One of the benefits of having/owning a business is the ability to reduce one’s taxable income via expenses that are directly related to the business. I saw a phrase this week that caused me to pause: tax aversion versus tax evasion. What’s the difference?
It was referencing the current matter of people like convicted tax evader Paul Manafort, who will be spending the next few years behind bars…because he sought to evade paying taxes. He made millions of dollars…and is now a criminal with shame.
As I have pointed out in a prior article (Picking Up The Tab – Oct. 2018), being a W-2 employee does not afford you the ability to deduct anything that pertains to your JOB. The employer will certainly, with the aid of their tax professional, find ways to reduce their taxable income; some of it because of your working for them.
The business person, whether a sole-proprietor, LLC, S or C Corporation will have numerous ways to offset their gross incomes legally. Those ways could be:
- capital expenses (buying equipment for the business)
- business travel expenses (attending a business conference)
- office supplies (pens, copier paper, etc.)
- telephone (both land line and business cellular)
- internet (who doesn’t have to use the Internet for business?)
These are but a few of the legal expenses, when documented correctly that can assist you in reducing what the IRS will be asking you to pay. Notice what I just said… The IRS won’t take your money out of your paycheck…unlike what happens as an employee.
So, consider what services/products you and your family and friends use regularly. Is there an untapped market for those? How might you provide that? Better? Cheaper? — With a touch of your own style and personality. With the Internet, almost anything can be found, purchased and drop-shipped; with your hands never even touching the product. You have created the online storefront and found people needing what you offer.
Then, keep ALL receipts! Let me repeat that….ALL receipts. Let your tax professional help you determine what is a Write Off…. A good tax professional will keep abreast of all new tax codes and laws, which might mean a significant savings for you. I keep an envelope of each month and place the receipts there. Mine may not be the most glamorous…but, use some system. Come tax time you’ll be glad you did.
And then you’ll be on the Right side of Writing Off your business expenses and creating a legacy of financial freedom for you and your family.