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Very Last Minute Tax Tips for Small Business Owners by Barbara Weltman The April 15th deadline for sole proprietors, as well as calendar-year partnerships and limited liability companies (LLCs), to file their 2008 income tax returns is fast approaching. Still, there is plenty of time to take action that can save tax dollars and avoid penalties. What’s new on your return This year, more than ever, pennies count, so be sure to take advantage of every tax break to which you are entitled. Some new items of note include:
Still time to save money Even though the 2008 tax year ended on December 31, you still can make some moves now to reduce your 2008 tax bill. Consider setting up and funding a Simplified Employee Pension (SEP) plan, which you can do up to the extended due date of your return. The maximum deductible contribution for 2008 for self-employed individuals is effectively 20% of net earnings from self-employment or $46,000, whichever is smaller. Owners who want these retirement savings must make contributions on behalf of their staff. Another post-year end move is to contribute to a health savings account (HSA). If you were covered by a high-deductible (low cost) health plan in 2008, you can contribute to an IRA-like account. Contributions (within limits) are deductible, earnings in the account grow tax-deferred, and withdrawals from the account to pay for medical costs are tax free. Unused amounts remain available for future needs. Filing extensions If, for any reason, you can’t complete your return by April 15, request a filing extension by this date. Individuals receive an automatic six-month extension to October 15; partnerships and multi-member LLCs have a five-month extension to September 15. It’s probably a good idea to ask for an extension if:
A filing extension does not extend the time to pay taxes. Pay as much as you can of any tax you estimate will be due on the final return to minimize or avoid penalties and interest. Estimated taxes April 15 is not only the due date for the 2008 income tax return; it’s also the date on which the first estimated tax payment for 2009 is due. Under a new rule created by the American Recovery and Reinvestment Act of 2009, individuals with adjusted gross income in 2008 under $500,000 and who derive more than half of their gross income from a business with 500 or fewer employees can avoid estimated tax penalties for 2009 taxes by making sure that quarterly payments total at least 90% of the tax shown on the 2008 return. This is a lower required payment that usually applies, allowing small business owners to keep more of their money for the time being. About Barbara |
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