Income Delay or Acceleration. Depending on whether it’s better for you, tax-wise, to delay or accelerate income, you can decide to bill clients or customers sooner (before year-end) or later (after the year-end) to accomplish your tax planning goals.

Partnership or S Corporation Basis. Partners or S corporation shareholders in entities that have a loss for 2006 can deduct that loss only up to their basis in the entity. However, they can take steps to increase their basis to allow a larger deduction. Basis in the entity can be increased by lending the entity money or making a capital contribution by the end of the entity’s tax year.

Caution: Remember that by increasing basis you’re putting more of your funds at risk. Consider whether the loss signals further troubles ahead.
Retirement Plans. Self-employeds who have not yet done so should set up self-employed retirement plans before the end of their individual tax year 2007.

Dividend Planning. Dividends you cause your corporation to pay qualify for the reduced 15% (or 5%) rate in the hands of stockholders, including you as a stockholder. Such a dividend may reduce the risk of a tax on accumulated corporate earnings or an IRS claim that compensation to company executives was excessive and so partly nondeductible.

Budgets. Although the need for a business budget may seem obvious, many companies overlook this critical business planning tool. Therefore, a brief reminder may be in order at year-end. A budget is extremely effective in making sure a business has adequate cash flow—and, thus, in ensuring a business’s financial success.

That’s why every business, from the smallest to the largest, should have a budget. Once the budget has been made up, then monthly actual revenue amounts can be compared to monthly budgeted amounts. If actual revenues fall short of budgeted revenues, expenses must generally be cut.

Tip: Each year-end, business owners should get together with their accountants and budget (project) revenues and expenses for the coming year. Amounts can be broken down to cover monthly or even weekly periods, depending on the business’s needs.