Planning ahead for 2012 is on most small business owners’ agenda before heading out for their December holidays. This past year’s financial climate has been tendentious at best for those who look for dark corners and rain clouds to interrupt the enjoyment of their morning coffee. If you are tuning in to the current Congressional payroll tax cut debate , you may be wondering how you should prepare.
Plan ahead for small business taxes
There are two tax tips, one for payroll and one for income, that have emerged from the current debate over how to fund the payroll tax cut. Although the Senate has agreed to the payroll tax cut, the House still needs to pass the measure. What does that mean for the small business owner?
Make money on your payroll taxes
Little looks like it will change for the payroll tax in 2012. The best plan that you, the owners, can make is a budget for at least the same rate of tax to be withheld from your company’s income. If you have not already done so, ask your CPA to create an expense category in your books so that your accountant can automatically hold the percentage payable for today’s payroll tax. Make sure that this money is deposited to a separate bank account, where it can simply sit and grow during the year. Turn this account into a moneymaker by collecting the best rate of interest available for a savings account. This time next year, not only will you be fully prepared to pay your taxes, you will also have an additional cushion as a year-end bonus for your employees.
Plan ahead and spend now
With the government trying to figure out payroll tax cut funding, small businesses have a decided advantage in planning ahead for 2012. Act on what is certain this year while 2012 remains undecided. Review last year’s purchases for the first couple of months and determine, as exactly as possible, what inventory you are likely to need. With only a few days left in this year, your buyer can place orders to be delivered in January. Meanwhile, prepay for that merchandise now. This maximizes your deductions for the current tax-year while allowing as much income in the first months of 2012 to flow into your accounts as unencumbered as possible.
Plan on certainty
MarketWatch.com quoted Jim Duggan of Duggan Bertsch, a corporate tax law firm, in their Dec. 14, 2011, issue as saying, “We at least have certainty this year.” “Take an inventory of what you expect to purchase in the first couple months of the following year,” Duggan continued. “If you know with relative certainty what those purchases might be, there’s nothing wrong with prepaying them in December.”
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