The Tax-Advantaged CEO

Question: A friend was telling me about increasing his managers' 401(k) savings without running afoul of IRS guidelines. What do you think?

Answer: Sounds shady to me.

Accountants who haven't bothered to keep abreast of subtle changes in the tax laws or new approaches to maximizing tax loopholes often try to deflect attention away from their own inadequacies by exacerbating corporate fears of the tax man. In fact, if a colleague or reputable published source recommends a strategy, odds are pretty strong that it stays within the letter of the tax law -- as long as an accountant who knows his or her business has designed it effectively.

Question: I just got a notice that I'm going to be audited. What should we do?

Answer: What do you mean "we?" I don't do audits.

Competent accountants display confidence in their ability to defend every line on their clients' tax returns. If yours doesn't, start running.

RESOURCES

The corporate world is littered with tax guides. Here are some worth pursuing.

Allyear Tax Guide: Starting Your Business, by Holmes F. Crouch, is a somewhat preachy but always practical guide to the nitty-gritty tax issues that matter for start-ups and companies whose sales are less than $1 million. Included are specific instructions about what records to keep, which practices can get new businesses in trouble, and which tax forms to use and when. The book can be ordered for $12.95 from Robert Erdmann Publishing, 810 West Los Vallecitos Blvd., Suite 210, San Marcos, CA 92069; (800) 833-0720, Dept. 15 .

The Ultimate Tax Planning Guide for Growing Companies, by Robert W. Wood, may be off-putting at first because of its length -- 462 pages -- and textbook-like appearance, but the inclusion of highlighted advice sections that focus on how corporations can minimize taxes, protect against audits, and avoid IRS penalties makes the book well worth its $27.95 price tag. Also included are sections that detail tax laws and strategies relating specifically to sole proprietorships, partnerships, C corporations, and S corporations. To order, contact Business One Irwin, Homewood, IL 60430; (800) 634-3966.

The Coopers & Lybrand Guide to Business Tax Strategies and Planning is the guide for owners and executives who want their tax information in a style that is quick, breezy, and easy to follow. In 208 pages -- with plenty of bullets to facilitate skimming -- this book provides tax tips on buying and running a business, designing employee-benefits and -compensation strategies, and coordinating personal-finance matters for owners. The price, $9.95, is also painless. To order, contact Simon & Schuster, 1230 Ave. of the Americas, New York, NY 10020; (800) 223-2348.

ALSO KEEP IN MIND

Inc. has previously covered some highly profitable tax strategies. Here are some worth considering:

* Simplified employee pension plans are a cross between individual retirement accounts and corporate profit-sharing plans, and are appealing because of sizable tax savings through payroll-tax reductions and a business-expense deduction for all corporate contributions ("The Big Easy," January 1991, [Article link]).

* Flexible spending accounts allow your employees to pay medical, child-care, and other qualified expenses with pretax dollars, while your plan administration costs are more than offset by payroll-tax savings ("Flexible Spending," October 1990, [Article link]).

* Annual stock gifts, valued at up to $10,000 per parent per child, can be made by business owners as part of a long-term estate-planning process -- free of estate and gift taxes ("Bringing Up Baby," August 1990, [Article link]).

* 401(k) wraparounds allow you to enhance the income- and tax-deferral opportunities of your key executives by designing 401(k) plans that permit deferral of bonuses and other special compensation ("Beyond the 401(k)", July 1990, Doc. No.07901031).

* Charitable contributions by business owners can be coordinated on the corporate and personal front so you can maximize a range of valuable tax incentives ("Smart Gifts," April 1990, [Article link]).

* FIFO to LIFO is a switch in inventory-accounting methods that may allow you to cut taxes and improve your cash flow ("Taking Stock," November 1989, [Article link],).

* S-corporation status still offers a powerful inducement if you want to avoid double taxation of your corporate dividends ("The Do-It-Yourself Tax Cut," September 1989, [Article link]).

 PREV  1 | 2 | 3 | 4 | 5