• All charitable contributions, regardless of the amount, must be supported by written documentation, such as a canceled check, credit card statement that clearly indicates the charity, or receipt from the charity. “Cash put in the collection plate at church or spontaneously given under circumstances such as when the firefighters collect on street corners for charities or even the Salvation Army Christmas kettles is no longer deductible,” Lewis says. “If you prefer to contribute cash to a house of worship and want to deduct it, use a donation envelope so you can get an accounting for tax purposes.”

• Some key deductions that ended in 2005 have been extended through 2007. Two such deductions are those for higher education expenses and state sales tax in states that don’t have an income tax. If you live in a state without a state income tax and are planning to make a major purchase such as a car or boat in the near future, Lewis suggests finalizing the sale prior to the end of the year to take advantage of the sales tax deduction.

• Tax preparers are going to be asking for increased documentation for expenses, particularly in areas such as automobile expenses, meals and entertainment, and the valuation of non-cash charitable contributions. “Congress is attempting to close what is known as the tax gap, which is the difference between what the U.S. Treasury thinks it should be collecting and what it actually is collecting,” Lewis says. “The IRS is setting a higher bar in regard to the documentation necessary to support many deductions, and it is enlisting the tax professional community to insure that those who are entitled to deductions have adequate documentation and that frivolous deductions are not being taken. Penalties for tax preparers that fail to meet the IRS requirements are being increased.” Be sure you know exactly what you can deduct and talk to your tax advisor to determine the best way to track and document those items.

This is also a good time of year, Lewis says, to be sure your records are completely up to date so that you can make appropriate year-end decisions. Pay your state and local taxes before the end of the year so you can take the deduction on your 2007 federal return. If you own investment property, get your miscellaneous repairs and maintenance done and paid for before the end of the year.

If you have bills on hand, get them paid before December 31. Stock up on office supplies that you’ll need in the near future so you can take that deduction this year. Consider accelerating equipment purchases, but be aware that there are some times when this strategy is not effective. Also, for any equipment purchase, you need to determine if it’s better to take an immediate write-off or depreciate the equipment over a period of years.

A common year-end tax strategy is to defer revenue to reduce your total taxable income, but this doesn’t always work and Lewis doesn’t recommend it. He says that if you voluntarily defer receipt of a payment, the IRS considers that “constructive receipt” and counts it as income for the year in which you earned it. “There are some exceptions, but for the most part, if you’ve earned the income and they’re ready to pay you, it’s income.”

Of course, before implementing any tax strategy, consult with your tax advisor. Consider not only your current situation but also what you expect to change in the coming year so that you can make the best short- and long-term decisions.

Finally, Lewis notes, Congress usually passes a substantial tax bill in November before they break for the holidays, so it’s a good idea to check with your tax advisor in early December to see if any additional changes have been made to the tax code that could affect you or your business.

Jacquelyn Lynn (www.jacquelynlynn.com) is the author of Entrepreneur’s Almanac. Brian Lewis, CPA is a Certified Public Accountant in Maitland, Florida.