Look at Your W-2 Form

More Taxes to Pay:

When we buy – Sales TaxWhen we sell – Sales TaxWhen we save – Capital Gains Tax When we own a house – Property

Tax School Tax & Local TaxesWhen we die – Estate Tax

Americans overpay their taxes by $140 BILLION a year.Your largest expense is the taxes you pay in your lifetime, more than any other expenses combined (Food, clothing, housing, etc.)

The first day of the year in which a nation as a whole has theoretically earned enough income to fund its annual tax burden.

Tax-Freedom Day

Federal, state & local taxes

x 365 (or 366) days =

Tax Freedom

Day

---------------------

Total income

The US Tax-Freedom Day

2010

04/09/201099th Day of 2010

Federal, state & Local taxes

Total Income

$3,469 billion

$12,901 billion26.89%= =

26.89% x 365 days = 99 days = April 9

Year Tax Freedom Day Taxes as % of Income

-------------------------------------------------------------------------------------------------------------------------

1900 Jan 22 5.90%

1930 Feb 12 11.70%

1950 March 31 24.60%

2000 May 3 33.60%

2008 April 21 30.40%

2009 April 13 28.20%

2010 April 9 26.90%Source: IRS; Congressional Research Service; Tax Foundation. 2010

Tax-Freedom Day & Tax Burden

Tax-Freedom Day in 50 States

State

Days Spent

Working to Pay Taxes

Tax Freedom

Day Rank State

Days Spent

Working to Pay Taxes

Tax Freedom

Day RankUnited States 99 April 9 -

Montana 95 April 5 33Alabama 92 April 2 42 Nebraska 97 April 7 27Alaska 85 March 26 50 Nevada 92 April 2 43Arizona 94 April 4 37 New Hampshire 96 April 6 28Arkansas 93 April 3 38 New Jersey 115 April 25 2California 104 April 14 7 New Mexico 91 April 1 45Colorado 100 April 10 17 New York 113 April 23 3Connecticut 117 April 27 1 North Carolina 97 April 7 26Delaware 100 April 10 18 North Dakota 93 April 3 39Florida 95 April 5 31 Ohio 98 April 8 23Georgia 98 April 8 24 Oklahoma 96 April 6 30Hawaii 99 April 9 19 Oregon 98 April 8 20Idaho 98 April 8 22 Pennsylvania  103 April 13 11Illinois 101 April 11 14 Rhode Island 102 April 12 12Indiana 96 April 6 29 South Carolina 93 April 3 40Iowa 94 April 4 36 South Dakota 88 March 29 47Kansas 97 April 7 25 Tennessee 91 April 1 44Kentucky 93 April 3 41 Texas 95 April 5 32Louisiana 85 March 26 49 Utah 101 April 11 15Maine 94 April 4 34 Vermont 103 April 13 9Maryland 109 April 19 4 Virginia 103 April 13 10Massachusetts

104 April 14 6 Washington  105 April 15 5

Michigan 98 April 8 21 West Virginia 89 March 30 46Minnesota 103 April 13 8 Wisconsin 102 April 12 13Mississippi 87 March 28 48 Wyoming 101 April 11 16

Missouri 94 April 4 35 District of Columbia  105 April 15

The Federal Budget DeficitBecause of the federal government’s ability to deficit-finance its operations, Tax Freedom Day moves somewhat independently from an alternative calculation that adds the federal budget deficit to total taxes collected. In 2010, an unprecedented budget deficit over $1.3 trillion produces a date of May 17, fully 38 days later than Tax Freedom Day.

May 17

"Are the services that I receive from

the government worth

a quarter to a third of my working life?"

Ask Yourself

Are We AllCreated Equal

In Paying Taxes?

120+ Million (~43.4%)

American PeoplePay

no tax at all.(based upon federal income tax records - these people usually pay no state

income or property taxes either and pay an insignificant amount of other taxes).

In fact, some will soon be getting rebates for taxes that they never paid.

The 120+ million poor Americans, who pay NO tax,

offset the effect of the less than 7 million rich taxpayers

(earning over $154,000 per year), who pay more than 60%

of the taxes actually collected.

That means that Tax Freedom Day actually comes closer to representing the average middle-class

AmericanThan either the rich or the poor.

