The countdown has begun.  The end of the year is quickly approaching and many business owners are concerned about their tax returns.  So, they’re looking to their tax preparers for tax planning tips to help them avoid any financial penalties.  Here are a few things to consider when meeting with small business owners:

Deducting the Full Amount of New and Used Equipment Purchases
According to Section 179 of the US Tax Code, small business owners can deduct new and used equipment purchases.  The full amount can be deducted now, so there’s no need to depreciate the cost over many years.  This includes computers, furniture, telephone systems, software, certain vehicles, and machinery used for manufacturing.  In other words, tangible equipment and personal property purchased and put into service in 2011.  Leased equipment also qualifies.  The total amount of equipment that can be deducted for tax year 2011 is $500,000.

Bonus Depreciation for New Equipment Purchases
An appendage to Section 179 allows companies that purchase more than $500,000 in qualified equipment to take a 100 percent bonus depreciation.  This applies to new equipment only (unlike Section 179 which allows the deduction of used equipment as well).

 Carrying a Net Loss Forward
Businesses with no taxable profits in 2011 who claim bonus depreciation can carry a net loss forward to future years.  This will be helpful to startup companies, as well as to those who have struggled during the recession but see potential to do better in future years.

Deferring to Next Year
Certain situations may warrant the need for a business to accelerate deductions and defer income into next year.  The success of the strategy completely weighs on the company’s financial situation and should not be taken lightly.

Last Minute Deductions
If deductions are a concern, end-of-year charitable donations might need to be considered, but donations made to an extreme sometimes attract unwanted scrutiny from the IRS, so be aware of that too.