Finding Deductions In the Oddest of Places
Happy
New Year to one and all! Here's hoping that everyone has the best year they
have ever had.
OK, now that the niceties are out of the way, let's ruin the year with talk of taxes. Just kidding - we are not going to ruin your year at all. In fact, we hope you might get some novel ideas that can help you file your tax return with novel deductions.
Most of you know that some deductions can be taken to arrive at Adjusted Gross Income while some have to be taken as Itemized Deductions. Itemized deductions are advantageous if they exceed the Standard Deduction the IRS already allows and typically include medical costs, taxes, contributions, home interest and a host of other deductions.
Where is as Important as When
Tax preparers understandably spend a lot of planning time around the question of when to execute a transaction or make a deductible payment. After all, if you don't spend the money by the deadline, you won't get the deduction.
Where you take a deduction can be as important as when. Let's look at an example. We all know that contributions to a charitable organization are deductible as Itemized Deductions. So when the development director of your local United Way asks for a contribution to help sponsor the Annual Campaign Dinner, you have no problem providing a $1,000 donation as a Silver Sponsor.
Before you record that donation as a charitable gift, though, think about what you are really getting for your money. Do you get any meals out of it that you can use to entertain your top customers? Perhaps you get special listing as an event sponsor and nothing else. Maybe you get a combination of both or neither. The distinctions are important.
If all you receive as a result of your sponsorship is recognition for your business in the dinner program and signs around the room, then you should consider the payment to be a deductible business expense. If you are self-employed, this will allow you to reduce your income and self-employment taxes. As an itemized deduction, you will only get a reduction in your income taxes. This one simple reclassification will save you $125 in taxes - and it's legal.
It's Not Deductible - But Are You Sure?
Let's take an example of a seemingly non-deductible expense that was held to be deductible. In most instances, cosmetic surgery aimed at enhancing one's appearance is a personal expense that is not deductible. The exception would be reconstructive surgery.
In a case out of Texas, an exotic dancer underwent surgery to insert breast implants. Her reasoning was that the implants would enhance her income earning capacity. She reflected the cost of the surgery as a business expense on her tax return. The IRS denied the deduction, but the Tax Court found in her favor, citing her own testimony that she would gladly take them out after each performance if she could.
The Point
Many Americans are under the impression that there is no way to beat the IRS. In many ways, that is true. On the other hand, the current law is written broadly enough that there are sometimes openings to save taxes legally by looking deeper at the essence of a transaction. By looking at an expenditure for its primary purpose and for what was received as a result of the expenditure, taxes can be saved. Just because the IRS does not specifically state an expense is deductible, don't assume you shouldn't ask us about it. The worst we can tell you is that the expense is definitely nondeductible.
Set Business Goals and Achieve Your Vision for 2012
The
recession and economic uncertainty of recent years have presented challenges
for many small businesses. As 2012 begins, economic recovery is tenuous
and vulnerable to government debt and economic tension at home and abroad.
In tough times like these, setting business goals and working diligently
to achieve them is more important than ever, whether you own a large enterprise
or run a home-based business.
As critical as it is to set and track your business goals, the beginning of any new year can be chaotic. Taking the time to analyze your business goals might seem overwhelming. But by following some simple guidelines, you can maximize the results as 2012 unfolds.
Visualize the Future
Look at the big picture and try to visualize where you want your business to go in 2012. Think big, dream big and strive for excellence, but be realistic. What sort of results would get you excited? What kind of lifestyle do you want to achieve? Which products or services were most successful in 2011? Do you need to introduce something different based on your market analysis?
Not all success is based on sales or income, although those things are obviously important. Consider other areas as well. What would you, personally, like to do more of or less of in 2012? How can your business help you do those things? Look back at the reasons you started your business in the first place. Are those reasons still valid? If not, what needs to change?
Not all success is based on sales or income, although those things are obviously important. Consider other areas as well. What would you, personally, like to do more of or less of in 2012? How can your business help you do those things? Look back at the reasons you started your business in the first place. Are those reasons still valid? If not, what needs to change?
Think about how your business integrates with your family life and personal life. Do you want to spend more time with your kids? How does your business need to transform in order to achieve your ideal work/life balance?
Once you identify your vision and determine what needs to change, you can develop a strategy for taking your business to the next level. The strategy will consist of all the goals you need to accomplish and the actions required. Once the vision is in place, you can use it as a guide to keep you on track throughout the year.
Consult With Your Customers
Don't forget that the customer is always right. Ask them what they would like to see from your business in the future. How did they rate your products, services, prices, customer service or quality last year? What can you do to give them what they want?
