As part of my duties for Laughlin Associates, I travel around the country speaking to business owners about the importance of corporate or LLC compliance. Once one of these companies is formed the owners have ongoing responsibilities to document the decisions that these companies make. I try to teach that to people.

But one person will ask the question that the entire room is interested in learning: How can I make my business more successful and make more money? They usually follow it up with discussions about websites, blogs, or marketing. It seems that the perception is the only way to be more successful in business is to get more clients. That is logical, more clients equals more money. I get it. However, your business could be more successful without gaining another new client. What I try to tell them is that there is wealth hidden in your business that you don’t realize.

A recent study conducted by the federal government estimates that the average business owner over pays their taxes. Not by a little, but by a whopping $11,600 per year. Think about that. What could you have done with an extra $11,600?  How many additional clients would you have had to get to “net” that extra income? So why do we over pay? It’s simple. We don’t know the rules.

Taxes are such an interesting topic to hear from business owners. They seem to fear it. People will tell me the tax code is too complicated to learn, or that their CPA takes care of the taxes for the business. The responses seem to indicate an implied waiver of the reasonability, or a genuine fear of the topic itself. But no matter what you do in your business, you will always be more successful with just a little bit of tax education.

Now if I suggested to you that you need to learn the entire tax code that would be intimidating. But a little knowledge goes a long way here. All business owners have basic deductions that are available to them. This is true regardless of your business structure. They are: Entertainment, Travel, Gifting, Home Office, and Vehicle. Many of us take these deductions now. However, when I ask people about these rules I hear a lot of different and conflicting stories. As a result, how could a business owner be confident in claiming a deduction if they didn’t know the rules? Further, how assertive could you be if you didn’t know the particulars of the rules? Therefore, what happens next is deductions don’t get claimed and overpayment of taxes is the end result. Boy that fear can be crippling!

So how do you stop this? You decide that you can learn it! The tax code is not as complicated as people think. This is especially true in regards to the deductions we discussed above. As part of our paper work program we offer clients the tools and education to learn these deductions and many more. So if you have an opportunity to get involved with our compliance service I would strongly recommend it because this is something that we offer those clients. Also I can suggest a couple of publications that might assist. Sandy Botkin, CPA puts out an excellent series of books and CD’s on business taxes that are great. And of course, you can also log onto the IRS website and download their publications.

I learned an expression some time ago that I think is quite fitting here. Someone once told me that the definition of fear is: indecision plus doubt equals fear. I like that. If you don’t know what the IRS is expecting from you that can create indecision. Claiming a deduction your not sure about is creating doubt, so you don’t claim it. So of course you have fear. But remember F.E.A.R. is nothing more than False Evidence Appearing Real.

It is not too complicated, and it is well worth the investment. Remember you can conquer anything you put your mind too. I know you can do it!

Scott Burnett is a highly acclaimed corporate trainer and Laughlin Associates’ Director of Education.  He will be speaking at these locations and at our July Seminar in Lake Tahoe.

Now that the Obama Administration has finally prevailed in turning its Health Care Reform initiative in to law, it is time to focus on what this really means to small business owners. And here it is…YOU’RE GONNA NEED TO MAKE MORE MONEY!

Regardless of which side of the debate you were on a couple weeks ago, the reality is that changes are coming and those will include increased taxes for businesses and many business owners. Not only are your taxes going to increase, but so is the level of tax enforcement by federal and state governments. In President Obama’s Fiscal Year 2010 budget delivered last May, it was noted that the IRS stood to receive an overall increase in funding of $764 million, including a $400 million increase in tax enforcement funds. This represented a 13 percent increase for IRS enforcement activities. Among the primary targets of this increased wave of audits will be sole proprietors, single member LLCs, and other closely held businesses. I have personally talked with a number of people who are terrified to take common deductions such as those associated with:+++++++++

They have reason to be fearful. All of these are red flags to the IRS and can trigger an audit. While the thought of an audit is scary, the only thing to really fear is being unprepared for an audit. If you don’t have your records in order then you will have a miserable and expensive experience. If you do have your records in order, odds are that you will zip through the process. I want to be clear about what these records include. In addition to your financial records, receipts, mileage log and so on, in a business audit you must have your corporate record book up to date. If you are a corporation or LLC and your record book does not show that you have been respecting the corporate veil, I guarantee you that the IRS auditor will not respect it either. Every year we hear stories of valuable corporate deductions being disallowed because the corporate record book did not indicate that the shareholder was treating the business like a separate entity. Instead of enjoying the tax deductions and protections afforded by a corporation or LLC, the business formalities were ignored and the shareholder managed the business like it was a sole proprietorship. These are expensive mistakes and hard lessons to learn.

As you navigate in this increasingly challenging environment, you will need every possible advantage you can employ. As a business owner, one of the most obvious and trusted protective shields available is a corporate entity. Using such a shield can keep you and your family safe from all kinds of attacks. But if you don’t take care of your armor as you should, you will find it rusted and worthless when it comes time to go to battle. There is no reason that this should ever happen.