Age 35-54: 28.4% Work Status work full-time 50-52

wks: 25.9% Occupation: Students (24%) Other services (16.6%) Administrative support (11.2%) Sales (11.0%) Retirees & other categories

Source: Tax Foundation, Estimated data for 2004

Who Are They?

What Taxes Can WE Save?

Of All the Taxes -

Sales Tax Capital Gains Tax Property TaxSchool Tax Local TaxesEstate Tax

NO!

YES!

52% of the 27.2 million small businesses

in the United States are

home-based .

Source: U.S. Small Business Administration Office of Advocacy, September 2008

How Many Tax SystemsIn This Country?

There are TWO tax systems in this

country. One for

Small/Home-Based Business Owners

One for

Salaried Employees

Source: Sandy Botkin, CPA, Esq. Lower Your Taxes Big Time

Pay Higher Social Security Tax & Medicare Tax

Fewer Deductibles

Small/Home- Based Business Owners

Salaried Employees

Legally Write Off Many Expenses

Thanks to the IRS & Congress

Saving THOUSANDS OF DOLLARS every

year

Taxes Paid

After-Tax $$ Spent on Personal Expenses

gas, cars, computer, travel, eat-outs, Internet service, cell phone, home office, entertainment, …

Personal Expenses: Non-Deductible

EmployeesTaxed First & Spend Later

Before-Tax $$ Spent on Business-Related

Expenses

After-Tax

$$

gas, cars, computer, travel, eat-outs, Internet service, cell phone, home office, entertainment, …

Business Expenses (ordinary and necessary): Deductible

Small/Home Business OwnersSpend First & Taxed Later

Two Tax SystemsIn U.S.?

• Separate business bank account

• Separate credit card for business expenses

• DBA (Do Business As) registered with county clerk

• Documentation/Proof of profit-generating

activities, training, business conduct

• Business record keeping system

Source: “Minding Her Own Business” by Jan Zobel

Qualifying Your Business

• IRS publication 334:

• Profit motive.

• Ongoing efforts.

• IRS reg. sec 1.183-2(b) – factors to determine

business activity:

• Put time and effort in carrying on the activity.

• Obtain training.

• Maintains complete and accurate books and records.

Qualifying Your Business Activity

In general – There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

Source: www.irs.gov

IRS Section 162 (a)

• Rent for an outside office • Employee salaries and

benefits  • Equipment rental • Legal and accounting fees • Car and truck expenses • Travel expenses  • Meal and entertainment

expenses• Supplies and materials• Publications • Subscriptions • Repair and maintenance • Expenses• Business taxes 

• Interest on business loans• Licenses• Banking fees • Advertising costs • Home office expenses • Business-related education

expenses• Postage• Professional association

dues • Business liability and

property • Insurance• Health insurance for

employees • Office utilities, and• Software used for

business 

Some of the Most Common TypesOf Operating Expenses

IRS states: must maintain records that support accurate tax returns.

Documentation helps you to prove to the IRS that you are pursing a profit.

Why Do We NeedDocumentation?

Records must be permanent, accurate, and complete. (Notebook or diary)

Includes sales slips, receipts, canceled checks, mileage, expenses

Record within 24 hours

What about Documentation?

Many of your current household expenses become business expenses

Deductible from taxable income (include W-2 income)

Lowered taxable income = lower tax bracket = pay less federal income tax = pay less social security tax = pay less medicare tax = reduce or eliminate AMT

Save Taxes Big Time

2010-2011 Individual Tax Brackets

Higher Tax Rates in 2011?

Starting in 2011, the federal income tax rates in effect prior to the adoption of the Bush Administration’s tax cuts in 2001 are scheduled to return. The top income tax rate is scheduled to go up to 39.6%, and the low 10% bracket will be eliminated. Will this actually happen, or will Congress extend the lower rates? It’s impossible to say.

Higher Medicare Taxes in 2013

Starting in 2013, Medicare taxes for high income taxpayers will go up by 0.9% to 3.8%. The increase applies to self-employed people with net self-employment income over $200,000.

