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It's Always Tax Season

If you want to get all the deductions and credits you qualify for, start planning now.
June 8, 2010
URL: http://www.entrepreneur.com/article/206912

This year's tax season is over, but the worst thing you can do is decide to put taxes out of your mind until next year. In a year when many businesses have experienced decreased income and investment returns, it becomes more important than ever to pay attention to the details of tax law and plan accordingly. You can't do much about the economy's ups and downs, but you can take control of your taxes, no matter which way the market moves. So, let's take some time to think about your taxes for 2010.

Estimated tax payments: As far as tax planning goes, knowing where you've been can help you get to where you want to go. This is especially true if you're self-employed. In other words, seeing how you came out on your last tax return can alert you to changes you need to make to minimize your tax burden next time. For example, if you underpaid your estimated taxes and were assessed a penalty, or if you overpaid your taxes and got a huge refund, you should adjust your estimated tax payments for this year accordingly. Get on the ball now. The second installment of your estimated payments is due this month--June 15. To figure out how much you should be paying, talk to your tax professional.

Equipment purchases: Start planning your Section 179 deduction now. The maximum Section 179 expense deduction for qualified property placed in service in 2009 is $250,000 ($285,000 for qualified enterprise zone property and qualified renewal community property). If a business has more than $800,000 in annual capital expenditures, it will not receive the full deduction. The amount by which your expenditures exceeded $800,000 is the amount by which your deduction is reduced. For example, in 2009, Mr. Jackson placed in service machinery costing $885,000. This cost is $85,000 more than $800,000; therefore, Mr. Jackson must reduce his deduction limit from $250,000 to $165,000 ($250,000 minus $85,000). Any capital expenses that exceed the $250,000 deduction can be depreciated over future tax years.

Small businesses might find it advantageous to use this tax incentive to increase their deductions for business expenses, thus reducing their taxable income and their tax liability. Necessary equipment purchases up to the limit can be timed at year end and still be fully deductible for the year. This tax incentive also applies to personal property put into service for business use, with the exception of automobiles and real estate.

Tax credits: Tax credits reduce your tax liability. And there are many to take advantage of this year. Here are a few you need to know about:

Tax planning does not have to be difficult, and the rewards of effective tax planning are priceless. Don't forget to stay organized, and keep receipts of all your expenses and charitable contributions. Start tax planning now, and you'll see the difference on your 2010 tax return.
 


Roni Lynn Deutch is known as The Tax Lady for a reason: She has two decades of practical experience resolving IRS tax problems and preparing taxes for taxpayers nationwide. Consequently, she has become a well-known media personality and one of the few go-to tax experts in the country.