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IRS Issues Final Section 199A Regulations and Defines QBI

Your ownership of a pass-through trade or business can generate a tax deduction of up to 20 percent of your qualified business income (QBI). The C corporation does not generate this deduction, but the proprietorship, partnership, S corporation, and certain trusts, estates, and rental properties do. In this article, you learn how to find your QBI.

IRS Clarifies Net Capital Gains in Final 199A Regulations

New tax code Section 199A can give you a tax deduction of up to 20 percent of your taxable income reduced by net capital gains. Last August, the IRS issued Section 199A proposed regulations that gave you some guidance on what net capital gains are. And now the new final regulations give you clarifying guidance on what the IRS deems are net capital gains for purposes of Section 199A.

Q&A: Avoiding the $100 a Day per Employee Penalty for S Corporations

The answer in this article explains how the S corporation can pay the solo owner-employee’s individually purchased health insurance without worrying about the $100-a-day penalty.

IRS Updates Defined Wages for New Section 199A Tax Deductions

Your Section 199A tax deduction disregards W-2 wages when your Form 1040 taxable income is equal to or less than $315,000 (married, filing jointly) or $157,500 (filing as single or head of household). Also, you don’t have to think about wages for your out-of-favor business if you have taxable income above $415,000 (married, filing jointly) or $207,500 (filing as single or head of household). But if you are in a group that needs to consider the wages your business paid you and your employees, you have to follow the rules set out by the IRS, as we explain in this article.

IRS Creates a New “Safe Harbor” for Section 199A Rental Properties

The Section 199A 20 percent tax deduction is a possible gift from lawmakers. Literally, you don’t earn this deduction; it’s simply there for you if you qualify. Under the trade or business rule, your rental property profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction.

IRS Section 199A Final Regs Shed New Light on Service Businesses

The IRS issued final Section 199A regulations that contain some new and very favorable provisions that are important to out-of-favor specified service trades and businesses. Of particular note are the de minimis rules discussed in this article that show you how to break your business into two or more businesses for purposes of the Section 199A tax deduction.

For 199A Tax Deductions, Must Landlords Give 1099s to Vendors?

Get ready. You may be about to experience another encounter with the law of unintended consequences. The Tax Cuts and Jobs Act gives you a possible 20 percent tax deduction on your rental property income. But that’s only if your rental property is a trade or business, and that comes with its own burdens.

New Downloadable Section 199A Tax Deduction Topic Guide

What do you need to know about the new 20 percent tax deduction that’s available to you if you have ownership in a pass-through business such as a proprietorship, a partnership, an S corporation, a trust, an estate, and certain rental properties? Find the information you are looking for with this downloadable PDF.

Section 179 Deduction: When Your Vehicle Lease Is Not a Lease

Is your lease a lease? Are you sure? There are lots of funny rules that make what looks like a lease a purchase—and make what looks like a conditional sales agreement a lease. This article shows you what happened to Arthur Boyce and gives you a number of tips to help you avoid his plight.

Avoid IRS Audits: Fix the 1099 Prepaid-Rent Mismatch

You don’t want a 1099 that reports an amount that differs from what you report on your tax return, because the IRS computers will pick that up and start an inquiry. When you prepay rent, your accounting method for preparing your 1099 likely creates a mismatch between you and your landlord. Here’s the technical correction when you have a mismatch and how to implement it, and a bigger tip on how to avoid mismatched reporting to begin with.

Tax Reform’s New Qualified Opportunity Funds: Helpful or Hype?

Qualified opportunity funds are a new tax-planning strategy created by the Tax Cuts and Jobs Act tax reform. The new funds have the ability to defer current-year capital gains, eliminate some of them later, and then on the new investment make capital gains tax-free. To put the benefits in place, you need to navigate some new rules and time frames.

Q&A: New 2019 Desktop Tax Rates for You

Your new (enhanced on May 16, 2019) 2019 desktop reference containing the 2019 capital gains and federal income tax rates for individuals, corporations, and estates and trusts, plus other desirable quick references you want at your fingertips, is now available with the download link in this article.

Entertainment Facilities after the TCJA Tax Reform

The Tax Cuts and Jobs Act (TCJA) tax reform crushed a big chunk of business entertainment tax deductions. Fortunately, your business entertainment facility escaped the mayhem and continues as a 100 percent tax-deductible facility. If you want such a business facility, make sure to review the rules in this article.

For You: New Downloadable Home-Office Deduction Topic Guide

For most business owners, the home office not only produces business deductions for a percentage of personal home expenses but also can create a substantial increase in business vehicle deductions.

TCJA Tax Reform Sticks It to Business Start-Ups That Lose Money

The Tax Cuts and Jobs Act tax reform added an amazing limit on larger business losses that can attack you where it hurts—right in your cash flow. And it works in some unusual ways that can tax you even when you have no real income for the year. When you know how this ugly new rule works, you have some planning opportunities to dodge the problem.

Seven Answers to Your Section 199A Questions

The Tax Cuts and Jobs Act tax reform added new tax code Section 199A that gives owners of pass-through businesses a possible 20 percent tax deduction on business income. Inside the rules for qualification, you find some complications that give rise to many questions. In this article, we answer seven of those questions.

Defeating the Kiddie Tax after the TCJA Tax Reform

If your family has trouble with the kiddie tax, you face some new wrinkles for tax years 2018 through 2025 thanks to the Tax Cuts and Jobs Act tax reform. This is one of the many areas where tax planning can pay off, as you will see in this article.

2018 Last-Minute Vehicle Purchases to Save on Taxes

Here’s an easy question: Do you need more 2018 tax deductions? If yes, continue on. Next easy question: Do you need a replacement business vehicle? If yes, you can simultaneously solve or mitigate both the first problem of needing more deductions and the second problem of needing a replacement vehicle, but you need to get your deduction in place on or before December 31, 2018. This article helps you find the right vehicle for the deduction you desire.

2018 Last-Minute Year-End Tax Deductions for Existing Vehicles

Yes, December 31 is just around the corner. That’s your last day to find tax deductions for your existing business vehicles that will cut your 2018 taxes. In this article, you will learn how to find and release tax deductions that the tax code trapped inside your existing business cars, SUVs, trucks, and vans.

2018 Last-Minute Year-End General Business Deductions

Your year-end tax planning doesn’t have to be hard. This article takes your daily activities and identifies easy year-end tax-planning moves you can make today. Our five strategies will increase your tax deductions or reduce your taxable income so that Uncle Sam gets less of your 2018 cash.

2018 Last-Minute Year-End Medical and Retirement Deductions

When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you six action steps for 2018 that can help you reduce your taxes and pocket extra money.

2018 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

Your stock market portfolio can represent a little gold mine of opportunities to reduce your 2018 income taxes when you take advantage of the tax code’s offset game. The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies. In addition to saving taxes with the game of offset, you can also avoid paying taxes on stock appreciation by gifting stock to charity, your parents, and your children who are not subject to the kiddie tax.

2018 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family

If you are thinking of getting married or divorced, you need to consider December 31, 2018, in your tax planning. Here’s a planning question: Do you give money to family or friends (other than your children who are subject to the kiddie tax)? If so, you need to consider the zero-tax-bracket planning strategy. And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.

2018 Last-Minute Section 199A Strategies

Starting now, this year (2018), you have to consider your Section 199A deduction in your year-end tax planning. If you don’t, you could end up with a big fat $0 for your deduction amount. We’ll review four year-end moves that (a) reduce your income taxes and (b) boost your Section 199A deduction at the same time.

Q&A: Deduction for Defunct S Corporation Expenses?

You’ve closed your S corporation and then paid expenses for it afterward. Can either you or the corporation deduct those expenses? We’ll explain what the law says, along with one thing to consider for taking deductions for your leftover expenses.

Update on Claiming Business Deductions for Work-Related Education

Learn how your continuous learning employees probably suffer because of the Tax Cuts and Jobs Act. It’s likely good business for you as a business owner to ease that suffering to encourage this continuous learning. On the personal side, you’ll find the tax law subsidies for your individual education to your liking.

IRS Says TCJA Allows Client and Prospect Business Meal Deductions

You are not going to do this very often, but thank the IRS for showing you the path to your client and prospect business meal tax deductions. Remember, the Tax Cuts and Jobs Act eliminated tax-deductible entertainment, so the IRS’s new client and prospect business meal rules are important.

Q&A: Health Insurance Premiums and Reasonable Compensation

Your S corporation has to pay you reasonable compensation for the services you provide to the corporation. If your corporation pays your health insurance premiums, does that change the salary amount you need to pay yourself? We’ll tell you the answer and how doing it wrong would cost you money.

Defining “Real Estate Investor” and “Real Estate Dealer”

The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classifications, you can do much to increase your net worth.

Q&A: New Home-Office Tax-Deduction Creation Guide

Obtain access to this new, handy 28-page guide to creating the home-office tax deduction. Inside the guide you’ll learn how the administrative office gives you the tax-favored principal office. This is the same tax code–defined “principal office” that you get when you make the cash register ring from your home office (Soliman case).

Q&A: Deduction for Defunct S Corporation Expenses?

You closed your S corporation and then paid expenses for it afterward. Can either you or the corporation deduct those expenses? We’ll explain what the law says, along with that one thing you need to consider for taking deductions for your leftover expenses.

How the TCJA Tax Reforms Hammer Personal Casualty Loss Deductions

The Tax Cuts and Jobs Act makes claiming a tax deduction for a personal casualty loss more difficult. And when you do qualify to deduct a personal casualty loss, you face a number of rules that add to your misery by making the loss deduction difficult. In select circumstances, you can use a safe harbor, which makes things a little easier.

Q&A: Tax Reform and the Cannabis Industry

Tax reform made a lot of changes that impact your choice of entity for your business. And if your business is in the cannabis industry, this is especially true. We’ll explain how Section 199A and other Tax Cuts and Jobs Act provisions impact your entity choice for a cannabis business.

Claiming the New Employer Tax Credit for Family and Medical Leave

In many business environments, you compete for employee talent in a variety of ways, including perhaps by implementing a medical and family leave policy. The good news on this front is that your federal government may have given you a tax credit (yes, that lovely dollar-for-dollar offset to your taxes) for what you wanted to do anyway.

Q&A: Statutory Insurance Agent Wins the 199A Tax Deduction

The life insurance sales professional who receives a W-2 with the statutory employee box checked is in a special tax category for income and employment tax purposes and also sits in a favored category under the new Section 199A deduction rules. But he or she may not be favored for 1099 income.

Q&A: Do Triple-Net Leases Qualify for a 199A Deduction?

The proposed Section 199A regulations give us guidance on whether rental activities qualify for the 20 percent deduction. If you use triple-net leases for your rental properties, you may wonder if you’ll get your deduction. We’ll discuss what we know and whether triple-net leases qualify for the deduction.

Drive Time Increases Odds of Deducting Rental Property Losses

Your rental properties provide tax shelter when you can deduct your losses against your other income. One step to deducting the losses is to pass the tax code’s 750-hour test. One step to finding the hours you need may be your drive time.

Five Strategies for Your Business Loss after Tax Reform

Tax reform eliminated your ability to get immediate cash in your pocket from a net operating loss. Don’t sit back and let the IRS keep that cash! Examine five strategies you can use right now to get an immediate tax benefit from your business loss.

Bird’s-Eye View of Tax-Deductible Small-Business Health Plans

Are you confused by the tax deductions you can claim for your small-business health care? We can help you with our bird’s-eye view. It takes less than two minutes.

Q&A: Did Tax Reform Take Away My Boat Deductions?

The taxpayer in this question-and-answer bought a boat. Tax reform did him considerable damage on two of his tax deductions. Learn what the Tax Cuts and Jobs Act (TCJA) tax reform did to this boat.

Three Ways to Take Money out of Your IRA at Any Age Penalty-Free

You could be like most taxpayers and think your IRA accounts have locked away your money until age 59 1/2 unless you are willing to pay a 10 percent penalty to access the monies. But that’s not correct: we’ll show you three ways you can take your money out of your IRAs tax-free or penalty-free, or both, regardless of age or reason.

Audit-Proof Your Time Spent on Rental Properties

To deduct your passive losses as a tax law–defined real estate professional, you or your spouse, or both, must prove time spent. Since you need proof of time spent to deduct rental property losses, use the tactics in this article to keep track of your time and also increase your overall profits on the rentals.

Q&A: Car Interest and Corporate Reimbursements

Say you operate your business as an S corporation and the S corporation reimburses you for your business use of your personal vehicle. If you have a loan on the personal vehicle, can your S corporation reimburse the business portion of the interest tax-free to you as it can with other reimbursed employee expenses? Find the answer in this article.

Reasonable Mileage

The law contains no reasonableness test for mileage. There are very specific rules for recording mileage. We recommend that you keep a mileage log for at least three consecutive months to prove your business-mile percentage.

Avoid Penalties—Give Notice of 2019 HRA Medical Plan on Oct. 2

You have three good reasons to get your qualified small-business health reimbursement account (QSEHRA) in place on or before October 2. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1.

New IRS Regs: Does Your Rental Qualify for a 199A Deduction?

Section 199A gives you up to a 20 percent tax deduction for your pass-through business income. Do your rental activities count? We’ll go over what the proposed Section 199A regulations say about your rental activities and whether those activities qualify you as an individual for this possible 20 percent tax deduction.

Use a Conservation Easement Donation to Create a $63,000 199A Deduction

If you have high income and operate an out-of-favor specified service business, you may think your Section 199A deduction is gone for good. But there is hope: we’ll explain how a conservation easement may be the solution to your problem. And if the numbers work out, you could get a large tax windfall in the process.

Q&A: 10 Proven Strategies to Lower S Corporation Taxes

Here’s a link to a resource that gives you 10 proven strategies to lower S corporation taxes.

New IRS 199A Regulations Benefit Out-of-Favor Service Businesses

Section 199A provides a valuable 20 percent tax deduction but denies it to certain “out-of-favor specified service businesses” when individuals have taxable income greater than $207,500 (single) or $415,000 (married). New IRS regulations are a welcome sight because they give more clarity and add leniency as to which businesses are out of favor (and which are not).

How to Find Your Section 199A Deduction with Multiple Businesses

Calculating your Section 199A deduction with one business is complicated. When you have multiple businesses, including businesses with losses, it gets even worse. We’ll clearly explain the rules related to multiple businesses along with how the new proposed regulations may allow you to aggregate certain businesses.

Q&A: Guide to Published TCJA Tax Reform Articles

Here’s a resource guide that gives you the Tax Cuts and Jobs Act tax reform articles published at the Bradford Tax Institute from January 1 through July 31, 2018, including for each article the (a) topic, (b) code section, (c) prior law, (d) new law, and (e) link.

How Capital Gains Can Destroy the New 199A 20 Percent Tax Deduction

As you likely already know, your Section 199A deduction depends on where you fall in the qualification process. For example, one qualification process is income below the thresholds that qualify you for the Section 199A deduction on your pass-through income regardless of business type. Another process is income in the phase-in range that qualifies you for a phase-in deduction. Here we explain what that income is and how it impacts your new tax reform Section 199A deduction.

IRS Clarifies Reasonable Comp. for S Corp. Owner’s 199A Tax Deduction

In early August, the IRS released its proposed regulations on new tax code Section 199A—the tax code section that created the 20 percent tax deduction that applies to S corporations and other pass-through entities. The good news in the new IRS regulations for S corporation owners is increased clarity on how to treat reasonable compensation for the Section 199A tax deduction.

TCJA: Convert Personal Vehicle to Business and Deduct up to 100%

Tax reform under the Tax Cuts and Jobs Act gives you bonus depreciation and favorable rules for converting your personal vehicle and other assets to business use. On the conversion, you can immediately qualify to deduct up to 100 percent of today’s fair market value on your existing personal vehicle.

How Cost Segregation Can Turn Your Rental into a Cash Cow

Cost segregation has always been a valuable strategy in your tax strategy toolkit. And now, thanks to tax reform’s recent changes to bonus depreciation, cost segregation is even better. We’ll show you the value of a cost segregation study post–tax reform, strategies you can use that involve cost segregation, and potential problems to avoid.

Q&A: Can a Corporation Reimburse a Home Office with IRS Method?

As you likely know, you now have two methods for finding the home-office deduction: the actual expense method and the IRS optional safe-harbor method. To make the deduction work at the corporate level, your corporation must reimburse you, the employee, for the deduction. Can the corporation use the IRS method?

Q&A: New Guide; How Tax Reform Transforms S Corporation Taxes

The Tax Cuts and Jobs Act (TCJA) has changed the way you can look at the S corporation as a tax planning entity. With the new Section199A deduction in play, the S corporation can help increase or decrease that deduction. To make this easier for you, simply download our new guide and get up to speed on how the S corporation works with the TCJA.

Retirement Plan and IRA Rollover Advice

When moving your retirement money to an IRA, you should follow this one rule of thumb. If you fail to follow it, you can face two big problems. First, your check will be shorted by 20 percent. Second, you will be on the search for replacement money.

Q&A: Did Goodwill Take a Hit under Tax Reform?

Tax reform changed the tax treatment of certain self-created intangible property. Does this affect goodwill? We’ll review the tax treatment of goodwill in light of tax reform.

Q&A: Qualified Improvement Property Snafu?

Congress created the qualified improvement property category in the Tax Cuts and Jobs Act with the idea that you could fully expense such qualified property with bonus depreciation. But Congress made an error in the law, and now you can’t use bonus depreciation for qualified improvement property. Don’t worry—we’ll explain how you might be able to fully expense it anyway.

Tax Time Bomb: Passive Foreign Investment Companies

Passive foreign investment companies, or PFICs, are subject to some of the most complex provisions of the tax law. You may own one and not even know it. In this article, we give you the basic rules so that you know what PFICs are and the different ways you can pay tax on them (yes, you have options!).

Q&A: IRS Auditor Doesn’t Know the 90-Day Mileage Log Rule

You cannot expect IRS auditors and agents to know the tax code and regulations. If you can produce the code or regulations that authorize your deductions, you are miles ahead in your audit.

What Did the TCJA Do to Your Tax-Free Supper Money?

The Tax Cuts and Jobs Act (TCJA) changed the landscape for a host of business meal and entertainment deductions. For supper money, the TCJA did damage, both short and long term. But the deduction continues in place, albeit damaged, for tax years 2018 through 2025.

Be Alert to the TCJA Tax Reform Attack on IRA Recharacterizations

The TCJA eliminates your ability to unwind a traditional IRA or other retirement plan transfer to a Roth IRA. This requires a change in your decision making for such transfers.

TCJA Changes Affecting Partnerships and LLCs and Their Owners

The Tax Cuts and Jobs Act made several beneficial changes that affect partnerships and their partners and LLCs and their members that are treated as partnerships for tax purposes.

Q&A: 199A Calculator Error Fixed

One of our members found an error in our 199A calculator. We thanked the member, fixed the calculator, and made technical corrections to the two articles affected (which we identify in this Q&A).

Does Non-Home Use of Your Home Damage Your $250,000 Exclusion?

The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone. Today’s law requires an allocation that keeps part of your rental as a rental so you have to pay taxes on that rental part.

Technique That Increases Deductions on Your Vacation or Other Home

Twenty years after the Tax Court approved a strategy that grants you extra deductions for your second home, the IRS would like you to forget it ever happened. Even though the case remains current law, you won’t find any mention of this strategy in IRS guidance to taxpayers. Unless you just happened to know old cases—or read this article—you might never have known how you could save thousands in taxes on your second home.

Q&A: What Are My S Corporation Election Options?

Because of the Tax Cuts and Jobs Act, more businesses are looking at the S corporation election. But you have to make a timely election to get the tax benefits. This article helps you with both a “timely” and a “late” election.

Tax Reform Doubles Down on S Corporation Reasonable Compensation

Tax reform gave you a new 20 percent deduction on pass-through income. For S corporation owners, your reasonable compensation plays a key role in determining your Section 199A deduction. Here, we’ll explain what the law says on reasonable compensation and how you can come out ahead.

Hit with IRS Penalties? Pay $0 with IRS Mercy

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.

Reduce Your Taxes: Make Your Spouse a Business Partner

Tax reform changed the rules of the game when choosing your best tax structure. A properly structured spousal partnership could now be your best choice, even over the S corporation in some circumstances. But beware, you need to navigate nuances in the law to do this correctly.

Tax Reform (TCJA) Expands Your Section 179 Deduction Privilege

The new and improved Section 179 deduction gives you more ways to take advantage of immediate tax deductions. It’s somewhat like having a flexible tax shelter in your back pocket for when you need it (and also need the property, of course).

Tax Planning to Winter in Florida and Summer in Massachusetts

You can plan your tax-deductible business life to avoid cold winters and hot summers. To do this, you need to know what a tax home is and where your tax home is located. The good news is that you have just one tax home unless you are one of those rare individuals who has no physical home.

Q&A: 100% Deduction for Long-Term Care Insurance with 105-HRA

If you are married, operate as a sole proprietor or as a single-member LLC taxed on Schedule C of your Form 1040, and have no employees, you absolutely, positively must consider hiring your spouse and creating the 105-HRA medical reimbursement plan. In this situation, the 105-HRA can cut your taxes without you spending one penny.

Beware: Conflicting IRS Rules for Deducting Your Business Gym—Don’t Use the Wrong Ones

If you are thinking of a gym for your employees, this is the article for you. The article keeps you from using the wrong set of IRS regulations. Yep, there two different sets of regulations from two different code sections that could apply.

Q&A: Does My Spouse Rob Me of My New Section 199A Tax Deduction?

When it comes to the new 20 percent Section 199A tax deduction, does a spouse in an out-of-favor business taint the Section 199A for you? The good news is no. But because of the multiple businesses, you may have a problem on the taxable income front.

How to Beat Some of the New TCJA Limits on State Tax Deductions

Tax reform went hard after your state and local tax deductions. The reduced deduction for your state income taxes has some states pretty riled up. The IRS is about to issue regulations that conflict with what the states are attempting to do. From your standpoint, count on the IRS winning for the moment, and use the clear planning opportunities you have available to you that will create more deductions for your property taxes.

TCJA Tax Reform Q&A: Does Moving W-2 Income and Employee Business Expenses to Schedule C Increase Taxes?

If you can qualify to move your W-2 income to Schedule C so as to enable those legitimate business expense deductions that you are losing to tax reform, should you do it? Maybe. You need to run the numbers to see if the new Schedule C taxes outweigh the monies you lost by not being able to deduct employee business expenses.

Don’t Let the Cliff Kill Your New Section 199A Tax Deduction

How will you fare with the new Section 199A tax deduction? This article can help you make sure that you realize the 20 percent deduction. It’s simply a tax gift if you qualify. And you can do some planning to help you qualify, but you may have to start now.

Tax Reform Update on Strategy for Business Meals with Clients and Prospects

Should you deduct your client and business meals in spite of the Tax Cuts and Jobs Act? This article explains why that is what you should do and gives you reasons for doing it.

Do Your Business Losses Make You an IRS Target? If So, Do This

The tax law has always treated your hobby activities unfairly. Tax reform under the Tax Cuts and Jobs Act made that unfair treatment even worse by preventing you from deducting any business expenses against hobby income. In this article, you see a strategy that can save your bacon on your hobby activity.

Divorce? Alimony? Tax Reform Says Get Divorced Now—Don’t Wait

Learn how the Tax Cuts and Jobs Act changes the alimony rules and what you need to do at this moment if you are in the process of getting a divorce and paying alimony. If you don’t act quickly, your cost of alimony could double.

Danger: Your Personal Home Is Not Your Tax Home

Depending on how you operate your business and where it’s located, the federal income tax terms “personal home” and “tax home” can have a big impact on your business vehicle deductions. And then there’s the difference between the federal income tax terms “business travel” and “business transportation” and how one very beneficial rule applies when you are inside the area of your tax home.

Reduce Self-Employment Taxes by Renting from Your Spouse

If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.

Hiring Your Children to Work on Your Rental Properties

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? No problem—simply insert it as we explain in this article.

Four Ways to Deduct Your Legal Fees after Tax Reform

Tax reform made it more difficult for you to deduct your legal fees. But don’t worry: the tax law still allows for a full deduction of your legal fees in certain circumstances. We’ll review four ways you can continue to deduct your legal fees after tax reform.

S Corporation Fringe Benefits after the Recent Tax Reform

More than 2 percent shareholder-employees of S corporations don’t catch a lot of breaks when it comes to the taxation of fringe benefits. But arming yourself with the correct information will help you maximize your deductions and avoid costly penalties.

Proving Travel Expenses after Tax Reform

Whether you operate your business as a corporation or as a proprietorship, you need to record your tax-deductible travel expenses in an IRS-approved manner. This means you need to know technically what a receipt is—and when you do or do not need one. By the way, the credit card statement is not a receipt.

Tax Reform Increases the Tax Benefits of Employing Your Child

If you or you and your spouse own your business and you have children, you need to consider the financial benefits of hiring those children to work in your business. Some businesses benefit more than others, but almost all businesses likely come out ahead with this strategy. And every business needs to thank tax reform for the new increased standard deduction that a business owner’s child can use to pay zero in taxes.

Q&A: Loophole to Deduct Hobby Expenses after Tax Reform

Tax reform killed the ability for you to deduct expenses for your hobby activity. But if you sell items in your hobby activity, the IRS allows you to deduct the cost of those items—if you do this the right way. Not knowing this rule can cost you thousands of dollars in extra taxes.

 

Q&A: Changes to IRS First-Time Penalty Abatement

You hate IRS penalties; everyone does. The IRS’s first-time abatement procedure is a valuable tool to defeat IRS penalties. This article explains recent changes to this procedure and how they could affect your ability to qualify for this relief.

Tax Reform Makes Professional Gamblers Who Lose Money Suffer More

If you’re a professional gambler, tax law did you no tax favors before tax reform. But now, because of tax reform, tax law has you between a rock and a hard place for tax years 2018 through 2025. The recent tax reform gives you one choice only for those years.

Good News: Tax Reform Lands a Blow to AMT

You likely have to worry about alternative minimum tax (AMT) in addition to the regular federal income tax. Tax reform made changes to the tax law that significantly impact AMT. The changes could mean more money in your pocket and less going to the government.

Q&A: New Section 199A Guide

The new Section 199A deduction created by tax reform is a source of excitement and confusion for tax professionals and small-business owners alike. Download our new guide and get all the details.

Tax Reform Puts Screws to Hobbies

Hobbies have been mistreated by the tax law for a long time. But the most recent tax reform brings the grim reaper to the party and it’s not pleasant. This means you need to focus on making your activity a business and not a hobby.

Tax Reform Does Much to Help Your Rental Real Estate

The recent tax reform, known as the Tax Cuts and Jobs Act (TCJA), added some good benefits to your real estate rentals, both commercial rentals and residential rentals. Notably, your qualified business income from your real estate rentals creates a possible 20 percent tax deduction with no effort on your part. And if you want less taxable income, the TCJA gives you enhanced bonus depreciation and new avenues for Section 179 expensing.

Did Tax Reform Goof When Disallowing Deductions for Client Meals?

We, you, and just about everyone else have been looking for a ray of sunshine that would allow tax deductions for business meals with clients and prospects. In this article, you learn that lawmakers may have intended to grant deductions for business meals with clients and prospects in spite of how they put together the Tax Cuts and Jobs Act.

Tax Reform Punishes W-2 Employees—Get Even!

The recent tax reform created both winners and losers. One big loser is the W-2 employee who incurs out-of-pocket business expenses to earn his or her W-2 income. Tax reform simplified those W-2 employee business expense deductions by simply making them not tax deductible.

Tax Reform Attacks Home Mortgage Interest Deductions

The home mortgage interest deduction rules did not fare well in the recent tax reform. First, a chunk of your home equity mortgage interest is no longer deductible. Second, you now face a new lower ceiling on mortgages that can qualify for the home mortgage interest deduction.

New Court-Approved Way to Defeat IRS Penalties

You hate IRS penalties, right? Everyone does! There are a lot of strategies you can use to potentially defeat an IRS penalty. Thanks to the courts, though, you now have a brand-new way to beat an IRS penalty.

Helicopter View of Meals and Entertainment After Tax Reform

Tax reform has had a significant impact on the tax deductions you can now claim for business entertainment and meals. The chart in this article shows you how the Tax Cuts and Jobs Act treats 12 meal and/or entertainment events.

New Section 199A Tax Reform Calculator for Your Use

The new 20 percent tax deduction under new tax code Section 199A has many nuances based on your type of business, taxable income, qualified business income, wages, and depreciable property. Here you have an easy-to-use Section 199A calculator that takes away the pains of manually computing your possible benefits.

Tax Reform Imposes a Penalty Tax on Transportation Fringe Benefits

The old saying that “no good deed goes unpunished” could certainly apply to the transportation fringe benefits that lawmakers penalized with the recent tax reform.

Yes, Tax Reform Did Kill Prospect and Client Meal Deductions

You asked us to elaborate on how tax reform did away with client and prospect business meals. It starts with the Tax Reform Act of 1986, when business meals were by law placed in the entertainment category. As you know, so-called business-friendly tax reform killed deductions for business entertainment and, along with it, client and prospect meals.

Tax Reform Cuts Business Tax Deductions for Charity Golf Outings

Imagine this. You pay $1,000 for your golf foursome to play golf in the annual charitable golf outing. You have been doing this for years, and you were always able to deduct the full $1,000. Now, because of the new tax reform, your deduction is $300. Disturbing?

