Employees play a critical role in the success of most businesses. They have a direct impact, in most cases, on the bottom line of the business. The best way to appreciate your employees would be to let them share in the bottom line. Even better is when you are able to do that with pre-tax money and use some very creative cash flow planning and business succession planning ideas to achieve that goal.
So, how about a couple of ideas where you can plan your cash flow well, get tax deductions, even arrange for your business to be sold at a great price to the people you want to sell it to and on top of all that get a preferential treatment by IRS for doing all that.
Here you go.
Recently IRS issued Revenue Ruling 2011-29 regarding the deduction of bonus even though the bonus would not be paid until the following year. This is applicable for businesses filing returns on accrual basis.
The revenue ruling allows an employer using an accrual method of accounting to take a deduction in the current year for a fixed amount of bonuses payable to a group of employees even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year. In other words, the entire amount of the bonus pool will be paid to members of the group of employees in the following year, but at the end of the current year the employer doesn’t yet know which particular employees will receive any bonus or how much.
If you have a business where you have employees and would like to offer some bonus to your employees for their extra-ordinary performance in 2011, you would be able to take advantage of this recent ruling and deduct the projected bonus amount in your tax return for 2011 even though it would not be paid by the end of the year.
This would be a great point to discuss with your tax consultant and see if you can use this opportunity. Of course you can always contact me to see if I can help out with this.
My next blog post is about the other wonderful opportunity to appreciate employees and achieve other goals such as tax planning, retirement planning and business succession (it's really a great deal).
