Tax benefits for you

PBN Staff

04/24/2010

Although the much-talked about economic recovery is still largely invisible to most small businesses, now is a good time to position your business to take advantage of special tax benefits as activity starts to improve. “Although tax rates may trend upward in the next few years, most businesses can offset a big portion of those increases with proper planning now,” says Steve Henley, national tax-practice leader at the accounting firm CBIZ MHM LLC. Here are some things that CBIZ suggests:
&#8226 Buy assets. “Our clients are getting tired of us saying this,” says Henley, “but now is the time to buy qualifying assets.” Under the Section 179 provision, you can deduct up to $125,000 of depreciable tangible personal property – including off-the-shelf software, for example – in 2010, if your business has sufficient taxable income. In 2011, however, the deduction limit drops to just $25,000. If the size of your deduction exceeds your business taxable income you can carry over unused amounts to future years.
&#8226 Be creative with compensation. CBIZ recommends putting an incentive compensation plan in place. The reason is this: An incentive plan can reduce cash outlay by using non-cash compensation while rewarding performance and providing tax breaks at the same time. But make sure you comply with deferred comp rules (the so-called Section 409A provisions) that can come back to haunt your later.
&#8226 Check into state credits and incentives. Although state and local governments are hurting for money, they still offer many money-saving opportunities for growing businesses. As you consider expanding facilities, adding employees or spending money on training, for example, be sure to check with state business development agencies to see what incentives they may be offering. Programs can include sales tax exemptions, property tax abatements, funds for training employees or direct tax credits for each new job you create.
&#8226 Document salaries. If you and other partners or officers in your business have taken reduced salaries during the downturn, lay some groundwork for rebuilding those salaries in the future, say tax experts at CBIZ. Document in your minutes that the reductions were due to austerity measures and may increase to more accurately reflect the value of services once the business is growing again. “This simple action can head off future IRS attacks of unreasonable compensation,” says Henley. &#8226

Daniel Kehrer can be reached at
editor@business.com.

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