Hello Everyone. Thank you for stopping by my blog. I started collecting data for this blog post over a year ago. Turns out, I was unaware of many of the amazing tax benefits of owning your own business (and I’ve even had my own business for some time now). For this post, the majority of tax information came from Sandy Botkin of TaxBot.com. Sandy is a well respected, tax expert, accountant, and former IRS attorney. I have summarized some lessons I’ve learned from his main webinar and elsewhere on the internet. My intention is to get you on the right track.
Please note, I am not giving direct tax or financial planning advice. I am making you aware of legal, government-sanctioned methods myself and others are using to save thousands of dollars every year. I will show you where to get these tax tools and more in depth training. And I will reveal the most profitable online business in internet marketing niche today. But keep in mind, laws change and interpretations vary. Neither myself, nor Sandy Botkin take any responsibility for any financial losses or negative consequences incurred as a result of information learned here. With that said, the information contained herein has incredible tangible real world value and utility; you should use this post as a jump-off point and take advantage of everything the government is offering you.
Why have a business? Watch this quick introductory video from Tax expert, accountant, and former IRS attorney, Sandy Botkin himself.
Tax Benefits of owning your own business
Synopsis: Instantly save $3,000 to $5,000 in tax incentives and write-offs, the minute you start a home based business. You can get a legitimate work at home business for FREE; and as Sandy Botkin says, of Taxbot, you’d be crazy not to have a home based business. Did you know, if you live in the US or Canada, there are two tax systems? One system makes you broke (being employed, aka your JOB, aka W-2 income) & the other system makes your rich (aka being self-employed, aka, owning your own business, aka 1099 income). Successful online businesses know how to use tax laws to their advantage. A self-employed business owner gets everything an employee gets, but the self-employed business owner can also write-off or deduct a large portion of their home, spouse, meals & entertainment, vacations, and even the equivalent of their kid’s educations & weddings. Essentially, you can build a home office worth thousands and deduct much of it. The self-employed person can set up a pension that makes any government pension look small by comparison.
Newsflash: The agents of the IRS are not the bad guys. The Federal Government wants you and your business to succeed.
They are even willing to give you money in the form of massive subsidies to help you succeed. All you have to do is play by their rules. It may come as a surprise, but when you start a home based business or any new business for that matter, the government wants to save you money in the beginning. Why? Because the IRS knows, all new businesses need extra capital in the beginning. They want your business to succeed because they know successful businesses will pay them a huge amount of money over time.
What sort of things can I deduct?
From day one, our government can free up funds you can invest in your business by subsidizing your losses against any other form of income you have such as interest, dividends, wages (yes w-2 wages from your day JOB), pensions, almost anything. Let’s use a very common deduction as an example. Did you know you can deduct your computer? So you might be thinking, “Wait, you mean I can deduct the computer I bought for my business against the wages I earned from my other JOB which is totally unrelated to my business or my computer?” Yes, that’s exactly what I’m saying.
Here’s another one to wet your palate; and no, you’re not hallucinating. You can drive 100 miles to a location to play golf on your favorite 18 holes. While you’re there you and spend $200 on an expensive lunch. While having lunch with that prospective client, you discuss your business. Now you can deduct the lunch and the milage. Why? Because you discussed your business and you properly documented key points. The best part, this documentation can be done in seconds with taxbot.
What if my business doesn’t make a profit in the first few years?
But you might ask, what if my business isn’t profitable right away? It doesn’t matter. You can take the loss you incurred from your business and use it to offset any taxes you might owe from the W-2 income from your JOB income. That’s the part people are most surprised about. But it’s totally true. Many smart tax payers take advantage of this tax allowance every single day.
I.E., say you make $60,000 per year at your JOB. Your new home based business incurs a 20,000 loss; now, you’ll only pay taxes on $40,000 of your JOB income that year. Not having to pay taxes on $40,000 can save you around $12,000. By comparison, let’s say you have a coworker who makes the same $60,000 per year and resides in the same tax bracket you do. If you have a coworker who doesn’t own a work from home business, he has to give the IRS $12,000 more than you do. Good for you. Not so good for him. I bet if you showed your coworker what you are doing, you would recruit him into your business in a heartbeat; and that’s exactly how many promote their home businesses, by real world examples. All you have to do is find a business that can truly help people, and everything else will fall right in place.
