Unfortunately in today’s business world, it is only a matter of time before your company is sued by someone or investigated by some governmental agency. However, you can lesson the odds by understanding and identifying the most common legal problems that could come your way and protecting your company against them.

1. Criminal Investigation

State and federal law enforcement and governmental agencies proliferate with each passing day. Depending on your industry, you could be regulated by as many as ten agencies, not counting the normal and customary policing departments. The power of government agencies is blinding. Recently, a trend has emerged targeting more and more businesses, executives and owners for investigation and prosecution. It has become so prevalent that all companies should focus considerable effort toward insulating their owners, employees and operations from risk.

Adopting a policy that your company will cooperate in all government inquiries and investigations with the assistance and counsel of an experienced criminal law attorney is the best way to insulate you and your employees from waiving your rights or creating more risk. Educate yourself and your employees on your constitutional rights and what procedures to follow with the advice of a criminal law specialist or attorney familiar with this trend and danger.

2. Employee Lawsuit

Employment law is the new lottery for Plaintiffs’ lawyers who have watched tort reform narrow their playing fields. For every perceived harm – real or imagined, there is a creative lawsuit waiting to be filed. Sexual harassment, age discrimination, pregnancy discrimination, racial discrimination, gender discrimination, disability discrimination, wrongful termination, retaliation, and injuries, are only some of the fertile ground for disgruntled employees.

Clear and thorough employee rules and policies are the first area of defense against this kind of legal threat. Develop an employee manual and document employee files. Treat all employees with respect and with equality and consistency. Engage a business or employment lawyer to review your policies and rules.

3. Cyber Issues

With the move of all businesses toward more and more dependence on technology and the use of internet communications and resources, cyber legal issues grow exponentially every day in ways that are just beginning to be understood and anticipated.

Specific rules and policies regarding employee computer usage, privacy and access are critical in today’s business. Adopt, revise, review or amend your policies and rules as soon as possible. Neglecting this area of legal threat is just asking for trouble.

4. Marital and Divorce Issues

If you are married or if any of your fellow owners or partners are married, significant risk exists in the divorce arena should any marriage fail.

Contractual protections in your entity documents or business agreements should address these risks so that you can continue conducting business regardless of someone’s divorce claims and proceedings. Marital property agreements can also provide additional insulation from this threat.

5. Business Contract Lawsuits

Attorneys’ fees and expenses can wreck your bottom line and distract you and your employees from your core business operations. Your goal should be to utilize contractual provisions to minimize the chance of being sued or having to sue third parties with whom you do business.

With the appropriate contractual clauses, you can avoid being drug into a courtroom by requiring arbitration, choose the state in which you will be sued or in which the arbitration will be conducted, limit damages, and require that the loser pay the costs of dispute resolution. Many more advantages can be built into contracts in order to give you control over the legal process.

All business owners and executives have the obligation and duty to their employees, shareholders, partners and families to insulate and protect their companies and operations from the legal threats that haunt businesses. By understanding the threats and risks, and by taking proactive measures to prevent lawsuits and legal disasters, you can control your own legal destiny and win the advantage in any future legal battles.

Marjorie Jobe is a practicing attorney in El Paso, Texas and is the author of Business Law Battle Plan for Entrepreneurs: Protect Your Company from Lawyers, Lawsuits and Legal Disasters.

http://marjoriejobe.com/

http://businesslawbattleplan.com

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Whether you own a small business or not we all dread the IRS. They always seem to want more money and if you fail to pay them or pay them late they’ll penalize you straight into the poor house. But as a small business owner your worries about the IRS can be much greater because you’ll now have to deal with employee payroll taxes.

With employees comes more taxes to pay and returns to file. It seems to be never ending. Death and taxes as the saying goes are the only two inevitables in life. Oh how true. But besides having to pay those taxes and file those returns there are a couple of other stipulations that also come with those responsibilities that you may not be aware of.

For those of you that are new to running a business and having employees I’ll give a quick rundown of how employee taxes work. Once you opened your doors and started doing business you put yourself in position to pay payroll taxes. When you hire your first employee you’ll be responsible for witholding taxes from checks, sending in those taxes to the IRS, filing 941 quarterly tax returns, W-3 yearly returns, and issuing W-2′s.

