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Recent Feature Headlines

November 2015

Facing IRS Penalties? Avoid Them with IRS Mercy; Here’s How

As a small business owner, you have good odds of someday facing a penalty for late filing and/or late payment of your or your corporation’s taxes. It’s likely you will think that you have to pay the penalties. But as you’ll learn here, when you know the rules of the road, you can travel the IRS mercy path and have those penalties forgiven.

Captive Insurance: Huge Tax Shelter

Do you have significant insurance needs? If so, the captive insurance company might save you money on your insurance, create a nice tax shelter, and produce a pile of cash. To achieve this agreeable result, you have to follow the rules and consider the tax code safe harbors.

Danger with Business Credit Card

You can make your tax life easier with a business credit card—but only if you use that business credit card correctly for tax purposes. For example, charging an expense to a credit card does not make it tax deductible. You need more proof. And you could create a type of double jeopardy if you operate your business as a corporation.

Q&A: I Won My Home-Office Deduction


Paying for College

Here’s a handy-dandy strategy for getting some money to your college student to help him or her pay for school. Have your child engage in an activity that’s not subject to self-employment taxes. If you operate your business as a corporation or your child is age 18 or older, this is a great college funding tool that you need to consider.

Q&A: HSA or Section 105 Plan?


Renting Property to Your Business? Avoid This Trap That Destroys the Tax Deduction

Do you rent property to your business? Under the self-rental rule, you could forfeit your expected tax breaks and end up on the hook for unexpected taxes. This is true even if you create a separate entity to rent the property to your business.

Secrets to Pocketing Cash by Renting a Bedroom in Your Home

If you want to rent one, two, or twenty bedrooms in your home, you need to avoid one big trap and navigate two sets of rules to obtain the tax benefits you likely were hoping for when you thought of this rental activity. This is an area where tax knowledge is power. Without the knowledge, you could create a very unsatisfactory tax result.

Three Traps to Avoid when Tapping Your IRA for Medical Expenses

You might want to tap your IRA penalty-free for medical expenses. If so, avoid the three traps that we explain in this article. Don’t be a victim. You suffer first because you incurred medical expenses, then you have to pay income taxes on the withdrawal of money from your traditional IRA, so the last thing you want is to pay a 10 percent penalty on top of all that.

October 2015

How Many $15,000 Penalties Do You Face for Not Filing Form 5500-EZ?

Do you have a solo 401(k) plan with more than $250,000 in it? Did you, your tax preparer, or the plan administrator file your 5500-EZ? Are you sure? The penalty for not filing the required 5500-EZ for a plan year is $25 a day, capped at $15,000. That’s for one plan year. If you failed for 10 years, that’s $150,000.

Got Junk? Donate It! Pay Less in Taxes

Pay less in taxes this year by donating clothing and household items. When you know what to do and how to do it, the noncash deductions available here can help you pocket some hefty after-tax cash that costs you nothing but a little time and effort.

Q&A: Oops! How Do I Correct My Missed S Corporation Election?


Make the Closing Statement Work for You When Buying Rental Property

One of your first tax steps in buying a rental property is to go through each line item in the closing statement and assign it to one of the following three categories: (1) basis, (2) loan acquisition, or (3) operations. With basis, you allocate costs to land, land improvements, buildings (including perhaps building components), and equipment. Loan acquisition falls into either costs of getting the loan or costs to reduce the interest rate. The assignments have a direct impact on how quickly you realize the deductions.

How to Treat Your Coin, Stamp, and Baseball Card Activities

Tax law places your collectible activity in one of four tax categories: (1) hobby, (2) investment, (3) trader, or (4) dealer. This means your collectible activity can, depending on category, trigger the AMT, capital gains, and self-employment taxes. When you know the rules that place you in these categories, you can make adjustments. Sometimes the adjustments are easy; at other times, they require rethinking the collectibles activity.

Q&A: 1099 Proprietor—Should I S Corp. or Not?


Don’t Make These Mistakes When You Convert Business Property to Personal Use

You need to know the tax rules before you convert business property to personal use. You don’t want the recapture surprise. You don’t want the tear-jerking missed tax deduction. With a little tax knowledge, you can avoid both the surprise and the tears.

How You Can Claim Zero Depreciation and Avoid the Double Tax

Have you been claiming zero depreciation for your home office so that you can avoid the depreciation recapture tax? Surprise! Tax law has allowed and allowable depreciation rules that can make you pay the recapture tax without giving you the actual depreciation deduction. If this happens to you, you are going to pay a double tax.

Mortgage Interest on Rental Property—Avoid Traps, Maximize Your Deductions

You don’t automatically get to deduct mortgage interest on a rental property. Lawmakers have set traps. One trap can totally destroy the interest deduction. Another trap makes you wait a long time to realize the tax benefits of the deduction. Make sure you know what the traps are so you can avoid their impact on your bottom line.

September 2015

Use Business Travel to Create Tax-Free Income for Friends and Family

Stay with family and friends when traveling for business. And then create tax deductions by paying them for your business lodging. You have a choice: deduct the cost of staying at the big hotel downtown, or deduct the cost of staying with your friends or family. Either way, the choice of location does not change the fact that you are on a tax-deductible business trip. The side benefit is that doing this right creates tax-free income for your friends and relatives.

