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When you join the SOHO world,
you actually receive a dual membership. You also join the 30 to 50 percent tax bracket. While entrepreneurs who have been around for while quickly learn
about their jump to the big time (in IRS terms that is), it is quite a shock for new SOHO's to discover that such a high percent of their hard-earned
profits will not end up in their pocket, but instead will go to government coffers.
The big question is "how do you stop the tax man from taking more than
his fair share?" The answer to that question and many other tax issues
is found in one of the better small business tax guides available,
Tax Savvy for Small Business published by Nolo Press. Here you will find answers to questions on scores of tax-related issues.
You might not even know you need to ask many of the questions until you browse through
Tax Savvy. And unlike most of the IRS publications, in
this book taxes are explained in common sense terms using understandable language.
While most people do no go into business to become tax experts, it is dangerous for anyone in business to not have a basic understanding of business taxes. Not taking the time to learn the basics can end up being a very expensive option.
Tax Savvy takes a basic approach to helping you understand tax planning based on the simple principle that there is money coming in from sales and money going out for expenses. What is left over is called profit and that is what you pay taxes on.
The challenge is to be sure you are taking all the legitimate expenses you can to benefit from not having to pay taxes on that portion of the business income. And that means that the SOHO person needs to have an awareness of what is deductible. When you realize that you are in the 40 percent tax bracket, every dollar you can put to the business expense column will decrease your tax bill by 40 cents on the dollar.
And that's Money that will go straight to your pocket.
A few examples of what Tax Savvy helps you understand include:
Automobile expenses
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Education expenses
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Entertainment expenses
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Depreciation and Section 179 deductions for equipment purchases
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Home office deductions
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Fringe benefits (perks) for business owners
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Retirement tax strategies
And it doesn't stop there.
Tax Savvy also covers:
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Record keeping and the value of a good bookkeeping
system
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How to keep good records that will stand up to an IRS
audit
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How to deal with taxes if you have
employees
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And a breakdown for your specific business structure whether you are a Sole Proprietor, Partnership, C Corporation, S Corporation or Limited Liability Company.
Tax Savvy
also covers a number of other not so common issues, like:
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what to consider when you buy or sell a
business
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what to do if you are in a cash crunch and can't pay your
taxes
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guidance for dealing with a the IRS when they tell you they want to sit down and have a little chat on one of your tax returns.
These and many other "special" situations are part of
Tax Savvy's wealth of information.
Tax Savvy for Small Business is one of the best and most understandable books on small business taxes on the market. Unless you have an army of accountants working for your business this book is a must read.
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