What's the best way for you to save money on your income taxes? What can you do now, to save money next year and the year after? How should you manage your expenditures for optimum benefit? How can you improve your bottom line by reducing your income tax liability?
These are questions I'm asked every year at this time. It seems that you're paying an ever-increasing percentage of your earnings to one type of tax or another. And for good reason! Uncle Sam wants as much of your money as he can get, and his greedy cousin, your state tax agency wants their cut, too!
The Number One Tax Advantage for the ordinary American is available on Schedule C - Profit or Loss from Business. You can benefit even if you live in a rented trailer behind your Aunt Harriet's house. Even if you don't itemize deductions!
That's right! The best thing you can do to keep more of your hard-earned money is to start your own Home-Based Business! As a Home-Based Entrepreneur, you're entitled to many deductions the ordinary citizen is not. Today, it's easier than ever to start and build a business with little or no cash at risk. You can literally start your home-based business today without the huge cash investment that was required just a few short years ago!
Let's consider a typical scenario. Suppose you're now working for an hourly wage. You're probably not thrilled with your job, and you probably don't make as much as you think you should. You probably have to put-up with more negative energy than your pay is worth, but you have bills to pay! You may be renting an apartment, mobile home, or house. You can't get ahead, but you aren't getting financial assistance, either. Income taxes have the worst negative impact on people like you!
If you had enough cash saved, you could go out and buy a house. That would entitle you, most likely, to itemize deductions because of your mortgage interest and related expenses. However, what if you're not in a position to do this? You can still start your own Home-Based Business and minimize your income tax liability!
This is how it works. You join forces with an organization that assists you in starting your business. You don't have to put-up any money, but you get the same benefits you would as a franchisee - comprehensive professional training, on-going business coaching, legal and organizational assistance, name recognition and good will. You're in business for yourself, but not by yourself!
You invest an hour or two per day of your time and energy, in exchange for the invaluable training and experience you'll get from your coach, or mentor. You learn the business from someone who has already achieved success in it. You simply do as they have done, and you too will achieve financial and personal success. This is absolutely the best way to go into business for yourself!
So, how does this save you money? Well, it is expected that a new business will have more expenses than revenues in the beginning. After all, the farmer has to buy seed and fertilizer and machinery before he can sell the crop, right? As a new entrepreneur, you'll have some expenses. You probably will have some advertising and promotion expenditures, as well as supplies and utility expenses. Suppose you use a room in your home as an office. You meet with clients/customers there. You use your phone to conduct business, as well.
These are business expenses. These expenses are applied against any revenue you may receive in the course of your business (commissions, profits on sales, etc.). If your expenses are more than your revenues, the resulting loss may be applied against your total income. This includes the money you earn at your regular job.
Do you see the beauty of your own home-based business? You are entitled to the same deductions as IBM, MCI, Standard Oil, Home Depot, McDonalds, or any other big business. Revenues minus Expenses equals Net Income or . It's that simple.
Our government knows that the backbone of our economy is the small business person - the entrepreneur. We account for the vast majority of economic activity, innovation, and progress. Remember, Bill Gates started Microsoft in his garage, and many others have begun likewise! The government wants an ever-increasing number of would-be entrepreneurs to "make it" and thus generate more economic activity and tax revenues. To that end, tax advantages are extended to Home-Based Entrepreneurs, like yourself.
Suppose your business is providing legal expense plans for business owners. Your primary responsibility is to make business owners aware of your offering(s). You'll have to distribute information - brochures, pricing, and forms - to your prospects. You'll have to be available for telephone consultations. You may need to discuss business matters over a cup of coffee or a meal. The money you spend marketing your business is important to your income tax situation.
You meet with a potential client at a local restaurant. Over a cup of coffee and a sweet roll, you discuss how your product will benefit his/her business. You give your prospect your literature and an agreement to review. Two days later, you follow-up with a long distance phone call. Your prospect agrees to sign on the dotted line, and you get the order! You've earned your commission!
Will you pay income tax on the entire commission? Not if you're smart! You spent money in the pursuit of that commission. Those expenditures - for printed materials, telephone use, and the business meal - not to mention transportation expenses - are to be deducted from any revenues you received.
It's vitally important for you to keep detailed, accurate records of your revenues and expenses. Keep a vehicle use log. For every trip, record the beginning and ending odometer (mileage) readings on your car, and the reason for the trip (eg., recruiting, sales call, etc.). Record every penny you spend, and for what reason. Keep track of all money received, and why you received it. Good records are vital if you're ever audited by the IRS or your local tax authority.
Your objective at his point is to get your business started - NOW! You know that working at a J.O.B. (Just Over Broke) is a ticket to mediocrity. In order to earn what you're really worth, you have to write your own checks! Start by working an hour or two a day, at home. Keep your regular job. Follow in the footsteps of someone who has already achieved the kind of success you desire. Be patient, work diligently, and NEVER QUIT! Winners always keep trying. Winners never quit. If you resolve to keep trying until you achieve financial success, it's just a matter of when!