Entrepreneurial

5 year-end tax planning tips for small businesses

–- Glen Wielandt is head of franchise business development at Fiesta Auto Insurance and a veteran in the income-tax services industry with more than 20 years of operational experience in the tax center franchise industry. The views expressed are his own. –-

It’s the end of the year, and you know what that means: tax season is right around the corner. Recognizing the positive impact that early tax-season planning can have on the small business community, below are five practical tips to better prepare yourself and your business for the 2011 tax season: Keep a calendar. Deadlines differ depending on the type of business and when your tax year ends. Meeting filing deadlines will minimize penalties and interest. Organize your records. Good organization may not cut your taxes, but there may be other financial rewards. Maintaining regular bookkeeping of your financial records year-round will make tax season a less daunting time of the year. Plus, your tax accountant will spend less time organizing your records, and you will pay less money for his/her time and services. Contribute to a retirement plan. The benefit to this can be two-fold – if your business is profitable and you have employees. You can shelter income in a qualified retirement plan that will provide you with a tax deduction for your contributions. This will defer tax on earnings on those contributions, which ultimately becomes paid for when you start taking money from the plan. In addition, providing employees with a retirement savings opportunity can gain employee loyalty. Defer income and accelerate deductions. There are several steps you can begin taking now to put off income into the next tax year and increase your deductions in the current tax year. Send your bills out a few days later, in the last month of the year. This means that you will get paid a few days later in January of the next year, and you will be able to defer the income, instead of having to declare that income immediately. Similarly, see what bills you have due in January and pay them before the end of December. This way, you can take that deduction during the current year. Business tax credits. Keep in mind that there are many tax credits that your small business may be eligible for, including: Alcohol Cellulosic Biofuel Fuels credit, Alternative Motor Vehicle credit, and Disabled Access credit, to name a few. You can view a complete list of available tax credits by visiting the IRS website.

As you begin wrapping up your year, take these tips into account now and you will be pleasantly surprised by how much easier you’ll get through the tax season and the savings you’ll find.

from Reuters Money:

Death and Taxes: Year-end estate tax craziness

USnow covers the gravestones in Section 60 of Arlington National Cemetery in Virginia after sunset two days before Christmas day in Arlington, Virginia, December 23, 2009.Estate taxes affect very few people, but for those with seven- or eight-figure estates that are impacted, the end of this year is a crazy, crazy time.

That’s because going from a year with no estate tax (as 2010, oddly, was) to a year in which the estate tax is back (but with a $5 million exemption and large gifting possibilities) raises all kinds of quandaries for those who are very ill and for their families.

What if staying alive another week would save tens of thousands of dollars in state estate tax because the elderly person had already used up the gifting possibilities for 2010—but not for 2011? Or, if dying after New Year’s, rather than before it, meant paying the Treasury tens of millions more tax? The possible scenarios of spouses and children, second wives and estranged children, large sums of money, and elderly relatives on life support could make a movie.

from Reuters Money:

3 ways to cope with year-end tax uncertainty

USA-TAXES/The end of the year is in sight. But with taxes still in flux, it’s easy to succumb to your own worst instincts and just block out all the noise: After all, how can you even think about your own year-end tax planning when you don’t know what the rules are, and may not know till after the end of the year?

“People can get paralyzed, and not take any action,” says Rich Kohan, principal of personal financial services at PricewaterhouseCoopers.

With December rapidly approaching, there’s very little time for Congress to act on the Bush tax cuts, which are slated to expire at year-end, increasing the risk that nothing will happen before that date. Democrats would like to see the tax cuts extended for couples who make less than $250,000 (or $200,000 for singles), while Republicans want them kept in place for everyone, including the richest Americans.

from Reuters Money:

1099 tax rule may bring big pain to small business

The new rules on 1099 forms, which were attached to the health care bill and are set to go into effect in 2012, call for all businesses, no matter how small, to file 1099 forms for goods as well as for services. That sounds like a technicality, but it’s got small business up in arms.

Here’s why it matters, and what you need to know.

rWhat exactly is the rule, anyway?

The new rule requires all business to file 1099 forms for goods as well as services, if those goods cost over $600 annually (the current threshold). It also gets rid of the distinction between corporations, which previously did not need to receive 1099s, and unincorporated entities, which did. The rule is slated to go into effect in 2012.

Who will it affect?

It will affect all businesses, including sole proprietors, consultants, self-employed people and freelancers, who are considered businesses for tax purposes, but may not think of themselves that way. It also will apply to charities and other tax-exempt organizations. The National Taxpayer Advocate, based on Internal Revenue Service data, figures that it will affect 26 million sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farms, 1 million charities and other tax-exempt organizations, and likely more than 100,000 federal, state and local government entities. All told, that’s more than 38 million taxpayers and taxpaying entities.

from Reuters Money:

Tax rule change causes big small-business ruckus

In the big tax fights of this year, the coming changes to who must get 1099 forms would hardly seem to rate. But for the vast majority of small businesses, these new rules will hit far harder than the estate tax, despite political posturing on that front.

USA-POLITICS/OBAMAThe new rules on 1099 forms, which were attached to the health care bill and are set to go into effect in 2012, call for all businesses, no matter how small, to file 1099 forms for goods as well as services, if those goods cost over $600 (the current threshold). It also gets rid of the distinction between corporations, which previously did not need to receive 1099s, and unincorporated entities, which did.

As someone who is considered a small business for tax purposes (as are all sole proprietors, consultants and self-employed people), I can't help but think what this might mean for me. If I buy a new laptop, I'd better get the taxpayer ID number for Apple or Lenovo (depending on if I go Mac or not) and send that form off to wherever their tax department is located. And if I think I might spend more than $600 on pens, notepads, paper and the like at Staples over the course of the year, well, I’d better get their taxpayer ID number, too, and send them a form.

Can’t pay your taxes? Don’t worry

- Thomson Reuters Tax Analyst Jim Keller provides some options available to help taxpayers pay their balance due. This article originally appeared on ThomsonReuters.com. –

Are there options for Americans who cannot pay their taxes? According to Jim Keller, senior tax analyst for the Tax & Accounting business of Thomson Reuters, if you discover on April 15 that you have a balance due on your 2009 Form 1040, you won’t be alone.

In addition to the traditional causes of tax underpayment (such as the receipt of interest, dividends, or other non-wage income), the government estimates that more than 15 million taxpayers will be unpleasantly surprised to discover that they owe taxes with their 2009 returns as a result of the way income tax withholding was reduced to account for the “Making Work Pay Credit”.

“Taxpayers who fail to file on a timely basis and pay their taxes face penalties and interest charges,” said Keller, “these folks can expect to come up against a more aggressive IRS. For example, the IRS filed more than 683,000 tax liens during 2008 and served over 2.6 million levies during that same period.

America’s economic recovery lies in the middle market

bonneytom5x5Thomas Bonney is founder and managing director of CMF Associates, a financial consulting, staffing and recruiting firm based in Philadelphia, PA, that serves private equity, middle-market and small-cap public companies nationally. The views expressed are his own.

In his 1988 Republican National Convention acceptance speech, George Bush championed the tradition of the American community, describing it as “a brilliant diversity spread like stars, like a thousand points of light in a broad and peaceful sky.”

More than 20 years later, this tradition still forms the core of our country’s strength – particularly the “thousand points of light” that comprise our medium-sized, family- and private-equity owned business community. I believe it is this community that will ultimately drive the tailwind of economic recovery and growth.

  •