Small Business Tax Planning Strategies | EMyth

Between your end-of-year business obligations and your holiday family schedules, you’ve got a lot on your plate. The last thing you want to think about during the merriment and bustle of the season is the tax man. Alas, as December 31 approaches, so too does your window for last minute tax breaks.

There are legitimate tax opportunities you may want to act on in December, but you have to know where to look and you need to be sure that those opportunities are the right ones for your business.

What's coming and going

If (and we certainly hope this is the case) business has been going “up and to the right,” and you expect a healthy profit in 2010; that profit, of course, is going to be taxed. But just how much that profit gets taxed will depend on your ultimate strategy.

For example, if you want to sell your business in the next few years, or need to secure lines of credit or attract investors, then you should be focused on producing a healthy balance sheet, profitability and a strong EBIDA. In this case, year-end tax deductions might not be a priority for you because you want to show that profit to prove that your business is doing well.

If however, you want to reduce the amount of taxes your business will incur in 2010, you should be looking for legitimate ways of reducing that profit this year. There’s only so much you can do about that, particularly in December, but if your business has the cash to handle it, here are two ways you may be able to realize significant savings:

• Defer money coming in. Any income you bring in during December will be reflected in your 2010 taxes. If you know you have income due in December, consider deferring it and instead recognizing that payment in January. Push that income out until next year..
• Maximize money going out. It’s the holiday season, it’s time to shop! Consider paying in full for new equipment, office furniture and other items your business will require in 2011 before the end of the year to maximize your deductions for 2010. There are all sorts of things this can apply to, from a new laptop, to building repair --- even the E-Myth Mastery coaching program which some clients will pre-pay for in December. Before you go on a spending spree though, run the purchase by your professional tax advisor to make sure you’ll actually benefit from the expense.

And that brings us to the most important thing: get help!

Talk to your professional tax advisor

You need not be an accountant, nor understand the latest tax laws to be a savvy business owner. Some things are better left to the experts and our advice about taxes is always: consult a professional tax advisor.

You should have one for your business already, but you may only visit with them once or twice a year when taxes are due. If your advisor hasn’t discussed year-end strategy with you yet, be proactive and reach out to them. And when you meet with them, be sure you come with a clear idea of:

• Your short and long-term business goals 
• Whether you’re going to be profitable or not this year
• What revenues you can count on in December
• What expenses you can count on in the first quarter up to the first half of next year

Make the best decisions possible

It’s important to keep in mind that the business decisions you make throughout the year have tax consequences – even those decisions you make on December 31. Ultimately, your goal is to keep as much money in your own pocket as possible, so consult your professional tax advisor and come up with a year-end tax strategy that will help you make the most informed and effective decisions possible.