With a new year under way, it is not too early for businesses and individual taxpayers to start working toward paying fewer taxes in 2008.
The easiest — and biggest — tax reducers are as simple as proper bookkeeping and accurate accounting, according to tax advisers.
Businesses need to make sure their books are properly set up and keep accurate records, a simple yet often overlooked detail, said Paul G. Stappas, a consultant for small and medium-sized businesses and the founder of Bookkeeping Administration Management, a company in Neshanic Station, N.J., that provides bookkeeping services.
The biggest tax mistake for small-business owners is “probably failure to keep accurate records,” said Thomas P. Ochsenschlager in a discussion forum hosted by the U.S. Small Business Administration. Ochsenschlager is the vice president of taxation for the American Institute of Certified Public Accountants.
For example, if a business owner receives a deposit for a service that hasn’t been provided, it’s not really a sale that requires sales tax payment yet and should be counted as a liability, Stappas said.
Businesses can also benefit by taking advantage of certain tax incentives.
For example, employees might prefer benefits such as education assistance, transit cards and dependent care to higher salaries — all of which are tax-deductible to the employer, Ochsenschlager said.
For individual taxpayers, a few strategies can minimize taxable income and maximize deductions for 2008. If available, individuals can defer part of their salaries until a later date, reducing their income for 2008. Those working on commission can delay collecting payments toward the end of 2008 until the beginning of 2009.
Homeowners also can prepay some items, such as mortgage interest for the first month of 2009 to receive a bigger tax deduction in 2008, Stappas said.
For charitable deductions, taxpayers now must save documents showing proof of all donations, even small ones or cash gifts.
“Now you cannot rely on cash giving,” he said.
Clothing donations are difficult to deduct, unless the donor has the value of the clothes estimated. Consignment shops and some charities will provide appraisals, Stappas said.