Tax Reform Creates an Unfounded Desire for the C Corporation

Has tax reform created a need for you to switch your S corporation to a C corporation? You will find the answer here. Also, you will find it interesting to see how we make the comparison easy with the chart in this article.

Q&A: New 2018 Desktop Tax Rates for You

We had many compliments on our 2017 desktop reference and requests to create a 2018 desktop reference so that you can quickly look up the new (after tax reform) 2018 tax rates. You can download the new 2018 reference with the link that’s in this article.

Tax Reform Allows 100 Percent Deductions for Presentation Expenses

Tax reform did not destroy business meal presentation expenses. Read this article to see how business meal presentations work in the real world and also learn the basic rules that apply to them.

Tax Reform Allows Bigger, Faster Business Car Deductions

Finally, lawmakers did the right thing by increasing the luxury auto depreciation limits on business cars. The old luxury limits were unrealistic, punitive, unfair, and discriminatory against any car that cost more than about $15,000. The new limits don’t create parity in all respects, but they are a big improvement.

Q&A: How to Make IRS Penalties Go Away

Download your free resource guide titled Beating IRS Penalties, Your Guide to Reducing or Avoiding IRS Penalties.

Does Tax Reform Dislike Your Reputation or Skill?

Here’s a troubling thought. Did lawmakers put you in the out-of-favor tax group that denies you the 20 percent Section 199A deduction (a) because your business makes too much money and (b) it does so because of the reputation or skill of one or more of the business’ owners or employees?

Tax Reform: Wow, New 20 Percent Deduction for Business Income

The new 2018 Section 199A tax deduction that you can claim on your IRS Form 1040 is a big deal. There are many rules (all new, of course), but your odds as a business owner of benefiting from this new deduction are excellent.

Tax Reform Sticks It to Doctors, Lawyers, Athletes, Traders, and Others

The new Section 199A deduction is a very nice tax break for business owners, except for owners with high income who also fall into the out-of-favor group. In general, the out-of-favor group includes lawyers, doctors, accountants, tax professionals, consultants, athletes, authors, security traders, actors, singers, musicians, entertainers, and others.

Tax Reform Eliminates Tax Benefits of Business Vehicle Trade-Ins

Tax reform no longer allows Section 1031 exchanges on personal property such as your business vehicle. The trade-in was the most common 1031 exchange of a business vehicle. Now, because of tax reform, the vehicle trade-in is simply the sale of the old vehicle to the dealer and the purchase of a new vehicle. The sale to the dealer creates gain or loss on the sale just as it would on an outright sale.

Tax Reform Wipes Out 50 Percent Business Entertainment Deductions

Lawmakers finally did it. First, they reduced the directly related and associated entertainment deductions to 80 percent with the 1986 Tax Reform Act. Later, in 1993, they reduced that 80 percent to 50 percent. And now, with the newest tax reform, lawmakers simply killed business deductions for directly related and associated entertainment.

Tax Reform Cuts Deductions for Employee Meals to 50 Percent

Lawmakers do not like businesses that feed their employees on the business premises. The new tax reform takes what last year was a 100 percent deduction for a meal served for the convenience of the employer, reduces it to 50 percent this year (2018), and then throws it into the compost pile with a zero deduction in 2026 and later years.

Tax Reform: Entity Choice—Proprietorship or S Corporation?

Will your business operation create the 20 percent tax deduction for you? If not, and if that is due to too much income and a lack of (a) wages and/or (b) depreciable property, a switch to the S corporation as your choice of business entity may produce the tax savings you are looking for.

Tax Reform Creates Taxes on Employee Fringe Benefit for Bicycles

You could (and can) deduct your costs for reimbursing employees for their qualified bicycle transportation costs. But tax reform now makes this bicycle transportation benefit a taxable event for your employees. As you will see in this article, even though the reimbursements are now taxable to the employees, you likely should continue the benefits.

 

Tax Reform: Will Section 199A Phase In or Phase Out Your 20 Percent Deduction?

If your pass-through business is an in-favor business and it qualifies for tax reform’s new 20 percent tax deduction on qualified business income, you benefit at all times, including being above, below, or in the expanded wage and property phase-in range. On the other hand, if your business is a specified service trade or business, it is in the out-of-favor group and you benefit only when you are in or below the phaseout range.

Tax Reform: Entertainment Deductions That Survived

Traditional business entertainment such as business meals and ballgames with clients and prospects died with tax reform. That’s a sad deal, really. On the good news front, your parties with employees remain deductible, as do your employee entertainment facilities and selected other types of entertainment.

Entertainment Tax Deductions Look Fishy

It’s true—you don’t need a receipt for an entertainment expense that is less than $75. But you may need to prove that you had the cash available to pay for your entertainment that cost less than $75.

Business Mileage: Beware of IRS Assertions of Metropolitan Area

The business mileage rules can get tricky, and this is especially true if you drive both inside and outside your metropolitan area. This metropolitan area is not what you think it is. The IRS and the courts have created special confusion about your metropolitan area.

Q&A: Say Good-bye to Unclaimed Tax Refunds

Even if you are not required to file a tax return, you need to file a return within the statute of limitations if you are due a refund and you want the cash. If you fail to file a return within the statute of limitations, you forfeit your refund and make a contribution of that refund to the government.

Home Office with More than One Business or Spouse Invasion

With one business use of the home office and no personal use, you qualify for the home-office deduction. The second business use, employee use, and spouse use must equally qualify for the home-office deduction, or else.

Are Your Rental Properties a Business? If So, You Win

If you own rental properties, you don’t want the tax law to call the rentals an investment. Instead, you want the rental properties to qualify as a trade or business so that you achieve tax-favored Section 1231 treatment and many other tax breaks.

Tax Savings Trap Crushes S Corporation Owner’s Expenses

What can appear logical when planning for the S corporation owner’s business expenses can prove costly to the owner and, as in this article, cost every penny of the business deductions.

Q&A: Desktop Tax Rates for You

We have had requests for a desktop reference that you can use to quickly look up the 2017 tax rates. You can download the 2017 reference with the link that’s in this article.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidity).

Six Ways to Beat the Passive-Loss Rental Property Rules

You want to deduct your business, rental, and non-rental losses when possible, because those deductions put cash in your pocket. The sooner you get the cash, the faster you can put that cash to work for you building your net worth. This article helps you realize those losses sooner.

Create Extra Cash by Using Depreciable Antiques in Your Business

You really should consider antiques when furnishing your offices or buying a unique second business vehicle. Unlike regular furnishings and vehicles, well-selected antiques increase in value. Also, you can depreciate or even Section 179 expense them. When you run the after-tax numbers, you can easily find that an antique will yield 36 times more after-tax cash than a non-antique.

Q&A: 33 Last-Minute Tips to Save on Your 2017 Taxes

If you are looking for some last-minute tips to save on your 2017 federal income taxes, this article has what you need.

Yikes! New IRS Audit Tool: The Form 1099-K Letter

The 1099-K gives the IRS another audit weapon. In this article, you see how an IRS revenue agent uses the 1099-K to catch taxpayers who underreported their gross income. You also learn why you are likely to receive a letter from the IRS auditing or asking about your 1099-K amounts.

Beware When Children Use IRAs and/or Savings to Pay for College

When it comes to college planning, your lawmakers created some real traps. One big trap is the kiddie tax. This insidious tax destroys the traditional IRA as a college funding source and does much the same to your child’s interest and dividends savings. There’s much to know here, and we make it clear.

Q&A: Traditional IRA Eliminates Kiddie Tax Here, But…

Do you have children who are currently subject to the kiddie tax? Could those children work for you or someone else and create some earned income? If so, the strategy in this Q&A can eliminate or reduce the kiddie tax.

Don’t Let IRS Mileage Rules Destroy Your Vehicle Deductions

What percentage of your business vehicles would you (or your business) like to deduct? To achieve your desired percentage, you need to know and apply the rules that the IRS applies to the mileage that you drive from your home to various business destinations.

Abandoned by Tax Advisor, Taxpayer Wins IRS Audit

The woman in this audit learned how tax knowledge can turn what appears as a nightmare (an IRS audit) into a positive happening—meaning cash refunds for the year of the audit and subsequent years. As the old saying goes, “knowledge is power.”

Update: 2018 Health Insurance for S Corporation Owners

In IRS Notice 2015-17, the IRS allowed S corporation owners in 2014 and 2015 to avoid the $100-a-day penalties on S corporation reimbursements of individually purchased health insurance and on providing insurance for the owners only. But 2016, 2017, and 2018 are new years, so what is that status now?

Act Now! Get Your 2018 Expensing in Place

If you have not done so before, make sure to put your safe harbor de minimis expensing election in place now. The new de minimis rules make your tax record keeping easier. With this safe harbor expensing, unlike with Section 179 expensing, you don’t need to track the assets and keep them in a depreciation schedule.

Find New Deductions with Two-Car Tax Strategies

If you have two or more vehicles in your family, you might find added tax deductions by driving more than one vehicle for business. To know if you benefit or not, you need to put your numbers into our magic two-car formula. This is very easy to do, and the formula result tells you for sure whether you come out ahead or not.

Q&A: Administrative Home Office Is a Principal Office

The special rule that applies to administrative or management use of the home office creates a principal office. There are only two ways to create a principal office in your home. The administrative or management office works when you have two offices: (1) an office in the home and (b) an office outside the home.

A Tax Break for American Builders—Including You (Yes, You)

You may not think of yourself as a manufacturer, but you might nevertheless qualify as one under tax law. There is a deduction for manufacturing that applies to a much broader array of activities than most people realize. There’s no catch and no recapture associated with this deduction—it’s just extra cash for your wallet. Find out if you qualify.

Q&A: Find Some Tax Sanity by Using the Gambling Per Session Rule

Tax law does not like you if you are a casual gambler. If you are a casual gambler, you report your winnings above the line, where those winnings can increase your taxes, cause loss of deductions because of phaseouts, and increase your Medicare premiums. Your losses are itemized deductions that appear below the line, where you benefit only if you itemize. There’s no choice about where you report your winnings and losses, but there’s a way you can use the per-session rule to mitigate the damage this reporting causes.

Update on Health Savings Accounts (HSAs)

Health savings accounts (HSAs) have gained substantially in popularity since enactment of the Affordable Care Act. Tax-wise, the HSA has some great features such as tax-deductible contributions, tax-deferred (even tax-free if used correctly) growth, and possible retirement benefits.

Easily Fixing Depreciation Errors Can Save Thousands in Taxes

Depreciation is a valuable tax deduction but is often missed or mistakenly computed. If you missed depreciation or did it incorrectly, you can fix it in the current year and get some possible major tax benefits for doing so. In fact, the need for a correction can create planning opportunities for you.

Shedding Doubts about Selling Your Home to Your S Corporation

If you want to convert your home to a rental property, don’t. Instead, sell your home to your S corporation and then have the S corporation make the property a rental property. We have written about this previously, and we received some questions that we address in this article.

Q&A: Tax Deductions for Nine Months of Out-of-Town Travel

How does the tax code define a temporary assignment that qualifies you for tax deductions during a full period of stay, such as nine full months? In this article, you learn how federal per diem rates interact with some actual expenses and what you need in place to achieve deductions for a temporary out-of-town work assignment.

Two-Car Tax-Deduction Strategy Approved by the IRS and the Courts

When the two-vehicle tax-deduction strategy works for you, you find new deductions without spending a penny or driving a mile farther. In this article, you find that both the IRS and the courts approve of your use of two or more vehicles for business.

Get Paid: Hire Your Child

You can pay your child to work in your business and get paid for paying your child. Yeah, we know. You think this sounds too good to be true, but it’s true. For how the government pays you and why this works, read this article.

Q&A: S Corporation Distributions in Retirement

A business owner accumulates earnings in an S corporation and takes no distributions or salary. The business owner then retires and wants to draw the funds out tax-free over multiple years. Are there any issues with this strategy?

A New Way to Beat the 50 Percent Cut on Business Meals

The Boston Bruins deducted 100 percent of their meal expenses for employees who traveled out of town for the away games. The IRS challenged that 100 percent and lost. One big deal with the Bruins’ win is that it is precedent-setting, meaning that the Boston Bruins may have created a road map for you that could lead to more 100 percent business meal–expense deductions (versus the usual 50 percent allowance for business meals).

Five Tried-and-True Strategies for an IRS Audit

If you’re like millions of taxpayers, just the thought of an IRS tax audit has you shaking in your boots. Luckily, you came across this article. In the next few moments, we will put those fears to rest as we show you how to keep all your rightful tax deductions.

Q&A: S Corporation Reimbursement of My Home-Office Expenses

If you operate your business as an S corporation and you take advantage of the benefits you receive by having an office in your home, you probably want an easy and audit-proof way to make the reimbursement request. You find that in this article.

Don’t Get Surprised by the Related-Party Matching Rule

The related-party matching rule places your business on the cash method for deducting payments to related cash-method payees. You need to know this rule to avoid unexpected tax results. Also, you need to know how the different ownership thresholds apply because one share of stock could make you a related party. Indirect relationships expand the reach of the rule and can create additional surprises.

Avoid Partnership Tax Filing with Two Little-Known Elections

Having a business or activity operated as a partnership means extra tax return filings and compliance headaches. But you might qualify to elect out of partnership treatment. Here, we discuss the two elections available, when you qualify or not, and the impact of making an escape election.

Arguing with the IRS: Making the Courts Help You (Part 2)

When you and the IRS disagree about an item on your tax return, you need authority on your side to either win your case or avoid a penalty. Court decisions can be a valuable authority to convince the IRS that you are right. We’ll discuss the various types of court decisions and which ones can help you the most.

Do This Right: Claim a Tax Credit for Sending Your Child to Camp

You may be able to claim the child and dependent care credit for the cost of sending your child to summer camp or a before- or after-school program, but only if it promotes your child’s protection and well-being, and is not for education or another purpose.

The Gambler’s Tax Guide—How to Protect Your Winnings from the IRS

If you win big at the casino, the government is going to ask for its share of the proceeds. Gambling income is taxable, and casinos must, by law, report big wins to the IRS. But the law provides you a way to offset your gambling income and thereby reduce your taxes. You just have to know the rules, including whether you are a professional or amateur gambler, and keep the right records.

Heavy Vehicle + Deductible Home Office = Major Tax Savings

As a small-business taxpayer, you likely have control of your business. With control, you can do much to increase your tax benefits with a qualifying heavy vehicle and a certain type of office in your home. So, if you’re looking for some major tax savings this year, you will find a path to them in this article.

Q&A: Tax Deduction for NFL Tickets

You can deduct NFL tickets under the associated entertainment rules. In this Q&A, our member is traveling from Portland to Atlanta to attend a business conference, and while at that conference, he and his team members will attend the NFL game. The conference creates an easy path to this deduction.

Marijuana Taxation: Don’t Let Your Cash Go Up in Smoke!

The legal marijuana industry is booming across the U.S. But there are tax problems: since marijuana is still a federally controlled substance, selling it comes with costly federal tax consequences. The good news is that with knowledge of the law in this area and some planning, you can cut the tax bill that Uncle Sam would otherwise send you.

Beware: Selling to a Related Party Can Kill Your Tax Losses

You need to know how the related-party rules work if you don’t want to destroy your tax-loss deductions. You are reading this right: you can lose your tax losses when you sell to a related party.

Q&A: Tax Deductions for Home-Office Lawn Care

When is it possible for the home-office deduction to include a percentage of lawn care and related landscaping expenses? Answer: As explained below, your use of the home office needs to create a qualifying business reason for a good-looking lawn.

Arguing with the IRS: You Need Tax Authority (Part 1)

Sometimes you and the IRS disagree about an item on your tax return. When that happens, you need authority on your side to either win your case or avoid a penalty if you don’t win. The Internal Revenue Code and certain IRS interpretations of it can be that authority, and we discuss them here.

Buying a Business with Co-Owners? You Need a Buy-Sell Agreement!

If you are buying a business that will include more than one co-owner, you need a buy-sell agreement—period. You have multiple reasons to put the buy-sell agreement in place and not one reason not to have a buy-sell agreement. But when you start to put the agreement in place, you need to consider the planning strategies in this article.

Passive Losses Don’t Destroy Your Tax-Favored Capital Gains

Suspended passive activity losses come about when the losses from all passive activities for the taxable year exceed the aggregate income from all passive activities for such year. These are losses above or beyond what you can deduct under the $25,000 offset for rental activities. When you sell your entire interest in a passive activity at a gain, you have a taxable gain and a jailbreak of those losses and maybe more.

Beat the Recapture Tax on Your Home Office

Learn how this IRS revenue procedure allows you to avoid taxes on the sale of a personal residence in which you had a home office or that you used as a rental property. The procedure lays out the methodology, which includes using the $250,000 ($500,000 if married) home-sale exclusion in unison with a 1031 tax-deferred exchange to avoid the taxes and enhance your deductions on the replacement home.

Tax Audit Tips for Travel, Entertainment, and Education

If you don’t have tax records as you are reading this sentence, think of this: how would your tax records hold up in an IRS audit? Oops, we forgot. You don’t have them. See what generally happens when you create those records after you get the IRS audit notice.

Q&A: Back Up Your Claim That You Can Reimburse Depreciation

One of our tax professional subscribers disagrees with the S corporation being able to reimburse the owner-employee for depreciation of the home office. She asked whether we can back up our claim that depreciation is reimbursable.

Should You Accept Bitcoins as Payment in Your Business?

More businesses are accepting bitcoins as payment. To the IRS, bitcoin is not the same as cash. You should know the tax implications of accepting bitcoins in your business and the major pros and cons of doing so.

Flowers, Fruit, Books: Tax-Free Fringe Benefits You Have to Like

It’s about as good as it gets when you see the words “tax-free” in the tax law. Under the de minimis fringe benefit rules, your business deducts the cost of giving you or your employees flowers, fruit, books, and similar property under special circumstances. The recipients—you or your employees—receive the de minimis fringe benefits tax-free.

Q&A: Is a Real Estate Agent a Broker for Deducting Rental Losses?

Before you can deduct rental property losses, you must first qualify as a real estate professional (a person in the real property trades or businesses). The real estate broker is recognized in the tax code as a person who is in the real property trade or business for purposes of the passive loss rules. The real estate agent is not recognized in the law.

Beating Penalties for Misclassifying W-2 Workers as 1099 Contractors

The IRS hit the Mescalero Apache Tribe with a bad result in an employee classification audit. The tribe took the IRS to the Tax Court and forced the IRS to turn over records on the tribe’s workers’ tax payments that will substantially reduce its tax bill. If you have a worker classification issue, you will want to know what the tribe did and why.

Warning! The IRS Is Outsourcing Tax Debts to Private Debt Collectors

A new law requires the IRS to send its inactive tax debts to third-party private debt collectors. If this happens to you, you need to know how this program works including what to expect and what rights you have.

Buying a Business: Due Diligence Is Critical

You generally buy an existing business because you believe that the existing business represents less of a risk than starting a new business from scratch. That may be true. And you help make that true when you do your due diligence.

Unpaid Taxes? Goodbye Passport

If you have “seriously delinquent tax debt,” IRC Section 7345 requires the IRS to certify that debt to the State Department for action against you. The State Department then must refuse to issue or renew your passport, or it can revoke or limit the use of your current passport. To get your passport back, you need to get right with the IRS.

Yes, You Can Settle Your IRS Tax Debts for Less Than You Owe

The IRS can give you monetary mercy regarding your unpaid tax debts by settling them for less than you owe via the offer in compromise program. Like anything with the IRS, this process is not easy, but the result could save you tens of thousands of dollars. We walk you through how to determine whether you qualify and what you could end up paying.

Q&A: Store S Corporation Vehicle in Owner’s Personal Garage?

 

Six Answers to Tax-Free Rental of Your Home to Your Corporation

This article answers six questions about the big tax benefits to the sole owner of the C or S corporation who rents a personal residence to his or her solely owned C or S corporation for 14 days or less. The answers deal with (1) the need for a 1099, (2) how to report the 1099 on the 1040, (3) multiple corporations, (4) events for independent contractors, (5) events for employees, and (6) proof of fair rent.

LLC Operating Agreements—Get One If You Don’t Have One

Each state’s LLC act provides default rules for governing your LLC and the members’ rights and responsibilities. Odds are they don’t provide what you want. Luckily, the defaults can be overridden by an operating agreement.

The TWO Times to Avoid the 1031 Exchange

The Section 1031 exchange is a great tax planning strategy when you are using it to your benefit. But there are two times when you need to avoid the 1031 exchange so as to come out money ahead. The first is pretty apparent, but it does catch many taxpayers by surprise. The second requires thought and knowledge, as you learn in this article.

Q&A: Legal Fees to Abort Timeshare Purchase

 

New in Business? Avoid These Two Tragic Vehicle Deduction Errors

If you are new in business, your vehicle deductions can prove problematic because you likely do not know what tax records you need. And without the right records, you arrive at your tax preparer’s office hoping for a miracle that’s not going to happen.

Buying a Business? Tax Planning for the Noncompete Agreement

When you buy a business, you probably don’t want the former owners competing with you—at least not for a while. To prevent the competition, you generally enter into a noncompete with the former owners. This has tax implications that you need to consider.

Are Tax Return Preparer Penalties Increasing Your Taxes?

How does tax law make your tax preparer part of the IRS tax compliance workforce, and what does that mean for your tax return? First, you should and can put yourself in a position to help your tax preparer avoid tax preparer penalties. For example, if your tax preparer is dubious about a deduction you want to claim, provide your preparer with the proof that the deduction is valid.

Create Tax-Free Fringe Benefit Deductions for Your Smartphone

Do you operate your business as a corporation, a partnership, or a proprietorship, or as an LLC taxed as one of these three entities? Your choice of entity impacts whether you can create a no-hassle, tax-free fringe benefit for your and/or your employees’ smartphones. In this article, you learn the rules that apply and which ones give you the best benefits.

Are You Cheating Yourself by Using IRS Mileage Rates?

If you qualify to use IRS mileage rates to deduct your vehicle, you need to know if you are cheating yourself with the method you select. The good news is, this article includes a tool that will give the one best method for your deduction and also tell you how much after-tax cash you pocket with that method.

Q&A: Where Do I Find an Accountable Plan Template?

 

Six Tax-Deduction Concerns about Renting My Home to My S Corporation

Last month we explained how an S corporation could rent the sole shareholder’s personal residence for 14 days or less, obtain a tax deduction for rent, and create tax-free income for the shareholder. An enrolled agent raises six issues that he thinks could negate this free-rent strategy. Learn what the issues are and why the strategy really does work.

Child’s College: Use a 529 Plan or Tap Your Roth IRA?

Conventional wisdom says that it’s best to (1) fund your retirement before your child’s college, and (2) use your retirement savings for your retirement and not your child’s college expenses. But conventional wisdom is like a general tax rule. There are exceptions.

Q&A: 1120S Line Item for Corporate Reimbursement of Home Office

 

Achievement Awards Are a Great, Tax-Free Way to Reward Employees

If you have employees who have worked for your business for years and years, you might be thinking of buying them something as a way of showing your appreciation. If you follow a few rules, you can make those presents “employee achievement awards”—and thus tax-deductible for the business and tax-free for the employees. (Depending on how you operate your business, you might even qualify as an employee eligible for the tax-free award.)

Buying a Business: Tax Benefits from Including Debt in Your Corporation’s Capital Structure

When you are looking to buy a business and then operate that business as a C corporation, you should consider the tax benefits you can realize by creating debt as part of the corporate capital structure. If you do this, you need to put the debt in place so that the IRS will respect the debt as debt and not treat it as equity.

Does the IRS Mileage Rate Cost You Deductions on a Leased Vehicle?

Are you going to lease your next business vehicle? Are you eligible to use IRS mileage rates? If so, both the IRS and the leasing company are going to give you rules to ponder and expenses to consider before you select your tax-deduction method—either the IRS mileage rate or the actual expense method.

Tax-Free Income from Rental of Home to C or S Corporation

Do you operate your business as an S or C corporation? If so, have you considered renting your home to your corporation for corporate meetings and perhaps the annual holiday party for employees? You should. Why? If you do the rental right, the corporation deducts the rent, and you receive the rental income tax-free.

Q&A: How the 105-HRA Creates New After-Tax Cash from Health Insurance

 

Avoid Lost Deductions When Corp. Vehicle Is in Your Personal Name

Do you operate your business as a corporation but own the vehicle you use for the corporate business in your personal name? If so, to avoid losing your rightful deductions, you need to have the corporation reimburse you for business use. The corporation can use one of two methods for the reimbursement.

Lock in the Home-Office Deduction for Your S Corporation

The home-office tax deduction provides tax savings to business owners. It turns otherwise nondeductible personal expenses into valuable business deductions. When tax law taxes your business as a proprietorship, you simply deduct home-office expenses on Schedule C. But when you operate your business as a corporation, you face special rules to achieve the same benefits.

Turbocharge Your Retirement Savings with an HSA

Looking for that extra boost to your retirement savings? Your first thought may have been to contribute to a traditional IRA. But before you do that, we have something else to show you. Consider a health savings account (HSA). That’s right. An HSA can be more than just funds you set aside to cover those copays. This is one surprisingly powerful savings tool that provides a much-needed boost to your retirement savings. See why an HSA provides some big benefits you won’t get with a traditional IRA.

Q&A: Does My Home-Office Deduction Include My Garage?

 

Minimize Your Tax Bill on Lawsuit Awards and Settlements

In many cases, the government hits your lawsuit award or settlement with the double whammy of (1) a tax bill on the gross dollar amount of the award or settlement and (2) a reduction to or even elimination of your legal fees tax deduction. But in some cases the legal fees you paid can become turbocharged tax deductions, saving you thousands of dollars in taxes. We’ll show you when you can qualify for the better deductions and how to claim them.

How to Buy a Target’s Stock and Treat the Deal as an Asset Purchase

When you can buy the target’s stock and treat the deal as an asset purchase, you have a real possibility of bringing tax-benefit smiles to both you and the seller. So if you are buying a business, make sure you know when the tax rules allow you to buy the stock of the target and treat that stock purchase as the purchase of the target’s assets.

Blueprint for Employee-Spouse 105-HRA (Health Reimbursement Arrangement)

The 105-HRA is the medical reimbursement plan you likely want to use if (a) you report your business income and expenses on Schedule C of your Form 1040 and (b) you can make your spouse your one and only eligible employee. Also, if you are single and operate your business as a C corporation, and if you are the one and only eligible employee of your C corporation, the 105-HRA is the medical reimbursement plan for you.

Q&A: Qualified Small-Employer HRA (QSEHRA)

 

Secret Cash Inside the IRS Standard Mileage Rate

Mileage-rate addicts usually think that the mileage rate takes care of everything—then they cost themselves money by failing to deduct a loss on the sale of a business vehicle.

Don’t Defeat Your S Corporation by Paying Yourself on a 1099

Do you pay yourself on a 1099 for the work you do in your S corporation? Why wouldn’t you, right? It makes life so simple. No payroll taxes to deal with, no withholding deposits, and no payroll services to pay for. Stop right there! Your simple life is about to get very complicated unless you make a change right now.

Q&A: S Corporation Owner’s W-2, Box 12 for Health Insurance?

 

Create a Business Partnership Tax-Free

You’ve decided to create a partnership for a new or existing business. Good news: forming a business partnership is usually tax-free. But you must meet the basic requirements for a tax-free formation, and you need to avoid the situations that cause you to owe taxes on the transfer of property.

Self-Rental Trap Still Costing Business Owners Tax Dollars

Business owners continue to get caught in the complex rules of the self-rental trap. A recent case taken from the Tax Court to the Fifth Circuit shows how business owners can get into tax trouble with self-rentals. But with proper tax planning and possible use of special rules called “grouping,” you can minimize and even eliminate the tax cost of the self-rental trap.

Tax-Free Injury Awards and Settlements

If you receive an award or settlement due to an injury claim, the law allows you to exclude some or all of the money you receive from taxation. You can use this exclusion along with other tax reduction strategies to minimize any tax you must pay on the amount you receive.

Tax Secrets of Buying a Business That Owns Intangible Assets

When you buy a business, you have much to consider. As you learned in prior articles, you need to consider the type of entity that owns the business and the type of entity you will use to operate the business. On top of that, every asset of the business you are going to buy impacts your tax results. In this article, you see how this all comes together and what you need to do to get the best results.

Use a Tax-Advantaged SEP or 401(k) to Retire Early and in Comfort

When you operate your own business, don’t pay yourself last. Pay yourself first. That’s a wealth-building strategy. And if you can combine the pay-yourself-first strategy with a retirement plan, you supercharge your wealth strategy.

Q&A: Can You Still Depreciate Antiques as Business Assets?

 

Dangerous Waters of Inherited Non-Spousal IRAs—Navigate Carefully

Special rules apply to inherited traditional IRAs. In this article, we look at non-spousal IRA inheritances that have their own sets of special rules. For the most part, you will like the rules. And in setting up your IRA for your beneficiaries, you should consider the stretch strategy.

Incorporate Your Business Tax-Free? Avoid Three Problems

You’ve decided to incorporate a new or existing business. Good news: incorporating a business is usually tax-free. But to make this work when traveling this road, you must meet the requirements for a tax-free incorporation and avoid the situations that cause taxes.

Q&A: Switch from Mileage Rate to Actual Expense Method

 

Special Needs Education Can Qualify as a Business Expense—Here’s How

Sending a child to a special needs school can be an onerous financial burden, with some tuitions reaching even $100,000 per year. Tax law lets you deduct tuition and other related costs as medical expenses, but you need to know which expenses qualify and how you should deduct them. This article shows you not only how to qualify but also a possible best way to maximize those deductions.