You can use current deductions to amend prior tax returns and claim refunds retroactively; or even carry those deductions forward for future tax returns (yes, the government let’s you rat-hole deductions).
Say you’re a single parent and your home or small business loss exceeds your whole W-2 income for the year. Well guess what single mom, you’re not paying any income taxes this year (if you follow a few simple rules).
Home based business tax benefits say you can even carry back all business losses 2 years and get a refund from the federal and state government for the past 2 years of taxes (Canadians can carry back 3 years).
Or you can carry any biz losses forward for up to 20 years. Here is an extreme scenario. You’re business lost is $100,000 this year (2014). The following year (2015), you make 100,000 at your W-2 job. Your income tax liability for tax year 2015 is now zero! That’s right! On that $100,000 you just made, you won’t pay one cent of income tax if you follow a few simple rules and treat your business like a business. And if income tax brackets run from 30 to 40% on average, you just saved 30 or 40 grand. Not bad!
As Sandy Botkin says, you will never lose a properly documented business deduction, as long as you are running your business like a business. If you need a business, here is one for FREE. This is the framework for one of the most successful online businesses you can run from home. If you need a way to document everything as fast and painlessly as possible, get Taxbot (two week free trial).
That’s the short version. Now let’s go into some more detail (1099 vs W-2 income).
For sake of clarity, 1099 income is income earned from your own business as a self-employed individual. Many sales jobs will classify you as an independent contractor which also pays you in the form of 1099 income. As a self-employeed individual, you are supposed to estimate your taxes and pay the IRS at various intervals (or payment periods) throughout the year. This is in contrast to w-2 income where your boss withholds whatever the hell he or she wants, and you can file to get the excess with holdings back at the end of the year. Personally, I’d rather pay the government what I owe them and not a penny more; and let my money earn interest for me instead of the government. They’re not going to give me any interest on that extra my boss sent them.
So now that we understand 1099 income, let’s contrast that with W-2 income which is simply income received from your JOB as an employee of some business other than your own. In this sense, your income is an expense for your employer and, therefore, your boss is the one who benefits by reconciling net profits vs expenses at the end of the year. And as the norm goes, you prepay your taxes with each paycheck; therefore, with this model, the government gets to earn the interest on money you don’t technically owe until April 16th.
What is great work from home business almost anyone can start and be successful at?
In this article, I will be recommending one of the most successful online businesses you could ever have for $49. Yes, I will offer you upsells to make your business more profitable. But, nevertheless, you will have a business for all of $49 (if that’s as far as you choose to take it). As a way to keep track of all your expenses (deductions), I’m going to recommend Taxbot for about $10/month (this link gives you a 2 week free trial).
Don’t take this lightly. Yes, there are ways to work from home. What I’m recommending is the ultimate one-two-punch (the ultimate business plan). There’s no need to reinvent the wheel here. Take advantage of my thousands of hours of sleepless nights, trial and error, and research……and just run with it.
Here are those two punches:
1. MTTB aka My Top Tier Business:
This is one of the most profitable home based business on the internet offered by internet marketing Guru, Matt Lloyd and owner of MOBE or My Online Business Empire. Take a look at the following video as it goes into how MTTB can literally help you fire your boss and gain financial freedom:
Click here to apply.
This is the #1 tax recording smartphone & desktop software by Tax expert, accountant, and former IRS attorney, Sandy Botkin. Take a look at this short clip to get a glimpse at what Taxbot can do for you:
You can get Taxbot here (14 day free trial).
You can get Taxbot here (14 day free trial).
In short, this is about me providing you access to a very affordable business model so you can legally take advantage of tax laws the government wants you to use to keep more of your overall income. The reality is when you start any business, for the average person, it could mean an instant tax savings of 3,000 to $5,000. For others, that savings can go into the tens of thousands of dollars. As far as tax savings are concerned, they can literally go from a little of nothing to 100’s of thousands of dollars per year. Here’s the thing: These savings are here for the taking whether you make a profit or not. The only thing that has to be in place is your “intention” to run a profitable business. For that, I will suggest a MTTB or My Top Tier Business. With this business, contingent upon positioning and licensing, everyday people are being paid anywhere from few hundred per month, to over $100,000 per month.
