Smart Answers November 6, 2009, 10:43AM EST

Tax Planning in 2009

Because of poor sales and pending legislation, common tax strategies might not apply to this year. Meet with your accountant and consider this advice

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Tax planning in 2009 presents some unique challenges for entrepreneurs. It's been a rough year financially for many small businesses, and common tax strategies may not apply this time around. And there's a lot of uncertainty, both about next year's economic outlook and about legislation that may pass late this year.

It's always a good idea to meet with your accountant before year's end, says John Evans, a partner at accounting and consulting firm BDO Seidman who specializes in small and midsize businesses. This is a time to go over your firm's performance so far this year, estimate revenues for the rest of the year, and set projections for next year.

Make sure that your business is primed to take advantage of the same tax deductions you took last year, if they're still applicable.Explore any regulations that may have changed, and whether you now qualify for new deductions or no longer qualify for a deduction your business took in the past.A life or business change, such as a change in your business structure or in your marital status, can alter what's in your best interest this tax year.

It's also a chance to discuss tax strategies and what makes sense for 2009 tax planning. "Take a look at your current 2009 tax status and make some guesses about where you're going to come out," Evans says. "Do tax planning that makes business sense. Don't do something just to get a tax break when it doesn't make sense for your business."

For instance, common wisdom holds that companies should defer receivables until after yearend. But this year, some clients who owe you money may not be around in 2010—and collecting all outstanding receivables promptly is probably your best strategy, Evans says.

Here are some additional issues you might raise with your CPA:

Net operating loss tax provisions. The American Recovery & Reinvestment Act of 2009 enabled small businesses reporting net operating losses for 2008 to offset those losses against income they earned in the five prior years. (Typically, a net operating loss can be carried back for only two years.)

It's likely that similar carryback provisions will be extended to tax year 2009, says Dean Zerbe, national managing director of Houston-based specialty tax consultancy alliantgroup and a former senior tax counsel to Senator Charles Grassley (R-Iowa). "That's a real money-in-the-pocket opportunity for small businesses, and they need to take advantage of it right away," Zerbe says. If the tax break is extended as expected, he says, small business owners should "put in refund claims immediately, in tandem with their accountants."

Stale inventory and bad debt. If you have inventory in your warehouse that has declined in value this year, you may be able to take a deduction for the loss. You must document that loss before the end of the year. You must also document deductions you take for bad debt that can't be collected. Keep records of your best efforts to collect on old debt, including telephone call logs, copies of letters you sent, and other efforts you made to get the money, including hiring a collection service.

Bonus depreciation. The stimulus bill also extended through tax year 2009 the first-year depreciation of 50% of the cost of new equipment purchased and put into service this year. This bonus provision is in addition to normal depreciation and tax deductions available under Section 179 of the tax code. It applies to purchases of tangible personal property such as equipment, computers, telephone systems, and office furniture.