Choosing the Right Entity for a Newly Acquired Business (Part 3)

When setting up your new or acquired business, you and your co-owners should consider the multi-member LLC, another form of LLC, or the straight-up partnership. This is the last article in our three-part series on the “choices of entity” for a newly acquired business. Make sure to consider the options in this article if you are acquiring or starting a business with more than one owner.

Q&A: Tax Refunds on Unfiled Tax Returns

 

Enlist the Taxpayer Advocate to Help You Alleviate Tax Problems

You might have a friend in the government you don’t know yet. The Taxpayer Advocate Service is an independent office within the IRS that helps taxpayers solve IRS problems that they can’t seem to resolve through normal channels. In some circumstances, the advocate office can force the IRS to give you relief.

Announcing NEW Tax-Deductible Penalty-Free Health Plans for Small Businesses

Finally, the health insurance rules that apply to small businesses that want to provide medical benefits to their employees make more sense and allow some benefits. As you would expect, the new rules are not perfect. After all, this is tax law. But the new rules are light-years ahead of the old rules.

Put Your $2,500 Expensing in Place Now ($5,000 with AFS)

If you have not done so before, make sure to put your safe harbor de minimis expensing election in place now. The new de minimis rules make your tax record keeping easier. With this safe harbor expensing, unlike Section 179 expensing, you don’t need to track the assets and keep them in a depreciation schedule.

Lawbreakers Rejoice! New Law Wipes Away $100-a-Day Penalty

Do you have fewer than 50 employees? Are you in compliance with the Affordable Care Act? Whether you are in compliance or not, we may have some big news for you. First, if you failed compliance, a new law has likely just released you from the monstrous $100-a-day penalty ($36,500 per employee per year). Second, if you made changes to get into compliance, you may have overtaxed your employees. Now, with this new law, you may be able to undo some or all of that overtaxation.

Q&A: Who Should Own the Business Car: Corporation or Individual?

 

S Corporation Net Loss? Don’t Suffer a Surprise Salary

Tax law requires your S corporation to pay you, the owner-employee, reasonable compensation for the work you do. But what about in a year when your corporation has a loss? Does a lack of net profits absolve you from the obligation to pay yourself a salary?

Buying a Business: How to Make Tax-Smart Price Allocations

When you are buying a business, you want to buy not only at the right price, but also in a manner that keeps your taxes as low as possible. If you structure your deal as an asset purchase, you can use tax-smart price allocations that give the best tax result. And you likely want to include a stipulation in the purchase agreement that can reduce your chances of an IRS audit.

How to Help Your Adult Child Buy a Home—the Tax-Friendly Way

Your adult child asks a big favor—help in buying his or her first home. If you are lucky enough to be able to help, you want to understand and avoid the tax pitfalls. In this article, you find five possible solutions to help your child while avoiding the tax pitfalls.

Q&A: Would Rental Real Estate Give Me Tax Shelter?

 

If You Hear This Advice on How to Cut Your Taxes, Stay Away

Some tax strategies claim to help you avoid all your federal income taxes—no math required—simply by making a few straightforward arguments on your tax return. The problem is, they have no basis in law, and in fact constitute tax fraud. The end result will almost certainly be penalties and even jail time. Protect yourself from these scams by knowing how to tell the difference between fairy-tale tax strategies and the real deal.

2016 Last-Minute Vehicle Purchases to Save on Taxes

Here’s an easy question: Do you need more 2016 tax deductions? If yes, continue on. Next easy question: Do you need a replacement business vehicle? If yes, you can solve or mitigate the first problem of needing more deductions and solve the second problem of needing a replacement vehicle at the same time, but you need to read this article now so you know what you have to do and when you have to do it.

Alert: IRS Creates Clear Path to Rental Property Loss Deductions

If you own rental properties, you want to qualify as a real estate professional. It’s a big deal. In this status, you can deduct your tax shelter losses from your real estate rental properties against your business and portfolio income. We hear that the IRS and some tax professionals are misapplying the law and wrongly denying real estate professional status. That’s an ouch! How does it happen? By mistakenly requiring an election to count multiple rental properties toward the number of hours needed to be a real estate professional.

2016 Last-Minute Year-End Tax Deductions for Existing Vehicles

Yes, December 31 is just around the corner. That’s your last day to find tax deductions for your vehicles that will cut your 2016 taxes. And with our existing high tax rates, 2016 is a good year to cut your taxes. In this article, you can find and release tax deductions that the tax code trapped inside your existing business and personal cars, SUVs, trucks, and vans.

Do New Rules Allow You to Double Your Mortgage Interest Deductions?

Home mortgage interest deductions make homes more affordable and save taxpayers thousands of tax dollars each year. Now, if you are single, a new IRS decision creates the possibility for added savings—perhaps double—if you co-own a home or vacation property.

2016 Last-Minute Year-End General Business Deductions

This article takes your daily activity and identifies five easy year-end tax-planning strategies. Here are two examples from the article: prepaying your expenses under the IRS safe harbor and simply not billing customers and patients until 2016. These two strategies are certainly easy, as are the other three strategies in this article.

How to Deduct the Costs of Thinking about Starting a New Business

The government allows you to deduct and amortize a host of start-up costs and organizational costs when starting a new business. The tax rules in this area are unforgiving, meaning mistakes can prove costly. With proper planning, though, you can save money from your “thinking about it” costs and beyond.

2016 Last-Minute Year-End Retirement and Medical Tax Deductions

When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2016 taxes. This article gives you six action steps for 2016 that can help you reduce your taxes and pocket extra money.

Avoid These Traps and Cash In on Taxes When Your Business Loses Money

When your business loses money, don’t miss out on valuable tax savings by not filing a tax return that would qualify for a net operating loss deduction. This is one of four traps in the tax law that can cost you tax refunds from prior years and tax shelter for future years.

2016 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family

If you are thinking of getting married or divorced, you need to consider December 31, 2016, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are under age 24)? If so, you need to consider the zero-tax-bracket planning strategy. And now let’s consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.

Buying a Business: Should You Buy Ownership Interest or Assets?

When buying a business, you face many decisions. One such decision is whether you should buy the assets of the business or the ownership interest. Here, you have both legal and tax issues to consider. Also, depending on the entity you are looking at buying, the ownership purchase option may not be available.

2016 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

Your stock market portfolio can represent a little gold mine of opportunities to reduce your 2016 income taxes when you take advantage of the tax code’s offset game. The tax code contains basic rules for this game, and once you know the rules, you can apply the correct strategies. In addition to saving taxes with the game of offset, you can also avoid paying taxes on stock appreciation by gifting stock to charity, your parents, and your children who are not subject to the kiddie tax.

Use the Foreign Tax Credit to Minimize U.S. Taxes When You Work Abroad

The tax law offers several ways to reduce or eliminate U.S. income taxes or foreign-sourced earned income. Picking the correct tax-reduction strategy based on your situation is the key to minimizing your U.S. income tax liability. In this article, you see common scenarios and options that show you how to pay the least amount of U.S. income tax on your foreign-sourced earned income.

2016 Last-Minute Business Motor Home Purchase

A business motor home could provide both big tax deductions and an ideal solution to your business lodging and transportation needs. You would know how clean your sleeping room is. You would know the room’s smoking history. You would know how many pets, if any, have graced the premises.

Want to Leave the U.S.? You May Have to Pay These Taxes

Planning on leaving the U.S.? If so, you have two choices from a tax perspective, but neither is painless. The tax law that applies to foreign living and expatriation can be tricky, so it’s essential that you depart the country correctly.

How to Travel to Exotic Locations Using the Seven-Day Travel Rule

When you travel outside the 50 states and the District of Columbia, you can use a special seven-day travel rule to deduct your business transportation costs to and from that business destination even when you work only one day during that trip. The special rules that apply to this seven-day travel are clear and easy to understand.

Tax Code’s Officially Designed “Rent-to-Own Your Home” Program for Investors and Renters

In this official tax code program, the landlord-investor benefits because he has no vacancies, few hassles, no management fees, and a known cash flow. The tenant-investor benefits because he gets into this home with little or no down payment, builds equity while paying rent, and gets detailed knowledge about the property while living there. At some agreed-upon future point in time, the landlord-investor sells his or her interest in the property to the tenant-investor or the two of them sell the property to a third party.

Q&A: IRS Allows Switch from IRS Mileage Rate to Actual Expenses

 

IRS Expands Tax-Deductible Meetings and Seminars Boondoggle Areas

Tax law places all conventions, seminars, and similar meetings into one of two areas: (a) inside or (b) outside the North American area. When you are outside the North American area, the rules do about everything possible to make your convention, seminar, or similar meeting nondeductible. So, if your group is not a worldwide group, attend conventions, seminars, and similar meetings only in the tax law-defined North American area. (Don’t worry, you’ll find many great locations in the tax code-defined North America area.)

Learn a Simple Strategy for 100 Percent Tax-Free Rental Income

The government taxes rental income just like any other income. However, a little-known loophole in the tax law may allow you to completely exclude some rental income from your income taxes. The requirements to qualify are simple, but there are some issues that could complicate your ability to use this loophole.

Three Strategies to Beat the Hobby Loss Rules

When you have a side business that produces a net loss, you automatically get to use that loss to lower your taxable income, right? Not so fast! The IRS could destroy those losses (and more) with one of the nastiest tax laws out there—the hobby loss rule. With an activity that’s showing losses, you need strategies to ensure your loss deductions.

Choosing the Right Entity for a Newly Acquired Business (Part 2)

In this part 2 article on choosing the right entity for your newly acquired business, you learn how the three possible corporations work and the advantages and disadvantages of each. In part 1, published last month, you learned about proprietorships and single-member LLCs taxed as proprietorships.

Two Special Tax Breaks for Retailers Who Improve Their Property

If you’re in retail, you know how useful a renovated, polished store can be in gaining the trust of your customers. Fortunately, restorations and upgrades to your property became far more financially achievable following a law Congress passed last December. Under the new rules, when you make qualifying improvements to your store, you can immediately or quickly write off much of the expense—even if the improvements cost hundreds of thousands of dollars.

Earn Big Returns with Self-Directed IRAs, but Tread Carefully

As a successful entrepreneur, you’re used to managing every aspect of your business. So it makes sense to pick a retirement plan like a self-directed IRA that gives you virtually unlimited discretion in your investment choices. But when you take this route, be very careful! You need to know the rules of the road, or you could trigger the collapse of your IRA and incur a retirement-ruining tax bill.

Three Strategies That Avoid 1099 Reporting and Penalty Headaches

Lawmakers make business owners report to the IRS certain payments made to workers such as payments of $600 or more to independent contractors. The rules and deadlines for reporting independent contractor payments on Form 1099-MISC can be tricky. But when you know the rules, you can employ strategies that minimize the impact of these reporting requirements on your business.

Business Tax Deductions with Section 127 Plan for Child’s College

Establish a Section 127 educational assistance plan in your business to help pay your age-21-or-older child’s college or other education costs. If you are in business and you have a child who is age 21 or older in financial need of educational assistance, this is a plan to consider.

Sample Educational Assistance Plan

As a member, you may download this sample Section 127 educational assistance plan in Microsoft Word format. Then, simply modify the document for your business or tax practice use.

Q&A: Biggest 2016 Vehicle Deductions

 

Uncover New, Big 2016 Tax Breaks for Your Commercial Properties

The Protecting Americans from Tax Hikes (PATH) Act enacted last December created a new (somewhat hidden) tax break when you make improvements to your nonresidential property. Nonresidential property is any real property you don’t use for dwellings, such as offices, stores, warehouses, hotels, and motels. Don’t be one of the thousands who overlook this new tax break. It’s easy to qualify for, and it can put big, immediate dollars in your pockets.

Choosing the Right Entity for a Newly Acquired Business (Part 1)

When you start a business either from scratch or by purchase, you need to consider the business entity in which you will operate. In this article, we discuss the sole proprietorship and the single-member LLC as possibilities. Both of these entities offer income tax simplicity.

Q&A: Does Grouping Release Prior Suspended Losses?

 

Pay Foreign Taxes on Investment Income? Reduce Your U.S. Tax Bill

If you have investments that generate foreign income, including U.S. mutual funds, you likely pay foreign taxes on that income. You can use one of two methods to reduce your U.S. taxes for any foreign taxes paid, and one method generally leads to a greater tax savings than the other. Not maximizing this benefit can cost you thousands in extra taxes over the years.

Start-ups: New Bang for R&D—Save More as an S Corporation

Small start-up businesses have an unprecedented new way to save money, and it does not involve income taxes. The new way to save money is on your payroll taxes. How? By applying research and development credits to your payroll tax bill.

Is the New 54-Cent IRS Mileage Rate a Rip-Off or Does It Help You?

To know if you are money ahead deducting your business vehicle using the IRS mileage rate or the actual-expense method, you need to use our magic calculator. Tax software used by tax professionals and consumers compares the first-year deductions only, and because of the wide variation in first-year deductions caused by the luxury vehicle limits, bonus depreciation, and Section 179 expensing, the first-year-only comparison is going to produce inaccurate results.

Unpaid Payroll Taxes? Four Ways to Defeat the Trust Fund Penalty

Business owners and employees who do not pay their payroll taxes can find themselves personally liable for the trust fund portion of those taxes. This is true even if the business operates as a separate legal entity such as a corporation. If you are a business owner or employee in trouble with the IRS over unpaid payroll taxes, you need to consider strategies you can use to stop the IRS from assessing the trust fund penalties against you.

Q&A: Hiring Your Dependent Children

 

Beware When Gifting Business Property

You need to know, and avoid, tax-problem surprises when you gift business property to your parents, children, or others. With the wrong method, you can toss tax-deduction benefits into the trash. You can easily suffer recapture. Don’t let your gift of business property surprise you and take money out of your bank account.

Q&A: Section 105 Plan (an HRA) for a Rental Property Business

 

Accelerated Tax Deductions for Qualified Leasehold Improvements

If you own tax code-defined nonresidential property (otherwise known as commercial property), you have to like The Protecting Americans from Tax Hikes (PATH) Act enacted last December. The PATH Act put three huge nonresidential property-qualifying leasehold improvement tax breaks in place through 2019.

Selling a Business: Who Owns the Goodwill? Does the 3.8% NIIT Apply?

When it comes time to sell your business, it’s likely that you need to consider the intangible asset of goodwill. You have several things to consider, depending on the business entity you used to operate your business. For example, if you operated as a C corporation, how do you avoid double taxation on the goodwill? This article shows you how. Regardless of entity, how do you avoid the net investment income tax (NIIT)? This article shows you how.

Comments from Readers on Last Month’s Tax Cheat Article

 

Make Sure Your Real Estate Options Pay Off

You may have heard that options are the perfect way to increase profits on real estate investments and rentals. Well, perfect is probably an overstatement, but good profits are available when you know what you are doing. You also need to know the tax rules to avoid clauses, charges, and events that can turn options into sales and trigger taxes when you least expect them.

Three Ways to Defeat Audit Penalties and Save Thousands

Because you are a small-business owner, you have a higher chance of an IRS audit. In an audit, the IRS will try to impose accuracy-related penalties on top of any unpaid taxes that it discovers. What you need to know is that the penalties are not automatic. You can beat them with one of the right arguments.

Will Tax Law Destroy Your Business Vehicle Donation to Charity?

There are many reasons why you may want to donate your business vehicle to charity, not the least of which is that you’re helping a worthy cause. But if your goal is to couple that good deed with a nice tax deduction, make sure you do the math before you hand over the keys to avoid suffering an unpleasant tax surprise.

Q&A: Hiring Grandchildren; Exemption from Payroll Taxes

 

Do Not Make This Mistake When Your Second Business Loses Money

When you expand to a second or third business, you increase your chances of running afoul of the passive loss rules. That’s not a problem if all the businesses are producing a profit. But if one of the businesses is incurring losses, you won’t get an immediate tax deduction if you don’t materially participate. And if you try to hide that business inside another proprietorship so your loss offsets your other income, you and your tax preparer face even more trouble.

Secrets of Collecting Residential Solar Tax Credits from the IRS

Your government offers a very generous subsidy, a 30 percent tax credit, if you install solar equipment at one or more of your residences. And if you live in the right area of the country, you can come out well ahead on this deal. But this is tax law, and as you would expect, there are some tricky rules that you need to follow to qualify for the credit.

Q&A: Net Investment Income Tax on Personal Goodwill

 

Tax Tips on Failed Rental Property Purchase

You face special tax laws when you attempt to buy a rental property and that purchase attempt fails. In general, the rules work to help you with that failed purchase, but you need to know how and when the rules work for you.

Selling Your Business: Be Prepared to Meet Buyer’s Due Diligence Requirements

Whether you sell the assets of the business or your ownership interest, you can expect the buyer to check things out before signing off on the deal. This is called due diligence. And there are various aspects of due diligence, depending on the type of sale you are making and the buyer’s needs.

IRS Pays Whistleblowers for Successful Audits of Tax Cheats

If you report a tax cheat to the IRS, you may receive a portion of any money recovered following an audit. For example, the IRS paid $104 million to a citizen who revealed that his Swiss bank employer was helping clients evade U.S. taxes. If you feel it is your civic duty to report a tax cheat, the IRS would be glad to hear from you and reward you for initiating a successful investigation.

Avoid the Big Triple-Tax Whammy When Renting to Relatives

Tax savings when renting to relatives depend on your compliance with the tax law’s fair-rent standards and your relatives’ use of the property. Violate these rules and you face the triple whammy of additional taxation. And it’s easy to violate the rules, especially if you don’t know what they are.

Tax Savings Tip: Increase Office Depreciation Rate by 42 Percent

What happens when you locate a commercial office (an office in the home or a regular office) in a duplex or apartment building? It’s possible that this location can produce tax-favored depreciation for the office. This seems a little strange at first, but once you see how the rules work, it’s pretty logical.

 

Q&A: Misguided Complaint about Selling Home to the S Corporation

 

Selling Your Business: Zero-Basis Receivables; Self-Created Goodwill

You have special tax-planning considerations when you sell a business that has zero-basis receivables and/or self-created goodwill. If you operate as a C corporation, you need additional planning because of double taxation. And the good news is that planning helps reduce the tax burden.

Tips for Best Tax Result on Vehicle Disposition

The sale or trade-in of a business vehicle has positive or negative tax ramifications. You have a choice in this matter. But first you need to know the dollar amount of your gain or loss. This article gives you the six steps to finding your gain or loss.

Q&A: Where Does the S Corporation Get the Money to Buy the House?

 

Tax-Saving Tip: Use Net Square Footage to Increase Home-Office Deductions

The IRS tax form for deducting the home office contains the gross-square-footage method and makes no mention of other permissible methods. But the instructions for that form and the IRS publication on the home-office deduction both mention other reasonable methods. This article shows you how one other reasonable method, the net-square-footage method, works—and why it is always superior to the gross-square-footage method found on the IRS form.

Two Paths to Deducting Certain Business Education Expenses

Business-related classes or seminars can put a serious dent in your wallet, so, of course, you’d like to write off those costs as business expenses. But there are some strict and somewhat tricky rules for deducting business education expenses. In some cases, the education can fail the tax deduction test but qualify for business deductions following an alternative path.

Tax Court Puts Personal Service Corporations on Notice for Bonuses

Personal service corporations pay taxes at a hefty flat tax rate of 35 percent. As a result, many personal service corporations pay their shareholder-employees year-end bonuses to zero out the taxable income. A recent court case put the kibosh on this for a law firm and should put you on notice.

Tax Audit Tips for Entertainment and Vehicle Deductions

Special documentation rules apply to entertainment and vehicles. One rule requires you to document your vehicle mileage within one week. Another rule says you don’t need receipts if the vehicle or entertainment expenditure is less than $75. This no-receipt rule can be hazardous to your deductions. It also does not relieve you from using the right documentation to prove the expenses.

Can Your Emotional Support Animal Take a Bite Out of Your Taxes?

If you struggle with depression, anxiety, or other mental disabilities, you may rely on an animal for critical emotional support. But this support animal might do even more for you. It could qualify as an animal for which you can deduct its cost, training, and maintenance.

Tax Tips for 1031 Exchange of a Porsche Cayenne for a Car

Follow these three easy steps to an IRS audit-proof tax-deferred Section 1031 exchange of your SUV for a car.

Q&A: Two More Reasons to NOT Rent Equipment to Your Corporation

 

Tax Tips for Credit Card, Hotel, and Frequent Flyer Rewards

The IRS deemed that personal use of business-earned frequent flyer miles and hotel reward points are tax-free until further notice. Cash rewards are another matter. First, they are not gross income. Second, they reduce basis. Third, they produce a deduction when you donate them to charity.

Live Abroad: Make $100,000 and Pay Zero Federal Income Taxes

Self-employed individuals and employees who live and work abroad can potentially exclude most, if not all, of their earned income from United States taxation. But to make this happen, you need to get on top of a few tricky tax rules. And your best bet is to use the tax code safe-harbor 330-day rule not only for safety but also for some extra after-tax income.

Q&A: Yikes! Failed to Deduct Real Estate Taxes on Empty Land

 

Age 70 1/2 or Older? Make Your IRA Donate Directly to Charity

When you turn age 70 1/2, the IRS wants a piece of those IRA accounts that you built up all those years. You’re required to make mandatory withdrawals each year just so the IRS can tax you on those amounts. But what if you can limit, perhaps even eliminate, these required withdrawals? Not only that, what if you could benefit a local charity in the process as well? Find out how donating to charity directly from your IRA accounts can make a huge impact on your bottom line.

Selling Your Business and Including a Noncompete Agreement

When you sell a business, you will likely sign a noncompete agreement, also known as a covenant not to compete. As the seller, the purchase price allocated to the noncompete does not produce the tax result you want. But the noncompete does do for the buyer what the buyer wants. Thus, you need to know how the noncompete works so you can negotiate the sale with knowledge.

Two-Person Seminar

A precedent-setting court case establishes that one-on-one training can count as a business seminar for tax purposes. Where do you want your one-on-one seminar to take place? Disney World? St. Thomas?

Tax Tips for Vacant Lot and Unproductive Land

You have tax decisions to make every year when you own a vacant lot and/or unproductive land. It starts with the interest and property taxes and what you can or cannot deduct as itemized deductions. If you can’t deduct some or all of the interest and property taxes, then you can capitalize them by making a formal election in your tax return. But if you incur other costs, you likely sit in a Catch-22 where you simply suffer the 2 percent floor on miscellaneous itemized deductions and the alternative minimum tax (AMT).

Sell Home to S Corporation and Then Make It Rental Property

Take advantage of the government’s tax-free $250,000 home-sale-profit exclusion ($500,000 if married) by selling your home to an S corporation that you establish. This gives you two things: (1) tax-free income and (2) a step-up in basis for the rental house.

Q&A: Country Club Dues or Season Golf Pass?

 

Tax Tips for Tax-Free Disability Income and Deductible Premiums

Tax law grants tax-free income status to the proceeds you receive from income replacement disability insurance policies. You pay a price for this tax-free income: You may not deduct the premiums. Special treatment applies to overhead disability, and there’s also special treatment for S corporation payments on behalf of “more than 2 percent” shareholders.

Q&A: Dutch-Treat Business Meals

 

Rent Equipment to Your Corporation; Qualify for Section 179 Expensing

Renting equipment to your corporation requires knowledge of the tax laws. If you as a non-corporate lessor want Section 179 expensing, you need to comply with three special rules. If you can’t comply, you may obtain the benefits of Section 179 in other ways as we explain or simply stay with the rental without using Section 179.

How to Deduct Your Business Motor Home

Your business motor home is either a lodging facility, like a hotel, or a transportation vehicle. As a vehicle, it can qualify for Section 179 expensing, but you likely want to avoid that and take the easy road with MACRS depreciation.

Selling Your Business Using a Contingent Price (Earn-Out) Deal

When you sell a business, you and the buyer may structure a contingency that can vary the selling price. The tax code gives you three basic reporting possibilities for contingent prices, and, of course, the three possibilities give you planning opportunities.

Tax Tips for Avoiding Section 179 Recapture

Your claim to Section 179 expensing comes with strings. You make a deal with the government to keep your business use above 50 percent during the depreciation periods for the assets that you expensed. Should you violate your agreement, and depending on when you did that, the government can show up and recapture a big chunk of your Section 179 expensing.

1031 Tax Program for Vehicles

Did you get big tax deductions using Section 179 expensing and/or bonus depreciation on your vehicle purchases in 2012, 2013, 2014, and/or 2015? If so, you now have a vehicle with a low adjusted basis. That gives you a tax problem when you sell the vehicle. To lessen and possibly eliminate the problem, use a Section 1031 tax-deferred exchange.

Q&A: Proof for the IRS That No W-2 Is Needed for the 105 Plan

 

Four Tax Strategies That Make Buildings Produce More Cash

The tax implications for your office building and rentals have changed. Now when you fix up and improve those buildings, you need to be alert to additional savings that were not available in some prior years. Further, if you are buying a new building, you absolutely need to examine how you can create deductions where none existed before.

Beyond the FBAR: Discover Little-Known Traps in Foreign Reporting

The IRS is pursuing taxpayers with foreign accounts and activities. You are likely aware of the FBAR and Form 8939 filing requirements, but the tax code has many other lesser-known required filings that carry large penalties for non-filing. Get onboard now. Learn the tax code’s requirements and how you might fix noncompliance and avoid huge penalties.

Q&A: Professional Association (P.A.)

 

Don’t Get Crushed by Assigning Income to Your S Corporation

Using an S corporation to avoid self-employment taxes is a terrific strategy. But things can go very wrong if you use it the wrong way. When you earn income as an individual and then assign that income to your corporation, the IRS will make you regret the day you implemented that strategy.

Foreign Travel: Combining Business and Pleasure

Tax laws and regulations are not known for their clarity. That’s why it’s so surprising how clear the IRS made its regulations on foreign business travel. Even more surprising, the regulations actually work in your favor! If you know what you’re doing, you can deduct most, if not all, of your costs associated with foreign business travel. And the best part: you need not work very hard.

2016 Tax Guide to Foreclosure on a Rental Property

You likely feel some pain when you lose a rental property to foreclosure. And if you have the mortgage structured wrong, tax law adds to whatever pain you experienced with the lender. But in the right circumstances, you can lose your rental property to foreclosure and save money, too.

Golden Nugget: New Write-Offs in New Repair Regulations

Get ready to thank the IRS. With the new tangible property regulations you can write off replaced components and achieve two types of tax savings. Before the new regulations, if you replaced a roof, you likely continued to depreciate the old roof and also depreciated the new roof. The old roof—the ghost roof—usually triggered additional recapture taxes. You are going to like the new rules, especially the two new types of tax savings.

Selling Your Business: Sell Corporate Stock as an Asset Sale

If you are selling your S or C corporation, you have plenty to think about. And of course, the buyer has much to think about too. By using an election in the tax code, you and the buyer can get on the same page so you can sell with one level of taxation and also give the buyer what the buyer wants most—a step-up in basis of the assets acquired.

Q&A: Social Security Loophole Closing: Act Immediately

 

Home-Office Deduction: Should I Claim Depreciation?

Do you claim the home-office deduction? If so, did you claim zero depreciation on the office so you could avoid the recapture tax? If yes, you need to spend a few minutes with this article to see whether that zero depreciation on the home office was a good idea or not.

Should Your S Corporation Buy Life Insurance?

What happens if you die? Or, in particular, what happens if you own an S corporation with others and one owner dies? Will you want to deal with the heirs? If not, how will you pay off the heirs? You might find the answer in an employer-owned life insurance policy, as discussed in this article.

Q&A: Affordable Care Act

 

Business Loss? Recover with Net Operating Loss (NOL) Strategies

You need to thank your lawmakers for the ability to claim your net operating loss (NOL) against income from other years. Think of it: tax deductions you incurred this year that exceeded your current-year taxable income turn into tax benefits, either immediately by carrying the NOL back or in the future by carrying the NOL forward. This article explains how this works, what you need to do, and how to see where you get the most dollars for your effort.

Make Magic with a Section 105 Plan

Health insurance premiums are rising at an astronomic rate. This is one of the biggest monthly expenses for many families. That’s where, because you are in business, a properly planned and executed Section 105 plan can work for you. This plan works like magic—it turns your medical expenses into tax-favored business expenses.

2016 Tax Guide for Debtors on Foreclosure of a Home

Few things can rock your world like the prospect of losing your home. In a foreclosure, the lender sends you one or two Form 1099s that will worry you too. The 1099s could show that you have cancellation of debt income (that’s taxable income). And then, just to pile on, the foreclosure that took away your home might trigger a taxable gain. That’s all bad news. But when you know the rules, you’ll see that you can make some or all of the bad-news tax problems go away.

Loophole Closing: Act Immediately to Claim $50,000 Extra from Social Security

If you and your spouse are the right ages, you can use one simple strategy to collect an EXTRA $50,000 or so in Social Security benefits. But it gets even better: while you’re collecting this additional amount, your own Social Security benefits continue to grow for an even bigger payout! But to do this, you need to act immediately.

Have a Small Business? Own Real Property? Discover Repair Deductions

The tax rules for determining whether amounts you spend on your rental properties are for improvements (which you must capitalize) or repairs and maintenance (which you can expense) are complicated. But if you qualify as a small business, the IRS has a possible gift for you in the form of hassle-free and income-generating safe-harbor expensing.

