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Tax Tips for Small Business Survival

Rob — Wed, 20 Jan 2010 14:17:20 +0000

There are many aspects to starting a business but the most important aspect in my opinion is taxes. As a business owner, staying on top of taxes will ensure the survival of your business. Before opening your business you (as the owner) may want to consider which type of business entity is appropriate for you, such as, a sole proprietorship, partnerships, or corporations to name a few. Each entity has different tax regulations or benefits accordingly, so choose wisely. Filing for the federal income tax is a priority for any type of business. Other types of taxes are: state income tax, employment tax, sales and use tax, and excise tax. When first starting out, it will behoove any business owner to educate oneself or seek professional advice when handling taxes. Also, the area that leads to common errors or even missing out on savings within the first year is depreciating assets.

Depreciation of assets or a write-off of an asset can be challenging. Most fixed assets by law must be depreciated over what is considered its useful life. (Tax laws can be found at ) One misunderstanding about depreciation is that some may believe depreciating an asset will provide money for its replacement. This is incorrect, for only the revenue generated (or not) from the asset over its useful life can be used to replace it. As for which method that should be chosen, it is up to the owner to pick what works for that particular company. For example, a new company choosing the straight-line method over an accelerated method may be best according to Tax-Savvy for Small Businesses. Due to fewer profits during the beginning stages of a business you may benefit from the smaller deductions by using straight-line depreciation. Furthermore, keep any records of personal use vs. business use of certain assets such as a computer, so at least part of the asset can be written-off. On the other hand, you may choose to not write-off the asset over its useful life and declare the asset under Section 179. For example, this allows the new business for its first year to expense the asset (in service) at full cost as long as it does not exceed $128,000 (as of 2008). Be aware of the tax bracket you are in prior to claiming Section 179 because freeing up cash may push you into a higher tax bracket which equals paying more money. Read about other qualifications and rules regarding Section 179 deduction in J.K. Lasser’s Small Business Taxes, 2008 edition. You can find this book, along with tips and a free news letter at .

Educating yourself about good book keeping and where you can receive help will ensure that you know about special tax reductions within the first year of business and most of all, save money. First, if you can invest in yourself and take a few courses in accounting this may help your business save money. Learning how to keep your books and records in order and learning the generally accepted accounting principles (GAAP) and the upcoming international financial reporting standards (IFRS) will improve your chances of reducing your taxes. For example, good book keeping will reduce your time filling out tax forms, and enable you to pay your taxes on time. It is crucial to never file your taxes late and incur un-necessary penalty charges! Also, if you choose to have your taxes done by a professional, and your records are already in order and accounting principles were followed, they will spend less time organizing and charge you less money. Preparing taxes through tax software programs such as Turbo Tax may help decrease any confusion when filing but even with these programs you may still need professional advice. Educating yourself about the various types of tax advisors will help in choosing which one is the best for your business. Certified public accounts (CPAs) seem to be commonly hired by small businesses due to their significant training (licensed by the state) and advice. In order to get more “bang for your buck” and not just a number cruncher, go online to to find the right CPA to match your company’s needs.

Though filing taxes may be challenging for a small business owner, there are plenty of ways to get assistance and save money. Educating yourself on the ever changing tax laws and knowing the basic accounting principles may seem tedious but it is a sure way to ensure the survival of your business.

Student at West Chester University of Pennsylvania
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4 Basic Principles Of Real Estate Tax Law

Rob — Thu, 01 Oct 2009 14:18:45 +0000

Most of the people are nowadays big or small real estate investors. If you own a home then you can be considered as a real estate investor and you need to learn varous laws regarding real estate that could be of immense importance to you. Moreover, most of the laws that we should understand are very simple.
However, if you fail to understand these laws then you might suffer huge losses. Some of these basic principles are:
1) Real Estate Taxes Can Be Avoided While Selling Home- According to the law of real estate you would be exempted from profits if you are selling your home for not more than $250,000 if you file your request singly and $500,000 if you are filing it jointly. Such laws are made to safeguard the families and let them own their house or encourage investment in the real estate. What is more? If your profit is more than the specified amount then the tax is levied upon the price exceeding the limit but that home should be your primary residence to avail any such benefits. For qualifying it as your primary residence you should stay there for at least two to five years before selling it.
2) Deductible Mortagage Interest – Most of us get mortgage whenever we buy a home. Mortgage interest proves to be the largest tax deductions one can ever have. What is more? Interest you pay on mortgage for homes other than primary residence is also tax deductible. Even the payments made against your primary mortgages or home equity loans is deductible.
3) Losses Incurred In Real Estate are Tax Deductible– When you file your tax with IRS, you can claim your loss on real estate if the selling price of that real estate is less than what you paid for it.
It would be deducted from your tax.
4) Save Taxes By Reinvesting In Real Estate- If the real estate you purchased is not primary residence of yours even then all your capital gains are not calculated in taxes as your profits. You need to reinvest your profits in an another real estate within a period of two years if the property you sold was not your primary residence. This way you can avoid capital gains tax on your property sales.
Therefore, you can understand the importance of understanding the semantics of tax deductions that are required to save a lot of money you would have paid otherwise as your capital gain tax. You should take advice of a good tax professional to avail many such real estate deductions that are there in the law.

