Business

Tax Deductions Working 9 to 5

If you are working for a company as an employee then you know there are a limited number of tax deductions that you can take to reduce your tax burdon. Some good tax deductions are your home mortgage and home property taxes. Besides personal deductions and child deductions, there is not much else you can do to reduce the taxes you pay. You are a W2 employee and will probably pay the highest taxes.

What do items you buy really cost?

If we assume you are in a 25% tax bracket it is easy to determine what items you buy really cost. For example, suppose you buy something you really like such as a computer for $925.00 and with sales tax the total is $1000.00 - how much did you have to earn to buy the computer?

You need to earn $1,333.00 in order to have $1000 to spend on that computer because you need to pay that 25% tax.
($1333. x .25 = $333). ($1333. - $333 = $1000.)

Taking this a step further, if you spend $20,000. a year on stuff, then:
You had to earn $26,666. to buy that stuff

In other words, because that stuff was not tax deductible you spent an additional $6,666. for it.

Tax Deductions owning a business

Tax deductions are numerous when you own a business. I am not licensed to give tax advice, therefore I am not. What I am doing is demonstrating how a business can reduce someone's tax burdon. For real life advice on how to structure your accounting or business, consult a professional.

A legitimate business owner is allowed to deduct all business expenses. Therefore, if you use a computer for business it is a business tax deduction. If you use part of your home, your car, your cell phone and home phone, gas and electric, water, internet connection, among other things - they are tax deductible to the extent you use for business. Let's look at some numbers. Suppose you now have a home business and are trying to make a profit and your expenses add up to $8000. for the year. Assuming a 25% tax bracket:

$8000 / .75 = $10,666. - Working 9 to 5 (w2) you would need to earn an additional $2666. to pay for the same items that you use anyway.

Another way to understand this is to realize that each time you buy something that is not a deduction it costs you another 25%, so you buy a cell phone for $100 - what did you really pay for it if it was not for business? $100 / .75 = $133.00. If you are in a 15% tax bracket the cell phone cost you $100 / .85 = $118.00.

Working 9 to 5 and Owning a Home Business

You don't need to quit your job to increase your tax deductions. All you need to do is start a home based business. Your home based business must show intent to make a profit or it would be considered a hobby.

Suppose you wanted to sell antique telephones. If you purchase these phones and set them up in your home for viewing and that is all you do then it is a hobby - not a business. If you create a sales invoice and advertise those antique telephones for sale at a profit then you are in business.

What is the Best Home Based Business

The type of business you start depends upon your needs and desires. If you want to keep your current job and work part time and you don't want any inventory to store and ship, you don't want to be bothered with customer service calls, chargebacks on credit cards, employees, and paperwork then I would suggest you open an online travel business. When you open an online travel booking website business you have the usual business tax deductions that are mentioned above, but there is a special benefit.

One of the best things about the online travel business is NO Inventories, NO Employees, NO Quotas, No Time limits, NO Charge backs, No Tests to take, NO Experience required, No Paperwork, No Customer Risk, No Deliveries, No Collections and NO Licensing.

With an online travel agency booking website business you simply let people know about your travel booking website. The toughest part is that companies like Expedia and Orbits spend hundreds of millions of dollars each year in advertising to get people to use their travel booking websites. It will take some work getting people to use your website, but when they do you will get % of the commissions generated. Get repeat customers and you will be making some serious money.

MLM and Network Marketing

Imagine what it would take to start your own online travel booking website business. You would need to develop the travel booking website, create agreements with travel companies to supply the data to your website, setup customer service, and then market your website against the competition of Expedia and Orbitz. It would cost you millions of dollars just to start and you would need 200 million for advertising. There is no chance for you to do this. And if you actually did create a booking website business then you would get crushed by the shear money and power of your competitiors - Expedia and Orbitz.

They combined a world class travel booking website that is equal to or better than Expedia and Orbitz with a network marketing business model. The result is a very inexpensive business for someone to get into along with the ability to sponor others into the business.

The Good and Bad of MLM

The problem with the MLM business model is that it has been used by many other companies with the intent to scam money from people causing a negativity about MLM's with those people. These criminal companies have created bad press for MLM's causing bias and fear in the public.

If you know anything about the MLM model you know that at some point the market becomes saturated due to exponential growth. Depending upon the product and market for the product, the length of time before saturation will vary. It could be 5 years, it could be 10 years and saturation might never happen. Now look at the standard business model. 90% of all business's fail the first year and most of these business's have a ton of money invested and lost. Most products have only a 3 to 5 year life span. For example, a business selling DVD's today might go under due to a shift to downloading in the future.

I believe MLM's have pluses and minuses just like other business models. You have a startup phase, then a growth phase, then an explosive phase, and then a declining phase, and then either it putts along or death. The best time to start any business whether standard or MLM is during the startup or growth phases. You need to jump onboard while the product is hot. Online travel was hot, which is why I jumped onboard. You can read more info about MLM's here.

What is a pyramid scheme?

The pyramid scheme is a type of MLM that is illegal because it derives most of it's money from the distributor's fees to join. Theoretically, when a pyramid saturates everyone that could be a distributor is already a member and there is no one else available to join, so those at the bottom of the pyramid are left holding the bag and have no chance of making money. This is why it is necessary for a real honest MLM business to derive most of it's income from a product or service. If you become a distributor you can sell the product for your income and not have to recruit other distributors.

You could get $500 back from YTB if you live in California - Law Suit
See for yourself - visit my online travel booking website

HOME

 

Copyright 2007-2009 Unique Dynamics, Inc.