Should You Minimize Taxes by Spending?
Every business wants to pay as little as possible in taxes. A good CPA can help you maximize your deductions and minimize your taxes. As year end approaches, some small business owners look at their projected taxable income and decide they need to spend more so they pay less in taxes.
Is that really what you want to do? Do you want to spend $10,000 to “save” $2,000 or $3,000 in taxes? Maybe…maybe not.
Here are some questions to ask yourself before you spend just to reduce taxes:
Is this something I need to buy? Is it better to put it in this year or next year?
Do I have the cash to buy this without harming my operations?
Am I sure that I’ve recorded my other transactions correctly so I’m taking the deductions I already have and really know my net income?
What’s the best use of the cash that I have? What can I purchase that will benefit the business in the long run – not just save some taxes this year?
Be sure to also run the calculations on your true savings. Here’s a simple example. Assume you’re considering spending $10,000 and pay 40% in taxes. Credit card interest is 20%.
At the end of the day, what’s more important – new items and tax savings or cash in the bank? Only you can decide this for your business – just stop and think before you spend.
Need help getting your books in order or trying to decide if you need to spend? Give us a call.