If your business is on a cash basis, wait to send out invoices for services rendered or goods sold so that payment won't be received until 2004. However, invoicing should not be delayed if there is a chance this may prevent payment from being received or if the business's cash flow needs require immediate payment.
Supplies are expensed as soon as they are purchased, and purchasing supplies before the end of this year could significantly lower your tax bill. Paying multiyear subscriptions or multiyear insurance premiums, though, will not generate a full tax deduction this year, since the IRS requires prorating the cost over the period for which the payment relates.
But pre-payment of ordinary monthly bills -- for example, medical insurance, postage, office supplies and deductible taxes -- prior to year-end is almost always a good idea.
In 2003, the cost of equipment can be expensed up to $100,000 instead of depreciating it over a number of years, provided taxable income is sufficient. For example, when buying a computer for $3,000, the entire cost can be deducted this year as long as it is placed in service before Dec. 31.
If cash is a problem, purchase equipment on a credit card, and the same write-off can be claimed.
If the business is profitable, establish a retirement plan or switch to one you can make higher contributions to. There are a number of pension and profit-sharing plan types available, and contributions can be made up to the due date of the return, including extensions. The business can receive a deduction on its 2003 income tax return so long as the plan is established by Dec. 31, 2003.
Simplified Employee Pension Plans can even be established up to the filing date of the tax return, including extensions. But those wanting to establish a SIMPLE IRA retirement plan are out of luck. SIMPLE plans had to be established by Oct. 1, 2003. James J. Holtzman is a CPA and senior assistant financial planner with Legend Financial Advisors Inc. Reach him at (412) 635-9210.