The ride is about to get more turbulent for many small business owners as the government doubles its efforts to exact funds from our bruised and shrinking private sector. Those of us that are committed to being in business for ourselves will have to deal with working more days each year for Uncle Sam. However, the number of days that each one of us works for him will differ based on our thoughtful preparation and targeted plan of action. It’s all up to you.

Laughlin Associates, provides consultation, education and hands on help to thousands of business owners every day to ensure that their corporate records are in order and ready when they need them most.

Author Aaron Young maintains his own blog at http://www.smallbusiness411.com

One of the expert speakers at Laughlin’s 3-Day seminars is Sandy Botkin. Sandy is both an attorney and a CPA and thus brings a unique perspective on business and taxes to his audiences. He is a friend to small businesses all over the country, providing easy to understand access to topics that owners need to be up-to-speed on. Sandy takes important, but typically dull tax information and makes it understandable and interesting. So, as we come to the close of the 2009 tax season, here are some of Sandy’s insights on taxes, scams and how to stay out of hot water. – AY

Tax Scams - By Sandy Botkin, CPA , Attorney

“The money is the same, whether you earn it or scam it.” – Bobby Heenan
“Who said crime doesn’t pay? Look at how much Madoff made.” – Anonymous

There are an ever increasing number of scams being investigated by the IRS. Some of these scams are so devious and clever that even the smartest of folks can be fooled. Every year IRS publishes a list of the “dirty dozen” tax scams. Following are some of the latest:

1. Phishing scams: Folks are receiving letters or emails with the IRS / Treasury department logo informing them that they may be owed a refund. In order to obtain this refund, they have to prove that they are the right person by confirming certain personal information such as social security number, mother’s maiden name, address etc. To date, IRS has identified as many as 1500 different phishing scams.

Sandy’s Elaboration: IRS will NEVER call you or write you asking for this type of personal information. You should never provide it to anyone by phone, letter or email. If you get an email requesting this type of information allegedly from the IRS, forward the email to phishing@irs.gov.

2. Economic Stimulus Scams: Some scam artists are trying to trick individuals into revealing personal financial information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a “rebate.” To obtain the payment, eligible individuals in most cases will not have to do anything more than file a federal tax return. But some criminals posing as IRS representatives are trying to trick taxpayers into revealing their personal financial information by falsely telling them they must provide information to get a payment. Sometimes, these criminals might ask for bank account information for the IRS to directly deposit the rebates, which then results in the thieves cleaning out the bank account.

Sandy’s Elaboration: IRS will NEVER ask for this type of information regarding your social security number or bank account information.

3. Frivolous arguments: There are a host of frivolous arguments being made by promoters of scams that purport to reduce or even eliminate most tax liability. Some of the many fallacious arguments are:

• “Taxes are unconstitutional or not properly codified by Congress”
• Folks are promised a non-existent “mariner’s tax deduction”
• “Tax filing is voluntary and thus, you don’t have to pay anything”
• “Taxes are only required for federal employees”
• “Wages, tips and other service income is not taxable”,

You can get a complete list of these fraudulent arguments by going to: http://www.irs.gov/taxpros/article/0,,id=159932,00.html This is found in IRS notice 2007-61.

Sandy’s Elaboration: None of these frivolous arguments have won in court. In fact, the judges are so tired of hearing them that they are asserting the government’s legal fees against those that make these arguments in court.

4. Fuel Credit Scam: Sometimes there is some truth behind the scam. Farmers are allowed a fuel tax credit for off-highway business purposes. Unfortunately, some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit was recently added to the list of frivolous tax claims, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

5. Hiding income offshore: To my knowledge, this scam has been around for years but is being aggressively investigated by the IRS. Promoters are promising that by placing assets offshore in foreign banks or tax havens, taxpayers would avoid all taxes and, at the least, not have their income discoverable by the IRS on these accounts. Interestingly, some Swiss banks helped promote this scam to the detriment of those involved. As an offshoot of this, some promoters set up foreign credit cards and promised that all income earned is paid to the credit card. This way, they promote that there will be no tax and that the IRS will never find out.

Sandy’s Elaboration: US citizens are taxed on their world-wide income. Setting up foreign bank accounts will NOT shield them from taxation. Furthermore, on the federal tax return there is a question specifically asking about foreign accounts. Now a taxpayer may have foreign accounts for many reasons; however, if a taxpayer doesn’t disclose these accounts, they are subject tocriminal fraud penalties. Moreover, IRS is aggressively investigating these accounts and has cut deals with most foreign jurisdictions.

6. Abusive retirement scams: The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to Roth IRAs. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into Roth IRAs or companies owned by their Roth IRAs at less than fair market value. In one variation of the scheme, a promoter has the taxpayer move a highly appreciated asset into a Roth IRA at cost value, which is below annual contribution limits even though the fair market value far exceeds the amount allowed.

