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Read About Taxes Below
Are You Overpaying Taxes If You Use Tax Preparation Software?
For many business owners the answer to this quandary is tax preparation software. Fill out a fairly simple interview, click “print” and out comes a completed return that will pass muster with the IRS. The answer to all your problems…or is it?
Can One Software Program Cover All Businesses?
Take a moment to consider the wide range of businesses that exist in the United States. Now cut that number down to those that can be categorized as “Internet businesses”. If you were asked to write a business plan to provide web design services to each of these services, how long would it be? It would be huge and completely useless because each business would have different needs. A Internet business selling flowers would have completely different needs from an online bank which would have different needs from a hosting company and so on. The only way you could create a practical plan for all Internet businesses would be to offer a collection of general services they could all use on their sites. Tax preparation software designers have the same problem.
There are over 15,000 pages in the tax code and over 100,000 pages of regulations interpreting those pages. Changes are made to the tax code ever year, and new regulations are issued constantly. If one were to create a list of questions for every tax deduction and credit detailed in those pages, the list of questions would be the size of a phone book! Yet, tax software programmers have somehow boiled it all down to a simple 30-minute interview process? Common sense should tell you that doesn’t make sense.
As practical matter, tax software programs are designed to make sure that you claim a general set of deductions that are applicable to businesses across all industries. Most programs try to mask this fact by asking you to identify your business before proceeding. For a lark, you might try selecting another industry and then running through the interview process. You will find that the interview process is modified a bit, but you are still being asked the same basic tax deduction questions.
If you are only claiming general business tax deductions, you are paying more than you should in taxes. Ask yourself if you have seen any of the following questions in a tax software program interview:
Q. Do you store business inventory in your house?
Hint: You may be able to claim hundreds or thousands of dollars in deductions.
Q. Did you start a pension plan for your employees?
Hint: You may be able to claim a tax credit for the next three years totaling $1,500.
Q. Do you have a home-based business and a second office?
Hint: You may be able to deduct your commuting expenses each day. Yes, commuting expenses.
Q. Do you have business meetings at your home?
Hint: Did you charge your business for the space?
Q. Should you claim the standard mileage rate for your auto or the actual costs?
Hint: The standard mileage rate may not the best option.
Q. Did you modify your business location to comply with the Americans with Disabilities Act?
Hint: You may be able to claim a tax credit AND tax deduction for tax savings of $20,000 or more.
Q. Did you refinance your home?
Hint: The points you paid on your original mortgage are fully deductible now, not over the length of the loan.
This represents only the tip of the iceberg of available credits and deductions available to you. Just one of these deductions could save you thousands of dollars in taxes. Yet, you are never going to see these questions raised in a tax software program interview. The tax code and regulations are simply too large to be incorporated into a usable software program.
Your business is unique. You face and overcome issues and problems that are unique to your size, financial situation and particular business needs. Don’t short change yourself by limiting your deductions by using tax software programs.
About the Author
Richard Chapo is with Business Tax Recovery - Obtaining tax refunds for small businesses for overpaid taxes. Go to our article section to discover tax strategies and deductions.
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Get The Facts on Debt!
Repossessions, wage garnishment, property seizures and foreclosures are words which strike fear into the heart of every consumer.
The general assumption is that overdue debts will result in these drastic measures. Sure, if you've put up property as collateral on a loan which you are unable to pay, it will typically be seized or repossesed. But the same does not necessarily hold true for unsecured debts. In reality very few creditors will ever push for garnishment on small unsecured debts. Garnishment and seizure are a creditor's most effective weapons to collect an outstanding debt, but they are also very expensive and time-consuming to the creditor. While it is within the creditor's legal rights to pursue collections through any of these means, the cost of recovering a debt often exceeds the amount of the debt itself, and so it's not always cost efficient to force a collection.
Sadly enough, in the United States alone thousands of bankruptcies are filed every week in response to collection efforts on unsecured debts under $5000. Consumers are so intimidated by creditors that they fold under the perceived pressure, resorting to bankruptcy as a means of escaping an unsecured debt. If these same consumers had simply ignored the threatening letters and intimidating phone calls, they would have discovered that most creditors are all bark and no bite. Bankruptcy is arguably the worst type of negative listing you can have, and it is almost certain to wreak havoc on your credit report for the next ten years. You should therefore consider a bankruptcy lawyer only as a last resort, and possibly never as an option to escape a relatively small, unsecured debt.
