According to business analysts, the home-based business trend is on the rise and a lot of people are jumping onto self-employment. The news is not surprising since there are many advantages in being self-employed and owning your own business. Aside from the fact that you can actually call something your own, there is also the sense of achievement brought by personal success. On the practical side, you get to be your own boss, which means that you decide your hours and how much effort you'll put into a project. Plus, there are certain advantages exclusive to dealing with self employed tax, sole proprietor tax, business tax, and other monetary matters.

Managing your taxes is easy, says Jan Zobel, a freelance tax specialist. Drawing from over 2 decades of tax management experience, she has the following suggestions on how to manage self employed tax, sole proprietor tax, business tax, and other independent taxes. She suggests filing appointment books, daily planners, or calendars with finance materials like taxes and banking records. Zobel tips that there is money in keeping time. Your schedule can be used as proofs to verify and clarify business expenditures like travel mileage, phone bills, and hotel receipts. Presto, instant tax deductions. She advises to log in your travel time and miles driven in business trips in your appointment book. Aside from this, Zobel also warns to take note of financial details. Often, these are the causes of tax troubles. Record those bank account deposits, regardless whether they are loans, gifts or business-related. It is also helpful if you note deposit sources. Keep these notes in a checkbook or a separate file. This way, you can separate business income from loans and gifts which aren't covered by tax. The IRS usually assumes undeclared income if audits reported an income excess even if these came as gifts. Proofs or records of these gifts prevent tax problems from the IRS. Zobel asserts that insisting you can remember everything related to your finances come tax time is unrealistic.

Self employed tax, sole proprietor tax, business tax, and independent taxes benefit greatly from separating business accounts from personal accounts. Zobel advises to keep business money in a separate account and your own money in your own account. Be reminded to write checks for business purposes from the assigned account and vice versa. For those who don't want separate accounts, Zobel suggests to note each check with remarks such as "business" or "personal" each time you write one. Identifying the purpose of the check won't hurt either such as "for office furniture". This tip minimizes mix-up of your personal and business finances. Following this tip, keeping credit cards for personal and business use separately is also preferred. She also reminds that interest in credit cards for business purposes is a hundred percent deductible. Zobel advises keeping credit card and sales receipts. These are especially handy during audits for reference. Consulting tax specialists, professional tax managers, and the internet for tax managing tips are also advised.

Lastly, whether you pay self employed tax, sole proprietor tax, business tax or freelance taxes, keep your records clean and straight. Remember also to settle your taxes on time. Racing after deadlines can make you forget key documents which might cause tax problems.

There is an adage that claims that the only things certain in life are taxes and deaths. One could presume that tax laws are as easily determined and understood as one identifies death. When a person stops breathing and his brain stops functioning, he's dead. However, this is not the case with taxes. There is nothing easily understood, clear, and simple when it comes to tax laws. Thus, more tax troubles ensue not because of disregard for the tax laws but because of misinterpretation and misunderstanding of the laws. Tax collectors, indeed, have very taxing jobs. Aside from collecting taxes from people who do not want to part with their hard-earned money, they also have to ensure that these people pay their fair share. Fortunately, Texas taxes, Texas tax laws, and policies are one of the lowest and manageable among the states. There is no magic in this; Texas simply does not charge income tax for state purpose. As a result, Texas taxes are not managed by the CPA of the state but the IRS.

This instance does not mean that Texas tax laws are lax and lenient. There are still several key events that tax collectors and auditors regularly deal with regarding Texas taxes. For one, there is the matter of tax evasion. Though used interchangeably with tax avoidance, there is an essential difference between the two that makes evasion a crime. Tax avoidance simply merits finding loopholes in Texas taxes, Texas tax laws, and policies, and using these to lower tax burdens by legal means. This ensures that the individual pays the least amount of tax as legally possible. Though this may cause tension between the collector and the taxpayer, this is something that can be easily settled with an audit. If the audit confirms that all tax deductions are valid, the taxpayer can get away with his minimum tax. However, if the audit proves otherwise, and the taxpayer was found out to have employed unlawful means to evade paying taxes such as under-declaring income, he could be charged with tax evasion. The legality of the methods used to lower taxes is the difference between the two.

Even if they lack state tax, Texas taxes, Texas tax laws, and policies require that the IRS conduct regular audits. These audits ensure that the taxpayers honestly meet their obligations. These are done in three ways, and the most employed is randomization. In this method, the IRS randomly selects income tax files from the submitted returns. Since there is a probability and a chance that they would be evaluated, taxpayers are driven to be honest with their tax information, thereby, limiting tax evasion cases. The second method employs a computer program used to spot evasion patterns which are prevalent among tax evaders. Evasion patterns such as unusually large allowances for entertainment are red-flagged. Individuals who are repeatedly tagged for the same pattern are investigated.

