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Tax Breaks for Small Business Owners

» Introduction
From a tax standpoint, being a self-employed small business owner is a wonderful thing. Why? Because the tax deductions for self-employed individuals are many.
» Step 1
Here is a short list of some of the key deductions available to self-employed taxpayers:

-- Office lease or rental payments
-- A home office (if you have one)
-- The cost of office equipment and furniture, including computers, phones, Internet services, desk, chairs, lamps – even the “Dilbert” coffee mug sitting on your desk.
-- Car and travel expenses
-- Health care/health insurance
-- A slice of your self-employment tax (up to 60%)
-- 50% of meals and entertainment
-- “Professional” fees from lawyers, financial advisors, Web site designers – anyone who assists you in the growth of your business
-- Subscriptions to business-related magazines, newsletters, fee-based Web sites like the Wall Street Journal.com, or professional training courses at the Learning Annex
-- Fees associated with professional organizations, like the Chamber of Commerce, a trade union, or business association
» Step 2
But be careful out there. Tax avoidance is one thing tax evasion is quite another. Here is a list of the most common types of self-employed fraud the IRS is likely to investigate

-- Not reporting substantial amounts of income, such as a pub owner’s failure to report a portion of the daily business receipts.

-- A claim for bogus deductions on a tax return, such as a glaring overstatement of travel expenses, or a taxpayer’s claim of a large deduction for charitable contributions when no records of the organization exists.

-- Accounting discrepancies, such as a self-employed computer technician’s failure to keep adequate records
» Step 3
Under a sole proprietorship, you can save money by hiring your kids – as long as they are under 18 years of age.

Corporations aren’t so kid-friendly, unfortunately. In a corporation, you can still hire the kids and deduct the wages on the company tax return. But be warned that the payments are subject to Social Security and federal unemployment taxes just like wages paid to regular workers

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