Effective Date Car Motorcycle Air Plane

Jan 01, 2011

Jan 01, 2010

$0.510$0.500

$0.480$0.470

$1.29$1.29

Jan 01, 2009 $0.550 $0.520 $1.24

Aug 01, 2008 $0.585 $0.585 $1.07

Mar 19, 2008 $0.505 $0.305 $1.07

Feb 01, 2007 $0.485 $0.305 $1.07

Jan 01, 2006 $0.445 $0.305 $1.07

Sep 01, 2005 $0.485 $0.305 $1.07

Feb 04, 2005 $0.405 $0.305 $1.07

Jan 01, 2004 $0.375 $0.285 $0.995

Jan 01, 2003 $0.36 $0.275 $0.955

Jan 21, 2002 $0.365 $0.28 $0.975

Jan 22, 2001 $0.345 $0.275 $0.965

Jan 14, 2000 $0.325 $0.26 $0.88

Apr 01, 1999 $0.31 $0.26 $0.88

Sep 08, 1998 $0.325 $0.26 $0.88

Jun 07, 1996 $0.31 $0.25 $0.85

Standard Mileage Rate for POV(Add parking and tolls)

Use Standard Mileage RateYou must own or lease the car and: • You must use the standard mileage rate in the first year you use

a car for business or you are forever foreclosed from using that method for that car.

• The car must not be used to transport persons or property for compensation or hire, for example as a taxi

• You must not operate five or more cars at the same time, as in a fleet operation

• You must not have claimed a depreciation deduction using the Modified Accelerated Cost Recovery System (MACRS) on the car in an earlier year, including any additional first-year depreciation or "bonus depreciation" or any method other than straight-line for its estimated useful life

• You must not have claimed a Section 179 deduction or bonus depreciation on the car; and you must not have claimed actual expenses after 1997 for a car you leased, and

• You cannot use the standard mileage rate if you are a rural mail carrier who received a "qualified reimbursement"

Documentation CriticalWho, When, Where, Why and How MuchRecorded on a daily basisMust provide written evidenceVehicle log for a portion of the year is OK.

[Temp. Reg. 1.274-5T( c )(3)(ii)].

Gas Supplies & equipment

Oil change Depreciation expense

Repairs & maintenance Lease payments

Insurance Loan interest

License & registration State & local taxes

Wash & wax etc

Actual Cost Of Operating Vehicle

1. 52-Week Mileage Book or Daily Log. You will list every trip you take, whether for business,

or personal reasons.2.Tracking Business Mileage

You will record your mileage only when you use your car for business.

3. Sampling Method- 90-Day Log. Keeping mileage records for a 90-day period is considered an adequate representation of the entire year. So you would keep a Daily Log for a 3-consecutive-month period, say January through March. To get your annual mileage total, you multiply the 3-month total by 4.- One-week Log. Keep a log for just one week of each month. Then you multiply that week's mileage by 4 to get the monthly total. You must scrupulously keep an appointment book showing your business appointments all year long.

Car Mileage Logging Methods

TOYOTA CAMRY 2001

Year Start End Total Business Use

Commuting

Personal Use

2007 78,658

86280 7622 3800 3822

2006 70534 78,658

8,124 4,000 4,124

2005 57,967

70,534

12,567 6,000 6,567

2004 38,972

57,967

18,995 12,000 3,080 3,598

2003 24,286

38,972

14,686 12,638 2,048

2002 20,500

24,286

2,786 2,286 500

2001 5,200 20,500

15,300 380 800 14,120

2000 0 5,200 5,200 3,564 1,636

Car Mileage Logging

Depreciation Limits 2010(triple these limits for an electric car bought after May 6, 2003)

Passenger Automobiles1st tax year $11,060 ($3,060 + $8,000 bonus

depreciation)

2nd tax year $4,900

3rd tax year $2,950

Each succeeding year

$1,875

Trucks and Vans1st tax year $11,160 ($3,160 + $8,000 bonus

depreciation)

2nd tax year $5,100

3rd tax year $3,050

Each succeeding year

$1,875As long as you continue to use your car for business, you can keep taking annual deductions after the 6-year depreciation period ends until you recover your full basis in the car.

50 miles/day business mileage 5 days/week = 250 miles/wk. 250 miles/wk x 50 weeks =12,500 Business miles/year X .585/mile = $7,310 Auto Mileage

deduction Discuss business other trips, they add to

miles and deduction – remember to DOCUMENT trips

* Commuting to & from work is not deductible.

