Lower Your Taxes: Big Time 2011-2012
There are two tax codes at work in America. One tax code for the workers and another for the business owners.
Can you guess which one is better?
I had the pleasure to see Sandy Botkin speak live several years ago. At the time, several of the tax strategies he advised were not useful to me. I earned so little from my job that my tax burden was almost nil. Additionally, I was just starting out in business and could not see the value in fussing over taxes so much. Taxes were something I would deal with later, after I made my money.
Sanford Botkin once trained IRS agents and it was during his employ at the IRS that he discovered that most people were overpaying their taxes. This is not surprising. The fear of retribution from the feds coupled with the incomprehensible tax code creates a toxic soup no sane person is willing to sip. This is Sandy’s battle-cry. Don’t let the IRS’s policies bully you into overpaying. Pay what you owe but no more.
He founded the Tax Reduction Institute in Maryland and started to teach these strategies to business people and real estate professionals. I saw him speak at a Seminar in Washington D.C. General Norman Schwartzkopf and Sanford Botkin were the ones I truly remember from that day. Schwarzkopf because he was a magnificent speaker and inspiring leader. Botkin because he was funny, smart and what he said made sense. I left the seminar and promptly forgot about the whole matter. My meager income incurred so little tax it was not even worth the hassle. Taxes would just have to take a back seat to the other more pressing things in my life. (like rent, food and other niceties)
A few years later I picked up the first edition of “Lower Your Taxes: Big Time” and started to put the ideas into play. It makes a difference.
I think everyone should consider starting and operating their own business. Tax benefits aside, the act of crystallizing my own ideas into a product or service that is 100% my own holds it own value. Entrepreneurial activities and pursuits help me understand the marketplace, business, law and taxes even more. Even if it is expanding a passion or hobby into a legitimate business that occupies your life only on weekends, there is value in this process. The key word here is legitimate. In Chapter 8 “How to Shield yourself from the IRS weapon of Classifying a Business as a Hobby”, Sandy describes strategies for making sure the IRS sees your activities as a business. For instance, the act of forming an LLC, keeping excellent records and ensuring your business activities are separate from your personal activities is a good start. Proving that you are in fact striving to make a profit at this point is much easier.
I recommend this book. It is well written and informative. I have picked up each annual edition for the past several years. This might not be necessary for each edition, that depends more on how drastic tax law changes from year to year. The greatest value of this book for me are lasting ones:
1. Understanding the ‘real’ value of choosing the proper business structure.
2. Understanding and developing good habits of record-keeping. This includes automobile, business related activities, meeting attendees, etc. Having a Tax Diary and keeping it up to date will alleviate 90% oftax stress. Knowing that you have excellent documentation is key. Having excellent documentation actually helps you grow your business and succeed.
3. The importance of running my business as a business, keeping a firewall between my business and personal finances, has benefits beyond dealing with the IRS. Running a ‘real’ business is empowering and a fantastic education on how things work.
If you are in business or considering one, pick up a copy of this book.