I just got off the phone with a client who is looking at some greatly reduced revenue for 2011. And it looks like he’s going to have a big bad debt to write off in 2011 or 2012, depending on a few choices he makes now.
I’m glad we had that talk now because it was really clear that we wanted to make 2011 as big a tax loss as possible. That’s because he paid a lot of taxes in 2009.
This is part of the tax strategy part. When we legally maximize the 2011 loss, we’ll create a NOL (net operating loss) that can be carried back for 2 years. That means the loss can go back to 2009 to get a refund within 45 days of filing the return.
At the end of 2011, if there is a choice on when to take income, we’ll want to push this out to 2012. And if there are deductions, we’ll want to take those in 2011. We’ll also want to maximize any pension contributions in 2011. We’ll take bonus depreciation instead of Section 179 so that the loss is all applicable in 2011. In other words, anything we can do to maximize the loss in order to get a big refund from the carry-back.
This is the type of tax planning you can do now to make sure you have a big refund and/or less tax.