Tax planning: it's time to act - Making the Case for New Mexico's Small Town s

New Mexico Business Journal, Oct, 1993 by Gail Rubin

WHEN THE ASPENS are turning gold in the magnificent mountains of New Mexico, the tax man isn't, unfortunately, far behind.

The bad news is provisions of the Deficit Reduction Act of 1993 go into effect in '93 and '94.

The good news is you still have an opportunity to reduce your taxes before the end of the tax year.

The end of the year, however, shouldn't be the only time you think about your financial and tax situation, say business planners and investment counselors.

Tax planning should be a year-round concern and it's important to do what makes sense for the business, not just for tax reductions.

"There's an attitudinal switch in year-end tax planning," says Colleen Regan, an Albuquerque certified public accountant. "All year long, you've strived to maximize your profits, and now you're horrified by the tax on those profits and want to whittle it down.

"Naturally, we'd rather spend money on ourselves than the federal deficit."

"Throwing away money just to save taxes doesn't make good business sense. We still don't have a 100 percent tax, even thought it might feel like it," notes Dennis Sterosky, a shareholder with Pulakos & Alongi.

"People don't like to pay for planning and so they put it off, but if you don't plan, you're going to get caught in a trap. December is too late to start making decisions."

"You don't ever want to make economic decisions that are driven only by the tax write-off implications," says Joe Kopczynski, president of Universal Advisory Services.

"People madly and wildly invested in limited partnerships in 1986 because of the tax deductions available to them," he warns. "And most of those people lost their shirts."

So what is ahead?

The Deficit Reduction Act of 1993 is causing people to scurry to their CPAs to find out what it all means and the implications of the act are just hitting home with additional issues becoming apparent as time goes on.

Those hardest hit by the changes are highly compensated salaried people, high earning sole proprietors and partners and shareholders in S corporations.

Some key changes affecting taxes in '93 and '94 for business executives include increased deduction for equipment, Medicare compensation tax, lowering higher income tax rates, higher gasoline taxes, reduced entertainment deduction and elimination of club dues deductions.

In addition, spousal travel expenses may not be deductible, moving expense deductions are reduced and charitable contributions will have to be clearly documented.

Executives can save some hard-earned dollars, for instance, by accelerating expenses before the end of the year and holding off collecting billings, revving up retirement savings, changing family income sharing plans.

Gail Rubin is a freelance writer based in Albuquerque.