It seems almost cruel to bring up the topic of taxes this far in advance of year-end, but now is the time of year when smart business owners are thinking ahead and making adjustments that will minimize the number of dollars that go into Uncle Sam’s pocket on April 15.
We all know taxes are complicated, but they still have to be paid. It’s a good idea to have someone who knows taxes inside and out so that you can get the tax advice you need.
Here are some things to ask yourself as you go throughout the year, so that taxes will be much simpler come tax time.
Do you have someone sitting down with you regularly to determine what the tax impact of your key decisions will be, including any major purchases you’re going to make and the size of your paycheck?
You can deduct more for equipment purchases than you have been able to before. You can also take expenditures that your company would otherwise need to write off over several years, so that your tax deduction is immediate. Depending on what tax bracket you fall into, you could get a tax break of between $15,000 and $39,000.
Do you have someone helping you construct a smart tax strategy so that your year-end income and expenses are optimized?
At year’s end, you should be thinking, “Increase expenses, and delay income.” This means that you’ll pay fewer taxes. For example, you can pay your January mortgage a little early or prepay for magazine subscriptions so that those taxes don’t get paid until the next year. However, if you’ve had a bad year and expect the next year is going to be better, you might want to do the opposite.
You have someone educating you are about ways to save taxes that you might not know about?
Be careful not to miss out on deductions. For example, you can set up something called a “Dependent Care Assistance Program.” This is a simple way to put more money in your employees’ pockets. You can reimburse employees from $5,000 in child care expenses, free of taxes. You don’t pay payroll taxes on that amount, and they don’t pay taxes on what they are reimbursed.
Your CPA still plays a vital role in preparing and filing your actual returns. But wouldn’t it be reassuring to know that there was somebody who really understood your business and was working side-by-side with you throughout the year to develop a big picture tax strategy?
Taking every legitimate deduction available to you is simply smart. However, you have to make sure your decisions are based on the long-term benefit your company, not just on short-term tax savings.
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