What you might not realize is just how far the IRS will go when holding you responsible for those taxes. A responsibility that can last even past the closing of your business. Of course paying the taxes late will result in some hefty penalties. And as the number of employees in your business grows the larger your tax bill becomes. Because not only do you have to pay the taxes you withheld but you’ll need to pay the matching taxes as well. And as your tax bill grows the IRS will require you to send those tax payments in more often. You’ll go from paying on a quarterly basis to a monthly basis, down to a biweekly time frame. So as your tax burden grows the amount of time your given between payments shortens up by a lot.

Not that you can’t handle all that pressure though right? Well as if that wasn’t enough we have one more piece of good news for you. Even if your business was to go bankrupt and you still owed taxes you can be held personally liable by the IRS. The bankruptcy court will probably not protect you from having to pay those taxes.

I know of a case a few years ago about a small business owner that ran into such a problem. Due to cash flow problems trouble arose in paying bills. Eventually the trouble extended to paying the payroll taxes on time. Finally the owner was forced to file for bankruptcy protection and close the doors. Once the paperwork was filed the bankruptcy court took control of all the assets. As there wasn’t enough money in the bank account to pay the taxes in full anyway they went unpaid and were listed as the top creditor in the bankruptcy court filing. The problem though seems to be the IRS bureaucracy. You see the court notifies creditors of the bankruptcy and requires them to file a claim. If they don’t then they cannot receive any of the proceeds from the sale of assets. Now since the IRS was owed taxes they are supposed to receive all the proceeds up to the point of the taxes being paid. But they are still just a creditor and must file a claim. In this case no claim was filed. Most likely the court documents were lost in the system.

So what does the IRS do? They hold the person that signs the 941 tax returns responsible. In this case it was to the tune of about $28,000.00. Now this could have been avoided if the taxes had been paid before the court took possession of the company but of course the owner didn’t have the means to pay anyway. There is a silver lining to the story though. The taxman that is normally the big bad bully in most cases was not here. Besides needing to provide copies of the bankruptcy paperwork and some other documents the IRS allows you to show whether you actually have the ability to pay the amount back yourself. Due to the fact you just filed bankruptcy and most likely lost your own livelyhood you may not have to pay any of it. Of course each situation is going to be different .

The main thing to learn here is that you need to be aware of your responsibilities as an owner when it comes to payroll taxes. The consequences of not knowing or fulfilling your obligations could ruin not only your business but you personally.

The purpose of this article is to demonstrate the importance of the tax impact in the sale of your business. As an M&A intermediary and member of the IBBA, International Business Brokers Association, we recognize our responsibility to recommend that you consult your attorneys and tax accountants for specific advice on your business sale transaction.

As a general rule, buyers of businesses have already completed several transactions. They have a process and are surrounded by a team of experienced mergers and acquisitions professionals. Sellers on the other hand, sell a business only one time. Their “team” consists of their outside counsel who does general business law and their accountant who does their books and tax filings. It is important to note that the seller’s team may have little or no experience in a business sale transaction.

Another general rule is that a deal structure that favors a buyer from the tax perspective normally is detrimental to the seller’s tax situation and vice versa. For example, in allocating the purchase price in an asset sale, the buyer wants the fastest write-off possible. From a tax standpoint he would want to allocate as much of the transaction value to a consulting contract for the seller and equipment with a short depreciation period.

A consulting contract is taxed to the seller as earned income, generally the highest possible tax rate. The difference between the depreciated tax basis of equipment and the amount of the purchase price allocated in an asset sale structure is taxed to the seller at the seller’s ordinary income tax rate. This is generally the second highest tax rate (no FICA due on this vs. earned income).

The seller would prefer to have more of the purchase price allocated to goodwill, personal goodwill, and going concern value.

The seller would be taxed at the more favorable individual capital gains rates for gains in these categories with an S Corp, LLC, Partnership, or Sole Proprietorship structure. An individual that was in the 40% income tax bracket would pay capital gains at a 20% rate. Note: an asset sale of a business will normally put a seller into the highest income tax bracket.

The buyer’s write-off period for goodwill, personal goodwill, and going concern value is fifteen years. This is far less desirable than the one or two years of expense “write-off” for a consulting agreement.