Sandy’s Elaboration: Contributions to retirement plans must be made in cash and NOT with appreciated assets. Also, there are limitations to yearly contributions, which must not be exceeded.

7. Claiming zero wages: Some taxpayers try to file phony wage or income related information such as Form 4852 which is a substituted W-2 or amended form 1099 (for income, dividends and royalties) in order to improperly reduce their taxes to zero. This type of behavior is being tracked by the IRS and is aggressively being prosecuted. Don’t get fooled into thinking that this scam will work.

8. Filing a false claim for refund: Usually taxpayers file form 843 to abate previously assessed taxes giving some fictitious argument. Even worse, many individuals who have tried this haven’t even previously filed a federal tax return.

9. Return preparer tax fraud: Perhaps this has been an ongoing problem for years which is why I have seen a dramatic increase in enforcement by the IRS against fraudulent tax preparers. Thirty years ago, it was rare if more than two or three tax preparers per week were barred from preparing taxes or representing taxpayers. Today, I have seen as many as thirty tax preparers per week barred from preparing taxes. The range of what these accountants are doing is quite varied. Some fraudulently pumped up their credentials claiming that they were CPAs or lawyers, which wasn’t the case. Some improperly gave the fuel tax credit noted above. Many preparers inflated taxpayer’s deductions in order to generate a lower tax liability. As an example, there was one accountant who claimed thousands more in charitable deductions than his client donated.

Sandy’s Elaboration: IRS investigates these fraudulent accountants and subsequently audits all of their clients. You should certainly look for an aggressive accountant but also one who is honest!

10. Disguised corporate ownership: Some folks are forming entities in some states in order to hide the owners who are conducting a wide array of illegal activities such as hiding income, money laundering, etc. IRS is working with state authorities to investigate these activities.

Sandy’s Elaboration: No entity can guarantee complete shielding from the IRS. If IRS wants to investigate an entity, they can get the names of the owners, officers and any other pertinent information. There are some states, such as Nevada, that promise increased privacy. Even corporations in these states can easily be investigated by the IRS. Don’t be fooled into thinking that any entity can be used to hide income from the IRS.

11. Misuse of trusts: Many promoters have promised taxpayers that certain trusts can be set up to minimize taxes by deducting a wide array of personal expenses or avoiding estate taxes. While there is a kernel of truth to this, especially regarding estate taxes, these trusts must be set up correctly. Moreover, they usually do not allow for deduction of personal expenses. It is vital to seek a good, qualified tax attorney to verify that these trusts do accomplish what was promised and are set up correctly. Finally, putting property in trust where you can control the assets or receive distributions can result in you, the grantor, being taxed on all of the trust income!

12. Abuse of charitable contributions and organizations: Many promoters promise to maintain control over donated property while taking a deduction. Examples of phony charitable deductions involve taxpayers who claim tuition payments as charitable contributions. They also claim that if you own property over a year, you can donate property and get a deduction for the fair market value of the item. Promoters have set up scams where they sell paintings, antiques etc. to taxpayers promising that after a year they will get these taxpayers an appraised value of many times the initial cost. When the item is donated a year later, the taxpayer uses the inflated appraised value to receive a higher charitable deduction. These overvaluation scams are fairly rampant.

13. Slavery tax credit: Although this isn’t on this year’s dirty dozen tax scams per se, IRS has noticed that this is a fairly widespread “frivolous argument.” Promoters promise African Americans a special tax credit as reparation for slavery and oppressive treatment. This is absolutely false and no one should be fooled by this. Each year, IRS publishes a new list of their “dirty dozen” tax scams. You should be aware of these widespread scams. They can cost you large penalties and may even subject you to criminal penalties if  you follow their advice. Avoiding these scams and running from people who promote them will make your life less taxing!

Sandy Botkin CPA, Attorney is a former trainer of IRS attorneys. He is president of the Tax Reduction Institute and lectures all over North America on tax planning. He has two bestselling books, “Lower Your Taxes: Big Time” and “Real Estate Tax Secrets of the Rich.” You can get these books in most book stores or by going to his web site at www.taxreductioninstititute.com

Nevada has done it again. Passing ground breaking new asset protection rules that offer more protection for business owners.

As of September 2008, Nevada legislators have deemed that with a Nevada Corporation, your shares are protected by a charging order. If you are involved in litigation you could lose the shares of your corporation in order to satisfy a judgment. A charging order only gives a creditor the rights to any distributions or dividends paid out to the shareholders, not control over the company.

Nevada is the only state in the country offering this level of protection. So, how do you take advantage of this extra protection if you don’t live in Nevada? Don’t worry! 72% of the companies formed in Nevada are based in other states. Take advantage of this powerful asset protection tool today give one of our consultants a call at 1-888-388-2902. If you already have a Nevada Company, you should definitely give us a ring so that we can check and make sure that you are in good standing. If you’re incorporated in Nevada, you wouldn’t want to miss out on the tremendous asset protection benefits that Nevada offers!