Q&A: IRS Mileage Rate Kills Amending for Section 179 Deductions

 

Mind-Boggling Traps in Retroactively Passed Bonus Depreciation

If you want to claim retroactively enacted bonus depreciation on ALL the qualifying assets you purchased during the year, smile. But if you don’t want that extra 50 percent depreciation on some or all of the assets, you need to take action on your tax return to avoid phantom depreciation and its very ill effects.

Tax Trick When Repossessing a Home You Sold with Seller Financing

If you sold your home using seller financing, you likely don’t look forward to your buyer defaulting on your loan. Here’s a twist: It may not be a bad thing in the end. Under the right circumstances, you could walk away with more cash in your pocket—and you could make some or all of that cash tax-free! But there’s one big trap that you need to avoid.

2016 Health Insurance for S Corporation Owners

In IRS Notice 2015-17, the IRS allowed S corporation owners in 2014 and 2015 to avoid the $100-a-day penalties on S corporation reimbursements of individually purchased health insurance and on providing insurance for the owners only. But 2016 is a new year, so what is that status now?

Fix Your Missed Bonus Depreciation Deductions, or Suffer

Are you suffering from phantom depreciation? This is when the tax law is depreciating your vehicles and other assets without giving you any deductions. Pretty outrageous, right? You suffer this when you fail to elect out of bonus depreciation. In this article, we show you how to fix bonus depreciation problems and also recoup a missed Section 179 deduction.

Q&A: Vacant Lot

 

Selling Your Business: Selling Intangible Assets

When you sell your business, you face two types of federal income taxes: (a) regular and (b) capital gains. Capital gains are better—much better. If you sell the assets rather than the business interest, your sale of self-created intangibles likely produces capital gains. Of course, the best bet is to sell the business interests rather than the assets, assuming you operate as other than a proprietorship, which can sell assets only.

Unfiled Tax Returns? Back Taxes? IRS Penalties? Do This!

Fringe Benefits for an Employee-Spouse in an S Corporation

Act Fast: Install New Audit-Proof $2,500 Expensing ($5,000 with AFS)

Q&A: Don’t Rent Home Office to S Corporation

Be Alert to Tax Rules That Destroy Mortgage Interest Deductions

Tax Implications of a Deadbeat Tenant

Q&A: Tax Deductions for a Gun Club

Has Your Swiss Banker Betrayed You to the Feds?

Selling Your Business: How to Make Tax-Saving Price Allocations for an Asset Sale

Owe Back Taxes? Try Deals that the IRS Accepts

Even the most savvy business owners can, at times, have trouble paying their bills. If one of those bills is your tax bill, the possibility of having to deal with the IRS to arrange payment is daunting. But have no fear: as you’ll learn here, the IRS offers multiple payment options, depending on how much you owe and your financial situation.

Triple Tax Advantages: Reimburse Your Employee-Spouse for Health Insurance

Schedule C business owners and their spouses must obtain health insurance coverage for themselves (and any other dependents) or risk a penalty under health care reform. While there are many ways to get that coverage, one way—a properly established proprietorship reimbursement arrangement—can lead to three and possibly four significant tax advantages for the business owner and spouse.

Hoping to Take a Bad Debt Deduction? Don’t Count on It

Do you ever worry that people or businesses that owe you money might not pay up? Do you take some comfort from the idea that if you end up on the short end of the stick, at least you can salvage a tax write-off out of it? Don’t count on it if you haven’t read this article.

2015 Last-Minute Year-End Tax Deductions for Existing Vehicles

Yes, December 31 is just around the corner. That’s likely your last day for finding tax deductions to cut your 2015 taxes. And with our existing high tax rates, 2015 is a good year to cut your taxes. In this article, you can find and release tax deductions that the tax code trapped inside your existing business and personal cars, SUVs, trucks, and vans.

2015 Last-Minute Year-End General Business Deductions

This article takes your daily activity and identifies five easy year-end tax-planning strategies. Here are two examples from the article: prepaying your expenses under the IRS safe harbor and simply not billing customers and patients until 2016. These two strategies are certainly easy, as are the other three strategies in this article.

Q&A: Help? Affordable Care Act Health Benefits for One Employee

 

2015 Last-Minute Business Motor Home Purchase

A business motor home could provide both big tax deductions and an ideal solution to your business lodging and transportation needs. You would know how clean your sleeping room is. You would know the room’s smoking and no-smoking history. You would know how many pets, if any, have graced the premises.

2015 Last-Minute Year-End Retirement and Medical Tax Deductions

When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2015 taxes. This article gives you six action steps for 2015 that can help you reduce your taxes and pocket extra money.

2015 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family

If you are thinking of getting married or divorced, you need to consider December 31, 2015, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are under age 24)? If so, you need to consider the zero-bracket planning strategy. And now let’s consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.

2015 Last-Minute Vehicle Purchases to Save on Taxes

Here’s an easy question: Do you need more 2015 tax deductions? If yes, continue on. Next easy question: Do you need a replacement business vehicle? If yes, you can solve or mitigate the first problem and solve the second problem at the same time, but you need to read this article now so you know what you have to do, when to do it, and what you might want to wait for before doing it.

Q&A: Home-Office Deduction for Orthodontist

Learn how orthodontists and other professionals can have an office downtown and also qualify for a home-office deduction using tax law’s administration rules.

2015 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

Your stock market portfolio can represent a little gold mine of opportunities to reduce your 2015 income taxes when you take advantage of the Tax Code’s offset game. The Tax Code contains basic rules for this game, and once you know the rules, you can apply the correct strategies. In addition to saving taxes with the game of offset, you can also avoid paying taxes on stock appreciation by gifting stock to charity, your parents, and your children who are not subject to the kiddie tax.

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.

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.

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.

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.

Reward Yourself and Your Employees with Tax-Free Supper Money

Have you ever faced this “problem”? A sudden boom in business requires you and your employees to work late in order to get everything finished. When this happens, how can you thank your employees for their overtime with a tax-free benefit that’s fully deductible to your business? You can provide a supper money fringe benefit if you follow four rules.

One Additional Way to Create 100 Percent Deductions for Employee Meals

Most business meals suffer a 50 percent cut in the amount you can deduct. But here’s one of those business meal strategies that produces a 100 percent deduction. So if you spend $5,000 for meals with this strategy, you don’t deduct $2,500 because of the 50 percent. Instead, you deduct the full $5,000.

Rent an Office in Your Home to Your Corporation? Avoid This Big Mistake

Business owners who operate their businesses as corporations and also deduct an office in the home commonly use one of three tax-deduction methods in an effort to achieve tax benefits. One method provides no tax benefit; it’s just smoke and mirrors. The second method might create a small deduction or none at all. The third method is the correct choice, as it ensures the full tax deduction and even reduces your chances of an IRS audit.

Unlock the Deductions Trapped in Your Personal Assets When You Convert Them to Business Use

Tax law gives you several nice tax-saving strategies for your business assets but not many for your personal assets. So what happens when you convert a personal asset to a business asset? Does the personal taint last forever? No! This conversion opens the door to a world of new deductions.

How to Avoid Thousands in Federal Taxes and Penalties If You Misclassified Employees as Independent Contractors

You likely want to hire independent contractors whenever possible. But if you are bending and breaking the rules, you face big back taxes, horrific penalties, and interest. So, a question for you: Have you been misclassifying your workers? If so, the IRS has a good deal that lets you off the hook with just a tiny payment. We’re talking a fraction of what you would otherwise owe if you lost your contractor classification in an IRS employment tax audit.

You Can Claim Thousands in Business Education Deductions—Unless You Make This One Mistake

The government wants to give you the gift of education. Your lawmakers in Washington created a tax break for courses that improve or maintain your business skills. You can deduct in full the cost of education ranging from a standalone seminar all the way up to an advanced degree—including the cost of an MBA program. But in order to get this deduction, you have to follow a couple simple rules.

Don’t Pick the Wrong Way to Deduct Long-Term Care Insurance—This Could Cost You Thousands

You can protect yourself against the financial consequences of chronic illness or disability by purchasing long-term care insurance. The premiums for this insurance are not cheap, but tax law lets you write off the cost, thus subsidizing your purchase. But beware—there are three ways to take this deduction. Choosing the wrong method could cost you thousands of dollars in tax benefits.

Silver Lining for a Loss on the Sale of Your Home? Deduct Your Home-Office Loss—and Slash Your Taxes

Five Ways You Can Fight the IRS When Your Tax Debt Is Too Big to Pay

Don’t Lose a Penny of Your Mileage Deduction: Defend It with Simple, Inexpensive Apps and GPS Tools

How to Deduct Mortgage Interest When You Need Someone Else’s Name on the Deed

Don’t Put Your S Corporation Vehicle Title in the Wrong Name! It Could Cost You Thousands in Tax Deductions

The Easy Way to Make Your Child a Millionaire Using Only His or Her Part-Time Wages

Are You Really an Independent Contractor But Getting a W-2 as an Employee? Change Tax Forms to Cut Your Tax Bill

Why You Should Accept the New IRS Offer to Immediately Deduct Assets That Cost $500 or Less

The IRS recently created a rule to make your life simpler and better. How is that for a change? It’s true. Now when you buy almost any tangible asset for $500 or less, you can immediately deduct the purchase if you follow the two easy steps laid out by the IRS. That means tax savings for you and fewer headaches for you and your tax preparer.

Double-Benefit Tax Rule for Property Owners Delivers Bonus Deduction: But Act Now!

The IRS is making an unusually nice offer to you as a business or rental property owner—but it’s good for just a few months. You can take extra deductions right now if you performed certain major renovations on your business or rental property in prior years. If you think this applies to you, act fast so you do not miss the October (or September, if incorporated) 2015 deadline.

Three Easy Steps to Deducting All Your Health Insurance Premiums as an S Corporation Owner

If you are an S corporation owner, you can get a full deduction for your health insurance premiums—despite Obamacare and even if your S corporation provides zero health benefits to non-owner employees. You have to follow a few steps to qualify for this deduction, but that’s a piece of cake once you know the rules.

Avoid Employment Taxes and Penalties: Sail into Section 530’s Safe Harbor

If you hire workers and want to classify some of them as independent contractors, you absolutely need to know about Section 530 and its safe harbor. By law, Section 530 is the first step in an employment tax audit. And if you don’t know about Section 530, you are making a potentially fatal financial mistake.

Make Employees Happy with Dental and Vision Benefits Using a Loophole in Obamacare

Have you been longing for the good old days when you could offer a Section 105 health plan to your employees without having to comply with the new Obamacare rules? Well, you can still offer such a plan—provided that you limit the benefits to vision and dental.

Four Steps to Turn a Husband-and-Wife-Only Board Meeting into a Money-Saving, Tax-Deductible Resort Stay

Where can you hold your tax-deductible board meetings if you operate your business as a corporation? Could you go to a nice resort? What if you and your spouse are the only board members? This article answers these common questions. It’s sure to make you smile.

The Easiest and Funnest Deduction You’ll Claim This Year: 4 Rules for Writing Off Employee Outings—100%!

The government wants you to have happy employees. That’s why the tax code grants you extra deductions when you provide entertainment and entertainment facilities that primarily benefit rank-and-file employees. In this article, we examine how the rules work when you take your employees on a party trip.

A Cruise Makes a Fabulous Vacation—and a Fabulous Tax Deduction If You Plan It Right

Do you have an upcoming business trip? Wouldn’t it be nice to travel there on a cruise ship and reach your destination fully revitalized? Surprisingly, tax law allows you to treat your cruise vacation as a business transportation expense, which means you can deduct most or all of the cost.

Spy on Your Competitors, Discover Ways to Improve Your Business, and Write Off the Whole Expense!

Have you ever visited a competing business as a customer to see how its operations stack up to yours? With the right documentation, you can fully deduct the costs of this research into your rival—even the amount you pay for their products or services—as business expenses.

Slash Employment Taxes: Take Three Steps Before Hiring Workers

You save employment taxes when you hire workers as independent contractors. But you want to make certain that the workers are indeed contractors, or you could subject yourself to some expensive tax penalties. In this article, we show you three steps to independent contractor status for your workers.

Don’t Let Expense Report Blunders Trigger Unnecessary Taxes, Punishing You and Your Employees

If you reimburse your employees for business expenses, or if you operate your business as an S or a C corporation, it’s crucial that you know and follow the IRS accountable plan rules—this will save money not only for you but also for your employees. We’ll give you two easy-to-use tools that will help you seamlessly incorporate these rules into your business routine.

Legally Escape the 50 Percent Tax on Goodwill Value When You Sell or Liquidate Your Corporation

If you own a corporation, you need to plan in advance for the eventual sale or liquidation of your corporation—even if you do not expect either to happen anytime soon. In particular, the planning you do regarding your business goodwill could mean hundreds of thousands of dollars in tax savings.

Don’t Settle for a 50 Percent Write-Off on Employee Lunches: Here’s How to Snag 100 Percent

Through a simple two-step process, you can fully deduct the cost of meals you provide to your employees. That’s right—this strategy helps you avoid the dreaded 50 percent reduction for entertainment expenses. But be careful when you use this strategy—your business may need to classify your meal differently from the meals for non-owner employees.

How to Beat the Absurd New IRS Rule on Taxable Reimbursements of Employee Health Insurance

The IRS just launched its latest attack on your reimbursements for individually purchased health insurance: Even fully taxable reimbursements could still violate the Obamacare rules and expose you to the $100-per-day penalties. But don’t worry. We’ll give you several strategies to beat this new rule.

Big News: IRS Undoes the $100-a-Day Obamacare Penalty and Overtaxation of Your Employees

Whether or not you complied with Obamacare last year, we have some big news for you. It’s no problem, compliance or not, and either way the news is big for two reasons. First, if you failed Obamacare compliance in 2014, the IRS likely just released you from the monstrous $100-a-day penalty. Second, if you did it right, you may have overtaxed your employees and now, with the new IRS guidance, you can undo that overtaxation.

Last-Minute News from the IRS—S Corporation Owners Are Safe from Obamacare Penalties through 2015

A November 2014 FAQ from the Department of Labor created quite a scare for S corporation owners, raising the possibility of huge Affordable Care Act (ACA) penalties simply for deducting your health insurance premiums according to IRS guidelines. However, a recent IRS notice explains how you can now safely avoid these penalties and claim your rightful deductions.

Don’t Overlook the New Law That Allows Section 179 and Bonus Depreciation Retroactively to 2014

Lawmakers did it again. They retroactively reinstated a number of so-called extender laws, including those tax-favored Section 179 expensing and bonus depreciation deductions. Did you buy vehicles and equipment last year? If so, this new law can make you smile, as this article shows it did for Harry Spencer.

Stop Taxes before They Happen by Shrewdly Planning the Trade-In or Sale of Your Business Vehicle

Before you sell or trade your business vehicle, take a minute to think. The actions you take now could come back to haunt you at tax time. You could be creating extra tax for yourself or missing out on tax losses that you could use to offset other income. We’ll tell you what you need to know to be sure you make the right decision.

Hire Your Kids to Work in Your LLC or Sole Proprietorship and Put a Huge Chunk of Their Pay Back in Your Pocket

If you put your kids to work in your business, you can use their compensation to create nice tax savings for yourself. This strategy lets you spend time with your children during the workday and teach them valuable lessons about working life—as well as valuable lessons about money and tax planning.

Write Off Your Clothing and Laundry Expenses without Giving All Employees the Same Privilege

In a previous edition of the Tax Reduction Letter, we explained how you get business deductions for the cost and laundry expenses of work clothes you buy for yourself and your employees. This update explains how you still get your full deduction even if you do not provide this benefit to all employees.

Stop Payroll Tax Embezzlement Before It’s Too Late—and Before It Costs You Your Business

Trust, but verify. That’s the motto you should have when it comes to your payroll tax payments. You likely have a professional or business associate take care of your tax filing and payments. But you could save yourself a lot of trouble down the road by knowing how to verify that your trusted associate has done what he or she claimed to do.

How to Squeeze Even More Tax Savings from Your Charitable Donations: Treat Them as Business Expenses

Giving to charity is a noble act no matter how you choose to give. But for purposes of tax savings, some forms of giving are much more beneficial to you than others. As a business owner, you can turn your charitable contribution into a business expense. While this does not change anything from the charity’s perspective, this hugely increases your tax savings.

Your Daily Commute Is Not Deductible—Unless You Do One of These Three Things

Your trip from home to the office each day certainly feels like part of your workday, but it’s not—at least according to the IRS. Unless you fall into certain exceptions, your commute creates personal mileage, which is not deductible. But there’s a solution, and it’s so easy that if you don’t do it, you’re simply giving money to the government that you could keep for yourself.

Don’t Let Income Limits Block Your Roth IRA Contributions: Build an Even Larger Retirement Stash

Would you like to use a Roth IRA for your retirement investments, even though you make too much money to contribute to the account directly? You can. Congress has “accidentally on purpose” created loopholes to allow even high-income earners to contribute to Roth retirement accounts. But you can’t contribute directly. You have to bring your money in through the back door.

Make Your Company Party More Fun: Find Thousands More in Legal Tax Deductions!

Lawmakers may not always make your life easy, but at least you know they want you to have fun every now and then. The tax code gives you a 100 percent deduction for the parties that you throw for your employees—as long as you invite the right kind of employees.

Deduct More of Your Rental Property Losses by Qualifying as a Real Estate Professional—Even If You Don’t Work in Real Estate!

Your rental property is worth more to you than simply the generation of rental income. Your property may also create tax losses that you can use to offset your income from other sources. It’s not as easy as it used to be to make your rental property a legal tax shelter, but you can still do this if you put in the right number of hours toward the right type of work.

How C-Corporation Owners Can Pay Zero Taxes on Gains: Tax Law Allows a Windfall “Wait to Sell” Strategy

2015 is the first year that stockowners can sell their C corporation stock completely tax free under Section 1202 of the tax code. If you started a C corporation or purchased stock recently and you qualify for this rule, you need to determine the date you acquired the stock and wait five years before you sell. This waiting period could save you thousands and even potentially millions of dollars in taxes.

Deduct the Shirt off Your Back—Yes, Here’s How You Can Legally Write Off Your Clothing and Laundry Expenses!

Sometimes it feels like the IRS wants everything from you, including the shirt off your back. At the Tax Reduction Letter, our team of researchers works every day to find ways to protect you from government overreach. We’ll be sure to help you keep your money—and even give you a deduction for that shirt on your back! Read this article to find out when the IRS allows you to deduct the clothes you wear in your business.

Three Rules for Contributing to Your Employees’ Health Savings Accounts and Beating the Dreaded 35 Percent Discrimination Tax

If you discriminate when you contribute to the health savings accounts (HSAs) of your employees, the IRS will make you pay a 35 percent tax on the total amount of your contributions. This tax can add up quickly, and if you have to pay it, you’ll kick yourself when you discover you can escape the tax entirely by following the three rules in this article.

Did You Miss Your S-Corporation Election Deadline—and Thousands in Employment Tax Savings? No Worries—Do It Now!

If you want to file your taxes for last year (2014) as an S corporation for the first time, you might be surprised to discover that the deadline to elect S corporation status has long passed. But if you didn’t file your election in time, don’t despair. By following the rules in this article, you can retroactively create your S corporation well after the deadline and get the full benefit of your tax savings.

Five Rules for Turning Your Vacation—Even a Luxurious One—into Tax-Deductible Business Travel

The next time you plan a vacation, stop and think about how you could make it deductible. If you find a good business reason to visit that destination and you throw in enough business hours on the trip, you suddenly convert a nondeductible personal trip into a deductible business expense.

Use This Forgotten Tax Technique to Increase Deductions on Your Vacation or Other Home

Twenty years after the Tax Court approved a strategy that grants you extra deductions for your second home, the IRS would like you to forget it ever happened. Even though the case remains current law, you won’t find any mention of this strategy in IRS guidance to taxpayers. Unless you just happened to know old cases—or read this article—you might never have known how you could save thousands in taxes on your second home.

How to Deduct Your Swimming Pool and Other Home Improvements as Medical Expenses—All Legal If You Do It Right

If your doctor recommends that you buy equipment for your health, pay attention. First of all, you should follow your doctor’s orders. But just as important, you may be able to deduct some or all of the cost. This article explains how the one-owner businessperson is in the best possible position to deduct the cost of medical equipment.

Slash Taxes When Rolling Over Your 401(k) Funds: Use This IRA Double-Win Strategy

The IRA double-win strategy allows you to get a tax benefit when you first contribute to your retirement plan and then again when you withdraw the money. This article reviews how the strategy works and answers some member questions we received regarding the process.

Two Compelling Reasons to Set Up a Tax-Advantaged Health Insurance Plan: It Saves You Money and It Delights Your Employees

If you are a regular reader of the Tax Reduction Letter, you know that you can use a Section 125 plan to save money on group health insurance. A number of subscribers have requested a template for how to set up one of these plans, and that’s what this article is all about—we’ll help you get your plan up and running.

3 Rules Ensure That You Can Deduct Lodging Expenses under New Regs—Even When You’re Staying Close to Home!

The IRS lifted its long-standing ban against deductions for local lodging expenses. Now you can deduct the cost of a hotel for yourself or your employees even if you’re staying near your home. But there are three rules to know to make sure that your expense falls within the IRS “safe harbor” for deductibility.

Your Car Is a Tax-Savings Machine: Rev It Up Using These Smart “IRS-Proof” Guidelines

The IRS is more than happy to take away your deductions for your vehicle’s operating expenses if you do not follow their perfectionistic standard of record keeping. But you can beat them at their own game. This article shows you the easy way to satisfy even the most demanding of IRS agents when it comes to proving the usage of your business vehicle.

Claim a Home-Office Deduction for Your Rental Property Business—But Be Prepared to Meet IRS “Gray Area” Requirements

You enter a muddy legal area when you claim a home-office deduction in connection with your rental properties. Why? You must prove that you operate the rental properties as a trade or business. This article shows you the best way to meet that “trade or business” test and safeguard your deductions (and escape self-employment tax in the process).

Married? You May Qualify for Huge Deductions on the Net Losses of Your Rental Properties

There are special rules that you need to know regarding the deduction of your net losses if you co-own or co-manage a business or investment with your spouse. Tax law gives you some nice advantages, but they’re not what we would call logical. If you don’t know how the rules work, you might be missing out on money-saving benefits.

IRA Double-Win Strategy: Minimize Your Taxes Further by Rolling Them Forward and Backward

Your traditional IRA comes with a looming tax bill. Sure, you deduct your contributions, but you have to pay tax on 100 percent of the money you eventually withdraw. Fortunately, the tax code gives you a great year-end planning technique that you can use to minimize this future tax. You can strategically roll your traditional IRAs forward (and backward) to Roth IRAs, which allow you to withdraw qualified distributions tax-free.

Drive Down Your Tax on Stock Gains by Selling and Repurchasing at Just the Right Time

If you own stock, you can take action now to escape the tax that you will incur when you ultimately decide to sell. By strategically timing sale and repurchase transactions, you can take advantage of the zero percent bracket for capital gains and gradually eliminate most or all of your tax before you ultimately dispose of the stock.

4 Ways to Turn Your Cars, SUVs, Trucks, and Vans into More Profitable Tax Deductions

December 31 is just around the corner. That’s likely your cutoff date for finding tax deductions that will cut your 2014 taxes. And remember, your 2014 taxes are the highest they’ve been in 28 years. This article helps you identify tax deductions embedded in your existing business and personal cars, SUVs, trucks, and vans.

Year-End Retirement and Medical Tax-Deduction Strategies: 7 Ways to Pocket More Money

When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you seven action steps that help you reduce your taxes, pocket extra money, and get ready for 2015.

5 Smart and Legal Year-End Tax Benefits Available to Every Small Business

This article gives you easy year-end tax planning strategies for your everyday business. For example, prepaying your expenses under the IRS safe harbor and simply not billing customers and patients until 2015. These two strategies are certainly easy, as are the other three strategies in this article.

7 Year-End Tax Reduction Strategies for Your Stock Portfolio

Your stock market portfolio is a great place to look for year-end tax planning opportunities. First, it’s a place where you can avoid paying taxes on stock appreciation by gifting stock to charity, your parents, and your children. Second, it’s a place where you can play a simple game of offset where you cancel out high taxes. This article gives you seven strategies that reduce your taxes and make you smile.

4 Year-End Tax-Deduction Strategies for Business Owners Who Are Married, Getting Married, and/or Have Children

In your last-minute search for tax deductions, examine your children under the age of 18, your marital status, and your relatives in the zero tax bracket. With some planning, you can save good tax money here.

7 Tax-Reducing Cars, Trucks, Vans, and SUVs to Buy Before Year-End

It’s November. It’s also the beginning of year-end tax planning time. And for many business owners, it’s car, truck, van, and SUV buying time. The combination of car, truck, van, and SUV buying time and year-end tax planning can help you make a sizable dent in your 2014 tax burden. And if lawmakers get their act together, they could further increase your tax benefits before December 31.

Should You Gamble on a Big Motor Home Deduction This Year?

You can use a motor home for your business. If you are thinking of buying a motor home at this time, your Section 179 expensing election is somewhat in limbo. It’s possible that lawmakers will reinstate last year’s limits on Section 179 expensing. This article examines the gamble you take if you buy before lawmakers take action or if they fail to reinstate last year’s limits.

Supercharge Travel Deductions by Knowing the Business Day Rules

When you take a trip and spend some of your time on business and some time on personal activities, how much of your expenses can you deduct? What happens to your expenses on holidays? Knowing the answers to questions such as these puts money in your pocket and safeguards you from IRS attack on your travel deductions.

Reduce Self-Employment Taxes by Renting from Your Spouse

If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.

 

How Tax Credits Make Historic Buildings More Affordable

Would a unique downtown historic building be the perfect site for your office? It may be more affordable than you think. Your state and federal governments want you to rehabilitate these buildings and give you a financial incentive to do so. Here is their offer to you: if you invest in and restore a historic building, the governments will give you tax credits to offset a huge chunk of the cost of restoration.

How to Help Your Employees Pay for Medical Insurance and Reduce Everybody’s Taxes!

The Affordable Care Act allows you to pay for employee insurance by increasing taxable compensation. But that’s not the route you want to take, since it means more taxes for both you and your employees. This article gives you ideas on how to pay for employee insurance without hiking up your tax bill.

Make the IRS Pay You When You Sell Your Home

You normally would not expect to have more money in your pocket after you pay your tax bill. However, with this new ruling from the IRS, you could end up with just that—a negative tax on the sale of your home! Read this article to find out how a taxpayer sold her home for a $100,000 before-tax profit and turned that into a $110,000 after-tax value.

How S Corporation Owners Can Cut Taxes by Keeping a Lid on Their Salaries

The number one way for S corporation owners to pay fewer taxes is to set the right salary. To do this, you want to find the salary sweet spot—an amount that is low enough to save you taxes but high enough to satisfy the IRS and not create a risk of audit. This article summarizes the important cases and rules you need to know in order to determine the right salary for your business.

How to Claim Big Home-Office Tax Deductions—Even for a Tiny Office, Even in a Small Home

Have you ruled out taking the home-office deduction because you believe your home is too small? You should think again. You can set up a mini home office using as little as a single square foot of floor space. When you read this article, you’ll see why this could generate thousands of dollars in tax savings.

Do the Right Kind of Work at Your Home Office

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.

Ignore the Tax Code’s Rules on Receipts

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.

Tax Tips to Know If You Buy Gold, Art, Antiques, or Stamps

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.

S Corporation? Office in the Home? Learn How to Escape Taxes

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.

Five Steps to Take When Lending Money to Employees

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.

Tax Truth about Home Equity 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.

Crooked Tax Preparer Creates Big Trouble for Client

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.

How to Increase Vehicle Tax Deductions without Spending a Penny

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.

Secrets to Deducting a Convention, Seminar, or Similar Meeting

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.

Fatal Place to Borrow Money

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.

How the IRS Lost $55,000 in This IRS Rental Properties Audit

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.

Is a Fix-up and Sale an Investor or a Dealer Property?

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.

Tax Deductions for Failed Business

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.

Is a W-2 Wage Needed to Create an Employee-Spouse 105 Plan?

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.

Hiring Your Children to Work on Your Rental Properties

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.

How to Escape Payroll Taxes on S Corporation Health Insurance

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.

Defined Contribution Health Plans versus the Tax Code

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.

Deduct Golf Expenses by Knowing When to Speak

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).

IRS Asserts Fraud and Crushes Failed Mileage Log

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.

Warning: Is Your Real Estate Activity a Business or an Investment?

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.

Sneaky AMT Bites Surgeon

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 Can (and Can’t) Deduct Mortgage Insurance

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.

Beware: Court Makes New Dangerous Law on IRA Rollovers

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.

How to Lease-Option the Sale of Your Home or Investment House

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.

Who Else Wants to Deduct Their Fishing Trips?

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.

How the Taxman Gets You with Backdoor Taxes

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.

Three Often Overlooked Tax Deductions When You Lease a Vehicle

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.

Secrets to Beating the Kiddie Tax

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.

Merciful IRS Lowers Tax on Home Sales during Tough Times

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.

Tricks to Deducting Meals with Your Spouse

Would you like to deduct business meals with your spouse? What would the IRS think about that? If the IRS said that the meals were not deductible, what would the courts say? You would think there are hundreds of rulings and court cases that explain this. Not so. There is one tax rule that mostly assures the deduction, but it requires an addition. Spend a few minutes learning how tax law treats your spouse when it comes to business meals.