Another very important issue for tax purposes is whether the sale is a stock sale or an asset sale. Buyers generally prefer asset sales and sellers generally prefer stock sales. In an asset sale the buyer gets to take a step-up in basis for machinery and equipment.

Let’s say that the seller’s depreciated value for the machinery and equipment were $600,000. FMV and purchase price allocation were $1.25 million. Under a stock sale the buyer inherits the historical depreciation structure for write-off. In an asset sale the buyer establishes the $1.25 million (stepped up value) as his basis for depreciation and gets the advantage of bigger write-offs for tax purposes.

The seller prefers a stock sale because the entire gain is taxed at the more favorable long-term capital gains rate. For an asset sale, (other than a C-Corp) a portion of the gains will be taxed at the less favorable income tax rates. In the example above, the seller’s tax liability for the machinery and equipment gain in an asset sale would be 40% of the $625,000 gain or $250,000. In a stock sale the tax liability for the same gain associated with the machinery and equipment is 20% of $625,000, or $125,000.

The form of the seller’s organization, for example C Corp, S Corp, or LLC are important to consider in a business sale. In a C Corp asset sale vs. an S Corp and LLC, the gains are subject to double taxation. In a C Corp sale the gain from the sale of assets is taxed at the corporate income tax rate. The remaining proceeds are distributed to the shareholders and the difference between the liquidation proceeds and the stockholder stock basis are taxed for a second time at the individual’s long-term capital gains rate.

The gains have been taxed twice reducing the individual’s after-tax proceeds. An S Corp or LLC sale results in gains being taxed only once using the tax profile of the individual stockholder. Below is a tax checklist:

Selling your business – tax consideration checklist:

1. Get good tax and legal counsel when you establish the initial form of your business – C Corp, S Corp, or LLC, etc.

2. If you establish a C Corp, retain ownership of all appreciating assets outside of the corporation (land and buildings, patents, trademarks, franchise rights). Note: in a C Corp sale, there are no long-term capital gains tax rates only corporate income tax rates. Long-term capital gains can only offset long-term capital losses. Personal assets sales can have favorable long-term capital gains treatment and you avoid double taxation for these assets with big gains.

3. Look first at the economics of the sales transaction and secondly at the tax structure.

4. Make sure your professional support team has deal making experience.

5. Before you take your business to the market, work with your professionals to understand your tax characteristics and how various deal structures will impact the after-tax sale proceeds. For example, a C-Corp stock sale at a lower purchase price could be much better than an asset sale at a higher price.

6. Before you complete your sales transaction work with a financial planning or tax planning professional to determine if there are strategies you can employ to defer or eliminate the payment of taxes.

7. Recognize that as a general rule your desire to “cash out” and receive all proceeds from your sale immediately will increase your tax liability.

8. Get your professionals involved early and keep them involved in analyzing various bids to determine your best offer. Know the impact prior to negotiating with your buyer because it is very difficult to change the deal at the eleventh hour due to your late discovery of the tax consequences.

Again, the purpose of this article was not to offer you tax advice (which I am not qualified to do). It was to alert you to the huge potential impact that the deal structure and taxes can have on the economics of your sales transaction and the importance of involving the right legal and tax professionals.

Tax Deductions (Business Tax Deduction Tips)

Tax tips and tax help to assist taxpayers by describing options
for tax reduction and tax cuts through lawful tax deductions.

Tax deductions contribute to national prosperity by providing capital to business. Tax deductions reduce taxable income. A $100,000 tax deduction reduces federal income tax by $35,000 ($100,000 X 35%) assuming a 35% income rate. Options for increasing business tax deductions include revising depreciation schedules, reviewing fixed asset listings, casualty losses, bad debts, and charitable contributions.

Real estate depreciation offers substantial opportunity for increasing tax deductions. Most depreciation schedules are established by simply separating land and long-life improvements. This simple approach is lawful but sharply understates lawful depreciation. About 20-40% of improvements for most properties are short-life items. Short life items can be depreciated over 5, 7, or 15 years. There are about 130 short-life items that have been determined by legislation, tax court decisions and IRS rulings.

