Like most business owners, you no doubt keep your eyes and ears open for any edge you can get. When your associates share their latest and greatest write-offs and tax strategies with you, how do you evaluate whether that idea is right for you and your company?
One way is to simply give it the common sense test. If you don’t (or can’t) qualify for something, then no problem. But, for everything else, use your common sense to determine if this new benefit is truly beneficial.
Reducing the taxes you owe on business income means doing something with that money.
Clearly, anything not put to use in a qualified manner will be taxed. But, moving money just to avoid paying taxes on it won’t always be the best strategy for your business. And, of course, you never want to tie up money you may need just down the road. When considering any sort of strategy or plan for your money and your taxes, you can make better decisions if your company has clearly defined objectives.
Suppose you’re approaching the end of the year and you’ve used up only a fraction of your allowed deduction for new equipment. What should you do? Should you rush out and buy new equipment just to maximize the deduction?
Sometimes you just have to ask… If not for the tax relief, would I even consider a new delivery truck right now? New computers?
If a tax strategy takes you and your business in directions you hadn’t planned, then your tax strategy is ruining your company. The common sense test here is simple enough. Is this where my company is naturally going? Is this strategy consistent with our goals and objectives?
For practical, professional advice on any of your business questions, call Partridge & Associates CPA’s PLC. We can help you figure out the best way to expend your resources to save taxes and increase profitability; help you decide which type of business entity to set up for your new company; or even help you create a long term business or succession plan. Put our more than thirty-five years of experience to work for you.