Companies that don’t want to keep track of the actual costs of using a vehicle for business purposes may use this standard mileage rate instead. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year.

In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes.

The standard business mileage rate can’t be used for automobiles used for hire (e.g., taxicabs) or for fleets of automobiles used simultaneously by the taxpayer. Nor can the standard rate be used if the vehicle was previously depreciated by other than the straight-line method, including using bonus depreciation or the Section 179 deduction.

When the business mileage rate is used, depreciation will be considered to have been allowed at a rate of 23 cents a mile. This depreciation reduces the taxpayer’s cost basis in the vehicle.

Why the difference?

If you’ve read the financial press in recent years, you know that many banks have been burned. Some with lax underwriting practices extended credit to companies that went bankrupt. Even some strong institutions failed when large loans weren’t repaid. Those that survived may be licking their wounds and rethinking their lending practices. As a result, your bank may be reticent to extend credit to a company that lacks a proven track record or that’s otherwise perceived as a bad risk.

But even if your bank is willing to extend credit, don’t sabotage your efforts by failing to prepare adequately. Increase your chances of getting a business loan by following these suggestions:

Show that you have a detailed business plan. Putting your ideas, projections, and assumptions on paper can uncover gaps in your logic and flaws in your research. Your business plan should lay out market research, financial projections, start-up costs (if applicable), and assumptions. Show how you’re going to spend every dollar of the loan proceeds to generate revenue. Consider the plan from the other side of the table. Would you lend money to a company that lacks a credible strategy?

Show that you’re capable. Lenders must have confidence in you. Convince them. Show that the combination of your management team’s education, skills, and work ethic will lead to success. To demonstrate your ability to repay the loan, you may be asked to share your credit report and tax returns. If you’ve struggled to meet prior obligations, be ready with explanations, including evidence of extenuating circumstances.

Show that you’re invested. Lenders often look kindly on business partners who have pumped a substantial amount of their own savings into a company. Before applying for a business loan, plan to document that at least 25% of the firm’s equity has come from the personal assets of its owners and investors. From a lender’s perspective, such an investment demonstrates a commitment to see the company through hard times — and to pay back the loan.

You can choose to deduct sales taxes instead of local and state income taxes. If you’re planning big ticket purchases (like a car or a boat), buy before year-end to beef up your deductible amount of sales tax.

If you’re a teacher, don’t overlook the deduction for up to $250 for classroom supplies you purchase in 2011.

Consider prepaying college tuition you’ll owe for the first semester of 2012. This year you can deduct up to $4,000 for higher education expenses. Income limits apply.

Max out your retirement plan contributions. You can set aside $5,000 in an IRA ($6,000 if you’re 50 or older), $11,500 in a SIMPLE ($14,000 if you’re 50 or older), or $16,500 in a 401(k) plan ($22,000 if you’re 50 or older).

Establish a pension plan for your small business. You may qualify for a tax credit of up to $500 in each of the plan’s first three years.

Need equipment for your business? Buy and place it in service by year-end to qualify for up to $500,000 of first-year expensing or 100% bonus depreciation.

Review your investments and make your year-end sell decisions, whether to rebalance your portfolio at the lowest tax cost or to offset gains and losses.

If you’re charity-minded, consider giving appreciated stock that you’ve owned for over a year. You can generally deduct the fair market value and pay no capital gains tax on the appreciation.

Another charitable possibility for those over 70½: Make a direct donation of up to $100,000 from your IRA to a charity. The donation counts as part of your required minimum distribution but isn’t included in your taxable income.

Install energy-saving improvements (such as insulation, doors, and windows) in your home, and you might qualify for a tax credit of up to $500.

These possibilities for cutting your taxes are just the starting point. Contact us now for a review of your 2011 tax situation and tax-saving suggestions that will work best in your individual circumstances.

