The end of the year can be a crucial time for reducing looming tax expenses and putting your 2009 finances in order. Taking effective steps now could mean significant tax savings in the coming year.

Without a doubt, 2009 has been a challenging year for businesses. While cost-cutting measures, profitability, customer demand and employment are likely to remain the top priorities for most companies, preparing a proper tax strategy can be equally important for beginning the new year with a stronger financial footing.

Thanks to temporary stimulus tax breaks and credits, smart tax-planning can allow you take advantage of a number of money-saving deductions, but many of these benefits must be locked in before the end of the year, not only because tax rules may change in 2010 but also because your income might fluctuate, making you ineligible for earlier programs.

“There’s one more reason to act now: even if Congress doesn’t pass new tax legislation, taxes are still going up. Income tax and capital-gains rates are slated to rise in 2011 when TIPRA (the Tax Increase Prevention and Reconciliation Act of 2005), which kept rates low during the Bush years, expires,” TIME magazine reports.

Several features of the 2009 tax year are also slated to disappear in 2010. AllBusiness.com advises entrepreneurs and small business owners to focus on the following areas to take advantage of existing policies and give an added boost to tax-savings strategies.

1. Purchasing Deductions
If you’re considering making a major purchase, it may be better to do it now rather than wait for the year to end. In 2008, first-year deduction limits for businesses doubled to $250,000, and the current economic stimulus bill will keep that rate through 2009. However, the provision may be altered next year, meaning it may be wiser to make a purchase now to secure the write-off at a 2009 deduction level.

2. Bonus Depreciation
Much like the purchasing deduction, bonus depreciation covers first-year expenses above $250,000. Its limit was also doubled in 2008, allowing 50 percent of any remaining purchase price to fall under the first-year write-off. Although the American Recovery and Reinvestment Act (ARRA) extended the bonus depreciation rate through 2009, it too is scheduled to expire at the end of the year.

3. Vehicle Deductions
If considering whether to purchase new vehicles for your business or personal use, it’s helpful to remember that there are higher write-off levels specifically implemented for 2009. Approximately $11,000 can be deducted from a new vehicle purchase made this year, and up to $49,500 of the sales tax paid on a new vehicle purchase can be written off, though some income and earning limits may apply.

4. Alternative Minimums
Originally intended to prevent the wealthy from paying no tax, the alternative minimum tax (AMT) can affect households earning $150,000 or above. The stimulus bill reduced the pressure to have it renewed at a higher exclusion rate, but those who are close to the minimum tax threshold may want to defer their income into next year or look for AMT-allowable deductions that can lower gross income to avoid higher payments.

In addition to these tax strategies, entrepreneurial and small business resource firm Gaebler Ventures recommends looking into home office, personal asset, entertainment and retirement plan deductions whenever they may apply for a small business.

When evaluating potential deductions and write-offs for your business or personal tax filing, it is critical to collect proper records and financial statements to ensure that a money-saving decision goes through without raising any red flags regarding its legitimacy.

“[D]on’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending,” Forbes.com advises. “If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.”

The following resources provide additional tax tips and information:

IRS FAQs
Answers to frequently asked questions from the IRS.

Business Taxes Overview
Descriptions and instructions for the four main types of business taxes.

Employment Taxes
List of the federal income tax requirements and withholdings for businesses with employees.

Self-Employment Tax
Information on filing, deductions and requirements for the self-employed.

Electronic Filing
Guidelines for the Electronic Federal Tax Payment System, a way to submit tax information via Internet or phone.

State Business Taxes
A resource, provided through the Small Business Administration (SBA), for finding state tax regulations and rates.

Local Business Taxes
A resource, provided through the SBA, for finding county-based tax regulations and rates.

Forms and Publications
Official source for IRS documents and tax products.

Earlier

New Equipment Tax Incentive Ends in 29 Days

Tax Tips for Entrepreneurs

References

Tax-Saving Tactics
by Janet Morrissey
TIME, Nov. 2, 2009

Year-End Tax Tips for 2009
by Carol Tice
AllBusiness.com, 2009

Tax Angles for Small Businesses
Gaebler Ventures, 2009

Ten Ways to Audit Proof Your Tax Return
by Robert W. Wood
Forbes.com, Nov. 3, 2009