Property taxes are one of the largest line item costs incurred by apartment owners. However, many owners do not appeal effectively. Even though owners realize that property taxes can be managed and reduced through an appeal, some view taxes as an arbitrary estimate provided by the government which can't effectively be appealed. It tends to boil down to the old adage, "You can't fight city hall".

Fortunately, the property tax appeal process in Texas provides owners multiple opportunities to appeal. Handled either directly by the owner or by a property tax consultant, this process should involve an intense effort to annually appeal and minimize property taxes. Reducing the largest line item expense has a significant effect in reducing the owner's overall operating expenses. While it is not possible to entirely escape the burden of paying property taxes, it is possible to reduce taxes sharply, often by 25% to 50%.

Why some owners don't appeal

Some property owners don't appeal because they either don't understand the process, or don't understand that there is a good probability of achieving meaningful reductions in property taxes. Some owners believe that since the market value of their property exceeds the assessed value, then it is not possible to appeal and reduce the property taxes. Although appeals on unequal appraisal are relatively new, there is a clear-cut way to appeal property taxes at the administrative hearing level based on unequal appraisal. Unequal appraisal occurs when property is assessed inconsistently with neighboring properties or comparable properties. Also, some owners are reluctant to hire a property tax consultant, even though many consultants will work on a contingent fee basis, in which there is no cost to the owner unless property taxes for the current year are reduced.

Overview of appeal process

The following are the primary steps in the annual process for appealing property taxes:

· Request notice of accessed value
· File an appeal
· Prepare for hearing
. Review records
. Review market value appeal
. Review unequal appraisal appeal
· Set negotiating perimeters
· Administrative hearings
· Decide whether binding arbitration or judicial appeals are warranted
· Pay taxes timely

Requesting a notice of assessed value

Property owners have the option of requesting a notice of assessed value for their property annually. Section 25.19g of the Texas Property Tax Code provides the owner the option to request a written notice of the assessed value from the chief appraiser. Owners benefit from requesting and receiving a written notice of assessed value for each property because it ensures they have an opportunity to review the assessed value. This notice should be sent on an annual basis. The appraisal district does not have to send a notice of assessed value if the value increases by less than $1,000. However, if an owner was not satisfied with a prior year's value and the value remained the same, the appraisal district probably will not send a notice of the assessed value for the current year. In this situation, the owner might forget to protest since a notice of assessed value for the property was not received.

How to file and appeal

On or before May 31st of each year, the property owner should file an appeal for each property. However, while many owners are comfortable with an assessed value, in many cases there is a basis for appealing. Two options for appealing include:

1. unequal appraisal, and
2. market value based on data the appraisal district provides to the owner before the hearing.

You can appeal by completing the protest form provided by the appraisal district and indicating both excessive value (market value) and unequal appraisal as the basis for appeal. In addition, the property owner can simply send a notice that identifies the property, and indicates dissatisfaction with some determination of the appraisal office. The notice does not need to be on an official form, although the comptroller does provide a form for the convenience of property owners. (You can access the protest form at www.cutmytaxes.com .)

House Bill 201 - helpful information

House Bill 201 is the industry jargon for a property owner's option to request information the appraisal district will use at the hearing, and to receive a copy 14 days before the hearing. The name House Bill 201 is derived from the bill used to enact the law. The details for House Bill 201 are located in sections 41.461 and 41.67d of the Texas Property Tax Code. When filing a protest, the property owner should additionally request in writing that the appraisal district provide a copy of any information the appraisal district plans to introduce at the hearing. The appraisal district will typically require the property owner to come to the appraisal district office to pick up the information and charge a nominal fee, typically $0.10 per page. While the cost for House Bill 201 requests are quite low (typically $0.50 to $2.00 per property for residential and commercial) the information is invaluable in preparing for the hearing. In addition, filing a House Bill 201 request is important because it limits the information the appraisal district can present at the hearing to what was provided to the property owner two weeks before the hearing.

Preparing for the Hearing

Start by reviewing the appraisal district's information for your property for accuracy. If the appraisal district overstates either the quality or quantity of improvements, this will justify a deduction. The next step is to review the information on market value and unequal appraisal provided by the appraisal district in the House Bill 201 package. If the subject property is an income property, review the appraisal district's income analysis versus your actual income and expense statements. Consider the following areas as opportunities to rebut the appraisal district's analysis:

· Gross potential income
· Vacancy rate
· Total effective gross income, including other income
· Operating expenses
· Amount of replacement reserves
· Net operating income
· Capitalization rate
· Final market value

Many property owners and consultants start with the actual income and expense data, and use one or two of the assumptions provided by the appraisal district. However, they primarily utilize information from the actual income and expenses in preparing their own income analysis and estimate of market value for the subject property.

