Monday, January 7, 2013

Small Businesses Are Benefiting From Tax Laws

The recent changes in the tax laws have definitely put small businesses in a tight spot. There is no denying this fact. But that in no way means that small businesses cannot work their way around it in order to mitigate the effects of such aggressive tax laws. For starters, aggressive year-end tax strategies is not what small business owners should be banking upon at this point of time. Your tax strategies should not be stringent. They should be flexible enough to accommodate benefits or losses incurred due to preplanned or unplanned policies.
A small business cannot always plan all its expenses in advance. It is common knowledge that there are times when a small business owner needs to pump more money into the venture than was planned in order to cover up some extra efforts that the company is probably making that could be related to marketing, increased production, etc. Alternately, there are times when a company is not able to spend as much as it set out to due to some reasons. This is why planning taxes in advance makes them bound to a plan and unable to make changes that would benefit them in the long run.
It is prudent that you try and maximize your deductions in order to minimize your taxes. When following this advice, keep a tab on the timing. In case you've had a particularly bad year financially, and you do not expect a change from this in the next year too, you would be placed in a lower tax bracket. So you do not need to take deductions right now, as your taxes would already be low. If things turn around however, you will be placed in the higher tax bracket, and this is when you should implement your deductions plan.
It is important that you as a business owner understand that when you spend $1, it is not $1 worth of tax paid, but $1 worth of money spent. So don't just go about spending money hastily for no reason in order to save tax.
The most commonly held false notion surrounding year-end tax planning is that it is wise to 'zero out your business bank account by 12/31'. While this is a good way to defer present year's taxes into the next year's it will not result in any complete tax deferral. Make sure you make your company's tax strategies keeping the above points in the hindsight.

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