Don’t Rely on the Government for a Tax-Free Home Sale

You may not expect to sell your current home or vacation property any time soon, but you should take these (easy) steps right now to prepare for—or better yet, avoid—the tax burden when that day ultimately comes. If you plan to rely on the home sale gain exclusion to shield all of your profit, don’t do that. We’ll tell you why not in this article. We’ll also show you how certain records can substantially reduce the taxes you owe on the sale of your home.

Depreciation and Section 179: The Good, Bad, and the Ugly

Tax law grants depreciation deductions. That’s good. It then recaptures or otherwise taxes the deductions you claimed. That’s bad. Don’t let depreciation and Section 179 deductions hoodwink you. Because of the back-end tax, the deductions amount to less than they appear on the surface. This means tax planning is in order if you are to pocket more tax money. This article helps you with that tax plan so that you get more out of your depreciation and Section 179 deductions.

Doctor’s Amway Business Ruled a Sham

When you operate a side business at a loss, the IRS might think your money-losing business is simply your private tax shelter and, if so, attack it as a hobby (i.e., activity not engaged in for profit). In the regulations, the IRS looks at nine factors to decide whether you can deduct your business losses. This article shows you how the rules worked against Dr. Mikhail and how you can avoid a similar fate.

Use Corporate Advances to Escape Double Taxation

Corporate advances are a nice way to get around the double tax problem of C corporations. But there is a hidden danger. If you take a loan from your corporation without taking all the right steps, then you are asking the IRS to apply its double-tax system (plus penalties). Read this article to learn the right way to take your corporate advances.

Don’t Get Fooled by the Deductions Affidavit Myth

Lost records are not a death warrant when it comes to audits. But if your tax advisor tells you that you can replace your missing records with an affidavit, you need to change tax advisors. This type of affidavit is a bad idea. It will not help you. Find out what you should do instead.

Small Employer Health Care under Obamacare

This article gives you a bird’s-eye view of the new health care landscape so that you can see all your post-Obamacare health care options together in one place. Choose the health plan that works best for your business based on the number of employees you have and the amount of money you are willing to spend.

Statute of Limitations for Tax Records

Do you know for what period of time you have to keep your tax records? You may have heard three years, four years, six years, and seven years. All of these can be correct, but also 17 years can be correct with a depreciable building that you sold in year 14. Because you need to keep the records for the required periods, you need to know what those required periods are.

Find the Winning Tax Law for Your IRS Audit

If you are suffering or about to suffer an IRS audit, you should know how your tax positions stack up against the IRS examiners’ positions. In most cases, you are discussing the facts, not the law, and you prove your facts with receipts, canceled checks, and logbooks. Once you get into the law, you need to know the rules that trump other rules. This article explains how you use the laws, rulings, and other IRS documents to prove the legal side of your case in an audit. And should your case advance beyond the IRS audit to the courts, this article helps you understand what the courts are looking for.

Secrets of 105 Plan Multiple Employee Coverage under Obamacare

As you know, Obamacare has a dramatic impact on Section 105 medical plans that cover more than one employee. Of course, the first question is who is an employee for purposes of the Section 105 medical plan. And if you have multiple employees, you will be happy to know that this article gives you eight strategies for making the 105 plan work for you.

S Corporation Owner’s Path to Health Care under Obamacare

If you are an S corporation owner and you buy health insurance for yourself or your family, you need to follow the IRS rules described in this article in order to protect your tax deductions for the health insurance premiums. You also learn how to escape the Obamacare penalties for group health care even if you discriminate against your employees.

The Best Way to Pay for Group Health Insurance

If you want to cover your employees with group health insurance but worry that the price tag will skyrocket your budget, you need to read this article. You will learn how to limit your annual cost and provide tax breaks to employees for their share of premiums. By following some or all of the strategies, you can drop your after-tax cost of group health insurance coverage.

Beware, Be Alert, and Be Selfish with Charitable Contributions

Making tax-deductible charitable contributions has become more difficult with each passing year. Two culprits make things messier than in years past. First, lawmakers have enacted more rules that you need to follow. Second, the Internet offers you opportunities to make donations that don’t qualify for tax deductions. That’s the bad news, but there is plenty of good news when you do this right.

Big Mistake with Life Insurance Policy

Once you borrow money from your life insurance policy, you need to pay attention and ask some questions. First, are you using the loans for a business purpose? Second, are you repaying the loans? Third, if you’re not repaying the loans, what happens when the loan balance causes the insurance company to terminate your policy? If you know what happens, you’re prepared. But if you don’t know what happens, you’ll be unhappy when you receive your tax surprise.

U.S. Government Models Gambling Tax Law after Vegas Casinos

Are you a recreational gambler? If so, you likely know that you are required to keep income tax records that prove your gambling winnings and losses. If you don’t have the records, your winnings are taxable and your losses nondeductible. Holy smokes! That’s terrible. Don’t let that happen. See why you need the records. Learn what the IRS and the courts say your records must show. Spend a little time with this article so that you can avoid overpaying your taxes on your gambling activity.

Give to Charity, but Make It Tax Deductible as a Business Expense

Have you considered the possibilities of turning the monies you send to charities into business expenses? You should. It can save you tax dollars. Sure, you might already be deducting the money now as charitable deductions. But wouldn’t you really rather achieve the tax deductions as tax-favored business expenses?

Tax Deductions for Entertainment Facility, Part 5: Hunting

In this article, part 5 of the entertainment facility discussion, you learn how lawmakers take shots at your hunting activities. First, both real and personal property involved in your hunting activities face the entertainment facility disallowance rules. Leasing land for the hunt has its problems too. But if you like to hunt, and if you would like to learn how to deduct your hunting, this article is for you!

Don’t Let Losses Disappear When You Liquidate Your S Corporation

You can create losses without selling assets when you liquidate your S corporation. But be warned: you first need to know exactly how the gains and losses are going to flow. In this article, you see the hurdles erected by lawmakers and the IRS. You learn what you need to know. With this knowledge, you can plan. That plan might include or exclude liquidation. It depends on where the liquidation chips fall.

Helping Daughter Creates Hobby That Kills Tax Deductions

Don’t be a victim of your own success. When you operate two businesses, one that is profitable and one that is not, the IRS likes to attack the deductions of the losing business. When the IRS attacks, you are in for a fight. But it’s a fight that you can win with knowledge and planning.

Lost Tax Records Destroy Both Your Time and Your Tax Deductions

Tax law grants relief, if you want to call it that, when you lose your tax records through no fault of your own. For example, say a flood, theft, hurricane, or earthquake caused the loss of your tax records. Your relief is the right to substantiate your deductions using a reasonable reconstruction of those records. Yikes, how long will that take?

The Right Way to Ask Your S Corporation for Travel Reimbursements

When you operate your business as an S corporation or a C corporation, you first need to remember that the corporation is a separate legal entity. If you incur travel expenses on behalf of the corporation, those are corporate expenses. You either need an agreement saying you can deduct the expenses personally or that you will submit the expenses for reimbursement. One of these two choices is really bad.

How Berge Earned Business Deductions on Trips to See His Parents

If you drive 36 miles to your parents’ home but spend time that day doing business research in the library around the corner from your parents’ home, are those 36 miles business or personal miles? They could be business miles. You need two types of proof: (1) library proof and (2) vehicle proof. How would you prove that you used the library? How would you prove that you drove the miles?

Tax Deductions for Personal Car Used for S Corporation Business

Let’s say you operate your business as an S corporation but use a personal car for corporate business. To create the proper tax deductions, the right way to handle this situation is for the S corporation to reimburse you using one of two tax law-approved methods.

Tax Deductions for Entertainment Facility; Part 4, Vacation Home

The entertainment facility rules are designed to destroy your entertainment facility deductions. But the law contains a number of exceptions. In Part 4 of this series, you learn how to use the business meeting and overnight lodging rules to make your vacation home a tax-deductible business asset.

Obamacare Revives S Corporation Income-Shifting Strategy

Find out how giving stock in your S corporation rather than the same dollar amount in cash can save you over $6,000. Until recently, this income-splitting strategy worked only when giving to adults, but because of the recent Obamacare tax, you now get a benefit when you shift money to your children.

Don’t Let Your Tax-Deductible Receipts Fade and Disappear

Learn how today’s restaurant and other receipts printed on thermal paper can create big trouble for your tax deductions. Over time, the images on thermal paper can totally disappear. And of those that have not yet totally disappeared, you have many that you can’t read. This means you need to create a plan that includes scanning or photocopying thermal receipts.

Tax Deductions for Entertainment Facility (Part 3), Employee Use

Learn how employee use of your ski cabin or beach home produces a 100 percent business asset with deductions for depreciation, operating expenses, and mortgage interest. This can make for a great fringe benefit for both the employees and you. It also can make for a profitable investment.

Incorporating Your Proprietorship

When you incorporate your business, you have to decide which assets you want to contribute to your new corporation and which you want to keep in your own name. For some assets, you get better tax benefits and better liability protection when you don’t transfer them to your corporation.

Does Your Section 105 Plan (HRA) Work for You after Obamacare?

The new 2014 Obamacare tax rules that apply to health reimbursement accounts (HRAs) such as Section 105 medical reimbursement plans make it difficult and impractical to have a Section 105 plan or other HRA when you have two or more employees. But if you have no employees or only your spouse as an employee, you escape the jaws of Obamacare and your Section 105 or other HRA plan gives you all the good tax benefits that you had before Obamacare.

Own Rental Property? Escape the Obamacare Tax—Use New IRS Rules

Are you subject to the new 3.8 percent Obamacare tax? Do you own rental property? If so, use one of the three escapes in this article so that your rental property can avoid the 3.8 percent tax. The three escapes revolve around the concept of a rental property as a trade or business property. The IRS just released new safe-harbor rules making it easy for some owners of rental real estate to qualify their rentals as trade or business property exempt from the 3.8 percent tax.

Buying a Business? Protect Your Investment and Deduct It, Too

When you buy a business, buy the assets—not the stock. The assets will significantly increase your tax savings in the early years of your new business. This article gives you the nuts and bolts of buying a business. It even explains how you can buy the stock of the target corporation and treat the stock purchase as an asset purchase.

4 Tactics That Turn Suspended Passive Losses into Tax Deductions

When you sell your rental property activity, you get a gift of sorts in that you now get to deduct the losses denied in earlier years. Tax law calls the denied losses suspended. To ensure realization of your rightful tax deductions, you need to avoid the hidden traps in this process that delay or prevent you from using your suspended losses. Make sure you know the right way to sell your rental property or activity in order to free up your losses for immediate tax deduction.

Tricky Step 1 to Making Your Rental Property Tax Deductible

If you have to show that your rental property activity rises to the level of your being in a tax-law-defined real property business, be sure to involve yourself in the day-to-day management in order to avoid the investor time trap that can cost you your current-year tax deductions for your rental property losses.

2014 Attack by Obamacare on Section 105 Medical Plans (HRA Plans)

For tax years’ beginning after December 31, 2013, Obamacare contains good and bad news for Section 105 medical reimbursement plans—health reimbursement accounts (HRAs). Bad news: the new health law requires that you pay for group health insurance if you want a Section 105 plan for more than one employee. Good news: with one employee only, such as your employee-spouse or yourself if you operate as a C corporation, you don’t have to buy group health and you can reimburse expenses as you always have.

HSA Solution to Obamacare

Do you employ 50 or fewer employees? Are you looking to do something on the health care front, but not interested in the group health insurance option? Health savings accounts (HSAs) could be exactly what you are looking for, especially as Obamacare becomes law.

Five Strategies to Avoid the New 3.8 Percent Obamacare Tax

The new 3.8 percent Obamacare tax on investment and passive income makes its debut on your 2013 tax return. Are you ready? Have you made a plan to avoid or minimize the tax? You should. And you can. In this tax-planning article, you’ll find five real-world tax reduction strategies to keep your money safe, happy, and in that place where it belongs—your pocket.

10 Last-Minute Tax Deductions for Business Vehicles

Your tax-benefit time for your business and personal vehicles is running out on December 31. If you are going to do something, do it now. This article gives you 10 year-end tax-benefit strategies for replacing or adding a business vehicle.

Year-End Tax-Benefit Strategies for Investments in Stocks

You can achieve year-end tax benefits by offsetting your stock market gains and losses in the right way. You also can make a gift of appreciated stock to charity, which will increase your tax benefits over what you would achieve with a cash gift. Be careful here though, as a gift of depreciated (versus appreciated) stock to a charity decreases your charitable deductions, costs you cash, and makes you unhappy when you find out what you’ve done.

Creating Year-End Medical and Retirement Plan Tax Deductions

In this article, you’ll learn how to create and/or ensure medical and retirement deductions before December 31. Of course, you need to get busy now. There’s not much time left. And if you are one of the targets who’s now subject to the new, higher tax rates that apply in 2013, you will find year-end planning more beneficial than ever.

Create Year-End Tax Deductions with Simple Business Expenses

If you have been waiting until now to start looking for some new and easy tax deductions to lower your 2013 taxes, this article has ideas you can use. For example, (1) using the IRS safe-harbor prepayment strategy or (2) simply using your credit cards to pay some bills gives you great last-minute deductions. In this article, you’ll find five last-minute tips for creating 2013 tax deductions.

Year-End Tax Deduction Tips for Kids and Marriage

You have some last-minute tax deduction opportunities with your family. Do you have children under the age of 18? If so, you should consider having them on the payroll. In this article, we explain how you benefit. Also, your marital status gives tax-planning opportunities. Have you been giving cash to relatives, other than your under-age-24 children? If so, you need to consider the 0 tax-bracket strategy in this article.

IRS Makes Income Limit Mistake on the Home-Office Deduction

What happens if the IRS makes a mistake in its publication or instructions? Is this your problem, or what? And how would you know if the IRS made a mistake? This article explains how the IRS made a mistake in its publication and in its instructions on the gross-income limit that applies when you want to claim the home-office deduction and have more than one place of business.

Test Your Tax IQ: Gain on Sale—Create Tax Benefits

You likely have a handle on how the acquisition of a new asset is going to give you tax benefits. But have you considered the asset you are replacing? Your first step with the asset that’s going good-bye is to see whether you have a gain or loss. If you have a loss, see last month’s article. If you have a gain, take this short test to make sure you are getting maximum tax benefits.

S Corporation Tax on Built-In Gains Is Trouble

Are you thinking of converting your C corporation to an S corporation? If so, you need to examine how the built-in gains tax can create trouble for you. Of course, once you know some of the trouble, you can find ways to mitigate it, and if you are patient, you can totally avoid it.

Good-bye, S Corporation; Hello, C Corporation or Proprietorship

Tax rates are changing. You completed a side-by-side comparison of your S corporation with other entities, and you decided that it’s time to convert that S corporation to a C corporation or a sole proprietorship.

Surprise Tax Deductions for Built-In Desk

Tax law treats the built-in desk as either personal or real property depending on where you locate the desk. The personal location, such as your home, can make the built-in desk real property whereas the commercial location, such as your home office, makes the built-in desk personal property. In business, you want the personal property classification so that you can get the vastly quicker write-offs.

Tax Deductions for Entertainment Facilities (Part 2), W-2 and 1099

You have many ways to make your entertainment facility tax deductible. For example, you can treat use of the facility as compensation to the users. Tax law tags two types of people in your business for purposes of entertainment facility W-2 and 1099 compensation: “specified individuals” and others. For specified individuals whose use of the business beach home, ski lodge, or other entertainment facility creates taxable compensation, tax law limits the business’s deduction for its entertainment facilities. For compensated taxable use by nonspecified individuals, the business faces no special limits on deductions for entertainment facilities.

How to W-2 the Vehicle You Provide to an Employee

You provide your employees with an automobile for business use. You know that their personal use of the vehicle must be included in their wages, but how do you calculate that amount? What valuation rules are available? This article tells you what your choices are and how to apply them.

Test Your Tax IQ: Realizing Tax Benefits of a Loss Deduction

Let’s say that you calculate a tax loss on the sale of your business vehicle. Tax law gives you tax benefits from a valid tax-loss deduction. But you need to make the right move to realize those tax benefits. And when it’s time to dispose of your old business vehicle, you have a number of choices, only one of which will produce immediate tax benefits for you.

Avoid These Common Mistakes When Converting to an S Corporation

Are you thinking of converting your business to an S corporation? The IRS will be watching you closely. Learn to avoid the common mistakes that many business owners make.

IRS Rules Same-Sex Married Couples Are Legal Spouses for Taxes

The IRS just ruled that a same-sex married couple are spouses for federal income tax purposes. This means the same tax deductions and tax benefits that accrue to other married couples now accrue to same-sex married couples. The IRS ruling is a direct result of the Supreme Court’s decision in Windsor. This article sets forth business and personal tax breaks that marriage provides.

Music Business Beats the Unfair Hobby Loss Rule

See how this musician could lose money for seven years in a row and prove that he was in the music business to make a profit. This was important. By winning his case, he cut his taxes by more than $17,000 for the two years at issue before the court. If you have an activity that you hope is a business activity, but that might be a hobby, you need to read this article.

Tax Deductions for Entertainment Facilities (Part 1)

How would you like a business tax deduction for your yacht, hunting lodge, hunting lease, airplane, beach cottage, fishing camp, swimming pool, ski lodge, or tennis court? Tax law contains a clear set of rules that you can follow to create such deductions. And as you would expect, the rules are pretty demanding.

Tax and Liability Answers for Business Owner’s Rental Properties

If you are a sole business owner and also have 10 unrelated rental properties, what are the tax ramifications of the rental properties? How is the income from those properties reported to the IRS? What is the best way to structure ownership of those properties to limit your liability exposure? This article addresses these questions and more.

Are Overhead Disability Monies Subject to Self-Employment Taxes?

Do you have disability insurance? Is your disability protection a traditional disability income policy or a disability overhead expense policy? If you become disabled, do you have to pay self-employment taxes on the benefits that you receive? This article explains what you need to know about the disability policies and the self-employment tax.

Make Your Section 105 Plan Work in Retirement

Let’s say that you have the Section 105 medical reimbursement plan in place that benefits you and your family. What happens if you or your employee-spouse retires? Here’s good news. With planning, your Section 105 plan can continue into retirement.

Impact of Death, Retirement, and Disability on the 179 Deduction

Have you purchased vehicles for use in your business? Did you take a 179 deduction for them? What happens to your deduction if you retire or become disabled before the end of the vehicle’s useful life? What if you die? This article gives you what you need to know.

Mom Dies: Daughter Inherits and Fixes Five Inferior Annuities

Say you inherit an annuity. That’s nice. But when you examine the annuity you find that it’s a bad investment; what can you do about it? Answer: plenty! This article shows you how a Section 1035 tax-free exchange can work to your benefit. Note the words “tax free.” That’s lovely, a tax-free fix for a bad annuity.

Court Denies Tax Deductions for Motorhome and Two Business Cars

Say the IRS sent you one of those lovely letters that says: “Come on down and bring your tax records with you.” How would your tax records hold up in an IRS audit? That’s a scary question. You need to make sure that you have this one tax record in good shape when you appear for an audit. Mr. Dunford, the subject of this article, failed that one record and it cost him plenty.

Test Your Tax IQ: Tax-Deductible Cruise Ship Travel

You may deduct your costs of business travel. But what happens to your deductions when you travel by cruise ship? Do the rules change? Do the rules vary by business destination? The answer is that the tax-deduction rules change for cruise ship travel and they change by business destination.

Escape the Lobster Trap of Corporate Tax

You might simply file a form to convert your business from a corporation to a sole proprietorship, but this simplicity can trigger unexpected taxes galore. Don’t let the taxes surprise you. Evaluate the tax costs. See if the conversion works to your best financial advantage. Also, make sure to examine tax law’s three special tax-benefit techniques available to small-business owners.

Repair That Vacation Home

Do you have a vacation home rental? Do you use it for both rental and personal purposes? If so, you need to know the rules on what makes a repair day. Why? Repair days do not count as either personal or rental days. And that’s only part of the story.

Being Married!

Do you gain or lose tax advantages when you marry? Lawmakers have tried to deal with the marriage issue for years, and they have made multiple changes in the laws. But there’s no perfect law, so winning and losing because of marriage still exists.

Big Mistake: File Your Tax Return Late

What one mistake can you make with your taxes that will cause you to pay penalties of up to 47.5 percent? And that’s not the worst part. What could be worse than a 47.5 percent tax penalty? How about both the penalty and a full-blown IRS audit? That’s far worse.

Oops! Loan Guarantee Sinks Self-Directed IRA

Taxpayers get into a self-directed IRA to achieve investment returns larger than they can achieve with conventional IRAs. Whether that works out or not is the investment side, but another big issue is the tax side. In this court case, the taxpayers learned that they destroyed their self-directed IRA on the first day. Thus, during the six years this self-directed IRA operated it did not exist under the law. This put the IRA owners on the hook for taxes and penalties.

Test Your Tax IQ: Can You Deduct Dutch-Treat Entertainment?

Business entertainment is tax deductible even when you pay only for yourself. That’s because entertainment tax deductions are based on the activity, i.e., whether it’s bona fide business entertainment, not on who paid for whom.

Fatal Error Makes Management Service Firm Fail as a Tax Strategy

Would you like to find more tax deductions for your business? This taxpayer created an ESOP as one way to gain more tax benefits from his business. He also created a management services corporation to provide services for his existing corporation. But he made one common and most tragic error. He just did not do the work.

Tax Treatment of Vehicles Provided for Employees

Have you considered providing your employee with an automobile? Would that automobile be used by the employee for business purposes or personal purposes? The tax effect for the employee depends on the answers to that question. This article gives you what you need to know.

Shedding Doubts about the Home-Office Tax Deduction

Are you timid about claiming your rightful home-office deductions, especially when you have a business location outside your home? You’re not alone. This article addresses the rule that causes much misinformation and worry. Join us as we dispel this home-office deduction doubt!

Bank Is Not a Work Location for Commuting Rules

Does stopping at the bank create business miles and eliminate personal miles? Is the bank a business stop for purposes of the temporary stop rules? This article explains the mileage rules that apply when you drive to the bank.

New IRS Optional Method for Home-Office Tax Deduction: A Good Deal?

The IRS created a new optional method that you can use to calculate the tax deduction for an office in your home. Obviously, this brings up a question: Does the IRS like you, or does the IRS hate you? The IRS reveals itself in this new optional method.

Danger: Your Personal Home Is Not Your Tax Home

Depending on how you operate your business and where it’s located, the federal income tax terms “personal home” and “tax home” can have a big impact on your business vehicle deductions. And then there’s the difference between the federal income tax terms “business travel” and “business transportation” and how one rule applies when you are inside the area of your tax home.

Test Your Tax IQ: Can Charity Double Entertainment Deductions?

As with other forms of business entertainment, taking a prospect, colleague, or client to a sporting event is deductible at the rate of 50 percent of costs. But, as this scenario illustrates, if the sporting event you and a prospect, colleague, or client attend is a certain type of “charitable sporting event,” your costs are 100 percent deductible.

Tax-Deduction Benefits for Section 105 Plan

This article answers Section 105 medical reimbursement plan questions from two 1099 independent contractors, a husband and wife, who work for the same firm but file separate Schedule Cs. The good news is that they can substantially increase their medical deductions by using a Section 105 medical plan where one spouse becomes the employer-spouse and the other becomes the employee-spouse.

Tenant Improvements Bonanza to Landlord

Do your tenants improve your property? Should they? Under Section 109 of the Internal Revenue Code, landlords receive the tenant improvements at termination of the lease free of income taxes. “Tax free” is what you have to call a nice package of tax benefits.

Cut the Spouse’s Tax Cost of Inherited IRAs

Inheriting an IRA used to mean a heavy estate tax and federal income tax burden. But recent changes to the estate tax have significantly reduced this burden. Further, spouses have special income-tax planning techniques available that can make inheriting an IRA today a much happier experience.

Tax Deduction for My Personal Seat License

Have you considered buying a personal seat license so that you can buy season tickets to watch your favorite football, basketball, hockey, baseball, soccer, or other team? Would you use the tickets for business purposes? If so, then you need to know if you can claim tax deductions for the cost of the seat license. This article tells you what you need to know.

Myth: Home-Office Tax Deduction Is a Red Flag for IRS Audit

Don’t claim that home-office tax deduction! It’s a red flag. Whoa! What’s a red flag and who says so? This article debunks the red flag for the home-office deduction.

Make Your Rental Property Losses Tax Deductible

The rental property tax-shelter game is for those who know how the rules work. Your rental property acts as a tax shelter when you can claim tax deductions for your rental property losses against your other sources of income. To qualify your rental properties for tax shelter benefits, you need proof of hours worked on your rentals. You win the tax shelter test when you (1) pass a 750-hour test, (2) pass a second, more-hours-in-real-estate test, and (3) pass an hours-worked material participation test for each shelter property or group of properties, if elected.

Protect Your Tax Deductions for Business Entertainment Meals

Lawmakers reduced your deduction for legitimate business entertainment meals from 100 to 80 percent in 1986 and then from 80 to 50 percent in 1993. That might be good news. It could protect you from the dreaded Sutter rule, where you could lose all your entertainment meal deductions if you didn’t spend more, or differently, than you spend on yourself. Yes, tax laws can be strange.

Test Your Tax IQ: Home-Office Tax Deduction with Regular Office

You can’t claim a home-office deduction if you also have a second location for your business outside the home. Right? Wrong!!! Here’s why.

Tax-Deferred Exchange of C Corporation Stock? Yes, It’s Possible

How would you like to buy a small business, sell it at a huge profit, and defer the taxes as if you had completed a tax-deferred exchange? You can. It’s not a Section 1031 exchange. But it can give you the same exact tax deferral that you can achieve with a Section 1031 exchange. You find this great benefit in Section 1045 of the Internal Revenue Code.

Ouch! Vehicle Totaled! Tax Benefits to Know

If you wreck your business vehicle, you will like the involuntary conversion rules that allow you to defer any taxable gain, providing you replace the vehicle within two years. This is true regardless of how you operate your business, corporation, or proprietorship.

Rats! Related Parties Destroy Qualified Leasehold Improvements

As the landlord or the lessee, you get big tax breaks when you can take advantage of a qualified leasehold improvement. We gave you those details last month. But if the landlord and the lessee are tax law-defined related parties, you can kiss those tax-favored benefits good-bye. In this article, you learn who those related parties are so you can avoid the kiss good-bye.

Test Your Tax IQ: Can You Depreciate Antiques Used in Business?

Antique desks, clocks, cabinets, bookcases, rugs, conference tables, paperweights, and even cars can add character and beauty to an office. Antiques also make a great investment because they appreciate in value. And here’s one more neat thing about antiques: you can expense them under Section 179 of the tax code if you (1) actually use them to conduct business; and (2) such use causes wear and tear to the antique.

How Your S Corporation Gets Tax Deductions for the Corporate Car

Do you operate your business as a corporation? Does the corporation own the business car? Do you drive the corporate-owned car or other vehicle for personal purposes? If so, you need to know how the IRS treats your personal use and what that personal use does to the corporate tax deductions.

Tax Deduction for Disneyland Tickets

When you attend a convention or similar meeting, your attendance automatically qualifies as you having a substantial and bona fide business discussion. When you precede or follow a substantial and bona fide business discussion with entertainment that takes place in a non-business setting such as going to Disneyland, you qualify to deduct the cost of the Disneyland tickets.

Tax-Free Rental of Personal Home to Owner’s S Corp., Q&A

This article answers six questions about the big tax benefits to the sole owner of the S corporation who rents his personal residence to his solely owned S corporation for 14 days or less. The answers deal with (1) the need for a 1099, (2) how to report the 1099 on the 1040, (3) multiple corporations, (4) events for independent contractors, (5) events for employees, and (6) proof of fair rent.

How Mortgage Brokers Can Beat the AMT Caused by the FHA and IRS

The Federal Housing Authority (FHA) guarantees loans so that lenders can make mortgage loans with lower down payments, lower closing costs, and easier credit qualifications. When the mortgage crisis hit, the FHA changed the rules for mortgage companies that had independent contractors brokering FHA mortgages. The change allowed only W-2 employees to sell FHA loans, and thus many mortgage companies converted their brokers from independent contractors to W-2 employees. For many, this new W-2 status produces a totally unfair tax result that can be overcome with knowledge.

Huge Tax Deductions for Landlords and Tenants, Last Call

Do you own an office building or commercial retail building that you lease? Are you a tenant in an office building or retail space? Are you considering some leasehold improvements to the space? If so, you need to get your act together lickety-split, as time is running out on IRS-approved huge tax deductions for “qualified leasehold improvement property.”

Tax Deduction for Home Office with Two Businesses

Your ability to deduct a home office is straightforward until you allow your spouse to use the office or you add a second business to the mix. When your spouse uses the office or you add a second-business, your home-office tax deduction becomes more complicated.

Tax Deduction for Parking at the Office

Do you own your business? Do you pay parking for yourself? An employee? If so, you need to know how the tax-free fringe-benefit rules for parking work, as explained in this article.

Know Two Major Rules for Tax-Deductible Business Entertainment

Your business entertainment tax deductions fall into one of two business categories for deduction. The first category requires that the entertainment take place in a business setting. The second category triggers a piggyback entertainment deduction for the non-business setting, such as golf or scuba diving. Once you know the two rules, you have clarity in knowing how to claim your tax deductions for business entertainment.

Maximum First-Year Tax Deduction on a Business Vehicle

How much of a vehicle deduction do you want from your business-vehicle purchase? A lot? A little? Could lawmakers trip you up in your desires? Absolutely. There are big differences in what you can deduct, depending on whether you buy a pickup truck, SUV, or car. Further, the differences among the categories depend on the weight of the vehicles. You need to know what the differences are if you are going to get the vehicle deduction you want.

