Year-End Planning Checklist for Businesses
The following questions can help you identify actions to take before year end to ensure that you pay the least tax under the current law.
 | Has the form of organization been carefully reconsidered? |
| Do you know your company's marginal tax bracket? |
| Are you sure you will not be subject to estimated tax penalties? |
| Have you reviewed your company's activities for changes you might make to reduce state and local taxes? |
| If you created a new C corporation this year, have you considered which fiscal year end would minimize your taxes? |
| If your business is an S corporation, have you determined whether traditional year-end planning (defer income and accelerate deductions) or the opposite approach will reduce your overall taxes? |
| If the alternative minimum tax is not a problem, have you considered investing your available cash in federal tax-free municipal bonds? |
| Have you reviewed opportunities for paying children a salary as a means of shifting income? |
| If your S corporation will generate losses this year, do you have sufficient basis in your stock to make the losses fully deductible? |
| Have you considered the benefits of LLC or LLP status? |
| REDUCING BUSINESS INCOME |
| If you expect losses in your C corporation this year, have you considered maximizing the losses which can be carried back to two prior profitable years, thereby generating a tax refund? |
| If your C corporation has funds to invest, have you considered investing in U.S. stocks to take advantage of the dividends received deduction? |
| If you use the cash method of accounting, have you considered delaying your billing and collection activities until January 2000 to defer income? |
| If you use the accrual method of accounting, have you considered whether you can defer paying tax on advance payments you have received? |
| DEDUCTIONS AND CREDITS |
| If you own an S corporation, do you know that expenses (such as wages and interest) due to 2% or greater shareholders must be paid by year end to be deductible? |
| If you own a C corporation -- not an S corporation -- do you understand that you can accrue compensation to shareholders with 50% or less ownership (or non-shareholders) and not pay them until 2 1/2 months after the corporation's year end? |
| Do you know that regular C corporation shareholders with more than 50% ownership must be paid compensation and reimbursed for other expenses by year end in order for these amounts to be deductible? |
| If accelerating deductions is a good strategy for you, have you tried to accelerate repairs and purchase supplies before year end? |
| If you use the accrual method of accounting, do you know that you may deduct accrued vacation pay if paid within 2 1/2 months after year end? |
| If you want to accelerate deductions, have you tried to settle disputed amounts before year end to ensure their deductibility? |
| Have you considered the benefits available from the work opportunity tax credit as a result of the nine month extension - for eligible wages paid to employees commencing employment prior to July 1, 1998. |
| Have you considered the benefits of the 20% R&E tax credit? This research and experimentation tax credit now covers expenditures paid or incurred through June 30, 1999. |
| Have you considered the benefits of the 50% tax credit for expenses incurred in developing certain drugs? |
| Have you considered the benefits of the welfare-to-work tax credit? |
| Have you considered the increase to 60% of the Health Insurance deduction for self-employed? |
| Are you aware that a deduction is allowed where a home office is used for administrative or management activities. |
| STRATEGIES FOR INVENTORY |
| If traditional year-end planning is appropriate for your business, have you thought about selling inventory on consignment (Income isn't taxable until your consignee sells the property.) |
| Have the rules regarding accrual of inventory shrinkage been considered? |
| If your inventory is subject to uniform capitalization rules, have current operations been reviewed to determine if any change to the computation is appropriate? |
| If your business is a C corporation, have you considered whether you can make donations that generally qualify for up to two times the items cost? |
| If your inventory costs are rising, have you considered the last-in, first-out (LIFO) inventory method? |
| If you use the first-in, first-out (FIFO) method of valuing inventory and traditional year-end planning is best for you, have you considered writing odd-lot, damaged and obsolete inventory down to its market value, if less than your cost? (NOTE: The lower value must be supported by an actual offer for sale within 30 days of the valuation.) |
| EQUIPMENT STRATEGIES |
| Have you taken advantage of the ability to deduct the cost of new property (other than real estate) up to $19,000 annually? |
| If your year-end strategy is to accelerate deductions, have you considered abandoning or selling unused business assets so you can deduct any undepreciated cost, net of any proceeds received? |
| When deciding when to place property in service, have you considered how to optimize your depreciation deductions? |
yearend_plan_busines.htm