J.K. Lasser's Taxes Made Easy for Your Home Based Business, 5th Edition

Rating:
Summary: Excellent Introduction to Taxes For Your Home-Based Business
Review: "J.K. Lasser's Taxes Made Easy For Your Home-Based Business: The Ultimate Tax Handbook For the Self-Employed" by Gary W. Carter is a great book for home-based business owners and especially for those who operate as sole proprietors.

I found the first chapter, "Legislative, Administrative, and Judicial Authority" a bit slow and skipped most of it. (It's well-written and authoritative. I just don't care too much about the internal workings of the tax system).

Discussing the Supreme Court, Carter writes: "...the Supreme Court has complete discretion over whether it will hear a case. A party requests a hearing by Writ of Certiorari. If at least four members of the Court believe the issue is of sufficient importance to be heard by the Court it will grant the Writ (cert. Granted). Most often, however, it will deny jurisdiction (cert. Denied). ..."

But, it sounds like denied Writs aren't completely bad. Carter continues: "Furthermore, even when the Supreme Court steps in and handles a tax case, its decision often has the effect of muddling the issues rather than clarifying them, leaving us even more confused and bewildered. ... [Y]ou can see that the answers to tax questions often are not clear-cut. Sometimes, when the IRS says no, the courts say yes; or some courts say yes and other courts say maybe. Having an appreciation for this puts you at an advantage when dealing with the IRS. You should never submit to an IRS agent's adjustment of your returns unless it is backed up by appropriate authoritative support. The next section tells you how to find the various sources of authority."

Carter then shows us how to learn about tax law using online and other resources.

A good section of Chapter One for those facing an audit is "The Audit Process And Your Appeal Rights." But, if you aren't facing an audit, you can probably skip that section also.

Another section of Chapter One I found useful was "Letter Rulings," which discusses how taxpayers can ask the IRS in advance how certain transactions will be treated. (There is a fee for this service. The fee can be more than $5,000, but Carter tells us that for those with income under $150,000 the cost is only $500. And, for business owners asking about business-tax topics, the fee is also $500, if the company's annual revenue is $1 million or less.)

We learn that a letter ruling is actually a contract between the IRS and the taxpayer. So, getting a letter ruling is better than just asking the IRS for general about how something should be treated. And, Carter tells us that because a letter ruling is a contract between that particular taxpayer and the IRS, we shouldn't rely upon someone else's letter ruling to determine how our similar transaction will be treated.

So, if you have a question about how the IRS will treat a certain transaction that means a great deal to you, asking for a letter ruling will clarify the situation for you and provide certainty. You won't wind up at your Writ's end in the process.

Chapter Three introduces the reader to the basic business structures: Sole Proprietorships, Partnerships, LLC's, C-Corporations, and S-Corporations. Various advantages and disadvantages of each business structure are discussed, along with options for retirement plans and information about dealing with health insurance.

A large section of the book discusses the home office deduction and home-specific expenses. For example, deductions for daycare providers are covered as are the rules for being able to claim a deduction for the use of your home.

One chapter covers IRS form 8829, "Expenses For Business Use of Your Home" in detail and another chapter covers automobile deductions.

Chapter 12 works a comprehensive example, showing a sole proprietor's tax returns, including the IRS Form 1040, Schedule A, Schedule C (the heart of a sole proprietorship business), Schedule SE (for Self-Employment tax), Form 4562 "Depreciation and Amortization," and Form 8829.

The chapter "Other Common Business Deductions" covers deducting meals, entertainment, computer software, magazine subscriptions, and books.

For example, we learn that the Section 179 deduction (which allows a taxpayer to write-off as a current year expense the cost of certain assets that are normally depreciated over a number of years) doesn't apply to software, because Section 179 only applies to tangible property, and software is intangible.

Carter writes: "If you purchase books for business or investment purposes having only short term value (a tax guide like this one, for example), you can deduct their entire cost in the year of purchase. Books of a more lasting value are seven-year property for depreciation purposes. ... Because books are tangible personal property, they qualify for the Section 179 election if they are purchased for business purposes...make the Section 179 election by putting them in Part I of Form 4562..."

Carter gives a great quote from lawyer and writer John Grisham: "It's a game. We [tax lawyers] teach the rich how to play it so they can stay rich-and the IRS keeps changing the rules so we can keep getting rich teaching them."

If you want to learn how to play the small business tax game, "J.K. Lasser's Taxes Made Easy For Your Home-Based Business: The Ultimate Tax Handbook for the Self-Employed" is an excellent resource. Don't feel you must read this book cover-to-cover. Just jump around finding the stuff that's specific to your own situation.

Peter Hupalo, Author of "Thinking Like An Entrepreneur" & "How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners."

Rating:
Summary: A must for budding entrepreneurs
Review: Offers numerous ways to save money on taxes for home-based businesses by educating on deductible expenses, types of accounting methods, how to manage record-keeping, and the latest tax laws to name a few. Lots of examples make the book easy to understand. A real eye-opener.

Rating:
Summary: The best starting point for Home-based Businesses
Review: This book, without any doubt, is the best starting point around for those of us who are starting a home-based business. However, words of warning:
-This is a reference. Do not assume you know all there is to know to your particular situation only by reading it. There is no good substitute for an accountant to help you with your business taxes, if not on an on-going basis, at least in order to get you going the first time you do your biz taxes.
-Watch for past editions. I ran into the 4th edition, and given changes in tax legislation, it is unwise to base any decisions on outdated (tax) information. Make sure you always read the latest edition of this book.

This said, I highly recommend this book for any business owner starting his/her business from home. It will give you a very good perspective on what to expect, what things you can change/improve to take full (and legal) advantage of the benefits the tax legislation offers to small business owners.