Well one thing is likely for certain, small business or businesses for that matter are likely looking at higher taxes in the not so distant future. It is to early to know there final form but they will likely occur in one of the following areas: increased taxes on dividends, increased capital gain rates, increased income tax rates for individuals, or tax rate limitation on deductions.

My advice…..get your Money out of your corporation now while you can. No this doesn’t mean bankrupt your company for the fear of future tax hikes and I’m not one for running a business with the fear of taxes, but it it does mean that you should not put off tax reduction strategies now simply because you don’t need the money. Between SEP 401ks, draws for S-Corp owners, dividends for C-Corp owners, section 179 deductions, etc you should be using these and other strategies to your best advantage now while they still exist in there current form.

Undoubtedly the need for accurate Tax Planning now and especially in the future is going to be at a premium especially for higher income individuals and corporations. Another bit of advice to clients is do not put off tax planning simply because it costs money. Its similar to the analogy of paying a mortgage simply for an interest deduction on your tax return…..“I never want to payoff my mortgage because I receive a deduction for it”. Well what sense does it make in paying $15,000 in mortgage interest for $3,000 in tax savings. On the other hand tax planning does cost money but if the benefits (tax savings) exceeds the cost isn’t it a no brainer? This is one point that I make to all potential clients that have a provider or are provider shopping…….are you sure your getting the most out of your business or are you just paying excessive fees for tax preparation? Regardless of “maximum refund guarantees” maximum refunds are not achieved at tax preparation, but are achieved before the year is over and when you CAN maximize your tax savings!

On an aside one thing I found interesting is many states voting strongly in Obama’s favor will be the same states most impacted by these types of future Tax Increases.

http://finance.yahoo.com/taxes/article/106659/Where-the-200K-Crowd-Lives

For a free in person consultation fell free to give me a call at 443-927-9161.

Thanks,
Travis Raml, CPA