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TAXES
Savvy strategies to help reduce your taxes
Section 179 Expanded
CCH, a leading provider of tax information, reports that small businesses will benefit from the recently enacted Small Business and Work Opportunity Tax Act of 2007. The law extends and expands the Section 179 enhanced expensing provisions through 2010. Under Section 179, businesses are permitted to deduct in one year outlays for equipment that would otherwise have to be depreciated over several years. The law provides for an immediate 2007 increase in the expensing limit from $112,000 to $125,000, with the phase-out level increasing from $450,000 to $500,000.
Accounting Practices
All small businesses must report income and expenses annually. But you have several options for how you actually complete the task. Using the calendar year – Jan. 31 through Dec. 31 – is the most common accounting period. However, your other option is a fiscal year, which is 12 consecutive months ending on the last day of any month except December. You must also choose an accounting method. With the cash method, you report income in the tax year you receive it and deduct expenses in the tax you pay them. With the accrual method, you report income in the tax you earn it and deduct expenses in the year you incur them, no matter when you actually pay for them. Confused? For more information, get IRS Publication 538, Accounting Periods and Methods.
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