The end of the year is fast approaching and there is only a little time left for small business owners to take steps that will reduce their 2003 tax bill. Here are some ideas to consider if the business is on a calendar year basis.

If a business is on a cash basis, invoices for services rendered or goods sold can wait to be sent out so that payment won’t be received until 2004. However, invoicing should not be delayed if there is a chance that this action may prevent payment from being received or if the business’ cash flow needs require immediate payment.

Supplies are expensed as soon as they are purchased. In fact, purchasing supplies for the coming year before the end of this year could significantly lower this year’s tax bill. Paying multi-year subscriptions or paying multi-year insurance premiums though will not generate a full tax deduction this year since the IRS requires proration of the cost over the period for which the payment relates. Pre-payment of ordinary monthly bills prior to year-end is almost always a good idea (for example, the monthly medical insurance bill, postage, office supplies, and deductible taxes).

In 2003, the cost of equipment can be expensed up to $100,000 instead of depreciating it over a number of years (provided taxable income is sufficient). For example, when buying a computer for $3,000, the entire cost can be deducted this year as long as it is placed in service before December 31. If cash is a problem, the equipment can be purchased on a credit card and the same write-off can still be claimed.

This, of course, only makes sense when the business is profitable. There are a number of pension and profit-sharing plan types available (too numerous to go into detail in this article). Contributions can be made up to the due date of the return, including extensions, and the business can receive a deduction on its 2003 income tax return so long as the plan is established by December 31, 2003.

Simplified Employee Pension Plans (SEPs) can even be established up to the filing date of the tax return, including extensions. For those looking to establish a Simple IRA retirement plan, they are out of luck. Simple plans needed to be established by October 1, 2003.

For those individuals that have a sideline business, a retirement plan can be established even if they are a participant in a plan from their daytime employer. However, limits on contributions may apply depending upon the situation.

Lastly, don’t forget to meet with the financial advisory team prior to year-end so that planning can be proactive. It may save tens of thousands of dollars.