As we enter the latter part of the year, its time to take a closer look at your business' financial situation and consider potential tax savings strategies. As you evaluate potential credits and tax minimization opportunities, keep in mind that the application of various strategies may differ depending upon your business' unique situation and accounting methods. The cash method allows for deductions and income reported for the year they are paid and received, while the accrual method applies income and expenses in the year incurred.

Some tax-saving tactics and strategies worth considering:

    * Defer recognition of income—If your cash flow permits, any payments your company can receive in January, as opposed to December, will reduce the current year tax burden. When using this strategy, the company's entity structure and annual profits and losses should be considered.

    * Contribute to a retirement plan—Make payments to an existing plan, or set up a plan prior to year-end. Contribution limits vary depending upon the plan type. There are numerous retirement plan options to choose from, it is recommended that you choose the plan that best fits your business, number of employees and retirement goals.

    * Pay discretionary bonuses—If you've had a good year and want to reward employees (provided your accounting is done on an accrual basis), accrue year end bonuses. Deductions are allowed for accrued bonuses to employees as long as they are paid within two and a half months of year end (March 15 for businesses with a December 31 year-end).

      * For bonuses given to owners:

      * S Corporations may deduct bonuses for shareholders or owners who have any percent ownership when bonuses are paid.

    * C Corporations may only deduct bonuses for shareholders or owners who have 50% or more ownership when bonuses are paid in order to get the deduction.

      * Cash basis—For those using cash method accounting, the bonus must be paid in that year to be deducted in the same year.

    * Make additional charitable contributions—If possible, make contributions prior to the beginning of the next year, so they may be deducted in the current tax year. Be sure to retain receipts.

    * Incur expenses—For cash-basis taxpayers—cash flow permitting—pay as many expenses as possible prior to year end to maximize deductions. Examples include:

      * utilities,

    * printing new marketing collateral,

    * office supply purchases and

    * equipment purchases—In this case, you have multiple write-off options (Section 179 deduction discussion below). The equipment must be in your office and in use by year-end.

      * Write off uncollectible accounts (bad debts)—The IRS allows deductions for actual write-offs, not those allowed for in your "allowance for doubtful accounts." If the item is truly a bad debt—meaning you're able to show you've tried to collect the debt and payment is unlikely—go ahead and write it off. Note: Only businesses using the accrual method of accounting can write off bad debts.

    * Write off obsolete inventory—If you have inventory, update your records, write off any obsolete or damaged inventory.

    * Deducting equipment and assets through Section 179 expense and Bonus Depreciation— Earlier this year, Congress enacted the Economic Stimulus Act of 2008. Under the Act, small businesses will be able to write off up to $250,000 of qualifying expenses in 2008. In addition, businesses will be able to deduct an additional 50% of the cost of certain asset purchases in 2008. Generally assets have to be depreciated over statutory lives, but under Section 179, a business or self-employed individual may be able to deduct the full amount of certain equipment or asset purchases in the year of purchase. New guidelines and considerations are as follows:

      * Certain types of tangible personal property are eligible, such as furniture and fixtures and machinery and equipment, and there is a very limited deduction for passenger automobiles. Real property and investment property are not eligible.

    * For tax years beginning in 2008, the maximum deduction is $250,000.

    * If your total qualifying property purchases exceed the $800,000 threshold, the maximum Section 179 deduction gets reduced.

    * Section 179 Expense Deductions can't be used to make business income go negative. Deductions that reduce income below zero can be carried forward for an unlimited number of years to a year when the business has positive income and can be applied to that year.

    * The Economic Stimulus Act of 2008 also provides for Bonus First Year Depreciation by allowing a bonus first year depreciation deduction of 50% of the adjusted basis of qualified property placed in service after December 31, 2007 and before January 1, 2009.

      * Perform a cost-segregation study if you own real estate—If you own real estate or build a building, consider taking advantage of a cost-segregation study, which can accelerate depreciation and increase cash flow. (To learn more, check out the IRS's Cost Segregation Audit Techniques Guide.)

    * Increase energy efficiency to receive tax incentives—Specific tax credits are outlined in the Energy Policy Act of 2005. Generally, businesses are eligible for tax credits for buying hybrid vehicles, for building energy-efficient buildings and for improving the energy efficiency of commercial buildings. (For more information, see the U.S. Department of Energy's "What the Energy Bill Means to You.") •

    * Manufacturers should explore the Section 199 Domestic Production Activities Deduction—Small businesses in the manufacturing sector should evaluate this tax deduction. An overview of the deduction is as follows:

      * A business engaged in a "qualifying production activity" is eligible to take a tax deduction of 6% in year 2007 - 2009, and 9% in year 2010.

    * The deduction is limited to 50% of annual W-2 wages allocable to the domestic manufacturing activities.

    * Determining the deduction is based on determining qualified production activity income (QPAI).

Careful planning is the best way to capitalize on available opportunities. There are many other potential tax-optimization strategies that may apply to your company, regardless of type. Consult a qualified tax professional about your unique circumstances when evaluating the strategies that are best for your business.