Six Tax-Deduction Concerns about Renting My Home to My S Corp.

Last month we explained how an S corporation could rent the sole shareholder’s personal residence for 14 days or less, obtain a tax-deduction for rent, and create tax-free income for the shareholder. An enrolled agent raises six issues that he thinks could negate this free-rent strategy. Learn what the issues are and why the strategy works.

How to Maximize Tax Deductions on New Business-Vehicle Leases

You may be leaving thousands and even tens of thousands of dollars in unclaimed tax deductions on the table if you traded in a vehicle you owned on the lease of a business vehicle. Here’s a look at why the money gets left on the table. It’s a simple matter of thinking that this was a trade. For tax purposes, it was not a trade. And that’s usually good for your pocketbook.

Do You Make This Big Mistake with Your Independent Contractors?

If you have workers who are paid on a 1099 as independent contractors, you need to avoid one fatal mistake. When you make this fatal mistake, you subject your worker employment classification to either the tax court’s common-law seven-factor test or the IRS’s 20-factor common-law test. Both of these tests are hard on the employer and often result in harsh reclassification of the 1099 independent contractors to W-2 employee status.

 

This Mistake Causes You to Pay Your Payroll Taxes Twice

Is your last payment of payroll taxes in the hands of the IRS or in the hands of an embezzler? How would you know? There’s one easy way to know: simply use the IRS’s online service to check. But that’s a lot of trouble, so why bother? Because if the money has been stolen, you (1) are out the money and (2) have to pay that same amount to the IRS. If you have to pay twice, you are going to be furious. Don’t let this happen.

 

Are You Cheating Yourself of Tax-Deductible Entertainment?

Are you treating your business entertainment correctly? For example, do you cut your deductions if the entertainment rubs against the lavish or extravagant rule? Are you cutting your entertainment expenses for the 50 percent rule? Learn why it’s easy to misunderstand the lavish or extravagant and 50 percent rules and how that could be hurting your business entertainment tax deductions.

Tax-Free Rental of Home to S Corporation

Do you operate your business as an S or C corporation? If so, have you considered renting your home to your corporation for corporate meetings and perhaps the annual holiday party for employees? You should. Why? If the rental is done right, the corporation deducts the rent, and you receive the rental income tax-free.

Clarifying Flow Chart for S Corporation Health Insurance

The flow chart in this article helps you visualize what needs to happen at the S corporation for the owner-employee to get any tax benefit from health insurance. The tax rules are not what you would call logical, but the flow chart clarifies the rules and gives you the path to follow to ensure your tax deductions.

Increase Tax Deductions for Business Meals at Employee Meetings

As you likely know, tax law contains a number of rather ugly rules. One such rule is the disallowance of 50 percent of certain meal and entertainment costs. For example, party with your employees and get a 100 percent deduction, but have a serious meeting with your employees in a restaurant and you are stuck with the 50 percent deduction. Interestingly, there is a totally different rule that gives you better tax deductions when you serve the business meal to your employees at a meeting that takes place on your business premises.

IRS Agent Denies Mortgage Interest on Home-Office Deduction

Tax law limits the home mortgage interest deduction to a maximum mortgage balance of $1.1 million. But what happens when you have an office in your home for which you claim tax deductions and also have a mortgage in excess of $1.1 million? In this article, the IRS agent incorrectly disallowed some home-office mortgage interest, and the tax professional had difficulty finding the tax law that would overcome the disallowance.

Trap to Avoid: Leasing When You Thought You Were Buying—or Vice Versa

Once you decide whether to buy or lease your business vehicle, you need to ensure that the actual transaction you enter into is the one you intended. It’s not simply a matter of what you call it. The actual terms of the agreement must make it a “true lease” or a purchase. If the IRS finds that the lease is not a lease or that a purchase is not a purchase, the IRS re-characterizes the transaction, charges you additional taxes, and then hits you with hefty penalties.

Answers about Tax-Deductible Business Travel

If you intend to travel to a business or personal location, you should check out the travel rules before you take the trip. This article sets the stage for what you need to consider. You might find that what you thought was going to be a personal trip is instead a tax-deductible business trip.

Test Your Tax IQ: Deducting More than One Business Vehicle

This article contains a short quiz that will help you understand when you can gain tax deductions by using more than one vehicle for business. You will see what the IRS has to say about driving more than one vehicle, how the mileage log works when you drive more than one vehicle, and what it takes to make this pay off for you.

Tax Deductions for Mileage to Rental Properties

How do you treat a trip from your home to your rental property? Does the trip produce deductible mileage? Or is the trip a personal commute? If it’s a personal commute, what could you do about it?

Buy or Lease a Business Vehicle: Which Costs Less?

Although personal considerations come into play, the choice between buying and leasing a vehicle for your business ultimately boils down to cost. So it’s essential to understand how to compute and compare the costs and to have the right tools to make those computations easy. This article gives you what you need.

How to Prove Expenses for Tax-Deductible Business Travel

Whether you operate your business as a corporation or as a proprietorship, you need to record your tax-deductible travel expenses in an IRS-approved manner. This means you need to know technically what a receipt is and when you do and do not need one. By the way, the credit card statement is not a receipt. This report explains how to keep your tax records, gives you an easy record-keeping resource to use, and helps you build audit-proof records that prove your travel expenses.

Weird, But Higher Tax Rates Increase Rental Property Profits

Our rental property analyzer reveals the truth about your rental property and gets you to bottom-line results that you can fully understand. The new higher tax rates impact your rental property. We suspect that you already knew that. But did you know that the higher tax rates could give you a better bottom line (i.e., more after-tax cash in your pocket from the investment)? This article explains how higher taxes work to your benefit.

S Corporation? Beware of Ugly Tax Rules on Your Health Insurance

When you operate your business as an S corporation, you run into some weird tax-deduction rules, like those that apply to health insurance. For example, the S corporation may not deduct the cost of your health insurance as an employee-owner fringe benefit. Then, if you pay for the health insurance personally, you may not personally deduct the cost of the health insurance as a self-employed individual. Tax law has you in a classic catch-22. But there is a workaround that’s very straightforward and beneficial as described in this article.

1031 Exchange Survives Rental to Son

If you own rental properties, enjoy being in that business, and want to grow that rental property business, you need to know the ins and outs of the Section 1031 exchange. The word “exchange” is misleading; what you really do in a 1031 is sell an existing property and then buy a new property, but you do this using an exchange intermediary. It’s easy and the intermediary is not expensive. In this article you will learn how to avoid Mr. Adams’s fate as we follow him to court with an exchange that involved a rental to his son that raised issues with the IRS.

Retirement Plan Design When You Have Employees

Employees complicate your retirement plan design, but you have many design options. This article takes you through six plan designs that open your eyes to the many possibilities you have to ensure that you get from your retirement plan the maximum retirement benefits you want.

Cashing In on Your S Corporation’s Profits

Are the S corporation dividends (technically distributions) taxable? If so, how does that work on my personal tax return, and how do I then get the money out of the S corporation?

Choosing the Right Retirement Plan Design

Have you considered the options that are available to you in designing your retirement plan? In this article, you will see how you might put away as much as $214,404 when you earn only $140,000. On the other hand, you might not want to put anything into retirement this year, and this article explains how your plan design can enable a zero contribution.

Tax Preparation Firm Charges Illegal Commissions

One of our subscribers encountered a tax preparation firm that charges a commission for amending past returns. Our subscriber asked this question: “Is such a commission legal?”

Tax-Deductible Loss on Sale of Timeshare

What happens if you buy a timeshare and then sell it at a loss? Is the loss deductible or not? Your answer depends on how you used the timeshare. Did you allow it to be rented to others? Did you use it for business stays? What about personal use?

Critical Tax-Deduction Proof for Nine-Day Trip to Jamaica

If you take a nine-day trip to Jamaica, how many days devoted to business do you need to make the trip tax-deductible? What happens when you spend one of those days doing no business and simply playing on the beach? The critical elements in this article give you a crystal-clear explanation of when and why you can deduct certain days, even those days when you do no work.

Creating Tax Deductions for an Entertainment Facility

Tax law picks on “entertainment facilities” and makes them difficult to deduct. This is where tax planning comes in. With good tax planning, you can create deductions for your entertainment facility.

Buy or Lease: 10 Tax and Money Factors That Decide

Buy or lease? That is the question you must answer when you acquire a new vehicle for your business. Unfortunately, like most business owners, you may simply not know the right way to weigh the options. Result: You could end up paying more than you should and/or miss out on glorious tax savings. Here’s what you need to know to ensure this doesn’t happen.

Pay More Taxes Now

The fiscal cliff is coming on December 31 unless lawmakers do something. What does that mean to you? Does it mean you should pay more taxes this year? Perhaps. For insights into what you need to consider, read this article.

Avoid the Section 179 Gotcha When Renting Equipment to Your Corporation

If possible, you want to take money from your corporation in some form other than salaries and wages, on which you pay payroll taxes. One such tactic, the lease of Section 179 personal property to your corporation, can accomplish this, but it rubs against one big gotcha and two steep hurdles. This article shows you how to avoid the gotcha, avoid the hurdles, and get the result you want.

IRS Retreats on Repair Regulations

To repair or improve your property? That’s the question. But should you have to wade through 256 pages of regulations to get the answer to whether your fix-up is a repair or an improvement? Perhaps not. The IRS is giving you an out on those 256 pages, at least until 2014

How to Qualify Conventions and Seminars for Tax Deductions

It’s easy to think that a business convention, seminar, or similar meeting is deductible when in fact it is not. The meeting could be in the wrong location. It might have the wrong people in attendance. Its purpose might not rise to the level needed for deduction. Protect your deductions for conventions, seminars, and similar meetings by knowing the rules in this article.

Tax Deduction for Classic Car Used in Business

How does the tax law treat the classic car when you use it for business? Can you deduct it just as you would any car you use in business? Learn how some tax law changes enabled the classic car as a business asset and why that can work to your advantage.

Tax Loss Trapped by Trade-In of Business Car

As a subscriber, you likely remember that the trade of a business car for another business car is a Section 1031 exchange. Most businesspeople and real estate investors use the 1031 exchange to avoid paying taxes on the profits that would exist if the asset had been sold outright. In this article, you see how poor Mr. Bird made a $47,000 tax loss not deductible because he used Section 1031 when he traded in his old car on a new car.

How to Claim No Depreciation on Your Home-Office Deduction

You might have asked yourself this question: Can I claim the home-office deduction and not claim depreciation as part of that deduction? The answer: Yes, but you need to have records that prove your zero amount. And then there’s the sad fact that you likely cheat yourself out of some after-tax cash by not claiming your depreciation deductions. This article explains how this works and more.

401(k) Reduces Penalty on Social Security Benefits

When you draw Social Security benefits before you reach full retirement age, you lose 50 cents on the dollar for each dollar that exceeds the earnings limit. With respect to the earnings limit, you find both good and bad news in 401(k) contributions.

New 2013 IRS Standard Mileage Rates

The IRS just released the new 2013 standard mileage rates. For business purposes, you can use the standard mileage rates in lieu of actual expenses for depreciation and operating expenses of the vehicle. It’s different for charity, medical, and moving mileage. Here, the rate is in lieu of “out of pocket” operating expenses only.

5 Year-End Tax Tips for Business Receipts and Expenses

Are you looking for more business tax deductions this year? It’s not too late. Learn five last-minute tax-planning strategies that you can implement now so you lower your taxes this year.

6 Year-End Medical and Retirement Tax Tips

In this article, you’ll learn four tax-planning strategies for your medical deductions and two strategies for your retirement. If you want to implement the strategies for 2012, you need to get busy now. There’s not much time left, and one of these strategies requires action before December 1.

9 Year-End Business Vehicle Tax Tips

If you want to do something with your business vehicles this year, you don’t have much time left. This article gives you the year-end strategies you need to ensure maximum tax benefits should you decide to replace or add a business vehicle.

4 Year-End Tax Tips for You and Your Family

Should you get married or divorced before December 31, 2012? What about your children—do you have them on the payroll? And what about the cash gifts you have been giving to your favorite aunt to help her in her later years—are you doing this gift the best way? You’ll find the answers to these questions in this article.

3 Year-End Tax Tips for Capital Gains and Stocks

Are thinking about harvesting your tax losses? You should be. Leaving tax-deductible losses on the table at the end of the year is very disappointing. And then there’s the stock gift to charity. Are you doing these correctly so as to maximize your tax benefits? Make sure by reading this article now.

Shellitos Win Their Section 105 Medical Reimbursement Plan Deductions

Good news. As you may remember from our previous article, the 10th Circuit Court of Appeals sent the Shellito case that involved a Section 105 medical reimbursement plan back to the tax court. We report in this article good news: The tax court reversed its original decision and granted the Shellitos their deductions. Most importantly, this reversal adds clarity to making your Section 105 medical reimbursement plan work.

Ouch! Court Rules That This Investor Is a Real Estate Dealer

Do you invest in real estate? Are you an investor or a dealer? Make sure you put the nine factors to work for you in your proof of investor or dealer status.

Tax-Deductible Reasons for Business Travel

One of the many benefits to owning your own business is the ability to deduct travel expenses, especially when you combine pleasure with business travel. You likely know lots of reasons for legitimate business travel, but this article will add new reasons and additional knowledge.

You Can Switch from the IRS Mileage Rate to the Actual-Expense Method

Are you currently using IRS mileage rates to deduct your business vehicle? Is that the right choice for you? If not, you will be happy to know that you can switch to the actual expense method. The IRS gives you two different ways to do the switch, depending on when you want to make the switch.

Taxman Says Stop at the Bank to Eliminate Commuting—Wrong

Have you ever wondered what you can do to eliminate commuting mileage? Perhaps you received some advice on how to do this. Was the advice correct? In this article, a tax preparer told a physician that she could deduct her mileage to her regular office if she simply stopped at the bank every day. Unfortunately, this advice is wrong.

How Would Your Mileage Log Stand Up to an IRS Audit?

Your mileage log may not be an estimate of mileage. Further, you need a mileage log that proves mileage. With a weak, suspicious, or error-filled mileage log, by law, neither the IRS nor the courts may give you any vehicle deductions—and we mean none, not a penny.

How to Deduct Travel by Car, Train, Plane, or Boat

You have a wide variety of choices on how to travel for business. You can use a car, train, plane, or boat. You can fly economy, business, or first class. Should you own a plane, you can use it for business travel. Special rules apply to the plane, boat, and car; accordingly, if you travel for your business, you should know the rules in this article.

IRS Audit Defense Insurance Fails Totally

Doing your taxes yourself using tax preparation software is dangerous business. You might realize the danger up front and decide that you need some type of audit defense or representation insurance in case of an IRS audit. And then, once the audit commences and you engage your audit defense team, find yourself in the soup like the couple in this article.

Tax Deductions Lost in Owner’s Equipment Rentals to His Corporation

If you, or another entity you own, rent buildings or equipment to your business activity, you likely face the self-rental rules. If you are unsure of what the self-rental rules mean and you have these types of rentals, you absolutely need to read this article.

Learn What Happens When You Convert an Asset from Business to Personal Use

Although you might have thought you converted an asset from business to personal use, you did not. You now simply use the asset for personal use and that changes your business/personal mix. The business asset retains its business attributes and that means gain, loss, and recapture at the time of ultimate disposal.

Tax Breaks on Shift of Corporate Ownership to Kids (and Others)

When it comes time to remove yourself from your business, what’s your plan? This article gives you one maneuver to consider if you operate your business as a corporation. It’s called the stock redemption, and this article shows how a father used the redemption to transfer ownership to his children in a tax-friendly manner. The principles in this article can also be used to transfer ownership to business associates, employees, and other shareholders

New Rules Reveal Six Ways to Lower Taxes on Your Personal Use of Your Corporation’s Airplane

Do you own an airplane? If not you, how about your corporation? This month, we are writing about the new IRS regulations that govern your use of your C or S corporation’s aircraft. In this article, you will find more than a half dozen strategies that you can use to minimize the tax bite caused by personal use of your corporation’s aircraft.

How to Deduct the Transportation Component of Your Business Travel

Your tax deductions for the transportation component of your overnight business travel face a set of rules separate from the business-day rules we examined last month. When in the 50 United States and the District of Columbia, you deduct your transportation cost under the 51/49 test. When you travel outside the 50 United States and the District of Columbia, you are subject to the 76/24 test for deducting your business transportation. And, as mentioned, the calculation for deducting the cost of transportation is separate and apart from calculations for deducting meals and lodging.

Do You Have These Four Tax-Deductible Business Mileage Questions?

Here are four answers to questions you might have regarding your business mileage, such as how to treat mileage from an administrative office in the home to yoga and then to your downtown office. Or how would you treat mileage to a Lions, Rotary, or Shriners meeting or activity? This article gives you both ideas and answers.

Motorhome Tax Deduction Questioned in My IRS Audit

When you use a motorhome for business travel, what tax rules do you trigger? For example, is the motorhome for lodging or transportation? Lodging has one set of rules. Transportation has a different set of rules.

Six Answers to the Home-Office Deduction for the S Corporation Owner

Do you operate your business as an S corporation? If so, how does the home-office deduction work for the employee-owner? Here are six answers that the S corporation owner needs for the home-office deduction. One of the six answers gives you ideas on how you can comply with the “convenience-of-the-employer” test.

How to Release Rental Property Tax Losses Trapped by the Passive-Loss Rules

Tax law’s passive-loss rules are pretty much the grim reaper of current-year tax benefits from your rental properties. Note the words “current year.” Those passive losses trapped this year are available down the road. With planning, you might be able to release those trapped tax benefits when you want.

Does the Tax-Home Rule Destroy Your Business Travel and Home-Office Deductions?

The tax law definition of your tax home can jump up and bite you when you have a business operation away from your personal residence. Since tax law does not govern where you live, it treats your decision on where to locate your home as a personal decision that gives you a personal location. When your tax home is not near your personal home, you can lose both (a) overnight business travel deductions and (2) business mileage from an office inside the home to a regular office outside the home.

Increase Tax Deductions by Knowing the Business Mileage Rules

Whether you use the IRS mileage method or actual expense method, you need to know business and personal miles. Business miles either increase your deduction directly or increase your percentage for the actual expense method. Regardless of your choice of entity, incorporated or not, this article gives you one sure way to increase business miles and reduce personal miles.

Tax Tips to Identify Tax-Deductible Travel Days

The IRS recognizes deductible business travel using the “overnight rule.” In other words, to have a deductible business travel day, you must be away from home long enough to stay overnight or require sleep or rest. Once this rule is in play, special circumstances can make weekends, holidays, and other personal days tax deductible. This article puts the many travel-day circumstances in an easy-to-use flowchart so that you can save tax dollars on your combined personal and business trips.

Buy the Building, Rent It to Your Business, Avoid the Self-Rental Trap, and Create Legal Protection with Tax-Deduction Shelter

As you know from last month’s article, the self-rental rules can catch you unaware and alter your rental property tax benefits. You can solve the self-rental problems by eliminating the rental and having your business own the building. That’s one solution. This article gives you a second solution that you might like better. Here, we show you how to qualify for a special election that allows you to treat your rental and your business as one activity for federal tax purposes. This can give you the best of both worlds: (1) legal protection and (2) tax shelter.

Does Section 179 Allow a Tax Deduction for a Paperweight Made of Gold?

Changes in the tax law cause tax-law casualties. If you are the casualty, that’s bad. But if the IRS is the casualty and you are the beneficiary, that’s good. That’s what happened with antiques, and it could happen with a paperweight made of gold.

Tax Tips for Tax-Free Life Insurance

Is your receipt of a life insurance death benefit tax free to you? For income tax purposes, the likely answer is yes. But when you get into the estate, the answers are (1) maybe, (2) no, or (3) yes, depending on who the recipient is and what type of planning has taken place. Life insurance planning is important now because the current $5.12 million exemption from estate taxes expires on December 31, 2012, and lawmakers slotted the 2013 exemption at $1 million and increased the tax rate from 35 to 55 percent.

Legal Structure to Save Taxes for the Husband-and-Wife Business (Part 2 of 2)

If you and your spouse work together in your business, you need to know the rules of the road for owning and operating your proprietorship, limited liability company, or corporation. In part 1 of this article we discussed how you can save both self-employment and income taxes with the right mix of income and employee status of your spouse. In this part 2, you learn what you need to do to ensure that your operating business entity allows you to achieve the benefits of part 1.

Finding Tax Deductions for Your Timeshare When You Use It Personally and/or Rent It

Your timeshare can qualify as a second home for the mortgage interest deduction easily if you don’t rent or attempt to rent it. Once you introduce rent into your timeshare equation, you trigger two tough rules: (1) a special mortgage-interest-deduction rule for the personal part of the timeshare and then (2) the dreaded vacation-home rental rules for the rental part.

How the Business Owner Can Discriminate with the Health Savings Account

If you operate your business as a proprietorship, S corporation, or single-member LLC, the HSA gives you, the owner, the ability to discriminate in benefits on your behalf. In addition, you get the HSA’s front-end tax deduction, tax-deferred growth, and no taxes on withdrawals used for medical expenses.

Renting the Office to Your Business Creates a Self-Rental Trap That Crushes Tax Deductions

When you rent to a business in which you and/or your spouse work 500 hours or more, you engage in a self-rental that limits your loss deductions and taxes your profits. In other words, you get tax law’s double whammy. There is one solution to this problem.

Taxes You Pay When You Convert Your Rental Property to Your Principal Residence

The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone. Today’s law requires an allocation that keeps part of your rental as a rental so you have to pay taxes on that allocated part.

Home-Office Depreciation Deductions Can Beat Recapture and Capital Gains Taxes

The home-office deduction lives in the world of false myths. One such myth is depreciation recapture. In most cases, the benefits of depreciation deductions far outweigh the recapture. Further, with a little planning, you can easily defer and even avoid the recapture tax altogether.

Tax Guide to Deducting Your Timeshare Stays as Business Lodging Costs

Could you use your timeshare for business lodging and other business purposes? If so, why should you consider it? Business deductions usually produce better tax benefits than personal deductions do, that’s why. Further, you need to know those special tax rules that can make your timeshare a rental property, personal residence, or business lodging facility.

Section 179 Deduction Lost When Truck Purchase Was a Lease

Is your lease a lease? Are you sure? There are lots of funny rules that make what looks like a lease, a purchase—and what looks like a conditional sales agreement, a lease. This article shows you what happened to Arthur Boyce and gives you a number of tips to help you avoid his plight.

Section 105 Plan for Unmarried and Same-Sex Couples

CPA subscriber points out that for the Section 105 medical reimbursement plan to work, marriage is not required.

Legal Structure to Save Taxes for Husband-and-Wife Business (Part 1 of 2)

Your husband-and-wife business may already be a success. That’s great. Now, with a little tax planning for the husband-and-wife business, you can increase your after-tax profits and sleep better at night knowing that your business form is good.

Digitize Tax Receipts to Protect Yourself and Make Credit Card Statements and Checkbooks Complete

Protect yourself and your receipts by digitizing them. You will like the results. Digitized receipts make the IRS smile and, of course, that makes you smile too. Without digitization, some of your receipts will disappear.

Part of Home-Office Deduction Lost with Violation of Exclusive-Use Rule

To claim a home-office deduction, you must use a portion of your home exclusively for business. The meaning of the word “exclusively” (pretty much “only”) is explained in this article.

W-2 Mortgage Loan Officer Avoids AMT with Employee Business Expense Deductions on Schedule C

The W-2 mortgage loan officer in this tax case beat the alternative minimum tax (AMT) by winning his claim that, in spite of his W-2, he was an independent contractor who should report his business expenses as a proprietorship on Schedule C of his Form 1040.

Should Your S Corporation Have an S Corporation Subsidiary?

You might want your S corporation to own an S corporation of its own (QSub). Tax law treats the QSub as if it doesn’t exist for income tax purposes, but treats it as a separate entity for employment tax purposes. On the legal side of the equation, you have two separate corporations with two sets of legal protections.

Better Deductions for Long-Term Care Insurance Costs

Because you are in business, you likely have the opportunity to improve your tax deduction for long-term care insurance. In fact, you might achieve a 100 percent deduction. If you are married, the 100 percent deduction can include your spouse.

Create a Business Tax Deduction for Your Timeshare When You Allow Use by Employees

This subscriber owns a timeshare that he is not going to use this year. He wants to know how he can obtain business tax deductions if he lets his employees use it, assuming the employees do some good work. He learns that he has two possible ways to let an employee use the timeshare, one of which is tax-free to the employee. The second method is to call use of the timeshare “compensation” to the employee, which produces the unusual result of taxable income to the employee in an amount often different from the tax deduction for the business.

Avoid Taxes on the Sale of Your Principal Residence That Contained a Home Office

Learn how this IRS Revenue Procedure allows you to avoid taxes on the sale of a personal residence in which you had a home office or that you used as a rental property. The procedure lays out the methodology, which includes using the $250,000 ($500,000 if married) home-sale exclusion in unison with a 1031 tax-deferred exchange to avoid the taxes and enhance your deductions on the replacement home.

How Tax Law Treats the Foreclosure or Short Sale of Your Principal Residence

You likely hate tax-law surprises. Foreclosures, short sales, and mortgage modifications can both reward and punish you, sometimes during the same transaction. You may not have a problem with your home’s value or its mortgage, but you may have a relative, friend, or client who faces this situation. If so, you may want to know how tax law treats the principal residence foreclosure, short sale, or loan modification.

Why This Travel Deduction to Cancun, Mexico, for an Online CE Course Fails

Beware of online continuing education courses that claim you can participate in them at any location of your choosing (such as a fancy resort in Cancun) and deduct airfare, meals, lodging, and other expenses for attending. The problem with these courses is that you fail tax law’s primary purpose test for deducting travel expenses. Thus, to deduct a videotape or online course, the course has to be offered at the site.

S Corporation Pays Zero Salary to Owner

You might justify a zero salary to the owner of an S corporation in the right circumstances. But there are some pitfalls, particularly if your purpose is to avoid payroll taxes. Further, and this is often overlooked, state law can come into play on the zero-salary game.

New IRS Regulations Hammer Tax Deductions for Repairs, But Also Allow a New Deduction

If you own rental property or your business’s building, you need to know what the IRS has in its new set of regulations that define when you have a tax-deductible repair and when you have an improvement that you must capitalize and depreciate. Repair deductions are best, but these are likely a little more difficult to achieve under the new regulations. Also, the new regulations contain a big new break that allows a write-off of the old component’s adjusted basis.

Tax Deductible Home Office in Your Vacation Home

You might qualify for an office downtown, an office in your main home, and an office in your vacation home. Wow! Three offices. And tax law might make all three offices principal offices. (Of course, three principal offices is an oxymoron, but hey, this is tax law, so three principal offices is a true possibility.)

Make Your Home Mortgages Produce Tax-Deductible Interest

You would think that tax law could make deducting mortgage interest straightforward. Perhaps that’s too logical; for certain, it’s not true. The rules on deducting mortgage interest contain a number of twists and turns that you that need to know to make sure your mortgage-interest payments qualify as tax deductions.

Sale of Three Rental Properties Releases Passive-Loss Deductions on Six Rental Properties

If you own rental properties, you need to know how to qualify for real estate professional status, and then you need to create proof of time spent on your rentals. No time-spent proof, no passive-loss deductions. Next, you have to decide to group or not to group your properties. Don’t leave this grouping decision to the IRS or to the courts.

Property Manager Reports Gross Rental Income to the Property Owner and to the IRS on Form 1099-MISC

Rental property managers report gross rental income to the property owners on a 1099-MISC. We have seen confusion about this reporting because new laws were enacted in 2010 and then repealed in 2011. This article eliminates that confusion and explains what the property manager needs to report and what the property owner can expect to receive.

Is the S Corporation the Best Tax-Deduction Entity for Your Business?

To know if the S corporation is the best choice of entity for your business, first you need to consider three advantages and nine disadvantages. Next, you need to take the S corporation advantages and disadvantages that apply to you and get a bottom-line number comparison with your second choice for an operating entity. In this way, you can make a logical choice, knowing that your best choice will stay with you for a number of years and let you pocket more after-tax cash while you sleep better at night.

Corporations Beat Proprietorships in Tax Deductions for Cell Phones

Do you operate your business as a corporation, an LLC, or a proprietorship? Your choice of entity impacts a variety of tax deductions, and now the cell phone creates a win for the corporate owner and a loss for the proprietorship and the single-member LLC.

New IRS Notice Makes More Spouses Eligible for Innocent Spouse Tax Relief

When the husband or the wife cheats on taxes, both spouses are liable for the unpaid taxes and penalties. However, the non-cheating spouse can qualify as an innocent spouse or for equitable relief. In new guidance, the IRS has made it easier for the non-cheating spouse to get out of paying the taxes.

Tax Rules for Section 105 Plan with Multiple Businesses

When you and/or your spouse own more than one business, you must look at all businesses as one business when applying the Section 105 medical reimbursement plan discrimination rules. If you are blocked by the discrimination rules, consider discriminating in health insurance coverage to your benefit.

16 Tax Deduction Targets to Increase Your Business Car, SUV, Truck, and Van Deductions

This article has 16 tax-deduction targets that you can use to increase your business car, SUV, truck, and van deductions. You don’t need to buy any new vehicles to get the benefits. You simply need the knowledge as laid out here.

Former IRS Agent Fails Tax Deductions for Hiring His Children

To deduct the wages that you pay to your children, you need proof that they did the work. You also need to complete the payroll paperwork.

