Moms Network

Small Business Owners, Stop Overpaying on Taxes!

Eric Tyson, MBA, author of the new book Small Business Taxes for Dummies^®, Second Edition, shares some great tax breaks you may not be using to your advantage.

          Hoboken, NJ (March 2019)—If you’re a small business owner, you know: The quest for revenue is never-ending. That means, besides chasing new customers, you’re also scouring your expenses to see where you might make cuts. Eric Tyson’s suggestion? Focus on minimizing one of the biggest (and sneakiest) expenses you face. Taxes.

          “Quite often, small business owners overlook some great tax reduction opportunities,” says Tyson, author of Small Business Taxes For Dummies^®, Second Edition (Wiley, March 2019, ISBN: 978-1-119-51784-9, $26.99). “Yes, we all have to pay taxes, but there’s no reason to overpay. Employ legal tax reduction strategies, send less to Uncle Sam, and you’ll automatically keep more revenue for yourself.”

          Keep reading to learn nine things you can do this year to improve your tax situation:

Invest in wealth-building assets. During your working years, you probably don’t need or want taxable income from your investments, because it can significantly increase your income tax bill. So, Tyson advises investing in real estate, stocks, and small business investments. These offer the best long-term growth potential. They are a tax-friendly option as well, because you’re in control and can decide when to sell and when to realize your profit. Hint: As long as you can hold on to these investments for more than one year, your profit is taxed at the lower, long-term capital gains rate.

Fund some retirement accounts. When you funnel your savings dollars into retirement accounts, such as 401(k), 403(b), SEP-IRA, or SIMPLE IRA, you can earn substantial upfront tax breaks on your contributions.

“If you think that saving for retirement is boring, just consider the tens of thousands of tax dollars these accounts can save you during your working years,” says Tyson. “And if you don’t take advantage of these accounts, you may well have to work many more years to accumulate the reserves necessary to retire.”

Contribute to a health savings account. HSAs hold promise for people to put money away on a tax-advantaged basis to pay for healthcare-related expenses. Money contributed to an HSA is tax-deductible, and investment earnings compound without tax and aren’t taxed upon withdrawal so long as you use the funds to pay for eligible healthcare costs. So, unlike a retirement account, HSAs are actually triple tax-free!

Calculate whether a deduction is worth itemizing. The IRS gives you two methods of determining your total deductions. You can either choose the standard deduction method, or you can choose to itemize. Standard deductions make sense if you make a regular paycheck, have a rented apartment, and have no large expenses. In 2019, single people qualify for a $12,200 standard deduction, and married couples filing jointly get a $24,400 standard deduction.

The other deduction method is itemizing. This procedure is more of a hassle, but if you can tally up more than the standard deduction amount, itemizing saves you money. Your personal property and state income taxes are itemizable, up to an annual cap of $10,000. Further, if you pay a fee to the state to register and license your car, you can itemize the expenditure as a deduction. (However, you can deduct only the part of the fee that relates to the car’s value.) Because you can control when to pay particular expenses that are eligible for itemization, you can shift more of them into selected years to take full advantage of itemizing. However, if your itemized deductions are equal to or less than the standard deduction, take the standard deduction.

Trade consumer debt for mortgage debt. Suppose you own real estate but haven’t borrowed as much money as your lender allows. And suppose you’ve run up high-interest consumer debt. In that case, you may be able to refinance your mortgage (borrowing at a lower interest rate than your credit card bill) and pull out extra cash to pay off your consumer debt. You may even get a tax-deduction bonus, because while consumer debt isn’t tax-deductible, mortgage debt usually is.

“Remember that refinancing your mortgage and establishing home equity lines involve fees and charges,” says Tyson. “Keep these expenses in mind when weighing the pros and cons of this strategy. Also, be aware that borrowing against the equity in your home can be an addictive habit that can handicap your ability to work toward other financial goals. Stay responsible.”