Real estate depreciation can typically be increased by 50-100% for the first 5-7 years of ownership by obtaining a cost segregation study. A cost segregation study precisely values up to 130 components of real estate that can be valued as short-life property.

By obtaining a cost segregation study, it is possible to obtain a windfall of tax deductions by “catching-up” previously under-reported depreciation. This one-time “catch-up” can occur in the first tax return filed after the cost segregation study is performed without filing any amended tax returns.

Reviewing fixed asset listings (of business personal property) can generate a meaningful amount of tax deductions. They often include items that should have been expensed, which have been sold or thrown away or which have an excessive depreciation life. Items that should have been expensed include operating expenses (sometimes included by error) and maintenance or repairs (which was necessary but did not increase the life of the assets or component.) Section 179 allows business to use up to $108,000 of 2006 capital expenditures as tax deductions. Confirm you are not capitalizing assets that could be claimed as a tax deduction.

Casualty losses also offer opportunity for tax deductions. For a casualty loss, you can deduct: 1) the market value immediately before the casualty less 2) the market value immediately after the casualty less the amount covered by insurance. The portion that is not intuitive is: the market value after the casualty is much less than the value before  plus the cost to renovate. Other factors which can and should be considered for tax deductions are: lost rent/usage, stigma (in some cases), construction management, construction risks, and entrepreneurial effort.

Bad debts are a subjective matter. Judgment is required to accurately estimate the amount that should be claimed as a tax deduction. If bad debts have not been examined carefully for several years, they may offer a meaningful tax deduction opportunity. (This applies to companies who utilize accrual accounting. Companies who use cash accounting can’t claim a tax deduction for bad debt since they never recognized the revenue.)

Do well by doing good. You reduce taxes in several ways when making charitable contributions. For example, you purchased land 10 years ago for $200,000, and it is now worth $1,000,000. However, you now realize you will never use the land for the intended purpose. You can donate the land to a qualified charitable organization and take a tax deduction for $1,000,000. However, you do not have to pay capital gains taxes on the appreciation.

Tax deductions sometimes seem arcane and complicated. However, a knowledgeable team of advisors from several fields can reduce your federal income taxes. The complexity of the tax code makes it difficult for any one personal to be knowledgeable in all areas. 

Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of cities where cost segregation generates meaningful tax deductions.

City:

New York, NY
Houston, TX
Hartford, CT
Las Vegas, NV
Memphis, TN
Philadelphia, PA
Orlando, FL
Phoenix, AZ
Atlanta, GA
Bridgeport, CT
Worcester, MA
Akron, OH
Harrisburg, PA
Salt Lake City, UT
St. Louis, MO
Portland, OR
Scranton, PA
Greenville, SC
Bakersfield, CA
Madison, WI
Chicago, IL
Fresno, CA
Riverside, CA
Albany, NY
Indianapolis, IN
Birmingham, AL
Ft. Lauderdale, FL
Baton Rouge, LA
Augusta, GA
Honolulu, HI

Cost segregation produces tax deductions for virtually all property types, including the following:

Property Type:

Medical facility
Shopping mall
Restaurant
Country club
Fast food restaurant
Power center
Hotel
Car wash facility
Convenience store
Health spa

Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.

Industry:

Golf courses and country clubs
Transportation equipment manufacturing
Electrical component manufacturing
Real estate lesser
Apparel manufacturing
Wood product manufacturing
Plastic and rubber products manufacturing
Furniture stores
Beverage and tobacco product manufacturing
Building supply dealers

O’Connor & Associates is a national provider of investment real estate consulting services including commercial real estate appraisals, business personal property valuations, business purchase price allocations, business valuations, cost segregation studies, due diligence, and insurance valuations. O’Connor & Associates is a national provider of income tax, tax deduction,property tax,real estate consulting, market research,condemnation appraisals,highest and best use,cost segregation,financial modeling,Galveston central appraisal district,Tips and Tricks for Appealing Your Property Taxes in Brazoria,Brazoria county appraisal, and Federal tax reduction. Appraisal services are provided for all commercial property types including nursing homes, discount stores, truck terminals, tennis clubs, supermarkets, country clubs, medical offices, mini-warehouses, restaurants, vacant lands, skating rinks, community shopping, centers, power centers, car wash facilities and service stations.

