If you haven’t tackled your Tax Return yet this year, you may not realize the impact your W-2 Income has on your life. While you’ve dedicated your life to the 40 year plan of working for someone else, your tax burden becomes more and more the higher your wages get.

One Tax client resorted to cutting his hours, because his wages took him to a higher Tax Bracket. However, there is a better way.

Earn more, keep more, and have more control over your investment and earnings.

A small home based business empowers you at Tax Time and Creates the added bonus of Incentive Income. If you’ve always thought you couldn’t do a home based business, for whatever reason, consider this: Your wage earner knowledge is important. There’s a niche for your knowledge or no one would pay you for it.

Step this way, right out of your comfort zone and let’s get started building you a future based on what you already know.

Step One: Determine exactly what it is you are paid to do.

This is commonly known as your niche. The job you do that keeps those paychecks coming can make you more money when you think of it as a Niche Market. Whether you wait tables at a truck stop, sell used clothing at a thrift shop, or work in a highly esteemed law office, your job has value and you have acquired intimate knowledge of your niche.

Step Two: Define it with keyword identification and label it.

Now that you know what you do, define it using keywords, and label it with a moniker that will be recognizable in your chosen field. Truck Stop Waitress, Thrifty Fashion Coordinator, or Para-Legal Secretary are the immediate names that come to mind, but you should define your job with words you would look for on a Google search, and choose something with some Pizzazz but not so unique that nobody will think of it.

Step Three: Choose an identity you want to live with and promote.

Now that you’ve got your niche, you defined it with keywords, you’re ready to identify it with a moniker that speaks to the multitudes of Internet Surfers and brings them knocking at your Internet Door. This name will be your Site name and Site address, so select something short, snappy, and to the point. Your moniker will be your Site name, and with some variation your site address. For instance: Truck Stop Waitress might be www.truckstopwaitress.com or Thrifty Fashion Coordinator might be www.thriftyfashions.com or Crime Fighting Legal Secretary might be www.crimefightsec.com, any of which would serve very well as your site address or site name (feel free to use any of these if available).

Step Four: Begin creating content for your site.

This is an important step. Before you get your site, you need to have some content ready to place on the site, and be ready to upload your content, either by copy/pasting into the post area, or by loading into your web pages. At the very minimum you’ll want five pages of ‘content’ including (but not limited to) an introductory paragraph, a description of who you are and what makes you an expert in this area, contact information and several ARTICLES you can use to Market your site.

Step Five: Set up a Blog or Web Page using the information above.

Using the information in your five pages of content, set up a free blog, to get you started and start working on web page development. Create your site using some basic ‘site creation pages’ and learn the process of managing your files. You can do this on free sites and quickly move into regular sites, or you can do this on a program you purchase and build the sites on your computer to upload to your website. Either way, you’ll want to keep track of what works for you, and what doesn’t. A small journal of your experience would be a good thing to start. Include all your expenses and time, details of what worked and what didn’t, and write something about your experience, including the time and date, every time you work on your business.

Your working journal becomes your guide to taxable income, tax deductions, and time management. As you keep the journal you’ll be researching what works for you, how much time you spend achieving your goals, and what you spend to get where you want to go.

Topics you’ll want to spend time researching include: affiliate marketing, google ad sense, product design, and passive income streams. There are a wide variety of topics out there. I highly recommend you sign up for some ezine, view some of the products, participate in some online forums, and concentrate your efforts on learning for a few days prior to starting your website. However, don’t be afraid to actually get your feet wet with some early extemporaneous design, it will be beneficial to your educational process.

If you run your own company and use your personal vehicle for business trips and errands, remember to track these miles in order to take this deduction when you prepare your tax returns. Business mileage is one tax deduction you can’t afford to miss!

You can take the per-mile deduction or keep records of all expenses regarding your vehicle and compute the percentage that was business use. Either way, you will need to keep track of the miles used in your business.