Business Auto Example

Besides the standard mileage deduction, you can also deduct partial interests you paid on your financed car.*

Example: FOR YEAR 2005 Your total mileage: 18,000 miles Your business mileage: 12,500 miles =

70% You paid the interest on your car:

$2,400 You can deduct 70%: $1,680

* Source: www.IRS.gov

Total Auto Deduction $8,990

Business Auto Example

* For foreign travel deductions, go to www.IRS.gov.

The IRS states that the business trip is any trip that requires you to sleep• Away from home

• Overnight

• In a strange bed

• Conducting business.

Business Travels*

Napping in the car does not count.

* For foreign travel deductions, go to www.IRS.gov.

Must conduct business 3 of 5 days, >4 hr/day (>50% rule)

Have business appointments scheduled in advance Record who, what, when, where and how much Attend training or business seminar Spouse/kids expense deduct if attend or assist Basic Deduction Guidelines:

– Airline, Train, Bus, Taxis, Rental cars, etc.– Lodging, Hair styling, Dry clean, Nails– 100% of food purchased from store – 50% of meals in restaurant– No receipts are required for travel expenses under

$75 per expense, except for lodging.

Reg 1.162-2(b)(2):

Domestic Travels*

Giant Hint:

Whenever going to a business trip,

take all your dirty cloth

with you.

Domestic Travels*

Not-more-than-a-week travel: 100% tax-deductible even if you only doing business for 1 day and 6 days for fun.

More-than-a-week travel: If more than 75% time doing business, 100% tax deductible. Otherwise, you only write off the percentage calculated as business days/total days

(IRS pub. 463)

Foreign Travels

MaximizingBusiness Travel Deduction

No any limitation

You can take boat or cruise to attend the Leadership School in Miami in 02/2008. You can take any ship which doesn’t have to be U.S. ships.

The ship MUST be a U.S. ship if you take courses on the cruise.

Means of Transportation

Deduction is to take the highest federal per dim rate and double it

2009 Dates Highest Fed. PDR

Daily Limit

01/01-06/30/2009 349 698

07/01-08/30/2009 323 646

09/01-09/30/2009 424 848

10/01-12/31/2009 411 822

Luxury Water Travel

Example: A business trip from New York to England by cruise or boat.

The federal per diem rate is $424 per day. You can write off $424 x 2 = $848 per day.

Luxury Water Travel

When driving to destination, the total days on travel need to follow the 300-miles-per-day rule.

Example: Drive from Washington DC to Orlando for 800 miles. The travel days should not greater than 6 days (round-trip).

Travel Days Count as Business Days

300-Miles-Per-Day Rule

Sandwich weekends and federal holidays between business days, even if you don’t do any work.

Exception: Assume you left on Sunday and supposed to come back on Thursday. The air fare is very expensive ($1300). If you come back on Sunday, the air fare is very cheap ($450). In this case, you can come back on Sunday. The Friday, Saturday and Sunday will be count as business days even if you only have fun on these days. (Your expense should be less than the savings.)

Weekends & Federal Holidays

You drive from Washington DC to San Francisco to attend the local seminars. If your whole family will go together, you can only deduct all your own expenses. But you can deduct the highest single-person-room rate.

Assume your hotel expense is $170 for your whole family per day. If the highest single-person-room rate is $160, you can write-off $160 per day although your whole family stay in more than 1 rooms.

Travel With Family Members

Single-Person-Room Rate

Per Diem Method of Substantiating the Amount of Travel Costs

Tax Payer M&IE +Lodging M&IE Only IE Only

Self-employed(Schedule C or F) No Yes Yes

Employer reimbursement of unrelated employee

Yes Yes Yes

Employer reimbursement of 10% related employee

No No No

Un-reimbursed employee(Form 2106, sch A)

No Yes Yes

- The time, place and business purpose must still be substantiated through adequate documentation

Per Diem Rates

Location M&IE ($)

Greensboro, NC 56

Miami, FL 66

Dallas, TX 71

Ocean City, MD 71

New York 71

Los Angeles 71

Effective Date: 10/01/2009 – 09/30/2010

Per Diem Rates

M&IE Total

$46

$51 $56 $61 $66 $71

Continental Breakfast/ Breakfast

7 8 9 10 11 12

Lunch 11 12 13 15 16 18Dinner 23 26 29 31 34 36

Incidentals

5 5 5 5 5 5

Means & Incidental Expenses(M&IE Breakdown)

You and spouse go to see parents in CA

Parents are clients, days you meet with them to discuss products = business days

Post ad in newspaper to generate leads and schedule appt in advance of trip to turn other days into business days.

