|
|
|
|
|
Contractor Tax Issues
|
Author:
Article:
Contractor Tax Issues
One of the comments we hear all the time from our contractors and other small business owners is, "Man, my taxes are killing me!" The truth is that the vast majority of contractors probably pay hundreds or even thousands more than you should in taxes. There are many reasons small business owners pay more than their required share of taxes. The ones we hear most often are mostly misconceptions. They include:
* "I don't have the time to become a tax expert."
* "It's too complicated and time-consuming to document my deductions."
* "The things I spend money on can't be deducted."
* "I'm afraid of being audited."
* "I don't understand the IRS tax code and I don't want to read it."
* "My CPA already gets me all of the deductions I qualify for."
It's time to dispel the myths and start saving money on your tax bill. What would an extra $100, $250, $500, or more per month do for you? The bigger question is, "What would you be willing to do for that extra $100, $250, or $500 a month?" The truth is that:
* You don't have to be a tax expert. You do, however, have the time it takes to learn the basics - what you NEED to know.
* Documenting deductions is EASY. It can take less than two minutes a day.
* Many of the things you already spend money on CAN be deducted.
* Audits are not scary if you know what to expect. Even if you do get audited, you have nothing to worry about if you follow a few simple steps. One of the best things you can do is have a written business plan. This business plan should include your goals, the plan of action to accomplish those goals, and mentors to help monitor you and keep you accountable. The vast majority of businesses don't have a written business plan. If you do, right off the bat an auditor knows you are on top of things.
* You don't have to read the IRS code at all. We can show you simple instructions that are easy to follow. The best part is that they are written in English!!!
* Most CPAs are unfamiliar with small business tax law. Even the CPAs who are somewhat familiar with small business tax law tend to be very conservative in what they will deduct for you. The last thing they want is to get audited. As a result, you may be missing out on deductions you legitimately qualify for.
Here are some suggestions for maximizing your legitimate tax deductions:
* Choose the right type of business entity (LLC, C-Corp., S-Corp, Partnership, etc.). Different entities are taxed uniquely. Find a business structure that gives you the most deductions and saves you the most money.
* Pay your spouse and dependents legally. Put them on payroll. Have them keep a timecard. Have a written job description on file of their duties and responsibilities within the business.
* Deduct all expenses as business expenses while traveling. It is important to document the business purpose and check with your tax professional for deductibility. This is a lot easier to show when you are traveling if your business is a real estate business. There is real estate everywhere. So spend some time on your next trip searching for different architectural ideas to incorporate in the homes you build or good investment opportunities. It is a lot of fun.
* Deduct the costs incurred from having a Home Office. Things like a percentage of mortgage or rent payments, utilities, etc. can be legitimately deducted based on defined guidelines.
* Learn how to deduct meals and entertainment (for business purposes).
* Write off 100% of your vision and medical care by properly setting up a Self-Insured Medical Reimbursement Program.
* Write off all deductions that are possible for your automobile. You can either deduct mileage or actual expenses. Track both and see which way saves you more.
* Utilize a tracking system to make tax time easy for you or your CPA and to ensure that you receive every legal deduction possible.
* Enlist the help of a CPA who knows small business tax law.
These are just a few of the common possibilities. Section 162 of the IRS code defines what you can write off and what you can't.
What if I were to tell you that saving money on your taxes is very easy? Three simple steps will help you save on taxes starting today. You may even be able to recoup what you have overpaid for the last three years. The three steps are:
* Know how to save money on your taxes. A simple step-by-step guide called, "It's How Much You Keep That Counts! Not How Much You Make" makes short work of this step.
* Know how to document your deductions. In less than two minutes a day, you can use the Tax MiniMi$er system to easily track all of the deductions you qualify for.
* Decide to either do your taxes yourself or hire a competent CPA. With the two tools listed above, you may find it very easy to do your taxes on your own. If you prefer to have some help, make sure you choose someone who knows what he/she is doing and is not afraid to be aggressive without going outside the lines. If you need some help choosing a competent CPA, we can help you find one.
This article may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.
To learn more about how to save hundreds or thousands of dollars each year on your taxes or to look at the products mentioned in this article, visit us at www.contractormd.com or send us an email.
-by Dan Wattleworth
Director of Coaching
Financial M.D. & Associates
www.contractormd.com
|
|
|
|
|
