开题报告XX 4.docx

开题报告XX 4.docx

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开题报告XX4

SmallMicroEnterpriseTaxPlanning

Taxplanninginvolvesconceivingofandimplementingvariousstrategiesinordertominimizetheamountoftaxespaidforgivenperiod.Forasmallbusiness,minimizingthetaxliabilitycanprovidemoneyforexpenses,investment,orgrowth.Inthisway,taxplanningcanbeasourceofworkingcapital.AccordingtoTheEntrepreneurMagazineSmallBusinessAdvisor,twobasicrulesapplytotaxplanning.First,asmallbusinessshouldneverincuradditionalexpenseonlytogainataxdeduction.Whilepurchasingnecessaryequipmentpriortotheendoftaxyearcanbeavaluabletaxplanningstrategy,markingunnecessarypurchasesisnotrecommended.Secondasmallbusinessshouldalwaysattempttodefertaxeswhenpossible.Deferringtaxesenablesthebusinesstousethatmoneyinterest-free,andsometimesevenearninterestonit,untilthenexttimetaxesaredue.

Expertsrecommendthatentrepreneursandsmallbusinessownersconductformaltaxplanningsessionsinthemiddleofeachtaxyear.Thisapproachwillgivethemtimetoapplytheirstrategiestothecurrentyearaswellasallowthemtogetajumponthefollowingyear.Itisimportantforsmallbusinessownerstomaintainapersonalawarenessoftaxplanningissuesinordertosavemoney.Evenifemployaprofessionalbookkeeperoraccountant,smallbusinessownersshouldkeepcarefultabsontheirsowntaxpreparationinordertotakeadvantageofallpossibleopportunitiesfordeductionandtaxsavings.＂Whetherornotyouenlisttheaidofanoutsider,youshouldunderstandthebasicprovisionsofthetaxcode.＂Justasyouwouldnotturnoverthemanagementofyourmoneytoanotherperson,youshouldnotblindlyallowsomeoneelsetotakecompletechargeofyourtaxpayingresponsibilities."Inaddition,asFrederickW.DaileywroteinhisbookTaxSavvyforSmallBusiness,"Taxknowledgehaspowerfulprofitpotential.Knowingwhatthetaxlawhastooffercangiveyouafarbetterbottomlinethanyourcompetitorswhodon'tbothertolearn.

GeneralAreasofTaxPlanning

Thereareseveralgeneralareasoftaxplanningthatapplytoallsortsofsmallbusinesses.Theseareasincludethechoiceofaccountingandinventory-valuationmethods,thetimingofequipmentpurchases,thespreadingofbusinessincomeamongfamilymembers,andtheselectionoftax-favoredbenefitplansandinvestments.Therearealsosomeareasoftaxplanningthatarespecifictocertainbusinessforms—i.e.,soleproprietorships,partnerships,Ccorporations,andScorporations.Someofthegeneraltaxplanningstrategiesaredescribedbelow:

ACCOUNTINGMETHODS.Accountingmethodsrefertothebasicrulesandguidelinesunderwhichbusinesseskeeptheirfinancialrecordsandpreparetheirfinancialreports.Therearetwomainaccountingmethodsusedforrecord-keeping:

thecashbasisandtheaccrualbasis.Smallbusinessownersmustdecidewhichmethodtousedependingonthelegalformofthebusiness,itssalesvolume,whetheritextendscredittocustomers,andthetaxrequirementssetforthbytheInternalRevenueService（IRS）.Thechoiceofaccountingmethodisanissueintaxplanning,asitcanaffecttheamountoftaxesowedbyasmallbusinessinagivenyear.

Accountingrecordspreparedusingthecashbasisrecognizeincomeandexpensesaccordingtoreal-timecashflow.Incomeisrecordeduponreceiptoffunds,ratherthanbaseduponwhenitisactuallyearned,andexpensesarerecordedastheyarepaid,ratherthanastheyareactuallyincurred.Underthisaccountingmethod,therefore,itispossibletodefertaxableincomebydelayingbillingsothatpaymentisnotreceivedinthecurrentyear.Likewise,itispossibletoaccelerateexpensesbypayingthemassoonasthebillsarereceived,inadvanceoftheduedate.Thecashmethodissimplerthantheaccrualmethod,itprovidesamoreaccuratepictureofcashflow,andincomeisnotsubjecttotaxationuntilthemoneyisactuallyreceived.

Incontrast,theaccrualbasismakesagreaterefforttorecognizeincomeandexpensesintheperiodtowhichtheyapply,regardlessofwhetherornotmoneyhaschangedhands.Underthissystem,revenueisrecordedwhenitisearned,ratherthanwhenpaymentisreceived,andexpensesrecordedwhentheyareincurred,ratherthanwhenpaymentismade.Themainadvantageoftheaccrualmethodisthatitprovidesamoreaccuratepictureofhowabusinessisperformingoverthelong-termthanthecashmethod.Themaindisadvantagesarethatitismorecomplexthanthecashbasis,andthatincometaxesmaybeowedonrevenuebeforepaymentisactuallyreceived.However,theaccrualbasismayyieldfavorabletaxresultsforcompaniesthathavefewreceivablesandlargecurrentliabilities.

