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Archive for the ‘Taxes’ Category

It makes good business sense to let temporary tax rates for the highest income brackets expire and revert to 1990s levels on January 1, 2011 as scheduled. Families should keep tax cuts on their income below $250,000, but well-off families should not get extra tax cuts on their income above $250,000.

Congress should not let Wall Street and big business CEOs hide behind small business to justify a budget-busting $700 billion tax giveaway over the next decade that would be even more harmful for Main Street than it was the last decade. Instead, Congress should build on constructive action like the Small Business Jobs Act and the overdue infrastructure investment we need to create jobs and stay competitive in the global economy.

Small business hiring is driven by customer demand, not tax rates

“Expecting high-end tax cuts to trickle down as job creation is about as reasonable as pouring gasoline on your hood and expecting it to fuel your engine. I’ve run a small business for more than 30 years. When people tell you that small business owners will use the money they save from lower tax rates to hire someone, they’ve got it backwards. Either they’ve never run a small business or they’re trying to mislead you. My tax rate doesn’t effect hiring. If I think I can do more business, my company will hire more workers. The costs of finding, hiring and paying new employees are business expenses. They’re deducted up front from our taxable income.”
—Lew Prince, Managing Partner, Vintage Vinyl, St. Louis, MO.

“The idea that ending the Bush cuts for the top brackets will hamper small businesses’ ability to reinvest is a red herring. I’m an average small business owner in Nebraska. I have 30 employees. My business does $2 million plus in annual sales. My personal income as the owner is less than $85,000 a year. The sales dollars I reinvest by hiring more employees or buying equipment don’t pass through onto my tax return. As a fellow businessman once told me, ‘Give me more customers and I’ll be forced to buy equipment and hire people to meet demand. Give me a tax break without more customers and I’ll just go to Aruba.’”
— Rick Poore, Owner, Design Wear Inc., Lincoln, NE.

“All across our country, families are fighting for their jobs, their businesses, their homes, their children’s education and their retirements. Congress and President Obama should be focusing like a laser on energizing Main Street business and job creation – not repeating policies that led to the greatest economic crisis since the Great Depression. No amount of smoke and mirrors can change the clear truth of history: the American economy created just 1.1 million jobs net under the policies of the Bush Administration, while creating 22.7 million jobs under the Clinton Administration. The Bush administration inherited a large budget surplus and left behind a giant budget deficit, economic meltdown and crumbling infrastructure. The high-end Bush-era tax cuts are contributing to our financial ruin rather than our economic success. They should expire as scheduled on December 31.”
—Margot Dorfman, CEO, U.S. Women’s Chamber of Commerce.

“The subjects of the state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”
—Adam Smith, The Wealth of Nations.

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Starting a small business can be hard enough, but getting hit with a hefty bill from the IRS at the end of the year can make a difficult situation nearly impossible.  There are plenty of different strategies for minimizing your tax liability, but the most effective one is itemized deductions, and know what you can deduct is the first step to getting prepared for tax season.  Here’s a list of just a handful of the eligible deductions for your small business, so be sure to investigate and leave no stone unturned before you submit your tax documents at year’s end.

Bad Debt
If your company sells goods, you can deduct the cost of any goods that were not payed for by a client.  This doesn’t make up for losing the product, but it can soften the blow

Auto Expenses
Company cars are deductible, but you can also deduct mileage, service, fuel and nearly any expense related to purchasing and operating the vehicle.

When you first start your business, you’ll face plenty of fees along the path to incorporation; good news is these are all deductible.

Legal and Professional Fees
Whether it’s a lawyer, tax professional, or the janitorial service for your offices, nearly all professional fees your business pays will be deductible.

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Taxes are unavoidable in business, (that is, unless you want to end up in prison) but businesses can drastically decrease their tax liability in a number of ways, small and large.  The key to reducing your taxes is to know all of the ways you can save, keep immaculate paperwork and remember that the small savings here and there are what add up to the big savings at the end of the year.

Be Diligent About Deductions
One of the most obvious ways to save on your taxes is through itemized deductions.  Unlike your personal taxes, businesses are taxed on income and then can deduct nearly all expenses, resulting in essentially just paying taxes on profits.  These deductions can be anything related to running the business (from paper clips to company cars) but there are plenty of regulations and restrictions that must be followed carefully.  If you’re not a serious type A personality, consider bringing in a tax professional to advise you quarterly on items you can deduct, cannot deduct and just to get an overall feel of how you’re doing.

Read about more ways to maximize your profits: