You’d think now that the extension deadline has past and 2010 tax returns are put to bed that all of us can sleep soundly and not worry about “tax stuff” until January or February.  Far from the case – now is the perfect time to position yourself or your business for 2011.  With just 2 weeks left in the year, there are plenty of opportunities to maximize your cash flow and minimize your tax burden for the year.  Here are some tips you can implement:

1) Accelerate some payments – if you pay your real estate taxes personally (rather than out of escrow), you could prepay your 2nd half payment by the end of the year and deduct that in 2011.  You can also prepay your fourth quarter state estimated tax payment by the end of year and deduct it too.  This example means just pushing up your payment a mere two weeks from its normal due date!

2) Business equipment purchases – we still have bonus depreciation and a lofty Sec. 179 limit this year.  We have no idea if these benefits will be extended beyond 2011, so if you’ve been thinking about upgrading your computer system or purchasing a new company vehicle, now may be the time to pull the trigger and receive the enhanced tax deduction now.

3) Capital gains and losses – the stock market has been volatile, but many individuals have still seen short term appreciation in their stocks and mutual funds.  It may make sense to sell some of those short-term winners and secure the gain.  Think about balancing those gains with stocks you have unrealized losses on in order to limit your tax bill, while diversifying your portfolio.

4) Charitable Giving – Many charities are actively requesting special year end gifts to help cover any revenue deficients.  Think about accelerating or making special gifts before the end of the year to help those in need, but also reduce your bill to Uncle Sam.  Some churches, businesses with United Way campaigns and other nonprofits have matching programs that will see your gift effectively doubled ($1 from you + $1 from the organization = $2 for the charity)

5) Open Enrollment time – If your employer provides you a Flexible Spending Account, around now is the time that your open enrollment is available to you.  Strongly think about utilizing this FSA, as medical deductions are notoriously difficult to deduct.  A FSA works by putting money pre-tax into an account in your name that you can use to pay medical expenses.  Key point is that any unspent money in the account is forfeited, so we recommend that you don’t get overzealous with how much you put into the FSA.  Examine your medical spending from the past year and use that as a guideline, then take into account any planned medical procedures (LASIK, surgeries, pregnancies, etc…)

6) Year-End Payroll – For many single member S-Corporations, the owner isn’t taking regular payroll – instead, they are taking S-corporation distributions.  You are required to have reasonable compensation in the form of a W-2 as a officer of the business.  A year-end bonus can meet this requirement, as well as add appropriate federal and state withholding to cover your tax bill without the need for estimated tax payments.

We’d love to sit down with you and talk about other opportunities for year-end planning.  Feel free to give us a call at the office and schedule an appointment – 505-821-0893.