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FOR IMMEDIATE RELEASE
Business Owners: Avoid a Frightful Tax Bill
by Planning Ahead
Lohman Company Offers Top 5 Tax “Treats”
to Reduce Your Liability
October 10, 2006 -- Trick-or-treaters
haven’t yet graced your doorstep but it’s not too early to start
thinking about end-of-the-year tax planning. Business owners
can avoid a frightful tax bill by thinking ahead, suggests Cati
Piorkowski, tax partner at Lohman Company, PLLC.
“When a business is experiencing good revenue growth, it is
easy to get caught up in day-to-day business activity and put
off year-end tax strategy,” says Piorkowski. “However, without
proper planning, business owners may find a big surprise waiting
when its time to pay tax bills. It is so important to have a
good understanding of your company's financial situation so you
can avoid unnecessary tax liability.”
Piorkowski suggests that business owners spend the time now
ensuring that books are up-to-date and accurate. Consider
scheduling time with your accountant for year-end advice,
specific to your company’s situation. Piorkowski says every
business should consider the following five tips:
-
Control
the Bottom Line –
The
easiest way to cut your tax bill is to defer income from
this year into next. Unless you suspect a higher income tax
rate in the foreseeable new year, it makes sense to delay
tax liability as long as possible. This strategy provides
benefits for many sole proprietors, partnerships, LLC's,
corporations, and S corporations. Any payments your company
can receive during the first week of January as opposed to
December will cut your tax bill this year. Of course, the
feasibility of any deferral strategy will depend on your
profit and losses for the year, your corporate legal
structure and your cash flow situation.
-
Go on a
Shopping Spree –
Reduce
your year-end taxable income by buying items your business
will require in the immediate future to maximize deductions
for the current year. If you anticipate the need for goods
and services in the first quarter of the New Year, buy them
now if cash flow permits. Stock up on office supplies.
Prepay monthly bills like rent and insurance. Pay for
travel and subscriptions in advance. Buy that new piece of
equipment now and consult with your accountant about whether
you can take an immediate write off of the entire amount or
if you must it depreciate over time. Use your credit card
to pay for your purchases before midnight on Dec. 31 and
get the deduction this year, even if you don’t pay on the
card until after Jan. 1.
-
Out
with the Old –
Depending on your accounting method, you may wish to write
down or write off inventory that is damaged or has become
obsolete. The decrease in market value or elimination of the
inventory may provide your company with added deductions.
-
Contribute to Retirement Plans –
Make
payments to your retirement plan or set one up before the
year-end to reduce your income for this year. Check the
contribution limits for your type of plan. The types of
plans that apply include KEOGH, Roth IRA or SEP's (it is too
late to establish a SIMPLE IRA as the deadline was Oct. 1).
Discuss the best strategy with your financial planner or
accountant.
-
Play
Santa
– Get the last Ho-Ho-Ho of the year by giving money to
charities and providing bonuses for employees. You will
reduce your taxable income, get valuable good will in your
community and with your employees, spurring them on to
another great year of work in 2007.
Piorkowski advises that these year-end tax tips will apply
differently to each business owner's situation and accounting
method. The cash method of accounting allows for deductions and
income reported for the year they are paid or received. The
accrual accounting method applies income and deductions in the
year earned or incurred. Take the time now to review your best
strategy with a professional advisor. By making the most of the
year-end tax planning early, you can avoid scary tax bills in
March or April.
About Lohman Company, PLLC
Founded in 2000, Lohman Company, PLLC is a certified public
accounting and business consulting firm offering professional
tax, audit, accounting and consulting services to
privately-owned companies in Arizona with revenues up to $200
million. Lohman Company, PLLC specializes in serving clients in
a wide range of industries including technology, manufacturing,
wholesale distribution, construction, real estate and services.
Lohman Company, PLLC is committed to providing the highest level
of proactive services to its clients within an atmosphere that
encourages camaraderie, intellectual challenge and work-life
balance for all employees.
For More Information Contact:
Lohman Company, PLLC
Stapley Center
1630 South Stapley Drive, Suite 108
Mesa, AZ 85204
Phone: (480) 355-1100
Fax: (480) 355-1130
Internet:
info@lohmancompany.com
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