PROBLEM SITUATION

A new client had a banner year and was facing a large corporate tax liability. Company profits had exceeded expectations and he was given a tax projection by his former accountant. He needed tax planning. He was contacted by us through our marketing efforts and decided to try our services. We met at our offices and he showed us his profit through November and projected profit by December 31st. Although there was a large profit, the company was cash poor.

JOSEPH BOLAND, CPA, PC SOLUTION

We interviewed him and discovered that the company was owned by a few individuals all of whom worked for the corporation full time. We explained that there were a few tax planning strategies that he could avail himself of before year end. We suggested that he and the other owners of the corporation take large bonuses justified by services rendered in prior leaner years. We also suggested that he start a company pension plan that would allow him to defer the tax on a substantial portion of his profits and that would benefit him and the other owners in the future. The bonus checks could be issued in December, cashed and put back into the company as shareholder loans to provide working capital. The pension plan could be established this year with as little as $100.00 and by filing a corporate extension request the company could deduct pension payments this year but not have to fund the pension plan until September 15th of the following year. This would give him a much needed additional nine and half months to raise the cash needed for the pension plan contribution.

RESULTS EXPERIENCED BY CLIENT

The client was able to substantially reduce federal and state corporate income taxes for the year by over $40,000.00.