Author, the Domain Tax Guide
Will you start thinking about 2007 taxes next April? Or worse yet next October, as the last filing deadline nears!? You’re not alone, but those who are the most tax savvy started planning for 2007 before it even began. Alas, it is not too late for a few final tax-saving strategies.
1. Update your accounting records. It sounds simple, but some small business owners don’t input their accounting information until well after the year is over. If you don’t know where you stand for 2007 now, then it will be hard to know just how much last minute tax planning you need to do.
2. Defer income. Most tax-planning strategies revolve around pushing tax out into future years rather than eliminating it entirely. Deferring income into next year is one way to accomplish this. Structuring the sale of assets (such as domains) as installment sales can push some of the income into future tax periods. For example, if you sell a domain name in December, why not structure the deal so that the buyer puts half down and pays the remainder in January? You’ll push off half of the taxable income into next year.
3. Accelerate deductions. Another way to defer taxes is to pull expenses that would normally occur in future years into 2007. If your business is on the cash basis, you can prepay domain registration fees, hosting fees, subscriptions, business travel, conference fees, etc. Even if your business uses the accrual method, you can accelerate the deduction of business equipment using the Section 179 deduction. Think about computers and other equipment you plan to purchase next year. This special rule allows you to deduct 100% of certain asset purchases up to $125,000 without having to depreciate them over several years. (Unfortunately, domain names don’t qualify)!
4. Ensure your S-corporation losses are deductible. If you are anticipating a loss from your S-corporation, make sure that your basis in the S-corp is sufficient to allow the losses to be deductible against your personal income. If your basis is too low, you may need to make a loan or investment in the corporation before year-end.
5. Become your own tax expert. While you may always need the advice and services of a tax preparer, your tax return is ultimately your responsibility. If you pay too much in taxes, you automatically lose. If you pay too little and ultimately end up paying penalties and other costs, you also lose. Whether you’re a domainer or an Internet marketer, take the time to learn about the unique tax implications of your industry. Discuss your findings with your preparer to help ensure that your tax strategy is sound and keeps more dollars in your pocket!