For 2007, the per-mile deduction allowed by the Internal Revenue Service is 48 ½ cents per mile. Travel 100 miles that you neglect to record and this is almost $50 in a deduction that would have reduced your taxable income. Even little trips add up, so be sure to record every mile you travel.

Don’t forget the weekly errands you do for your business- that trip to the bank, the office supply store, a vendor’s warehouse to pick up inventory as well as the trip to a client’s site for your consulting business- are all valid business trips you should be recording. All miles to and from your place of business, even if that place is your house, are deductible.

While it may seem like a lot of work to maintain a record of your mileage, consider that it only takes a few seconds each trip to do so. Purchase a mileage log book at any office supply store, or you can use a small, spiral-bound notebook that you keep in your console or glove box. I’ve even papered my dashboard with sticky notes until I decided it was easier to use a log book.

I’ve used a log book or tracked my miles on a spreadsheet, but now I simply enter it in the accounting software I use for my business. At year-end, I print out the report and keep it with the other information I need to prepare my tax returns.

I always record the date, beginning and ending odometer readings, and the purpose of the trip. To save time, I use abbreviations such as PO (for post office) or BK (for bank). Business dinners, networking events and even sales calls to prospective clients are all business-related trips that you should be tracking.

If you prefer to calculate your expenses using the percentage method, you will need to keep all receipts for gas, maintenance, vehicle registration, etc. You will still need to know the number of miles traveled during the year and how much of this was business versus personal miles. Multiply that percentage by the total of your actual expenses and you have the dollar amount you can deduct- almost any tax preparation software you may use will compute this for you, but you will need to enter this information.

Personally, I use the per-mile method so I don’t have to keep all of these receipts, and I’ve found that I still have quite a deduction each year by using this method. It may sound like a lot of work, but you will be amazed at the dollar amount that accumulates during the year, and this can help reduce your tax bill on April 15th.

The Point of Sale scheme is the most accurate and often most complex scheme for both charging and submitting VAT. The Point of Sale scheme requires you and your staff to calculate and charge VAT, according to the appropriate tax rate, at the time the sale takes place. Extensive record keeping is essential.

There are two Apportionment schemes, each calling for you to calculate the approximate percentage of your sales and their appropriate tax rate. If approximately 60% of your purchases are for sales taxed at the standard 17.5 per cent rate, then 60% of your takings are taxed at 17.5%. Apportionment scheme 1 is for businesses with sales taxed at the standard and reduced rates, Apportionment scheme 2 is designed for businesses with sales taxed at the standard rate and zero rate.

Two Direct Calculation schemes are available under certain circumstances. Direct Calculation schemes require you to figure the percentage of your goods charged at the various tax rates. You then mark up your majority goods to include the average VAT rate. This is the most complex scheme to calculate, however you must only calculate it once.

Free VAT Advice Should you require advice regarding charging VAT, you can contact National Advice Service, a UK helpline for VAT, Customs, Excise, Aggregates Levy, Air Passenger Duty, Climate Change Levy, Insurance Premium Tax, Landfill Tax, Money Laundering Regulations and Rebated Oils taxes. Ring 0845 010 9000 (+44 2920 501 261 outside UK, 0845 010 0300 for Welsh or 0845 000 0200 for text phone, for the hearing impaired) Monday to Friday, 8am to 8pm (8am to 6pm for Welsh service.) Translation services are available for languages other than English and Welsh.

National Advice Service can answer general questions about charging VAT, including rates and regulations, they cannot, however, assist you with your VAT registration. For VAT registration and deregistration advice, you will need to contact your local VAT office.

Private VAT Advice Should you need additional assistance or advice for charging VAT, consider the hire services of a VAT or tax consultant. Choosing the right consultant is an important business step. The consultant you hire should not only help you reduce your tax liability but also take the stress and frustration out of the process. Choose wisely, your tax consultant will be privy to your financial records and documents.

To help you choose the proper consultant for your specific needs, create a list of all the services you believe you need from your advisor. Beyond calculating the best way for your business to charge VAT, would you like the consultant to assist you with assessments and submitting VAT to HMRC?