Undergenerallyacceptedaccountingprinciples（GAAP）,theaccrualbasisofaccountingisrequiredforallbusinessesthathandleinventory,fromsmallretailerstolargemanufacturers.Itisalsorequiredforcorporationsandpartnershipsthathavegrosssalesover$5millionperyear,thoughthereareexceptionsforfarmingbusinessesandqualifiedpersonalservicecorporations—suchasdoctors,lawyers,accountants,andconsultants.Otherbusinessesgenerallycandecidewhichaccountingmethodtousebasedontherelativetaxsavingsitprovides.

INVENTORYVALUATIONMETHODS.Themethodasmallbusinesschoosesforinventoryvaluationcanalsoleadtosubstantialtaxsavings.Inventoryvaluationisimportantbecausebusinessesarerequiredtoreducetheamounttheydeductforinventorypurchasesoverthecourseofayearbytheamountremainingininventoryattheendoftheyear.Forexample,abusinessthatpurchased$10,000ininventoryduringtheyearbuthad$6,000remainingininventoryattheendoftheyearcouldonlycount$4,000asanexpenseforinventorypurchases,eventhoughtheactualcashoutlaywasmuchlarger.Valuingtheremaininginventorydifferentlycouldincreasetheamountdeductedfromincomeandthusreducetheamountoftaxowedbythebusiness.

Thetaxlawprovidestwopossiblemethodsforinventoryvaluation:

thefirst-in,first-outmethod（FIFO）;andthelast-in,first-outmethod（LIFO）.Asthenamessuggest,theseinventorymethodsdifferintheassumptiontheymakeaboutthewayitemsaresoldfrominventory.FIFOassumesthattheitemspurchasedtheearliestarethefirsttoberemovedfrominventory,whileLIFOassumesthattheitemspurchasedmostrecentlyarethefirsttoberemovedfrominventory.Inthisway,FIFOvaluestheremaininginventoryatthemostcurrentcost,whileLIFOvaluestheremaininginventoryattheearliestcostpaidthatyear.

LIFOisgenerallythepreferredinventoryvaluationmethodduringtimesofrisingcosts.Itplacesalowervalueontheremaininginventoryandahighervalueonthecostofgoodssold,thusreducingincomeandtaxes.Ontheotherhand,FIFOisgenerallypreferredduringperiodsofdeflationorinindustrieswhereinventorycantendtoloseitsvaluerapidly,suchashightechnology.CompaniesareallowedtofileForm970andswitchfromFIFOtoLIFOatanytimetotakeadvantageoftaxsavings.However,theymusttheneitherwaittenyearsorgetpermissionfromtheIRStoswitchbacktoFIFO.

EQUIPMENTPURCHASES.UnderSection179oftheInternalRevenueCode,businessesareallowedtodeductatotalof$18,000inequipmentpurchasesduringtheyearinwhichthepurchasesaremade.Anypurchasesabovethisamountmustbedepreciatedoverseveralfuturetaxperiods.Itisoftenadvantageousforsmallbusinessestousethistaxincentivetoincreasetheirdeductionsforbusinessexpenses,thusreducingtheirtaxableincomeandtheirtaxliability.Necessaryequipmentpurchasesuptothelimitcanbetimedatyearendandstillbefullydeductiblefortheyear.Thistaxincentivealsoappliestopersonalpropertyputintoserviceforbusinessuse,withtheexceptionofautomobilesandrealestate.

WAGESPAIDTOFAMILYMEMBERS.Self-employedpersonscanalsoreducetheirtaxburdenbypayingwagestoaspouseortodependentchildren.Wagespaidtochildrenundertheageof18arenotsubjecttoFICA（SocialSecurityandMedicare）taxes.Undernormalcircumstances,employersarerequiredtowithhold7.65percentofthefirst$62,700ofanemployee'sincomeforFICAtaxes.Employersarealsorequiredtomatchthe7.65percentcontributedbyeveryemployee,sothatthetotalFICAcontributionis15.3percent.Self-employedpersonsarerequiredtopayboththeemployerandemployeeportionsoftheFICAtax.

ButtheFICAtaxesarewaivedwhentheemployeeisadependentchildofthesmallbusinessowner,savingthechildandtheparent7.65percenteach.Inaddition,thechild'swagesarestillconsideredataxdeductiblebusinessexpensefortheparent—thusreducingtheparent'staxableincome.Althoughthechildmustpaynormalincometaxesonthewagesheorshereceives,itislikelytobeatalowertaxratethantheparentpays.Somebusinessownersareabletofurtherreducetheirtaxburdenbypayingwagestotheirspouse.Ifthesewagesbringthebusinessowner'snetincomebelow$62,700—thethresholdforFICAtaxes—thentheymayreducetheself-employmenttaxowedbybusinessowner.Itisimportanttonote,however,thatthechildorspousemustactuallyworkforthebusinessandthatthewagesmustbereasonablefortheworkperformed.

BENEFITSPLANSANDINVESTMENTS.Taxplanningalsoappliestovarioustypesofemployeebenefitsthatcanprovideabusinesswithtaxdeductions,suchascontributionstolifeinsurance,healthinsurance,orretirementplans.Asanaddedbonus,manysuchbenefitprogramsarenotconsideredtaxableincomeforemployees.Finally,taxplanningappliestovarioustypesofinvestmentsthatcanshifttaxliab