This is especially true when choices are based on “sunk costs.” Broadly defined, sunk costs are past expenses that are irrelevant to current decisions. For example, many firms hire consultants who sell and install software. In some cases, a company is still waiting — three or four years into the contract term — for a functional and error-free system. Meanwhile, costs continue to escalate. But are those costs relevant? Managers, especially those who initially procured the software and contractor, may reason that pulling the plug on a failed contract would be “wasting all that money we’ve spent.”

Not true. That money is “sunk”; it’s beside the point. Deciding to continue with a non-performing contract instead of staunching the flow of cash and changing course is irrational. It may be difficult to admit that a mistake was made. It may bruise the ego of the decision maker. But abandoning a failed contract is often the wisest decision. The only relevant costs are those that influence the company’s current and future operations.

Irrelevant costs:

Let’s say your firm hires a new salesman. You spend thousands of dollars sending him to training seminars. You assign mentors who take time from their busy schedules to provide on-the-job coaching and oversight. But despite your best efforts, the new hire isn’t working out. He doesn’t fit your firm’s culture; he doesn’t grasp the company’s goals and procedures; he doesn’t generate adequate revenues for the business. As a manager, what should you do? At some point, you may need to terminate that employee and start over with someone else. But what about all that time and money you spent training and mentoring the new salesman? Those costs are irrelevant; they’re “sunk.” You can’t get them back. So the best decision — as of today — may involve cutting your losses and starting anew.

Other examples of sunk costs may be found in the areas of product research, advertising, inventory, equipment, investments, and other types of business expense. In each of these areas, companies spend money that can’t be recovered, dollars that become irrelevant for current decision making.

Sunk costs may also cloud one’s judgment in the arena of investing. In a completely rational world, people would base investment decisions on the bedrock of estimated future returns. Of course, that’s not the real world. Investors hold stocks in companies that are careening into bankruptcy, all the while refusing to sell because they’ve already committed so much money. Understandable, but foolish. Emotional, not rational. Throwing good money after bad won’t salvage a poor investment — or a poor investment decision.

Precious metals Scams take many forms, but those involving gold and precious metals are especially problematic right now. Buying gold is trendy, and it can appeal to a senior’s desire for tangible security. Naturally, scammers will take advantage of this appeal. If someone you know is elderly and considering a gold-related investment, make sure they do their homework and work with a reputable company. Anyone pitching gold as a safety net against doomsday scenarios or hyperinflation should be carefully vetted.

Investments Of course, more traditional investment vehicles can also be dangerous. Life insurance, annuities, and other potentially complex deals can be marketed to prey on an elderly person’s fear of running out of money. Investment advisors should only offer products suitable for the age, health, and financial wherewithal of their client. A perfectly legitimate investment can still be all wrong given certain circumstances.

E-mail offers By now, repetitive e-mail requests from some foreigner to wire funds to your bank account might seem almost comical, but to those who fall victim to a carefully crafted ploy, it is all too serious. Some very smart people — young and old — have been taken in by these types of scams, and when it happens to an elderly person, the fear of looking incompetent often adds to the problem. Educate the senior in your life to always reject these offers.

Pre-paid services Not only do the elderly dread running out of money, they sometimes have an unhealthy concern for being a burden to others. This can manifest itself in attempts to prepay for certain services or signing up for strategies that will pay for bills owed at the time of death. Every so often, when the time comes to cash in these plans, the company is nowhere to be found, or the policy doesn’t cover nearly as much as was expected. Like any other investment, the company behind the pitch should be scrutinized.

So, can you protect your senior from all the criminals out there? Probably not. But creating a fire wall around your loved one might call for a softer touch. Stay connected to their daily routine. Who are they spending time with? What are they reading? Become a stronger presence in their life, and the fears and loneliness that often initiate a wrong financial move could be reduced.

When you designate a beneficiary for an account, that person inherits the assets in the account, regardless of what your will might say. That’s why updating your will periodically might not be enough. Typically, you’ll have beneficiaries for each of your IRAs, your 401(k) or other retirement plans, annuities, and insurance policies.

