Obviously neither a sign business nor any business owner can literally reduce their federal income tax rate. They can, however, take actions that will have a similar effect. For example:

• Choosing the optimal form of organization for the business (such as sole proprietorship, partnership, corporation or S corporation). Although not a year-end tax planning strategy, this option deserves attention in the overall tax planning process especially in light of the new 15 percent tax rate on dividends paid by incorporated sign businesses.
• Structuring a transaction so that payments received are classified as capital gains. Long-term capital gains earned by non-corporate taxpayers are subject to lower tax rates than other income.
• Shifting income from a high-tax bracket individual (such as you, the business owner) to a lower-bracket individual (such as your child). One fairly simple way to accomplish this is by hiring your children. Another possibility is to make one or more children partners in the business, so that net profits are shared among a larger group.

The goal is usually to reduce taxes this year. To be really effective, however, the tax bracket should be consistent year after year. If income is up this year, but expected to be down next year, a sign professional might want to postpone assets sales or other unusual transactions that might generate a profit until next year. At that time, the additional profits won't be quite as likely to put the operation into a higher tax bracket.

Depending on their individual circumstances, there are a number of legitimate strategies that a sign professional can employ before year's end to balance things so as to remain in the same bracket this year, next year and for many years thereafter. Those basic year-end savings strategies include:

Delaying Collections
Delay year-end billings or processing of credit card receipts until late enough in the year that payments won't come in until the following year.

Delaying Capital Gains
If the sign professional is planning to sell assets that have appreciated in value, delay the sale until next year -- if this can be accomplished without significantly reducing the price.

Accelerate Payments
Wherever possible, prepay deductible business expenses, including rent, interest, taxes, insurance, etc. But also keep in mind that the tax rules limit tax deductions for some prepaid expenses.

Accelerate Large Purchases
Close the purchase of depreciable personal property or real estate within the current year.

Accelerate Operating Expenses
If possible, accelerate the purchase of supplies or services or the making of repairs.

Accelerate Depreciation
Elect to expense or immediately write-off the cost of new equipment instead of depreciating it. Remember the new Section 179 tax rules now permit every sign business to immediately deduct as an expense up to $100,000 in expenditures for new equipment.

Naturally, what any owner or manager can do depends a great deal on the accounting method used by the operation. A cash basis sign operation, for example, deducts expenses as paid and receipts become income when received -- or made available. An accrual-basis sign business realizes income when billed and expenses when incurred -- regardless of when paid for.

Tax Credits Not Deductions
A tax credit is defined as a dollar-for-dollar reduction in the amount of tax that a sign business owes. Unlike deductions that reduce the amount of income that is subject to taxes, a credit reduces the actual amount of tax owed. And, yes, Virginia, there are still tax credits in our tax rules.

What qualifies as a general business tax credit?

Disabled Access Credit
Years after the passage of the Americans With Disabilities Act, any eligible small business is entitled to a nonrefundable, disabled access income tax credit for expenditures incurred in making a business accessible to disabled individuals.

The amount of this credit is 50 percent of the amount of eligible access expenditures for any year that exceed $250, but that do not exceed $10,250. And, an eligible small business is defined as any sign business that either (1) had gross receipts for the preceding tax year that did not exceed $1 million or (2) had no more than 30 employees.

Pension Start-up Credit
For tax years after 2001, if a sign business begins a new qualified defined benefit or defined contribution plan (including a 401(k) plan, SIMPLE plan or simplified employee pension plan, they can receive a tax credit equal to 50 percent of the first $1,000 in startup costs.

Reducing Taxable Income
By beginning that tax planning process now, many sign business owners can legitimately deduct benefits that would otherwise be classified as nondeductible personal expenses. No sign business owner should, for instance, overlook the possibility of purchasing health insurance, investing for retirement or providing perks like a company car through the business. But perks, particularly those that benefit the owner of a closly-held business or operation, require advance planning.

The Restrictions On Tax Planning
Despite any rumored changes to our tax rules, every sign professional should immediately begin thinking how to reduce their 2003 income tax bills using the rules now in effect. Tax planning should be undertaken immediately, perhaps with professional assistance from your accountant or tax adviser.