Our mission is to provide information and strategies
to business owners and managers for improvement
in the effectiveness of its business management
so that key objectives can be realized.
- Principal/Senior Consultant
John Morre - Principal/Senior Consultant
Linda Panichelli - Principal/Senior Tax Consultant
CFO Plus, LLC
1450 Grant Avenue, Suite 102
Novato, CA 94945-3142
Ever since the May 2003 tax
legislation hit the airwaves, it seems that
most business owners have been obsessed about
whether or not to buy a heavy vehicle (to
take advantage of the full tax break, the
vehicle must weigh more than 6,000 pounds).
With the new tax laws, it is more important
than ever to plan to take advantage of tax
breaks. Some of the changes in the law bear
a Cinderella-like quality in that they revert
back to previous limits.
Here, we cover some of the more general time
guidelines on tax planning issues, but there
are many more to consider, so be sure to call
your accounting advisor to discuss your plan
of action. Use this list to begin implementing
tax-saving strategies that will contribute
to minimizing your tax bill.
appropriate retirement vehicles in place.
For sole proprietors, a fairly new retirement
vehicle called a sole 401(k) offers a
place to build a nest egg while also offering
a soft place to land should you need to
borrow against the funds. Different than
a Simplified Employee Pension, the sole
401(k) allows owners to divert much more
than a SEP. There are distinct limitations
on who qualifies for a sole 401(k), but
for those who qualify, this can be a beneficial
way to save for retirement.
the best entity for your business.
Create your multiple-member LLC or corporation
prior to the beginning of your business's
tax year in order to take advantage of
your selected form of business organization
for the entire tax year. If you wish for
your business corporation to be taxed
as an S corporation, make that election
anytime during the tax year prior to the
year the S election is to begin, or by
the 15th day of the third month of the
tax year to which the election is to apply.
Note: There are extension rules, but they
are not automatic, so make your election
capital equipment into service for maximum
tax savings. In order for capital
equipment to be eligible as a tax deduction
(either using depreciation and/or Section
179 tax laws), you must purchase and place
the equipment into service in your business
prior to the end of the tax year. So,
to take advantage of saving on your 2004
taxes, purchase equipment by December
your kids to work. Many business
owners realize they can pay their children
to work for the business, but many try
to pay their kids a lump sum at tax year
end. The best way to hire children is
to hire and pay them throughout the year,
as money is earned. Pay your children
when they perform legitimate work in your
business. If you planned on giving them
money anyway, this is a great way to give
them wages that are tax-deductible to
your business, tax-free to them (up to
the $4,750 standard deduction), and you
still get to claim your children as dependents
on your personal income tax return.
advantage of funding options for retirement
plans. In some instances, you
can gain another nine months to fund your
prior year’s retirement plan. For instance,
if you want to put $8,000 in a SEP, you
have until the individual tax return filing
deadline to fund this. That means you
could designate the $8,000 for the prior
year’s tax return and not pay the $8,000
until October 15 of the current year,
which is the same time you would file
your individual tax return. This does
not mean that you can avoid paying Uncle
Sam on April 15 if you have a tax liability.
Keep in mind that if you have a tax refund
due, you will not receive it until you
file your tax return.
business estimated tax payments on time.
Despite minimizing your overall tax
burden, you still need to ensure that
you make quarterly estimated tax payments
on time. It doesn’t make sense to spend
time saving money only to pay more in
the form of penalties.
addition to business tax planning, company
owners also have a myriad of individual tax
breaks to consider as well. If you aren’t
sure where to start for 2004, call us today
and we will put you in touch with a tax planning
consultant that can help minimize this year’s