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BMO Harris Bank Says ‘Make a List and Check it Twice’: 5 Year-End Tax Tips for Small Business Owners

CHICAGO, December 14, 2011 — As many small business owners are busy with holiday activities and making plans for 2012, it’s important to remember that there is still time to take advantage of several tax-saving opportunities in 2011. BMO Harris Bank offers 5 year-end tax tips and strategies for small business owners that can pay dividends come tax time.

“While 2011 may be a year remembered most for its economic challenges, there are things small business owners can still do to help them finish 2011 on more solid ground,” said Margie Lawless, Senior Vice President—Small Business Banking Executive, BMO Harris Bank. ”Before the holiday rush, now is the time to do a quick financial check-up with a small business specialist and your accountant to consider some straightforward tips and ways to help minimize the amount of 2011 income tax payable,” added Lawless.

For small business owners (most commonly a sole proprietorship or partnership), there are a number of year-end strategies that can be applied to reduce the amount of income tax payable, including:

1. Do a ‘Financial Check-Up’: A small business specialist, accountant, and investment advisor can help owners make sure they have a clear understanding of their current financial situation. These professionals can also help develop or adjust existing plans based on new needs or changing circumstances. 
   
   
2. Defer Income: Depending on a number of factors (e.g. future tax rates, projected profit or loss for 2011, cash flow), small business owners may be able to reduce the current taxes they will be paying by deferring some of the income they expect to receive in December, into January 2012.
   
   
3. Gather Business Receipts and Increase Expenses: Maximize income tax deductions by ensuring all allowable receipts for business-related expenses (e.g. gas, stamps, customer lunches, coffee for the office) are itemized. Over the course of a year, those receipts for the little things can add up. Business owners can consult the guidelines available from the Internal Revenue Service, or speak to th eir professional tax advisor about eligible business expenses.
   
   Business owners can also increase some expenditures now on things they will need early in 2012, in order to maximize 2011 deductions. For example, consider accelerating the purchase of new equipment or other depreciable assets before the end of the year; you could benefit from a claim for tax depreciation in the current year. 
   
   
4. Consider Inventory Write-offs: A drop in the value of inventory may also provide an opportunity for an additional income tax deduction for the current year. It is important to speak to a banking advisor and your accountant about the tax rules that apply to your particular situation.
   
   
5. Set-up a New SEP, and make the Maximum Contribution to an IRA: For unincorporated small business owners, income earned by the business becomes personal income when filing taxes. However, many small business owners fail to take full advantage of the best income tax deduction available—the SEP.

SEP contributions are deducted from annual income, thereby lowering income tax payable at the individual’s marginal tax rate. Now is a great time to set up a new SEP or make a contribution to an existing plan for 2011 to benefit from the tax-deferred growth right away. The process is simple, quick and can be done at any bank branch. Making an SEP contribution does not typically preclude you from also making a contribution to an IRA.

Depending on your particular tax situation, a contribution to a Traditional or Roth IRA may also be deductible. Even if you don't qualify for the tax deduction, the earnings will remain tax deferred until withdrawn. Be sure to consult with your tax advisor to determine the best retirement plan for your particular situation.

About BMO Harris Bank 
Based in Chicago, BMO Harris Bank has approximately 700 branches and approximately 1,350 ATMs in Illinois, Wisco nsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.

About BMO Harris Bank N.A.
BMO Harris Bank is a trade name used by BMO Harris Bank N.A. Banking deposit and loan products and services are provided by BMO Harris Bank N.A. Member FDIC. Brokerage products are offered through Harris Investor Services, Inc. (HIS), a registered broker/dealer, member FINRA/SIPC, and SEC-registered investment advisor. Insurance products are offered through Harris Bancorp Insurance Services, Inc. (HBIS). Investment banking services are provided by BMO Capital Markets Corp. (BMOCMC) and BMO Capital Markets GKST, Inc. (GKST), a Municipal Bond Dealer and member FINRA and SIPC. Financial planning and investment advisory services are provided by Sullivan, Bruyette, Speros & Blayney, Inc. (Harris SBSB), an SEC registered investment advisor. Family Office Services are provided by Harris myCFO, Inc. Investment advisory services are offered by Harris myCFO Investment Advisory Services LLC (Harris myCFO), an SEC-registered investment advisor and wholly-owned subsidiary of Harris myCFO, Inc. Stoker Ostler Wealth Advisors (Stoker Ostler) is an SEC-registered investment advisor. Investment advisory services to institutional clients are provided by Harris Investment Management (HIM) or its wholly-owned subsidiary HIM Monegy (Monegy), SEC-registered investment advisors. Products offered by HIS, HBIS, BMOCM, Harris SBSB, Harris myCFO, Stoker Ostler, HIM, and Monegy, which are affiliated companies and wholly owned subsidiaries of BMO Financial Corp.,: Are not insured by the FDIC or any Federal Government Agency, not a deposit of or guaranteed by any Bank or Bank Affiliate, may lose value. The purchase of insurance or an annuity is not a condition to any bank loan or service. Not all products and services are offered in every state and/or location.