If People Are Really Tired Of Our Tax Laws, Why Canâ??t Someone Do Something?

Rob — Sat, 19 Sep 2009 15:06:25 +0000

You would be hard pressed to find any man or woman on the street that thinks our current tax laws are working for the benefit of our country as a whole. The tax system is so convoluted and complex, almost no one that any level of financial complexity in their lives can really be sure they are following the rules as the IRS expects us to. Why canâ??t we find a politician to champion a cause towards simplification and fairness of the tax laws?

Most people would probably attribute it to the invested interest of the massive tax industry as a whole and the manner in which special interest groups have so much at stake in the gains they have made over time molding the tax code to give them advantages. These advantages might not be so generous if our system were to revert to a simpler and overall fair system.

The magnitude of the problem is clear from the struggles of a group called FairTax.org. This proposal has been around a number of years, but cannot seem to break through the barriers in Congress that are preventing it from getting a true hearing. How can this be when you read the fundamentals at the heart of the FairTax proposal (taken from the FairTax.org website):

Only people pay taxes.

Consumption taxes are the oldest form of taxation for many good reasons.

Consumption tax rates are self-limiting.

Consumption taxes, throughout history, have enhanced civil liberties and more.

Direct taxes (income taxes/poll taxes/head taxes), throughout history, have been the tools of tyranny.

Uniformity of taxation wards off special interest manipulation.

The fact that such a logical and well thought out plan can get so little traction in our country makes one wonder if Congress truly has our best interests at heart of not. At the very least, you have to wonder if the populous is just empathetic about this problem.

Until more success can be had, the regular taxpayer needs serious advice. One way to improve on your tax situation is to become your own private little bank endowed with some seriously positive tax advantages. If you are interested do a search for â??personal bankâ? and talk to a professional financial advisor who can help you navigate our swamp of tax laws.

For more details: www.thepersonalbanker.com

I am the owner of this site
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Learn More Tax Law Facts – Save Your Money

Rob — Thu, 09 Jul 2009 14:56:05 +0000

Like any other law, tax law also changes the only difference is that it changes every year which affects our filing of tax return for the year. You can benefit from these changes like you can start to save money because of the change made if not it will be the other way around. Some changes may only take effect for a year some for many years and other tax laws might be permanent.
Just take into consideration the withdrawals made by the Congress from college 529 saving plans tax free in 2001. Withdrawals that were made for qualifying expenses, like college tuition, rooms, books and board, not taxes would be paid on the withdrawal that is according to the said tax law. But this tax law is not permanent it will expire on 2011. It is being taken into consideration whether to extend this legislation or not. So be aware if year 2011 comes, if the said tax law is extended by the Congress or if it will be changed.
Here are some examples of regular changes on tax law one which is regularly changed is the actual income brackets. Many people are not aware that actual income brackets are changed every year. Actual income brackets are changed to avoid increase. Another good example is the usual mileage rate deduction. This deduction is used to gain reimbursements for the miles driven using their own cars for business purposes, this is usually used by the self-employed. The IRS adjusts this rate most especially when the prices of gas increase abruptly or drastically. In fact, for some years, one mileage rate for part of the year was subjected to taxpayers but a different mileage rate is imposed for other part of the year.
One good thing IRS is doing is that they let the people know of the changes made to the tax law by releasing a publication which provides a detailed overview of the changes. So before filing your taxes for the year make sure that you have read and understood the released publication so you can take note of the changes in the tax law which applies to you.
Filing taxes on your own is a bit difficult to do and being updated on the tax law also is difficult but you can hire a professional to file your for you to make sure that you are filing your tax properly. You will need to pay them but this will surely help you save time, avoid being in trouble or avoid an audit.
Whatever way you want to do it, always make sure that you are updated with whatever changes made to the tax law every year and include them by the time you are going to file your tax.