ATTENTION SMALL-BUSINESS owners: It's not too late to make tax-saving moves for your business. The likelihood, or lack thereof, that you'll be in a higher tax bracket in 2009 can determine whether it makes more sense to defer income into next year and accelerate deductible expenditures into this year or do the opposite.

In this conclusion of our two-part series on year-end tax-saving strategies for small businesses, we'll tell you which moves to make between now and Dec. 31.

(To read our first installment, click here).

Juggle Income and Expenditures Before 2008 Is Over

If the Business Is a Sole Proprietorship, S Corporation, LLC or Partnership
If you run your operation as a sole proprietorship, S corporation, LLC, or partnership, the net income generated by your business will be reported on your personal Form 1040 and taxed at your personal rates. I now expect the politicians to keep the scheduled 2009 federal income tax rates (which are taxpayer-friendly) in place in order to help the struggling economy. (See the table at the end of this article for those rates.) If that's what happens, the traditional year-end strategy of deferring income into next year while accelerating deductible expenditures into this year will make sense in most cases. Since many small-business owners will probably be in the same or lower tax bracket next year, deferring income and accelerating deductions will, at a minimum, postpone part of their tax bill. As an added bonus, it could even cause some income to get taxed at a lower rate next year.

However, if your business is thriving, and you expect to be in a significantly higher tax bracket in 2009 (say 35% vs. 28%), take the opposite approach. Accelerate income into this year (if possible) and postpone deductible expenditures until 2009. That way, some income will be taxed at this year’s lower rate instead of next year’s higher rate.

If the Business Is a C Corporation
For businesses run as regular C corporations, the 2009 corporate tax rates are quite likely to remain the same as in years past. If you expect your corporation to pay the same or lower rate in 2009, postpone income into next year while accelerating deductible expenditures into this year. If you expect the opposite, try to accelerate income into this year while postponing deductible expenditures until next year.

Moves You Can Make
Assuming your business is eligible, cash-method accounting gives you flexibility to manage your 2008 and 2009 taxable income to minimize taxes over the two-year period. If you expect business income to be taxed at the same or lower rate next year, here are some specific cash-method moves you can make. (If you expect to be in a higher tax bracket try to do the opposite of the moves listed below. Given the economy, keep in mind that accelerating income into this year may be difficult or impossible. But you can still postpone deductible expenditures until next year when the write-offs will be more valuable.)

• Before year's end, charge recurring expenses that you would otherwise pay early next year on credit cards. You can pay the resulting credit-card bills next year while still claiming deductions on your 2008 return. However, this favorable treatment doesn’t apply to store revolving charge accounts. So you can’t deduct business expenses charged to your Sears account until you actually pay the bill.

• Pay expenses with checks and mail them a few days before year-end. The tax rules say you can deduct the expenses in the year you mail the checks, even though they won’t be cashed or deposited until early next year. To lock in 2008 deductions for big-ticket expenses, send checks via registered or certified mail. That way, you can prove they were mailed this year should you get audited.

• Prepay for some of next year’s expenses. As long as the economic benefit from the prepayment lasts 12 months or less, you can claim a 2008 deduction. For example, between now and year-end, you could prepay the first few months of next year’s office rent or premiums for property insurance coverage for the first half of next year. The IRS says it’s OK.

• You don’t have to report income until the year you receive cash or checks in hand or through the mail. To take advantage of this rule, put off sending out some invoices so you don’t get paid until early next year. Of course, don't do this if it means risking the chance to collect your dough.

Some Other Helpful Tips for Cutting Your 2008 Tax Bill

If you have not established a retirement plan for your small business, consider doing so before the end of the year. You can put off making the 2008 contribution until next year, while still claiming a contribution deduction on this year’s return. Read the following stories for details. (1) “Small Business Retirement Plans” (2) “The Solo 401(k)” (3) “Tax Perks of the Solo Defined Benefit Plan”.

Finally, if your business is a profitable C corporation with plenty of cash, consider taking dividend payouts before year-end. That way, you’ll pay no more than 15% tax to the feds. (For more information, read our story here). This is an especially good idea if you’re worried the dividend tax rate will be raised for 2009. I don’t think that will happen, but playing it safe can’t hurt.

SMALL BUSINESS TAX PLANNING INFO FOR 2008 AND 2009:

Note: If you run your business as a C corporation, the 2008 federal income tax rates and brackets are the same as for prior years, and they are currently scheduled to be the same for 2009 as well.

2008 Retirement Account Contribution Limits

Maximum deductible solo 401(k) contribution to business owner’s account: $46,000

Maximum deductible solo 401(k) contribution to age-50-or-over business owner’s account: $51,000

Maximum deductible SEP account contribution: $46,000

Maximum profit-sharing Keogh account contribution: $46,000

Maximum SIMPLE IRA salary deferral contribution: $10,500

Maximum SIMPLE contribution if age 50 or older: $13,000

2009 Retirement Account Contribution Limits (Assuming No Changes)

Maximum deductible solo 401(k) contribution to business owner’s account: $49,000

Maximum deductible solo 401(k) contribution to age-50-or-over business owner’s account: $54,500

Maximum deductible SEP account contribution: $49,000

Maximum profit-sharing Keogh account contribution: $49,000

Maximum SIMPLE IRA salary deferral contribution: $11,500

Maximum SIMPLE contribution if age 50 or older: $14,000

Other Important 2008 Tax Planning Figures

Maximum first-year Section 179 depreciation write-off $250,000*

Cap on Social Security tax (based on wages or self-employment income) $102,000

Allowance for business mileage:
January-June: 50.5 cents per mile
July-December: 58.5 cents per mile

* For tax years beginning in 2008.

Other Important 2009 Tax Planning Figures (Assuming No Changes)

Maximum first-year Section 179 depreciation write-off : $133,000*

Cap on Social Security tax (based on wages or self-employment income): $106,800

Allowance for business mileage: 55 cents per mile

* For tax years beginning in 2009.