An accountant offers tips for entrepreneurs planning to make the most of corporate and personal tax breaks.
A new tax year is just beginning, so you have time to prevent a last-minute scramble by planning to make the most of corporate and personal tax breaks. Jeffrey Levine, a partner at Alkon & Levine, P.C., a Newton, Mass., accounting firm, recommends that you --
1. Keep good corporate and personal tax records from day one. "This sounds simple, but most entrepreneurs just don't do it." Specifically, he advises, instead of cash, pay with checks and credit cards that record and document expenditures; and if you haven't already computerized tax and accounting records, you should. "A good basic system can cost as little as $60."
2. Plan purchases to take advantage of the IRS's annual equipment tax break. "In 1995 you can deduct as much as $17,500 that you spend on equipment instead of having to depreciate it over a longer period."
3. Watch out for multistate tax bogeymen. "States are revenue hungry and looking for ways to assess sales, user, corporate, nonresidential, income, payroll, or registration taxes on nonresident companies," warns Levine. To avoid unnecessary tax liabilities, ask your certified public accountant how best to handle your out-of-state business transactions.
4. Participate in a tax-advantaged savings plan -- a corporate pension, profit-sharing, or 401(k) plan, or an individual retirement account.