Loveland CPA firm Mueller & Associates, CPA, LLC Has Your Tactical Tax Plan for 2009 - 2010

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) March 14, 2010 -- Loveland CPA Paul Mueller asks business owners, “Who needs to worry about income taxes? Nearly 10% of the workforce is unemployed, corporate earnings are down, the stock market is still 30% down from its high in 2008 and your 401k is now a 201k.”

Contrary to what you might think, tax planning right now is critical.

Though the traditional “defer income; accelerate deductions” strategy may not be in play, there are numerous ways to save taxes and create refunds! Read on.

You’ve done everything you were supposed to do to fund Johnny’s college education. You opened up a Section 529 Plan and added money periodically. Despite prudently selecting the investments, the account value has plummeted, perhaps by half or more, and college is not that far off. You don’t have to just sit there and take it. If you itemize your deductions, you can close the account and claim an ordinary loss for your unrecovered investment. That could result in a decent recovery of income taxes to help offset your investment losses. If you wait more than 60 days, you can reinvest the money into a new Section 529 Plan and start the process all over again. When you do, make sure you setup the account through the Colorado program, CollegeInvest, so that you can deduct the contribution on your Colorado income tax return.

Now that Johnny is taken care of, what to do about your IRA, which could now be called a Cry-RA? Closing out the account would be the ultimate disaster. Not only has it lost value, but closing it would expose the proceeds to taxes and penalties, reducing the amount by another one-third. Instead of getting mad, get even! In 2010, everyone will have a chance to convert their taxable IRA to a ROTH IRA. Although the conversion is a taxable event, you and your heirs will never pay tax on future withdrawals. What makes 2010 so attractive is that the tax on the conversion won’t have to be paid until you file your 2011 and 2012 tax returns.

Most business owners are experiencing losses and a squeeze on cash flow. If handled properly, those losses might actually be a new source of cash. In the past, businesses have been allowed to carryback operating losses to offset income reported on the two preceding year tax returns to generate tax refunds. Now, a business can elect to carryback those losses to as many as five previous returns. This is an opportunity to obtain refunds of taxes previously paid when the business was flourishing. The IRS also has a streamlined procedure to expedite the payout of these refunds to cash-strapped businesses.

Declines are across the board – stock prices, real estate values and lease occupancy rates. Pundits and prognosticators are advising us to “hunker down” and “ride out” the storm. Wrong!

Instead, your mantra should be that of Howard Beale in the movie “Network” who said, “I’m as mad as hell and I’m not going to take this anymore”. Rather than head for the bunker, you need to become tactical:

If you operate your business as a tax-paying “C” corporation, now might be a great time to convert to an “S” corporation. Generally, S corporations do not pay tax. Instead the profits and losses are reported by the shareholder(s) on their personal tax returns. If the corporation is expected to produce losses, those losses can be used by the shareholders to reduce their personal taxes. A conversion would also limit or avoid the so-called “double tax” that can apply to C corporations when they are sold or liquidated.

For business owners and families that have built up significant wealth, a general decline in valuations and lower interest rates presents an opportunity to transfer wealth to successive generations and permanently reduce or avoid estate taxes.

If you lease property or office space, now might be a great time to have a heart-to-heart talk with your landlord. Vacancies are up and lease rates are down. Your landlord might entertain the notion of a renegotiation if it’s a way to secure a long-term tenant relationship.

Business owners need to focus all their time and attention on protecting and stabilizing their operations. There is little time to spend on administrative or “back-office” activities when survival is at stake. One example of a time-consuming activity is payroll. Payroll outsourcing is a very competitive industry right now, and you will likely be surprised how easy and inexpensive it would be to outsource this function. Many of the larger payroll companies can totally offload the administration of payroll, employee benefits, workman’s compensation, retirement plans and all the related paperwork so that business owners can focus on revenue-generating activities.

In the Chinese language, the word “crisis” contains two elements – danger and opportunity. During this troubling economic environment, make sure you are managing the danger while also not overlooking the opportunities.

Mueller & Associates, CPA, LLC, is a Loveland CPA firm that provides financial guidance, consulting and tax preparation services for small and mid-sized businesses, throughout Northern Colorado. Services include Quickbooks training, setup and management, non-profit consulting, tax consulting & preparation, fraud prevention and business succession planning. Find out more at http://mueller-cpa.com/services.html.

More information can be found online at http://mueller-cpa.com/services.html

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