Allowed 2 days for weekend – no business

Travel days count as business days Conduct business more than 4 hours a

day

Business Trip Example

$350 x 2 for plane tickets $270 for rental car while in CA $500 Lodging ($100/day x 5 days

hotel) $100 training seminar or local

seminar $150 buy food to contribute to family

meals $280 meals ($80 x 7 days x 50%) $2,000 x 2 trips/yr = $4,000

deduction for vacations you were already taking

Total Vacation Deduction $4,000

Business Trip Example

Designated cell phone as your primary business phone

Have internet business, deduct internet access

2nd line for fax = business line Have to receive/make business calls from

home phone, deduct ½ home phone Long distance calls discussing business

IRS publication 529:

Communications

$600 cell phone ($50/mo)$360 2nd line for fax ($30mo)$300 Home Phone ($50mo

x½)$600 Internet Access ($50/mo)$180 Business LD calls

($15/mo)ADD $600 spouse cell if

business partner$2,640 Communications

deductionTotal Communication Deduction

$2,640

Communications Example

IRS Sec. 274(a) allows a deduction for M&E only if- (1) directly related to business or- (2) associated with business

Tickets given to customers as thank you or promotional gift

Take friends/clients out to dinner, movie, concert, baseball game, etc. – Deduct 50% meal if business

discussed Entertain at home, deduct 100% food Home Party, deduct 100% food purchased from store if business promoted directly. Must document!!

Meals & Entertainment

You have to have a business intent

Guest: “How is your business?”

You: “It is unbelievable. I never have enough business referrals, prospects, etc.”

What is a Business Party?

You are limited to 2 Dutch treat lunches a week and up to 100 Dutch treat lunches a year.

You are limited to 2 Dutch treat breakfasts a week and up to 100 Dutch treat breakfasts a year.

You are limited to 2 Dutch treat dinners a week and up to 100 Dutch treat dinners a year.

You can have totally 300 Dutch treat meals

a year.

Go-Dutch Meals

You can deduct 50 percent of the difference between the cost of your meal and what it would cost you to eat at home.

Go-Dutch Meals

If you split a lot of tabs and are worried about the IRS might challenge your deductions, you can save your grocery bills orreceipts from eating out for a month to show what you usually spend.

You don’t need to keep track of which grocery items you eat for each meal.

Instead, the IRS assumes that 50% of your total grocery receipts are for dinner, 30% for lunch, and 20% for breakfast.

Eating alone is never tax-deductible unless you are on a travel

Never eat alone when you are NOT on a travel

Meals Tip

Dining out Going to a nightclub Attending a sporting event Going to a concert, movie, or the theater Visiting a vacation spot (a ski area or beach

resort, etc.) Taking a hunting, yachting, or fishing trip Etc.

What is Business Entertainment?

Entertainment does not include activities that are for business purposes only and don’t involve any fun or amusement.

You must be with at least one person who can benefit your business in some way. This could include current or potential: Customers Clients Suppliers Employees Independent contractors Agents Partners Professional advisers

Who You Can Entertain

Entertain business associates at home Cannot deduct the costs of inviting

nonbusiness guests to your house with the possible exception of a business associate’s spouse

Keep receipts for expenses over $75, just as you would for entertainment outside the home.

Entertaining at Home

Entertain your spouse at home: 0% deductible

Keep a record showing: Date of entertainment Business purpose of entertainment Entertainment costs Set up a guest register that includes the

following columns: Name of guest (have them sign their

name) Business Affiliation (e.g., member, V.P.

Finance, etc.) Referred by

Entertaining at Home

If meal and entertainment expenses fit any of the following exceptions, they are fully (100%) deductible: Recreational and social activities for

employees: – This includes activities such as:

the company Christmas party and company picnic

occasional meals, such as a pizza party, the Thanksgiving turkey or ham you give to

employees Promotional activities:

– For example, you provide food and beverages to members of the general public who agree to sit through your sales presentation.

Exception to the 50%Limitation Rule

Tax-free de minimis fringe benefit: – This applies to expenses of providing an employee

cafeteria on the employer's premises and more than 50% of the employees to whom meals are provided are furnished the meals for the employer's convenience.