There is a common adage that says the only two things that are certain in life are death and taxes. While death is definitely not certain when it comes to a home business, taxes assuredly are. If you are going to operate a home business, there are some things you need to know about taxes or you may find yourself in a world of trouble.

I can not think of one person I know who likes paying taxes, doing taxes or talking about taxes; but the fact of the matter is taxes are an inevitable part of life and if you start a home business, they are probably going to be an even bigger part of your life than they were before.

When you work for someone else, your taxes are taken out of your paycheck and then at the end of the year, you simply file your tax return and you either pay money to the IRS or you get money back. Paying home business taxes gets to be quite more complicated than that. While income taxes are the main concern of those employed by others, home business owners need to worry about use taxes, sales taxes, employment taxes, income taxes and a number of other taxes that may apply to their business.

The first thing you need to take care of in terms of home business taxes is the process of getting an EIN number. A business’ EIN number is much like a social security number for your business. It is the number that is used when reporting taxes to the IRS. Once you have your EIN number and your home business starts generating income, you are going to have to start making estimated tax payments to the IRS.

Unlike the annual tax returns you filed when you were employed by someone else, home business owners have to pay taxes on a quarterly basis. For example, you are going to have to pay taxes on the money you make from January through March in April and for the money you make in April through May, you have to pay taxes on in June. The IRS provides home business tax payers with the Electronic Federal Tax Payment System in order to make paying your quarterly taxes more convenient.

If your home business has employees, you are also going to have to take care of your employees’ income taxes. When you have employees, you are required to withhold their income tax from their paychecks and you must pay that income tax to the IRS. If you have less than one-thousand dollars in income tax liability each year, you can do this annually. However, if your employees’ income tax liability is going to total up to more than one-thousand dollars a year, you are going to need to pay the IRS either monthly or semi-weekly.

Remember, this only applies to you if your home business has actual employees. Independent contractors are not considered employees and taxes do not have to be withheld from payments made to independent contractors.

Home business owners also have to pay self employment taxes. Self employment taxes are taxes self employed people pay to Social Security and Medicare. This tax allows you to receive Social Security and Medicare benefits when you retire.

If you are not sure how to manage your home business taxes, you should hire a small business accountant to consult with you on the best way to approach your tax requirements. Hiring an accountant who is willing to teach you how to do your own home business taxes can be much more cost effective than hiring an accountant who insists on doing all of your taxes for you without any explanation of what is being done.  

Past due payroll taxes can cause you to lose your business and in some cases, your freedom. The IRS is focusing increased tax compliance efforts on small businesses so it is important to know the common payroll tax audit triggers and learn how to avoid severe IRS penalties, huge tax debt and federal criminal investigation.

1. Small businesses are the most likely target of increased tax compliance enforcement Small business owners have been identified by the IRS as the largest source of uncollected taxes. And because they are known to be big tax evaders, the IRS tends to focus their enforcement efforts on small businesses, especially during economic downturns.

2. You can lose your business due to extremely aggressive IRS collection tactics for past due payroll taxes When it comes to payroll tax debt, the IRS collection Revenue Officer has unyielding power and authority. They have the power to padlock your front doors, putting you out of business, without obtaining a court order. They can seize your machinery and equipment. They can contact your customers, and if your customers owe you any money, the IRS will intercept these funds through their powerful levying authority. You must take immediate action to deal with a payroll tax issues, or you will find yourself out of business.

3. Payroll tax penalties can add up quickly and generate huge tax debt The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase your total tax bill. Whether you operate your small business owners as a sole proprietorship, corporation, or LLCs, the taxes you owe can cause you to lose your business. There are three major penalties you can be hit with (failure to file, failure to deposit, and the failure to pay), which can add up to about 33% plus interest if you don’t pay in just 16 days after you have filed the 941 (Payroll Tax Return) past the due date!

4. Not filing or paying your payroll taxes can be considered a federal crime. The IRS can refer your case to the Criminal Investigation Division and ultimately to the Department of Justice if they can prove that you intentionally (very low thresholds) didn’t file and/or pay.

