Tag Archives: how to reduce taxes for high income earners

Tax Time: Having A Small Business Helps

Start A Business To Reduce Taxes?

Creating a business for tax purposes is an excellent thing to do because the side business deductions can significantly impact your final tax bill.

Now, I know the issue makes a few folks twitchy because you see news stories and made for TV movies about folks having trouble with the tax man.

I know how you feel. I felt the same way.

After doing my due diligence and researching the issue I found that the time and effort required to keep proper records to take advantage  of the tax law also gave me additional tools and information I needed to make my household a more profitable enterprise.

What Is An Eligible Small Business for Tax Purposes?

I don’t think it matters too awfully much. As long as your business is a legitimate business providing goods and services to your customers and it is run from your home I would think it eligible for using as a source of deductions to reduce your tax bill.

Now, having said that let me add this. While I am not a tax professional it is my understanding that after some period of time your business has to generate some kind of income in order for you to continue to use it to generate income tax deductions.

Besides, you have the business, right? You might as well try to make it profitable.

So, it is my opinion that the best business for tax purposes is one that sells products or services about which you are truly excited about using and representing.  If you like what you are selling and believe it to be of value to your clients then the question of which business is best for your tax situation becomes irrelevant

Your Tax Team

You are going to need a tax team of qualified professionals and I am not on it. That is my way of saying I am providing this in an effort to help but you will need your own trained professionals to help you when it comes down to keeping records and filing.

Years ago I was an agent with Northwestern Mutual Life. One of the things drilled into me was that no one can do everything and that the best plans come from teams of professionals.

Your team should consist of the following:

  1. Accountant.
  2. Tax attorney.
  3. Banker.
  4. Life insurance Agent.

You probably won’t need them all starting out but as your business becomes profitable the choices and options expand greatly.  The four types of professionals working together can create a quite strong set of protections between your wealth and those who like to confiscate it.

Tools for Tax Savings

As we discussed above you will need to hire talent. I don’t mean like a full time accountant. You will just need to begin to develop relationships with local professionals so when you have a problem you already know where to go.

In an effort to find ways to reduce taxable income small business owners will have to invest in not only talent, but also some tools.

Quicken or QuickBooks or similar software packages are essential. You won’t understand everything at once but as time goes on and you develop a need for the capabilities of the software it will come.

Which accounting software are you going to use? Money? Quicken?

You might want to get your accountant person in place first, then ask them which one they use. It will save time and you have someone to ask question of besides the software’s helpline which is generally not staffed by accountants.

How are you going to keep records? I use Day Timer but the Franklin Planner or Day Runner are fine, too. You may go through several until you find the one suited to your brain. How will you know? Because it will be one you finally start using every day.

How are you going to manage your relationships with your customers? A CRM, or Customer Relationship Management package is essential. It is my opinion there is a 100% chance you will leave money and lose customers if you do not use a CRM. These can be expensive.  Here is the CRM I use.

Business Loss Tax Deduction Limit

  • You can deduct as many expenses as you incur for the year.
  • If you have income as an employee, you can deduct business expenses that exceed your business income from your regular income.

There are also ways to carry losses forward but that is a subject for you accountant. As you build your business and it becomes successful the issue of how to reduce taxes for high income earners will move from being an issue that puts you out like a light to one that makes you light up like a Christmas tree with excitement.

Here’s to keeping more of what you earn,

TimSingleton

 

 

 

Tim Singleton

Here are a couple of links related to the subject at hand: