DSA TAX PLANNING

TAX PLANNING  TOOLS CAN HELP  YOU PROSPER AS  AN INDEPENDENT DISTRIBUTOR.

The tax planning tools described here are designed to help you prosper in your business. Good planning and recordkeeping can be worth thousands of dollars to you and your family. On your part, what is required is careful recordkeeping of certain expenses and some thought and planning in structuring and operating your business.

DSA's tax planning recommendations represent the best possible approach for the great majority of distributors like you. However, everyone's situation is not the same. You may not be able to use all the ideas presented here. You may have other ideas on how to reduce your taxes. If so, let us know! We'll be happy to pass them on to other DSA members for their use.

DSA's program is not intended to deal with every conceivable tax problem and issue. If you have any questions or concerns, please give us a call at 1-(800)-879-6605. We're here to help you.

Before examining some of the individual planning tools you should consider using, we'd first like to review two concepts which many distributors use, and which may be of invaluable assistance in helping you to be successful.

SETTING UP A RESERVE ACCOUNT

Most of the expenses that you incur in operating your business reoccur frequently. Payments to yourself, gas and oil, etc., are expenses you will have every week. Things like loan payments, lease payments and insurance will occur either weekly or at least monthly.

But some expenses occur very infrequently and often unpredictably. These expenses can be a major threat to your business unless you set aside money for them For example, tax payments, vacation relief, and major vehicle repairs, don't occur regularly, but must still be saved for on a regular basis. You can address this problem by establishing a reserve account for these expenses. The steps necessary to do this for your business are simple

1. Open a savings account at your bank. If your bank can, link your savings account with your business checking account.
2. Determine how much your irregular expenses are likely to run:

3. Having determined your weekly reserve amount, write a check to yourself for that amount every week and deposit it in your savings account, or if your accounts are linked, merely transfer from business checking to savings.
4. When an expense arises for taxes, vacation or major vehicle repairs, simply transfer the necessary amount from your savings reserve back into your checking account and pay the expense from your checking account so you have a complete tax record. (Note: When you transfer money from your reserve account back into your checking account, you must remember to subtract it from your deposit total as indicated on the monthly recap.)

PAYING YOURSELF- DETERMINING YOUR “SALARY”

The other aspect of being in business for yourself that can be a source of difficulty is determining how much of the cash in your business account you should take out as "salary". It is extremely important to the health of your business (and to planning for your family budget) that you establish a conservative salary and leave the balance in your business account, taking it out as a "bonus" or a "raise" only after you are sure the business is producing sufficient income to permit it.

If you are just starting out as an owner of your business, try to get advice from other drivers as to the appropriate level for your salary. If you are converting from an employee status to an owner, it may be a good idea to set your salary at the same level as your take-home pay when you were an employee, and leave it there until you have had at least six months experience with your business and are confident that there is enough income available to permit you to take a raise.

THE HOME OFFICE DEDUCTION

The office in the home deduction is again available thanks to recent congressional action. You will find further information on how to take this valuable deduction visit home office expense. It is extremely important that you maintain your office in your home so that you can take full advantage of the business use of a personal vehicle deduction.

BUSINESS ASSET DEPRECIATION

Generally speaking, your business assets fall into two categories for depreciation: tangible assets and intangible assets. Your tangible assets consist primarily of the truck, computer and other similar assets used in your business. Your intangible asset is the route.

Tax law assigns different time periods to different assets for purposes of depreciation. Depreciation means that you can take a deduction from your income - thereby reducing your taxes - equal to the cost of the asset divided by the time period provided by the law. Your route, for instance, is depreciated over 15 years. This means that if you paid $75,000 for your route you can take a deduction of $5,000 every year for 15 years ($75,000/15=$5,000).

Your DSA Set-Up Kit contains a section of questions concerning these assets. DSA will use the information you provide to compute and claim the maximum deductions for you every year. DSA does this automatically for you and will assure you get the maximum tax savings available to you.

INVOLVING YOUR CHILDREN IN YOUR BUSINESS

This is an area where our tax code provides you with an opportunity to get your children involved in the business, teaching them the importance of working to earn money, while taking a tax deduction at the same time. Income taxes are not incurred on earned income until the income exceeds in the area of $4,850. An additional $2,000 can be earned without tax if your child puts that amount into an IRA. At this point, the child incurs a liability at the lowest tax bracket (15%) - probably considerably lower than the parents tax bracket. Any such payments from your business to your children are entirely tax deductible.