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Tax Planning

Originally published: 1/1/10 by Mike Coyne

Forecasting your annual tax benefits for 2009 may help you increase your business.

If your business, like many, operates on a calendar year, it’s time to start tax planning — not for 2008, but for 2009. At the beginning of a new year, most of us are not thinking about the coming year’s tax liability. Instead, we are worrying about where we’ll get new business for the coming year. However, tax planning, to be effective, needs to be part of your regular business planning and needs to start early in the year. Here are some ideas for 2009.

Make a point to sit down with your accountant or tax lawyer sometime in the next few weeks to find out what changes in the law might affect your business. There were six major tax bills enacted into law in 2008. While many changes affected individual taxes, there were also a number of changes to business taxes. For example, the amount of new equipment that a business can write off as an expense has been increased to $125,000. Additionally, a number of tax law changes are being contemplated as part of the economic stimulus package that is likely to be enacted by Congress in the next several weeks. Find out if any of these changes can help you save taxes.

If you haven’t done so already, 2009 would be a good time to consider adopting

a retirement plan. Small employers who start retirement plans and meet certain qualifications may take a tax credit of 50 percent of the cost of administering the plan and providing education and retirement planning for the first three years of the plan, up to $500 per year. As we discussed in a previous issue, retirement plans can be designed to benefit the business owner with a relatively modest cost for employees.

In fact, starting a new retirement plan does not have to increase your employee costs at all. Many employers establish retirement plans or other fringe benefit plans for employees in lieu of increasing taxable wages. If you are faced with providing wage increases to employees anyway, find out if there is a way of changing your benefit package so that both you and your employees save money.

If you have children, consider whether it would make sense to employ them in your business. Businesses can employ children age 7 and over who are likely to have very low or 0 percent tax rate. Typically, income up to $4,750 is tax free. If you choose to employ your children, remember that the children must handle business related and necessary activities, and their involvement must be properly documented.

Finally, consider whether some of the tax benefits that have been extended to individual taxpayers can help you sell your services. For example, the Emergency Economic Stabilization Act of 2008 included a number of energy related tax provisions, including changes to the residential energy credit. The credit for geothermal heat pump systems (a 30 percent credit limited to $2,000) has been extended through December 31, 2016. Informing your customers of these and other tax benefits associated with your services may be a good way of increasing business. 

Michael P. Coyne is a founding partner of the law firm, Waldheger Coyne, located in Cleveland, Ohio. For more information on the firm, visit www.healthlaw.com, or call 440-835-0600.

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