When comparable sales are the primary issue in determining market value, start by reviewing the comparable sales data provided by the appraisal district versus the assessed value for your property. Convert the sales prices from the appraisal district to either a per square foot or per unit basis. Then compare the sales to the per square foot or per unit assessment for your property. Sales can be helpful during the hearing.

The cost approach is not typically used in the property tax hearings except for brand new or relatively new properties. If your property is new, the appraisal district will probably want to review the cost information and you probably won't want to show it to them. In many cases, the actual cost of a property is higher than the estimate provided by the appraisal district. If this is the case, you will likely want to appeal on unequal appraisal instead of on market value. No matter how good your argument or how passionately it is expressed, the appraisal district staff and Appraisal Review Board (ARB) members tend to believe that cost equals value for new properties.

Deferred Maintenance and Functional Obsolescence

Another issue that is important for the market value appeal, and to some extent for a unequal appraisal appeal, is information on deferred maintenance and functional obsolescence. Deferred maintenance could include items such as:

· rotten wood
· peeling paint
· roof replacement
· substantial repair
· landscaping updating and other similar items

Most appraisal districts give minimal consideration to requests for adjustments based on deferred maintenance, unless the property owner provides repair costs from independent contractors. There are some exceptions where a cooperative informal appraiser or sympathetic ARB will take an owner's estimate of deferred maintenance and make adjustments based on those costs. Most appraisers and ARB members are much more inclined to make adjustments if third-party cost estimates are provided. In addition, the appraisers and many ARB members are inclined to only deduct a portion of the total cost using the argument, "we've been giving a replacement reserve allowance for this item for the past years and it'd be double-dipping to deduct the whole value off it in the current year." While this is an incorrect appraisal argument, it does tend to be the practice at many appraisal districts. The reality is, the cost of curing deferred maintenance is deducted from the offer by a prospective buyer.

Examples of functional obsolescence would be a three-bedroom apartment unit that only has one bathroom, or a two-bedroom apartment that does not have washer/dryer connections in an area where those connections are common. Another example would be an apartment that has a window air conditioner in an area where central HVAC is typical and expected.

Unequal appraisal analysis

The Texas Property Tax Code, section 41.43(b)(3), provides for appraising or appealing on unequal appraisal including ratio studies and "a reasonable number of comparable properties appropriately adjusted." Virtually all unequal appraisal appeals involve a reasonable number of comparables that are appropriately adjusted. Comparables are similar properties.

This is primarily because of the difficulty and cost of performing a ratio study. Historically, the position of many appraisal districts was that the property owner needed to get a fee appraisal for each comparable property and compare the market value estimated by the appraiser to the assessed value. The cost of getting multiple appraisals made this process financially impractical. Compiling a reasonable number of comparables appropriately adjusted is simple and straightforward. The first step is to choose a reasonable number of comparables. Usually four to five comparables is the typical number used at a property tax hearing, but in some cases, property owners choose ten to thirty. In some cases, there may only be one to four comparable properties that merit consideration. Most unequal appraisal presentations include three to ten comparables. The number of reasonable comparables depends on the location, type, size and age of the property. For example, there would be fewer five-year-old bowling alleys in the northern part of Harris County compared to recently built apartment complexes.

After choosing a reasonable number of comparables, array them in a table format, including fields of data such as account number, net rentable area, year built, street address, assessed value and assessed value per square foot.

The next step is to determine whether or not to make appropriate adjustments. For the administrative hearing, if you have truly comparable properties, most boards (appraisal review board or ARB) won't be concerned with you not making adjustments. If you make adjustments, those would typically be based on factors such as differences in size and age compared to the subject property.

You should also review the information in the appraisal district's House Bill 201 packet on an unequal appraisal. In many cases, the appraisal districts unequal appraisal analysis will document a reduction in your assessed value! If the appraisal districts unequal appraisal analysis documents a reduction, either the informal appraiser or the ARB should make the adjustment in assessed value for you. Having the opportunity to get an assessed value reduced automatically based on the appraisal districts unequal appraisal analysis is one of the reasons to appeal every property every year.

