Death and taxes. Both are unavoidable, as the old saying goes. But with careful planning, businesses and individuals can take steps now to reduce—or at least better manage—the pain when next year’s tax deadlines roll around.
According to Sharon Lassar, director, School of Accounting in the College of Business Administration, it’s not too early to start reviewing 2008 tax strategies—especially in light of the current economic downturn.
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What every business should consider . . .
“Whether your business is making or losing money, now is a good time to talk to your financial advisor,” she said. “Your CPA or tax accountant can help you make the best business investment, purchasing, or expensing decisions as you move through the year. You can explore different ways to borrow money or raise capital to reach your desired objective while minimizing your tax situation. Taking the time to discuss options now gives you the opportunity to think through decisions before you fully engage them.”
Certainly, the state of today’s economy combined with the credit crunch comes into play for businesses of all sizes.
“This is a good time to re-evaluate your current business tax strategy and make appropriate adjustments,” Lassar said. “You might, for one thing, consider slowing down deductions and adjusting the depreciation rate on capital additions for longer-term benefits.”
Actions individuals can take.
For individuals, Lassar recommends taking the time to review your personal 2007 tax situation closely and compare it with predicted 2008 income, expense, and investment opportunities.
“If, for example, your income is decreasing, you should re-evaluate your withholding allowances so that you don’t end up paying too much toward taxes this year,” she said.
Lassar stresses one key bit of advice for individual taxpayers: always remember to pay yourself first.
“This year, we’ve already seen a downturn in stock portfolios,” Lassar said. “Now is a good time to review and restructure your stock investments. You might consider selling some investments and recognizing losses as a way to offset potential gains.”
She also suggests that individuals review itemized deductions and consider alternating itemized and standardized deductions from one year to the next.
“Be sure and check in with your financial advisor in the summer months or early in the fall to review your personal tax situation, as this gives you time to change direction if your situation has shifted,” she said.
Bottom line, no one likes taxes but everyone has to pay them.
“You can’t make taxes go away, but you can plan proactively to minimize the tax bite,” Lassar said.