Look. You've put it off long enough. Stop procrastinating. Surely, it's not fun; but it can greatly benefit you if done immediately.

There is little you can do after December 31 to reduce your taxes for the current year. However, as 2005 nears its end, there are several things that businesses still may be able to do to minimize their tax exposure. So, in the midst of festive holiday distractions, be attentive to your tax issues before realizing too late that some financial planning pitfalls could have been avoided.

For many businesses, the two biggest year-end concerns will be capital spending and retirement plans — either of which can give businesses a potentially large tax deduction.

If a company uses the cash method of accounting, it can defer (i.e., delay) year-end billing for work completed this year, which allows the company to receive payment after 2005's close. In effect, the time for paying taxes on this income would be postponed to 2006.

Businesses can also purchase needed supplies and equipment now with items that will be needed next year. Doing so now allows for a deduction claim this year. Smart buying can save businesses money on the cost of both their supplies and their taxes. Now is also an advantageous time to upgrade office equipment such as computers, telephone systems, machinery or even office furniture. Equipment placed in service by December 31 can be expensed (immediately deducted) up to $105,000, rather than depreciating the cost over a number of years, according to an article at MyBusiness magazine. The expensing deduction applies even if the company finances some or all of the cost.

As well, businesses should take this opportunity to write off sub-par goods from their stock. Offering these goods for sale allows the company to claim a deduction in 2005. (An alternative to selling these goods is to donate them to charity; see below.)

Companies also can simultaneously save for retirement and create a tax deduction: businesses have until the last day of 2005 to set up a qualified retirement plan for this year. While retirement plans may seem to be an obvious way for a company to lower its tax bill, according to an Associated Press article (via the Miami Herald), "accountants say many small-business owners don't get around to starting one." It is as easy as signing the paperwork now to adopt a profit-sharing plan or other qualified plan. As the My Business article said, even a single dollar does not need to be contributed at this time. Companies have until Oct. 16, 2006, the extended due date of the 2005 return, to fund the plan.

Another step a company can consider benefits the company as a whole as well as the rank-and-file employees: paying year-end bonuses. Factor in the cost of employment taxes in setting bonus amounts. Employee bonuses declared in 2005 by accrual-basis businesses are deductible this year as they are actually paid by March 15, 2006. Remember, bonuses paid to owners often cannot be accrued, so it may be best to pay those before the last day of this year.

The final tax move we will suggest is an action that — in an ideal world — would not need to be "sold" via the advantage of tax reductions: Give to charity. There is no lack of charitable organizations throughout this country and the rest of the world, particularly in the United States' post-Hurricane Katrina+ climate; know that corporate donations to charity enable businesses to claim a charitable contribution deduction. New breaks apply to certain gifts given to storm victims before the end of 2005. (A tip from My Business magazine: "When gifting late in the year, bear in mind that gifts of checks mailed to charity by Dec. 31 are valid this year, even though received next year. Gifts charged by credit card by Dec. 31 are valid this year, even though you pay off the charge account statement next year.")

For further year-end tax tips and online resources:

• Internal Revenue Service at www.irs.gov/businesses
• Quick Tax Tips Before the Year Ends at http://sbinformation.about.com/cs/accounting/a/aa121502a.htm
• TurboTax's Year-End Tax Tips for Businesses at www.turbotax.com/articles/year_end_tax_tips_for_businesses.html
• CCH Business Owner's Toolkit at http://www.toolkit.cch.com/text/P07_0005.asp

References

Better Late Than Never: Last-minute tax moves to make before Dec. 31
by Barbara Weltman
MyBusiness, December/January 2006
http://www.mybusinessmag.com/fullstory.php3?sid=1275

It's the last chance for 2005 tax planning
by Joyce M. Rosenberg
Associated Press (via the Miami Herald), Nov. 28, 2005
http://www.miami.com/mld/miamiherald/business/special_packages/business_monday/13259148.htm