Smart Financial Decisions Below are some financial, tax, and business tips to help you make smart financial decisions. 1.) First and Foremost: If an idea, deal, or offer sounds too good to be true, most likely it is. 2.) The Importance of Tax Considerations: Tax considerations are only a factor in making important financial decisions. Often they are not the determining factor. So don’t ignore tax considerations, but also don’t let them outweigh common sense or good business sense. 3.) Financial Benefits of Employing Family Members in Your Business: A definite benefit of employing family members is you can save taxes and keep money in the family. For example, if your spouse works in your business you may be able to deduct health insurance payments as a business expense, which saves social security tax. If you have children that can work for your business, you may be able to deduct the money you pay them and help them save for college and retirement. 4.) Equipment Purchases: Don’t purchase equipment to save taxes. You should only purchase new equipment because it makes business sense. (Don’t spend $1,000 just to save $400.) However, you can time purchases to get the best savings. 5.) Transferring Your Assets to Family Members: Your family objectives, business goals and net worth should determine if it is wise to transfer business assets to the next generation. Transferring your assets may save estate taxes, but it also may result in additional income taxes later on. 6.) Lease vs. Purchase On this decision the effective interest rate is often more of a factor than considering tax benefits. 7.) Record Retention Guidelines o Tax return documents should be kept at least three years after the return is filed. o Property and improvement records and investment statements should be kept at least three years after the property/investment is sold. o Original cost basis of gifts received or given should be kept forever. o Payroll records must be kept at least four years. o Sales tax records should be kept at least three years after the return is filed. o The main thing is if in doubt of whether you should hold on to the record, you should definitely keep it. 8.) Time Value of Money o The date when funds are received or paid (i.e. the time value of money) is a key factor in most financial decisions and is often ignored. Money you have today can be invested for tomorrow or utilized to pay debt now.
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