Write it Down
No matter what goals you set, if you don't write them down and refer to them frequently, you are less likely to remember them or act upon them.
Start with a brainstorming session, listing every goal you can think of that will help get your business closer to the vision you identified in the first step. At this stage, be sure not to over think or judge your ideas. Jot down everything that pops into your mind. Use your imagination. You can analyze, prioritize and whittle the list down to a final, working list later.
Assess Your List
Once you have a loose list of goals that match your vision, it's time to assess what you have brainstormed. In this step, use an analytical approach, eliminating entries that do not mesh with the overall vision of where you want your business to be by year's end. Use your business sense. Is the goal realistic? Is it achievable? Make sure your goals are feasible.
Categorize your goals into buckets that make sense. Divide them into short-term and long-term goals. Long-term goals can then be broken into a series of short-term goals to help you stay on track and keep you motivated. As always, keep your overall vision in mind and set reasonable time limits for achieving each goal.
Identify Actions
No goal is attainable without taking action to make it happen. For each one, identify an action or series of actions that you must take to achieve that goal. They are the engines that drive you toward your goals. They help you manage your daily business activities and make your efforts sustainable. By clearly identifying the actions you must take to reach them, you are less likely to be overwhelmed by a long-term goal; furthermore, you will gain confidence that comes from continually working toward them.
Support, Advice and Accountability
If yours is a large organization, support can come from within. But if you are a small business, a home-based business or a sole proprietorship, you might need to look outside for advice and support. Even if it's someone in your own family, find a trusted person to get their opinions, share your ideas with and help hold you accountable. Tell them your vision and ask them to help keep you on track to achieve it. Just knowing that someone else is expecting you to achieve your goals can provide some motivation and some positive pressure to help keep you accountable and moving forward. And don't forget to consult with your tax, legal or financial advisor for their expert advice.
By establishing a vision, identifying short- and long-term goals and actions, and then working hard to achieve each of them, you can make 2012 a better year for your business.
New Year - New Resolutions
It might be cliché, but beginning the year with renewed enthusiasm and new
goals can be a major boost to business success and an excellent way to get
back to business basics. Instead of making unrealistic resolutions, aim
to make some simple changes to improve your chances of business success.
Here are some suggested starting points.
If something isn't working in your business, let it go now and try something different. Whether it's a relationship, a product or business method, if it hasn't worked in 2011, recognize reality and move on. Both professionally and personally, many of us waste time and money trying to force a square peg into a round hole. Resolve to act when something is not working and make a change immediately. Be willing to listen to others who might have the experience and insight to steer you in a more productive direction.
Make business planning a weekly activity. Don't wait for the next month or quarter to review your company's progress. Business moves at lightning speed, and in order to correct mistakes or identify new opportunities, it makes sense to evaluate your progress and goals each week. This way you can make corrections when the changes needed are still minor and relatively easy to implement. In a tough business environment, weekly strategy sessions will give you more control over your own destiny.
Promote your business consistently - in good times and bad. When you're busy, it is easy to ease off on new business activities. Unfortunately, that is when you most need to keep your efforts going to keep your business healthy. In today's economy, problems with your clients' business affairs can come out of nowhere and hit your bottom line fast. Keeping existing customers happy is important, but it's equally important that you identify new prospects and constantly market your business to new clients.
Give something back to your community. Don't try to spread yourself too thin, but do find a local cause or charitable organization to support. Find something that is close to your heart or a logical fit with your area of expertise. Whether your contribution is in cash or in pro bono work, this type of giving cannot fail to energize you and help you appreciate your own good fortune. Although this work should never appear to be self-serving, good deeds generate recognition and enhance business reputations. Although the payback might come in unexpected ways, it rarely fails to materialize.
Differentiate between being busy and being productive. Running your own business presents you with many varied tasks - but they are not all of equal importance. Resolve to manage your own time better. Start by delegating minor tasks to others so that you can expend your energy on things that are critical to your business success. Prioritize your daily activities and begin with the most important first. Show others that you expect them to respect the value of your time as you value theirs. Insist that all company meetings have a short written agenda, that they start and end on time and that a participant documents all decisions, tasks, assignments and deadlines.
Extending this list wouldn't be hard, but these five simple suggestions can provide a practical framework for success in 2012. Use them to improve your personal productivity and to also provide your staff with a great example of business leadership.
Questions?
Have Questions? Call Us
We are here to help, if you have any questions please don't hesitate to contact us.