Completing Hearing Preparation

After reviewing the appraisal district's information on your property, the House Bill 201 package, and your market value and unequal appraisal analyses, determine the strengths and weaknesses of each approach and decide which basis of appeal provides the best opportunity for a meaningful reduction. Although appeals on unequal appraisal have clearly been the law of the land since 2003, some appraisal districts and review boards have chosen to disregard the option for unequal appraisal put forth by the Texas Legislature. Although there is litigation underway which should resolve this issue within the next year, it would be prudent to visit someone who is knowledgeable in local property tax appeals to determine whether the county appraisal district and ARB in your area are considering appeals on unequal appraisal.

Set Negotiating Perimeters

After reviewing the information, it is important to set the highest level of assessed value you will accept at the informal hearing because after you accept an assessed value, the appeal process will be complete for the year and you will not be able to appeal further.

Administrative Hearing Process

The two steps to the administrative hearing process are the informal hearing and the appraisal review board hearing.
The Informal Hearing
The following procedure and rules are typical at the informal hearing:

· Meet with an appraiser representing the appraisal district. You should be polite and prepared at this meeting. While many property owners are frustrated and angry at the high level of real estate taxes, the appraisal district appraiser does not control the tax rate set by various entities nor the policy regarding property taxes in the area or the state. The appraisal district appraiser is trying to execute his job in a professional manner and appreciates it when property owners work with him on that basis.
· Provide the appraiser information on your property and he will review that information and information he has available.
· The appraiser will likely make an offer to settle the assessed value of your property fairly quickly. You can either accept the value or negotiate further. Either way, you should know within ten to twenty minutes whether the appraiser will offer an acceptable value. If the value is acceptable, conclude the negotiation by agreeing to the value for the current year. If the value offered is not acceptable, ask to go forward with an ARB hearing.

Appraisal Review Board Hearing (ARB)

The ARB hearing panel consists of three impartial citizens selected and paid by the appraisal district. The age of most ARB members ranges from fifty to eighty. There is an unfortunate bias in the system since the ARB members are selected and paid by the appraisal district, but most ARB members are reasonable people who want to make appropriate decisions.

Like the appraisal district appraiser, the ARB does not set tax rates or tax policy. The members are also not responsible for the effectiveness of local government. It is unlikely to help your case if you complain to the ARB members about either the high level of property taxes or the poor quality of some aspect of local government.

The ARB will expect you to make your presentation in about three to ten minutes. They will typically wait patiently while you make your presentation and may have questions after you conclude. An appraiser from the appraisal district, who may or may not be the same person who attended the informal hearing, will represent the appraisal district at the ARB hearing. The appraiser will comment on the evidence you presented and will often present other information the appraisal district has available. If you requested a House Bill 201 package for your property, it substantially limits the evidence the appraisal district appraiser can offer at the hearing. The ARB members may have questions after the appraisers presentation. Then the property owner will be given a final opportunity to rebut evidence presented by the appraisal district appraiser and quickly summarize the evidence. The ARB members strongly prefer you not repeat your entire presentation at this point.

After hearing the evidence, the ARB members will confer and make a decision. This decision is not subject to negotiation and they will not revise the decision if further evidence is presented. When this decision is announced, the hearing is effectively over. The ARB will send a letter two to four weeks later summarizing their decision and notifying the owner of a 45 day limitation from the date receipt of the ARB decision to either request binding arbitration or file a judicial appeal.

Tax savings through cost segregation is no longer out of reach for investors in small and medium size properties. With appraiser expertise, fees for analysis are often one-third to one-half lower than those charged by traditional preparers.

Several years ago a definitive court case ruled that tangible personal property included in an acquisition or in overall costs should be depreciated as personal property for asset recovery, using the old Investment Tax Credit principles to classify personal property.

This meant that owners of improved properties could distinguish between real property and personal property to depreciate component costs over varying useful lives. Basically, instead of depreciating an entire commercial property over 39 years, or residential roperty (single-family rentals or multifamily) over 27.5 years, certain components are correctly identified as depreciating in much less time. For about 135 items, useful life periods can be 5, 7 or 15 years. This is known as cost segregation.

The result of increasing depreciation is lower taxable income (which would have been taxed at 35%) and more income taxed at the capital gains rate (15%) when the property is sold. Furthermore, it works for any type of improved property.

Until recently, primarily large accounting firms or engineering firms implemented cost segregation studies, addressing large and newly built properties and sometimes outsourcing the analysis.

Prices for those analytical reports, usually in the $10,000 to $40,000 range, were out of reach for owners of small properties, especially those holding less-than-new assets. Unfortunately, those owners representing the largest segment of real estate investors in the country were mostly overlooked by previous providers of cost segregation services.

