PROTALK CORNER:
Alternative Tax Planning for the Entrepreneur

While most taxpayers rush around trying to get their tax information together in order to meet the April 15 deadline, a growing number of Americans are letting the clock tick-tick-tick away and not filing until mid-August, or even as late as mid-October.

While some people might think of this as “procrastination,” to many others it’s another opportunity for some alternative tax planning. On the other hand, there are millions of Americans who think they are on top of things by filing as early as possible so they can collect their refund for “overpaid taxes”. If you fall into this second category, shame on you for practicing poor tax planning.

For those who practice planned tax filing procrastination, their principal reason is to have more time to put together all the required information and also give their tax preparer more time to look for tax savings. Of course, being a procrastinator actually takes good financial planning throughout the year to be sure you don’t owe too much in taxes and end up with surprises you don’t really want.

If want to join the growing throngs practicing alternative tax planning, here are a few other items to consider:

1. Never depend on someone else to control your finances.
   While having a good accountant and tax preparer is important, no one will be as conscientious as you about getting every tax deduction possible. Spend a few dollars and a few hours every year making yourself tax savvy so you know what questions to ask and what information to give your tax preparer. Simply visit a local book store like Barnes and Noble or Borders and browse their latest collection of small- business tax books.

2. Educate yourself.
   There is a wealth of information on ways to cut your tax bill. A few places, other than your local bookstore, to find this information include the Internet (including the IRS at www.irs.gov), libraries, and continuing education courses at local colleges.

3. Use a computer to track finances.
   Every business should be using an accounting software program to track and analyze finances as well as a tax preparation program. Even if you have a professional tax preparer, it’s a good idea to prepare your own year end returns first and then let your tax preparer look for ways to take additional deductions you might have missed.

4. Track your taxes throughout the year.
   Every two or three months determine whether you are overpaying or underpaying taxes. If you are overpaying, lower your tax contributions. If you aren’t paying enough, catch up. Your goal should be to actually have to pay $500 or less when you file for an extension on March 15th or April 15th, depending on the legal structure of your business.

5. Be a procrastinator.
   While there are varying opinions, a popular consensus is that the later you file the less chance there is of an audit. Remember … this isn’t an extension to pay your taxes, only to file your return. Another opinion is that if you use a computer-generated tax return (either yourself or from a tax preparer) there is less chance you will be audited.

While it’s not likely you want to become a tax expert, it’s important to you to play a role in helping your tax people find the most savings. This truly is an area where a little bit of knowledge will go a long way!e Answers!

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