Rising Payroll Tax Rates Encourages Taxpayers to Start Their Own Businesses to Take Advantage of Tax Write-Offs
This year, Tax Resolution Services has been busier than the last few years. We have seen 30% more clients that are small businesses, sole proprietorship, and independent contractors who all gross less than $2 million; some with payroll problems and delinquent business tax problems. Payroll tax problems such as delinquent payroll tax deposits can result in severe IRS penalties, so it is important to stay informed and seek help when necessary.
Obama’s new and increased budget for the IRS in the upcoming years may encourage many regular law-abiding taxpayers to consider alternative options for paying taxes. In the next 10 years, Obama plans to raise taxes by a whopping $626 billion–which means higher taxes in almost all tax categories: sales tax, death tax, payroll tax…etc.
Higher payroll taxes during this struggling economy is unnerving to many regular law-abiding taxpayers who are now seeking alternatives as a response. Many taxpayers see starting their own businesses as a viable way to ameliorate the higher tax payments in the upcoming years.
Recently I spoke with Russ and Sully on the Big Biz Show about what we may expect to see in the upcoming years as a response to these increasing tax rates. There are a number of alternatives taxpayers may seek in order to avoid paying higher taxes; there are also risks associated with taking such alternatives, so it is important for taxpayers to know all the necessary facts before proceeding.
Aside from a highly probable increase in the underground economy (where people will trade in cash instead of checks and using bank accounts), there are other legal alternatives taxpayers may seek to save money on taxes.
Starting your own business is a good way to cut back on taxes because business expenses are considered legitimate tax write-offs. However, you must exercise caution on categorizing business expenses as many people have found themselves in IRS trouble because they mis-categorize personal expenses as business expenses. This is a tax crime and is severely punishable.
Also, if you decide to go into business with a partner, you must realize that all tax liabilities are shared in this case. There is no “Innocent Business Partner” claim that you can file for not knowing your business partner has been evading taxes. If you and your business partner are both signatories on the business bank account, and you both have a shared stake (50%) of the company, then you will both be liable for any tax penalties.
Keep in mind that there are certain tax benefits to starting your own business–such as tax write-offs for business expenses, but also remember that you must tread carefully during these tricky times so that you do not find yourself mired in financial turmoil with the IRS. Stay informed and remember that you are entitled to a tax lawyer’s representation when you are fighting with the IRS.
Listen to the full interview for more tax tips!
Contact our team of experts for a free consultation. Call us at 866-IRS-PROBLEMS (1-866-477-7762) or visit our website at www.TaxResolution.com
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