Meals and entertainment you pay for employees: – You may deduct 100% of the cost of meals and

entertainment if the cost is included in the employees compensation subject to income tax withholding.

Restaurants: – If you provide meals to employees at your own

restaurant do not include the cost in your employee's compensation. Instead, include the cost in your cost of goods sold.

Exception to the 50%Limitation Rule

Make sure you document the following 6 items to support your meal and entertainment expenses:– Date– Amount (including taxes and tip)– Place– Business purpose– Name of business associate(s)– Relationship of individual(s)

customer, client, potential customer, employee.– A good habit to get into is making notes on the back of

receipts, in a business diary, or calendar. Example:

– 6/20/2007, lunch with Jack Jones, customer; Figaro's restaurant; $75; discussed Market America business opportunity.

Audit Proofing M & E

$300 Theatre tickets as gifts (customers can take you as their guest and it’s still deductible)

$625 Business meal ($25 x 50wk x 50%) $1500 Entertain in home – business

mentioned– $50 food/drinks/week x 30 weeks

$375 Home Party, e.g., Open House, Holiday, etc.– MUST have clear business function for ALL guests -

products displayed and discussed, business aspect part of entertainment, etc

– Document well – who, what, when, examples, photos

$2,800 Entertainment Deduction

Total Entertainment Deduction $2,800

Meals & EntertainmentExample

Must use the space exclusively and regularly (IRS sec 280A(c)(1)) for Business Separate room or area of home (Prop. Reg. 1.280A-2(g)(1)) Your home is your principal place of business Can’t be just desk in corner of living room, TV room, etc. Storage of inventory or product samples 2 methods:

– Room method: % of total # of rooms– Square Footage Method: % of total square feet

Must have net profit. If not, deductions are limited.

Carry forward to future years.Exceptions: The storage of inventory or product samples does not have to meet “exclusive use test”. Check IRS guidelines and rules. www.IRS.gov

Home Office

Types of Home Expenses

Expense

Description Deductibility

Direct Things you buy only for your home office

Deductible in full

Indirect Things you buy to keep your entire home up and running

Deductible based on the percentage of your home used as a business office

Unrelated

Things you buy only for parts of your home that are not used for business

Not deductible

Direct ExpensesIndirect Expenses

– Rent– Mortgage interest and property taxes

Save $153 in self-employment taxes for every $1000

– Depreciation– Utilities– Insurance– Home maintenance– Casualty losses– Condominium association fees– Security system costs– Etc.

Types of Home Expenses

1. Take a picture of your home office and draw up a diagram showing your home office as a portion of your home.

2. Have all your business mail sent to your home office.

3. Use your home office address on all of your business cards, stationery, and advertising.

4. Obtain a separate phone line for your business and keep that phone in your home office.

5. Encourage clients or customers to regularly visit your home office, and keep a log of their visits.

6. To make the most of the time you spend in your home office, communicate with clients by phone, fax, or e-mail instead of going to their offices. Use a mail or messenger service to deliver your work to customers.

7. Keep a log of the time you spend working in your home office. This doesn’t have to be fancy; notes on your calendar will do.

Audit-Proofing Home Office Deduction

Assume 2000 sq ft home w/ 200 sq ft bus =10%

Usual monthly expenses:– $500 mortgage interest– $250 real estate taxes– $150 home owners insurance– $300 utilities (elect, gas, water)– $300 maid and lawn services– $300 cleansers, paper products, repairs etc.– $300 depreciation (100K 30 years) MUST

TAKE

Total $2100/mo x 10% x 12 mo = $2,520/yrTotal Home Office Deduction

$2,520

Home Office Example

Don’t be too chicken to take the home office deduction!!!

Don’t be to

o chick

en

to ta

ke the h

ome o

ffice

deduct

ion!!!

• Hiring Your Children – to deduct $5700 for each

child aged between 7 and 18 years old in 2010. - Salary, bonus, training expenses - Other ordinary and necessary business expenses

• Keep a weekly time sheet or time card.

• Pay them by the business check.

