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Why
the Most Important Business Decision You Probably Never Made is
the Key to Paying Thousands Less in Taxes
by
Wayne Davies, EA
You
can reduce your taxes immediately by putting my Tax Tidbits to
use. Each one of these strategies is easy to implement and doesn't
require any additional out-of-pocket expenses. You just have to do
a little planning and a little record-keeping and presto, you've
got several hundred or even several thousand dollars in your
pocket:
Estimated Tax Savings
Tax
Tidbit #1:
$833 http://www.YouSaveOnTaxes.com/tax-tidbit-1.html
Tax
Tidbit #2: $1,080
http://www.YouSaveOnTaxes.com/tax-tidbit-2.html
Tax
Tidbit #3:
$324 http://www.YouSaveOnTaxes.com/tax-tidbit-3.html
Tax
Tidbit #4:
$200 http://www.YouSaveOnTaxes.com/tax-tidbit-4.html
Tax
Tidbit #5:
$350 http://www.YouSaveOnTaxes.com/tax-tidbit-5.html
TOTAL $2,787
Whoa
-- $2,787! That's a lot of pizza in my house. (Obviously, your
particular tax situation may result in a different amount of tax
savings then the numbers cited in each Tax Tidbit; I'm just using
these as conservative examples of the type of tax savings possible
when these strategies are implemented. You could get more or less
than this.)
Then,
if we add to that the immediate tax savings of $1,750 from Section
179 (http://www.YouSaveOnTaxes.com/tax-crater.html),
now we're up to $4,537.
So, you've
just saved over $2,700 or even $4,500 in taxes. How does that make
you feel? Not bad, eh?
Well, I'm
here to tell you that this is just the tip of the iceberg.
Saving
$2,000 or $3,000 or even $4,000 per year in taxes is awesome --
but it's just the beginning.
The five Tax Tidbits and the Section 179 Deduction are
great -- they are perfectly legal ways for the average small
business owner or self-employed person to put some "easy
money" in your pocket.
But of all
the tax reduction strategies available to you, they really are
"small potatoes" when compared to the tax savings
available to you when you make a change in your Choice of Entity.
This is so
important, let me say it again: Your biggest potential tax savings
will result from doing a serious analysis of your Choice of
Entity.
Let's review
the possibilities:
Scenario #1:
You are a Sole Proprietor.
This is
probably the most common scenario for the new small business owner
or self-employed person. And my experience is this -- most likely,
you are a Sole Proprietor "by default", i.e. because you
really didn't know any other way to run a small business.
And that's
OK. You have to start somewhere, and if that's where you are,
that's where you are.
But you've
got to take a serious look at this: how much less tax would you
pay if you formed a corporation, partnership or limited liability
company? Do you have any idea? Probably not.
Now let’s
look at Scenarios #2, #3, and #4, which are really just variations
of Scenario #1.
Scenario #2:
You are a Partner in a Partnership. How do you know that this is
the best Choice of Entity for you? Would you pay less tax if you
were a corporation, LLC, or Sole Proprietor?
Scenario #3:
You are a C Corporation. What would happen if you converted to one
of the other entities?
Scenario #4:
You are an S Corporation. What would happen if you switched to a C
Corporation, LLC or Partnership?
Scenario #5:
You are a LLC? How do you know that this is the best scenario for
you?
I think you
get the picture. You've got to do an analysis of the pros and cons
of each entity.
And when I
say that these other tax strategies, like the Tax Tidbits, are
just the tip of the iceberg, here's an example to illustrate what
I mean.
I have a
client, let's call him Donald, who started a business about 4
years ago as a Sole Proprietorship. Like many new business owners,
he didn't really know any other way to do it. His brother-in-law
told Donald, "Just keep it simple. Don't even think about
anything complicated like a corporation. You have to pay a
high-priced lawyer, fill out mountains of confusing paperwork, and
you'll just end up spending money unnecessarily."
(Donald's
brother-in-law, by the way, is a self-employed painting
contractor, and of course, the "family authority" on the
subject of taxes and Choice of Entity!)
Well, Donald
had enough sense to come to me for help with his income tax return
that first year in business. He ran a low-overhead
service-oriented business and was immediately profitable.
In fact, he was so profitable, he had to pay several
thousands in taxes with his tax return.
I suggested
to Donald that he form a corporation.
After factoring in the additional legal and accounting fees
needed to run a corporation properly, Donald would still save over
$4,000 per year by operating as a corporation rather
than as a Sole Proprietorship.
Now, what do
you think Donald said to me when I told him about the four grand
in tax savings?
"Well,
that's a no-brainer. Let's do it." And I helped him set up
his corporation. (Sure, there is some extra paperwork. But again,
he still saved over $4,000 after paying the additional
expenses required of a corporation.)
