December 21, 2002
Table of Contents
Quote of the Week
Featured Resource - PEGASUS MAIL
Staff Article - THE
- YEAR END TAX PLANNING
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A GIFT FOR YOU! THE
Here is a short, inspirational story by Allen Says that can
teach you a lot in a very simple but powerful way. Enjoy!
Quote of the Week
A wise man will make more
opportunities than he finds.
- Francis Bacon
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by: Cary Christian
I want to tell you a brief story that has very little to do with
business and much to do with life.
I spent the first eleven years of my career working 60- to 80-hour weeks
clawing my way up the ladder of a "Big 5" firm. I never had a lot of time to
spend with my family but they seemed to understand.
Then I decided to go out on my own with a couple of my peers and
spent the next eleven years building my own businesses. Again, I never
seemed to have much time to spend with my family and they still seemed to
understand. For the most part.
Christmas of 1998 was quickly approaching and, in many ways, it was much
like every Christmas before it. But there was one large difference: my
father was gravely ill. For the first time in my life I realized he was not
going to be around forever. This weighed on my mind every day. I thought of
all the holidays past where I had spent virtually no time with my Dad.
Twenty-two years of them. I determined that this one would be different.
Because of Dad's illness, my parents decided not to put up a tree for
Christmas. They just weren't in the mood. So my wife and I decided to put
one up for them. We arrived at my parents house with a six-foot tree, all
the trimmings and an assortment of good foods to nibble on as we enjoyed the
My wife made me, my parents, our daughter and her boyfriend all wear Santa's
hats, Christmas t-shirts and comfortable flannel Christmas pants (kind of
like pajama bottoms) to get us in a more festive mood. I thought that was a
little much, but it worked. It was a wonderful evening. The gleam in my
Father's eyes told me how wonderful it was for him.
I ended up spending more time during the Christmas holidays of 1998 with my
parents that I had spent with them in many years combined. It was good for
me and I found myself wishing I hadn't missed out on being with them more
during my career- and business-building years.
A little over four months later my Father lost his battle with
cancer. The world lost a truly kind and gentle man. I lost my hero, though
I'm not sure I ever adequately let him know that that is just what he was to
I'll always have regrets over the often misplaced and one-sided
emphasis of my early life. But I'll always have the memories of that
Christmas of 1998.
Now I know you can see the moral of this story a mile away. But if your
approach to business and career is like mine has always been, please take a
moment to reconsider. There are hundreds of days available in the year to
nurture your career and build your business. Take time to enjoy the holidays
with your family. Put business aside for a few days. It will still be there
waiting for you when you get back.
Life is short. None of us know when we or a loved one may enjoy our last
Christmas. Be there for it. Immerse yourself in it. Bask in the love of your
family. You'll be stronger for it and so will they.
I wish you all the very best of the holidays!
Copyright (c) 2002
YEAR END TAX
by: Cary Christian
Your tax deadline is approaching rapidly. You're concerned
because you believe you may owe tax but you're not sure just how big the
bill might be. You're thinking about filing an extension just to put it off
for awhile, but you know it will continue to bother you until you know just
how much you owe.
Does this sound familiar? Most small businesses do not pay enough attention
to their tax situation until it is too late to do anything about it. March
15, April 15 and any of the Extended deadlines are simply too late. You must
think about your tax position before the year ends. Where should you start?
Begin by actually determining what your tax return would look like if you
filed it on December 15. Go through the process of preparing your return or
get your accountant to prepare an estimate for you. If you're comfortable
with the flow of a tax return and any specialized calculations that apply to
your business, you can do this on a spreadsheet rather than on the forms. If
you're not that comfortable or proficient with taxation, actually fill out
the forms to see where you stand.
This is a very tough first step for many of you, we know. But it is
absolutely critical that you do it! You cannot plan and manage your tax
liabilities unless you know what they are before year end. You do not want
to implement tax saving strategies if you don't need to. You'll be wasting
money instead of saving it.
Once you've determined where you stand you are ready to consider
specific techniques for either deferring or accelerating income or
Let's say you've determined you're going to be taxed at the highest rates on
your business income. It's been a good year! So you need to think about
deferring income and accelerating deductions. Here are a few techniques you
* If you use inventory in your business, take stock of what you
have. If you have items that are damaged or are otherwise unsaleable at
normal prices, offer them for sale at a reduced price. If you do so, you be
able to write down the value to the reduced price whether you sell them or
* If you are a cash basis taxpayer, consider paying expenses in
December that are otherwise due in January. Write out the checks and mail
them at the end of December. If you need the cash flow, pay them using a
credit card where possible. You'll still get the deduction in the current
year but won't have to pay the credit card until January.
* If you are an accrual basis taxpayer, make sure you evaluate all your
expenses that are coming due in January and accrue amounts that relate to
December. For example, if you pay a cleaning service monthly on the 15th for
cleaning your offices, you should accrue 16 days of cleaning expense in
December out of the amount to be paid on January 15. Go through all of your
expenses to look for this type of accrual capability.
* If you are a cash basis taxpayer and have a payroll due early in January,
consider paying it early to have it fall in December. Your employees will
like it and you'll get the deduction this year. If you are an accrual basis
taxpayer, make sure you accrue the payroll related to days worked in
* If you are a cash basis taxpayer and have sold goods on terms, get your
customers to pay you just after the beginning of the year. If you are an
accrual basis taxpayer and have orders to process, check with your customers
to see if it would be acceptable to ship them on January 2 and move the
accrual of the sale to the next year.
* If you don't have a retirement plan, investigate starting one
right away. Check with your investment advisor or CPA to see how much you
could contribute in the current year. Be aware that if you have employees,
they will have to participate in the plan as well in order for your
contributions to be deductible. This can become quite complex but is
possibly one of the best tax planning options available to you, not to
mention a very sound investment vehicle. You will have until the due date of
your return to set up most small business plans. In other words, if you
didn't set it up during 2002, it's not too late!
* If you are planning to buy equipment in the near term, consider buying it
in December and taking advantage of the Section 179 deduction that allows
you to expense the acquisition within certain limitations.
Now let's assume that you find you will be taxed at the lowest tax rate or
that you have a loss and will pay no tax at all. Don't assume you are done!
If you are expecting a large taxable income next year, you will want to
consider accelerating income and deferring deductions. In other words, you
will want to do the opposite of the recommendations above.
Why would you want to create taxable income in a year when you will not owe
tax? To take advantage of the lower tax rates. If you can shift income from
next year that will be subject to a tax rate of 40 percent or more to this
year where it will be taxed at 15 percent, the savings of 25 percent is real
Be sure you evaluate your tax position over the next week or so and take
action where necessary. Proper planning can save you a great deal of money.
If you need help with any of the above techniques or would like explore
other options, please contact us. We would be happy to help.
Copyright © 2002, all rights reserved
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