April 16 resolutions

The 2008 tax year is water under the bridge.  It's time to turn your attention to 2009.  Here are nine ways to make 2009 less taxing.
 
1. Start funding your IRA or SEP now, a little at a time.  Many taxpayers can save money with an IRA or Simplified Employer Plan, but they just don't have the cash when the April 15 funding deadline comes around.  Don't wait.

2. Start keeping that mileage log.  Whether they do it with a PDA, an appointment calendar, or a specialized log book, folks who deduct business mileage are much better off at tax time - and especially audit time - when they have support for their mileage expense.

3. Save those business meal and entertainment receipts, and write down what they were for.  The tax law requires you to be able to document the time, place, parties involved and business purpose of all meal expenses.  If you don't do it right away, you'll never remember it.

4. Act like a real business.  Many entrepreneurs keep seat-of-the-pants records.  While understandable, it makes it hard to tell if you are really making money, and how much.  It also is very costly at tax time when your tax pro has to charge you for sifting through the debris of your business records.  Buy Quickbooks or a similar program and learn how to use it. It will save you enough time and effort to pay for itself. 

5. Use your 401(k).  Salary deferral through a 401(k) is the easiest way to shelter income from taxes.  Most employers match some or all of the amount employees defer; you're crazy if you turn down the bosses money by not at least maximizing the employer match.

6. If you qualify, start a health savings account and use it.  Health Savings Accounts are like IRAs, except withdrawals for health care are never taxed.  If you have a qualifying high-deductible health plan, this is an easy tax shelter.

7. If your income isn't subject to withholding, watch your estimated tax payments.  If you're making money, be sure you keep up with your payments.  If you're losing money, don't send the IRS money if you don't need to.  See your tax pro.

8. Don't mix up personal and business expenses.  If you are running personal expenses through your business, it can make for an awkward discussion when somebody is interested in buying you out.  It's even more awkward when the IRS comes calling.

9. Focus on what ends up in in the cigar box.  Some folks are so obsessed with lowering taxes that they lose sight of the real game - making money.  If you have to pay a little tax to make some money, take the money.