantage of this provision.

If you have further questions on this issue, please contact our offices.