With all the trumped up ya-ya from the press lately over big businesses, corporate tax, and rich folks not paying their fair share, I wanted to offer up some detailed directions for small business owners who may want an opportunity to save some money on their tax debt and still be able to make a good living income.
How to Strategize Spending –
Business owners have always planned and strategized their expenses for best benefit, but this may be a bit more structured. To strategize your small business spending program to best influence your tax statement, I have a few recommendations.
- Either operate as a DBA, or pay yourself as a contractor so you can personally deduct any business expenses you may have.
- Use your personal vehicle for business and deduct ALL business miles possible – read the tax code, or ask your accountant – keep documented proof.
- Use the home office deduction and work from home at least 50% of the time, as your primary place of business.
- Don’t overdo it on the deductions. Stay legitimate and don’t take advantage of the situation, it will get you in trouble, but do take ALL legitimate deductions.
How to Plan Income –
Income generally comes in randomly if you have a small business, and you never know when you’ll have income, and when you won’t, so strategizing your income and taking advantage of the options you do have are important. An investment in your business is always beneficial tax wise, because you often don’t need to take income out of your business, and can take it in deductible results.
How to Apply Deductions –
Items that can be purchased and depreciated for the business – purchase them, depreciate them, and after depreciation is out, sell those items for actual value or below. Once an item is no longer being used in your business, get rid of it.
How to Prevent Over-Payment –
Remember that every dime paid into the government in pre-tax payment is money you don’t get to spend yourself, and cannot draw interest on. Keep your money in your pocket as long as possible, and don’t pay in until you must. For those who pay in quarterly, be sure you’re not over-estimating y our taxable income?
How to Invest in Your Business –
Depending on how your business is owned, corporation, partnership, or proprietorship, you may prefer to purchase needed equipment for your business personally, and take depreciation options. The way you choose to invest in your business, and take income back, will determine much of how you are paid by your business, and the type of tax you will be paying on your personal income.
Income tax is not a personal requirement, and there are many ways to avoid having anything due at the end of the year, by strategically planning your investments, deductions, and income. The more money you make, the more important your strategy becomes.
The question then becomes, what taxes will you be paying through your business?