Good tax management means approaching both routine decision-making and long-term planning with an eye on the tax consequences. This newsletter is in the form of a checklist of actions to consider taking to minimize taxes. Before taking any steps, consult with your accountant.

• Keep accurate, timely records of all financial activities. That means daily sales, cash receipts, deductible expenses and schedules of asset purchases. The SBA booklet, Record Keeping in a Small Business, is a useful guide. Ask your accountant how long you need to keep business records in order to satisfy the laws and regulations of local, state and federal agencies.
• Consider changing your accounting methods. Although most businesses operate on an accrual basis, cash-basis accounting can save taxes for certain kinds of businesses. Check with your accountant
• Defer taxes. Are you doing all you can to postpone or defer taxes? Accelerating deductible expenses and deferring income may be the simplest ways to accomplish this goal.
• Monitor local real estate taxes. Challenge increased assessments, especially if property values are flat.
• Investigate the benefits of a subchapter S corporation. In a regular C corporation, the government taxes profits earned by the company then taxes shareholders who receive dividends from those after-tax company profits. This is the phenomenon of "double taxation" of corporate earnings. In an S corp, earnings are taxed only once, when they are earned, much like the profits from a sole proprietorship or a partnership. In addition, owners of an S corp retain the limited liability that goes with incorporation. The tax pros and cons of the two corporate forms become more complicated if you're planning to sell your business in the near future or if it has a considerable amount of net passive income. But beware: The process of converting from C-cor
• Check your depreciation methods to make sure you are taking all the depreciation allowances to which you're entitled. If you have items or equipment that becomes worthless faster than the depreciation schedule allows, discuss a different depreciation method with your accountant and review your fixed-asset capitalization policy.
• Keep track of organization and start-up expenses. If your business is new, they can be deducted when you sell the business, or you can choose to deduct them over the next five years or so. Check with your accountant for the best choice for you.
• Consider deferred-compensation packages, especially non-cash arrangements (stock options and deferred profit sharing, for instance), as ways to improve cash flow and save taxes. Ask your accountant to explain various employee-benefit programs and how they are taxed.
• If you operate in more than one state, investigate ways to shift your tax obligations to the jurisdiction with the lowest tax rate. Also, check with your accountant to make sure that you are properly filing all state and local income, and sales-tax forms.
• Consider employing family members and transferring partial ownership of the business to them as part of sound estate planning.
• Make sure you are properly classifying your workers as either employees or independent contractors. The IRS has firm guidelines on this distinction, and the tax consequences of an incorrect classification can be severe.
• Finally, don't prepare your own tax returns. Use a professional accountant. You should benefit from a more accurate return plus the ongoing value of having a working relationship with a tax expert throughout the year.