Best Tax Advice Ever: The Tax Lady’s Guide to Beating the IRS
Unhappy with your 2008 taxes and got the tax day blues? Who doesn’t? Well, according to a new poll from Gallup, 61% of Americans think that their taxes are just right or even a little low. But, guess what:
Consider this: about 40-50% of Americans pay no federal income tax at all. That’s zero dollars. I think we can safely assume that these are the people who think their taxes are about right. What this means, then, is that virtually every American who pays any income tax at all thinks they’re paying too much.
So what are we going to do about next year? I know what I’m going to do, because I read The Tax Lady’s Guide to Beating the IRS and Saving Big Bucks on Your Taxes by Roni Lynn Deutch. It is the best tax advice book I’ve ever read, because of two simple paragraphs that have changed my perspective on business record keeping entirely:
Still, to be a successful, innovative business owner, [record keeping] is a responsibility that must be met. Good record keeping could be the difference between recording your annual balance sheets in red ink or black. In fact, the University of Maine Cooperative Extension claims you can save $100 per hour solely by keeping good records. How, you ask? Well, imagine you have a $20 business expense that you failed to record or maintain a receipt. This failure raises your business’s net income by $20. Overstating your net income by $20 causes your Social Security tax to go up $3.06 (i.e., $20 times 15.3 percent for a self-employed person), your federal income tax to go up $4 (i.e., $20 times 20 percent — assuming you are in the 20 percent tax bracket), and your State Income tax to go up $1 (i.e., $20 times 5 percent — assuming you are in the 5 percent tax bracket for your state).
As you can see, this $20 oversight has now cost you $8.06 more in taxes (i.e., Social Security, federal, and state). No, how much time do you think it would have taken you to record this expense or maintain this receipt? Five minutes, tops, right? So, had you spent this five minutes recording this expense or saving the receipt, you would have saved $8.06 in taxes in 1/12 of an hour of work. Or, put another way, a savings of $96.72 per hour. And that kind of savings can mean a lot to any struggling company.
Giveaway: I have five copies of The Tax Lady’s Guide to Beating the IRS to giveaway. To enter, leave a comment on this post with your best tax tip, describing why you really need some tax help, or just say hello!
Sven Ericson on April 15th, 2009 6:24 pm
Hi Dane, enter me, please!
Natalie Wickham on April 15th, 2009 6:31 pm
Here’s an idea that’s helped me keep all my receipts organized. Place 12 clear sheet protectors in a 1″ binder. Use a sticky label to make a little tab for each sheet protector with the name of each month on a tab. Throughout the year, after recording the expenses into a record-keeping program, just drop receipts into the corresponding month’s sheet protector. Make a new binder each year and easily store previous years’ binders until you can rotate them back around again (I usually keep 5 years’ worth of receipts in case of an audit).
Thanks for hosting the giveaway!
Brandon on April 15th, 2009 8:10 pm
Tax tip: If you paid taxes this year, you can put it on your return next year to lower tax liability.
Wilson on April 15th, 2009 8:32 pm
You can still file an extension. Use filelater.com
Dane Carlson on April 15th, 2009 8:56 pm
@Natalie Excellent tip!
@Brandon How does that work?
@Wilson Good point. I wonder how late you can file for an extension. It’s already 9pm on the west coast.
Something that is really helping me is to put an envelope in the glove compartment of each of our automobiles, so that we can easily save receipts when we’re out.
Lindsey Hawkins on April 15th, 2009 8:58 pm
Double check Social Security numbers on your return. Incorrect SSNs are the 2nd most common tax return error.
Steve on April 15th, 2009 9:30 pm
Go over your tax forms line by line after you finish your taxes.
When I finished my taxes using an online tax program, I went through my printed forms line by line and I was able to see which line items and numbers directly affected my taxes. It’s easy to not realize this stuff when you just plug in numbers into a software program or when someone else does your taxes.
When you realize how saving a receipt, writing down mileage or saving that donation receipt, really affects the bottom line, you will be more inclined to do everything it takes to lower your tax liability.
Sara on April 16th, 2009 8:26 am
OK, I admit it… I am terrible at doing taxes (and it goes without saying that I also strongly dislike doing taxes).
I consider it a major accomplishment if I can actually fill out 75% of the form my tax accountant sends me on the first go-around. This year, for the first time, we’ve filed for an extension because I couldn’t even do that. Sigh.
I would love to win the book because I really need to get on top of the whole tax game more, especially as a new home business owner. My business is small, but I know I need to get myself more buttoned up. Help would be VERY appreciated, and this book sounds like it could be that help.
Thanks for considering me!