Consider charitable contributions and expenses. When you itemize your deductions on Schedule A, you can deduct contributions made to charities. Most people already know that when they write a check to a college or house of worship, they can deduct it. Yet many taxpayers overlook the fact that they can also deduct expenses while performing activities for charitable organizations. For example, when you go to volunteer at a soup kitchen, you can deduct your transportation costs getting there. You can also deduct the fair market value of donations of clothing and other goods to charities; just keep your documentation of donated items. Finally, you can deduct contributions to local schools, including youth sports programs, as long as the money goes to the overall team rather than being earmarked for your child. You can even deduct the cost of driving your kids to school events.

Scour for self-employment expenses. If you’re self-employed, you already deduct a variety of expenses from your income before calculating the tax that you owe. When you buy a computer or office furniture, you can deduct those expenses. Employee salaries, office supplies, rent or mortgage interest for your office space, and phone expenses are also generally deductible.

“Although more than a few business owners cheat on their taxes, some self-employed folks don’t take all the deductions they should,” says Tyson. “Be sure you take advantage of deductions for which you are eligible.”

If you’re part of a married couple, crunch the numbers on filing separately. About 5 percent of married couples file their federal income tax returns under the status of “Married Filing Separately.” Most do so to save money, but there can be other reasons, such as each spouse not wanting to be liable for their spouse’s tax transgressions. To know if you should consider this option, crunch the numbers. Couples with the following characteristics may benefit:

• If one spouse owns a pass-through business that is eligible for the 20 percent pass-through deduction but loses that deduction due to the combined income of their spouse.
  
• If one spouse has high medical expenses, which can be written off when they exceed 7.5 percent of adjusted gross income, but loses that deduction due to the higher combined income with their spouse.
  
• If the couple lives in a state that has a tax code that may favor spouses who file separately.
  
• If you have a tax preparer, be careful to understand their additional fee for filing separate returns as that cost may wipe out the potential tax savings.

Consider working overseas. When you work in a foreign country with low income taxes, you may be able to save big-time on income taxes. For tax year 2019, you can exclude $105,900 of foreign-earned income (whether you work for a company or are self-employed) from U.S. income taxes. To qualify for this exclusion, you must work at least 330 days (about 11 months) of the year overseas or be a foreign resident. If you earn more than $105,900, don’t worry about being double taxed on income above this amount. You get to claim credits for foreign taxes paid on your U.S. tax return, and the IRS gives you two extra months, until June 15, to file your tax returns.

Remember two caveats to this exclusion. First, many of the countries people dream of living in—such as England, France, Italy, Sweden, Germany, and Spain—have higher income tax rates than the ones in the United States. Also, this tax break isn’t available to U.S. government workers overseas.

          “When you’re running a small business, every penny counts,” says Tyson. “Having more revenue in the bank can make the difference between struggling and thriving. A smart tax strategy can help more than you may have ever realized.”

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About the Author:
Eric Tyson, MBA, is the author of Small Business Taxes For Dummies^®, Second Edition (Wiley, March 2019, ISBN: 978-1-119-51784-9, $26.99). Eric is an internationally acclaimed and best-selling personal finance author, counselor, and writer. He is the author of five national best-selling financial books including Investing For Dummies, Personal Finance For Dummies, and Home Buying Kit For Dummies. He has appeared on NBC’s Today show, ABC, CNBC, FOX News, PBS, and CNN, and has been interviewed on hundreds of radio shows and print publications.

About the Book:
Small Business Taxes For Dummies^®, Second Edition (Wiley, March 2019, ISBN: 978-1-119-51784-9, $26.99) will be available at bookstores nationwide, from major online booksellers, and direct from the publisher by calling 800-225-5945. In Canada, call 800-567-4797. For more information, please visit the book’s page on www.wiley.com.

Simple words…

Don’t put so much pressure on yourself.  Sometimes your big picture dream and goals for your home based business can seem so far out of reach that it can stall you right in your tracks.  They can, in essence paralyze you, unless viewed realistically.  While it is good to have that big picture in mind, you need to break that dream down into small goals that you can complete in a timely fashion.  You need to feel a sense of accomplishment as you work with your business.

So, give yourself a break, take a deep breath, step back and dissect that dream into tasks that are baby steps to help you get to the finish line.