Does Your Foreign Bank Account Smell Like Offshore Tax Evasion to the IRS?

The IRS does not like offshore and foreign bank accounts that are not reported on the FBAR, IRS Form 8938, and Schedule B of IRS Form 1040. Millions of U.S. taxpayers have perfectly legal and properly reported offshore and foreign bank accounts. But legal or illegal, they must be reported on the two income tax forms and the FBAR.

IRS Arrives at the Audit with Tax Assessor’s Allocation to Land and Building

On your rental properties, you need proof of your cost allocation to land and depreciable buildings. If you have no proof of that allocation, the IRS has started using the Web to grab the tax assessor’s allocation and use that against your depreciation deductions.

Use the Estate Tax Value to Avoid Federal Income Tax on Home

Keeping your home until death has advantages. At death, your estate avoids both capital gains and recapture taxes, and passes the home to your heirs at a stepped-up fair market value basis. This combination triggers a good number of income tax planning strategies.

Professional Corporation as a C Corporation Is a Personal Service Corporation

If you incorporate your personal service business, you face the personal service corporation tax rates, where tax brackets do not exist and the 35 percent flat-tax rate applies.

Tax Deductions for Shotgun and Partying at Charity Skeet Shoot

Tax law contains a strange rule that doubles the business tax deduction for a charitable skeet shoot over the deduction allowed for business entertainment. In fact, the charitable-skeet-shoot rule produces a business tax deduction greater than what you could deduct as a charitable deduction.

New IRS Ruling Improves Tax Deductions for Business Travel to Panama

Panama is now part of the tax-defined North American area where tax deductions are favored by tax law. For entry into this favored tax-deductible area, Panama had to agree to give the IRS and other government agencies banking and other information that otherwise was not available under Panama’s bank secrecy laws.

Tax Deductions for Dues and Expenses of Being a Mason or a Lion

Tax law favors and allows deductions for civic and public service clubs and even names some favored clubs. But tax law does not allow dues deductions for airline, hotel, country, golf, athletic, and business-meal clubs.

IRS Now Says No Payroll Taxes on Family Employment in a Single-Member LLC

The IRS admits that its regulation that made the single-member LLC a corporation for payroll tax purposes is unfair to small business family employment. To right this wrong, the IRS allows the single-member LLC to use the family employment rules to exempt FICA and Medicare taxes retroactively to January 1, 2009. The regulation granting this change expires on or before October 31, 2014.

New IRS Forgiveness Program for Improper 1099 Payments to W-2 Employees Is Not the Gift It Appears to Be

Is your worker an independent contractor or an employee? You want to get this right at the beginning. But if you improperly classified an employee as an independent contractor, the IRS has a tax penalty relief program for you. Should the IRS plan not have the best relief for you, consider the Section 530 employer protection plan.

Single-Member Limited Liability Company (LLC) as Choice of Entity

In the right circumstances, the single-member limited liability company (LLC) gives you corporate liability protection combined with easy Schedule C (proprietorship) rules for your tax return. In this article, you learn the two tax advantages and two tax disadvantages to the single-member LLC.

Last-Minute Tax Planning for Business Vehicles

Okay, it’s December and you have some last-minute tax planning to take care of. This article helps you identify big last-minute tax deductions for bonus depreciation and Section 179 expensing on business cars, trucks, vans, and motor homes, including those you already own and may or may not use for business.

Last-Minute Year-End Tax Planning for Your Business Tax Deductions

Are you looking for more tax deductions this year? It’s not too late. Learn 12 last-minute tax-planning ideas that you can implement to create or push more deductions into this year so you can pay less in taxes this year.

Should Your S Corporation Discriminate on Your Behalf with Its Health Insurance Coverage?

Tax law makes it hard for the owner of an S corporation to win deductions for his health insurance. First, the corporate-provided health insurance is not a tax-free fringe benefit for the owner. Second, the S corporation has to pay for the health insurance or the owner will suffer a loss of tax deductions. Third, the S corporation payment for the health insurance will produce wages either exempt or nonexempt from FICA and Medicare taxes. This article shows you how to make the three tax deduction rules work for you.

Road Map to Section 105 Plan Deductions

The appeals court remanded the Shellito case back to the Tax Court along with its road map for establishing the Section 105 plan. In the right circumstances, the 105 medical plan creates tax deductions where none existed before, and its tax-free fringe benefits can operate as the sole remuneration to the employee-spouse.

Tax Court Denies Rental Loss Deductions on Four of Six House Rentals

The government subsidizes your rental property profits when you realize all your tax deductions. If tax law’s passive-loss rules deny your current rental losses, your profits will go down. Therefore, you need to know how the passive-loss rules work so you can maximize your rental profits and avoid unpleasant visits with the IRS.

How to Find Your Best Tax-Deduction Business Entity

Is your business entity the best tax-deduction business entity for you? Do you need liability protection? How do the different entities produce different tax deductions? If you are looking for answers to these questions, this article is for you. Also, the article contains one sure way to select the best business entity for you.

Employer Uses De Minimis Fringe Benefit Rules to Deduct Tax-Free Gift of Flowers to Employee

Many small businesses underutilize tax deductions for de minimis fringe benefits. The beauty of the de minimis classification is that the business gets the tax deduction and the employee gets the benefits tax-free. This makes for happy owners and employees.

What Qualifies as Regular Use for the Home-Office Deduction?

To prove and keep your home-office deduction, you must know what the courts accept as regular use, and then you must take the steps necessary to prove your regular use. The biggest failure of the home-office deduction is failure to prove regular use.

IRS Agrees That You Should Ignore Truck Chassis for Section 179 Expensing Deductions

The chassis of an SUV, truck, or van does not define its status for tax purposes. In other words, the truck chassis does not make that SUV a truck. Similarly, the car chassis does not make that SUV a car. If you want to use Section 179 expensing on your SUV, you need to know what makes the SUV a truck or a car.

Tax Law Prohibits the Assignment of Income to Your S Corporation

If you want to operate your business as an S corporation, you need to recognize that the S corporation is a separate legal entity and that you are an employee agent of that corporation. You also need to ensure that the S corporation is the earner of the income. You may not assign your income to your corporation.

Use Business Tax Deductions to Build Your Child’s College Fund

Your business ownership creates an opportunity for a tax plan that can give you tax deductions for hiring your children and can give your children tax-free income. But your tax plan does not stop there. Your children might start Roth IRAs where they can invest their tax-free income in a college fund. Done right, as described in this article, the government pays you for your help with this plan.

Best Tax Deduction for Employee Party

Does your chart of accounts contain two categories for your business entertainment tax deductions? It should. Your tax deduction for an employee party goes into a different deduction category from your regular business entertainment. Learn about the two accounts and how to get more tax deductions when you party with your employees.

Create Both Tax-Free Income for Mom and Dad and Business Travel Deductions for You

Stay with your mom and dad on a business trip, and create tax deductions by paying them for business lodging. You have a choice: deduct the cost of staying at the big hotel downtown or deduct the cost of staying with your parents. Either way, the choice of location does not change the fact that you are on a tax-deductible business trip.

Mom Avoids Self-Employment Tax When She Gets Paid for Painting CPA’s Office

Are you subject to the self-employment tax if your activity does not rise to the level of a trade or business? Answer: no. When not subject, you report the non-business income on page 1 of your Form 1040 where the self-employment tax does not apply. That’s good for the income. The deductions for this non-business activity have to take another route, and the deductions don’t fare very well.

Tax Guide to Best 2011 Business Vehicle Tax Deductions

Tax law requires your attention to enable tax deductions on your business vehicles. Your tax write-off results differ with certain aspects: vehicle type (car, van, pickup truck, crossover vehicle), new or used, use of Section 179 expensing, and bonus depreciation. This article guides you through the deductions so you can select what gives you the best write-offs.

The One Best Way to Claim a Home-Office Tax Deduction for the Owner of a Corporation

How does the owner of a corporation claim a tax deduction for an office in the home? Rental is not the best method. Deducting employee business expenses as miscellaneous itemized deductions is not the best method. The best method is to use an accountable plan, as you will learn in this article.

Find New Tax Deductions with Two-Car Tax Strategies

Learn the basics of the two-car tax-deduction strategy and then, best of all, use the magic formula calculator to see if you increase or decrease your tax deductions with this strategy.

Tax-Deductible Business Expansion Beats Capitalization

Tax-deductible business expansion beats both capitalization and start-up expense classification. Capitalization basically means no tax deduction until you get out of the business. Start up means you can deduct up to $5,000 and then must amortize the remaining start-up expenses over 15 years.

Is the New IRS Mileage Rate a Rip-Off or Does It Improve Your Deductions?

The IRS mileage rate can produce misleading results. Often the new person in business wrongfully thinks that the IRS standard mileage rate overcomes the need for a mileage log. This article contains a magic calculator and gives you the ins and outs of what you need to know to ensure that you are picking the best after-tax cash result for your business vehicle.

How the IRS and Courts Have Approved the Two-Car Tax-Deduction Strategy

When the two-car tax-deduction strategy works for you, you find new deductions without spending a penny or driving a mile farther. In this article, you find that both the IRS and the courts approve of your two-car tax deductions.

Customer Properly Rejects Year-End Prepaid Expenses Strategy

To find the cash value of tax deductions generated by prepaid expenses, you need to consider the time value of money. Focusing on just the compound value of the tax benefits is a mistake.

Tax Refund When Paying the “Nanny Tax”

Learn how you can qualify for a tax refund when you pay the “nanny tax” on the wages that you pay your nanny. For the most part, you want to qualify for the child and dependent care credit because the dependent care assistance program discriminates against the one-owner or husband-and-wife-owned business.

Buy a Business? Your Thoughts Start Up the Tax Deductions!

If you are looking to buy a business individually, this article explains the tax deductions you achieve when you begin to think about the business you want to buy. If your corporation is going to buy the business, this article explains how to apply the process of thinking about it to the corporation. The rules for buying an existing business are different from those explained last month for creating a business from scratch.

Tax Rules That Allow Tax Deductions for Your Yacht

To get a tax deduction for your yacht, use it for business travel and avoid the entertainment facility rules. If you run afoul of the entertainment facility rules, you have one small hope. To maximize your deductions, you want more than 50 percent business use and knowledge of the luxury water transportation tax deduction limits.

What Is 1099 Income and Why Does the Definition Cause an Incorrect 1099 and a Possible IRS Audit?

Learn what is 1099 income and why that often causes an incorrect 1099, which in turn can lead to an IRS audit. Often, correcting an incorrect 1099 on Schedule C compounds the problem. In this article, you learn how to 1099 correctly and what is 1099 income. The definition of “what is 1099 income” may surprise you.

Add Tax Deductions on Top of Your HSA with a Section 105 Plan, FSA, or HRA

With proper planning, you can use two exceptions to add a Section 105 plan, FSA, or HRA to your HSA.

Roth IRA Owns Foreign Sales Corporation

The Roth IRA is tax advantaged. The foreign sales corporation also is tax advantaged. Imagine putting the tax-advantaged foreign sales corporation inside a tax-advantaged Roth IRA. That’s what happens in this article.

Commissioned W-2 Salesperson Beats AMT with Expenses on Schedule C

The courts have determined that the alternative minimum tax (AMT) cheats many commissioned W-2 employees out of their rightful deductions. To fix this problem, the courts have allowed certain commissioned W-2 employees to move their employee business expenses from the IRS Form 2106 itemized deduction category to the tax-advantaged sole proprietorship on Schedule C.

“Nanny Tax” Compliance Avoids Payroll Tax Problems

Learn how to avoid payroll tax problems when you hire a nanny or other household worker. Your best bet is likely a payroll service that specializes in “nanny tax” compliance.

Tax Benefits for Thinking About and/or Starting a New Business

If you are thinking about a new business, you need to know the rules on how to deduct start-up costs right now. Why? Your deductible costs could start accumulating simultaneously with your thinking about this new business.

Home-Office Deduction Requires Exclusive Use

The home-office deduction requires exclusive business use of the residence area used as an office. Under this exclusive-use standard, how much and what types of personal use does the law allow?

Best Small-Business Retirement Plans: Part 5, the Defined Benefit Pension Plan Option

The defined benefit retirement plan might be your choice of retirement plans if you are age 50 or older and your business earns a healthy income.

Life Insurance Policy Loan Tax Nightmare

The inside buildup of cash value in your life insurance policy coupled with loans against the policy can create an unexpected taxable outlay on your part.

New: Big Bonus Depreciation Break Applies to Trade-Ins

The new 100 percent bonus depreciation enables new tax planning strategies, as it applies to both the carryover and boot basis on a trade-in or other Section 1031 exchange.

Tax Breaks Start When Business or Rental Activity Starts

You trigger business deductions once you start your business. Thus the question: Which triggers do you need to pull for the business to start?

Court Rules That This Independent Contractor Is a W-2 Employee

You are not self-employed for tax purposes just because your employer says so. This is true even when your employer is the British consulate general.

Can Home Office Tax Deductions Include Garage Space?

Do you claim a home-office deduction? Do you have a garage (attached or detached) at your home? If so, you need to spend a few minutes with this article. You will learn when to include and exclude the garage when calculating your home-office space.

Does the Proprietorship Exemption from Payroll Taxes Apply when the Owner of a Single-Member LLC Hires His 15-Year-Old Child?

The single-member LLC is a disregarded entity for federal income tax purposes, but a corporation for employment tax purposes.

Deduct That Convention in Paris

Learn the two special rules that make travel to a convention in Paris or other foreign destination tax deductible, or not.

Best Small-Business Retirement Plans: Part 4, the Solo 401(k) Option

This is part 4 in our series of articles on retirement plans for the one-owner or husband-and-wife-owned business. Here we explain the solo 401(k), which permits the largest deductions of the defined contribution plans. The solo 401(k) has unique advantages when your income fits this profile.

Tax Loss Crushed by Passive Loss Rules on Rental Property Investment

If you own rental property, you need to pay attention to the passive-loss rules. This court case helps clarify two rules that can enable deductions for rental property losses.

Don’t Use Your Corporation as Your Personal Piggy Bank

Giving money to and taking it from your corporation needs an audit trail and paperwork to ensure proper treatment. If you operate without the formal paperwork and without the proper logging of entries, you can have unexpected and unwelcome experiences with the IRS and the courts.

IRS Lets Small Business off the Hook for W-2 Reporting of 105 Plans

If you are married, operate your business as a proprietorship, and have only your spouse as an employee, you likely want a Section 105 medical reimbursement plan that can turn most, if not all, of your medical expenses into business deductions on your Schedule C. Before health care reform, you did not need to give your employee-spouse a W-2 for Section 105 medical plan reimbursements. Now, thanks to the IRS, the Section 105 medical reimbursement W-2 requirement for small businesses does not apply before the 2014 W-2 reporting season—and may not apply afterward.

Tax Tip: Don’t Repair Your Home

Repairs to your home give you zero tax benefits. Improvements to your home add to your basis and reduce your taxes. Thus, don’t repair your home. Improve it!

Roth IRA Owns a Domestic International Sales Corporation (DISC)

The self-directed IRA is not a common sight, but it is even more uncommon, almost rare in fact, for the self-directed IRA to have an interest in a tax-advantaged domestic international sales corporation. This article gives insight into what’s possible with a self-directed IRA.

Short-Term Rental Creates Hotel, Destroys Rental Loss Deductions

The real estate professional exception that can create rental property loss deductions does not apply to properties rented for an average of seven days or less.

Can I Deduct My Handgun?

You would think that you could find a straightforward tax answer to deducting or not deducting the handgun you carry for business protection. Not true. There is just one case and it is likely not right on point, but it does give you something to consider.

New Law Inadvertently Kills Business Car Depreciation; IRS Rescues Deductions with a Safe-Harbor Escape

How often do you say, “Thank goodness for the IRS?” Well, you are going to say that when you see how the IRS saves the bacon when you claim the recently enacted 100 percent bonus depreciation on your business car.

Best Small-Business Retirement Plans: Part 3, the SIMPLE-IRA Option

The SIMPLE-IRA may be the best retirement plan for the modest-income business owner. And, as you would expect from its name, the SIMPLE-IRA is easy to understand and implement. However, there is one very unusual exception. The SIMPLE-IRA has a current-year October 1 deadline for having the plan in place. That’s 12.5 months earlier than the deadline for a SEP.

Lawmakers Repeal 2010 Expansion of 1099s

New law retroactively repeals, as if never enacted, the 2010 law that required three new types of 1099 reporting: (1) 1099 reporting by owners of rental real estate, (2) 1099s for payments to corporations, and (3) 1099s for purchases of property.

Tax Tips for Divorce (Part 2)

Part 2 of the divorce series of articles covers your retirement plans and IRAs. Your goal when giving a little or a lot of your retirement plan to your ex is likely to be that he or she who gets the cash should pay the taxes. To make the taxes follow the money, you need specific words in the right divorce documents. If you fail to put the words in the right place, you can give the cash to your ex and double whammy yourself by paying taxes and penalties to the IRS.

How to Audit-Proof the Owner’s S Corporation Salary

Setting the owner of an S corporation’s salary so that the owner saves money on self-employment taxes requires attention to some details. This article shows how a CPA with S corporation earnings of $246,000 had a reasonable salary of $91,000 according to the IRS. If you follow the principles used by the IRS to identify the $91,000 salary, you build audit-proof support for the salary.

Tax Tips for Divorce (Part 1)

You have at least three parties in your divorce: you, your soon-to-be ex, and your Uncle Sam. Yes, as with almost everything, there are tax consequences to a divorce. This article puts you on a path that will help you protect your money and your assets.

The Best Small-Business Retirement Plans: Part 2, the Simplified Employee Pension (SEP) Option

This is the second article in our series on the best small-business retirement plans. Here we identify the four major advantages and three disadvantages to the SEP.

Prevent Payroll Embezzlement

You need preventative steps to ensure that you are paying the wages you think you are paying to your employees and that your payroll tax deposits are actually being sent to the IRS and not to an embezzler’s pockets.

IRS Releases 2011 Luxury Auto Limits

Tax law limits depreciation deductions on cars, trucks, and vans that don’t qualify for Section 179 expensing. The IRS updates the limits each year for inflation. This article explains how the limits work and gives you a link to the 2011 revenue procedure that contains all limits for both purchased and leased cars, trucks, and vans.

Tax Tips for Lawns and Landscaping

You want repairs and maintenance deductions on your business and rental properties. Here are tax tips on finding tax deductions in your lawn, landscaping, and other land improvements.

Is Your Corporate Veil in Place?

When you operate your business as a corporation, you need to pay attention to the details if you want the corporation respected by the IRS. If you fail in the details, your corporation could lose its status as a corporation and cause you big trouble.

Real Estate Dealer or Investor?

The taxpayer in this case made three major mistakes, one of which was the probable cause of his IRS audit. His assertion of being an investor and not a dealer defied most of the nine factors the courts use in deciding the dealer versus investor question.

The Best Small-Business Retirement Plans: Part 1

This is the first in a series of articles on retirement plans for small-business owners. In this first article, you learn the basics. Why should you have a retirement plan? When should you start contributing to your plan? What types of plans are available to you? Regardless of the type of business entity—proprietorship, LLC, S corporation, or C corporation—this article gives you the basics you need for a quality retirement plan.

New Tax Court Ruling Makes Gamblers Rejoice

Hallelujah, gamblers in the business of gambling may now deduct business expenses in excess of gambling losses. The Tax Court, in a new, precedent-setting case, establishes new rules for gamblers in the business of gambling.

IRS Secretly Allows Medicare Part B as Self-Employed Health Insurance Deduction

The IRS changed its 1040 instructions to allow the proprietorship and single-member LLC a self-employed health insurance deduction for Medicare Part B. The impact on the S corporation owner is not as favorable.

Horse Hobby Needs Tax Psychiatric Review

The hobby classification on a tax return is death to deductions. You have a number of choices, but the two most prominent are (1) quit the hobby, or (2) make the hobby a business.

New Revenue Ruling Enhances Alternative Minimum Tax Deduction for Home Mortgage Interest

The IRS has issued a new revenue ruling granting bigger deductions than the courts have granted on home mortgage interest deductions for alternative minimum tax purposes.

Tax Lawyer Is an Employee, Not an Independent Contractor

Learn why it is important to get the independent contractor classification correct. If your supposed contractor status is in reality employee status, you suffer major penalties.

Nine Important Facts about the New Age 27 Health Insurance Rules

The new under-age-27 health insurance coverage grants windfalls, pitfalls, and planning opportunities.

How the Law Decides If This Travel Day Is Personal or Business

If you travel out of town overnight on business, you need knowledge of the tax rules that allow and disallow such travel. This article clarifies the days that tax law deems to be business and the days that tax law deems to be personal.

Energy Tax Credits for Your Homes

For 2011, you can qualify for the uncapped and unlimited 30 percent tax credit for installing qualified solar, wind, and geothermal in your home, vacation home, or other residence.

Tax Tips for the New Estate and Gift Tax Rules

The newly enacted tax cut creates a new 2011 and 2012 estate tax. The new rules are taxpayer friendly in two respects. First, they are easy to understand. Second, they contain a $5 million exclusion (portable, if properly elected, for husband and wife, giving a married couple an exclusion of $10 million).

Tax Choices for Estates of Those Who Died in 2010

Tax law gives choices to the executors who are handling the estates of those who died in 2010. Choice one is to apply the 2010 rules. Choice two is to apply the newly enacted 2011 and 2012 estate tax rules.

Tax Tips for the S Corporation’s Fringe Benefit Realization

Tax law creates trouble for selected fringe benefits that the S corporation gives to a more than 2 percent shareholder. The loss of benefits and accompanying complications are factors to consider in the selection of the S corporation as your choice of business entity.

Should You Have a Health Savings Account?

As a business owner, you should have your health insurance in a tax-advantaged position. If it is not possible or practical to utilize the Section 105 medical reimbursement plan, consider the health savings account.

How Tax-Favored Health Savings Accounts Work in a Nutshell

Here is the big picture on how the health savings account (HSA) works for the proprietor, S corporation owner, and C corporation owner. The good news is threefold: (1) the tax deduction for the high-deductible insurance, (2) the tax deduction for the HSA investment account, and (3) the tax-deferral and tax-free use of the HSA investment account.

How to Make Your HSA Investment Account Work for You

You need time and rate of investment return on your side to make your HSA investment grow to your satisfaction. One consideration for a higher rate of return is a self-directed HSA that allows you to invest in individual stocks, real estate, and mortgages.

Tax Tips for the HSA: Buying High-Deductible Insurance

You need to strategize your purchase of high-deductible insurance to maximize your HSA tax-favored investment portfolio.

Seeing the HSA in Action for One Year

The health savings account (HSA) offers the opportunity to save on insurance costs and create an investment nest egg. To learn how the HSA could work for you, do some easy arithmetic, like we show you in this article.

Tax Tip: With the New Tax Law, What’s Best—IRS Mileage Rates or Actual Expenses?

The new tax law contains some real surprises when it comes to deducting vehicles. In some cases, you can deduct the full cost in the year you place the vehicle in service. In other cases, the luxury auto limits might stretch your depreciation deductions over 30 or more years.

IRS Says No Tax Credit on Health Insurance Premiums Paid for the Proprietor’s Employee-Spouse

New guidance from the IRS on the new health care law says the owner of a business (proprietorship, corporation, LLC, etc.) may not claim the 35 percent tax credit on the health insurance premiums paid to cover his or her spouse.

Tax Saving Tips: How Repairs Put Extra Cash in Your Pocket

The repair deduction can substantially outperform the capitalized improvement. The added cash comes from two sources.

Tax Tips to Save Your Social Security Benefits

You might think that you are entitled to your Social Security benefits. In fact, that would be logical. Unfortunately, however, it’s not true. You need to plan your benefit collections, or you could lose a huge chunk to taxes.

Better Tax Deductions for Repairs to Business and Rental Buildings

Tax law penalizes depreciation deductions, whereas it rewards repair deductions. The impact on your net worth can be huge. This article helps you qualify for the repair deductions that increase your net worth.

New Health Care Law Requires Strategy Change for Section 105 Vitamin Deduction

The new health care law changes the requirements for deducting vitamins in your Section 105 medical reimbursement plan.

Tax Tips for Repairs—A Short Litany

Spend a few minutes looking at the list in this article to see what qualifies as a repair. Then spend another minute on the list of improvements. This will help you decide what you need to do to your property.

Tax Tip: The Classic Repair—the Farmer’s Creamery Case

Repairs to property produce more after-tax cash than improvements do. If you invest in property, you should pay close attention to the rules on what is a repair versus what is an improvement.

1040X, 1120X Amended Tax Return for Section 179 Expensing

It used to be that when you claimed a Section 179 expensing deduction, you locked that deduction in stone for the year you claimed it. Because of the economic downturn caused by 9/11, lawmakers wanted to stimulate the economy. Accordingly they increased Section 179 expensing and, fearing that some business people would miss this opportunity, they inserted a window of opportunity during which you may amend your tax return for Section 179 expensing.

Tax Tips for Owners of Multiple Businesses

Revenue Procedure 2010-13 requires disclosure of the business and rental groups you form to avoid the disallowance of losses under the passive-loss rules. At first glance, you might think, “Oh, no, not more disclosures.” But further examination shows an audit-proofing aspect to this disclosure that is most appealing.

Tax-Free Supper Money Tax Tips

Do you provide supper or other meal money when you require your employees to work overtime? If so, is the meal money a tax-free fringe benefit or is it additional W-2 compensation to the employees?

IRS Mileage Rate Kills Section 179 1040X

You can amend your Section 179 deduction. However, when you chose IRS mileage rates, tax law grants you no Section 179 deduction and no ability to amend your tax return to claim it. You can recover many of those missed deductions by switching to the actual expense method as described in this article.

Tax-Free Lunches for Employees

Under the right circumstances, you can provide tax-free lunches to your employees. That’s nice. But what about you? How do you, the business owner, qualify for this tax-free fringe benefit?

Tax Tips for Landlord’s Snowblower Deduction

The properties owned and the activities of the landlord determine whether the landlord can Section 179 expense a snowblower in whole or in part.

Tax Tips for Making Business and Personal Loans Correctly

Follow the nine steps in this article to ensure that tax law treats your loan gone bad as a real loan rather than as a fake loan. Real loans give you tax-favored bad-debt deductions when uncollectible. Uncollectible fake loans give you undesirable capital contributions and nondeductible business gifts.

Tax Tip: When Losing Money 24 Years in a Row Is Not a Hobby

The IRS often visits a business that loses money year after year when the owner has another substantial source of income. But that combination of facts—income and losses—does not automatically make the loss activity a nondeductible hobby. There are nine factors that need consideration, and one of those factors carries huge weight.

12 Last-Minute Tax Tips Not Related to Vehicles for 2010

This issue contains 21 last-minute tax tips that you can use for 2010. We broke the tips into two articles: one for vehicles and one not related to vehicles. This article contains 12 last-minute tax tips that are not related to vehicles.

Nine 2010 Last-Minute Tax Tips for Vehicles

This issue contains 21 last-minute tax tips that you can use for 2010. We’ve broken the tips into two articles: one for vehicles and one not related to vehicles. This article contains the tips that apply to vehicles.

Tax Tips for S Corporation’s HSA

When the S corporation makes HSA contributions on behalf of its more than 2 percent shareholder-employee, the S corporation treats the contributions as compensation to the shareholder-employee. In turn, the shareholder-employee has a deductible HSA on his or her personal tax return.

Tax Audit Tips on Entertainment for Lawyers and You Too

You learn valuable business and documentation strategies from IRS audit manuals. We spend time reading these. In this article, we reviewed the IRS audit manual on self-employed lawyers and carved out selected business and documentation strategies you can use to audit-proof your deductible business entertainment.

Bank Foreclosure Auction

When the bank forecloses on a home, tax law comes into play in some surprising and often beneficial ways, especially this year. Tax law treats recourse and nonrecourse mortgages in completely different ways, but with a personal residence, the end result can be pretty much the same.

Income Tax on Debt Relief

If you are personally liable for a debt and that debt is canceled or forgiven, you include the canceled debt as taxable income on your income tax return. Your situation dictates whether you will pay taxes on this taxable income. You might qualify to exclude the canceled-debt income from taxation altogether or to pay little or no taxes on it this year and then pay taxes in later years.

Say Good-bye to Unclaimed Tax Refunds

Even if you are not required to file a tax return, you need to file a return within the statute of limitations if you are due a refund and you want the cash. If you fail to file a return within the statute of limitations, you forfeit your refund and make a contribution of that refund to the government.

New Law: Another Small-Business Economic Stimulus Package for You

The Small Business Jobs Act of 2010 spends $12 billion on small businesses, hoping to add a little stimulus to this economy. Make sure you are getting your fair share of this stimulation.

Tax Tips to Find a Profitable Rental Property

This article contains our Rental Property Analyzer software to help you analyze your possible real estate investments in an absolutely understandable and meaningful way. If you are thinking of buying a rental property, you absolutely, positively must read this article and use this software, which is included in your subscription.

New Rules on Allowable Section 105 Medical Plan Reimbursements for Over-the-Counter Drugs

The IRS just clarified the Section 105 medical reimbursement plan rules for deducting over-the-counter drugs in 2011. Read this article to get updated. Then, download a sample Section 105 medical reimbursement plan document that your business can use to comply with both 2010 and 2011 requirements.

Tax Tips for Rental, Non-Rental, and Business Losses

You want to deduct your business, rental, and non-rental losses when possible, because those deductions put cash in your pocket. The sooner you get the cash, the faster you can put that cash to work for you building your net worth. This article helps you realize those losses sooner.

