How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

By Darren Oliver

With the rush to file your taxes by April 15th, you probably did not consider the possibility that you overpaid. According to the General Accounting Office, in 1998 alone, there was $311 million paid unnecessarily to the IRS. Do not count on the IRS to tell you if you have overpaid because they are not required to but you can file an amended return for up to three years.

Chances are, you either prepare your business taxes yourself or have your tax preparer or CPA does them. There a number of issues surrounding either tax preparation method, which can result in your tax liability being calculated as higher than it actually is including missed deductions, numerous changes in tax laws or being given incorrect advice.

As a home-based business professional, there are a number of deductions you are entitled to which many tax preparers often miss. For example, if you run a home office you are entitled to deduct expenses for the percentage of square footage the home office is occupying. Expenses include the combined total of mortgage interest, property taxes, utilities, repairs, etc. For example, if 250 square feet of a 1,000 square foot house is being used for a home office, you are entitled to deduct a quarter of your total expenses.

Although some deductions may seem minor, over an entire year, they can add up to thousands of dollars that you are unnecessarily paying the IRS. That is money that you could be using to grow your business.

Karen McClafflin, owner of home-based Secret Canyon Realty in Colorado Springs, CO, was able to recover $11,000 when her tax preparer failed to include home office and automobile deductions in her past returns.

Another area, which causes many business owners to overpay, is being given incorrect advice by their CPA, tax preparer or even the IRS directly. In a poll performed by Money Magazine, the average tax preparer, prepares an average of 480 returns between February 1st and April 15th, that is a lot of returns in a relatively short amount of time which makes it difficult for your return to get the time and attention it deserves. This same poll also found there was an average discrepancy of 300% between what the tax preparers said was due and what was actually due. Moreover, in a poll of 50 professional tax preparers, consisting of 10 basic tax questions, none answered all 10 questions correctly and only 34 got at least half correct.

This problem does not extend to just tax preparers or CPA's. In the IRS's 2001 assessment of their own 544 call centers, they found that 50% of the time, their representatives gave incorrect or insufficient advice. Whether you do your taxes yourself and had to call the IRS for clarification on an issue or your CPA did, odds are the answer was not accurate.

The United States tax law is one of the most complex in the world. Not to mention, tax laws change every year and have changed tremendously in the last couple of years. Even the best tax preparer, CPA or even IRS representative can easily make a mistake or, forget to use an exemption which could reduce your tax liability.

If you have not yet filed your taxes, it is a good idea to get a second opinion from an independent source. The extra money and time spent in doing this could save you thousands. Look for someone or a company who:

· Has sufficient years preparing home-based business tax returns

· Prepares less than the average number of returns between January and April so that your return gets sufficient time and attention.

· Have had clients get a second opinion. In addition, talk to those clients to get there first hand insight.

· Is willing to pay for a second review of your tax returns to ensure accuracy.

· Is willing to take MSN's online Tax IQ Test at http://moneycentral.msn.com/invest or/calcs/n_taxq/main.asp. Although designed for consumers, this test contains basic tax information that even junior level tax preparers should know.

Just as you trust a surgeon with your life, you trust this individual or company with your money and confidential information. Be highly selective and do not be afraid to put them through a rigorous qualification. If they are not willing to participate in your qualification then either they do not know their stuff or, your business is not that important to them.

If you already filed your taxes or think you might have missed out on deductions, have been given bad advice or failed to take advantage of a tax law change which could reduce your liability for previous tax years, what can you do? The good news is that by law, the IRS is required, for up to three years, to review your returns and records as many times as needed to find errors. You have the same three years to get a second opinion and file an amended return. In fact, in 2002, 3.3 million taxpayers filed an amended return.

Samuel Rowley, owner of Muffler Masters in Colorado Springs, was able to recover $14,500 through the filing of an amended return when it was found that he overpaid FICA and payroll taxes.

You may worry that an amended return will trigger an audit however; the IRS itself admits this is not the case. In 2002 alone, 3.3 million taxpayers filed an amended return. The IRS is not the big, bad agency we used to know. In fact, statistics show that audits are down and continue to decline.

Businesses throughout the U.S. overpay their taxes to the tune of billions each year and your money could be part of the billions that is overpaid. When it comes to your taxes, always get a second opinion to ensure you are not paying more than you should and, you can even hit pay dirt by looking back.

Darren Oliver is the Chairman and COO of Tax Recovery Systems (TRS) which he founded in 1995. Through their network of sales partners and franchisees, TRS is dedicated to recovering overpaid taxes for home-based and small to medium sized businesses all over the U.S. This commitment has resulted in an average $8,000 recovery for over 60% of qualified reviews. For more information, visit www.trs-esp.com or call (800) 714-3504.

---

Save Money on Taxes - Is the Only Way to Get Your Tax Savings is to Sleep With an IRS Agent?

Tilting the Tax Laws in Your Favor.In order to accelerate... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

Your IRS Tax Appeal Rights

Are you in the middle of a disagreement with the... Read More

Understanding Marketing Tax Deductions

Marketing is a necessary expense in running practically any business... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Understanding Basic Tax Terms

If your like many, you don't always understand what people... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

Where to Find Tax Breaks for Your Home Based Business

April 15th looms in front of most people every year... Read More

Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction

Most people look forward to getting their tax return, but... Read More

Navigating The Internet Sales Tax Laws

QUESTION: I have been contacted by my local city... Read More

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

Render Unto Caesar

Once a year Canadian taxpayers are required, by law, to... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

Income Tax Returns Your Accountant Should Not File

You've been feeling uneasy (perhaps even guilty) because you've failed... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

How to Cut Duty Cost and Increase Profit as an Importer

Import duties continue to be significant elements in the cost... Read More

The Internet Tax Man Cometh

Q: I was contacted by the city tax collector to... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

Save Money on Taxes - Let Uncle Sam Pay for Your Fun!

"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

Small Business Tax Issues for Self-Employed Individuals

The United States is a nation of entrepreneurs. There are... Read More

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

Knock-Knock-Knock

Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax... Read More

Getting A Second Extension to File 2004 Taxes

Millions of people file tax return extensions every year. The... Read More

How To Claim CHILD TAX CREDIT The Right Way And Add An Extra $2,000 To Your Refund

The U.S. Department of Agriculture estimates that it costs nearly... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More