Rethinking Your Tax Strategy

With the economy slowing and Washington threatening to boost audits of small businesses, it's time to rethink your tax strategy.

  There are two proven paths to building wealth: You can increase the amount of money you make, or you can increase the amount of money you keep.

Chances are you devote abundant time and energy to the first strategy, meaning you're utterly consumed with developing new products or breaking into new markets. But the second path tends to get less consideration, particularly because one of the primary ways of keeping more money is paying lower taxes.

Taxes are painful not only to pay but to think about. Taxes are complex. Figuring out ways to shave your tax bill is not why you went into business.

But ignore the subject at your peril. In an effort to shore up a record deficit, the IRS is increasingly targeting small businesses for audits and has made no secret of the fact.

Consider 2006, when the IRS audited nearly 18,000 small companies (which it defined as those with assets less than $10 million), up from 7,000 in 2004. At the same time, many small-business owners overlook key deductions and wind up needlessly giving away hard-earned cash.

To help you make the most of your tax-saving opportunities, FSB spoke with some of the nation's top experts on small-business tax issues, who offered smart moves that are often overlooked even by sophisticated entrepreneurs: under-the-rug tax credits, record-keeping tips, audit red flags, and more.