Every year about this time I remind business owners and
CFO's (financial officers) to review their business
deductions for the year. If you use the calendar year as
your tax year (like most of us do), December 31st is a very
important date. And this year, with the potential for major
tax increases starting January 1st (in the U.S.), working
with your tax professional is more important than ever!
Here are two important facts:
1. Depending on where you live and your tax rate, about 40%
of everything you make will go to the Government, and the
final accounting for most businesses comes on December 31st.
The more you make, the more your "partner" will take in
taxes.
2. Conversely, any legitimate business expenses you incur
in the next few weeks are deducted directly from that tax
bill. In the U.S., that means "Uncle Sam" is willing to chip
in and pay for about 40% of whatever you buy for business
purposes! Take advantage of that!
If you need new office equipment, a new computer, or routine
office supplies, take action! It's like getting "40% off!"
If you can pre-pay some regular business expenses
(insurance, rent, supplies or fees) by the end of December,
they come directly off your "bottom line" which means lower
taxes in April.
Now, obviously, the expenses must be for legitimate business
purposes, and there are some limitations. And obviously you
should check with your accountant or tax advisor for
specific advice in your particular situation. No cheating!
(It never pays.) But remember that a few months from now you
will pay taxes on every dollar you make this year and if you
can legally reduce that amount by stocking up now, that's to
your advantage. Think about it!
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