January 2009 is the time to make sure you keep money from 2008 in your own pocket.

Now is the time to make plans to plan to avoid paying “Uncle Sam” and get your biggest refund ever.

1. If you have a business, do the following:

√ Take end of year mileage - It doesn’t matter when you clock end of year mileage - it just matters that you do it in a provable way. Get an oil change, photograph your odometer or get your neighbor to witness the mileage reading. Do this quickly so your year end mileage is as close as possible to the actual year end.

√ Get an oil change; take a picture of odometer, or something similar to support your claim.

√ Take an end of year Inventory: Every retail business has inventory. Take an end of year inventory. As with mileage, you want to do this as close to actual year end as possible. That lets your year-end numbers serve as your next-year’s-start numbers.

Inventory is important in determining your profit - and profit determines your tax bill. Inventory is not a deduction until it is sold. Although an expense to the business, it cannot be deducted until sold. Until sold, it is an asset. Inventory doesn’t affect profits until it is sold.

In most cases using an inventory company simplifies this process

〉 “Quick Analyze” Your Systems: Now is the best time to quick analyze your financial systems. Look at your accountant or tax preparer. The beginning of the year is the best time to make this change. Our free article gives you sample questions to ask your potential new accountant.

Would you like to upgrade a manual accounting system to an easier digital system? Consider software like QuickBooks that will fit your needs. Be sure to include your bookkeeper AND your tax preparer in the discussions for choosing and setting up a new system.

Do you feel like you are paying too much tax? Check out our article on Top Tax Tips for 2009. Now is the time to set your financial foundation for 2009.

2. Here are two individual tax suggestion for 2009:

〉 Look at Your Form W-4: Form W-4 determines how much tax is deducted from your paycheck. Here’s a quick way to decide whether you should have more tax deducted: When you paid at tax time last year, and your income is the same or higher this year, then having more tax deducted from your paycheck can keep you from having to pay at tax time next year. Our free article, The Top 5 Planning Tips for 2009 gives details on this and other strategies.

〉 Consider a hobby or home based business: Many people look at a business as the better of these two options.

If profit is not a concern, and you have an interest that you spend time on and make some money in, consider a hobby. With a hobby, you are able to take deductions up to the amount of money you make. With a hobby, you are able to “break-even” tax-wise.

If you are a stamp collector, for example, and travel to conferences, it can be deductible. The more money you make in the hobby, the more you can write off.

A hobby is a life style choice, not necessarily a financial one.

A business is able to write off deductions above income, and show a loss. This loss can offset income from other areas, like a paycheck.

If you have a profit motive, start a business or turn your hobby into one. It may require more effort than a hobby, but offer more benefits and have more long term potential.

If you are interested in starting a business, check out our, “Tax Guide for Home Based Businesses.”

Do It Now

We all make our resolutions at this time of the year. Seriously look at your personal and business tax situation and take action now to reduce your tax burden in 2009.

Check out our free article Top Tax Tips for 2009 now.