While you may focus on taxes during tax season when you know your income tax return for the prior year is due, you should be thinking about taxes throughout the year. The actions you take during the year can favorably impact your tax results at tax time.
Since you're a Schedule C filer, your business and personal tax picture is intertwined. Reducing the business income that's subject to tax can save you taxes on your personal (nonbusiness) income. For example, if you bring down your taxable business income by allowable deductions, you can minimize or avoid high-income limitations on your personal exemptions and itemized deductions as well as the additional Medicare taxes on earned income and net investment income.
In taking actions for tax results, don't do so at the cost of bad business results. Keep in mind that taxes are only one factor in the actions you take. Assess the impact that actions will have on cash flow, productivity, and other business issues. In many cases, as you'll see in this chapter, tax savings align with business and financial advantages.
Actions you take throughout the year can pay off in tax savings on your return. These actions can have effects beyond mere tax savings. They can help protect the financial security of your ...