Posted By Kelly Reins on March 31, 2015
Springtime is a wonderful time; exhibiting life in many ways. Bulbs awake from their winter slumber and breakthrough in the most lovely and hopeful way. Neighbors begin showing up out-of-doors taking walks, biking, and gardening. Gorillas in tu–tus and highly animated Statues of Liberty wave signs on many-a-corner, advertising that it’s that time of year again. “It’s tax time, and we can offer you a deal while helping you file your taxes. We’re reputable of course. Our professionalism is packaged in a tu-tu.” Ah, yes, spring is here!
In honor of fast approaching tax day, I thought I’d share one of my favorite books. I’ve experienced first hand the benefits of Sanford Botkin’s tax strategies in more than a few home-based businesses. Sanford Botkin, CPA, Esp. used to work the IRS teaching auditors how to audit you until he founded Tax Reduction Institute over a decade ago. As the story goes, he did his father’s taxes one year and saved him a significant amount of money and his father was able to go on a dream vacation, his first vacation in many, many years. That insight led Botkin to teach how small and home-based business owners could do the same and more.
“Lower Your Taxes – Big Time” is not a financial planning book or a book about money, it is a practical book on tax strategies and IRS audit proofing techniques. An excellent tool for serious household managers. The book covers: Why you should start a home-based business. How to completely deduct the equivalent of your children’s college, room and board, and their wedding. How to deduct automobile expenses. Ways in which your home is tax-deductible. How to audit proof your tax journal. How to shield yourself from the IRS classifying a business as a hobby. Finding the best corporate entity for your business. How to eliminate up to 40% of your social security and medicare tax with an S corporation. How to get assets and money into a corporation tax-free. Over looked real estate deductions and other fringe benefits.
“There are really two sets of tax laws in this country. One is for employees; it allows deductions for normal employee items, such as individual retirement accounts, 401(k)s (if you have one set up by your company) , interest and property taxes on your home, and charity. Then there are the laws for small and home-based business people who conduct their business either full or part time. In addition to the tax deductions employees can get, small business people can deduct, with proper documentation, their house, their spouses (by hiring them), their business vacations, their cars, and food with colleagues. They can also set up a pension plan that makes any government plan seem paltry by comparison and deduct most of their “vacation” trips if they combine them with an appropriate amount of business.” Emphasis added.
Would you love to give up your job and spend more time at home? A home-based business may be the means to get you back home. The title of chapter one speaks to the same notion. It’s titled, “Why You Would Be Brain Dead Not to Start a Home-Based Business (If You Don’t Already Have One) The chapter overview is as follows:
- You’re never going to get rich until you get your taxes down to the legal minimum.
- There are two tax systems in this country–one for salaried employees, one for small business owners.
- A home-based business will make you better off than a second income.
- Traditional job security has declined over the years and will continue to do so, making home businesses more attractive.
- You will probably save $2,000-$10,000 per year by starting your own part-time business.
So why not just add a second income to the household budget? Botkin outlines an example that is just plain hard to argue with. The facts are all there. A second job yielding $15,000 will net you a take home of $1,156 after non-deductible taxes, car expenses, child care, lunches, business attire, and take out easy prep food since she, the wife, is oh-so-tired, too tired to cook after a full day of work.
The same work done at home? “The expenses wouldn’t be dramatically more then she is currently spending.” he says, but many of us have proven it costs much less. Botkin continues, “If she had a home-based and/or consulting business, however, many of her expenses become deductible. This concept is know as ‘redirecting expenses.’ With a home-based business, she can now deduct some of the expenses that she is incurring anyway.”
This is significant considering this recent popular article, where the author considers the economic value of the investments his wife makes in creating a better quality of life for him and his family running his household than he could obtain out sourcing her work.
Here’s a couple snap shots of my favorite pages of this book:
Botkin gives more reasons a home-based business is an attractive option.
The security my grandparents knew has gone away. “…the era of large corporate profits and economic growth came to an end. Moreover, many economists believe things won’t be getting better any time soon.” Is the American dream possible any more? “Today, young and middle aged alike are realizing that their dream of having a job with a company forever is an illusion. Just pick up any newspaper and you will see companies downsizing, rightsizing, and capsizing.”
