Before I tell you the biggest obstacle to small business tax reduction, let me tell you a story.<\/p>\n
One foggy night the captain of a large ship saw what appeared to be another ship’s lights approaching in the distance. The two were on a course that would mean a certain head-on collision.<\/p>\n
So quickly the captain signaled to the approaching vessel, “Change your course ten degrees west.” The reply came, blinking back through the thickening fog, “You change your course ten degrees east.”<\/p>\n
The captain became insulted, pulled rank, and angrily sent a message back: “I’m a sea captain with 35 years experience. Change your course ten degrees west.”<\/p>\n
Without hesitation, the signal flashed back, “I’m a seaman, fourth class. You change your course ten degrees east.”<\/p>\n
The captain, now becoming enraged, realized that the two ships were rapidly approaching one another, and would certainly crash in a few short minutes. So he sent his final warning: “Now you listen hear. I’m a fifty thousand ton freighter. Change your course ten degrees west – now!”<\/p>\n
A simple message came blinking back: “I’m a lighthouse.”<\/p>\n
End of story.<\/p>\n
Now back to the original question: “As a small business owner, what is your biggest obstacle to paying less tax?”<\/p>\n
Whenever I’m asked “How can I reduce taxes?”, I’m always glad to offer an answer packed with potential tax-saving strategies: form a corporation, start a medical reimbursement plan, implement a SIMPLE retirement plan, take the home office deduction, keep track of your mileage, etc., etc., etc.<\/p>\n
Of course, the easiest way to paying less tax is to keep better records of the expenses you already have, but have failed to report because of poor bookkeeping.<\/p>\n
But lately, I’m wondering if I’m giving the best possible answer to this question. I’m wondering this because of a recent conversation I had with a small business client, who came to me for tax reduction advice.<\/p>\n
This man was an ideal candidate for converting his sole proprietorship to a corporation. In about 30 minutes I showed him how he could save over $5,000 in taxes per year by implementing that one strategy of incorporating. His response: “I don’t have the time.”<\/p>\n
Yes, it would take some time to implement this strategy. And it would take some time to maintain this strategy. Guess how much? About two hours a month, max.<\/p>\n
You do the math. Better yet, I’ll do it for you. If he spends 24 hours a year doing what it takes to maintain a corporation, he’s just made $208.33 per hour at this new part-time “job”.<\/p>\n
Hmmm. How many self-employed people can go out and make five grand a year for 24 hours of work? Can you think of any? I sure can’t.<\/p>\n
I showed him the numbers I just showed you. His response: “But I don’t want to change the way I do business.”<\/p>\n
Ahh, now we’re getting somewhere. Now we just got to the heart of the matter. He finally told me the real reason for his unwillingness to save $5,000\/year: he was unwilling to change.<\/p>\n
Did you get that?<\/p>\n
And this is actually a very common reaction to an effective tax reduction strategy. I’ve seen it many times.<\/p>\n
If there is change involved, people are often unwilling to implement tax reduction strategies — it’s too new, too different, too time consuming. Too whatever.<\/p>\n
So I’d like to challenge you with this simple question: Are you really willing to make the changes required by an effective tax reduction plan?<\/p>\n
All the tax knowledge in the world won’t do you any good without the right attitude toward change. Before pursuing tax reduction strategies, make sure you are ready to change.<\/p>\n","protected":false},"excerpt":{"rendered":"
Before I tell you the biggest obstacle to small business tax reduction, let me tell you a story. One foggy night the captain of a large ship saw what appeared to be another ship’s lights approaching in the distance. The … Continue reading