5. Review deferred compensation rules. With proper planning, a business owner can establish a 401K or profit-sharing plan where they get the bulk of the contribution, and at the same time get a 2005 deduction without any personal tax liability. New tax rules regarding deferred compensation were enacted in October 2005, so it pays to review these rules very carefully before you do anything. All of the old rules are out the window, so don't just do what you did last year because you may be surprised.
6. Check into the deduction for qualified production activities. Believe it or not, your operations may qualify under this new law. Construction is listed as one of the qualified activities. It is a 3% deduction of "qualified production activities income", which increases to 9% in 2009. This is a big deal if you qualify. I would make it my business to find out what is required to do so.
The trick to good tax planning is just that — planning. You should know where you're at by March of any year. Do you have tax to pay? If so, do you have the cash to pay it? Are there any losses you can use? Are there new rules to take advantage of?
Planning takes time and it is tough to accomplish if you start doing it on December 15th. Take advantage of what is available to you, and don't run your business from a tax perspective only — it seldom pays off.
Garry Bartecki is director of dealer/distributor services at BDO Seidman, LLP of Chicago, as well as a consultant to the AED. He can be reached at (312) 616-4677 or email@example.com.