The fourth quarter of 2007 will arrive this Monday in grand fall fashion, and with it the onset of holiday planning; for the self-employed (or any person who reports income via a Form 1099), holiday planning for 2007 should include year-end tax planning and forming strategies for 2008.
One of the most truly financially dangerous myths that self-employed people in Atlanta (and everywhere else for that matter) may cling to is "my accountant takes care of my taxes." The average small-business owner overpays his or her taxes by more than $11,000.00, according to a study by the U.S. General Accounting Office. If self-employed earners lost that much money every year to their dentists for "taking care of my teeth", Atlanta would be the dentistry capital of the South. Accountants are wonderful, but they simply are not equipped to do for us what Atlanta's self-employed and small-business owners must do for themselves.
Most self-employed income earners do not realize that essentially every deduction that is given to, for example, the Coca-Cola Company, is given to them. Thinking like an employee about taxes is, frankly, naive. Fortunately, the cost of scaling the learning curve is really quite low.
The fact is that there are many deductions that self-employed Atlantans leave on the table for the tax collector, which translates into "money gone." Another fact is that learning how to keep that money is simply a matter of (1) knowing the basic rules and (2) keeping simple records. These two things will make those accountants who work so hard love their self-employed clients, and that translates into "money kept."
So, what are some practical things self-employed, 1099 income earning Atlantans may do to keep more of their money? First, assess your vehicle situation. Are you keeping logs of mileage of personal use and business use? If not, you are leaving money on the IRS table. To take mileage deductions, mileage logs are required for business use. Increase your business miles by making everything you do, every place you go, an opportunity to request referrals from whoever you meet while you are wherever you are! This builds your business, which is exactly what Congress wants you to do, and why the automobile mileage deductions are designed as they are. Your mileage to every destination where you ask for referrals can be deductible business mileage. There is money in "them thar" miles -- 48.5 cents per mile, to be exact, for 2007.
Second, learn to log. Your tax life can be revolutionized in, literally, 3 minutes a day. The IRS allows you to keep a 90 day log of your business and personal use of everything you use in your business. Cars, computers, cell phones, you name it. Instead of a 365 day log, a thorough 90 day log of your activities will serve as an ample record sample of your annual activities. If you don't write it down, it didn't happen. Your PDA or daytime organizer is fantastic place to log your activities, including mileage; also, you can purchase tax diary systems from publishers such as Bradford and Company (www.bradfordandcompany.com).
Third, when December rolls around, don't just plan to buy gifts. Prepay up to 12 months of 2008 business expenses. This money that you are going to spend anyway can be deducted in 2007; in fact, it is 100% deductible, and reduces your gross income dollar for dollar. That translates, for most, into a cash savings of almost half of the deduction amount. Invest that savings of money you were going to spend anyway, and you'll find, after several years of using this strategy, that your retirement nest egg will sprout new wings. All this happens because you engaged in a little planning and spent money you were going to spend anyway. You'll feel like a genius, and you'll have your peers telling you how smart you are.
Fourth, learn the rules. There are many other deductions that self-employed Atlantans may take. Some of these require a little more planning than others, but for just a minimal amount of self-education time, the conversion of what would otherwise be IRS tax revenues into personal business revenues can make your business the envy of those peers. Enroll in a tax-course with an "on-the-go" format for busy people. Many are available. One of the best is probably Bradford and Company's "Tax Strategies For The Self-Employed." An overview of that course is also online at the URL given above.
As the dollar dips and oil prices rise, Atlantans who are self-employed need ways to multiply their dollars. Let's face it, our purchasing power is shrinking. Our accountants can diagnose our problem, but only we can treat it. Get aggressive on your income tax, but do it legally and ethically. See the growth in your take-home and in your business!
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Copyright © 2010 GreatMinds
Tax Relief For Self-Employed Atlantans
Copyright © 2010 GreatMinds
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