As plumbing and heating contractors conduct business throughout 2008, it’s a good idea to keep in mind these five tax tips, provided by accounting and tax firm Grant Thornton LLC, to help save money (consult your tax professional to see how they apply to your business):
1. Take advantage of the I.R.C. Section 199 domestic production activities deduction.
This deduction may reduce your taxable income by up to six percent for 2007 through 2009, and nine percent when fully established in 2010. Potentially problematic issues within proposed regulations have been addressed in the final regulations, making the deduction more beneficial to contractors.
2. Examine your capital asset depreciation methods and lives.
“Catch-up” deductions are possible on under-depreciated existing assets. You may be able to write off 100 percent of the under-depreciated amount in the current tax year without amending past returns by filing an automatic change in accounting method.
3. Obtain a marketing edge by offering your customers more.
Work with your tax advisor to provide a turn-key cost segregation study to your customer with your completed project. They can assist in analyzing and appropriately classifying capital assets associated with the project into the most tax-beneficial depreciable lives.
4. Consider establishing a separate entity to own and lease fixed assets used in your business.
Often referred to as “leasing companies” or “procurement companies,” these entities help manage your assets and may significantly reduce your sales and use tax - a tax you collect and remit regardless of whether your company is profitable.
5. Determine if your company has overpaid sales and use taxes.
Most companies pay a substantial amount of money to suppliers and state tax authorities, but often overlook potential sales and use tax exemptions. Where appropriate, a tax advisor can assist you in filing a refund claim to recover sales tax overpayments that have already been made, and put a system in place to prevent future overpayments.
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