3. How about a 3rd Punch?
But you know what, let’s take it a step farther. What if I provided you a complete time tested bluprint to online success, for free? Would you take it? Because I’m offering it to you right now. It’s called the Ultimate Online Profit Model Ebook. This is my cornerstone offering which helps you avoid a lifetime of trial and error. Every internet marketer needs a Killer offer. Well, MTTB takes care of that. But there is a bit of a dance which has to be learned, in how to construct an offer which entices people to literally steal MTTB away from you. The Ultimate online Profit Model E book is that dance, if you will. If you choose to come on board with me, I am going to allow you to give away the Ultimate Profit Model Ebook to your prospects for free (well almost free); I’ll also cobrand the e-Book with you writing the forword and placing your picture next to the author, John Chow. You’re prospects will have to give you an email address for the e-Book; but they’ll gladly do that. Then I am going to give you an extremely high converting email sequence to use in your autoresponder. Next, I’m going to allow you to further entice your prospects with two major bonuses. One is worth $2,300 and other is worth $17,000. This is a well known but frequently missed concept in internet marketing. If you want someone to buy sometthing, offer them a bonus worth more than the thing you want them to buy (Matt Lloyd). You can get The Ultimate Profit Model e-Book here for free
Look below. Here are some recent commissions I made with MTTB/MOBE and the Ulimate Online Profit Model e-Book:
(I’ve whited out name for privacy of my clients)
But what If I’m never profitable at this, incurring a loss year after year?
Let’s hope it doesn’t come to that; but yes–theoretically, you could do this for years and years, never turning a profit, and continue receiving the benefit of all these business deductions.
Remember, you don’t have to make money with this program. You just have to have the intent to run a profitable business and keep decent records of that intent.
Once again, just to be clear, I am in no way a tax expert. But I do know enough to tell you, if you do not have a home based business–for the average taxpayer–you are throwing away $3,000 to $5,000 per year if you just did the bare minimum. You may think the documentation is a nightmare? It’s not. You may think you don’t have enough time to spend on your home business to get the deductions? You do. And you might think you have to turn a profit to save money on your taxes? You don’t. And you might think all home based businesses are all scams. Some are. But many are not. In fact, with a little strategy and effort, you might actually turn a profit as I did.
One Harvard study demonstrated that only 4% of Americans, are able to retire at the same level they were once accustomed to pre-retirement. So how do you avoid becoming that statistic? Number one, by not depending on your employer or his chincy pension plan for your future. The truth of the matter is, most of us will never achieve anything close to financial freedom while working for someone else, aka, trading money for time. And number 2: for God’s sake, don’t depend on social security for anything which might constitute a retirement check. Take control of it yourself. In the richest country on the planet, there is no reason for anyone to ever go into retirement without being dept free and enough money in their pension to totally live it up. I don’t know about you, but I won’t settle for anything less than $15,000 per month from my retirement plan. I don’t have to settle for less; and neither do you!
Get your 25-30% cash back card
Many of us have credit cards which pay us 1% – 2% cash back for purchases; now that’s smart spending, provided you pay off those balances each month. But you could be doing much better, hence, some of the key benefits of owning your own business. How many of you would you like a 25 – 45% back card? You see, depending on your tax bracket, most pay 25-30% taxes (some as high as 45%). Now I’ve heard friends and family say, I don’t want to make more than 100K per year because Uncle Sam will take too much. Well, that’s the stupidest thing I’ve ever heard anyone say in my life and here’s why. Let’s say that person pays an average of 30% taxes on the 100K per year income. So their take home is $70K. Well personally, I don’t care if uncle Sam takes 50% if I’m making a two million a year, I still bring home an extra $1 million a year. Because 50% of two million is still better than 100% of no million. Ok, I kind of got off on a tangent there. And I’m just kidding,. You’ll never pay 50% if you keep good tax records and run your business like a business. But stay with me…….
So getting back on track–seriously, what if I could offer you a 25 – 45% cash back card? Most would take it right? Well guess what? Most can! Because (wait for it), it’s known as your business card. Let’s say you go out and by a computer and desk. If you spend $3,000 on that computer and desk, you can reduce your taxable income by $3,000 (income earned from your 1099 business or your W2 JOB). Not paying taxes on $3,000 will save you 25 to 45% or $800 to $1,400, respectively, depending on your tax bracket. That is essentially a 25 to 45% cash back card. Other things that can be deducted are: meals & entertainment; vehicle usage (@ 0.52 / mile); home office; your kid’s college & weddings; medical expenses (braces); and even recreational travel as long as you meet certain criteria.
