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Friday, April 29, 2011

MONEY: Business:Pricing, Dealing With Taxes and the IRS

     Having started a business years ago with the money in my pocket and no working capital it is easy to get in trouble.  The first thing you need to do is get a Tax ID number and no that is not a social security number.  It is a number that must be put on all your paperwork dealing with the IRS and is kind of important.  I did not find out about all this till I was three years in debt to the IRS.  Putting off paying the tax on your income is not a good idea.  Two reasons that might make you understand why I say that.  One is that the government fines you $500 for failure to file, and also $500 for failure to pay your taxes.  These fines apply regardless of what you earned and yes the IRS charges you interest on the sum from the time (year) it was due.  So it can add up.  If you are serious about starting a business keep all your receipts and find a good but reasonable book keeper.  They are not hard to find.  It may save you a lot of money in the long run.
     The second is that the IRS is more than willing to work with you if you are serious about doing your taxes.  I went to a local IRS office and they helped me get my ducks in a row.  The government is not some evil empire dedicated to breaking you.  They are dedicated to helping keep the government running and they know that keeping businesses running does just that.  Once you have figured out how much you owe if any.  Believe it or not you may be due some money back.  The IRS will ask you how you want to pay.  They will set up a payment plan for you.  Remember your goal is to get out of debt.  The main thing is to pay what you say you can pay.   I sat my plan up for $500 a month and paid on it for several years, but I did pay it off and got my business on its feet.  I could have said $100 a month and made it easier on myself as a friend of  mine did.  However you will be paying interest on the unpaid balance and to me the goal was to get it over with.
    Finally when you are setting prices for your services and you decide to undercut the market you are only hurting yourself.  People who sell things like hearing aids, dentures, glasses, landscaping and roofing may seem to charge high prices.  They have been in the business long enough to know how much they have to charge to make ends meet.  Selling your product below market values is not good business.  You would be better to charge full market and contend your service is better or worth it.   Cutting rates means you will probably not survive the off season.  Some business's are seasonal and you have to put back for the dry spells.  Others sell products or services that last for long periods and repeat business is not something you can look forward to.  The years I was in business I never withheld help from someone new to the business. My view was that our paths would cross, but often it did not matter because our goals were different.  One person might want to get home.  The other wants to get to another area for a load that will get them home, but with more money in their pocket.  I do not really remember butting heads with anyone I helped.  It is just how business works.  Everyone finds there own way to find jobs and stay working.  If you spend your time following the competition and trying to get his work the only thing you will do is probably starve yourself to death. Over the years I had competition actually throw work my way when they had more than they could handle and I usually did likewise.  That is how everyone survives. Cutting others throats to get a job only makes it harder on yourself in the long run.  Any questions, comments or suggestions are welcome and I will try to help anyway I can.  Good Luck

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