Your designations could be out of date just because of life’s changes. Since you made your initial choices, you might have married, had children, or divorced. Some of the beneficiaries you chose could have died, divorced, or married. Their circumstances could have changed so you no longer want them to be the beneficiary.

Also, the tax laws change frequently, and they can have an impact on your choices. Choosing the wrong beneficiary, or failing to name a contingent beneficiary, can affect the long-term value of your IRA assets after you die. That’s why it’s important to review your choices with tax consequences in mind.

Here’s how to update your designations. At a minimum, you should have copies of your beneficiary designations in one place. If you don’t, call the trustees of your retirement accounts and your insurance agent, and request copies.

Then review the documents and decide what changes you’d like to make. Make an appointment to review your decisions with your tax and estate planning advisor. Discuss matters such as naming secondary beneficiaries and naming your estate as a beneficiary (sometimes not a good idea).

Finally, send your changes to the account trustee, ask for a confirmation, and keep copies in your records. For any assistance you need, contact our office.

In order to thrive it is not enough to survive but grow. But a growth strategy doesn’t necessarily have to be a high risk strategy. Too many company owners embark on an unnecessarily dangerous journey by trying to be everything to everyone.

A highly esteemed business professor at Harvard by the name of Michael Porter expressed the view that there are only two ways a firm can gain a competitive advantage.

One way is to differentiate. The other way is by being a low-cost producer. By low-cost, Michael Porter wasn’t talking about discounting.

To be a low-cost producer a business needs to be able to source key components of their product or service at a price that their competitors can’t match.

This allows the firm to maintain a viable margin and therefore be able to compete profitably. Both of these views are in themselves interesting strategies that we will cover in more detail in the future.

However it is interesting to compare these ideas with common methods adopted by a significant number of small businesses.

One errant but all-too-common strategy is to try to be all things to all people.

From a high level this type of strategy does make sense. It’s all about creating more clients and a sure fire way of doing that is to create more products and services to encourage them to buy.

“More products and services usually require a higher level of investment.”

This also increases the demands on the business to support and provide knowledge on these additions.

Another downside is that clients may start to see your business as something of a general store rather than a business that has carefully selected what it does and how it does it better than anyone else.

In some cases, the client will account for this perceived risk (real or not) by devaluing the price of the product and perhaps the value of your brand as well.

There are a number of ways to successfully grow a business. We can help you determine the pathway that will work best for your business.

Review your expenses. The start of a new year is a great time to take inventory of your finances. Track your expenses for six months or so. You may be surprised at the result. Do I really spend that much on coffee? Are my utility bills really that high? For many people, getting a handle on how cash actually flows through their checkbook can be a great motivator.

Build an emergency fund. Unless you plan to finance your “rainy days” with expensive credit card debt, setting aside cash in an easy-to-access emergency fund should be a priority. Many companies will allow you to allocate paycheck deposits into more than one bank account. Pick a savings account, designate it as your emergency fund, and start socking money away. Strive to accumulate a large enough balance to cover three to six months of living expenses.

Save — automatically. Retirement savings can be set up along similar lines. By making deposits directly into a retirement account, the money won’t show up in your checking account where it’s likely to be spent. Of course, if your employer offers to match contributions to a 401(k) plan, be sure to take full advantage of the matching amount.

Pay down debts. If you’re saddled with debt, you’re beholden to others. As the old saying goes, “The borrower is slave to the lender.” True, it’s often more fun to buy stuff on credit — you don’t have to wait. But by whittling away at debt, you can expect to cut your overall interest costs and enjoy more financial flexibility in the future.

Treat yourself. Most of us can’t live like monks. To stay motivated, budget some “fun money” into the mix. Make that meal at a nice restaurant or a weekend get-away your reward for the financial sacrifices you make the rest of the year.