Inside Small Business | Small Business & Home Business Marketing

Outside the Box: When to Pay More Taxes

Art Dinkin, CFP

As the April 15^th tax filing deadline approaches, most small business owners and their accountants scurry to find every possible expense and deduction which can lower the tax liability. Most of the time, paying less taxes is good; but not always.

You may want to pay more taxes if…

You plan to sell your business soon – Business valuation is an art unto itself. Every industry and situation is unique. But this much is certain, the more profitable the business, the more it is worth. Most businesses are worth a multiple of profits. Every dollar of bottom line profit may cost as much as 39 cents in taxes but could make the price of the business worth $1.50 to $5.00 more.

You’re seeking financing for your business – Have you ever heard the saying “You have to spend money to make money”? Of course you have. Few people understand better than a small business owner that growing a business requires up front capital. Often, the best way to raise the money is simply to ask your banker. Of course, they will want to see your financial statements. If you told the government that you lost money (or made very little) on your tax return, your banker may not be so likely to open up the vault for you.

Protecting your income – I am a believer in risk management. Part of the process includes identifying the assets you can afford to lose as well as those you can do without. If the asset is expendable, c’est la vie. But if you can’t do without something, insure the heck out of it. For most small business owners their ability to get up, go to work, and build their business is their most valuable asset. No insurance company can underwrite potential, only earnings. Before issuing a disability income policy the insurance company is going to want to see your tax return.

No one wants to pay any more taxes than they have to. But don’t get so focused on the single goal of writing a smaller check to Uncle Sam that you fail to consider what it may cost down the road. When your CPA has completed your tax return, ask for a copy and run it by your financial planner before you file. Working together as a team you can make decisions which give your business the edge you seek.

About the author: Art Dinkin, CFP®, CLU, ChFC is an independent Certified Financial Planner ^TM practitioner in West Des Moines, Iowa who works frequently with small business owners. His ability to explain financial matters so they are understood has been developed through nearly 20 years of experience combined with his classroom skills acquired as adjunct faculty at Des Moines Area Community College. He writes a popular blog on personal finance, Art Dinkin’s Moment on Money.

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5 Tax Savings Tips for Your Company

Jim Haines, Just Accountants

Do you want your company to pay less tax this year?

Of course you do. It’s a pretty silly question, right? No company wants to pay more tax than they absolutely have to.

Nevertheless, many companies don’t take advantage of the opportunities that are available. Luckily, with some fairly straightforward tax planning, you can significantly reduce your corporate tax this year.

Here are our five top tips that will help reduce your company’s tax liability this year:

1) Bring Forward Long Put Off Expenditures:

Bring forward that long overdue office repair or redecoration project or that direct marketing campaign you were considering for next year. Any expenditure before the company year end will reduce the current year’s tax liability and lets’ face it, your office will look nicer.

2) Make The Most Of Your Capital Allowances:

You will certainly save your company some tax by bringing capital expenditures - such as machinery - forward. Some of the bigger savings can be found in the purchase of energy saving technologies and products which qualify for a 100% allowance.

Companies generally receive a 25% allowance on plant and machinery related capital expenses, but SMEs companies get a 40% allowance in their first year. So, if you are a small or medium sized company (as defined by company law), take advantage and make those types of purchases before the end of your first year trading.

Even better, for computers and telephone equipment, you can claim a 100% reduction against your profits in the first year.

The best bet of all is in research and development - a new R&D tax credit means you can claim 150% of what you spend, and if you are a loss-making company you have the option of taking a part of that as an immediate cash payment.

This is a little known and often misunderstood tax credit, but many companies can take advantage of it. Get some advice on what exactly qualifies as research and development first, just to be on the safe side.

3) Re-structure Your Dividends and Bonuses:

Smaller companies - in particular, owner-managed businesses, can save on National Insurance payments by taking dividends rather than paying themselves a salary. On average for a higher rate tax payer, the tax rate will be reduced to around 39% compared to 47%.

