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[Book Report] Lower Your Taxes Big Time, By Sandy Botkin
In this "book report," I cut through the fluff, and outline only the most useful ideas and information from the book, so that you can put them to use right away.
If you're a business owner, now is a good time to make sure you're getting all business deductions you're entitled to for 2008, and to think about tax planning for the new year.
In his book, Lower Your Taxes Big Time, Sandy Botkin, a former attorney and trainer for the IRS, shares some insider info on our tax laws that you're sure to like as a business owner. He even tells you which section of the IRS tax code the info comes from, and how to "audit proof" your tax return with proper documentation.
Chapter One: Why You Would be Brain Dead Not to Start a Home-Based Business
In this chapter, Botkin shows how having more than one job in a family doesn't produce any major effect on most people's incomes, because of the tax laws.
He illustrates his point with an example of a married couple with kids. When the wife gets a job to supplement the family income, they end up with only $1,156 more for the year. This is because they are now paying all the federal and state taxes, social security tax, transportation costs, better clothes, childcare, and eating many meals out, for both lunch and dinner, and other expenses associated with having less time.
Then he explains why you would be brain dead not to start a home-based business. Of course, as small biz owners, you and I already understand the benefits.
Chapter Two: How to Deduct Your Fun
1. Deduct 50% of your meal, if you had a prearranged appointment to discuss business with your companion/s.
2. Deduct 50% of entertainment costs, as long as the entertainment precedes or follows a substantial business discussion.
3. To audit proof these deductions, you need to document the following:
* Who was entertained
* Where did it take place
* When did it take place
* Business purpose (eg: "Tried to get a listing or referral", "Talked about my services", etc.)
* Cost (save receipt)
4. Deduct 100% of the cost of an entertainment event, if it's a benefit for a tax exempt charity, all the proceeds are contributed to the charity, and the event is staffed mostly by volunteers.
5. You're not required to keep receipts if the bill is under $75, but it's good to keep them anyway, as IRS agents love seeing receipts.
Chapter Three: How to Turn Your Vacation into a Tax Deductible Write-Off
1. You are on business travel when you go on a business related trip, and stay somewhere else overnight, though it can be at a friend's or relative's house. There is no geographical limit to this travel - even if you stay at a hotel near home, you are considered to be on business travel. For example, if you are teaching a seminar at a hotel near home, and stay at the hotel overnight, your expenses are deductible.
2. If you have a legitimate business reason, you can bring your spouse or friend on the trip, and deduct his/her travel costs as well.
3. You can even deduct your expenses for a weekend during your business trip, if you have business activities, at the location, on Friday and Monday.
4. Be sure to keep good records of your trip, and have business appointments, seminars, or activities scheduled in advance.
Chapter Four: Income Shifting and Income Splitting
1. Hire your spouse, and deduct medical expenses that ordinarily wouldn't be deductible.
2. Hire your children, and deduct their wages. In 2007, the first $5,350 of earned income is tax free because your children receive a standard deduction of this amount on their own tax return.
3. When hiring any relative, document the following:
* Day of the week he or she is working
* Date
* Description of task performed
* Number of hours worked
Chapter Five: How to Turn Your Car Into a Tax-Deductible Goldmine
1. You can deduct the larger of the actual expense or the optional IRS standard rate (48.5 cents per mile in 2007).
2. Keep track of your business driving with the following documentation:
* Where you went
* Business purpose
* Starting/ending odometer reading
* Number of miles driven.
3. I keep a dedicated datebook in my car, to keep track of my mileage. This way, it's easy to get in the habit of writing down my mileage and information, every time I drive for business purposes.
Chapter Six: Home Office: The Misunderstood Key to Saving $15,000 Every Five Years
1. To take the home office deduction, a portion of your home should be used exclusively, on a regular basis as one of the following:
* Your principal place of business
* A place of business that you use to meet with clients
* Part of a day-care business
2. There are three ways to take this deduction:
* Number of rooms office occupies, divided by total rooms in the house
* Total square feet office occupies, as a percentage of total square feet in the house
* Net square feet applicable to office use.
The book also includes information on:
* Beating an IRS audit
* How to shield yourself from having the IRS classify your business as a hobby
* How to incorporate to save money on taxes
* Business fringe benefit deductions
* Top 10 tax questions
While it was my intention to share useful information from the book that you could use immediately, Lower Your Taxes Bigtime is so full of interesting deduction ideas and detailed information, that I couldn't possibly cover them all in this book report. Even if you pick up just a few tips that save you money on taxes, this book is definitely worth reading.
About the Author Emilie Nottle is a Graphic/Web Designer, Online Strategist, and Principal at Zooop Design - a full service graphic and web design firm. If you're ready to make the most of your online presence, automate your marketing efforts, and grow your biz, subscribe to her free monthly eZine .
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