• Hiring Your Legal Spouse - to deduct un-reimbursed

medical-related expenses - self-insured medical reimbursement plan and travel expenses. - Co-pays for doctors visits - Annual insurance deductibles - Prescription drugs - Braces, glasses, dental• Employment agreement, duty list

Hiring Your Family

In general, children who are dependents (claimed on someone else's tax return) must file a tax return if:

- they have earned income of $5,700 or higher (this is the standard deduction amount for 2010, the amount for 2008 was $5,450)- they have unearned income (investment income) of $950 in 2009 ($900 in 2008)- they have gross income (both earned and unearned) in excess of the larger of $950 or their earned income plus $300.http://children-and-taxes.blogspot.com/2009/07/children-and-taxes-when-kids-are

.html

When Kids Are RequiredTo File A Tax Return?

8 ½ hours/month x 12 = 102 hours/year

$5.15 /hour x 102 hours/year = $525.30/year

Benefit: deduct 100% of all medical expenses and your travel expenses.

Hiring Legal Spouse - Example

Answer phone and take messages daily. Open and check the box of products ordered Clean office, sweep floor, wash cars Enter client data into computer, write

Christmas cards Watch baby Works 7.5 hours/week, or 30 hour/month Pay $12.50/hour x 30 hours/month =

$375/month Deposited into a bank account that has her

name and my name on it.

What Kind of WorkCan Children Do?

Products given as gifts – LABEL Advertisements Flyers, Signs, Tapes, Videos, etc. Free Samples Products openly displayed in

home Donations to charities, raffles Business Cards Any literature, mailing with

business mention, website, etc.

Promotional Deduction

$25 per person per yearYou and your spouse are

considered as one person for figuring the $25 limitation.

ButIf you send a business gift to

an individual organization without mentioning any person's name, it will be 100% deductible.

If a person's name is mentioned, the $25-per-person-rule will apply.

Business Gift

$300 Products as gifts- B-day, Xmas $500 advertise for bus partner in

paper $250 products donated to raffle @

FMV $150 Gifts in form of books, tapes

that promote or relate to prods or business

$200 free samples to prospects/clients

$300 products displayed in home $150 Printing cards, flyers, letters,

etc.

Total Promotional Deduction $1,850

Promotional DeductionExample

加速 折旧

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the US Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to purchase qualifying vehicles (like SUV's and Hummers.)

What is Section 179?

When your business buys certain pieces of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a vehicle, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.)

Now, while it's true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

Section 179 works like this:

Section 179 deductions (not available for rental activity)– Up to $125,000 in 2007 (Total

Amt: $500K)– Up to $250,000 in 2009 (Total

Amt: $800K)– Up to $250,000 in 2010 (Total

Amt: $800K) Section 179 does come with limits - there are caps to

the total amount written off ($250,000 in 2010), and limits to the total amount of the equipment purchased ($800,000 in 2010.) The deduction begins to phase out dollar for dollar after 800k, so this makes it a true small and medium-sized business deduction.

However, in 2009, businesses that exceed the $250k deduction limit can take a bonus depreciation of 50% on the amount that exceeds the limit. And then also take normal depreciation on the rest. In 2010, there is no 50% bonus depreciation.

Section 179 Deduction

Section 179 Deduction

Tax Year Upper Limit 2002   $24,0002003 $100,000 2004 $102,000 2005 $105,000 2006 $108,000 2007 $125,000 2008 $250,000 2009 $250,000 2010 $250,000 2011 $500,000

CameraComputerHDTVVehicleSoftware, etc.

Section 179 Deduction

Section 179 Deduction

Section 179 Deduction

Section 179 Deduction(Tax Year 2011)

• 2011 Deduction Limit - $500,000 (up from $250k previously). Good on new and used equipment, including new software.

• 2011 Limit on equipment purchases - $2 Million Dollars (up from $800k previously).

• “Bonus” Depreciation - 100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2 million in capital equipment purchases.

Section 179 Deduction

Difference between Section 179And Bonus Depreciation

• Both new and used equipment qualify for Section 179 Deduction (as long as the used equipment is "new to you")

• Bonus Depreciation covers new equipment only. • Bonus Depreciation is useful to very

large businesses spending more than $2 million on new capital equipment in 2011;

• Businesses with a net loss in 2011 qualify to deduct the cost of new equipment.

