It’s not hard to qualify for the home-office deduction when you take advantage of the administrative and management activities safe harbor. This approach gives you all the nice benefits of the home-office deduction but allows you to spend the majority of your time in your office outside the home. However, you have to know how the rules work—namely, you have to know which business activities you can and can’t do in each location.
There is one part of tax law that you should ignore. It will get you into trouble. If you read the literal language of the tax code, you might get the impression that receipts are not always necessary. Don’t fall into this trap. Make it a general habit to keep your receipts and you will make your tax life much, much easier.
If you invest in gold, stamps, or antiques but you don’t know the tax rules governing collectors, you’re probably falling into costly tax traps that you could easily avoid with tax knowledge. When you put yourself in position to improve your tax situation, you put more money in your pocket (which gives you more money to build your collection). Read this article to discover how you can deduct your collection expenses and also minimize your taxes when you sell your items for a profit.
Are you an S corporation owner who takes advantage of the office-in-the-home deduction? If so, here’s good news. With the right tax planning, you can sell your home containing the office and defer or eliminate 100 percent of your tax, including recapture for any depreciation that you claimed. That news should put a smile on your face. Read this article to find out how you can use this strategy to pocket some extra tax dollars.
Lending money to an employee can be a great way to help your worker through difficult times and build loyalty to your business. But when you do this, you need to plan for the possibility that your employee is unable or unwilling to repay the loan. In this article, you will discover the sad example of a business owner who suffered the consequences of poor planning. Fortunately for us, his mistakes serve as a guide on preserving good tax treatment for bad loans.
Your home may be your biggest investment and storehouse of cash. While interest rates remain low on home loans and home equity lines of credit, you may be tempted to pull money out of your home with a loan. Before you act, you need to know 1) how much interest you can deduct, 2) what the limitations are on those deductions, and 3) when you get slammed by the alternative minimum tax (AMT). Read this article and find out how to make sure that your home equity interest produces tax benefits for you.
In this precedent-setting case, the Tax Court had to decide for the first time whether a tax preparer’s fraud extends the statute of limitations for IRS audit of the client return when there is no charge of fraud against the client. If the court rules against the client, then by precedent a tax preparer’s fraud extends the client’s allowable audit period from three years to forever.
When you own a business, you should look at all possible assets that you own personally and how you might use them to increase your business deductions. This is particularly true for vehicles. And the beauty of identifying assets such as personal vehicles that you can use for business is that you don’t spend money to create deductions. You simply use assets you already own.
If you are going to attend a convention, seminar, or similar meeting, you need to know that tax law breaks the Earth into two locations. In location one, you deduct your convention, seminar, or similar meeting if the event benefits or advances the interests of your business. That’s easy. In location two, you have to meet a much more difficult reasonableness standard. That’s not easy.
You never, ever want to borrow money from this one place. It’s poisonous. If you don’t suffer immediately, you might wish you had. This is a situation in which the money is readily available, you think it’s yours, and you think you are simply borrowing the money. But that’s not what’s happening. You are in truth stealing the money and violating your fiduciary responsibilities.
The thought of an IRS audit is a worry, no question. But it’s worse when the IRS wants a lot of your money. And it’s even worse yet when the IRS wants your money because it interprets the law incorrectly and at the time you see the IRS adjustment, you have no idea whether the IRS is right or wrong.
If you buy a property, fix it up, and then sell it, is that property a dealer or an investor property? The classification boils down to your facts and circumstances. That makes it a tough call for both you and your tax preparer. And if investor status produces long-term capital gains, you want to avoid dealer status, because that causes ordinary income and self-employment taxes.
You are right to worry about the hobby loss rules when a business fails, because those rules would give you no tax deductions for the failed business. But if you worked at the business, kept decent records, and tried to make money, you had a business, and that business failure would produce tax deductions as explained in this article.
If you operate your business as a proprietorship and hire your spouse as an employee, you likely have questions about the need to pay wages to make your spouse a bona fide employee. And you likely want your spouse as a bona fide employee who receives as a tax-free fringe benefit a Section 105 medical reimbursement plan—family coverage, of course.
If you own rental property in your name or in the name of a single-member LLC, you report your rental property income and expenses on Schedule E of your IRS Form 1040. But what happens when you have an expense for which the IRS has not created a line item on the form? Answer: If it’s an ordinary and necessary expense, it’s deductible.
