We may be coming off of a decade
of tremendous corporate profits and economic growth, but for the vast majority
of North Americans, we're in a dismal, uphill climb. And many economists
believe that this next, new millennium won't be getting better any time soon.
Why?
Changing business and government
attitudes are the reason. There has seemingly been more anti-business
legislation in the last decade than in any other this century. Stronger
employment and labor laws, the Age Discrimination in Employment Act, the
Comprehensive Omnibus Budget Reconciliation Act (COBRA, which includes
mandating health insurance for workers for a period of time after they leave
employment), safety laws, much tougher laws for discharging workers, more
liabilities for lawsuits, Family Leave Act, Americans With Disabilities Act
(which is creating immense numbers of lawsuits), along with higher minimum
wages and fringe benefits.
Just reading this list is
exhausting.
While these acts have beneficial
and protective aspects, they have also encouraged businesses to move their
facilities. That "sucking sound" popularized by Ross Perot is not
just down to Mexico, but elsewhere as well. The result has been a dramatic
loss of heavy industry in the U.S.
The young and the middle-aged
alike are realizing that their dream of "having a job with a company
forever" is an illusion. Companies have been downsizing, rightsizing and
capsizing for some time now, and they continue to do so--more now than ever
before. Even the federal and state governments are getting into the act with
layoffs and attrition of jobs.
In addition to all this
uncertainty and mutual lack of loyalty between companies and employees, even
the workers who do keep their jobs have no guarantee of promotions due to the
shrinking number of management positions. These circumstances aggravate the
already tryingly long commutes in rush hour traffic and increasingly typical
frustrated boss--spelled backwards, that double S-O-B.
Finally, if all this isn't bad
enough, under recent tax laws employees are shafted more than ever with limits
and thresholds for their employee deductions and higher social security tax
limits. This results in more couples working than ever before and, on many
occasions, working at more than one job. It is now almost impossible to have
only one job in the family and make ends meet! Today, many households need
three incomes just to survive.
Sadly, even having more than one
job does not produce any major positive effect on most people's bank accounts.
Why? Because of tax laws. This was well illustrated in 1994 by Jane Bryant
Quinn in her Woman's Day article on "How to Live on One Salary."1
Where The Money Goes
Ms. Quinn's example assumed that a man was earning $40,000 per year. His wife
(we will call her Lori) wasn't working. They had more month than money. (Sound
familiar?) Lori subsequently got an administrative job for $15,000 per year.
You would think this would improve the family's financial situation, but when
Ms. Quinn examined the economics of getting this extra income, the results
were startling!
Lori had to pay federal and state
taxes on her new income. Since they filed jointly, the family's combined
income was what established their tax bracket. She paid $4,500 in new taxes,
most of which was non-deductible, for federal and state income tax.
Lori had social security withheld
from her paycheck at the rate of 7.65 percent, which amounted to an additional
nondeductible amount of $1,148 being extracted from her salary. She also had
to commute to work 10 miles a day round trip, which is probably conservative
for most people. This resulted (in 1995) in nondeductible commuting costs of
$696.2
Lori also had some child care
expenses, which give a partial tax credit. Ms. Quinn figured that the amount
spent over and beyond the tax credit was $4,250 per year.
Lori also ate out each day with
colleagues, spending an average of $5 per day, five days a week. This results
in a nondeductible expense of $1,250 a year. (I would love to know where she
ate for only $5.)
Now that Lori has a job, she has
to have professional clothing--this means a hefty dry cleaning bill. Ms. Quinn
assumed that Lori's increased expenses here amounted to an extra $1,000 per
year, nondeductible, of course.
Finally, with both spouses
working, Lori wasn't in the mood to cook dinner every night. They bought more
convenience foods and ate out more frequently. This resulted in increased food
costs of a nondeductible $1,000 per year at minimum.
Add it all up and Lori's take-home
pay was a paltry $1,156 a year, for which she had to put up with a daily
commute, an unpleasant boss and corporate hassles. (See the following summary
of all these numbers, so you can do the math for yourself.)
