US Tax Strategies for 2011

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As the year comes to an end, it’s time to start thinking about US tax strategies for year-end. There is still some time to get things done, but remember your tax strategies need to be in place before the end of the year. You can’t plan in 2012 for 2011 taxes.

Here are some of the things to do now:

  • Project your income for the 2011. If you don’t have a current financial statement for your business, make that your first business priority. A common rookie mistake is thinking that your bank balance reflects your income.

Cash in bank does not equal taxable income.

You may have spent money on things that are not deductible (like owner drawers, non-deductible items or assets) and you may have no-cash expenses like depreciation.

You can’t plan for taxes without an idea of how much taxable income you have.

  • List out out ‘extra-ordinary’ tax events such as sales of property, inheritances, gifts, foreclosures, short sales and the like.
  • Estimate your itemized deductions, if applicable. If you’ve had a move, job change or bought or sold your principal residence, you may have some big changes in deductions. This is a good time to look at the tax impact.
  • Calculate the amount of federal and state tax you’ve paid to date.
  • Based on the above, estimate what you will owe or have as a refund, before you make any changes. This is the starting point before you start looking for additional deductions.

Pay less tax in 2011:

  • Start a home-based business.
  • Purchase business equipment before year-end.
  • Set up a pension plan before year end if you plan on having a Solo 401(k) or SEP. You can wait until the filing date of your return to fund it, but you must have the documents prepared and signed before year-end.
  • If you’re cash basis, you may want to delay income at the end of the year to push it into next year.
  • If you have an LLC, it’s not to late to elect S Corp or C Corp treatment for your business to reduce self-employment tax.
  • Do you need to get another business structure formed before year-end? You may be too late to get one started and registered with the proper state before year end. The best solution may be a shelf company. We have a few available still at

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