Have you ever noticed how American taxpayers everywhere breathe a collective sigh of relief on April 15?
Unless you filed an extension, you've got your tax return done and now you can forget about taxes for another year.
If you found yourself agreeing with me there, guess what?
I just caught you making the biggest tax mistake you can possibly make -- the incredibly short-sighted attitude that taxes is a "once-a-year" thing, something you do only because you are forced to deal with it every spring, and then you are so fed up with the whole mess that you gladly forget about it until next spring, and then, only because you are forced to deal with it again.
If this is the way you approach taxes, you are doomed to overpay your taxes forever.
My message today is a simple one, but unfortunately, one that often falls on deaf ears. So please, I really do hope you are listening with your ears wide open.
Here it is, my Post-Tax Season Message (but it is applicable any time of year):
Our tax system is unbelievably confusing, incredibly convoluted, and increasingly chaotic. In a word, it's crazy. And it's only going to get worse.
But even with all its mind-numbing complexity, our tax code has many legal loopholes you can drive a truck through.
And the biggest cause of this situation is the simple fact that small biz owners and the self-employed are not using all the tax loopholes they are entitled to.
It's gotta be a year-round task. And you need to realize that some of the best tax-reduction strategies require some research on your part. You've got to do your homework, check things out, maybe even consult with a professional to make sure you're not missing something and that all your ducks are in a row.
In my experience, there is one small biz tax-reduction strategy that stands head and shoulders above all the rest: Choice of Entity.
Sole Proprietorship, Partnership, C Corporation, S Corporation.
Note: The Limited Liability Company is also a possible entity choice, from a legal standpoint. But if you form a LLC, you then must decide how that LLC will be taxed, and the LLC can be taxed like any of the 4 options listed in the above paragraph.
The purpose of this article is not to tell you which entity is best for you and exactly how much money you can save in taxes by picking one of these entity choices.
I can also tell you this: every year, thousands of small biz owners and self-employed people save literally thousands of dollars in taxes because they made a simple one-time change in their Choice of Entity.
Obviously, there are many factors that determine how much tax you pay: the accuracy of your record-keeping, how organized you are, your knowledge of all the many available tax deductions, etc.
So, now that Tax Season is a not-so-distant memory and your mind turns to other, supposedly more important matters, my question to you is this:
These are not the kinds of questions you have time to address while frantically looking for lost receipts and filling out the tax forms on April 14th.