Six Tax Tips to Enhance Your Growth Strategy
If you’re a business owner, then you know how challenging it is to maintain your profitability in these tough economic times, let alone grow your business. Therefore, it’s critical to ensure you have the right resources, team, and business partners who not only support you, but also truly understand your business … from all angles.
Every business owner should have an accountant whom they can rely on to support their business’ challenges and provide timely and appropriate advice. Your accountants should be more than just advisers whom you speak with during tax season. They should serve as your business partners, helping you with financial and operational strategies and supporting your objectives for profitability.
Business owners should communicate with their accountants throughout the year to ensure they are taking advantage of all eligible government subsidies, basically tax breaks, that are relevant to the company. These are designed to support investments in capital assets as well as every organization’s most valued resource: its people. The following tips are designed to help decrease risk and improve profitability.
1. Review all expenditures made in 2011 to see if they qualify for the business-property-expensing option. The generous dollar ceilings that applied until Dec. 31, 2011 for both Sec. 179 and 100% bonus depreciation expensing allowed many businesses to deduct most, if not all, of their outlays for machinery and equipment.
2. Next, review your eligibility for the following credits:
• Employee retention tax credit of $1,000 for each eligible new employee whom you have retained for at least 52 consecutive weeks;
• Small-employer health-insurance credit of 35% of your non-elective contributions to your employees’ health insurance; and
• Research and development tax credits, including certain costs incurred in the creation of a Web site. This can be a very lucrative tax credit, which is often overlooked in businesses, especially in industries not commonly affiliated with research and development.
3. Did you take advantage of alternative fuel and energy credits? There are a variety of options, and it’s important to speak directly with your accountants to confirm if you qualify for any of these credits.
4. It’s important to substantiate and retain documentation for all of your deductible business expenses, particularly meals, entertainment, and automobile mileage. The IRS is auditing small businesses with a particular focus on disproportionate meals and entertainment as well as automobile expenses. Review your expense-tracking system with your accountant for compliance with these requirements.
5. Meet with your accountant to review the status and classification of all independent contractors. Some might need to be classified as employees and receive W-2 forms rather than 1099s.
6. Evaluate your options with an existing retirement plan or consider setting one up beginning in 2012 to maximize your benefits and theirs.
During every growth stage in a company, it’s extremely important to manage your liquidity. Therefore, this is the perfect time to establish a budget for 2012 to accurately forecast the funds needed to run your business. Cash flow is the lifeblood of every organization, so ensure that yours is healthy.
Robert F. Gorton is a shareholder and CPA at Waldron Rand. He has more than 20 years of experience providing assurance, tax compliance, and business-advisory services to privately held companies in varying industries. He works closely with each client’s management team to implement short- and long-term business, financial, and tax plans to ensure success. He is skilled in the area of mergers and acquisitions and has counseled many clients on due diligence, negotiations, and integration activities. He is certified in financial forensics and has significant experience in litigation, accounting and auditing, and investigative analysis; [email protected]