What It Is

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 questions to ask yourself and some important facts to consider.

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 money than ever before for equipment purchases. You can also take tax deductions on expenditures that your company would usually need to write off over the next several years, and get an immediate tax deduction. Depending on what tax bracket you fall into, your tax break could be anywhere from $15,000-$39,000.

Do you have someone advising you on a good strategy so that you tax-optimize your year-end income and expenses?

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?

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.

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.