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Tax Tips
With tax day just a few weeks away, there is no better time to cross your t's and dot your i's. Here are some simple tips that could save you time, aggravation and money

Tax saving—like charity—begins at home.

At least that’s the way a number of tax-preparation/consulting experts see it: Are the tools that used to hang on your home’s garage walls now used at your contracting business? Do you have kids who are old enough to work and need money for movie nights, or maybe that first car? If so, you may be able to save thousands in business taxes. For more, here’s what experts told LowesForPros:

Put your tools to work. Like many contractors, you probably use tools from home in your business. But did you ever think about writing off what you’ve used? You could save thousands of dollars by doing so. Still, it’s a step too few contractors take. “Just walk around the house and get a sense of what used to be there,” says Karla Dennis, founder/owner of Cohesive, a tax preparation/planning firm in Cypress, Calif. “Are you missing a wrench? If you don’t account for all of these tools that are now being used on your jobs, you’re missing out on big deductions.”

While you’re at it, put your kids to work. It's not just good for their character, or a way to pay for the prom or video games. It's a way to reduce your tax burden. Children who work for their parents in sole proprietor businesses under age 18 are not required to pay Social Security taxes, and you, as the business owner, don't have to match the contribution either, according to John Pearson, who runs Norwalk, Conn.-based Tax and Educational Strategies. And there's another way to make your kids pay off for you come tax time. “Once they're on the payroll, you can use their earnings to pay for private school, college and even sports and music training,” Pearson says. “So, in effect, you are tax deducting educational and student enrichment costs through your business.”

A gift that keeps on giving. If you have fully depreciated equipment, Pearson says, considering giving it to your college-aged children. “Then you can lease it back from your child and get that asset off your books,” he says. “The income that the child gets from the leasing could end up taxed at a much lower rate, while your business benefits from the rent expense deduction.”

Beyond the homefront
There are more steps beyond home-based ones that independent contractors can make to save on businesses-based taxes. For starters, it’s best to seek professional help. If your shop is too small to have a full-time accountant on board, then it’s best to seek tax assistance from a full-time CPA specializing in small businesses and taxes. You’ll save time and aggravation in forms preparation, and that CPA will likely know ways to save you money. That’s not all. Some additional solutions suggested to LowesForPros by experts included the following:

Get your business property value reviewed. Property values have declined in many regions, so it may be a good time to get an updated valuation. “This can not only generate savings in the first year, but future years as well,” says Todd Taggart, a partner specializing in contractor-based tax services with Chicago-based Grant Thornton LLP, an audit, tax and advisory services firm.

Make sure your health plan is part of the business plan. If you’re a very small shop and pay for insurance out of your own pocket, you’re missing out if you pay as an individual, instead of as the owner of a company. “Set it up as part of your business plan,” Dennis says. “Considering the tax savings, it’s worth the paperwork.”

Reduce energy for lower operational costs — and lower taxes. Business owners who take part in reducing energy may qualify for tax breaks. For details, go to http://www.energystar.gov/index.cfm?c=products.pr_tax_credits. “Regardless of the type of business you own, you can implement low-cost upgrades yourself,” says Paul Lambert, business development territory manager with Efficiency Vermont, a provider of energy-efficiency services based in Burlington, Vt. “Lighting, heating and cooling improvements are usually the easiest places to start, and you'll see immediate savings in your bills — not just at tax time.”

Delay gratification. Around November or December, you have some leeway to put off payment for work done until after Jan. 1, so you won’t be taxed for it until next tax season. Sure, it goes against a contractor’s instincts to ask to be paid later rather than sooner. But it could provide a better benefit in the longer run. So delay invoices if you have adequate cash flow, or ask customers to delay payment. “If you’ve had to press clients for payment before, they may appreciate the breather,” reasons Linda Horn, master financial planner and CEO of Capital Concepts, a Cincinnati-based financial-planning and tax-preparation firm. “The bottom line is that if you have nothing to lose by holding off on collections if you can already pay the bills, why not wait until January to receive payment?”

Media Contact:           
Allison Brinkman, Eisen Management Group
Allison@eisenmanangementgroup.com
859.291.4302