The Biggest Mistake of All Now that you see how business owners and professionals miss out on tax breaks, let's talk about the biggest mistake of all. What mistake is that? The biggest mistake of all is missing our tax planning service. Have you heard the saying "if you fail to plan, you plan to fail?"
Here’s a fun deduction... business meals. The basic rule is that you can deduct meals where you conduct a "bona fide" business discussion. This means clients or patients, prospective clients or patients, referral sources, and business or professional colleagues. So let me ask you - when do you ever eat with someone who's not a client, prospect, referral source, or business colleague?
Car and truck expenses are easy to overlook. That's because most taxpayers simply take a standard mileage allowance. But that allowance is the same for all vehicles, no matter how big they are, how much they cost, or how much gas they guzzle. Do you think every car on the road costs the same amount per mile to drive?
Home office expenses are probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared it raised an automatic audit flag. But Congress has relaxed the rules, so now home offices attract far less attention. Your home office qualifies as your principal place of business if...
Let's talk about health-care costs. Surveys used to show that taxes used to be small business owners' biggest concern. Now it's rising health care costs. If you pay for your own health insurance, you can deduct it as an "adjustment to income" on Page 1 of Form 1040. If you itemize deductions, you can deduct unreimbursed medical and dental expenses on Schedule A, if they total more than 10% of your adjusted gross income. But most of us don't spend that much on healthcare, so we don't get full deductions for what we spend. What if there were a way to write off medical bills as business expenses?
The minimum age for hiring a child is just seven years old. That lets you get started saving early, and even help give them good work habits. They can earn up to the standard deduction amount for a single taxpayer without paying any income tax at all.
Choosing the right retirement plan can be just as challenging as choosing the right business entity. How much do you want to contribute for yourself? How much can you afford to contribute for your employees? If you're looking to save more than the annual limit for IRAs, you have four main choices...
The next mistake is choosing the wrong business entity. Most business owners and professionals start out as a sole proprietor, then go on to establish a corporation or limited liability company. But which corporation? A "C" corporation for employee benefits or an "S" corporation for minimizing employment tax?
The second mistake, which keeps people from taking advantage of true tax planning, is holding the wrong expectations.
Do you think tax planning means "raising red flags"? Taking advantage of "gray areas"? Being "aggressive" and hoping not to get audited?
The first mistake is failing to plan. Planning is the key to beating the IRS, legally.
I don't care how good your accountant is with a stack of receipts on April 15. If you didn't know you could set up a Section 105 plan and write off your kid's braces as a business expense, there's nothing you can do on April 15. You lose that deduction forever!
True tax planning gives you concepts and strategies needed to minimize your taxes; in plain English, not legalese; without intimidating spreadsheets or endless "projections" that change every time Congress decides to change the law. What should you do? When should you do it? How should you do it? And tax planning gives you two more valuable benefits.