Can You Spot the Tax Mistakes this Business Owner made?

This post is in: Blog, Business
No Comments

Meet Angela. 
After an epic crash with her real estate investments in 2008-2010, Angela hit gold with her next business she had started as a side business.  

Based on that past business, she’d learned to diversify and be conservative with her spending. She worked very hard at the side business and put all the money she made back into her business. She lived off of her job as a full-time bookkeeper 

Her business was where her heart was.  

She had created a line of natural skin care products that were super hypoallergenic and supported people with skin conditions like psoriasis and eczema. She started off using other suppliers and had them drop ship their products to her clients, then she began creating them herself. It took a lot of funding for the equipment and inventory, plus the number of employees and the payroll costs were growing. She spent the money as fast as she made it.
She diversified her business by becoming a manufacturer of natural lotions and potions for other sellers. Tax saving strategies didn’t really matter to her. That was because she didn’t have a lot of taxable income right now. All free cash went back into the company. Her sales grew, but so did her expenses.  

She was nervous, but she was doing as well as she could with the situation, she reasoned. 
Then, she went to lunch with her friend, Amy.  

“I’m watching the numbers and I know this will turn soon. We are building a business here with overall low manufacture costs. And we’re also set up to make products for others,” she explained to her friend, Amy, over lunch during their monthly treat.  

Amy had a business too, so their conversations zig zagged between personal and business. 
“My CPA sent me an article about R & D Tax Credits. You know Research & Development,” Amy said. “It really seems like something you should consider. That’s what you do all day long! You’re always figuring out formulas.” 

“That won’t work for me,” Angela said. “For one thing, I’m not a scientist. I don’t have any scientists or engineers working for me. We’re just kind of stumbling along, following guidelines to keep things pure and figuring out what people like.”  

“And besides,” she continued. “I don’t pay that much in taxes anyway. It wouldn’t be worth the trouble to track it. Why worry about tax credits when I don’t pay taxes?”  

Can you spot the mistakes that Angela made? I’ll share some at the end of this email. First, though, I want to talk a bit about Research & Development tax credits.  

If you do a Google search for “R & D tax credits” or “Research & Development tax credits”, you’re going to see websites talking a lot about these. 
“Make 10 times what you could with a PPP loan!” says one site. Another says, boldly, “You’re walking away from hundreds of thousands of dollars in tax credits!”  

When you click through, you’ll find some good information but it’s missing one important element. 
The “how to” legally file for R & D tax credits isn’t there. The answer is to hire them for thousands, sometimes tens of thousands of dollars.  

So, read those sites to find out how easy it can be to get R & D tax credits. That’s probably accurate in your case as well.  

But then think twice before you hire a firm to file them for you. 
You CAN do it yourself. That’s what “R & D Tax Credits: The DIY guide to putting more money in your pocket” will teach you.  

Why haven’t you heard about R & D tax credits before? 

R & D tax credits used to be hard to get and not even that useful. Then gradually, bit by bit, laws in 2014, 2016, 2018 and now 2020 and 2021 have changed all that. 
R & D tax credits are available to just about anyone with a business. However you DO have to follow the guidelines for planning and documentation of them
That’s really the only secret.
Get the plan. Follow the plan. And document.  

Are you ready to put money in your pocket? 
Angela was. Here were some of the things that she said that were wrong:  

R & D Tax Credits Only Work If You Pay Federal Income Tax  


You Have to Have a “Real” R & D Facility with Engineers or Scientists 


You Don’t Qualify Because You’re Not Developing Anything New  


There is a 4-part IRS test for R & D expenses that we’ll talk about on Wednesday, 1/20/2021 during our Wednesday Coaching. Plus, of course, we’ll talk about the plan you’ll need to follow and how to document the expenses.  

The reward to all of this is money in your pocket and a system that may make your business more valuable.  

NOTE: If you’d rather not join the coaching and still want this information, the home study course will go for sale at in February.  

Leave a Comment