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It turns out that hiring a PR firm can be a valuable tax minimization strategy.
Here's how it works. Hire a PR firm for 2012 and prepay the PR agency for 12 months of service. If the PR retainer is $8,000 per month, you write them a check for $96,000. Similarly, if the PR monthly fee is $10,000, pay them $120,000. Make sure to send them the check before December 31, 2011.
Assuming that you file taxes based on the calendar year and regardless of whether you are a cash or accrual basis taxpayer, you can deduct the entire payment in 2011.
For companies who are in a positive net income situation, and therefore heading for a substantial 2011 tax burden, this smart business move can quickly take a significant bite out of your tax bill.
This is important. Don't prepay for more than one year of service. Some experts argue that any prepayments that are for services that benefit you more than one year out should be capitalized and cannot be expensed as a one-time deduction.
This is a smart tax move for you and for your firm. As an added bonus, by agreeing to prepay for 12 months of PR, you may be able to negotiate the PR firm's fees down a bit. Most professional services will trade fees for term, meaning they will charge you less if you agree to use them for a longer period of time up front.
Mind you, we are marketers and PR experts, not tax gurus. Before you start counting on these tax savings, you'll want to discuss this strategy with your tax advisor and make sure that he's agrees with our approach to lowering your business taxes.