|
Tax Tips For Fall
(ARA) - The Fall season not only means back to school and full work schedules, but it's also the time to get business plans and taxes in line to avoid cramming and cringing at the end of the year.
This year's economic downturn doesn't necessarily have to affect taxpayers as adversely as they might think, if they take a few steps to financial freedom and use loopholes -- old and new -- in the tax laws to help them. Many tax tips are listed on www.legaltaxloopholes.com,
but here are a few tips for fall, according to tax strategist Diane Kennedy, CPA, and author of
"Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less
Tax." Education
* Educational IRA
Consider putting aside up to $500 per year into an Educational IRA for your children's future education costs. The money grows tax-deferred. Be aware that the allowable portion of the IRA does phase-out as personal income rises.
* Educational Expense for a Business
Educational expenses to make an owner more effective in his or her business (including anything from interpersonal behavioral training to accounting) are deductible.
* Educational Assistance Plan for a Corporation
Put an Educational Assistance Plan in place for your corporation that will allow your corporation to provide, tax free, more than $5,000 per year. The new 2001 Tax Plan has added graduate work as a covered expense under the Educational Assistance Plan.
Starting a Business?
"For those starting a business, that's the best. Good for you!" says Kennedy. "The sad truth is that there are very few legal tax deductions available for employees. But, as soon as you move into the business arena, it's a whole new set of rules," she adds. Here are a few tax tips to get new business owners started:
Most Commonly Missed First-Time Deductions
The most commonly missed first-time deduction is for items "contributed" by the owner into a business. This would include:
* Legal and accounting costs to set up the business
* Contributed furniture and equipment such as computer, software, fax, desk, table, cellular phone and file cabinets
* Costs to investigate the business (travel, research expense, financial analysis)
* Interest costs for financed items for the business
Back to Business
As the holiday season approaches, consider promotions or sponsoring events. Promotions are deductible. For those charitably inclined, they are limited by the individual's income. Even worse, if they have a Schedule C, Sole Proprietorship, the deductions don't reduce the amount of net profit subject to the onerous 15.3 percent self-employment. One tip is to look for a promotional aspect to charitable contributions to get a full deduction.
Most Avoided Legal Deduction
The most-avoided deduction is for a home office. The home office deduction is back, after a hiatus due to a contrary Supreme Court ruling. It's legal again but for some reason, many people still aren't taking this deduction.
To qualify for a home office deduction, the space must be:
(1) Exclusively for business. A small, "de minimus" personal use, is allowed but this can be risky. It's better to set aside a separate room and call it a business room.
-And-
(2) Regularly used to conduct administrative or management for the trade or business.
-OR-
(3) Regularly used to conduct client meetings.
-OR-
(4) A separate structure.
Once qualified, business owners can take a pro-rata portion of their home expenses, such as home mortgage interest, property tax, mortgage insurance, insurance, utilities, janitorial and other home-related expenses.
Courtesy of ARA Content, www.ARAcontent.com, e-mail: info@ARAcontent.com
EDITOR'S NOTE: For more information, contact Sherri Klein, APR, (203) 323-2600, sklein@kleincomm.com
Kennedy is the founder and owner of DKA, a leading tax strategy and accounting firm based in Phoenix, Ariz., and is the co-owner of TaxCents, a tax education company designed to encourage individuals to make informed tax-advantaged financial decisions. TaxCents provides do-it-yourself tools and education so all taxpayers can take advantage of the legal loopholes they are entitled to and decrease their taxes. At www.legaltaxloopholes.com,
TaxCents offers books, tapes and seminars, and the latest in what's hot in tax loopholes. 1-866-TAXCENTS
|
|
Today's Question
