Lower Your Tax Bill By Planning Instead Of Cheating

Plan ahead, don’t cheat to avoid paying your taxes. It’s an amazing practice to observe, business owners failing to report income, putting cash into their pockets, wanting to avoid paying taxes. Wage earners have similar issues with tips. Not declaring them does avoid tax payments, but also puts you in jeopardy. The service knows that hair stylists and waitstaff receive sizable percentages of their income in tips. Accepting potential criminal liability, yet feeling its OK and even a good plan? Foolishness! There are better ways to reduce your tax bill without taking such risks.

There are volumes of statutory laws that spell out how to appropriately and effectively reduce your tax liability fairly and without risk. Why not utilize the services of a professional tax planner who can review your situation and organize you more effectively as well as recommend various strategies that may be best for your circumstances, reducing your outlay legally and safely? The probable reality is that if you evaluate your expenses and consider how much of it is directly applicable to income production, it would not be a surprise to me if you are entitled to far more deductions than you are currently taking. This could reduce your tax obligation far more effectively than not declaring cash, and legally.

The fear is that aggressively recording your business expenses will trigger a tax audit. Well, that’s not the worst thing that could happen. If you record them correctly and they are not unreasonable, you will survive a tax audit in reasonably good shape. Keep in mind that tax audits are infrequent and even if you increase your odds, it is a reasonable bet to take the deductions so long as you are playing by the rules and recording accurately and as dictated. You are doing the right thing, as directed by the code, by recording all your expenses and taking appropriate deductions.

Better yet are the more interesting tax planning strategies like buying real estate which throws off depreciation, interest deductions, cost of management and even losses and in the end, provides you with an excellent investment and a reduced tax bill. This is a good strategy–growth and enhancement of your wealth while reducing your tax bite. Sounds a lot better then stealing cash and not declaring your correct income, right? Home offices, traveling and entertainment, creating multiple organizations and cross-billing for legitimate services, all the time reducing income and taxes while performing appropriate services… there are so many variations to the theme and paths to reduce your tax bill legally. Buying a home or itemizing legitimate deductions are far better plans for reducing your tax liability. Why would anyone take the cash and not declare it? Beats me. Find a good accountant and get good advice. Plan, do not avoid.

Developing a home business is another wonderful way to begin your tax planning adventure. Expand a hobby into a business and then reap enormous rewards and deductions for your home office, travel and entertainment, education and additional expenses that you may have been incurring anyways. What was once a nondeductible hobby or living expense now becomes a deductible business expense. Keep in mind, you are not obligated to make a profit every year, just once or twice in five years will suffice, and it can be a small profit. Even breeding a pet dog and selling the pups turns many hobby expenses into business deductions. Buying a vacation retreat and renting it for a prescribed amount of time provides a tax benefit as well as a retreat.

Here is another stick in your eye as an additional “reward” for not declaring your real revenues. To decrease your tax bill, you also decrease the value of your business. When you go to sell your business, you’ll get far less than it may actually be worth because you recorded your reduced revenue instead of your actual revenue. Try telling your buyer that your tax return is not really accurate because you take $1000 per week out in unrecorded cash. That will go a long way. Not only will you not get credit for this admission, you will also be telling your buyer that you are a liar and a cheat. Why should he believe you about anything else you tell him? Additionally, should you be interested in borrowing from a bank or other legitimate lending source, you will find once again that by removing cash you have effectively reduced the likelihood of being able to borrow because you may not show adequate profitability. You can’t win here either. This tax planning business is sounding better and better than the risk of cheating every moment, right? That’s because it is.