With a tremendous number of tax favored ways your company can pay you, you’ll want to decide which ones help your family and business most. Best news, you can make changes that fit your changing lifestyle & business, adding selections as your family and business grow.

1. Paycheck / Owner Draw / Salary – Okay, this is the obvious
2. Business use of your home tax deduction
3. Rent from the business
4. Training and education you desire
5. Travel related to business you get to choose
6. Choosing your own travel modes, timing, and conditions
7. Extra days traveling paid by business
8. Travel conditions you choose
9. Choosing your favorite meals & entertainment places, foods, and times
10. Cell phone
11. Choosing your own Equipment brands, tools, and power toys
12. Lend Money to your company
13. Collect interest from lending
14. Negotiate favorable terms
15. Retirement plans paid by company
16. Flexibility in choosing the best retirement plan for you
17. Deferred Compensation
18. Welfare benefit fund
19. Cafeteria Plans
20. Adoption assistance
21. Dependent care assistance
22. Education assistance
23. Distributions on profits
24. Set up Benefit Programs you desire such as:
25. Vision coverage
26. Dental coverage
27. Medical coverage
28. Health Savings or Flexible spending accounts
29. Business working conditions – that you get to choose
30. Business partnerships that you get to choose
31. Auto provided for your use – you get to choose
32. Parking & parking passes
33. Family on payroll instead of hand out
34. Building emergency reserves
35. Building expansion reserves
36. Certain meals for business, family, friend, & prospects
37. Benefits that can be excluded to executives:
38. Athletic facilities
39. Meals for business convenience
40. Lodging for business convenience
41. Additional health plan coverage
42. Family peace of mind, including:
43. Life Insurance
44. LTC Insurance
45. Disability Insurance
46. Key man Insurance
47. When selling your company – you get to choose when & how
48. Golden parachute on company sale
49. Working part time & flexible scheduling after company sale
50. Goodwill throughout your community
51. Control over your own destiny – Priceless!

Every business is different and every family is unique. Sit down with Merra Lee and see what makes sense for you and your business today.

Now stop reading about 51 Ways Your Business Can Pay You and start doing! Let’s create your personal profit strategies for growing profit. Call small business profitability coach Merra Lee Moffitt, CFP®. She can be reached at, 888-920-2030 or by email at merralee@captureprofits.com.

In Your Self Employed Hidden Paycheck – How to Pay Yourself More with Less (Part 1), I showed that my 2008 hidden paycheck from being self employed was $23,606. Here is how the numbers add up. We’re talking about items my family gets direct benefit from, but can be attributed to the business and are taken as small business tax deductions. If you are self employed your family also gets paid in “stuff” that employees normally buy after they get their paycheck, but you can buy before you take your paycheck. The business purchase of this stuff, instead of you personally constitutes a hidden paycheck.

Most articles found on the web and elsewhere focus on self employed taxes and the tax savings aspect. Like the $6,610 savings I made last year in self employed taxes. But this article focuses on the hidden paycheck produced by legitimately buying goods and services used for you business that also has personal benefits.

Make sure you check with your CPA before you take any of these deductions since your situation is most certainly different.

My Self Employed Hidden Paycheck items for 2008:

Self employed health insurance – First, the big one. As an employee, it’s not deductible even if you pay the whole thing. Being self employed, it’s entirely deductible. I spent $5,068 last year.

Cell phone – I have five lines for my family. These cost $179 a month after subtracting the kid’s lines, although all are necessary to my business and my sanity.

Home/business phone – Working from home allows me to write off my phone ($45/mo) and my long distance VOIP line with BroadVoice ($35/mo).

Internet – My Internet at home costs $50/mo. Who could run a business without that?

Lunches/dinners out – Meeting with clients and prospects over lunch or dinner is a relaxing way to build business. Even after the 50% deduction, I spent $129/mo.

Party leftovers – My client party at my house had 146 clients and prospects last year. In Berks County, it’s a mortal sin to run out of food, so I ended up with a steak, shrimp, appetizers and alcohol left to freeze. Although extremely hard to estimate, I would say safely about $500 total was the value of what we ate later in the year with family and friends.

Travel – I have a lot of clients near San Jose, California where I used to live, many began as close friends. Traveling there three times last year to see them and the clients they refer is like a vacation for me. Since I stay with my mother-in-law (who I just love), I only spent $2,772 on three trips last year.

Vacation – When many people go on vacation, they work part of the time and deduct part of the cost. I didn’t last year, so my business deductible vacation was $0. This can be a significant amount as we will see in a future article.

Home office deduction – Working from home allowed me to take $3,484 last year off my taxable income. Think of it as the business paying part of the electric, mortgage, pool maintenance, and everything that goes into maintaining a house divided by the square footage used for your business.

Per diem meals – I found this little known tax deduction works for me because I stay at my mother-in-law’s house when I visit my clients in CA. Per diem meals is a daily rate based on where you travel allowed for deduction where you don’t need a receipt. California is $59/day and I spent 47 days there last year. So I get to take $2,802 as business expenses.

Office supplies – With two teenagers in school and various Boy Scout projects, we use extra office supplies such as paper, toner, and notebooks. Maybe it’s not worth mentioning at only about $200 a year, but it illustrates that there are probably things you haven’t thought of yet.

Auto mileage – If you routinely stop at the grocery store, department store, or friend’s house on your way home from a client or meeting, you have saved yourself a trip and pocketed the mileage. Make it a habit and it is money your household is getting without spending. With .55 cents a mile, that was around $1,294 last year.

