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Start Tax Planning, Now!

Feb 28, 2008
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.

Of course, taxes can get complicated. Hey, even Albert Einstein claimed, "The hardest thing to understand in the world is the income tax." And you've got more important things to do with your time. Make sure there's someone in your corner providing the 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.

Who's sitting down with you on a regular basis to determine the tax impact of your key decisions including major purchases and sizing your personal paycheck?

The amount of money you can deduct for equipment purchases is higher than it has ever been. You can take expenditures that your company would otherwise need to capitalize-write off over several years-and get an immediate tax deduction. Depending on your tax bracket, you could see a tax break of $15,000 to $39,000.

Who's helping you develop a tax-savvy strategy for your year-end income and expenses?

In general, the mantra for year-end tax planning is, "Delay income and increase expenses." This can be as simple as paying your January mortgage early or prepaying for magazine subscriptions early as well. This helps you keep the tax money out of Uncle Sam's hands for an extra year. However, if you've had a bad year and expect that the next year is going to be better, the opposite approach is probably better.

Do you have someone advising you on ways to save taxes you might not know about?

Take care in check for those frequently missed deductions. For example, you could set up what's called af "Dependent Care Assistance Program." You can put more money in your employees' pockets this way. Every year, you can reimburse employees for up to $5,000 in childcare expenses, tax-free. They don't pay income taxes on the reimbursement, and you don't pay payroll taxes on that amount, either.

Of course, your CPA has a job to do when he or she prepares and files your returns. However, it's nice to know that there's somebody who really understands your business and works with you, so that you can develop a long-term 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.
About the Author
Author: Margot Brandlin lives and writes in Minneapolis, Bookkeeping with Owl Bookkeeping and CFO. Bookkeeping in Minneapolis with Owl Bookkeeping and CFO allows her to provide the highest caliber of service to her clients.
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