Dorion-Gray: 2012 year-end tax strategies for business owners
Tax reform was one of the most contentious topics in this year's election, with both personal and corporate income tax rates under scrutiny. While leaders in both parties agreed that corporate rates should be reduced from the current high of 35 percent, they differed on how to do so without further widening the budget deficit. Should foreign income continue to be taxed, and if so, how? Should deductible expenses be reduced or eliminated, and if so, which ones?
And what will be the overall economic impact when nine out of 10 businesses don't even pay corporate income taxes? Indeed, according to the Senate Finance Committee, 95 percent of all U.S. businesses are structured as "pass-through" entities, which means their income is reported on owners' personal income tax returns.
Regardless of whether you pay corporate or personal income tax on your business income, you probably know that time is of the essence when it comes to tax reform. If Congress doesn't act by Dec. 31, the nation will face the ominously and now infamously named "fiscal cliff" – the series of impending tax code and budgetary spending changes that some economists say will propel us into another protracted recession.
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