Taxes and Tax Information

Why a Corporation Helps Save You Taxes

The Tax Rates (Notice anything unusual?):

The following tables provide a list of the tax rates for individuals and corporations:

Personal:
$0-$24,650 15%
$24,651-$59,750 28%
$59, 750-$124,650 31%
$124,651-$271,050 36%
$271,050+ 39.6%

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Corporate:
0-$50,000 15%
$50,001-$75,000 25%
$75,001-100,000 34%
$100,001-$335,000 39%
$335-000-$10M 34%

If you examine them closely, you will see at least one glaring contrast. The individual making $49,000 per year is in the 28% percent bracket, while a corporation that earns $49,000 is only in the 15% bracket. That¡¦s a potential 13% difference in your tax rate if you organize your finances to take advantage of this one little item.

But, that¡¦s just part of the story. An individual who makes $49,000 in salary pays taxes on almost the entire $49,000. However, a business can first deduct its operating expenses, and only pay taxes on what¡¦s left. As Robert Kiyosaki says ƒ± the corporation acts as a filter that is used to reduce the corporation¡¦s taxable income by utilizing the tax deductions afforded by the tax code.

Basic corporate deductions include telephone expenses, equipment (faxes, computers, photocopy machines, telephones), automobile gas, repairs and insurance, travel, entertainment, seminars, etc. Do you have any of these types of expenses? Sure you do!

The difference is that businesses subtract these first, then pay taxes on the balance. You, as an individual taxpayer, pay taxes on the greater amount, then pay for these expenses (you call them living expenses) out of what¡¦s left. Did you ever wonder why there¡¦s not much left for living at the end of the month? Now you can see why. The question is “Are you going to do something about it?”

Keep in mind that there are two steps here; first you must start to shift your efforts from earning a salary to earning more money through your business. There are many ways that you can do this.

For instance, you can start with your own business concept. Maybe you¡¦ve already got an idea that you want to pursue. It could be a product or a service or something along the lines of art and crafts. It doesn¡¦t have to be sophisticated or high tech; it just has to have a profit motive.

Secondly, you may have something that you already enjoy doing as a hobby. You can probably convert that activity into a viable business enterprise. Just remember that there are rules that you must follow to ensure that your new-found business is not treated as a hobby by the I.R.S, and the deductions voided.

Thirdly, you can get into a network marketing business. There are many available, some of which don¡¦t require a lot of money to get going. The older types of network marketing schemes available in the past made little money for anyone except the original promoters.

Today, Wave 3 network marketing companies offer legitimate profit potential and significant residual income streams. I will be happy to make a recommendation if you like. Lastly, you may be able to sell the services of your new company to your employer. Suppose for example that there is some aspect of your job that you think can be done less expensively or more efficiently on an out-sourced basis.
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It could be anything really, clerical services, database management, sales or marketing. Instead of working overtime and on weekends to make more fully taxable income, your company could generate revenue by providing the ¡§outsourced¡¨ service to your employer, and, in doing so, you could take advantage of the tax benefits.

And the nice thing is that any of the above can be done on a part-time basis. You can maintain your current job (and income) while you grow your new business.

The next step is to learn to maximize your deductible expenses. The items listed above are only a few of the many deductions that are available. We will be going into more advanced topics later in this booklet.

One of the best ways to start this process is to review your current expenses and see if there is a way to convert these expenses to business expenses. Start with your checkbook; list all of the expenses that you pay each month on a piece of paper. Next, go through your credit card bills for the last year and list them. Next, go through your cash receipts and see where your cash was spent.

Now, having done that, you want to see which of these expenses can be converted into business expenses. For instance, I¡¦m sure that you spent money on your automobile lease or note payments, gas, insurance, repairs, etc. In many cases, a portion of these can be converted to business expenses, if properly documented. Then, take a look at your phone bill. Some of this can be converted. The same is true of travel, meals and entertainment. And work your way down the list. The key is not to add additional expenses just because they are deductible, but rather to convert those things that you are already spending money on into legitimate business expenses.

Keep in mind, that the I.R.S. has specific rules concerning each kind of deductible expense. These rules must be followed. It is imperative, therefore, that you work closely with your accountant to insure that you are in compliance with these rules. THERE ARE STIFF PENALTIES IF YOU FAIL TO DO SO.

Why a Corporation Helps you Save Taxes *

Lets look at the tax advantages of the corporation. The difference between how much or how little you pay in taxes is when you pay your taxes as an individual or as a corporation and what your tax rate is.

Your Tax Base and Tax Rate Make a Big Difference to Your Savings!
Tax Help

Individual Corporation
Your income (Your Tax Base) Your Income
Tax at 28% **

Expenditures Expenditures
Your Tax Base Tax at 15% ***
Savings Savings

Sincerely,
Drew Miles, The Tax Saving Attorney

Drew has combined what he learned during formal education, informal education and twenty five years of business experience in the development of programs designed to teach people how to build and preserve lasting wealth. He is an author, teacher and international speaker in the areas of asset protection, and tax saving and wealth building strategies.