Gross Income
$15,000
LESS
State and Federal Taxes
-4,500
Social Security Taxes
-1,148
Car Expenses
- 696
(at 29cpm-50 miles a week)
Child Care
-4,250
Lunches at the Job
-1,250
Business Clothing & Dry cleaning
-1,000
Higher food expenses (eating out, snack foods, etc.)
-1,000
Net take-home pay:
$1,156
No wonder more and more people are
starting home-based businesses. This has become and will continue to be one of
the greatest mass movements in the U.S.
--------------------------------------------------------------------------------
Why a Home-Based Business Makes
So Much "Cents"
There are many reasons why so many people are favoring home-based over
traditional business.
There is no commute (unless you
have a really big home), no boss, little if any chance of lawsuits, much lower
overhead, no employees (or few), and far fewer government restrictions. In
fact, many of the laws previously cited don't apply to small firms with few or
no employees. It is for these reasons, according to Entrepreneur magazine,
that 95 percent of home-based businesses succeed in their first year and
achieve an average income of $50,250 per year with many earning much more.
If everyone in the U.S. who is
employed full-time got a part-time business and used the strategies I suggest,
each employee could easily reduce his or her taxes from $2,000 to $10,000 each
year.
There are really two sets of tax laws in this country. One is for employees,
and it allows deductions for individual retirement accounts, 401(k)s (if you
have one set up by your company), interest and property taxes on your home
(which some in Congress want to do away with), and charity. Then there are the
laws for home-based business people who conduct their business either full- or
part-time. They can deduct, with proper documentation, their house, their
spouse and even children (by hiring them), their business vacations, their
cars, and their food with colleagues. They can also set up a pension plan that
makes any government plan seem paltry by comparison.
For Lori--and for you--the meaning
of all this is simple:
Lori earned $15,000 in salary as
an employee, but took home only $1,156. She could have netted the entire
$15,000 had she earned it in a home-based business!
This is an increase of almost 13
times her take-home pay as an employee.
Notice that Lori is not spending
dramatically more money than she is currently spending. She would eat out
anyway, go on trips and drive her car the same as before. By having a
home-based business, however, many of her expenses become deductible. This
concept is known as "redirecting expenses." With a home-based
business, she can now deduct some of the expenses that she is incurring
anyway.
Renegade Strategy: If you don't
have a home-based business, start one!
In addition to all the benefits
mentioned above, Congress will subsidize you while you are growing your
home-based business. If your home-based business produces a tax loss in the
first year or so, you can use that tax loss against any other income you have.
It can be used against wages earned as an employee, dividends, pensions, or
interest income--or you can use the loss against your spouse's earnings if you
file a joint return.
If the tax loss exceeds all your
income for this year, no problem. You can carry back the loss two years and
get a refund from the IRS for up to the last two years of income taxes paid,
or you can carry over the loss twenty years. You read it right: You can offset
up to 20 years of income!
Here's an example:
Mike earns $50,000 in a job with
the government. If he starts a home-based business that generates a tax loss
of $10,000, he only pays tax on $40,000.
Renegade Tip: You can never lose a
properly documented business deduction.
In fact, if everyone in the U.S.
who is employed full-time got a part-time business and used the strategies I
suggest, each employee could easily reduce his or her taxes from $2,000 to
$10,000 each year. If all employees in the U.S. did this, the tax bite of the
IRS would be reduced by a whopping estimated 300 billion dollars annually. Of
course, Congress would have to change the laws for this to occur.
Renegade Strategy: Get LUCK--Labor
Under Correct Knowledge.
Can You Succeed In a Home-Based
Business?
Research has constantly shown that it is rarely the business that determines
success or failure. It is usually the business owner. Why does one person
succeed and another fail at the same business?
Two words--Knowledge and Action.
Some people want the benefits of
having their own business, but they don't take action. The result is business
failure.
Then there are the people who are
always working. They take action all day but still fail. The reason is that
they are not taking the correct actions, the knowledgeable actions, that will
bring the desired results. Again, business failure.
