Tax laws are written by politicians and they write IRS laws to shape society the way they and their constituents want. This is something that accountants and tax preparers are taught every tax season.
Politicians today want workers for the rich so they can live in bigger houses and take vacations their employees can only dream of winning the lottery. Those who want to help others end up giving the taxes paid by honest taxpayers to dishonest people, instead of those who really need it. However, you can help yourself pay less in taxes and make sure your tax money goes where it counts.
Big business and the rich spend money on accountants to figure out how to dodge taxes and give politicians money to pass the laws they want. As a small business person, you can take advantage of those very laws that the rich spend a lot of money to get.
Here are ten surefire ways you can use the IRS and your small business to your advantage, just like big business, and pay less in taxes.
- Run a business bank account because depositing into your personal account leaves it open to IRS inspection. If you want to keep the IRS out of your personal account, you must deposit all business money into an account used only by your business. That’s the way big companies keep the IRS away from your other money.
- Do not give away or gifts, advertise instead. A business is only allowed one gift of $25 per customer, donations go on your personal form if you are not onboarded, but you can spend all advertising done for your business directly on your Schedule C. When asked to gift or donate, ask if there is an opportunity to advertise in your niche.
- Never go without the necessary equipment in a business. Any necessary equipment is deductible, so buy what you need to earn the most money. Dont wait!
- Trips are also deductible if you go for business. Hire your spouse to work the booth at a convention and you’ll both be covered for the trip. What you do at night is your business as long as you both work on the show.
- Track every business mile you drive. This is usually a large deductible for a small business, so it’s important to factor in every trip to the bank or post office, to the store, to buy supplies, etc. Commute miles are not deductible unless you go to your second job (which includes self-employment) and follow special rules. Find out if you qualify or not.
- Learn what expenses are considered “normal and necessary” in your industry and keep track of all business expenses you incur that fit this category. You will lose less than what is deductible if you do. Any business expense offsets your business income.
- Spend money in the last few months of the business year on anything your business needs to keep going. Do this and you’ll lower your taxes and grow your business faster.
- Anyone who is double dipped must be turned over and you must never add to your income. Dishonest people take their regular income from taxpayers in the form of unearned social security disability, tax-free income, free housing, earned income checks, tax credits, taxpayer-funded child support, health care, etc. and double dip by keeping 100% of all income they earn for themselves. People who lie about their income or the number of children they have in order for the taxpayer to support them are cheating and making everyone’s taxes higher. An independent contractor pays 17% of their earnings to social security plus state and federal taxes. That means he can multiply the money from a double scoop by a minimum of two since they pay neither. These people steal from taxpayers like you, your spouse, parents, children, and others, and many make more money than some of these people. If every honest taxpayer turned over one or two of these dishonest swindlers, we’d have more tax dollars for those who really need our help. Use IRS Form 3949a, you can be anonymous and you can earn a reward.
- Invest money now for your retirement. Anyone can save money for retirement, and most get an IRS deduction for some or all of the money saved. A business owner can set up a SEP and save 25% of their compensation for retirement. That number may be hard to give up now, but he’ll pay less in taxes if he does, and when he’s old he’ll have money waiting.
- Go after the IRS to change current tax laws for your benefit. There’s clout in numbers, so you’ll want to join a group of similar businesses before you start, but then you need to work to get the tax laws changed in your industry’s favor. There is probably a group for business owners in your industry. Check there first. This has worked for other industries in the past and it will work for you.
If you follow these 10 simple rules as an independent contractor, self-employed person, or small business owner, you’ll pay less in taxes. Skip one or two and you’ll pay more than the big companies pay, and more than your fair share.