I Want to Introduce You to a New Friend

What do you think of when I say, “The IRS?”

Does your stomach clench up a bit? Does your forehead get warm? Maybe the physiological reaction isn’t so dramatic, but I imagine that your mental associations with the Internal Revenue Service of the United States are anything but positive. Fair to say?

Maybe you got off to a rough start, but perhaps that was due more to schoolyard rumors than anything else. It’s possible, too, that you’ve hit a rough spot in your relationship. But I want you to get reacquainted with the IRS and think about the way you two could be friends.

Certainly the thoughts of being friends with someone taking anywhere from 25% to 50% of your hard-earned dough on an annual basis might seem distasteful. I don’t like the Tax Man any more than the next guy, but as long as you accept that the IRS is taking some of your money every year – and you really come to terms with the fact – you may want to get better acquainted.

There are only two business people who should be concerned by the IRS:

1. Those whose accounting is so terrible that an audit would be an unbearable nightmare, and

2. Those who are trying to cheat and break the law.

If you don’t fall into either of those categories (and a lot of my clients, I unfortunately discover, do), then consider what the IRS can do for you. Remember, the government is going to take a nice bite out of your income, but the size of the bite and the ferocity with which it’s taken might be more variable than you’d otherwise imagined, particularly if you are a business owner, CEO, president or CFO.

And I want to be very clear here that everything I am suggesting you do is 100% legal. Do NOT do anything illegal. It’s not worth it, and you will be caught. They’re always caught. Trust me. I’ve seen more fraud than you can imagine.

You might be saying right now, of course there are ways of paying taxes “better” – that’s why I have a CPA. And I bet you have a wonderful CPA, but I assure you he won’t mind you doing a little leg work yourself to figure out how to save your company some money.

An obvious way to save money is to take advantage of the Bonus Depreciation and Increased Section 179 Deduction under the American Recovery and Reinvestment Act, which allows you to fully depreciate a wide variety of assets. That’s right. No schedules this year if you don’t want them. And the IRS is happy to let you do it.

That’s just the tip of the iceberg, though, and the only way you’re going to figure out all of the ways that you could more advantageously be classifying your expenses and spending your money is if you explore www.IRS.gov. Use the search bar in the top right hand corner and start getting acquainted with the IRS. You guys could be better friends than you think.

WARNING: Obviously you shouldn’t go reorganizing your business’s books for 2011, confusing your CPA/account/bookkeeper and doing anything funny. However, since you’re bound to be meeting with your accountant again soon, you should think about all the ways you spend money – consider terms like “petty cash,” “entertainment” and “meals” for starters – and start looking them up. Go to your accountant with a list of questions, suggestions and links, and see if s/he can’t continue steering you in great directions to get, use and save more money in 2012 than you may have in 2011.

If you notice any particularly good tidbits while you’re looking around, share them with us in the comments section below. Happy hunting!

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