The next quarterly payment of estimated income tax forthe self-employed is not far off. Network marketers whoreceive a form 1099 at the end of the year, and/or whoare expected to owe $1,000 or more in taxes, must filea form 1040-ES Payment Voucher quarterly to avoidpaying a penalty.
When it comes to paying income tax, I'm like ArthurGodfrey who said, "I am proud to pay my taxes. I'd bejust as proud to pay half as much.
Like most network marketers, I work hard for what Iearn and do not savor sending the government anymore money than what I legally owe. So you canimagine how I felt four years ago, when I learned Ihad overpaid my income tax by some $9,800 overthree years.
I had trusted the guy who did my tax returns. After all, preparing tax returns was big part of his business.
But guess what, I fired him.
Once I learned what the law provides home-basedbusiness owners to deduct, I went back through threemost recent years of returns, revising my 1040 to claimdeductions my tax guy didn't have the foggiest notionexisted. Or if he did know, he failed to ask me aboutthem.
For instance, my tax guy failed to ask me if I had anydogs. Did you know your dog (or three dogs in my case)qualifies as a "security system" for your home-basedbusiness? 100% of all dog food, Vet bills, license feesand medication is tax deductible! I have the IRS taxcode to prove it. My tax guy didn't know that. I calledhim on it and told him to look it up for himself.
You see, I did something worthwhile. I invested in awell-known and respected home-based businesstax-reduction book. I learned that with some 43,000tax codes on the books, a typical CPA could notpossibly know them all. How could they?
CPA's typically specialize in corporate tax code, andare often short sighted when it comes to tax deductionsfor home-based business owners. But I now have myhome business tax-guide that lays out exactly whatdeductions I can take and cites the tax code foreach one.
Thankfully, the law allows me to revise previous taxreturns, so I was able to save a bundle of money, money I thought was gone. My point to you is this:The likelihood is great that you, too, have overpaidyour taxes and are not even aware of it. How much?
According to what I read, the average home-basedbusiness owner overpays $1,000 to $2,000 in taxesevery year. But the IRS is not about to refund whatwe overpay without us asking for it through anamended tax return. When you add in the interest
that tax money is earning and refunded with youroverpayment, the average refund is more like$3,000 to $6,000.
From my experience, do not trust anyone doing taxpreparation who is not intimately familiar with home-based business tax deductions and tax strategies. They could cost you thousands of dollars if they arenot up on home-based business tax law, no matterhow many initials they carry after their name.
Congress knows that small business is the enginethat runs our nation's economy. To encourage smallbusiness, Congress has passed legislation givinghuge tax breaks to people who invest in a smallbusiness. Your network marketing enterprise placesyou squarely into that small business category.
That fact presents another problem for many part-time network marketers, because they do not thinkthey have earned enough money from their businessto qualify for tax deductions. This erroneous thinking is costing them literally thousands of tax dollars.
When I do business seminars, I hold up a DistributorApplication and romance it. Why, because just theact of signing that piece of paper qualifies us as ahome-based business owner; one who is now eligibleto claim thousands of dollars in legally authorizedtax deductions; deductions we could not claimbefore signing that piece of paper.
Profit or loss is not the criteria, it is our intent to makea profit that allows us to claim deductions year after year.
No matter how you view your business, this is yourmoney. So it should behoove you to learn what youcan about minimizing your tax liability.
You should do so for yourself, and then for others. How much more good could we do if learned how tokeep tax dollars at home? How much more could wedo for others if we taught them the same?