Now a revolutionary paradigm shift is opening the door to very significant savings for owners of small properties. Much of the change is based upon introducing the efficiencies of highly knowledgeable real estate appraisers who often apply industry-accepted cost estimation techniques before determining remaining asset life. By not “over-engineering” the staffing or production process, professional fees are lower. Yet, results can usually meet or exceed those of far more expensive reports. This approach has been successfully field-tested by IRS auditors.

Changes that appraisers are introducing to cost segregation analysis and reporting are addressing: 1) the size of the property being analyzed, 2) the age of the property, and 3) an affordable price point. O’Connor & Associates, a nationwide real estate service firm, is taking advantage of such techniques to effect these beneficial changes:

1. Owners of property with an improvement basis as low as $500,000 can benefit from cost segregation. This compares to the limited properties worth $5 to $10 million and above that previously benefited.
2. Existing properties built or purchased after 1986 offer significant savings in year-one of cost segregation, even without producing original cost documents. Capturing non-segregated depreciation from prior years is perfectly allowable by the IRS. This compares to firms previously applying the methodology only to new construction.
3. Fees are no longer prohibitive. To prepare an analysis and report for many small properties, prices are low enough to generate at least 3 times the report cost in the first year. This compares to the traditional fees ranging from $10,000 to $20,000 and up for comparable size properties.

It is wise to keep the owner’s CPA or tax preparer abreast throughout the process. For older properties, the CPA may need to complete a Form 3115 to submit with the tax return so the owner can realize savings on items not previously depreciated - without filing an amended return. Income producing properties worth as little as $500,000 can achieve a 3:1 payback ratio of tax savings over the modest price of a cost segregation report. If owned for 3 or more years, the typical payback ratio is 10:1.

U.S. taxpayers aren't the only ones to feel a bit of a crunch at tax time. In fact, we don't have it that bad.

You may not believe it after paying that huge tax bill in April, but the U.S. isn't the top of the income-tax list when compared to the rest of the world. A recent study by the Organization for Economic Cooperation and Development compared the tax rates in 30 countries.

In Belgium, a single worker with the average income paid 42% of his income to the government in 2005. Twenty-eight percent went to income taxes and 14% went to Social Security, according to the study.

The German worker also paid a combination of income and Social Security that hit 42%. In Denmark, the average worker only pays 41%.

All tax rates were based on single workers with no children. They did not take into account what the employer pays in Social Security for the worker's behalf.

In the U.S., the average worker pays 24% to income tax and Social Security combined. The rate ranks the country 19th among the 30 listed.

Mexico came in at number 30, with 8% going to the combination of income taxes and Social Security taxes.

"Countries differ in how much they decide to collect in taxes on people's income and how much tax they collect on when good are bought," explained Christopher Heady, head of OECD's tax policy and statistics division.

He points out that Mexico collects a very small amount of tax when compared to the other countries. But it collects most of its revenue on the sales of goods, not on labor. Belgium, on the other hand, doesn't charge much for sales tax, relying on labor income instead.

When all taxes were considered, including income, sales, business and others, Sweden was the top of the list. It tax revenues came in at about 50% of gross domestic product. Denmark and Belgium finished up the top three.

At the bottom of the list were Mexico, at number 30; Japan and Korea, tying for 29 and 28; and the U.S. at 27.

"The U.S. is a comparatively low-tax country. I'm sure the people filing tax returns recently wouldn't agree with that, but that's particularly because the U.S. collects a lot of its revenue from income tax and you don't have a value-added tax," Heady said.

Heady points out that high-tax countries do have benefits.

"Most of those high-tax countries have universal health-care systems. That means you don't have to pay for your own health care or pay for insurance to cover your health," he explained. The countries "usually have more generous state-provided retirement pensions than the U.S, so that people don't usually feel the need to buy a private pension. There's better provision of preschool education, and universities are cheaper. There are all sorts of public services that are provided at lower cost."

Government auctions and tax sales generally occur when a homeowner is unable to pay the property taxes on their home, or their home is abandoned.

In the U.S., when city or county taxes aren't paid for an extended period of time, the property is considered "sold to the state," meaning that the deed is transferred to the area's local governing authority.

In most cases, the former owner is given a five-year window of opportunity to redeem their home by paying overdue taxes, penalties, and other costs. If the property is not reclaimed in this manner within five years, the city or county can put it up for sale in a government auction.

Most of these tax sale properties are priced for a quick sale, which often puts them well below fair market value. This is a great opportunity for first time homebuyers or low income families to swoop in and pick up a discounted home in an otherwise unattainable area.

The most important thing to remember before doing this, of course, is to make a detailed list of all expenses (including taxes) associated with the property, to ensure that it is within your price range, and won't be back on the auction block