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If you are most people, you have spent plenty of time online trying to find some quick tax tips and marketing write offs for your small businesses. Thousands of tax "gurus" and outright charlatans plague the Internet with their swill and poor advice. For a dose of reality, read on: The following tax tips and marketing write offs for small businesses will help you keep some of your hard-earned cash in your pockets.
The carryback works like this: Say you lost $100,000 in 2007 after turning a $50,000 profit in each of the previous two years. Your accountant changes your previous year's tax return to offset the profit for that year and that is how you "carryback" the loss to offset your taxes. You would then be due a refund from the federal government and about a third of the state tax departments. You would also show a loss balance of $50,000 that you could carry back to 2005 and offset your profit for that year as well. Ask your accountant how to use the carryback correctly.
The IRS allows depreciation in value of equipment and machinery throughout a three- to 15-year period. The accepted equipment list is broad, and there's plenty of room for interpretation - it includes everything from table saws and desks to landscaping. Depreciation allows you recover your money, but in small increments that can take throughout a decade. There is a cunning and legal strategy that allows you to take a large write-off in a single year. That is the beauty of a Section 179 deduction. A large one-off deduction makes sense in a down economy. You will get a bigger bank roll to rush back into your business right now without losing anything to inflation.
Almost every marketing tool you use is a tax write off. Even money spent testing and researching additional business ventures can be written off if they are properly documented. That's the catch ... if they are properly documented. Your accountant probably gave this advice, but make sure to keep every receipt that you get your hands on, no matter how trivial they might seem at the time of the purchase.
With a little patience and some time spent with a good accountant, you can turn the current economic meltdown into a tax refund one way or another. A skilled accountant should be able to steer you and your company throughout the year, not just at tax time. In the meantime, consider these tips when preparing questions for your accountant.