Computer equipment – Who could run a business without a computer? It also serves as my personal entertainment, shopping aid, and correspondence tool. We tend to buy a laptop about every year for either my husband or me and give the older one to our kids or assistants. Patrick’s MacBook and all its software, cases and parts was $2,052. Yes, we bought other computer stuff, but I’m only counting here what we would have had to buy for the family (and unable to deduct) if we weren’t self employed.

Telephone equipment – Between dropping my Ipaq and being a woman with the ‘no pockets’ problem, I need to upgrade my cell phone nearly each year. Without extending my contract, it cost $299. At home we have a TalkSwitch PBX which died after 5 years and we replaced it for $826.

NOW, a big disclaimer, I do not do taxes! I work with an excellent CPA who specializes in self employed taxes. She is a tremendous help to me. I then pass onto my self employed clients whatever they are missing. So if you have any questions regarding whether something is business deductible in your situation, ask your CPA. I am only helping to stimulate your brain and get this stuff recorded in the first place. You can’t count it if you don’t track it.

How do you figure your hidden paycheck? Comment now.

Now stop reading about your hidden paycheck and start doing! Let’s create your personal profit strategies for growing profit. Call small business profitability coach Merra Lee Moffitt, CFP®. She can be reached at, 888-920-2030 or by email at merralee@captureprofits.com.

As self employed, we’re pulled in two directions. We want better income from being self employed, yet we want our self employed taxes to be as low as practical. We want our family to benefit from having a better income and all the luxuries it can buy: travel, TVs, cell phones, dining out, and more. But the more dollars in your paycheck, the more self employed taxes you pay.

Fortunately there are common, regular and necessary expenses in your business that have direct benefit to your family. The average employee must pay for all these items AFTER he gets his paycheck. Being self employed, you can count these items against your business and pay for them BEFORE you take your paycheck. Your self employed income will seem lower but your family gets “paid” in the stuff the business pays for. This, in turn, builds your hidden paycheck.

This hidden paycheck is part of what makes being self employed worth the effort. Many items in our daily lives are also used for business. For the purposes of tax reporting, we get to take those expenses against the business because they are necessary for running the business. Depending on your business, this adds up to a hidden paycheck of $15,000 to $25,000 a year.

Your CPA can help you figure out exactly which costs fall into the various buckets and where to report them on your tax forms. Let’s go over some examples. Better income from your hidden paycheck comes from:

I’ll go into detail in part 2, here are just some totals. Last year, my hidden paycheck amounted to $23,606. I’ll show you how I got there in Your Self Employed Hidden Paycheck – Little Things Add Up (Part 2)

Here are the categories I used:
Self employed health insurance
Cell phone
Home/business phone
Internet
Lunches/dinners out
Party leftovers
Travel
Vacation
Home office deduction
Per diem meals
Office supplies
Auto mileage
Computer Equipment
Telephone equipment

What’s in your self employed hidden paycheck? Comment now.

Now stop reading about your hidden paycheck and start doing! Let’s create your personal profit strategies and demand growing profit. Call small business profitability coach Merra Lee Moffitt, CFP®. She can be reached at, 888-920-2030 or by email at merralee@captureprofits.com.

Your money might go a little farther this year, thanks to new raised limitations of several common IRS deductions. Use this information to plan your savings and contributions and to take advantage of what good news there is going into 2009.

1. The maximum earnings subject to Social Security tax is now $106,800. The Social Security tax rate remains at 15.3%.

2. The maximum annual wage that someone under the normal retirement age can earn without a reduction of Social Security benefits is raised to $14,160.

3. The SSI COLA is 5.8% for payments beginning January 2009. Welcome relief in Medicare premiums is that these premiums will remain the same in 2009, now at $98.60.

4. The 15% marginal income tax rate begins at $16,700 taxable income for Married Filing Joint (MFJ) and $8,350 for single. The 25% marginal bracket begins at $67,900 MFJ and $33,950 single. The 28% marginal bracket begins at $137,050 MFJ and $82,250 single.

5. The personal exemption for 2004 is now $3,650. The standard deduction for Married Filing Joint (MFJ) is now $11,400 and $5,700 for single filers.

6. The business auto mileage deduction is now .58 cents per mile. In fact, that rate began July 1, 2008.

7. The child tax credit remains $1000 per child.

8. The long-term capital gains tax rate remains 15% if your marginal tax bracket is higher than 15%. It is 5% if your marginal tax bracket is 15% or lower. Qualifying dividends are now generally taxed at the same rate as long-term capital gains.

9. The Traditional IRA deductibility phase-out for MFJ has been raised to $65,000 to $75,000 and to $45,000 to $55,000 for Singles.

10. Eligibility phase out for Roth contribution begins at $105,000 for singles and for MFJ at $166,000. The Traditional and Roth IRA deduction maximums remain at $5000 with $1000 catch-up provision for age 50 and over.

11. The SIMPLE IRA deduction is now $11,500 with a catch-up provision of $2,500 for those 50 and over.

12. The 401K, 457,403(b) and SARSEP maximum contributions are now $16,500 with a catch-up increased from $5,500 to inflation-indexed if you are 50 or over.

13. The SEP IRA and Defined Contribution limits are now $49,000. The maximum salary that can be considered is $245,000.

14. Health Savings account maximum contributions for 2009 are now $5,950 for families and $2,300 for individual plans. Anyone age 55 or older can add an additional catch-up of $1000.

Merra Lee Moffitt, AWMA, CMFC, CFP® spends all day, everyday helping families and business owners reach their financial dreams and goals. She can be found at, 888-920-2030 or by email at merralee@moffitt.com.