Use These Strategies to Avoid Getting Slammed with Taxes When You Roll Over a Traditional IRA to a Roth

A Roth IRA is an extremely attractive option for retirement savings, since you can grow those earnings completely tax-free. You can convert your traditional IRA to a Roth IRA no matter how high your income. But you could get slammed with a hefty tax bill when you make the switch without a plan. In this article, you find three surefire strategies that will not only minimize your tax bill when you roll over those funds to a Roth IRA, but in some cases also eliminate the additional taxes completely!

Q&A: Health Insurance Deduction for Solo Owner-Employee of a C Corporation


Use Seller Financing to Create Wealth

If you are selling a rental property or your home, you should consider seller financing as a possible method to achieving a rate of return better than you are receiving from your current investments. This article gives you six ways to improve the structure of your seller financing so you can pocket more cash.

Q&A: IRS Audit


Cash In When the Buyer Defaults on Your Seller Financing

You may want to consider seller financing when you sell a rental property. It can boost your rate of return. Now, you might say “Yeah, but what happens if the buyer doesn’t pay up?” There could be a big silver lining here that you haven’t considered, and that’s why you should read this article now.

Pay the Nanny Tax and Make Money Doing It

If you plan on paying a nanny at least $1,900 during 2015, then you need to pay the nanny tax (payroll taxes from you, the employer). This strikes fear into many taxpayers who think this is a HUGE HASSLE and a HUGE EXPENSE. But there’s no need to fear this tax. In this article, you learn how you can offset most, if not all, of the tax expense with the help of a couple of tax breaks. In fact, you may actually end up with more money in your pocket in the end.

Cut the Cost of College with Tax Credits

The paradox of choice applies when you consider the multitude of tax benefits available when paying educational expenses. In this article, we help you put money in your pocket by taking both the paradox of choice and the complexity out of two education tax credits with our step-by-step guide.

Selling Your Business: Should You Sell Your Ownership Interest or the Business Assets?

If you are selling your business, you likely want minimum taxes and no exposure to business-related liabilities once the sale is completed. That’s what this article is about. In an asset sale, you see types of taxes and opportunities that make the asset sale work to your advantage. In a stock sale, you likely get tax-favored capital gains, but you may have to give up something to the buyer.

August 2015

Beat Sneaky Traps and Unfair Limits on the Self-Employed Health Insurance Deduction

The self-employed health insurance deduction could give you a big surprise when you file your taxes—and that’s not good. The law imposes a couple of restrictions that many people don’t know about and that might strip you of your tax savings. Take some time right now to figure out whether you qualify for the deduction and if not, what you can do about it.

Converting a C corporation to an S corporation: Save Thousands by Avoiding the “BIG” Tax Problem

If you want to convert your C corporation to an S corporation, you need a plan. No plan, BIG tax. The BIG tax means the tax on built-in gains at 35 percent. But it’s worse than that, and bigger than that, because after the 35 percent tax payment, you continue to pay at your regular tax rates on the remaining 65 percent that flows from your S corporation to you. This is torturous double taxation. So make a plan to avoid as much torture as possible, perhaps all of it. This article helps you with that plan by showing you four strategies that you can use.

Want a Big Deduction for Your New Vehicle? Here’s Good News

Lawmakers have yet to decide if they will retroactively enact bonus depreciation and the higher Section 179 expensing limits for 2015 purchases. But if you’re looking to buy a large SUV or truck for your business, you may be surprised to learn how fast you can write off the full cost of the vehicle even if lawmakers fail to extend the tax breaks. Knowing the write-offs may entice you to pull the trigger on that purchase immediately instead of waiting for changes in the law.

Q&A: Home-Office Deduction—Pool Table in the Room


Tap Your Roth IRA the Right Way—Tax-Free and Penalty-Free

A Roth IRA is not your average retirement plan. It’s a retirement savings, boondoggle savings, down payment savings, college savings, and emergency savings plan all wrapped into one. But to realize the benefits, you need to know how to avoid taxes and penalties when you take the money out. The good news: do this right and you can tap that Roth IRA and pay ZERO taxes and ZERO penalties.

Magic Release of Rental Property Tax Deductions with a Home-Office Deduction

Your rental properties provide tax shelter when you can deduct your losses against your other income. For you to deduct your losses, you need to pass the tax code’s 750-hour test. The good news in this article is that the home-office deduction can help you pass this test in some delightful ways that you would not usually think of.

Selling Your Business: It Might Be Worth More Than You Think, and the Tax Implications Are Probably Crucial

You need to know a number of tax rules when it comes to selling your business. For example, you likely want tax-favored capital gains, but your buyer may not like that idea, as it cuts into the buyer’s tax deductions. This article is the first in a series of articles on selling your business, and it will help you understand how this process is going to work.

Q&A: Paying My Daughter: W-2 or 1099?


Reinstate Your Rentals as Tax Shelters

A great tax shelter is a rental property that shows a positive cash flow and a deductible tax loss. You can still have that type of tax shelter in today’s tax world. To make this work, most taxpayers, likely you included, need to avoid the investor trap to deduct their losses against all their other income (thus creating tax shelter). This article helps you avoid the investor trap so you can create the rental property tax shelter.