And to claim this 25 – 45% cash back card, all you have to do is follow certain rules of conduct. Treat your business like business. And it all revolves your intent and your willingness to document your efforts. Be accurate. Use a tax diary. Or now days, something to make the whole process stupid simple, like Taxbot. And by stupid simple, we’re talking about as little as a few minutes per day.
But this will get me audited by the IRS
Yes, this makes some people nervous. Why? Because they think they will be audited. They think they are doing something wrong. They don’t want to upset the IRS Gods. Well, you know what? The IRS Gods want you to succeed in your business. They give you every tool to succeed. Because in the grand scheme of things, the more money you make, the more you can pay them. They are not expecting you to make huge profits in the infancy of your business. And they know, if they help you lay a good foundation–by what basically amounts to government subsidies–in the long run, you will make much more money as a successful business owner than you ever would as an employee. And in turn, you will be a more prolific taxpayer and better contributor to the economic growth of our country. Everyone wins. You will get some side benefits of owning your own business. The IRS will have helped create a much better taxpayer and contributor to our society. The IRS is not out to trick you or trap you. They just want you to become incredibly successful within the confines of a few easy to follow rules and decent record keeping. Do you need to make a profit in your business? No. Do you need to have the intent to make a profit? Yes. Can it be a longshot? Well let’s hope it’s not a longshot, but yes! In US and Canada, just treat it as a business with a “reasonable expectation” of profit and you’ll be fine. Does that mean if you claim a business loss for the next 20 years, it’s not going to raise some eyebrows? Not at all, it will eventually raise eyebrows. As long as you keep good records, eyebrows will never harm you. But believe it or now, turning a profit online is not that hard of a thing to do, as you’ll see here.
Please watch this very important video
If you liked what you just saw, you can apply here.
Now, for some common myths of home based businesses:
The beauty of a home based businesses is they give you the same rights and tax deduction opportunities as any brick and mortar businesses. And you get those same benefits whether you work it full time or part time. Now let’s crush a few common myths.
True or false, my accountant takes care of my taxes? False. You’re accountant processes the data you give him or her. The only person who can really take care of your taxes is you.
True or false: I Get tax refund every year so I must be doing ok right? False. Sure you might be getting a refund, but you could also be getting a much “bigger” refund. Here’s some shocking data: 84% of small businesses over-pay their taxes by 150 billion per year. 90% didn’t think they overpaid.
Why does this happen? Procrastination, lack of knowledge and tools, faded receipts, sloppy mileage logs, etc… So basically, if you don’t know rules, you’ll overpay. But here’s the thing, the rules are not that hard to understand; people just think they are hard to understand. In reality, a 2nd grader could be taught these simple rules in a little of no time.
Ways to work from home – what are the Logistics and records I need to keep?
So here is an example how you can deduct an outing to the movies or some other recreational activity. Every person is a prospect; so every lunch can become a deduction. Every time you go to movies, plays, golf, games, you can deduct 50% as long as you talk business within the same 24 hours day of the fun.
Your tax diary show included several parameters: who, what, where, when, why, how much. Use it; it will save you a lot of stress and money. If you don’t keep a tax log, you will over pay. Why? Because you are scared of the audit. And for good reason; because if you don’t keep good records, you will be in jeopardy of getting audited. Your deductions could be disallowed and get hit with interest + 75% (50% in Canada) civil penalty for fraud. But keep good records, and even with an audit, you are safe.
So what do I need to start saving money on my taxes? Two things: a business (with an established blueprint) and an easly way to record the associated business expenses as they come about. I recommend CLICK FUNNELS & Taxbot . Taxbot is $10/month after your 14 free trial. But I would say paying $10 per month is worth it to instantly saving $3k to 5K thousand your first year . And you can even deduct your investment MTTB and $10 per month Taxbot investments from your taxes as well. And the beauty of this is these are two products can literally change your life. We have people making from a few hundred dollars to a few hundred thousand dollars per MONTH with this business model. And with Taxbot, you are not only getting a state of the art recording mechanism, you are getting a huge library of tax knowledge to help you maximize your profits using the tax laws as they were designed for.
What can a $50 business get me?
