Year-End Tax Tips For ODs From J.R. Armstrong, CPA

As 2009 year-end quickly approaches, here are my thoughts on how you can save taxes in three important areas of your practice:

1. Equipment Purchases: If you are planning to purchase new equipment in the next few months, doing it before 12/31 will allow you to capitalize the equipment and take the depreciation expense on the tax return. This, in turn, will lower your income for 2009 and reduce your taxes.

You can deduct the full purchase price up to $250,000 of certain equipment put into use in 2009. Also, 50% bonus depreciation allowance can be taken for qualified property as well.

2. Retirement Plan Funding: Common plans optometrists use are SEP and SIMPLE Plans. An advantage of the SEP IRA is that you have until the deadline of your tax return, including extensions to contribute.

Maximum contribution limits for SEP IRA’s have increased to $49,000 or 25% of compensation for 2009. Contributions to a SEP IRA are not mandatory each year, so reviewing your income can help determine how much, if any, contributions should be made.

A SIMPLE plan must be established by October 1 of the tax year the plan is effective. Maximum deferrals for 2009 are $11,500 and an additional $2,500 “catch up” contribution is allowed if over the age of 50. It is important to review retirement contributions in light of your tax situation, as it may be prudent to delay retirement plan funding to later years.

3. Withholding And Estimated Tax Payments: If you missed, or were late, with an estimated tax payment in 2009, you still could be subject to interest and penalties, even if you overpaid.

It may be to late to remedy the problem this year, but here is a fairly simply solution to avoid a penalty in the future. Adjust the amount of withholding on your W-2. Unlike estimated tax payments where they have a due date and can be late, withholding from wages will count as being paid early throughout the entire year and proper withholding planning can eliminate underpayment penalties. 

Smart Planning Can Save Tax Dollars

In my opinion, tax planning is one of the most valuable services a CPA can provide. Be sure yours is helping you assess all the options available to help you legally reduce your income tax and make smart moves for retirement.

J. R. Armstrong, CPA, can be reached at May & Company in Vicksburg, MS at 601.636.4762.

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Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2009 Jerry Hayes, OD. Not to be reproduced without written permission of the author.