Small Business Tax Strategies

The first shot in Washington’s tax reform battle was fired earlier this month when the President’s Advisory Panel on Tax Reform issued its long-awaited list of tax-simplification suggestions.

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It’s no fun paying a hefty tax bill when you file your annual return. But Uncle Sam doesn’t want to wait that long for your cash. Estimated-tax rules say you must pay a certain amount of tax during the year. If you don’t, you run the risk of an underpayment penalty on top of your regular tax bill. Fortunately, you can stop the bleeding with some minor band-aids. Following is the who, what, where and when of estimated taxes … and how to avoid penalties.

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Q: I’m interested in the strategy you wrote about regarding collecting rent when you lease personal assets to your company. (See 10/17/05 issue.) If I rent assets to the company, am I then subject to Social Security tax on the net income? J.C.K., Hood River, Ore.

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The Social Security Administration (SSA) announced that the wage and self-employment income base for the Social Security tax will rise next year.

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Estimated-tax penalties are equivalent to the interest you’d pay on tax underpayments.

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The IRS just updated its per-diem rates for business travelers. After inching up by just a few dollars the past few years, the new rates reflect double-digit increases for both "high" and "low" areas. (IRS revenue procedure 2005-67)

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As a small business owner, your company’s 401(k) plan is one of the best deals around. You can salt away part of your salary tax-free within generous limits, while the company matches all or part of your deferral.

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If you’re one of the big wheels at your company, you may be in line to receive either qualified or nonqualified stock options. Qualified options (also known as "incentive stock options") have a tax edge.

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If you own a vacation home or a boat, you may not be using it as much now that the summer is over.

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Suppose a regular customer is experiencing economic difficulties. You’ve let that customer slide on several invoices, but now you’re concerned you may never be paid. Should you aggressively pursue collection efforts or continue to gently remind the customer about the unpaid bills?

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