Some business types are so unique and their needs so peculiar that specialised financial services are needed. If you believe your business may be one of these, consider seeking out an accountant specialising in your business type.

Large accountancies offer the widest range of services and advisors. Small accountancies offer personalised services. Depending on your comfort level, you may prefer one or the other.

Do you remember getting started in your brand new business venture? Besides testing the market, deciding on a product or service, there was this decision regarding entity selection. Before the early 1990's, there was the corporation (C or S), the partnership in its many forms, and the sole proprietorship. With the advent of the Limited Liability Company or LLC, choosing an entity form has become more interesting and thought provoking.

The C corporation is a taxable entity in and of it self. The C corporation is a tax designation that simply segregates a regular corporation fro the subchapter S corporation. Owners of a C corporation will ultimately decide whether the entity will pay income tax or the ownership group will pay income tax as individuals. In the closely held business world, owners in the C corporation are also the management team which is very different from most publicly held businesses. It is not uncommon for the owners in a closely held C corporation to strip the earnings out of the business to avoid paying corporate level income tax. The C corporation is an entity that can produce double taxation in the sense that it is possible to leave earnings in the entity, subjecting them to tax, and then later distributing them to the ownerhsip group, or shareholders, to be taxed again. Careful management of this issue can serve to avoid double taxation. The C corporation is a great source for providing fringe benefits to the shareholders of the entity unlike the other entity forms. Careful consideration should be given to this point when making an entity selection decision. In addition, there can be many advantages for first starting a business as a C corporation entity, including code section 1202 stock. This code section allows for the exclusion of 50% of the proceeds from the sale of the company's stock. However, this exclusion is subject to the alternative income tax (a later discussin for my faithful readers). An important characteristic of 1202 stock is that one can sell C corporation stock and invest in another C corporation's stock with the proceeds, and avoid paying income taxes currently on the transaction. As noted, careful planning is essential.

The S corporation, for income tax purposes, is typically a flow through entity. This means that earnings at the corporate level flow through to the shareholders to be taxed at their individual income tax rates. In a subchapter S corporation, these flow throughs are not subject to the employment taxes (SE tax) which could save significant tax dollars. Fringe benefits can not be paid and deducted for more than 2% shareholders of the S corporation and 1202 stock provisions will not apply. The S corporation does work very nicely where the business is extremely profitable and there is fear that there will be unreasonable compensation charges if the company were operating as a C corporation. There are instances when Internal Revenue will claim that wages paid to the shareholders in a C corporation consititute dividend payouts rather than deductible compensation. Dividends represent double taxation as they are taxed once at the C cororation level and again at the shareholder level.The S corporation eliminates this problem for the most part as the shareholders can set their compensation levels reasonably and allow the rest of the earnings to flow through. The S corporation can also be good for the sale of a business. Depending on one's time horizon and structuring of the sale, the S corporation can provide for capital gain treatment if the business' assets are sold rather than its stock (as compared to 1202 stock treatment of the C corporation).

The limited liability company (LLC) is an interesting entity choice. It works wonders for multiple businesses and can provide for significant tax savings when fully understood. The LLC can be taxed as a sole proprietorship, a C corporation, an S corporation, or a partnership. It is a versatile format for running one's business. My personal preference is that new entities be formed as partnerships with our spouses. Imagine that I am a real estate broker. My earnings are subject to the self-employment tax. If my income is $60,000, my SE tax will be $9,180 ($60,000x15.3%). If my wife owns the business with me jointly in a partnership, she will not owe the SE tax on her half of the earnings (assuming she owns 50%) becasue she does not participate in the business on a full time basis. She is but a passive investor. By operating my business in this manner, my SE tax is cut in half to $4.590. This is a significant savings. I recently helped a client save $8,000 in taxes by forming this entity structure with his wife.