So one huge part of this is you need a business. I guess you could just pull one out of your head. But why gamble when you can one of the most successful online businesses ever created? There’s no need to reinvent the wheel here. Get a business that is already proven to be a profitable, with an infrastructure and everything already set in motion. How much does a home-based business like this cost to start? As little as $50.00. But you might say, “I probably don’t get much for $50 do I?” You’d be wrong. But what do you care? You just want the tax deduction right? Well just in case you’re willing to put forth a little effort. Here’s what $50 can get you:
- A legitimate powerhouse home based business with real people who are earning from a few hundred per month to over 100K per month. There will be zero doubts from the IRS that this could ever be considered a sham business.
- Your very own coach will be at least a 6 or 7 figure online earner (yes you get a live coach).
- A plan which has the capacity to take you from zero to 100K in your first 6 – 12 months (some have done it in less than two months).
- Access to a complete system and the same tools our top affiliate used to make over $130,000 in one month.
So what are you going to do?
Are you going to keep paying the IRS and robbing Peter to pay Paul, or are you going to make a change?
Donald trump once said, “The smarter taxpayer is the wealthier tax payer”. He is very right. Ask any financial planner or counselor about income versus expenses. They’ll tell you, “It’s never been about how much you make. It’s always been about how much you keep”! Simple but profound. If you know what you are doing, you can work half as hard to make 100,000 per year. Or if you don’t know what you’re doing you can work the normal amount to make that 100,000. Or if you are really clueless, you can work twice as hard just to make the same 100,000. It all amounts to what you know and how you apply it.
Still not convinced? Take a look at this more in depth list of things you can deduct from your taxes – (Tax advantages home based business):
- Furniture: you can depreciate it over the length of 7 years or claim 100% in the year of the purchase
- Home office is worth 2400 per year on average.
- Home Office tax deduction rule.
- Has to be designated as work only area. I.e., if your home office is 30% of your house hold, then 30% of your mortgage, rent, insurance, and unities become a tax deduction.
- Office supplies, regardless, if there is a designated office space in your home.
- Your office is in one bedroom and equals 1/8 of the house. Then can deduct 1/8 of utilities, interest, taxes, depreciation, rent, maid service, alarm service. (Caveat, Canadians might not want to take home deprecation or they will have to pay taxes on that appreciation
- Use an exclusive portion of a room (separate and identifiable from rest of room).
- No other books in the business bookshelf.
- Take pic of home office every year and date it. Don’t put it in with tax return.
- Show use it regularly 45minutes per day 4 – 5 days per week.
- Use home as principle place of biz (no other office where you do your admin work).
- Do the majority of paperwork/management from your home office.
- Mileage on your car:
- You can do actual expenses. Actual % of gas, oil, insurance, wash, wax, depreciation. So total mileage driven one year is 50,000. Business use is 50%; therefore, 25,000 miles can be deducted. Expenses total 10k; therefore, you can deduct ½ which is 5K.
- Or you can use the IRS Method. Better to use IRS when you drive over 22,000 miles per year and cost of vehicle is less than $19,000. RS gives you 56 cents per mile for business; 23.5 cents per mile for medical or moving; and 14 cents per mile for service or charitable organizations. If you don’t write off your vehicles, you are losing a whole dollar for every 2 miles you drive. IRS method:
- Pay your kids to do work on your business, AKA, allowance.
- Pay your wife to help you with your business, AKA, thanks baby.
- Pet expenses if your fearless Chihuahua is used to guard your home business
- Meals & entertainment if talking business within 24 hours.
- Equivalent of you kid’s college & weddings & education.
- Medical plan and deduct braces.
- Travel with no geographical location limitations. I.e., how to deduct personal trips? Do you have client, business stop, nearby (even Hawaii)?
Understand this, You’ll never be financially free trading money for time by working for someone else.
As you can see, there is quite a bit on the line if you only work for someone else. So why not make a change and start your own business? What’s the one requirement to be able to take all these deductions and get all the benefits of owning your own business? Run your business like a business and keep accurate records. And if you follow the steps laid out in this article, you can not only save money on your taxes, but you can amass some huge profits like other successful online businesses.
To get access to get your very own home based business, click here.
To get Taxbot for recording everything and learning a few simple tax rules, click here (the link gives you 50% off and a 14 day free trial).
Any questions, feel free to contact me here. When you enter your name and email here, I will send you an email with all my contact information, as well as an ebook with all my contact information. Feel free to reply to that email or reach me by phone or skype.
To your Success,
Author: By Jody Heath (Owner Operator of SouthernProfit.Com)