It's time to consider tax strategies in light of the "fiscal cliff" and changes in tax laws for 2013. Remember that the key to saving money on taxes is to minimize income and maximize deductions in years of higher income or higher taxes. Since we don't know what will happen before Congress adjourns for the holidays, it's anyone's guess whether taxes will increase.
William Perez, Guide to Tax Planning here at About.com, has put together some excellent insights into how you can save money on your business taxes if you are self-employed or working as a freelancer. For example, he says:
- Freelancers may want to accelerate income into 2012 to lock in a known tax rate now instead of an uncertain or possibly higher tax rate next year. Similarly freelancers may want to defer deductions until later years so those deductions will offset income taxed at presumably higher rates.
- Because the Social Security portion of self-employment tax is likely to increase in 2013, and the Social Security maximum is increasing, consider moving income into 2012, when this tax will likely be less.
- Review your retirement plan or consider setting up a retirement plan, like a SEP-IRA, SIMPLE IRA, or 401-K.
I'll be talking more in the next week about some of the strategies mentioned in William's article. In the meantime, before you make any year-end tax moves, talk to your tax advisor or CPA.
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