Tax Tips for Business

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Manage Your Grocery Bill
It can be painfully clear: your grocery bill eats up a significant part of your monthly budget. Some families report that as much as 30, even 40 percent of their budget is spent on food items that they must have and simply cannot do without. Is your grocery bill unmanageable? If so, read on and we'll take a look at ways you can trim the cost without trimming the food.

Clip those coupons... Read personal finance article



Save Money
I was doing research for my web site, on ways to save money. Checking other web sites and discussion forums, I found that the cheapskates are hitting new - and funnier - lows. Choosing a spouse according to how frugal he or she is, and reusing the plastic from bacon packages were just a couple of the serious suggestions. One man even said, "Instead of buying toilet paper, I use yesterday's newspap... Read personal finance article



Tax Tips for Business
Running a one-person business? Tired of the huge hit you take at tax time? Want to save money on your accounting and taxes? Consider these simple tips and tricks...

Tip 1: Use an accounting system

Oh sure. This sounds obvious. But unless you have a decent way to track both your income and your deductions, you not only won't know how much money you're making until tax time, you'll also miss or forget about tax deductions.

Something like Quicken or Microsoft Money will work just fine. If you need more bookkeeping horsepower than these checkbook programs provide, look at stepping up to QuickBooks or Microsoft Small Business Accounting.

Tip 2: Don't Incorporate

New business owners often rush to incorporate. But incorporation rarely makes sense for small businesses. And incorporation totally complicates your taxes and accounting.

What's a new business owner to do? Form a limited liability company instead. A limited liability company, or LLC, gives you all the same liability protection. But without the tax complexity of a corporation.

An LLC with just one owner, for example, gets treated for income tax purposes as a sole proprietorship. Which means to report your business activity to the IRS or state revenue folks, all you do is file a simple, one- or two-page schedule with your regular individual tax return.

Tip: Consider hiring your kids

If you have minor children and they help you out in your business - doing real work - consider hiring them. As long as they earn less than $5,000, they won't pay any income taxes on their wages nor any payroll taxes. Yet, you'll still get to write-off the amounts you pay them as business expenses. (This might be a neat way to save for a kid's college expenses.)

Tip 4: Consider hiring your spouse

While medical insurance is a deduction for income-tax purposes for sole proprietors, you can save far more in taxes by hiring your spouse and then setting up what's called a Section 105(b) plan. Such a plan lets you treat all of your family's medical expenses (insurance, out of pocket, deductibles and so on) deductions for both income tax purposes and self-employment tax purposes.

If you are interested in this, confer with a local tax practitioner. Section 105(b) plans can be a little tricky to understand if you haven't used them before.

Tip 5: Take the home office deduction

Hey, if you regularly and exclusively use some portion of your home for your business, go ahead and take the home office deduction.

Don't worry about this deduction being an audit flag. Or a hassle. The deduction is meant for people like you.

Tip 6: Set up a pension plan

If you want to save more than a regular IRA allows, set up a pension plan for your business. You can easily set up something like a SEP-IRA which will allow you to contribute up to twenty of your profit to a tax deferred account.

Example: If you make $50,000, you could use a SEP-IRA to contribute $10,000 to your pension account. And there are other good low-cost options available, too, such as SIMPLE-IRAs and one-person 401(k) plans.

To get more information on small business pension plans, contact the Vanguard Group at www.vanguard.com or Charles Schwab at www.schwab.com.

Tip 7: Learn and then use TurboTax or TaxCut

A final tip: In most cases, the taxes of sole proprietorship are pretty simple. So, rather than come to someone like me (a CPA) or an enrolled agent or one of those nationwide tax preparation firms, try doing your return yourself using tax software.

Programs like TurboTax and TaxCut work great for simple-situation sole proprietors.

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Are We Living Beyond Our Means

If we really think about our grandparents, they had much less than us, no credit, and somehow made ends meet. Why is it so different today? Were our grandparents better at budgeting and much more frugal when it came to spending their money? Were there less must have consumer products they needed to purchase. Did they live with the philosophy if you can't afford it, you just don't buy it. Living through depressions and wars made them appreciate the simpler things in life? Anyone of these things could be a factor. Regardless of how they did it, our grandparents brought up much larger families than we are, most bought a home, and good portion of them invested and saved money for their own retirement.

ARE WE LIVING BEYOND OUR MEANS?

I would say that the one thing our Grandparents did not have was the type of inflation and taxation we have to deal with today. Keeping up with the "Jones" was geared more towards quality of life, like food, shelter and clothing, then worldly possessions.

I just think of my dearly departed great uncle who landed in this country at 17 years old, made 6 dollars a week, and somehow was able to save enough to bring my grandmother and my great aunt here. As a single person in these times, how many people could really afford to live, and do such a thing?

ARE WE JUST NOT MAKING ENOUGH?

In today's world we do have credit, and most people need to survive on it, because they do not make enough. You want to buy a car, no problem 0 down $339/month for the next five years. Need a home, you can get a mortgage up to 30 years, have an emergency or need that family vacation, just charge it on your credit card, it will only cost a minimum payment for the next up teen years, which you can afford. Maxed out your credit card, need more credit consolidate you debts to one easy payment, start all over again. This system works for most people until they lose their jobs, or have a real financial problem like a huge house repair. In our Grandparents time bankruptcy was not looked upon favorably, and it was a sink or swim life. No such thing as social assistance or unemployment insurance.

CONCLUSION

In many ways we probably are living way beyond our means because of the need to have everything now. We are willing to risk everything to have the latest computers, state of the art televisions in our homes, the latest cars, and huge homes. The one thing we are not willing to risk is in investing in is ourselves and making our dreams of success become reality. Our grandparents had nothing to lose and everything to gain; they knew to better themselves they needed to sacrifice a bit now for prosperous futures for their families later. That is why so many successful businesses were built during that era of time.

Arnold Nadler is a long-time entrepreneur and founder of The Startup Business Doctor, a private company specializing in helping new and small businesses get their company off the ground. Programs include professional coaching, franchise opportunities and inexpensive advertising packages.




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Tax Tips for Business
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