4) Minimize Capital Gains Costs:

One of the best ways to minimize capital gains is to reinvest the proceeds of a sale into buying a replacement asset. Be warned, though, that not all assets qualify for relief. Check first before utilizing this tip.

5) Get The Right Receipts

A useful tip is to make certain that your employees ask for VAT receipts whenever they make a purchase on behalf of the company. That will ensure you can claim back the VAT on all purchases that are VAT rated.

If your company reviews it’s tax affairs between two and three months before the end of your financial year, then you can start planning how to effectively and, most of all, legally, minimize your tax liabilities.

Article Source: http://www.articlesbase.com/management-articles/5-tax-saving-tips-for-your-company-284481.html

Jim Haines works for Just Accountants, a UK website that allows companies to get quotes from up to 4 accountants. Visit Just Accountants for details.

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Dear Small Business Owner

Maggie Sefton, Novelist

I’m leaving tomorrow for two back-to-back mystery conferences - Ft.

Lauderdale and then Denver. We novelists are always working on planes/shuttles/airports/coffee shops, whatever. Writing away because we live in a world of deadlines.

For the record, I haven’t worked as a CPA for years (I let my license lapse), but when I did I worked mostly on small business accounts.

Exactly like what I have myself. Writing novels is a small business, too, and I’m self-employed. So that means I have to file a Schedule C form just like any small business.

Okay, off the top of my head - in between my own business emails, here’s some “down in the trenches” small business advice:

• Most of the problems small businesses get into seem to revolve around accounting or bookkeeping issues. They don’t keep track of their expenses or the money they receive or, here’s the biggie, they fail to pay their quarterly tax returns, both state and federal. Money is tight one quarter, and they forget. That’s a big no-no. The Tax Guys will jump on that faster than fleas on a dog.

• Businesses that involve product sales also have to report sales tax collections on a quarterly basis. And, if there are employees who work for the business, then there are social security taxes that have to be withheld from their wages and reported. And there are other quarterly taxes as well to keep up with.

• My best advice for small business owners is to start a very simple system to keep track of income and expenses. The easiest is a manila envelope in the desk drawer. Shove in all receipts, invoices, slips of paper w/numbers, whatever. Shove it in the envelope.

• Then, save yourself a lot of headaches and heartache and take that envelope to an accountant or bookkeeper. Quarterly is better, because then you’ll get a regular and timely handle on how your business is doing.

• Since I am the “friendly neighborhood accountant” for my business, I do the books. But, since most people seem to find accounting tasks odious at the least, I advise them to pay someone else to do it for them.

• And you don’t have to use a CPA for the quarterly record keeping. Save money and use an accountant or bookkeeper who does it for other businesses and knows how to file “quarterlies.” Stay on track. Then at the end of the year, take those records to a CPA and have them file your yearly income tax returns. And save all those receipts.

• If you’d like to save money on the bookkeeping fees, then have one of those expand-a-files that you can label for expenses, etc. Take a look at a Schedule C and use the same categories: advertising, supplies, business meals, phone expense, and my all time favorite–”Other.” That includes postage.

• Also a very big expense for some business, like mine, is auto mileage. Keep a notepad in your car so you can keep track of how far you drive when you’re visiting clients or going to conferences or delivering products, whatever. Jot down that mileage in your daytimer or whatever you use regularly. That mileage adds up and the amount allowed is actually quite good. So, don’t lose out on an important expense. Keep track.

All this may sound too simple to be repeated, and it is. But, alas, people forget it all the time. And it is the fastest way to get into trouble. Believe me, this is where most small businesses have problems. And the statistics aren’t encouraging.

Nearly 90% of all small businesses go belly-up within three to five years.

Why?

Accounting issues: keeping track of money coming in and out and paying taxes on time. So, stay on track and stay out of trouble.

Good Luck! I’m off to the airport and another conference.

–Maggie Sefton

Maggie Sefton is the author of the nationally bestselling Berkley Prime Crime mysteries: Knit one, Kill two, Needled to Death, A Deadly Yarn, and A Killer Stitch. To learn more, visit www.maggiesefton.comor her blog at www.cozychicksblog.com

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