5. Borrowing from payroll taxes is against the law. Many small and mid-size businesses use the money they collect from payroll taxes to pay their operating expenses. The money collected from employees to pay their share of federal withheld tax, FICA and Medicare (Social Security) does not belong to the business and must be accounted for and paid to the government. Generally, one must make a federal tax deposit (by tax filing service, phone, or in person at a bank) 3 days after the pay date of the pay roll checks.

6. The IRS can come after business owners individually for payroll taxes owed. The IRS can access what is called the Trust Fund Recovery Penalty (TFRP) against owners and shareholders. The IRS is the only creditor on the planet that can “pierce” the corporate veil and go after individuals, which can be a very scary situation.

7. What do I do if I get audited? If you owe payroll taxes, you need to get expert professional help before it’s too late. Representing yourself before the IRS would be like going to court without a lawyer. And you do not want to take any chances when dealing with the IRS.

You need the help of experienced Tax Attorneys and/or a Certified Tax Resolution Specialist who have experience negotiating hundreds of these cases. They can defend you and advise you on viable options including Payment (“stepped”) plans, Offers in Compromise, Computational Abatement of Penalties, Abatement of penalties due to reasonable cause, and analyzing the Statute of limitation to assess.

For more advice and information on payroll tax debt and how to get professional help if you’re in trouble with the IRS, visit the Tax Resolution Services web site for a free tax relief consultation, or check out the Tax Resolution University Blog.

Tax Write Offs for the Self Employed…Discover 101 Ways To Reduce your Taxes Legally…

Unfortunately, we had been students of self-employed tax deductionsstrategies for over 20 years before we learned what I’m about to share with you regarding tax reduction tips.

I was shocked when we first found out that as self employed owners there were more tax loopholes than the limited itemized tax deductions that we had routinely rehearsed and become accustomed to.

My husband and I thought we were savvy entrepreneurs especially when it came down to self employed tax deductions solutions. (He said I knew how to squeeze a dollar to make George holler)

Boy when we found out that we were severely losing out on Thousands of dollars per year from not maximizing self employed tax deductions expenses…well it was just a bitter sweet experience. We weren’t happy campers to say the least. Now don’t get me wrong we weren’t blaming anyone.

It was sort of like the lady on the news that was scammed for millions. Her concern was not that she had been scammed. Her concerned was that she was paying income taxes on money that didn’t exist. She was gravely looking for IRS to bestow a tax reduction… better yet, interest tax deductions for all of the years of over paying.

We implemented every self employed tax deductions suggested by our accountant. We were appalled to discover how considerably more tax deductions we could claim as self employed home business owner.

It was no secret we’ve visited our share of CPA ,CFP and every other kind of C’s and never seem to stumble on the one that really resonated with us or could noticeably reduce our business taxes.

Now you get the opportunity to benefit from the same self employed tax deductions tips that it took us over 20 years to learn… you get to devour in the time it takes to read this article.

Fortunately, you get to learn from your experiences and from ours.

Here are 9 Bullet-Proof Self Employed Tax Deductions:

If you own your own business (even a home business) or if you’re an Independent Contractor, you could save hundreds… even thousands of dollars each year.

Here is an outline of what you will learn:

1.      Learn how to potentially deduct most of your fun such as movies, plays, and season tickets

2.      Learn how to potentially deduct your golf, golf balls, golf clubs and lessons

3.      Learn how to potentially deduct all parties in your home

4.      Learn how to potentially bullet-proof all your entertainment from any IRS or state audit!

5.      Learn how to potentially deduct any vacation anywhere in the world by combining the trip with business.

6.      Discover the secret as to why IRS doesn’t require receipts for under $75 per item!

7.      Find out how to potentially deduct all dry cleaning and laundry and even the cost of clothing itself!

8.      Learn how to potentially bullet proof all travel from even the toughest IRS scrutiny

9.      Discover a little known secret (that is used by the super rich) to potentially deduct the equivalent of your children’s weddings and education including law school and medical school- No kidding!!

Sanford C. Botkin, CPA and Former top IRS Tax Attorney lives in Germantown, MD, a suburb of Washington D. C., just a short distance from the IRS headquarters.

Over the past 15 years, Sandy has helped over 50,000 taxpayers including home business owners save millions in taxes through legal tax reduction.

To find out what fox news has to say about Sandy Botkin check our website.

