Posted By Administrator
Well one thing is likely for certain, small business or businesses for that matter are likely looking at higher taxes in the not so distant future. It is to early to know there final form but they will likely occur in one of the following areas: increased taxes on dividends, increased capital gain rates, increased income tax rates for individuals, or tax rate limitation on deductions.
My advice…..get your money out of your corporation now while you can. No this doesn’t mean bankrupt your company for the fear of future tax hikes and I’m not one for running a business with the fear of taxes, but it it does mean that you should not put off tax reduction strategies now simply because you don’t need the money. Between SEP 401ks, draws for S-Corp owners, dividends for C-Corp owners, section 179 deductions, etc you should be using these and other strategies to your best advantage now while they still exist in there current form.
Undoubtedly the need for accurate tax planning now and especially in the future is going to be at a premium especially for higher income individuals and corporations. Another bit of advice to clients is do not put off tax planning simply because it costs money. Its similar to the analogy of paying a mortgage simply for an interest deduction on your tax return…..“I never want to payoff my mortgage because I receive a deduction for it”. Well what sense does it make in paying $15,000 in mortgage interest for $3,000 in tax savings. On the other hand tax planning does cost money but if the benefits (tax savings) exceeds the cost isn’t it a no brainer? This is one point that I make to all potential clients that have a provider or are provider shopping…….are you sure your getting the most out of your business or are you just paying excessive fees for tax preparation? Regardless of “maximum refund guarantees” maximum refunds are not achieved at tax preparation, but are achieved before the year is over and when you CAN maximize your tax savings!
On an aside one thing I found interesting is many states voting strongly in Obama’s favor will be the same states most impacted by these types of future tax increases.
http://finance.yahoo.com/taxes/article/106659/Where-the-200K-Crowd-Lives
For a free in person consultation fell free to give me a call at 443-927-9161.
Thanks,
Travis Raml, CPA
Posted By Administrator
I don’t mean to be insensitive because I know the economic challenges are tearing lives apart as we speak. However it must be known that these problems were all caused by people chasing the fast or easy money. The late 90’s and early 00’s it was stock regardless of fundamentals. Then it was real estate regardless of the fundamentals. Now its the bank because they forgot the fundamentals. Now its the consumers because they forgot the fundamentals of living on borrowed credit at lifestyles they could not support.
Where ever you fall in all this as a Small Business Owner you must realize, that from this point forward you need to be better. That means the previous tried and true business methods need to be reanalyzed or possibly trashed all together. It means growing when everyone around you is shrinking. Now this is not to say every business has this opportunity, but if you do, you have to realize your businesses survival depends on you, what you do, and who you get help from.
One place to start is tax planning. Most people confuse this with tax preparation and they couldn’t be more wrong. Tax planning for small businesses is a major project. Why? Because there is so much at stake. From month to month your running losses, then profits, then losses…….and then get to the end of the year and you scream yes we made money. Problem is you probably didn’t tax plan with that money. Now say you are a (non corp) LLC and you earned 100,000 in this scenario. Now right off the top the government is going to take almost $16,000 in self employment taxes. No that’s not all, they are then going to tax the 100,000 again for federal and state taxes. Consider yourself lucky if you walk away with 60,000.
No what if I said at the beginning of the year we need to change your filing status, and draw down a reasonable salary until year end at which point we can pay you a bonus because your going to have a great year. The year goes by and we end up with making the same $100,000. But something amazing happen, you save over $6000 (or more) in taxes just because I helped you adequately plan at the beginning. During the middle when you were loosing money and saying this guys an idiot for having me take a salary……..however you came around in the end and are at least $6000 (or more) to the better for it.
This of course is just and example, but an example that happens ever day to clients everywhere. If your up to taking on the challenges of getting your business profitable…….we can help. That means getting down to business and working harder (remember the easy money is gone), it means analysis prepared by a licensed professional with experience in these types of matters. Try asking that of your bookkeeper or bargain basement tax preparation service.
If you looking for the bottom dollar tax preparation and planning then we are not for you. But if your ready for intelligent insight on how to take your business to the next level than you owe it to yourself to just give us a call at 443-927-9161. We offer a free in person consultations and are giving new clients a 25% off towards there 2008 individual tax return.
Thanks
Travis