Irma on April 16th, 2009 9:21 am
Hello Dane,
I am about to start my own residential cleaning bussiness, and I would love to read the book. It sounds so interesting and helpful, it would help me a lot now that I am about to have my own bussiness finally!
Thanks so much for all your interesting and helpful articles!
Irma
deirdre on April 16th, 2009 1:50 pm
I also have Roni’s book, and maaaaan did it help this year!! I have never understood my tax return better. I bought the book for both of my 20-something kids after I read it, and they felt the same way about their taxes this year as I did!
Debbie on April 16th, 2009 4:38 pm
I’m starting up a home based travel business and this would be sooo helpful in order to know what we can do and what receipts and records to keep!
This year I filed my own personal taxes and owed both fed and state, would be nice to get big tips on deductions for next year!
Dane Carlson on April 16th, 2009 6:28 pm
@Sara, I can’t recommend TurboTax enough. That (and a wife who trained to be an accountant) take care of me!
A version is available for both corporations/parternships/LLCs and sole proprietors.
Dane Carlson on April 16th, 2009 6:29 pm
@Debbie: Good luck with your travel business!
Dane Carlson on April 16th, 2009 6:29 pm
@Deirdre: Glad I’m not the only one who enjoyed the book!
Dane Carlson on April 16th, 2009 6:32 pm
@Irma, You’re very welcome!
Nadona on April 17th, 2009 2:38 am
My best tax tip would be…exploit the tools and resources offered at http://www.irs.gov (publications you can download for free, links to other helpful websites, info for people and/or businesses in your own city that you can talk to)
After losing my job in March I decided to stop waiting for the government and decided to create my own stimulus package by starting my own small business. With no experience in my new line of work and no one to turn to for advice I turned to the IRS website and discovered all kind of helpful tools, such as the following:
‘The IRS provides information and classes for new business owners. Please visit http://www.irs.gov or see IRS Publication 334, Tax Guide for Small Businesses, for more information.’
I downloaded this publication for free and saved it on my computer for future reference. After scanning the website I was able to decide the best record keeping method for my business, sign up for a local class on Transaction Privilege Taxes, and find out the method the IRS uses to audit people in my industry…very helpful!
I would LOVE to continue my education and learn how to save big bucks on my taxes with a copy of Roni Lynn Deutch’s book! Thanks for the opportunity…
jim bob dickens on April 17th, 2009 10:02 pm
nadona, are you some kind of shill for the IRS?!
i don’t know anyone else who would ever say anything positive about them, unless they were paid to do so!
Nadona on April 18th, 2009 9:19 am
Ha ha ha…..I wish!
Then maybe I wouldn’t be on here trying to get a book to learn how to beat them at thier own game!
That is exactly why I posted it as a tip……no one wants to ask the bad guys for advice, and a majority of people dont…including me! Unfortunately, I dont have the money or the connections to learn more about how to run the financial side of my business to keep my money in MY pocket instead of the governments so I have to research, research, research. After browsing the IRS website I have a better understanding of what I actually HAVE to do instead of what they WANT me to do as a small business. It was alot of reading, deciphering, and concluding……..but I am more confident that filing my taxes next year for the first time as a small business owner won’t be as scarry as I thought it would be.
Brandon on April 26th, 2009 8:51 pm
Sorry for the late response. I posted a tax tip above that stated if you paid taxes this year, you can lower your tax liability next year by reporting the amount you paid. I believe this is an itemized deduction and only works regarding paid state taxes…Here is the IRS link: http://www.irs.gov/taxtopics/tc503.html
Lowering tax liability is the best way to keep more money in your pocket. Let me know if you need more advice..
Keith on May 5th, 2009 1:23 pm
Re: the IRS, who comes up with tax law? Isn’t it Congress? If so, those are the guys we should hold accountable, not the IRS. It seems to me that the IRS is just doing its job of inforcing the law that Congress passes.
No, I don’t work for the IRS. I just like to get the mail delivered to the correct address.
Dane Carlson on May 5th, 2009 7:27 pm
Thanks to everyone who entered. The contest is now closed. I’ll be announcing the winners tomorrow.
toni clarkson on May 9th, 2009 8:41 pm
My husband has been disabled for 14 years, so I was the sole bread winner until Jan of last year when I too became disabled. i NEED to learn to save every penny I can and I belive your book would be a Godsent.
Thank you.
PS I am still allowed to make upto 800.00 a year and not lose my SSDI. I don’t know how I can do that. Do you have any helpful hints? If I had a laptop that could connect to the desk top I may be able to work a couple of hours a day.\\
toni
Nadona on June 10th, 2009 1:28 pm
Dane,
Did you announce the winners? I must have missed it…
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