VIcky Collins

I have had the privilege of teaching thousands of home-based business owners about the excellent tax benefits that are available to them. I love it when the "aha" moments come as I debunk myths and fears of the IRS, or shed new light on tax deductions. My seminar attendees have taught me a lot too. I have learned that there are common mistakes made by many home-based business owners and these mistakes can cost many thousands of dollars each and every year.

Let me ask you to ponder on these questions

õ Are you satisfied with the taxes you pay?

õ Are you confident you're taking advantage of every available break?

õ Is your tax advisor giving you proactive advice to save on taxes?

I've got bad news and I've got good news. The bad news is you're right. You probably do pay too much tax. You might not be taking advantage of every tax break you can. Sadly, many tax and financial advisors do a poor job of actually saving their clients tax dollars. The good news is you aren't stuck. You just need a better plan.

#1: Failing to Plan

"There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn't prevent that." William H. Rehnquist

The first mistake is the biggest mistake of all. It's failing to plan. Many of us are excellent at planning a school party or planning a cool vacation, or even for a possible emergency, but many also fall short when it comes to planning for tax. Consider it financial self defense. To get the outcomes you want, you need to plan.

It really doesn't matter how good you and your tax preparer are with a stack of receipts on April 15th, if you don't know there is a way to write off your kid's braces as a business expense, you'll still be overpaying your tax bill.

In football, a team needs a coach to cross the finish line. In business, you probably need a tax coach. Tax coaching is about giving you a plan for minimizing your taxes.

õ What should you do?

õ When should you do it?

õ How should you do it?

Tax coaching offers two more powerful advantages.

1. It is a key financial defense. As a business owner, you have two ways to put cash in your pocket. Financial offense is making more while financial defense is spending less. For most people, your largest expense is tax. It just makes sense to focus our financial defense where we spend the most. You might already use other forms of financial defense such as using coupons at the grocery store or taking advantage of discount buying. How much will those strategies really save in the long run compared to what you could save in taxes?

2. Tax coaching guarantees results. You can spend all sorts of time, effort, and money promoting your business. These are smart financial offense strategies. But that doesn't always guarantee results. You can set up a medical expense reimbursement plan, deduct your daughter's braces, and guarantee savings.

Ultimately, there are only two kinds of dollars: pre-tax dollars, and after-tax dollars. Pre-tax dollars are great. And after-tax dollars aren't bad. But they're not as good as pre-tax dollars. So here's the bottom line:

You lose every time you spend after-tax dollars that could have been pre-tax dollars.

The rest of this series will be spent showing you how to turn after-tax dollars into pre-tax dollars by using three primary strategies.

õ First, earn as much nontaxable income as possible.

õ Second, make the most of adjustments to income, deductions, and credits.

õ Third, shift income to later tax years and lower-bracket taxpayers. This includes making the most of tax-deferred retirement plans and shifting income to lower-bracket children, grandchildren and other family members.

There's really no magic to it, other than knowing what's available. That's why I'm here. Things to keep in mind:

õ You need to pay what you legally owe in taxes

õ You do not need to pay more than you legally owe in taxes

õ Legitimate tax strategies keep things legal for you

Articles by Vicky Collins, CPA are intended for general use and are not to be construed as personal tax advice and will not be considered a defense against penalties imposed by IRS. Always check with a tax preparer before adopting tax strategies.

© 2007 Vicky Collins, CPA All Rights Reserved. This article may not be copied or distributed in part or in the entirety without express written permission of the author.

Contact Vicky Collins Deduction Diva Website

These articles are copyrighted. In order to reprint them, you must have permission from the author and use the bylines and contact information given by the author. Contact webmaster@barefoot-executive.com for more information. Thank you for not violating the copyright by reprinting, emailing or otherwise sharing without permission.