by Leo Bruette, BDO Seidman Small Business Specialist

It’s almost that time of year again – and as you may know, 2007 was full of tax changes for businesses and their owners. With seven new tax laws being passed, many late in 2007, tax preparation and filing will be challenging this year. To navigate all these changes, here are some tips, ideas and cautions from the tax professionals at BDO Seidman, LLP:

• More Pennies for Patents. According to the SBA, U.S. small businesses produce 13X more patents per employee than large firms. The Tax Relief and Health Care Act of 2006 added the “alternative simplified credit” to the mix of available research credits for tax years starting in 2007. The new credit may be the best option for start-ups because it can be figured without reference to a base amount and it is not limited by gross receipts.

•  Did You Buy Business Equipment in 2007? If so, the entire cost paid last year might be deductible but there is a limit for taxable income. For 2007, the Section 179 deduction allows a company to expense the first $125K of eligible equipment purchased from their taxable income. If a taxpayer purchases, and puts into service, more than $500K of eligible equipment in 2007, there is a required reduction in the otherwise allowable Section 179 deduction dollar for dollar over the $500K.

• Does Your Biz Involve Manufacturing Activities? If so, you may owe less tax than you think. For tax years beginning in 2007, the domestic production activities deduction allows businesses to reduce taxable income by 6% (up from 3% last year) of the lower of: qualified production activities income or taxable income.  However, be aware there are limitations.

• Did You Go Green in 2007? Business tax credits outlined in the Energy Policy Act of 2005 and in the Tax Relief and Health Care Act of 2006 allow credits for energy-efficient commercial buildings, buying hybrid vehicles, and for improving the energy efficiency of commercial buildings. In addition, be sure to check out your local state comptroller website or speak to your accountant to figure out which state tax incentives may be available for your business. An example: Businesses can claim a 30% credit for installing a qualified solar energy system (see Form 3468). However, the solar energy credit is limited by the AMT, so some or all of the credit could be lost if you fall within it.

• Calculating Contributions. If your business made contributions of food or books in 2007, you may be eligible for an enhanced deduction but there are limitations. C Corps, typically those that manufacture or develop the equipment or software, may also take an enhanced deduction for contributions of computer technology or equipment made to schools or libraries.

• Kids & Taxes. Remember that if your business hired your teen children you can get a deduction for their salary and the because the child is in a low tax bracket they can put up to $4000 in a Roth IRA each year they are employed. Restrictions do apply so speak to a tax advisor regarding your kids, your business and taxes thought.

• Composers get CopyRIGHTS. For the first time ever, musical composers, who are often self-employed, can treat their compositions as a capital asset for tax purposes.