Tax Tips to Save Money on Taxes - Get the Corporate Kick and Save Loads of Money
Why a Corporation Helps Save You Taxes
The Tax Rates (Notice anything unusual?):
The following tables provide a list of the tax rates for individuals and corporations:
$59, 750-$124,650 31%
If you examine them closely, you will see at least one glaring contrast. The individual making $49,000 per year is in the 28% percent bracket, while a corporation that earns $49,000 is only in the 15% bracket. ThatЎ¦s a potential 13% difference in your tax rate if you organize your finances to take advantage of this one little item.
But, thatЎ¦s just part of the story. An individual who makes $49,000 in salary pays taxes on almost the entire $49,000. However, a business can first deduct its operating expenses, and only pay taxes on whatЎ¦s left. As Robert Kiyosaki says ?± the corporation acts as a filter that is used to reduce the corporationЎ¦s taxable income by utilizing the tax deductions afforded by the tax code.
The difference is that businesses subtract these first, then pay taxes on the balance. You, as an individual taxpayer, pay taxes on the greater amount, then pay for these expenses (you call them living expenses) out of whatЎ¦s left. Did you ever wonder why thereЎ¦s not much left for living at the end of the month? Now you can see why. The question is "Are you going to do something about it?"
Keep in mind that there are two steps here; first you must start to shift your efforts from earning a salary to earning more money through your business. There are many ways that you can do this.
For instance, you can start with your own business concept. Maybe youЎ¦ve already got an idea that you want to pursue. It could be a product or a service or something along the lines of art and crafts. It doesnЎ¦t have to be sophisticated or high tech; it just has to have a profit motive.
Secondly, you may have something that you already enjoy doing as a hobby. You can probably convert that activity into a viable business enterprise. Just remember that there are rules that you must follow to ensure that your new-found business is not treated as a hobby by the I. R.S, and the deductions voided.
Thirdly, you can get into a network marketing business. There are many available, some of which donЎ¦t require a lot of money to get going. The older types of network marketing schemes available in the past made little money for anyone except the original promoters.
And the nice thing is that any of the above can be done on a part-time basis. You can maintain your current job (and income) while you grow your new business.
The next step is to learn to maximize your deductible expenses. The items listed above are only a few of the many deductions that are available. We will be going into more advanced topics later in this booklet.
One of the best ways to start this process is to review your current expenses and see if there is a way to convert these expenses to business expenses. Start with your checkbook; list all of the expenses that you pay each month on a piece of paper. Next, go through your credit card bills for the last year and list them. Next, go through your cash receipts and see where your cash was spent.
Now, having done that, you want to see which of these expenses can be converted into business expenses. For instance, IЎ¦m sure that you spent money on your automobile lease or note payments, gas, insurance, repairs, etc. In many cases, a portion of these can be converted to business expenses, if properly documented. Then, take a look at your phone bill. Some of this can be converted. The same is true of travel, meals and entertainment. And work your way down the list. The key is not to add additional expenses just because they are deductible, but rather to convert those things that you are already spending money on into legitimate business expenses.
Keep in mind, that the I. R.S. has specific rules concerning each kind of deductible expense. These rules must be followed. It is imperative, therefore, that you work closely with your accountant to insure that you are in compliance with these rules. THERE ARE STIFF PENALTIES IF YOU FAIL TO DO SO.
Why a Corporation Helps you Save Taxes *
Lets look at the tax advantages of the corporation. The difference between how much or how little you pay in taxes is when you pay your taxes as an individual or as a corporation and what your tax rate is.
Your income (Your Tax Base) Your Income
Tax at 28% **
Your Tax Base Tax at 15% ***
Drew Miles, The Tax Saving Attorney
Drew has combined what he learned during formal education, informal education and twenty five years of business experience in the development of programs designed to teach people how to build and preserve lasting wealth. He is an author, teacher and international speaker in the areas of asset protection, and tax saving and wealth building strategies.