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Tax-Saving Moves for Small Businesses

December 12, 2012 | By | No Comments

There’s a whole new tax world that small business owners will face beginning on January 1, 2013. While several tax breaks expire on December 31, 2012, ordinary tax rates for individuals, long-term capital gains and qualified dividends increase in the 2013. How are individual tax rates relevant to the taxation of businesses? Most small businesses are taxed as S corporations, or as multi-owner pass-through entities – where the results of operations are passed through and taxed to the individual partners, members, or shareholders.  The following tips are ways for small businesses to save.

5 Tax-Saving Moves for Small Businesses

Sell Corporate Stock – Sell stock and partnership and LLC interests by December 31, 2012 to take advantage of the 15 percent or 0 percent long-term capital gain rate. For sales qualified as an installment sale from the year prior, the taxpayer can accelerate note collections into 2012, and for sales in 2012, the taxpayer can elect out of the installment method. This sill pull proceeds into the lower tax rates of 2012.

Give! (… This Season Especially…) – Give business interests to family members. The 2012 applicable exclusion amount offsets on cumulative lifetime gifts and testamentary transfers of $5.12 million; however, this amount falls $1 million in 2013. Similar tax benefits can result from transferring stock to a family limited partnership and gifting interests to family members-gift tax is avoided or reduced by the increased applicable exclusion amount.

Write off Startup Expenses – Did you remember to include any investments made during the startup phase of your business? Eligible expenses include: planning, consulting with business professionals, training employees, and other necessary investments directly necessary to get your business going.

Expense Account Reimbursements – Organize all of your receipts for business expenditures paid from your personal funds and have your business reimburse you before the end of the year. Post expenses to a spreadsheet and total by category. Include all of your receipts for true resource documentation and then cut a check. This reduces taxable income.

Setup or Fund Retirement Plans – Of course businesses need working capital, but don’t dismiss the idea of funding your future. Contributions made to retirement plans reduce your taxable income. For 2012, self-employed individuals can contribute $17,000 as a 401(k) deferral, plus 25% of net income. Plans differ depending on plans, so refer to your administrator.

 

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