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Cut taxes while you keep your cash

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in Small Business Tax

Suppose you're staring down the barrel of a big estimated-tax payment coming due this year. You can lower that payment and avoid a penalty. How? If you can't bring Mohammed to the mountain, bring the mountain to Mohammed.

Strategy: Lower your taxable income for 2005. For example, postpone capital gains until next year or, if you're self-employed, delay billings for a few weeks. That way, you can avoid an estimated tax penalty without paying any money out of your own pocket. That strategy helps you qualify for one of the safe-harbor methods described at left.

Example: Say you've paid 90 percent of your tax liability to this point, but you're sitting on a stock gain of $10,000. By realizing the $10,000 gain in early January instead of late December, you eliminate the need for a fourth quarter estimated-tax payment.

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