Tax Considerations for the Self-employed and Business Entities

• Revenues - For cash-basis method businesses, send out invoices late in December so that collections will not be made until January, thus reducing current year income and the related tax burden.

• Purchase of New Equipment – Acquire and place equipment into service before the end of the year to take advantage of the immediate deduction of up to $250,000. Limitations may apply if total expenditures exceed $800,000. In addition, for other property placed in service in 2008, an additional 50 percent bonus depreciation allowance is available.

• Retirement Plans – Establish a retirement plan before the end of the year. A deduction may be allowed on the current-year return even if funded next year.

• Estimated Taxes – Consider the status of any final estimated tax payment requirements. A penalty for underpayment of taxes can be costly.

• Mileage rate - On January 1, 2010 the rate changed to 50 cents per mile.