It's like drilling for oil. If you
set up a drilling rig in your back yard, it is going to fail at producing oil
unless your back yard is in Texas or Alaska. The same rig in a good oil field
will produce a gusher, because it was placed where oil was known to exist.
The point is that most people who
get excited about starting their own home-based business do so without all the
necessary knowledge. Consequently, many people quit before they acquire,
through experience, the knowledge they need, without realizing that they are
getting
substantial tax breaks. This leads to another strategy. . . .
Renegade Strategy: Learn to
duplicate the success of others.
Duplicating the strategy of others
is much quicker and more effective than going to the school of hard knocks. It
is also known as modeling, which is well-illustrated by the way The McDonald
Corporation blazed a trail to success that many have since followed.
In the early 1950s, McDonald's and
other start-up companies discovered that they could grow many times faster
than the conventional firms through franchising. Instead of the company
investing millions of dollars to build new stores, they let independent
franchisees do it for them.
It seemed like a great idea, but
at first no one figured out how to make it succeed on a consistent basis;
therefore, the media attacked relentlessly and continually. News articles
featured destitute families who had lost their life savings through
franchising schemes. Virtually every state attorney general in the U.S.
condemned the new marketing method. Some congressmen even tried to outlaw
franchising entirely.
Over the years, however, Ray Kroc
and his management team at McDonald's developed a turnkey franchise business
system that produced consistent results for virtually anyone who bought a
McDonald's franchise. The newfound success--from the system--turned public
perception of franchising around. Today, virtually every franchise business
models--to some extent--the franchise business system created by McDonald's,
making franchising one of the most respected ways of doing business in the
world.
Modeling is simply learning what
other successful people have done to achieve success in a specific area, and
then doing the same thing. Someone said that "education is the shortcut
to experience." With modeling, you literally leverage your own learning
with the collective years of learning through experience of many others.
Modeling the success of others saves both time and money and reduces
frustration and stress.
The light at the end of the
tunnel, for you and millions of others today, is the financial opportunity
that starting your own business offers. If you have one going already, then
make sure you are enjoying the many financial advantages to which your smart
choice entitles you. The tax advantages alone can make a home-based business
the single best financial move you could ever make.
--------------------------------------------------------------------------------
Summary
Job prospects are declining and
will continue to do so. Promotional opportunities to management within major
companies are also shrinking.
Traditional businesses have higher risks than those associated with home-based
businesses.
You will never get rich unless you reduce your taxes to the legal minimum.
Everyone should have a home-based
business immediately!
You can never lose a properly documented business deduction. If necessary, you
can always carry business losses three years or carry forward all business
losses twenty years.
Get LUCK--Labor Under Correct Knowledge.
--------------------------------------------------------------------------------
1 Jane Bryan Quinn, "How to
Live on One Salary," Woman's Day (November 1, 1994) p.13.
2 In 1994, the IRS conservatively
estimated that cars cost 29 cents per mile to own and operate. The allowed
figure (as in 1996) is 31.5 cents per mile, which means the automobile costs
cited in Ms. Quinn's article are much lower than they would be today.
--------------------------------------------------------------------------------
SANFORD C. BOTKIN, Attorney,
Certified Public Accountant, is Chief Executive Officer and Principal Lecturer
of the Tax Reduction Institute, a tax education company located near
Washington, DC. During the past ten years, Mr. Botkin has taught more than
50,000 taxpayers how to save more than $300 million on their taxes with his
Tax Strategies seminar, Tax Reduction Diary System, and his instructive tape
series, Tax Advantages For Your Home Based Business. Mr. Botkin has extensive
financial and legal experience, including five years as a legal specialist in
the Office of Chief Counsel for the Internal Revenue Service. He was also one
of eight attorneys selected by the Internal Revenue Service to train new
attorneys to the Internal Revenue Service's Corporate Tax Division. Mr. Botkin
is a member of the Florida Bar Association and the Florida Institute of Public
Accountants.
Click
Here Now to learn more about Sandy
HOME
Join the billion dollar industry of Health and Wellness!