Article published by : Article Alley on Thursday, January 12, 2012 - Viewed 1115 times

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Category : Taxes

Small Business Taxes - What Is The #1 Reason You Pay Too Much Tax?



What is the Number One reason you pay too much tax? Let's brainstorm. We all pay too much tax because:

1) Our elected politicians created the complicated and convoluted monster known as the U.S. Tax Code, and this monster takes our money away.

2) Public Enemy #1 (The IRS) takes our money away.

3) Tax preparers are too busy preparing tax returns to help us take advantage of all the complicated and convoluted tax loopholes, leaving us to fight a losing battle against The Monster and its evil watchdog, the IRS.

What do you think? Are we on the right track?

I'd like to suggest one more reason, and it is really the only factor that you and I have complete control over: Bookkeeping.

There's not much we can do about Reasons #1 and #2. And there's a limit to how much we can do about Reason #3. But there is a tremendous amount we can do to maintain better tax records -- and this, more then anything else, is the Number One reason why small business owners and self-employed people pay more tax than necessary.

Let me now prove it to you by asking this question: How did your business do last year? (By "business" I'm referring to any type of small or home-based business venture, full-time or part-time, including self-employment activities of the typical sole proprietor.) Did you have a profit or a loss? Do you even know whether you had a profit or loss?

If I called you up on the phone right now and asked you how much profit (or loss) you made in your business last year -- at least 5 people out of 10 wouldn't have a clue. If I asked you right now to tell me how much profit (or loss) you made last month, I know for a fact that 9 out of 10 couldn't tell me.

And chances are that when tax time rolls around each year, you won't even know how much profit you made last year for at least a month or two -- after spending days and untold stressful hours trying to fix your record-keeping nightmare.

I deal with this scenario regularly: The typical small business owner or self-employed person is stressed out about taxes because his/her records are in a shambles. You know what I'm taking about, don't you? Receipts scattered in five places, and you've long forgotten what they were even for. Hand-scribbled notes in your day timer. A checkbook. Twelve months worth of receipts from three different credit cards.

And now you've got to figure out how to put it all together in the next few weeks so you can prepare your own return or give it all to your accountant without him laughing in your face because of the total disaster your records are in.

And most folks wouldn't even dare think about what would happen if the IRS came calling for an audit. The IRS would laugh all the way to the bank at the record-keeping disaster they find.

Most self-employed folks use a variation of the "shoe box" method -- they throw all their receipts, cancelled checks, bank deposit slips and anything else business-related into a box and then come March or April they dump it out and try to figure out what the heck was what -- for about 5 days straight. Is this any way to run a business?

Isn't it time you got organized? And the easiest way to do that is to automate your bookkeeping. You are using a computer right now, correct? Then do yourself a favor and throw away any manual bookkeeping system you've used before and start keeping records on the computer.

There are several good programs on the market - Quicken and Quickbooks are the most well known. If you have little or no bookkeeping experience, try Quicken. Quickbooks is for those with a background in accounting.

If you are self-employed or run a small business and you do the books yourself, Quicken is the program you need. Nothing fancy or confusing. Fairly easy to learn. You'll save hours with this program, and when you're done, you'll have all the info you need to do your tax return. If you take your "tax stuff" to an accountant, he'll love you for using it.

Not only will tax time be much easier, but you'll finally know how your business is doing at any point during the year. No more guessing about the bottom line.

Never forget this simple fact: Most people pay more taxes than they should. And the #1 reason is unreported deductions. When your record-keeping system is messy, you end up paying hundreds and even thousands of dollars in taxes that you should not have paid.

With a program like Quicken, it will take you a fraction of the time to get everything organized. And since it is specifically designed for the small and home-based business owner like yourself, it is easy to get started saving time and money.

Looking for more ways to increase your deductions and slash your taxes? Get your free copy of the Special Report, "How To Instantly Double Your Small Business Tax Deductions" at www.YouSaveOnTaxes.com. Wayne Davies is the Internet's top tax preparer and author of 3 ebooks on tax deduction strategies for small business owners and the self-employed.

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