Would you like to avoid payroll taxes on your S corporation’s inclusion of the cost of your health insurance on your W-2? You can. First, you and your S corporation can take advantage of one of two safe harbors. If you don’t qualify for a safe harbor, you can go back to a law originally enacted in 1939 and claim that you are in a separate class of employee exempt from payroll taxes on the health insurance fringe benefit that your S corporation gave you. And then if all else fails, you can pull out the IRS’s own publication and its online assistance and insist that the IRS follow them, even though they’re legally incorrect.
You may have seen advertisements online for “defined contribution health plans.” If you use one of these plans, be sure you understand how they work. Some of them appear to offer reimbursement methods that violate tax law and expose you to enormous penalties. Read this article to identify both the safe and unsafe types of defined contribution health plans and learn how to comply with the law.
If you have ever had a tough day on the golf course, you might not think of golf as “entertainment,” but that’s how the IRS classifies the activity. This is good news for you because it means that in the right circumstances, your golf expenses are deductible. Read this article and discover the unique rules you need to follow to ensure your deduction for golf (and other associated entertainment activities too).
You need basic books and records to avoid trouble with the IRS. If you have inadequate books and records and also make a large cash deposit in the bank, you might visit with the IRS every two weeks for about a year as the taxpayers in this case did. That’s a lot of unpleasant face time with an IRS agent.
Here’s a trick question: should you operate your real estate activities as a business or as an investor? If you operate as a business, you can deduct trips to real estate seminars and conventions. But if you are flipping houses, you don’t want business status because that makes you a dealer and taxes you at high ordinary tax rates rather than lower tax-favored capital gains rates. Check out this article about deducting seminars and insights into how the tax law treats dealers, investors, rental properties, and more.
That ugly alternative minimum tax (AMT) can raise its snakelike attack when you least expect it. In this court case, by changing the medical practice from a solely owned corporation to practicing as an employee of an education institution, the surgeon looked squarely in the eyes of the AMT and lost almost $20,000.
When you buy a house with less than 20 percent down, your lender will almost always force you to buy mortgage insurance. This protects the lender in case you default. Tax law used to help a lot people with the cost of mortgage insurance by allowing a deduction to certain taxpayers. That selective help on personal homes expired in 2013, but there’s hope for an extension, and existing deductions continue for your rentals and office in the home.
IRA rollovers are dangerous. In a recent court case, a judge overturned a long-standing rule on IRAs, subjecting the taxpayer to income taxes, a 10 percent penalty, and an additional 20 percent penalty! Learn how the court made a new rule that you want to avoid, and then discover an alternative method for your retirement funds that completely eliminates the danger.
If you are looking for creative ways to get rid of a house that won’t sell, consider the lease-option. This strategy only works with the right tenant and your correct use. But get this right and it’s a nice deal for everyone involved. Make sure you avoid the traps that blow up the deal and add extra taxes to your tax bill. After all, your real purpose with the lease-option is to increase your cash flow and keep your taxes to a minimum.
Tax law allows you to have fun at work—in fact, your fun can earn you new deductions. Your can deduct your fun “entertainment” expenses ranging from fishing, hunting, and dancing to fashion shows or whatever you find enjoyable. What’s the catch? You have to mix just the right amount of business into your fun. Fortunately, the law tells you exactly how. This article passes along the information you need to deduct fishing trips and similar activities.
Have lawmakers inserted any sleight of hand into your Form 1040 tax calculations? Yes, they have! And it’s really terrible. For example, the alternative minimum tax (AMT) rules make you pay taxes on your tax deductions. How’s that for true sleight-of-hand terribleness? The AMT even makes you pay taxes on the personal exemptions the regular tax law grants for your children. It’s outrageous. But, because you own a business, there are some things you can do to get even.
Lease or buy? That’s the question you often face when you want to replace your business vehicle. To help you get maximum tax-deduction benefits should you decide to lease, examine the three often overlooked tax deductions in this article.
Good tax planning these days includes planning for your children as old as age 24. They may be subject to the kiddie tax, which can skyrocket their tax rates, even on investments they received from grandma and the ones they created themselves from their own income. If you have children under the age of 24, read this article to learn when the kiddie tax applies and to see what strategies you can use to reduce or completely eliminate the kiddie tax.
When a situation outside of your control forces you to sell your house, you will have a lot of things on your plate, not the least of which are tax concerns about the sale. Fortunately, there is a friend you can turn to—the IRS. In one of its rare moments of sympathy, the IRS may lend you a helping hand and lower your tax burden if you can show that you are in a difficult situation.