Now, there
is no way I can sit here and tell you that you are going to save
$4,000 every year if you form a corporation. I have no way of
knowing that what is true for Donald is true for you.
But I can
tell you that I've talked to enough small business owners like
Donald to know that it would certainly be worth your while to
check into it. Even if the tax savings was $3,000 or $2,000 or
$1,000 -- wouldn't that be worth it?
Because once
you've made a change in your Choice of Entity, and that change
results in, say, $3,000 of tax savings in Year One, chances are
that you will get that same tax savings in Year Two and Year Three
and Year Four, and so on.
After five
years, we're talking $15,000 here!
Whoa --- see what I mean about "small potatoes"
and "the tip of the iceberg"?
To begin
your Choice of Entity analysis, you need to take action. Here's a
simple 3-Step Plan to get started:
1.
Contact your local tax professional.
If you
already have an accountant, please go to the phone right now
and make an appointment to discuss this with him/her.
At the
appointment, tell him exactly what you want: You want help
determining the best Choice of Entity for your situation.
You want to
know how much tax you would pay if your business existed as each
possible Choice of Entity. Example:
You were a Sole Proprietorship last year. You know how much tax you
paid last year as a Sole Proprietor. Now you want to know how much
tax you would have paid last year if your business had been a
C Corporation, an S Corporation, or a Limited Liability Company.
If any of
these other entities would have paid less tax than the Sole
Proprietorship, what would it take to make a change? What are the
legal and tax requirements for making such a change? What would it
cost to hire an accountant or an attorney to help you make the
change?
2. Do
some research yourself.
If you don't
have a local tax professional, or if you feel that your local tax
professional may not be qualified to do this type of analysis,
then you may need to start the analysis yourself.
Here's a
great place to start your research -- I've written an eBook for
small business owners and self-employed people called the “Tax
Reduction Toolkit: 29 Little-Known Legal Loopholes That Will
Reduce Your Taxes By Thousands”. To get your copy, visit http://www.TaxReductionToolkit.com.
Several of
these "legal loopholes" deal with the tax advantages of
the S Corporation, which is sometimes the best Choice of Entity
for the small business owner/self-employed person.
Again, I
can't guarantee that the S Corporation is the best entity for you,
but it is for many, so I highly recommend that you check into it.
The Tax Reduction Toolkit will give you an excellent explanation
of why the S Corporation has the potential to reduce your taxes by
many thousands of dollars.
The Toolkit
includes $445 worth of tax consulting coupons, so you can get some
professional input on your particular situation without spending
an arm and an leg.
These
coupons entitle you to do the following:
a) Send me
up to four (4) previously filed tax returns (business or personal)
for my review. When I analyze these returns, I'll be looking for
ways to reduce your taxes, including the possible tax benefits of
a change in your Choice of Entity.
b) Talk to
me on the phone for 60 minutes about your tax situation.
Pick my brain, ask all the questions you want.
We’ll go over your tax returns and look for any
overlooked or missing deductions that could save you thousands.
Sound fair
enough? Hey, you've got to start somewhere -- so why not start
your research at http://www.TaxReductionToolkit.com
and get a professional
analysis for less than the cost of dinner for two.
Oh -- I
almost forget to mention that if I am unable to offer specific
suggestions that reduce your taxes by at least $2,000 -- then I
refund your purchase price. Fair enough?
For a more
in-depth look at the tax advantages of incorporating, I’ve
written a second eBook for Small Biz Owners and the Self-Employed
called “Incorporation Tax Secrets Revealed” – http://www.IncorporationTaxSecrets.com
This eBook
explains the differences between the 3 types of corporations
(“S” Corp, “C” Corp, and Limited Liability Company) and
enables you to make a truly informed decision regarding which one
is best for you. Believe
me, when it comes to this Choice of Entity, one size does not fit
all!
For many,
the “S” Corporation is the best entity.
For others, it’s the “C” Corporation or the Limited
Liability Company. In
certain situations, it even makes sense to have more than one
entity.
Incorporation
Tax Secrets Revealed includes $340 worth of tax consulting
coupons: a personalized Choice of Entity Analysis Certificate and
a one-hour Choice of Entity Telephone Consultation.
Should you
decide to form a corporation or LLC, here’s a great way for
Do-It-Yourself-ers to save hundreds or even thousands in lawyer
fees – take a look at my eBook, “How To Incorporate Yourself
For Free”, available at http://www.HowToIncorporateForFree.com.
The purpose
of the eBook is simple -- to show the typical Do-It-Yourself small
biz owner or self-employed person how to form a corporation, all
by yourself, without a lawyer, and without paying a dime in legal
fees.
(Yes, it is
legal to incorporate without a lawyer.)
Understand,
of course, that this eBook is not for everyone. For many, hiring a
lawyer to incorporate is the best way to go.