So small it could almost be a miniature elephant

It’s a buzz word. Time Management. We manage everything to death! Can we really manage time? It seems to me that time manages itself on its own. I look at the clock and I never see the hands skip ahead or stop for a break. I would sometimes like it to begin to move backwards, but wishing won’t make it so! Can we stop or start it? I wish we could. We cannot manage time any more than we can schedule when the sun will rise or set! Time Management is defined as self management and event control. What we manage is not time but, we manage ourselves and how we use time, and schedule and prioritize events. Time will pass regardless of what we are doing. There is no special way to freeze it or bottle it up to use a later time. So when we say “time management” we are really referring to the art of balancing events to increase our personal productivity. Moving faster and faster does not improve our productivity. My father had a great saying, “the hurrieder I go, the behinder I get”. Many times if we try to move faster we end up making mistakes that would cause us to have to repeat the task in order to complete it properly. Increasing our speed does not necessarily increase our productivity. Increasing our speed is guaranteed to raise our stress levels, but not our productivity. So if self management does not mean stepping up the pace, what does it mean? “There is more to life than increasing its speed.” -Mohandas K. Ghandhi * Self management really relates to several things. * Self Discipline * Emotional Control * Problem Solving Skills * Communication Learning the art of self discipline and emotional control is crucial, but often learning new problem solving skills and communication can speed up many difficulties that related to time. Think about those four areas. Where can you improve? Event Control Event control really relates to the tasks and how we schedule those events. You know your events are not scheduled well if you arrive everywhere out of breath , and you feel like your day timer has a life of its own! Firstly, to be effective in managing our tasks we need to decide what things are important to us; to set goals. It is important that we decide what it is that we want out of our life and schedule our time to reflect this. In deciding our goals, we then need to rank importance or prioritize over all of our tasks in general and relate them to our goals. It is important when setting these goals that you remember to have personal and family goals too. You have a life away from work or your business. And remember this, if you are not setting and working towards your own goals, someone else will have you working towards theirs. (And maybe that is why your schedule is so full!) The second part of event control has to do with grouping like events together. If you set a day specifically to run errands, you are often able to combine trips. I remember reading stories when I was younger where women running the household set certain days for certain tasks. Often they planned their days a little better! You remember: wash on Mondays, baking days were Saturdays, etc. It is only since technology has advanced and we have become more affluent that we lack organization. How many of us think nothing of jumping into the car to run to the store, several days a week? If we just went to the local store, it still takes more time to make three trips than it does to make one! So the trick is to combine like items together. If you are scheduling appointments, try to arrange them so that they fall on the same day. You will be dressed for success and out already anyway, so try to do them all on one day! If you have administrative errands to do, do them all at one time too! About a month before Christmas a friend asked if I had done my Christmas baking. My reply surprised her. I told her no, I would do it all on one day. I explained that if I did it over the course of several weeks, I would take the sugar out of the cupboard six or seven times, and I would have dishes to do as many times as well. In addition to this I would have the general clean-up that we have to do after baking to do six or seven times as well. Therefore I do it all one afternoon and it is over and done. I involve the kids and we make it our bake day. In the end, I spend less time doing it all and it is less stressful and it does not all get eaten before the next baking day comes! Take some time to review your events. Can you schedule errands to be done all at once instead of on three separate occasions? Look at where you spent your time yesterday and add up all the trips out you made. Grouping our tasks into different types of days is instrumental in how effective we are in doing the important things at the right times. Grouping days keeps us focused and we spend less time running around doing errands and tying up loose ends. Working smarter means that we organize our tasks in a way that we begin to use our time more efficiently. Managing our events means that we must begin to work smarter. Most of us have been raised with a strong work ethic. We believe that working hard will get us what we want out of life. This may or may not be the end result. One thing is certain, there are only 24 hours in a day, and we can work hard and long but if it is not effectively organized then all we end up with is a tired body and frustrated mind. Learn to work smarter, not harder and you will find that 24 hours really can stretch! Mandie Crawford, author of “When Every Second Counts” and owner of www.mandiecrawford.com responds to what she views as a growing need for the public to slow down and simplify their lives. Mandie now teaches Time Management, Organization, organizes homes and offices and  is a certified behavior consultant. Mandie also coaches people and  assists them to get their lives in order, and motivates them to set and reach their goals.