* Here’s my disclaimer….I’m not a CPA or Tax Attorney this is for educational purposes only

O.K…. I’m back

According to Sanford Botkin, CPA and Former top IRS Tax Attorney.

Owning a home business is one of the most profitable tax deductions a person could have.

As small business/home business owners we have more tax breaks available to us then the average business takes.

Any legitimate home base business owner that’s actively pursuing a profit, even part-time can qualify for substantial tax breaks.(read  Sandy’s facts)

According to the American Taxpayer Union in 1958, the average American paid 18 percent of their gross income in taxes, Federal, State, and Social Security.

Today, the average American spends 41 percent of their gross income in taxes.

Taxes are the largest expense for most people. It exceeds food, clothing, lodging, and transportation combined. The Average American works 5 months supporting the government and 7 months supporting their families. Learn tax deductions methods to help you reduce your support to 2 or 3 months supporting the government and 9-to 10 months supporting your family.

Here’s one of the biggest mistakes home business owners make, which is having the mindset that their tax accountant will take care of them. No doubt about it, most accountants are working as hard as they can trying to keep abreast of the never-ending changing tax laws while maintaining and growing a client base.

That’s why we have to study  and do our homework to realize the maximum tax reduction possible for your business. Thinking your accountant will take care of your taxes is like thinking your doctor will take care of your health regardless to what you eat.

We hope this information helps you the way it did with us.

*Strategy is better than Strength
proverb

If you fall into one of these three categories, this article is for you: 1) you own a sole proprietorship; 2) you are a partner in a partnership; or 3) you are the owner of a limited liability company being taxed like a sole proprietorship or a partnership. What do these three types of business owners have in common? They are all faced with the dreaded self-employment (SE) tax on the profits of their business. If you’re new to the world of small business taxes, here’s a quick review of self-employment tax. Sole proprietors and those taxed like sole proprietors (i.e. partnership partners and LLC owners who have not chosen to be taxed like a corporation) must pay 15.3% of their business profit in SE tax to the federal government. This consists of 12.4% social security tax and 2.9% Medicare tax. In effect, it is the self-employed person’s version of the employee/employee federal payroll tax of 15.3%. But here’s where frustration begins to rear its ugly head: employees and employers each pay one-half of the 15.3%. The self-employed person must pay the entire 15.3%. So what’s a self-employed person to do? There’s one particularly effective strategy to legally reduce self-employment tax: choose to be taxed an “S” corporation. Here’s how it works. In 2009, the self-employed person pays SE tax on the first $106,800 in profit. Let’s assume you make $60,000 profit this year (sales minus expenses). You must pay SE tax on the entire profit, so your SE tax will be $9,180 ($60,000 x .153). But if you choose to be taxed like an “S” corporation, you can legally reduce the SE tax by structuring your compensation as a combination of wages or salary (which you must do now that you are being taxed as a corporation) and a profit distribution payment. Assuming that you can pay yourself reasonable compensation of $35,000 salary, only that salary will be subject to the 15.3% SE tax (which will now be called “payroll tax” rather than SE tax). The remaining $25,000 in profit can still be paid to you whenever you like, but it will not be subject to payroll tax, because only wages/salary are subject to payroll tax in a corporation. End result: the payroll tax on $35,000 will be $5,355. Compare that to the $9,180 in SE tax and you legally reduce your taxes by $3,825. Two important caveats: First, note that it is only SE tax (or payroll tax) that is reduced. This strategy does not reduce income taxes, because regardless of the entity (self-employed or corporation), the entire $60,000 will be subject to income tax. Second, now that you are paying yourself wages/salary as an employee of a corporation, the corporation must do all the paperwork that comes with payroll. You must issue yourself bona fide paychecks (which means that withholding calculations must be done). You must also file all the required federal, state and local payroll tax returns, and make all the required federal, state and local payroll tax payments. This can be quite a mountain of paperwork and you should probably outsource these payroll tasks. This will result in a new expense to hire an accountant or bookkeeper to do payroll, but most small business owners in this situation still come out way ahead.

The Best Golf Cart Rental Business Start-up Plan. Excellent Home Business. Green Business. $4,000+ Low Speed Vehicle (lsv) Tax Credit Expires 12/31/09.

Golf Cart Rental Business Plan.