The number one priority of politicians is to be re-elected. This trumps everything else in life for them and dictates their policies and behaviors. As a small business owner or investor, you can benefit financially by understanding and planning with this concept in mind. For example, one technique is to follow the money. Track who gives a lot of money to the party in power and monitor the payback.
As you know, taxes are scheduled to increase next year. The chances of the tax cuts being extended is not high due to the mantra that tax cuts protect the rich.
One of the ways to handle this upcoming issue is to review your business income and see what you can push to declare as income this year. Since you have to pay the taxes no matter what, move it into a lower tax bracket by shifting the timing into this year. Think outside the box. If you’re on a cash basis, offer discounts to get those accounts receivables paid. Be strategic and look at your bracket. What’s a 1% discount when you save 5% in taxes. Do the numbers and involve your CPA in the planning.
If you’re on accrual basis, will bulk discount offers move more sales into 2010 vs. 2011? Be careful though and only offer to your top customers who you know will be able to pay you. This is critical since you will be paying taxes on the income before the cash arrives.
With so much publicity about how low the approval rate is for Congress, the White House is considering a special tax break package for businesses to be pushed before the actual election. This is designed to help Democrats retain their seats. Among some of the ideas are a temporary payroll tax holiday and extension of the research and development tax credit. Manufacturers should keep an eye out on the R&D credit. Many small businesses don’t realize that they qualify. I had to point out a $74,000 credit for a sheet metal company because their CPA didn’t think to check for R&D and did not know that the company was doing research in developing a new oven for production.
Most of these measures, if passed, will be temporary because they are designed to raise voters’ morale prior to the mid term election. This means that businesses will need to be diligent at monitoring the progress in order to maximize any tax breaks that get approved.
The intent of the temporary breaks is to promote hiring within the business community. However, as a business owner, you need to be strategic and long term in your thinking. Just because you get a temporary $10,000 break for 2010 does not mean that you will be able to afford to pay the salary and benefits for a new employee for several years.
Hire only if it makes business sense. Don’t hire because you feel guilty or have extra cash. It is better to not hire than to over extend your cash flow and put your company out of business. That would result in more people joining the unemployed ranks.
What business and financial opportunities do you see developing as we head into the election cycle.
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Money is an area I’ve always wanted to be smarter in and your website gives me that ability. I must admit I’m really lost and reading this latest article is almost a foreign language to me. But I’m a go getter and I will not be defeated! I feel confident your information will make me ready for any financial encounter. I will keep reading and use your expertise to get better.
Donna,
Thank you so much for your kind comment. Just by making finance a priority for yourself is 80% of the battle. That choice alone puts you ahead of millions of people.
I wanted to share with people that finance and money is not hard but simply a matter of paying attention and listening to your own needs. I still have a long way to go on learning how to communicate. Please keep giving me feedback. We can’t improve unless we know what we did wrong or not well enough.