For the last 10 weeks, we’ve been busting tax myths left and right on our Financial Gravity blog. Below is a summary of all the myths we’ve busted in that time.
1. Having an accountant is the same thing as having a tax planner. MYTH
Everyone knows that if you are an entrepreneur or small business owner, having a good Accountant is essential to the function and success of your business, but it’s not everything. If you want to lower your personal taxes, increase your profits, and attain greater wealth, you’ll need the help of a Tax Planner. Read more here.
2. Taking a proactive approach to tax planning will put your business at risk for an audit. MYTH
Implementing strategies that help you reduce your taxes will not raise your risk of audit. In fact, it’s why the Internal Revenue Code exists (all 70,000+ pages of it). Inside the IRC, there are plenty of legal ways that Small Business Owners like you, can learn to lower their tax liability and keep capital in your business. Read more here.
3. Becoming an LLC prevents me from having to pay Self-Employment taxes. MYTH
Becoming an LLC will not magically prevent you from paying Self-Employment taxes. Why? Because an LLC is not a tax filing status. To determine which tax filing status is right for your business, get in touch with a Tax Professional. Read more here.
4. Having an IRA or 401k is a Sufficient Retirement Plan. MYTH
If you are a small business owner, and you have an IRA (Individual Retirement Account) or a 401k, you don’t actually have a sufficient retirement plan. Not only do conventional retirement accounts (401k, 403b, 457, SEP, SIMPLE, IRA) contain massive hidden fees but they only work if Taxes don’t go up and Your income decreases upon retirement. Read more here.
5. Kids are an expense. Case Closed. MYTH
As long as you have a written contract, you are paying your “employee” through the payroll (so the IRS gets their fair share), and the money is being deposited into your “employee’s” account, it’s totally legal, moral, and ethical. Read more here.
6. The Affordable Care Act took away my ability to write off medical expenses. MYTH
There are still PLENTY of ways for you to write off glasses, braces, massages, acupuncture, and other medical related expenses. Here are just a few; Flex Plans, Health Savings Accounts (HSAs, or a Medical Expense Reimbursement Plan (MERP). Read more here.
7. A home office deduction will put me at an immediate risk for an audit. MYTH
Not only is a home office deduction LEGAL, MORAL, and ETHICAL, but there are four different ways (YES, FOUR!) to do it. If writing off your home office was risky, why on earth would the IRS give you four ways to do it? Read more here.
8. If there is food involved, then it’s a meals and entertainment expense. MYTH
If the food is part of a marketing expense, bought while traveling for work, or purchased for staff as a “working lunch”, you may be able to deduct 100% of the cost. Read more here.
9. Mileage is the only tax write-off I can use for my car. MYTH
In addition to writing off your mileage, the Internal Revenue Code allows you to write off your leased car (but not a loan.) Read more here.
10. If lowering my tax liability was that easy, I would already know about it. MYTH
Most accountants, attorneys, or business consultants aren’t taught to master the myths standing between you and your money. In fact, the financial industry benefits from small business owners not understanding tax myths. At Financial Gravity, however, we have expert tax planners and tax specialists who not only understand the tax code and the available “green lights” you can use to reduce your taxes but who will help you engage in proactive tax savings and tax planning. Read more here.
If you’d like to read about the myths in further detail, you can download your own copy of the Tax Myth eBook here. After reading the eBook, you’ll have a better understanding of what you need to do to lower your tax liability, increase your profit, and enhance your quality of life.
*image by Edu Lauton