Tax planning has never been more important given the incoming tax increases and the coming end of the 2012 tax year.  Given the fiscal climate we are soon to enter, I am sharing some tax strategies to help you maximize your returns before the 2012 tax year comes to a conclusion.

Accelerate or Defer income –  tax rates are expected to increase from current historical low rates. If you are in the top tax bracket, it may be better to accelerate income. However, those in the lower tax brackets should follow the traditional tip of deferring income.

Accelerate expenses – you can accelerate expenses to reduce your business taxable income. Buy goods and services needed by your business. Pay early bills like phone services, subscriptions, rent, insurance, utilities and office supplies.

Equipment expensing – you can deduct up to $139,000 of equipment purchased in 2012. This tax break applies only to equipment purchased in 2012. Current law also extends 50% bonus depreciation to 12/31/2012.

Retirement plan – set up a self-employed retirement plan if you are self-employed and have not done so yet.

Increase basis in a partnership or S corporation – if doing so will enable you to deduct a loss from it for this year. A partner’s share of partnership losses is deductible only to the extent of his partnership basis as of the end of the year in which the losss occurs. An S corporation shareholder can deduct his pro rata share of an S corporation’s losses only to the extent of the total of his basis in his S corporation stock, and debt owed to him by the S corporation.

These are just some of the year-end steps you can take to save taxes. If you have any question, I urge you to contact me for a free consultation.

Sincerely,

John Jeng, CPA