How to make a balance between good cash flow and low corporate tax payment?

Question

I have a small company. My company pays income tax at 15%. I would like to minimize the amount of corporate income tax that my company is paying, by giving my employees more bonuses (thereby increasing expenses). I'd like to know if there's any rule of the thumb method that I can follow, to ensure that I'm not paying too much taxes.

Answer 1

Paying a bonus to your employees will reduce your taxes, but will not save you anything in cash flow.  A $100 bonus will reduce your income tax by $15 but will increase your payroll taxes by at least $7.65 (unless the employee has already been paid $102k or more in 2008) so this isn't a way to improve your cash flow since it hits your cash flow up to $107.65.  As long as tax rates are less than 100%, increasing expenses to cut taxes will ALWAYS be a losing battle.

Answer 2

How are you incorporated?  Are you an S corp, C corp... LLC?  There is no way to answer your question without knowing that.  The type of company you have is what dictates how you are taxed and what you can write off.  

Make an investment in the future of your company: Purchase "Own Your Own Corporation" by Garrett Sutton.  It is part of the "Rich Dad" series.  If you don't have this info under your belt, you probably ARE paying too much in taxes by being set up improperly and by missing write-offs.  You have to know HOW to do your taxes LEGALLY before you can get all the best bennefits.