Some of the decisions you make during the next few months can mean your company pays less to the government. But perhaps more important, they also can help your business grow and help you attract and retain good workers.

Employee benefits are perhaps the first place you should examine when considering how to lower your taxes. They can give your business a tax deduction and also will make your company look more appealing to prospective employees, especially in a tight labor market. In the current environment, you have to think, 'What can I to attract and retain people?'

A variety of retirement plans are available, including the traditional defined benefit plan, which provides for set payments to employees after they stop working; defined contribution plans, with include the popular 401(k) plans; and several kinds of individual retirement accounts.

Employers can get a tax deduction for the amount of money they contribute to a plan. But it's important to keep in mind that different kinds of businesses get differing tax benefits under the Internal Revenue Code, and these variations will mean that one kind of retirement plan is more suitable for your business than another. So if you're trying to decide which plan will work for your company -- and which will be most attractive to employees -- you need to consult an accountant or human resources professional.

Health insurance is another benefit that can give you a sizeable tax deduction and help your staffing situation, particularly since health care is such a big concern to employees. A relatively new kind of health benefit, known as medical savings accounts, are aimed at small businesses. These accounts allow employees to set aside pretax earnings for medical expenses, and employers can also contribute to them.

If your company is what's known as a C corporation, in which the firm's tax liability is separate from its owners or shareholders, this also is a good time to look at your expected profits and decide whether to increase your employees' (or your own) compensation.

But if you decide to give your employees or yourself a bonus or a big raise, you need to be careful, or you could find yourself being audited by the IRS for possibly unreasonable compensation. The more closely a salary is tied to profits, the more it looks like a corporate dividend -- and not wages.

Under the tax laws, profits paid out as dividends are taxable to both the company and the recipient. Compensation is a deductible expense for an employer.

The earlier in the year that compensation levels are set, the better. So if you're going to give out a lot of extra money, do it now.

Now also is a good time to rethink your capital spending. If you were planning to buy a new computer or other equipment next year, but so far 2008 has been unexpectedly profitable, you might want to think about moving up such purchases and making them during the second half.

Under the tax code, small businesses can deduct up to $100,000 of the price of equipment bought this year. The rest of the purchase price must be depreciated in subsequent years. Note, however, that the equipment must be tangible and it cannot be a building or a structural component of a building.