“Finally, if that isn’t bad enough, under recent tax laws, employees are shafted more than ever with limits and thresholds for their employee deductions and higher Social Security tax limits. This results in more couples working than ever before and, on many occasions, working at more than one job. It is almost impossible to have only one job in the family and make ends meet!”
Botkin goes on:
“The reasons so many people are going into a home-based business or becoming consultants rather than joining a traditional business are many. There is no commute (unless you have a rather large home), no boss, little if any chance of lawsuits, much less over head, and no employees or very few employees. It is for these reasons, according to Entrepreneur Magazine, that 95% of the home-based businesses succeed in their first year and achieve an average income of $50,250 per year, with many earning much more.”
“I should note that, in addition to all the benefits noted above, Congress will subsidize you while you’re growing your small business. If your business produces a loss in the first year or so, you can use that loss against any other income that you have. It can be used against wages earned as an employee, dividends, pensions, or interest income, or against your spouse’s earnings if you filed a joint return.”
Depending on your choice of business you may even have the ability to yield residual income. It’s a far better ROI for sure. Sounds promising and then there is the obvious reasons we yearn to establish a home based economy. As he says, times are changing.
When I originally published this article in 2007, I sited a 2005 article from Barna Research titled, “What Is A Purpose Driven Life to Americans?” where the four top priorities were family, faith, friends, and a less common priority was earning a comfortable living.
Family rating number one is pulled together in a home-based business as opposed to everyone going in separate directions. Carrying out principles of our faith ranks number third after our sense of patriotism and is taboo in the workplace, but not in a home-based business where you are the boss and your home schooled children are your employees. And fourth, having good friends. With the freedom that a home-based business affords you by giving you control of your time and your income you can choose how to order your life and who you will spend your time with. Surprisingly earning a good income comes 4th and yet in spite of our priorities most throw away family, faith and friends at the expense of chasing the dollar all day.
As we become more socialized, American priorities reflect not only a strain on the pocket book but also a shifting loyalties from God to the state. Inevitably, the fruit of socialism is the disintegration of the family unit. When Dad and mom are straining to make ends meet, it seems all but impossible to keep the family unit together and inevitably we outsource our children’s care and education to the state just as they intended.
An article from July 26, 2010 speaks of the effects of a strained economy has had on the priorities of Americans.
Has the weakened economy affected what Americans prioritize in life?In the face of the economic conditions, many Americans have become more focused on surviving and thriving. When asked to identify their highest priority in life, more Americans mention issues of health, leisure, personal comfort, and lifestyle balance than did so just a few years ago. Cumulatively, these priorities have grown from just 13% in 2006 to 20% in the 2010 study.Another significant “winner” in the last few years has been Americans’ increased emphasis on wealth, financial stability, money, professional attainment, success, and paying bills. These types of priorities have nearly doubled over the past four years, from 9% in 2006 to 17% in the current research.While many observers have suggested that the economy has caused people to become more focused on life’s essentials, the current study shows a drop in two life components that consistently top the list: family and faith.
Finally, on March 19th, 2015 Barna updates their findings with an article titled, “What Most Influences the Self-Identity of Americans?” Man is now the center of our interest so it seems. We’re not longer setting the terms. The terms of our life are being set for us. The interest shifting to what we identify with rather than our having a principled outward influence, while the family remains first, socialism ranks above God and our concern for financial independence. The state seems to be winning out.
A home based business unifies the family and in turn strengthens other areas of life as well as the your future and your children’s futures. The fact that couples who work together pursuing the same goals in a family integrated home-based business are supporting the strengthening of these waning priorities is a strong indication many will find hope in choosing home-based businesses for their future. It is their only option and not a constraining one. With the ability to retain profits and the hope of a financially secure future, the flexibility and time to disciple and educate one’s own children, strengthen the family and marriage, and keep religion a priority in the household, the home-based business has the potential to significantly influence our country in every area of life and hopefully stabilize and drastically change Barna’s stats for the next 5 years.
Get your copy of “Lower Your Taxes Big Time” here
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