But if you
like doing paperwork (or can at least tolerate it) and are willing
to spend a few hours filling out government forms in order to save
several hundred dollars, then this eBook is for you.
NOTE: These
3 eBooks are available separately, or as a 3-volume set at a
substantial discount. I’ve
bundled the 3 eBooks together into “The Ultimate Small Business
Tax Reduction Guide – http://www.SmallBusinessTaxReductionGuide.com.
3. Make a
decision and implement it.
After
consulting with your tax professional and after consulting with me
(or both), make a commitment and go with it.
If you see
the need to form a corporation or an LLC, do it! Don't put it off.
Do it now. There is no better time than the present to
dramatically improve your tax situation.
I have many
great clients. And I truly enjoy working with them. And I've
helped many small business owners and self-employed people go
through this Choice of Entity decision. Those that take the time
to do it never regret it. Most
end up with thousands of dollars in tax savings for many years to
come.
But
occasionally I get a client like Tony, the typical small business
owner who is just "too busy" running his business to
deal with any extra paperwork. Tony came to me five years ago and
I persuaded him to let me do the Choice of Entity analysis. He
just shrugged his shoulders and said, "Sure. Whatever you
say."
So I did the
analysis and called him with the results.
Tony could save over $3,600 per year by converting from a
Sole Proprietorship to a Corporation.
He liked the sound of that, and so made an appointment to
get started with the paperwork.
But making
the appointment is all Tony ever did.
On the day of the appointment, Tony cancelled. Something
came up.
A month
later, he called to reschedule. And on the day of that second
appointment, Tony cancelled. Something came up.
And on three
more occasions, Tony has made an appointment to get his
corporation started, and each time, he either cancelled or just
didn't even show up.
I still do
his tax return each year, and each year I remind him of the simple
fact that he overpaid his taxes by $3,600 each year -- for
the past four years! So now Tony has paid $14,400 more than
necessary, just because he's too lazy to follow through on a
simple one-time change in his Choice of Entity.
Which small
business owner do you want to be: Donald or Tony? The choice is
yours.
Have
you heard about the recent tax law change that turned a small
business loophole into a crater?
http://www.YouSaveOnTaxes.com/tax-crater.html
Want
to know the biggest tax mistake you can ever make? (And how
to avoid it?)
http://www.YouSaveOnTaxes.com/tax-mistake.html
Do
you know why the most important business decision you
probably never made is the key to paying thousands less in taxes?
http://www.YouSaveOnTaxes.com/tax-decision.html
Hungry for
some tasty Tax Tidbits guaranteed to put at least $2,000 in your
pocket? Check out this 5-article series:
Tax
Tidbit #1: http://www.YouSaveOnTaxes.com/tax-tidbit-1.html
Tax
Tidbit #2: http://www.YouSaveOnTaxes.com/tax-tidbit-2.html
Tax
Tidbit #3: http://www.YouSaveOnTaxes.com/tax-tidbit-3.html
Tax
Tidbit #4: http://www.YouSaveOnTaxes.com/tax-tidbit-4.html
Tax
Tidbit #5: http://www.YouSaveOnTaxes.com/tax-tidbit-5.html
About The
Author:
Wayne
M. Davies is author of three tax-slashing eBooks for small
business owners and the
self-employed:
** The Tax Reduction Toolkit **
29
little-known but perfectly legal strategies to reduce your taxes,
postpone your taxes, and even avoid taxes altogether -- for small
biz owners & self-employed people only!
http://www.TaxReductionToolkit.com
**
Incorporation Tax Secrets Revealed **
How to save thousands in taxes by
forming a corporation or LLC for your small business or
self-employment activity. Discover the #1 Tax Secret of the Rich!
http://www.IncorporationTaxSecrets.com
**
How To Incorporate Yourself For Free **
How to
avoid paying $500, $1000, $1500 or more in lawyer fees by
incorporating your small business all by yourself...for FREE!
http://www.HowToIncorporateForFree.com
Wayne's eBooks are available separately, or
at a discount as a 3-volume set:
**
The Ultimate Small Business Tax Reduction Guide **
Find out just how easy (and legal) it is to reduce your
taxes by $2,000...$3,000...$4,000 or more!
http://www.SmallBusinessTaxReductionGuide.com
To
receive a free copy of Wayne's 25-page Special Report,
"How
To Instantly Double Your Deductions"
click
here:
http://www.YouSaveOnTaxes.com
www.YouSaveOnTaxes.com
A
Division of Wayne M. Davies Inc.
4660
W. Jefferson Blvd., Suite 220
Fort
Wayne, IN 46804
(260) 459-3858
Wayne@YouSaveOnTaxes.com
http://www.YouSaveOnTaxes.com
http://www.MagneticMarketing.biz
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