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“Deducting Meals and Entertainment”

O.K. You’ve been working really hard on these lessons. Now its time for some fun. Are you with me? Imagine if you could spend time with friends, eating, drinking and seeing shows and your company could foot the bill? Wouldn’t that be GREAT! Fasten your seat belt, we’re going on a (tax-deductible) journey…

Tax Secrets of the Rich found here

Our first stop is meals. There are several great ways to deduct your meals. The first is to turn your social outings into business meetings. No Fun, you say. Watch this, I say. Many of my lunches are already spent with colleagues and associates. That’s the way it is when you’re in business for yourself. You start spending more and more time with business partners and associates.
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Well, if I have lunch or dinner with a friend, that’s NOT tax deductible. But, if I discuss business with that same person, suddenly it becomes a deductible expense. And what does it take to officially discuss business? The IRS says that that the following conversation will suffice:

Your Associate: “How’s Business?”

Your Reply: “Great, but I could always use more business” (with the inherent request for referrals) That’s it. You’ve just turned a social gathering into a legitimate business meeting and the meal becomes 50% deductible. Don’t forget to document it properly.

What about having a meal with your spouse or “significant other.” We’ll the IRS is pretty darn smart, so they aren’t about to let use write off all our romantic dates. Yet they realize that when two couples go out for a meal, that’s a great time to discuss business in a relaxed setting. So the rule is that if you and your spouse enjoy a meal with another couple and you have that same business discussion outlined above, the meal is (50%) deductible. You want more? No problem.
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How about dinner and a show. Or what about a full day on the golf course? The rule is that if you have a business meeting that is followed by entertainment, or entertainment that is followed by a business meeting, that’s a deductible expense. The IRS wants to see that you have a table or some other flat surface available to you during the meeting, so that you can sign documents, etc. Same thing goes for skiing, the movies or even a day at the beach. How about a ball game or even the Super Bowl? Just precede or follow it with a business meeting and document what you discussed.

One more, you say. Fine here it is. Imagine that you work for a large insurance company or law firm. You’re involved in a big case and you’re up against a touch deadline. Your boss comes in toward the end of the day and says, “I need you to work though dinner tonight- we’ve got to come in under that deadline. Don’t go home for dinner, just order in, on the firm”. Its called “supper money” In essence, your boss has allowed the company you work for to buy your dinner.

Your own company can do the same for you. Just don’t forget to document your expenses properly.

Sincerely,
Drew Miles, The Tax Saving Attorney

Drew has combined what he learned during formal education, informal education and twenty five years of business experience in the development of programs designed to teach people how to build and preserve lasting wealth. He is an author, teacher and international speaker in the areas of asset protection, and tax saving and wealth building strategies.

Popularity: 1%

Adding Your First Additional Stream of Income

Most new wealth builders currently have a full-time job. After realizing that means “Just —-Over Broke” they commit to quitting their job and starting their own business.

Tax Secrets of the Rich Found Here

The concept is good, but let’s turn it around some.
One of the philosophies of the wealthy is to reduce risk. In this scenario, that means keeping your job until your business has been firmly established. That’s because the biggest stress point for new businesses is cash flow. Even if the owner has a viable business strategy, it takes time to get the machine operating smoothly. In the meantime, income can be sporatic. Cash flow shortages, even temporary, can create havoc for the small business owner.

Use your salary as your core business income. In other words, if your job brings in $50,000 a year, treat that in your mind as if you have one client that brings in that much cash flow. Be frugal with it, manage it carefully.

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Now use your business to generate a “second” client and a “third” client. Continue to build your business until the business income matches your salary.

At that point, you can make an intelligent decision about timing the move to full time businessperson.

The mistake some people make is to leave their job too soon. Three to six months later, there is a shortfall of cash. Without sufficient cash, bill don’t get paid and the pressure mounts. Creditors start calling and the downhill spiral begins.
While you build your business, keep your job resentment in check. View your job as an opportunity to finance the development of your own business without unnecessary pressure.
Then, as your business grows, avoid the temptation to spend the additional income on fun and games. Instead, invest the additional income back into the business to help it grow. Build the systems that allow you to delegate lower level activity. Add the computers and data base programs to make things run smoother. Focus on marketing your business and attract new customers.

Expect to re-invest at least 50% of the additional income in growing your new business.

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Now, as your net business income meets and exceeds your job income, you can transition yourself into a full-time business owner.

Sincerely,
Drew Miles, The Tax Saving Attorney

Drew has combined what he learned during formal education, informal education and twenty five years of business experience in the development of programs designed to teach people how to build and preserve lasting wealth. He is an author, teacher and international speaker in the areas of asset protection, and tax saving and wealth building strategies.

Popularity: 1%