Local CPAs Offer Advice For Closing Out The Year
Just 'get your ducks in a row'
The start of the New Year is the traditional time for self-contemplation. But accountants say business owners had better not wait that long. By taking a hard look at the books in the weeks before the year ends, people who run companies may be able to save some serious money on their taxes.
One way people in the manufacturing, construction and restaurant businesses may be able to save is the "domestic production activities deduction." The deduction was created as part of the American Jobs Creation Act of 2004, but previously, it offered only a 3 percent deduction on qualified production. This year that doubles to 6 percent.
"Clients should really watch out for that," said Harold Shapiro, a tax partner in Carlin, Charron & Rosen LLP of Westborough.
Debate Watch
Companies structured as LLPs, S Corporations, trusts or partnerships should be sure to follow the debate in the U.S. Congress over the alternative minimum tax. Although the tax applies mainly to individuals, those types of business entities "flow through" to their owners' personal finances, making the tax relevant to the businesses' planning.
William E. Philbrick, a senior vice president at Greenberg, Rosenblatt, Kull & Bitsoli PC in Worcester, said Congress failed to pass a "temporary fix" limiting the tax's impact before Thanksgiving but may still pass it before the end of the year.
Business owners "should be watching and talking to their accountants right at the eleventh hour," Philbrick said.
Business owners whose tax preparers try to squeeze every penny out of the law have another new law to think about. A tax act passed this May substantially increases the penalties on preparers who take positions that the IRS ends up disputing, according to Timothy Sullivan, a partner at Sullivan, Shuman, Freeberg LLC in Natick.
"What businesses may be finding is an increased level of concern on the part of their tax preparers because of the significant penalties that can be assessed," he said.
Businesses are also advised to look into an increase in the value of personal property that business taxpayers can expense.
In addition, there's a tax credit available for energy-efficient improvements to buildings. Companies should also be aware of requirements related to the new Massachusetts health care system and new federal documentation requirements aimed at discouraging the hiring of illegal immigrants.
Aside from any new issues this year, companies should also follow some basic guidelines for closing out any calendar year.
Most importantly, Philbrick said, they should make sure all records are current and they should fully understand their financial situation. Owners may want to defer income or maximize expenses - stocking up on office supplies and paying bills in advance, for instance.
"The best advice is basically get your ducks in a row," he added. "Know what your financial situation is before the end of the year."
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