The only painful part of owning a profitable small business is having to share the spoils with Uncle Sam.
Trees aren't the only things that can be trimmed during the holiday season. Business advisers say the waning days of December are a perfect time to plot eleventh-hour tax-trimming moves.
You don't have to convince Tom Smith, who co-owns a specialty furniture store in Orchard Park. He received his master's degree in business administration from Niagara University several years ago, so he knows a lot about tax-planning.
But finding the time to plot sound strategies during the busiest time of the year can be as challenging as trying to seat six portly guests on one of Smith's stylish couches.
"It's not unusual for me to be at my desk by seven in the morning -- three hours before the store opens -- just so I can handle all the paperwork."
Smith and his wife, Bernadette own Quaker Country Home Inc. on South Buffalo Street. They opened the store five years ago, not long after they visited a Yield House Furniture store during a skiing trip to Vermont. The shop is one of only 150 dealers of the Yield House line and ranks as one of the top 10 Yield House retailers in the United States.
Mrs. Smith continues to work full-time in the insurance industry, so her husband manages the store -- a business that is located on two-floors of a building that was once a rectory. He said 18-hour days are not unusual when you tally all the time he spends hawking furniture, accessories and gifts, then tackling weekly bookkeeping chores.
"You need to keep on top of the paperwork every day, our you'll lose track of things," said Smith. "Part of the challenge is to engage in good tax-planning. And you shouldn't wait until December."
Still, many frazzled business owners who are forced to juggle many tasks start pondering ways to reduce their tax burdens weeks sometimes even days -- before New Year's. National surveys have shown that coping with year-end paperwork is one of the most commonly-cited causes of stress among smaller entrepreneurs.
But experts say there are some simple things that businesses can do in December that will ultimately lower their tax bills.
Charles S. Battaglia has been counseling businesses and individual taxpayers for more than 30 years through his job at the local Internal Revenue Service. For the past six years, he has been assigned to the IRS' Business Assistance Center on West Huron Street.
"Now is the best time to take a good look at your tax situation and reconcile all your records," said Battaglia. "It takes some time and discipline, but it will be worth it."
Battaglia noted that most smaller companies operate on a cash-accounting basis. In laymen's terms, it means that both income and expenses are reported for the year they are received or paid.
"If that's the system you're using, it's possible to accelerate your expenses by prepaying some things," he said. "But you can't prepay expenses more than 30 days in advance."
Smith, who works closely with a local accountant, said Quaker Country Home makes it a Yuletide ritual to find last-minute deductions. For example, he said the store typically prepays its January rent in December.
Battaglia said other businesses stock up on furniture, equipment and supplies toward the end of the year, taking delivery before Dec. 31. He said even if the purchases are charged on a credit card and payment isn't due until 2000, they will still be deductible on this year's tax return.
Some businesses pay too much in taxes simply because they overlook common deductions. They include:
Bank service charges and business association dues.
Parking expenses (including parking meter fees, as long as there's documentation.)
Coffee and beverage service.
Telephone calls away from the business.
Lee and Kay Rousselle own Practical Solutions, a home-based business in Tonawanda that distributes magnifying mirrors, herbal products and decorative paperweights made from authentic river rocks.
Rousselle said he went to the IRS' Business Assistance Center to get general tax advice for his two-year-old enterprise.
"Small businesses like ours don't have the resources that allow us set up our own accounting department. It's helpful to be able to go to an office that can answer all types of questions about setting up and operating a business," he said.
Rousselle urged novice business owners to do one thing right from the start: Make sure company expenses are kept separate from personal expenses. Mixing these expenditures is common, especially among the smallest home-based businesses. But it can make it tougher to claim legitimate business deductions and cause nightmares at tax time.
"We have even have a separate phone line so our business calls don't get mixed in with our personal calls," he said. "And we have a cell phone that we carry with us at all times so we don't miss any customers. People hate voice mail."
Tom Smith, whose furniture store has seen sales increase by an average of 40 percent a year since 1995, said he begins his tax-trimming quest in the early fall.
"I sit down with my accountant in late September and we go over the figures for the first three quarters," Smith said. "It's a lot tougher to make good decisions when you start thinking about these things in December."