Reducing taxes by being prepared!

By Loyd Hambrick
Chief Operating Officer

Do you want to pay less in taxes? Lots of help exists for self-employed individuals to better prepare themselves for tax time. It was noted during a recent webinar I attended on SETI, the Self Employment Tax Initiative, studies conducted by organizations supporting SETI indicated individuals who were prepared for tax time received on average 300% higher refunds from the IRS than those not prepared. Yep, that’s right, 300%. For those that are not aware, SETI was launched in 2005 by the Corporation for Enterprise Development (CFED) and according to their website, “The Corporation for Enterprise Development is a national nonprofit based in Washington, DC dedicated to expanding economic opportunity for low-income families and communities. The purpose of SETI is to demonstrate how local organizations can use the tax code to deliver essential business development and financial services to low-income entrepreneurs.” One of the greatest values this organization noted of SETI was the coaching and training they were able to offer self-employed individuals to better understand one of the most important documents for the self-employed, the Schedule C. Anyone earning a profit of at least $400 per year through self-employment, is required by law to complete and file a Schedule C which is simply a profit and loss statement in an IRS format. Fortunately, Mendocino County residents have a great resource at their disposal for the same type of training and coaching. West Company, the Mendocino Small Business Development Center and Women’s Business Center, offers free consulting as well as workshops that enable small business and microenterprises to keep more of their money, and who doesn’t want to do that? The clearer understanding a business owner has of Schedule C, the more they can use the document to their advantage. For instance, let’s say you are self-employed and you have one or more employees. As a good business owner, you want to reward your employees for a job well-done by buying them lunch let’s say once-a-month. Under Schedule C guidelines, legitimate business meals and entertainment are deductible but only at fifty percent. Knowing this, a business owner can devise a better incentive program that could be classified as an acceptable expense but deductible at one-hundred percent. Though training such as West Company offers is not a substitute for accounting advice from a licensed CPA, it goes a long way in making that advice much more valuable. The more prepared a business owner is when seeking the services of a CPA, the less time required of the CPA and therefore the smaller bill a business owner must pay. If you would like more information on how you can be better prepared for tax season, contact West Company at (707) 467-5931 for inland regions or (707) 964-7571 for coastal region or visit us online at www.westcompany.org.