Why would you want to start a home-based business even if you are otherwise gainfully employed? Simple. To keep more of your hard-earned money to spend the way YOU want to spend it. How? By NOT paying excessive taxes to the governmental collection agencies (IRS primarily, but since State, County, Municipal, and other collection agencies usually follow a subset of the IRS, you can reduce ALL taxes). Can you really do that without coming under the gun-sight of the dreaded IRS AUDIT? Yes! Will you pass the Audit if it should occur? Yes! What will it cost you? $16.95 and some record-keeping duty.

This week’s column has nothing to do with tax preparation books, tax software, CPAs, Accountants, Preparers or similar topics. These products and people are great, and they will fill-in or help you fill-in the blanks on the government forms; but it is your task to furnish the material that goes into the blanks. If you let them do the selection you may not benefit from the many significant deductions you can take as a small or home-based business. For example: I recently contacted eight firms (two national - six local) who want to prepare your tax returns with this scenario: “I own a small home-based business, and I often treat prospects to a fun activity and dinner. My prospects bring either a spouse or friend, and my wife comes along to talk with them so I can concentrate on the prospect. My wife doesn’t get involved in the business part. I usually ask for business, referrals or something similar at least once during the dinner, and I get some business through this. The cost averages $200. How much can I deduct as a business expense?”

I am sorry to report that everyone, even the national firms, gave marginally bad advice. One said, “100%.” One said, “Your and your prospect’s dinner only, not the show and not the other two people.” One said: 50% of everything.” Two said: “50% of the dinner, none of the show.” One said, “Nothing. When you include the show you make it a fun thing and that’s not deductible.” One said, “We would have to examine the situation as you may be able to get around the government rules.” One said, “Check IRS Pamphlet 17.”

Want the correct answer? Buy the book! “Lower Your Taxes-Big Time” ISBN: 0-07-140807-X, price:$16.95, by Sandy Botkin, former IRS Attorney and Senior Tax Law Specialist. (You will find this book at your local bookstore or order from Amazon.com or Barnes & Noble at bn.com sites.) Sandy proves his answers by annotating every single deduction you can take with the exact section of the IRS code that permits the deduction! You don’t have to guess! Profusely sprinkled through the book are Author Notes that explain the deduction in simple terms, Author Observations that give you another point-of-view, and Examples galore! [Why You Would Be Brain Dead Not To Start A Home-Based Business (If You Don’t Already Have One) is the title of Chapter 1 of Sandy’s book, and my selected title for this article.]

Sandy answers just about every question you could ever ask related to fringe benefits available to small and home based businesses in Part 3 of his book. Part 2 discusses how you should select from a Proprietorship, LLC, S-Corp., Partnerships, or some other forms of business structure, and everything in the book is backed by a reference to the IRS rules that is your guide.

I also suggest you replace your usual tax organizer with Sandy’s to record your ‘audit-proof entries’. Order this from his website at www.taxreductioninstitute.com or call 1-301-972-3600. I have one, and I use it.

As you know, I champion the small and home based business persons of the world. Emails come from everywhere … the USA, Canada, Vietnam, China, England, Finland, and countries I can only spell, not pronounce. Many of these entrepreneurs can use our methods of sales, marketing, promotion, and so-forth, but obviously cannot use our tax laws. You can. The tax code of the United States was developed to support the many activities of our country, and there is absolutely no stigma, penalty, or reason for you to not use the code to benefit you. Just keep it legal, keep it honest, and follow your dream!

(NOTE TO EDITORS: PLEASE INCLUDE THE FOLLOWING.) Paul Tulenko is an International Small Business Success Consultant based in New Mexico, USA. Additional tips and suggestions are available at www.tulenko.com or call (toll-free) 1-866-TULENKO.