W2 Employees — How To Keep More Income

W2 Employ­ees – How to Keep More Income

What is the biggest sin­gle finan­cial oblig­a­tion of each per­son in the USA? Taxes.

With all the bailouts, and gov­ern­ment spend­ing we can be sure that our taxes will not be being reduced any time soon.

This blog post will be look­ing at how to increase your net­worth by just becom­ing a part-time home-based busi­ness owner, and with­OUT nec­es­sar­ily mak­ing any more money. But mak­ing more is always a good thing, if you know the tax rules.

Why own a home-based business?

1. Be your own boss.

2. Cap­ture the power of resid­ual income

3. Be rewarded for busi­ness achievements

4. Reap the tax ben­e­fits – This is a major major benefit.

We all know that the more money we pay in taxes, the less money we get to keep.  So let me ask you this, what can give you a bet­ter bot­tom line, a $2000 raise or own­ing a home-based busi­ness? Keep read­ing and you’ll guess and under­stand the answer.

If you have a W2 job and you have a part time busi­ness as well, you are enti­tled to take the same tax deduc­tions you would receive if you were a full-time home-based busi­ness owner.

What are the IRS qual­i­fi­ca­tions for own­ing a home-based busi­ness? There are only three things that show you are a legit­i­mate busi­ness owner.

1. You must have prof­itable intent. (It does not say you have to actu­ally make a profit, just that you intend to be profitable.)

2. Be con­sis­tently work­ing in your busi­ness. (So rather than spend­ing one whole week­end a month work­ing your busi­ness, it would be bet­ter to divide the time into weekly incre­ments. IRS says 10 hours a week is acceptable)

3. You must keep accu­rate records. (I would say the major­ity of part-time, small, MLM and home-based busi­ness own­ers find keep­ing acu­rate records is the hard­est to do, yet it is the most nec­es­sary for proof of your business)

Your main goal in keep­ing accu­rate records is to keep track of all your legal and eth­i­cal tax deduc­tions so you are able to KEEP MORE of the money you are already earn­ing, lower your tax bracket or lower your tax­able income. This is the HUGE advan­tage of hav­ing a home-based business.

Being self employed can trig­ger about $10,000+ in poten­tial deduc­tions, on aver­age, before you even begin to earn any money. But how many peo­ple fail to take advan­tage of these deduc­tions even while own­ing a busi­ness? The aver­age over-payment of taxes by small busi­ness own­ers in 2008 was $11,000. What could you do with that amount of extra cash flow?

Let us iden­tify what con­sti­tutes a legal and eth­i­cal tax deduction.

Know­ing the tax rules can make it pos­si­ble so almost every­thing you do could become tax deductible.

The three ques­tions that must be asked for each expense is:

Poten­tial – Does this expense have the poten­tial to help me MAKE more money or GROW my business?

Intent – What is the pri­mary intent in spend­ing this money? Can I prove the pur­pose of spend­ing this money was for busi­ness gain, rather than for per­sonal use.

Nec­es­sary – Is the expense rea­son­able, ordi­nary or necessary?

There are over 100 poten­tial deduc­tions avail­able to the typ­i­cal small busi­ness owner – includ­ing 100% med­ical deduc­tions (through a med­ical reim­burse­ment plan) and busi­ness edu­ca­tion expenses. Other deduc­tion areas you might want to max­i­mize deduc­tions for are your vehi­cles, travel expenses, enter­tain­ment, spe­cial sport­ing events, pre­sen­ta­tion expenses, bonuses, busi­ness gifts and clothing.

Con­sult a tax advi­sor – take a class – buy a home study course!

Knowl­edge put to use = Power = Money = Wealth Building!!!

What are the two largest expenses that we are oblig­ated to pay?

1. Debt – An amount owed by a per­son for funds bor­rowed. There is intent to pay back an amount owed by a spe­cific date. Do you like pay­ing the bank more in inter­est for the home you are buy­ing, than you actu­ally pur­chased the home for?  Wouldn’t like to know of a legal and eth­i­cal way of pay­ing a lot less inter­est charges on all your debts thereby keep­ing more of your money in your pocket?

2. Taxes – Do you like pay­ing taxes?  Doesn’t every­body want to keep more of the money they earn? Own­ing a home-based busi­ness is such a huge advan­tage because it pro­vides a legal and eth­i­cal way of doing that, of keep­ing more of your hard earned dol­lars in your pocket.

…It’s all about cash flow…

What type of tax payer are you?

W2 employ­ees

Only make about 60% of every­thing they earn and have to pur­chase every­thing with AFTER TAX DOLLARS

Busi­ness Owners

Pur­chase every­thing with BEFORE TAX DOLLARS and when they pay taxes, they only have to pay on what they have left over.

What type of tax payer do you want to be?

W2 employee

The two main deduc­tions a W2 are

* Mort­gage interest

* char­i­ta­ble contributions

Busi­ness Owner

As a busi­ness owner you can deduct

* travel expenses

* enter­tain­ment

* mileage – 55c on every mile in 2009

* home office % of mort­gage inter­est in addi­tion to mort­gage inter­est you’re already deducting.

* % of utilities

* % of insurance

* med­ical costs

There are poten­tially over 100 legal & eth­i­cal tax deduc­tions for the small home-based busi­ness owner

Once again, which type of tax payer would you rather be?