The Wonderful Time of Tax Season

People say this is the most wonderful time of the year - but it might not be if you make unwise financial decisions in December. After all, a new tax year is right around the corner, and poor choices you make before Jan. 1 could haunt you come tax time in April 2010.

Here's a list of things you should be thinking about before you turn your thoughts from business (the popping of cherries) to New Year's celebrations (the popping of Champagne bottles).

Should I send out some late invoices?

It sounds crazy to delay getting money. But it might not be a bad idea at the end of the year.

Let's say some people owe you $5,000 in December. Send them an invoice at the very end of the month, making them pay you in January. And what do you get? More time to pay taxes on that $5,000 because it will count toward tax year 2009.

But be careful: Don't delay income to January if you think the amount will bump you into a higher tax bracket for 2009.

Should I go hog-wild at Home Depot?

Many businesspeople stock up on office and computer equipment at the end of the year, and not just because a lot of sales are going on. They do it because it might give them a financial boost.

As a business - even if you're self-employed - you can deduct part of the cost of equipment and other supplies. Essentially, you don't have to pay taxes on money you spend on business expenses.

If you buy a lot of equipment before Jan. 1 and lower your overall taxable profit, you could conceivably push yourself down into a lower tax bracket for 2008. And that means you'd pay less in taxes. You can lower your 2008 taxes even more by paying some 2009 expenses ahead of time, like your January mortgage payment. But how will you know if this approach will work for you? If you're curious about how you'd make out tax-wise, you could run your 2008 taxes on versions of various types of tax software like Turbo Tax or TaxCut.

Should I do something about my retirement?

If you have an IRA - an individual retirement account - there's no hurry to put money in. You can open an IRA or add to it up until April 15. But if you have the money available, why not make a contribution before the end of the year? That way your money can start making money.

Should I give money to charity?

This is another way to reduce your tax bill at the end of the year, and you don't have to give cash. You can get a tax break by donating stock: If the price of your stock went up while you owned it, you can avoid having to pay a capital-gains tax if you give it to charity. (And you still get the charitable deduction.)

Remember, though, that charitable contributions are only deductible if you itemize your taxes. If you don't own a home, you probably don't itemize, and the IRS won't give you a break if you give money to charity.

Should I visit my accountant?

Your friendly neighborhood accountant is swamped come tax time, but he or she won't be as busy in December. It might be a good time to drop by and talk about tax year 2009.

Should I get a new credit card for business expenses?

If you're like a lot of self-employed people, you make business purchases with your own personal credit card. There's nothing wrong with that, but you might want to consider devoting a single credit card to business expenses.

For one thing, some credit-card companies will give you a summary of your annual expenses at the end of every year, which could be an easy way to get a handle on where your money is going.

For another thing, a business-expenses-only credit card could help you out if you lose any receipts. You could just look at old statements to remind yourself of what you bought.

Should I get more organized?

If you keep all your receipts in a shoebox, then the answer would be yes. Or as they say in our business, oh, oh, yes!

Being organized is a pain. But it won't hurt as much as missing out on a tax break because you can't find a receipt.