My favorite entity of all, when dealing with multiple entities, inldues a management company (C or S corporation) over seeing the LLC's which own the different activites. This way, I can say that all earnings of the LLC,s are not subject to SE tax. I can demonstrate that the SE tax will be paid at the management corporation level. The LLC's will pay management fees to the governing corporation where SE tax will be paid through W-2 compensation paid to the shareholder or shareholders. Whether the management company is a C corporation or S corporation depends on issues mentioned above. If I want fringe benefits, the C corporation is the proper choice. If wish to save even more money on SE tax, The S cororation will be my entity of choice (beware of getting too greedy as IRS is cracking down on S corporations with low salaries to owners). Because of this structure of LLC's and the management company, I am not concerned about unreasonable compensation issues as I can control the amount of management fees that get back to the management company. All other earnings will flow through to the partners' returns from the LLC's and will not be subject to the SE tax.

Taxes is a difficult issue that effects everybody's life. The notion of fair taxation system is a merely mystical one because no matter how well planned it is there will be people who will not be satisfied for a number of reason. First of all, it is necessary to understand different types of taxes that are used for revenue generation by the US government. Famous Adam Smith once stated that taxes should be related to population’s ability to pay them. Clearly such tax as VAT (value added tax) does not prove it to be true, because the amount of VAT one pays for a particular object will remain the same for everyone no matter how much they earn. Such tax is a regressive one. It simply means that the more income an individual or a family receives, the less the proportion that is spent on taxes such as VAT. Therefore this type of tax will not influence people with high incomes as much as those with low level of earnings.

There is another kind of tax opposite to regressive one. A progressive tax means that people who earn more they pay in taxes, thus tax represents a greater proportion of person's income as their income increases. On the other hand regressive tax shows a smaller proportion of a person's income when income rises. Making conclusions from what is written above one can see that regressive tax is an unfair one, because it does not represent equal opportunities and responsibilities of tax payers.

In the state of California general sales tax represents only 14, 69% out of almost 47% of taxes that are generated for the total revenue of the state. Individual income tax and corporate tax put together amount to more than 23% of all taxes that are paid into governmental revenue. Clearly it is a big percentage that is paid on the basis of progressive taxation method when people are taxed according to their earnings and thus taxes on sales or consumption are reduced. Maryland is another state in which general sales tax is quite low compared to that paid on individual income. 10,51% and 8,18% are taxes on general and selective sales respectively, while individual income tax is as high as 20, 13% in Maryland. These figures say that people are paying very high taxes on what they earn and thus those who are on the low income end are not hit too much by these taxes. This state also operates mainly on the progressive system of taxation.

When both of these states are compared to Texas it becomes clear that its government has a different approach to taxes. Looking at the figures provided by state government finance department, one notices that general sales and selective sales taxes amount to 34% out of total of 42% that are accumulated by tax collection. These figures speak loudly of the method applied in Texas for total revenue generation. Evidently the state does not apply taxes on the individual or corporate income according to the numbers, therefore people are taxes unfairly based on regressive approach. Considering '0s' that are in certain columns, if follows that people with low incomes are spending a huge amount of their earnings on consumption-sales taxes, rather than being taxes in accordance with the money they actually make not spend.

There is no great logic behind regressive method of taxation for the simple reason of unequal distribution of income in economy as a whole. If this type of taxes will be applied in all states it will help accumulate big amount of money in hands of certain number of people leaving those with lesser income much poorer than they were before paying out taxes. This in turn will lead to stagnation in economy as fewer people would be able to purchase things and thus provide revenue to government. Such one-sided approach to taxation is generally wrong because it only considers one population sector, thus a combination of taxes have to be applied in order to rationally distribute incomes and generate more revenue. Proportional taxation would be a better if not perfect type of tax for Taxes because currently it is obviously skewed to the sales side too much and has to be balanced out by increased individual income tax. Combination of various taxes for state revenue generation is necessary to ensure and help stability of country's economy overall and also to encourage citizens to honestly pay taxes.