Comparison of Deductions:Section 179 vs. Depreciation

Year Federal Income Tax Rate

Federal Income Tax Saving Using Section 179 Deduction

Federal Income Tax Savings Using Depreciation Deduction

2008 15% $750 (15% x $5,000 total cost)

$75 (15% x $500 of total $5,000 cost)

2009 25% 0 250 (25% x $1,000)

2010 28% 0 280 (28% x $1,000)

2011 28% 0 280 (28% x $1,000)

2012 28% 0 280 (28% x $1,000)

2013 28% 0 140 (28% x $500)

Total $750 $1,305

$500 Camera $1000 Computer

Total Section 179 Deduction $1,500

Section 179 DeductionExample

To qualify for an education deduction, you must be able to show that the education:

- Maintains or improves skills required in

your business, or

- Is required by law or regulation to maintain

your professional status

Knowledge Is Power

Education Expenses

Deductible education expenses include:

- Tuition- Fees- Books- Other learning materials- Transportation- Travel

Knowledge Is Power

Education Expenses

- New Distributor Training- Basic 5- ECCT Training- UnFranchise® Business Presentation- Local Seminar- District Rally- Regional Convention- Chinese Convention- International Convention- World Conference- Upper-Level Training- Moving-up Seminars- Various Professional Certificates Training

Total Education Deduction $1,500

Education Expenses

Postage and Product Shipping & Handling Fee

Office Supplies – pens, paper, labels, etc Office Equipment – lamps, desk, bookcase Refreshments for trainings in your home Dues and Subscriptions Legal and Professional Services Taxes and Licenses Business Bad Debts Casualty Losses Insurance for Your Business Interest on Business Loans Domestic Production Activities

Other Deductions

$150 Postage $250 Office Supplies $100 Dues and subscriptions $200 Refreshments $100 Business Bad Debts

Total Other Deduction $800

Other DeductionsExample

The money you spend to get your business up and running.

The deductible amount in the first year you are in business:– up to $5,000 before tax year 2010– Up to $10,000 in tax year 2010

Deduct the remainder, if any, in equal amounts over the next 15 years.

Start-up Expense(I.R.C. Sec 195)

$8,990 Auto Mileage $4,000 Business Vacations/Travel $2,640 Communications $2,800 Entertainment $2,520 Home Office $3,200 Hire Children $1,850 Promotional $1,500 Section 179 $1,500 Education $800 Other Deductions

$29,800 Business Deductions

Add Them UP …

Range of Expenses for Sole Proprietorships(Tax Year 2001)

15 Most Common Operating Expensesfor Small Businesses

Expense Percentage Claimed

1. Car and truck expenses 81%

2. Utilities 68%

3. Supplies (other than office supplies)

60%

4. Office supplies 60%

5. Legal and professional services 60%

6. Insurance 54%

7. Taxes 51%

8. Meals and entertainment 47%

9. Advertising 43%

10. Repairs 40%

11. Travel 31%

12. Rent on business property 26%

13. Home office 21%

14. Rent on equipment and machinery

21%

15. Interest 18%

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TOTAL $29,800 Business Deductions

Converting Deductions to Tax Savings: If your tax bracket is 10%, you save

$2,980. If your tax bracket is 15%, you save

$4,470. If your tax bracket is 25%, you save

$7,450. If your tax bracket is 28%, you save

$8,344. If your tax bracket is 33%, you save

$9,834. If your tax bracket is 35%, you save

$10,430.

How Much Did I Save?

- $ 99.95 Renewal fee - $ 1200 ($100 x 12) Products

ordered+$ 100 Retail profit

Maximum annual expenses for this business

$1200

The Cost To Maintain As aWaiting/Sleeping

Market America Distributor

Investment $1200

Tax Advantage

$2980 - $10430

Free Products !!!Free Services !!!

Never Bankrupt !!!

Conclusion

Stand up to the IRS (Something the IRS doesn’t want you to know)

Audit-Proof Strategies

1. Be Neat, Thorough, and Exact2. Mail Your Return by Certified Mail3. Don’t File Early4. Don’t File Electronically5. Form a Business Entity6. Explain Items the IRS will Question7. Avoid Ambiguous or General Expenses8. Report All of Your Income9. Watch Your Income-to-Deduction Ratio10.Beware of Abnormally Large

Deductions

Ten Tips for Avoiding an Audit

Tax Savings are Government paying you to be in business

Tax Laws favor businesses in ways that employees never benefit

Thoughtful tax planning pays/saves you $$$

IMPORTANT POINTS: – save receipts– keep good records and daily calendar– document your activities, so you calculate

most deductions, can prove deductions if audited & keep your accountant happy

Bottom Line