Knowing the ins and outs of the tax code is vital to the health of every small business. Virtually every decision a business makes has tax consequences that can affect its bottom line -- and the IRS is always watching. Fortunately, Tax Savvy for Small Business provides valuable strategies that will free up your time and money for what counts: running your business, and running it effectively. It explains how to: deduct current and capitalized expenses write off long-term assets write off up to $104,000 of long-term assets each year compare the advantages of different legal structures take advantage of fringe benefits keep records that will head off trouble with the IRS get tax breaks from business losses pay payroll taxes on time deduct home-office expenses negotiate payment plans for late taxes handle an audit get IRS penalties and interest reduced maximize retirement funds use retirement funds as a tax break Completely updated, the 8th edition of Tax Savvy for Small Business provides the latest tax breaks, rules, forms and publications. This edition also includes a brand new list of the Top 25 Business Deductions -- the best deductions to take and how to claim them. An essential book for entrepreneurs, independent contractors, small-business owners and anyone else making money on their own -- get it today!

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"There is nothing sinister in arranging one's affairs as to keep taxes as low as possible … for nobody owes any public duty to pay more than the law demands." -- Judge Learned Hand Small business owners and self-employed people want to maximize their tax savings. The key to legally cutting business taxes to the bone is knowing the best way to identify and deduct business operating expenses and knowing exactly what taxable income is. That's the focus of Chapter 1. Next, in Chapter 2, Writing Off Business Assets, we'll complete the picture with the rules for writing off assets purchased for the business. First, how will your business income be taxed? The U.S. government taxes a business's profits -- so the more you end up with after expenses, the more taxes you pay. And, it is a progressive tax, meaning the more you make, the higher your tax bracket. This means the American entrepreneur has a strong incentive to keep taxable profits as low as possible, while at the same time taking home as much money as possible. Let's start with a simple illustration of how net, taxable profits are determined in any kind of business operation. EXAMPLE: Homer quits his job at the nuclear power plant and goes into business selling an automated dog walker that Bart invented. Incredibly, Homer makes money, and at the end of the year determines his taxable profits as follows: Gross sales $35,000 Less cost of goods sold (manufacturing costs) -12,000 Gross profit (before operating expenses) 23,000 Less deductible business expenses (shipping, supplies, rent, utilites, etc.) -5,000 Net profit (taxable to Homer) =$18,000 How much Homer will owe in federal (and maybe state) income tax on the $18,000 depends on his total income, personal deductions and exemptions for the kids. Wondering what you must include in your reportable business income? Sales only? Bartered goods? Foreign income? Gifts? Ill-gotten gains? Fringe benefits? Inheritances? To learn what exactly is included in your sales and income figures, see Section F, below. Now let's quickly move to the main point of this chapter: the expenses you can deduct from your gross profits to get that net profit number as low as possible. What Is a Deductible Business Expense? The Internal Revenue Code (IRC) says that just about any outlay to produce business income can be deducted from your business income. Then, the IRC lays down about a million rules telling you just what you can deduct and, more often, can't deduct. Luckily, very few of these IRC sections apply to the average self-employed small business owner. In this chapter we discuss the ones that do. The IRS goes by three main principles. To be deductible, an expense has to be all of the following: "ordinary and necessary" for the business sensible (not extravagant) primarily for the business (not personal). Basically, this means that any money you spend in a reasonable way, with an expectation of bringing in revenue, is a deductible expense (even if it turns out that the expenditure didn't bring in money). 1. Ordinary and Necessary Okay, so what's an "ordinary and necessary" expense for a business? The tax code doesn't define it. This means we have to look at court decisions and IRS pronouncements for guidance. One court said necessary means "appropriate and helpful." Another court said that ordinary means "normal, common and accepted under the circumstances by the business community."

 

Part 1: The Basics 1. Deductible Expenses 2. Writing Off Business Assets 3. Bookkeeping and Accounting 4. Business Losses and Failures 5. Tax Concerns of Employers Part 2: The Structure of Your Business 6. Sole Proprietorships 7. C Corporations 8. S Corporations 9. Partnerships 10. Limited Liability Companies 11. Personal Service Corporations Part 3: Thinking Small 12. Family Businesses 13. Microbusinesses and Home-Based Businesses Part 4: Fringe Benefits 14. Fringe Benefits 15. Retirement Plans Part 5: Buying or Selling a Business 16. Buying a Business 17. Selling a Sole Proprietorship Part 6: Dealing With the IRS 18. When You Can't Pay Your Taxes 19. Audits 20. Appealing IRS Audits 21. Penalties and Interest 22. Help Beyond the Book 23. Answers to Frequently Asked Tax Questions Glossary Appendix: IRS Publications and Forms Index

This plain-English guide will show you how to make the most of your tax-deductions.

 

The author has more than 20 years experience...Even if you use an accountant, pick up a copy of this book for further understanding and tax management.

 

Frederick W. Daily is a tax attorney with over 20 years experience helping individuals and small business owners make smart tax decisions and stay out of trouble with the IRS. He has been featured as a tax expert on Good Morning America, and in publications across the country including Money Magazine, U.S. News & World Report, the Miami Herald and the Chicago Tribune. He is the author of Stand Up to the IRS, Tax Savvy for Small Business and Surviving an IRS Audit.

 

Tax Savvy for Small Business by Frederick Daily
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