Archive for the ‘Small Business Tax Issues’ Category

Health & Dental Care Costs Rising At Epidemic Proportions – Here’s How To Protect Yourself & Family
Health care costs are now approaching 15% of our national economy and the economic repercussions have been felt by most American families as employers are unwilling to absorb the bulk of the health care cost burden.

In 2004, employer health insurance premiums increased by 11.2% -nearly four times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $10,000. The annual premium for single coverage averaged $3,695. Health insurance premiums will rise to an average of more than $14,500 for family coverage in 2006.

In 2004, health care spending in the United States reached $1.7 trillion, and is projected to reach $1.9 trillion in 2005. Health care spending is 4.3 times the amount spent on national defense.

Overall national health care costs will increase further with the implementation of Medicare prescription drug coverage. Too many Americans are uninsured while even a greater percentage have no insurance at all. Uninsured individuals also present a problem for hospitals and other providers who must provide treatment in catastrophic situations without compensation.

Many employees receive restricted coverage and insurance plans that are negotiated between employers and insurance providers limit coverage to a single insurance carrier or an HMO. Prescription drugs are the fastest-growing part of the nation’s health care expense. Pharmacy bills have become a significant item in the budget of most families.

For 37% of Americans without prescription coverage, the problem is critical. Especially for seniors who constitute 12% of the population but use 37% of prescription drugs. The rest especially those without health insurance, is significantly affected by high drug prices.

What has caused this cost increase? Much of it is due to a riddled health care system of excessive administrative expenses, inflated prices, poor management, inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers.

On the other side of the cost issue there is the recent development of new effective medications for a variety of illnesses. Such newer “brand name” medications are patent-protected and cost far more than generic medications.

The drug industry argues that the higher cost of new medications helps fund research and development of even newer medicines. Many critics argue that much of the research and development of pharmaceutical products is actually government funded.

Also contributing to the cost increase is marketing. As this is 30% of a drug manufacturer’s budget. Brand-name U.S drug makers were reported to employ 81% more people in marketing than in research and development of much needed drugs.

Policymakers and government officials agree that health care costs must be controlled. But they disagree on the best ways to address rapidly escalating health spending. Some favor price controls and imposing strict budgets on health care spending.

Others believe free market competition is the best way to solve the problems but if people can’t afford it, how will they protect themselves and their family?

Well there is something you can do and that’s become apart of the solution and not the problem by learning more about our troubled medical industry.

Visit http://www.medicalcardsavings.com and sign up to our weekly ezine and receive our Free ebook for complete details and answers to these questions and more.

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Blaine G. Dares is President & CEO of Medical Card Savings USA -Save 80% on Dental, Medical, Prescriptions, Vision & Chiropractic Care. Everyone Covered with Instant Nationwide Savings.

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Small Business Tax Issues For Self Employed Individuals
The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business. Of course, few of you enjoy the paperwork and confusing tax issues that arise from owning your own business.

Many self-employed individuals are considered “sole proprietors” or “independent contractors” for legal and tax purposes. This is true regardless of whether you are turning a hobby into a business, selling an indispensable widget or providing services to others. As a self-employed person, you report business revenue results on your personal income tax return. Following are a few guidelines and issues you should keep in mind if you are pursuing your entrepreneurial spirit.

Schedule C - Form 1040.

As a self-employed person, you are required to report your business profits or losses on Schedule C of Form 1040. The income earned through your business is taxable to you as an individual. This is true even if you do not withdraw any money from the business. While you are required to report your gross revenues, you are also allowed to deduct business expenses incurred in generating that revenue. If your business efforts result in a loss, the loss will generally be deductible against your total income from all sources, subject to special rules relating to whether your business is considered a hobby and whether you have anything “at risk.”

Home-Based Business

Many self-employed individuals work out of their home and are entitled to deduct a percentage of certain home costs that are applicable to the portion of the home that is used as your office. This can include payments for utilities, telephone services, etc. You may also be eligible to claim these deductions if you perform administrative tasks from your home or store inventory there. If you work out of your home and have an additional office at another location, you also may be able to convert your commuting expenses between the two locations into deductible transportation expenses. Since most self-employed individuals find themselves working more than the traditional 40-hour week, there are a significant number of advantageous deductions that can be claimed. Unfortunately, we find that most self-employed individuals miss these deductions because they are unaware of them.

Self-Employment Taxes - The Bad News

A negative aspect to being self-employed is the self-employment tax. All salaried individuals are subject to automatic deductions from their paycheck including FICA, etc. In that many self-employed individuals often do not run a formal payroll for themselves, the government must recapture these taxes through the self-employment tax. Simply put, you are required to pay self-employment taxes at a rate of 15.3% on your net earnings up to $87,900 for 2004. For net income in excess of $87,900, you will pay further taxes at a rate of 2.9% on the excess.

In an interesting twist that reveals the confusing nature of the tax code, you are allowed a partial deduction for the self-employment tax. Simply put, you are allowed to deduct one-half of your self-employment taxes from your gross income. For example, if you pay $10,000 in self-employment taxes, you are allowed a deduction on your 1040 return of $5,000. Many self-employed individuals miss this deduction and pay more money to taxes than needed.

Health Insurance Deduction

This used to be a very messy area for self-employed individuals, to wit, you received little tax relief when it came to your health insurance bill. This was a particular burden for small business owners when considering the astronomical cost of health insurance. All of this has changed and you now may deduct 100% of your health insurance costs as a business expense.

No Withholding Tax

Unlike a salaried employee sitting in a cubicle, you are not subject to withholding tax on your paycheck. While this sounds great, you are required to make quarterly estimated tax payments. If you fail to make the payments, you are subject to a penalty, but the penalty is not the biggest concern.

A potential and dangerous pitfall of being self-employed is failing to pay quarterly estimated taxes and then getting caught at the end of the year without sufficient funds to pay your taxes. The IRS is not going to be happy if you fail to pay your taxes and you will suffer the consequences in the form of penalties and interest. Making sure you pay quarterly estimated taxes helps avoid this situation and it is highly recommended that you follow this course of action.

Record Keeping

You must maintain complete records of all business income and expenses. Simply put, document everything. Create a filing system for each month and file every receipt, etc. All business travel expenses must be documented, including auto mileage you incur when performing business tasks. Office supply stores sell business mileage books that you can keep in your car and use whenever you travel. If you have any doubt about documenting something, just do it!

In Closing

As a self-employed individual, your focus and time is spent on making your business successful. Your focus is not on the complexities of the tax code and how to limit the amount of taxes you owe. If any of the information in this article is new to you, then it is highly likely you have paid far more in taxes than required.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

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