As the holidays are quickly upon us, I’m sure the last things you are thinking about are your taxes. But taking a moment to assess your tax situation NOW could pay off big in 2009.

Here are some year end tax tips that could drastically change your tax situation.

Get Current. One of the most important tax tips I can give is to make sure your accounting is up-to-date. It is important that you have a complete understanding of your financial situation. Scheduling a year-end planning session with your accountant is a good idea and a good start.

Procrastinate. I know this may sound crazy, but hear me out. If your cash flow can sustain it, then wait until January to bill those end of the year clients. Any cash you receive in December must be included on your 2008 tax return as income, but if you wait just a few more days you can defer payment of taxes on that income for another year.

Shop ‘til you drop. Purchase items that your business will need in the near future. Again this is if your cash flow permits. Some things you should consider are office supplies, equipment purchases or pay some bills early (i.e. business cell phone bill, utilities, rent, etc).

More blessed to give. We’ve all heard the saying, “it’s more blessed to give than to receive”. And it’s true in more ways than one. Push an early 2009 charitable donation back to 2008, which allows you to take the deduction in 2009 instead of waiting until 2010. Be sure you get a receipt to support the tax deduction.

Sock it Away. This is a great time to make payments to your retirement plan or setup one to reduce your business income before the year ends. Meet with your financial planner to verify the contribution limits and deadlines.

That covers the business owners, now I hear the individual taxpayers saying, “What about us?” Here are some deductions for individuals that are often times overlooked.

1. Job-related moving expenses
2. Job-skill improvement classes (including travel)
3. Professional and investment publications
4. Union or professional dues
5. Job-hunting expenses (including travel)
6. Child care expenses
7. Costs associated with operating a business from a home-office
8. New or used clothes, toys, and household goods given to charity
9. Fees for tax or investment advice and tax return preparation
10. IRA fees
11. Client gifts

Note: These year-end tips will apply differently to each individual’s situation and accounting method. Seek professional advice to determine the best strategy for your transactions for tax purposes.

SECRET TAX TIP #4

Even Small Deductions Can Add Up To Big Tax Savings!

Don’t forget the “de minimis” fringe benefits for maximum tax savings.  Did you know that the tax code allows you to deduct for things such as (a) tickets to theatres and sporting events, (b) cocktail parties for employees and guests and (c) the holiday gifts you give?   Although these expenditures may not seem large, they can really add up!

Again, the reason most American’s do not take advantage of these kinds of “tax breaks” is they do not have a simple system to follow.  No, I did NOT say complex.  If tracking your tax deductions throughout the year is complicated, you won’t do it.  So choose any system you want, just make sure it is right for you, your lifestyle and your personality.  If you are a detailed person who likes to track expenses and you love technology gadgets, then you’ll go about choosing a monthly tax deductions organizer differently than someone who has a hard time balancing their check book. 

The problem is not the system you choose.  The problem is continuing to believe a bunch of little deductions will not add up to big tax savings.  They do and if you need to throw a wad of cash down your toilet this month to help you experience the pain wasting money, please do so.  But, if you rather not, then start tracking those tax deductions and watch the net gain back to you add up big time come tax time!

SECRET TAX TIP #5

“EAP” Offers Tax Relief Through Your Employees!

Use an Education Assistance Plan (“EAP’) to get a $5,250 deduction per employee and reimburse your employees for their college education expenses.  With an EAP you can also take the same deduction and help pay for your child’s education.  

Look, this is definitely a win / win proposition.  The people who work for you and represent your business get more education and you get to write off for over $5,000 per employee!  And what is the down side?  Well, what if your employees need more education and you need more tax deductions?  If you don’t use a EAP, sounds like to me you are in for a double whammy!