Tax Audit Tips for Travel, Entertainment, and Education

How do you lose deductions to the IRS in an audit? Worse, how do you compound that loss of deductions by taking your case to court? In this article, see how one proprietor managed to do both.

Tax Tips on Equipment Leases to C Corporation

Renting to your corporation can produce tax advantages. Even failing to collect the corporate rent, as the individual did in this court case, can produce tax advantages.

Tax Tips for Rental of Ski Cabin

The cabin at the ski hill could be a hotel, a residential rental property, or a personal residence. It depends on your personal use of the property; the length of rental periods; and documentation of your time, others’ time, expenses, and activities.

Tax Tips on Failed Rental Property Purchase

Learn how you treat monies spent when your attempted purchase of a rental property fails. Tax law provides you with a path of special, mostly favorable tax rules.

Tax Audits of Small-Business C Corporation Returns Increase by 34 Percent

The IRS is in the midst of its largest hiring initiative in years. Therefore, the increase in IRS audits seen during the last few years is expected to continue at an even greater rate.

Tax Tips for Home Ownership

Should you buy or rent your home? What gives you the best quality of life and monetary value? Here is what you need to consider.

New Law Grandfathers Discriminatory Health Insurance

Many one-owner and husband-and-wife-owned businesses opt for discriminatory health insurance plans for their businesses. The new health care law eliminates that discrimination for new plans but allows grandfathered plans to continue as before.

Tips for Best Tax Result on Vehicle Disposition

The sale or trade-in of a business vehicle has positive or negative tax ramifications. You have a choice in this matter. But first you need to know your gain or loss. This article gives you the six steps to finding your gain or loss.

Tax Tip: Advance Account Shows That Incorporation Is Not for Everyone

To operate successfully as a corporation, you need to be good at paperwork. Also, you may not treat the advance account on the corporate books as your personal slush fund.

Tax Tips for Charitable Deductions as Business Expenses

The critical point for making payments to charities and churches deductible business expenses is your reasonable expectation of financial return.

Tax Tip for Business Car When Incorporated

Here are your only two tax-saving choices when you operate your business as a corporation but personally own the car you use for business.

Tax Tips for Section 179 Expensing of a Motor Home

This subscriber is going to buy a motor home and use it during the first year for travel to and from conventions. In the second year, he is going to convert that motor home to a transient rental property. His plan meets the qualifications for Section 179 expensing and avoids recapture.

Did S Corporation Low Salary to CPA Owner Doom Tax Strategy?

The CPA in this court case operated as an S corporation with a low salary. The low salary got the IRS’s attention. To salvage bigger things, the CPA had to take the IRS to court

Reimburse Corporate Owner-Employee for Depreciation

If you operate your business as a corporation but own the business car personally, your best result comes about when you have your corporation use an accountable plan to reimburse you for actual expenses, including depreciation and Section 179 expensing.

Tax Audit Tips on Hiring Your Child

When the IRS invites you for a tax audit, the examiner does not know that you hired your children. This fact surfaces during the initial interview or survey process, and the IRS instructs its examiners to examine this hire closely. You avoid all the problems when you have the right records.

Tax Tips for S Corporation Employing Owner’s Mom

When your S corporation employs a relative, you need to be aware of the stock attribution rules that can wreak havoc on the health insurance fringe benefit.

Tax Audit Tip When You Fail to Seek Expense Reimbursement

When you fail to seek reimbursement for an expense, you often have no write-off. However, there are exceptions to this general rule, as examined in this tax audit tip

Tax Tips for the Real Estate Investor/Dealer

Tax law allows an individual to be a real estate dealer with respect to his dealer properties and a real estate investor with respect to his investor properties.

Tax Tips That Unearth Section 179 Deductions in Lodging Properties

Your lodging property may qualify for one or more of four exceptions that allow Section 179 expensing. The four exceptions override the basic rule that you may not claim Section 179 expensing on property used primarily for lodging or in connection with the furnishing of lodging

Tax-Saving Tips for Married Taxpayers Claiming Section 179 Deductions

If you are married, you need to consider your spouse’s W-2 and other income sources in your Section 179 expensing eligibility. The inclusion of your spouse often enhances the amount you can deduct using Section 179 expensing.

Tax-Saving Tip: Use Net Square Footage to Increase Home-Office Deductions

The IRS tax form for deducting the home office contains the gross-square-footage method and makes no mention of other permissible methods. This article shows you how the net-square-footage method works and why it is always superior to the gross method found on the IRS form.

Tax Savings Tips When Renting to Relatives

Tax savings when renting to relatives depend on your compliance with the tax law’s fair-rent standards and your relatives’ use of the property. Violate these rules and you face the triple whammy of additional taxation.

Trade-Ins of Business Cars Can Create Big Tax Deductions

The trade-in of your old business car on a replacement car creates additional basis. The subsequent trade-in can also increase basis. This process can create a big tax deduction if you know what to do.

What Can I Deduct for Section 179 Expensing?

One question that is often answered incorrectly, thus reducing tax benefits is the question: What is considered business income for the Section 179 expensing limit? Actually, the real problem is the assumption (and you know what they say about assuming) that I know what business income is. That assumption often limits Section 179 expensing to far less than what is allowed.

Tax Deductions for the Business Town House

Doing business in two different locations requires tax knowledge. The purchase of a town house in the second location brings up many tax planning opportunities and a few hazards to avoid.

Tax Savings Tip: Increase Office Depreciation Rate by 42 Percent

What happens when you locate an office (home office or other office) in a duplex or apartment building? It’s possible that this location can produce tax-favored depreciation for the home office.

Can I Deduct Business Clothing?

To deduct business clothing, you must pass the condition-of-employment and not suitable standards.

Tax Cut for Prepaid Expenses Pays Better Than Seen at First Glance

Prepaying expenses has been a most overlooked tax planning strategy because it is misunderstood. Proper use of the new safe-harbor prepayment rules can guarantee the prepayment deduction. Continued use of prepayments combined with strong investment returns can produce a nice addition to your net worth.

Tax Tips Needed on Land and Self-Rental Passive Loss Traps

The tax strategy of renting property you own personally to your businesses needs your attention if you want tax benefits. Similarly, special recharacterization rules apply to rentals of land and also when land is a big part of the rental.

Claiming the Net Operating Loss (NOL) Carryback If Return Is Filed after the Due Date

The U.S. tax system is kind to proprietors and corporations that lose money in their businesses. The losses can be carried back and forward, but you must pay strict attention to the elections and due dates to ensure your benefits.

Defining “Real Estate Investor” and “Real Estate Dealer”

The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classification, you can do much to increase your net worth.

Tax Savings Trap Crushes S Corporation Owner’s Expenses

Poor planning for the S corporation owner’s business expenses can cost the owner every penny of his deductions.

Entertainment Tax Deductions Look Fishy

It’s true, you don’t need a receipt for an entertainment expense that costs less than $75. But you may need to prove that you had the cash available for the entertainment.

Federal Tax Deductions for Business Involvement in Charity Fundraiser

You always come out ahead when you can deduct your charity involvement as a business expense.

How You, the Small-Business Owner, Can Cash In with Tax Credits for Health Insurance on Employees

Tax credits are a true incentive for the business owner. They reduce taxes dollar for dollar. Now, you have waiting for you a hefty 35 percent tax credit on small-business health insurance coverage for employees. Here are the rules you need to know.

Don’t Let the New 2010 Luxury Vehicle Depreciation Limits Hurt Your Deductions

Luxury limits on passenger automobiles and light trucks and vans produce planning benefits at the back end. If you want to beat the luxury limits, you have to buy a vehicle that’s exempt from the luxury limits.

How the New Health Care Law Treats You, the Owner of a Small Business

The new health care law grants a nice tax credit to business owners who cover their employees. How about the owners themselves? Lawmakers did them no favors, but one group of proprietors might catch a break.

New Health Care Law Makes Cash Gift to You with Deductions for Children Under Age 27

For business owners who have children ages 22, 23, 24, 25, and 26, the new health care bill contains a healthy break, and perhaps even better than that. Amend Section 105 plans now for this new provision. Download your sample plan from this article.

How Much Does the New Health Care Law Cost You?

Most of this issue explains how you pocket money from the new health care tax credits. That’s nice. But you have to ask, who is paying for my tax credits?

What Is the Unpardonable Sin in an IRS Audit?

Should you or your corporation be unlucky enough to face an IRS audit, there is one record that stands out as critical to your audit health. If you are missing this one record, the IRS audit can quickly expand to other areas of your tax return.

Qualify as a Real Estate Professional to Deduct Rental Losses

If the passive loss rules are taking away your tax deductions on your real estate rentals, examine the real estate professional rules for an escape. You can be a lawyer, medical doctor, etc., and also qualify as a real estate professional.

How to Materially Participate to Deduct Rental Property Tax Losses

You can be a lawyer, CPA, MD, or business owner and qualify as a real estate professional if you or your spouse materially participate in the rentals or in the rental group.

Qualifying for Rental Real Estate’s Tax-Favored $25,000 Allowance

Learn how to qualify for the rental real estate active investor category for deducting rental property losses of up to $25,000. You can plan deductions to lower the $100,000 and $150,000 ceilings.

Audit-Proof Your Time Spent on Rental Properties

To deduct your passive losses as a real estate professional, you must prove time spent. Since you need this proof, use these tactics to keep track of your time and also increase your overall profits on the rentals.

Business Education Tax Guide

Learn how the government pays you to get educated. The basic rule: you may deduct education that maintains or improves the skills you need in your business, providing the education does not qualify you for a new business.

What is a 1099 Independent Contractor?

If you are thinking of hiring your workers as 1099 independent contractors, this article is for you. The article shows you how the rules work and helps you understand what you need to properly classify your workers as independent contractors.

IRS Home-Office Deduction Separate Entrance

Local zoning laws might require a separate entrance for an office in the home, but this rule would not apply to the type of home office we recommend.

Rental Property Business Tax Attributes

If you own rental properties, you don’t want the tax law to call the rentals an investment. Instead, you want the rental properties to qualify as a trade or business so that you achieve tax favored Section 1231 treatment and other tax breaks.

Business Gift Basket Tax Deduction

The business gift basket runs into the $25 limit on business gifts. If you want to deduct more than $25, you need to know the rules in this article that produce bigger deductions.

No Tax Relief for Donation of Office Space to Church

Allowing your church to use office space free does not produce a tax deduction for you. Make sure you know the rules on these types of donations, including the rules that apply when you donate a week at your timeshare or vacation home.

Reasonably Low Salary for S Corporation Owner

The zero salary strategy is getting hammered by the IRS and the courts. You need to take a reasonable salary. If your purpose in having the S corporation is to save self-employment taxes, you want that reasonable salary to be audit-proof low.

IRS Mileage Rate for 2010—Good or Bad Deal?

Would Section 179 expensing make the IRS rates a bad deal for you? How about leasing or the luxury limits? Know for sure when you use the analyzer that comes with this article.

Secret Cash Found in IRS Mileage Rates

IRS mileage rates contain a depreciation surprise for many taxpayers. The depreciation might be hiding cash that can be yours with a simple strategy.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidy).

How to Deduct the Timeshare Condo

Proper business use of your timeshare grants business tax deductions.

Home-Office Deduction with More than One Business

With one business use of the home office and no personal use, you qualify for the deduction. The second business use, employee use, and spouse use must equally qualify for the home-office deduction, or else.

Starbucks Gift Cards for Business Promotion

Making gifts to promote your business is complicated by time, inflation, and poor tax legislation. Make sure you know the rules so that you keep your tax deductions on your tax return.

Use Safe Harbor to Lock In Capital Gains When You Subdivide Land

Section 1237 grants a safe-harbor to qualified taxpayers who want to subdivide land. The safe-harbor requires the taxpayer to pass seven tests, but then rewards the taxpayer with tax-favored capital gains treatment (versus ordinary income treatment).

Use an S Corp. to Lower Taxes on Subdivision of Land

Good tax planning can avoid ordinary income treatment on the subdivision of land. The planning involves avoiding the partnership entity and using an S corp. for development.

How Many Tax Diaries for Three Businesses?

Tracking and proving deductible expenses for three businesses requires good planning, but this planning can pay you for the effort.

Buyer Defaults on Business Seller’s Take-Back Loan

The business bad debt generates the best bad debt tax breaks, except when the debt is incurred to protect, enhance, or continue your employee relationship (i.e, keep the corporation in business so you have a place to work).

First-Time Home Buyers’ Tax Credit Improved—Buy That Home?

Is this the right time to buy a home? Tax credits make the home purchase more appealing. Learn if the home purchase is right for you or your relatives. Use the home analyzer software, free, that’s linked inside this article.

Big Tax Breaks for Hiring Your Child

Tax law favors the son or daughter working for the mother or father in a proprietorship or husband and wife partnership. If you operate your business as a corporation, you also can come out ahead by hiring your child.

How Children Employed by Parents Can Use IRAs to Pay for College

Having your child work in your business produces college funding strategies with both the Roth and the traditional IRA. As an added bonus, you can use the traditional IRA with earned income to eliminate some kiddie tax.

Payroll Taxes Embezzled; Owner Has Big Tax Problem

Do you own a business that withholds taxes from employees? If so, you need 100 percent certainty that the withheld payroll tax monies are going to the IRS. You can achieve 100 percent certainty with the IRS EFTPS registration..

How the No-Receipt-Under-$75 Tax Rule Works

The no-receipt-under-$75 tax rule applies only to certain travel, entertainment and listed property.

IRS Audit Can Include Physical Inspection of an Office in the Home

You can keep records that reduce the chances of an IRS physical inspection of your office in the home.

Tax Law Obliterates Hobbies

Lawmakers hate taxpayers’ hobbies. They apply the most draconian of all taxes to hobbies. If you have a hobby or are thinking of a hobby, read this article before you take step one.

How 1031 Real Estate Exchanges Work

This article gives you the nuts and bolts of the Section 1031 real estate exchange, including how with proper planning the Section 1031 real estate exchange can be nothing more than the sale of your old real estate and the purchase of the replacement real estate.

Pocket More Cash by Paying Transportation Fringe Benefits

You can use the transportation fringe benefit in lieu of wages. In fact, you can ask the employee to take a pay cut equal to the transportation fringe benefit. Amazingly, this swap of a pay cut for the transportation fringe benefit works out to give the employee an after-tax cash raise in pay and it puts cash in your pocket too.

Taxpayers Win Loss Deduction on Charter Fishing Activity

To deduct a loss on a charter fishing activity, you must materially participate in the activity. When the activity is organized as an LLC, you have more choices for material participation than a limited partner.

Transient Rule Applied to Business Motor Home

This article shows you how to apply the transient rule to use of a motor home for business purposes. By passing the transient test, your motor home can qualify for Section 179 expensing to the extent of business use.

IRS Audits Expanded to Six Years for Overstatement of Basis

If you understate your gross income by more than 25 percent, the IRS can adjust that return for six years, rather than the traditional three-year statutory period for audits. In this clarifying regulation, the IRS explains that an overstatement of basis counts as an understatement of gross income for the 25 percent test.

IRS Expands Break for Section 1031 Exchanges of Business Vehicles

Wow! This new IRS private ruling expands the number and types of like-kind vehicles available for Section 1031 exchanges.

No Mileage Log on Business Truck Destroys $53,625 Section 179 Deduction

You need a mileage log on your business vehicle. With no mileage log, you can try the alternate-proof method, but the odds are better than 9 to 1 that you will lose. This article gives you a perfect mileage-log system free.

Proving Federal Tax Deductions with Credit Cards

Credit cards are valuable time-saving assets when used correctly by the business taxpayer. Incorrect use damages both your wallet and your time management.

IRS Uses UBS Swiss Bank Account to Nail California Man with Tax Fraud

Swiss UBS AG and other supposed tax havens and secret banks are divulging the names of tax cheats to the U.S. government.

Inheritance Advice for the Family Home

Distributing the assets of an estate needs a tax plan to ensure the favorable results embedded in the tax law.

How to Write Off the Investment in a Failed S Corporation

The U.S. government taxes your profits and subsidizes your losses. That’s nice. Not all governments share in the losses.

Tracking Personal and Business Checking Accounts

Computers and programs like Quicken make it easier to track business and personal activities. Even so, there are rules of the road that you should follow to ensure the best results.

IRS Refund Owed after IRS Audit

The woman in this audit learned how knowledge can turn what appears as a nightmare (an IRS audit) into a positive happening—meaning cash refunds for the year of the audit and subsequent years. As the old sayings goes, “knowledge is power.”

IRS Loses On Subdivision of Lots

You can be a dealer with respect to some properties and an investor with respect to others. You can also subdivide lots and obtain tax-favored capital gain treatment, but you need the right numbers and a good plan.

Tax Deduction on Sale of Business Car

Learn how to calculate the tax deduction when you sell your business car at a loss—the most likely result.

Travel Tax Deductions Can Include Educational Trip to the Bahamas

When you know what you are doing, you can qualify trips to the Bahamas and similar destinations as tax-deductible trips.

Business Tax Deduction for Golfers and Spectators

Being in business for yourself produces huge tax-deduction advantages for golfers and golf spectators. Golf advantages are more than double those of football, baseball, and basketball.

Federal Tax Deductions for Section 127 Education of Grandchild

You can use a Section 127 education plan to obtain tax benefits for yourself (or your corporation) while you help your grandchild through college or other learning.

Baseball Cards and Memorabilia as Office Decorations

The proper tax deduction treatment for decorating a business office with a baseball card and memorabilia collection comes from the courts in their decisions on depreciating antiques.

Federal Tax Deductions with Section 127 Plan for Child’s College Education

Establish a Section 127 educational assistance plan in your business to help pay your age 21 or older child’s college or other education costs. If you are in business and you have a child that’s age 21 or older in financial need of educational assistance, this is a plan to consider.

Sample Educational Assistance Plan

As a subscriber, you may download this sample Section 127 educational assistance plan in Microsoft Word. Then, simply modify the document to your business use.

Increase Federal Tax Rebates with More Business Mileage

Learn the federal income tax rules on business mileage to increase vehicle deductions. The four questions and answers in this article give you a clear roadmap of the rules along with the strategies you need to pocket more cash from your business.

Home Office Deduction—Show Me the Proof!

Show me the proof that I can have an office in my home when I have an office downtown! Have you ever wanted that proof? This article gives you the law, legislative history, and IRS authorization for the office in the home deduction.

Tax Deduction Checklist Should Include Repairs

Learn when to tax deduct flood damage as a casualty loss or repair deduction and avoid capitalization. The law gives business owners an advantage when they fix up their business property after a floor or other casualty.

Federal Tax Deductions for Three Business Cars

This article empathically answers the “show me where it says that you can use three cars for business” question.

New IRS Safe-Harbor Tax Relief for Ponzi Scheme Losses

If you are the victim of a Ponzi scheme, you absolutely, positively must read this article to learn how the law gives you favored victim status. This includes a safe harbor election, possible carryback of the losses to one of five years, net operating loss treatment, and more.

Deducting Travel to a Second Business in a Second State

If you operate one business with two operations in separate states, you need to know the rules to tax deduct overnight business travel between the two locations. You also need to know these tax deduction rules if you have two businesses in two states.

Deducting the Security System

You may claim a tax deduction for the business portion of your home security system regardless of your qualification for the office in the home deduction.

Tax Penalty for Early Withdrawal of IRA Money Is Reduced for Medical Expenses

Make sure you know all of the ramifications of a premature IRA withdrawal before you make the withdrawal for medical expenses.

How to Dissolve a Corporation

If your corporation is not going to pass the “it earns the income” test, then it’s time to take the steps to dissolve this useless corporation. The secretary of state for the state of incorporation has guideposts for you to follow.

Federal Income Tax Rates to Increase?

Federal Reserve Board Chair Ben Bernanke told a House Budget Committee to address the government’s long-term fiscal shortfall with higher tax rates that do not impede economic growth.

Court Rules Trusts Are Shams

The court made it clear that every taxpayer may properly use the tax law to reduce his or her tax burden, but the use of paper entities that fail the economic reality test does not work.

Prior Year’s Tax Return Not Filed

If you are looking for tax deduction trouble from the IRS, do this: Don’t file your tax return or at the very least, file it well after the filing deadline.

More 1099s, Audits, and Enforcement

Treasury Secretary Timothy Geithner told the Senate Finance Committee that more 1099 reporting and IRS audits provide the solution to the tax gap.

Home Equity Loans Pros and Cons—Learn How to Avoid Tax Pitfalls

Your home equity loan can give you a full, partial, or no deduction for your interest. If you will get zero or a reduced benefit, make the necessary changes to protect your tax benefits.

 

How Does a Home Equity Loan Work with a Rental Property LLC?

If you are using home equity loan proceeds for your rental property LLC, you need to pay attention to both the legal and tax aspects of that transaction. The legal part is needed for liability protection. The tax part is needed to ensure your tax deductions.

How Many Rooms Can You Use for Your Home Office?

This court case shows how an office in the home may have than one room that qualifies for deduction.

S Corporation Setup Destroys Tax Savings

You may not claim a home office deduction when you rent your home office to your S corporation employer. Therefore, redo this arrangement by taking advantage of your employee status.

Apply Section 179 Expense against W-2 Income

Section 179 expensing is available against business income. For this purpose, business income is defined to include, among others, W-2 income.

Rental Property Tax Rule Surprise—How to Avoid

Whenever possible, you want your rental property to avoid the Uniform Capitalization Rules. If you don’t meet the de minimis rule on your improvements to a rental property, you may have to (1) capitalize the interest and (2) capitalize the direct and indirect costs.

How Often Can the IRS Audit?

The IRS has a procedure in place where you can ask “not to be audited” this year for the same items for which you were audited last year.

Education Deduction for CFP

You may deduct education that improves or maintains the skills you need in your current business, if this education does not qualify, or lead to qualifying, you for a new or different business.

Big, Unlimited 2009–2016 Tax Credits for Installing Solar, Wind, or Geothermal

This new law gives you 30 percent uncapped and unlimited tax credits for installing qualified solar, wind, or geothermal energy improvements in your home, vacation home, or other residence.

New 2009–2010 Homeowner’s Energy Property Tax Credit

Tax credits are best. They reduce your taxes dollar for dollar.

Now, you can pocket a 30 percent tax credit of up to $1,500 when you install qualifying energy approved windows, doors, HVAC, insulation, water heaters, roofs, and similar property in your principal residence.

IRS Releases the New Luxury Vehicle Depreciation Limits for 2009

Tax law’s luxury vehicle depreciation limits can apply to business cars, pickups, SUVs, crossover vehicles, and vans costing less than $15,500. That’s bad news. The good news: You often find a hidden tax deduction in the back end of the luxury limits (and mileage rates).

Owner Loses Business Loss Deductions

Ownership and involvement in your business may not be sufficient if your business suffers an operating loss. To deduct a business loss, you must materially participate in the business.

Creating a Dependent Care Credit

With net business income less than $115,647, the sole proprietor with two qualifying children and a stay-at-home spouse can hire the spouse and pay a wage of $6,000 to create a $1,200 child care credit with no change in their joint income taxes—other than realization of the $1,200 credit.

Deducting Golf after the Office Meeting

Golf before or after convention meetings has been preapproved by the IRS as deductible associated entertainment that follows or precedes a bona fide and substantial business discussion. Golf before or after an office meeting has no such preapproval. It must pass the “associated entertainment” test to qualify for a deduction.

Business Furniture in the Home

You do not need a tax deductible office in your home to deduct the cost of business furniture and equipment in your home

About Time! A True Tax Credit for First-Time Home Buyers

Higher inflation could be good for that home you buy today—and if you buy today, you will have today’s low interest rate. That’s a pretty good combination. Then add the 2009 tax credit and get the government to pay you $8,000 for taking the chance. Sounds like you hit the trifecta doesn’t it?

How the 2009 Stimulus Package Can Stimulate Your Business Deductions

The official name of the new stimulus is the American Recovery and Reinvestment Act of 2009 (Public Law 111-5). Like last year’s version, the 2009 stimulus contains three big deals for business: (1) fifty percent bonus depreciation; (2) Section 179 expensing of up to $250,000; and (3) an increase in first-year luxury car depreciation on new (not used) cars.

Make Your 2009 Stimulus Tax Savings Permanent with a Section 1031 Exchange

The tax-favored like-kind rules for personal property such as cars contain a number of twists. For example, trading a car for an SUV, a crossover vehicle, or another car qualifies as a like-kind trade. But the trade of a car for a pickup truck is not like-kind.

The One Time to Avoid the 1031 Exchange

The very first thing you need to do once you make the decision to buy the new asset and replace the old asset is to calculate your taxable gain or deductible loss on the old asset (as if you were going to sell it right now). The result—gain or loss—determines the strategy you should follow.

Section 179: Avoid These Three Things

When you claim a Section 179 expensing deduction, you make a deal with the government. You agree to give back your early tax benefits if, during the recapture period, your business use drops to 50 percent or less.

Real Estate Agent Is a Real Estate Broker for Passive Loss Rules

A real estate rental is automatically in the passive bucket if you do not qualify as a real estate professional. In this court case, a real estate agent qualified her real estate agent work time as time spent in a real property trade or business. Thus, she qualified to deduct her real estate rental property losses.

Real Estate Agent Avoids Passive Losses

Two tax attorneys told our group that time spent as a real estate agent actually worked against you for the time test (more than 50 percent) to qualify as a real estate professional. The attorneys claimed that in audits the IRS is disallowing the unlimited loss to people who are full-time agents, treating their agent work time as non–real estate time and thus making it just about impossible to meet the 50 percent test.

Husband and Wife S Corporation Board Meeting

The Heineman case gives a roadmap to how a husband and wife might deduct the cost of attending a board of directors meeting where they are the only participants. Using the principles enunciated in Heineman, husband-and-wife corporate owners will find deducting the out-of-town board meeting easier than deducting board meetings that occur in town.

Best Entity for Rental Real Estate

The most recent hot entity for real estate ownership is the LLC. The fact that it’s hot does not necessarily make it the best option for you. When considering your choice of entity, examine qualification for single-member LLC status, extra state income taxes, and how this compares with the S or C corporation possibilities.

Medical Insurance Deduction for the S Corporation Owner-Employee

The S corporation owner is an employee of his or her corporation. Thus, his or her personal payment of health insurance does not qualify for deduction on page 1 of the Form 1040. To get this page 1 deduction, the IRS says that the health insurance must be paid by the corporation and come to the owner on a W-2.

Social Security with Wages and Business Loss

If you draw Social Security retirement benefits before full retirement age, you face the loss of $1 in benefits for each $2 of earnings over $14,160. Further, when the provisional income on your tax return exceeds $25,000 (single) or $32,000 (married), you must include at least 50 and not more than 85 percent of your Social Security benefits in taxable income. Thus, your receipt of Social Security benefits triggers the need for planning.

Applying the Luxury Vehicle Limits

Your maximum write off on a new $14,000 car purchased in 2008 is $10,960. To get to this number, you need to use Section 179 expensing. Should you have personal use of the car, then you reduce your $10,960 limit by your personal use.

Boondoggle Trip with Employees

Most entertainment deductions are cut by 50 percent when you complete the tax return. Tax law grants a number of exceptions to the 50 percent cut. One exception eliminates the 50 percent and grants a 100 percent deduction to the party, facility, or entertainment that is primarily for the benefit of employees.

It’s Ski Season—Let’s Make Your Skiing Deductible

The first thing to get straight with the skiing deduction is that it is deductible as associated entertainment. Thus, you need a bona fide business discussion in a business setting before or after the skiing. If you are staying overnight, remember that lodging for business entertainment purposes is not deductible, but lodging for business education or meetings is deductible.

 

Discriminate with Your 105 Plan

Use this Section 105 medical reimbursement plan template to make sure you provide maximum medical benefits to you and your family while legally discriminating under both tax law and ERISA rules.

 

Tips to Audit-Proof Your Records

The law gives you no choice but to keep the proper tax records on a timely basis. This is pretty easy when you know what to do. One easy rule to follow is to never commingle your activities in your bank accounts. Both the rule that requires a mileage log and the rule that requires a time log are more difficult, but absolutely essential to proving your deductions.

Big Budget Deficit

The Congressional Budget Office estimates that this year’s federal budget deficit will top last year’s by more than 250 percent.

Weekly Lunches

Every business meal absorbs your personal consumption, and the IRS allows that consumption as a business expense almost all the time. But the IRS can, whenever it gets the urge, invoke Sutter to destroy your deductions.

Recruiting Expense

You may deduct travel, meals, and lodging in an unsuccessful attempt to hire an employee.

 

Dinner with Husband

You are talking to yourself (for tax purposes) when you discuss business with your husband over dinner. This is a nondeductible experience.

Dependent Care Credit

The sole proprietor may not claim a business deduction for child care that enables him to work. The tax benefit for this type of child care comes on the personal income tax return as a dependent care credit.

Do You Have What It Takes to Deduct Your Holiday Parties

Holiday parties trigger a variety of tax rules. Some parties, or parts of parties, are 100 percent deductible. Make sure that your chart of accounts has a place for 100 percent entertainment and a place for 50 percent entertainment deductions.

20 Last-Minute Tax-Planning Tips for 2008

As the end of the year arrives, you still have time to pocket some tax money. The 20 strategies in this article have a wide range, from getting married to selling your old vehicle. Spend a few minutes and pick up some last minute tips.

Husband and Wife 1099s

When husband and wife receive individual 1099s from the same firm, they generally can improve their after-tax cash results by having one spouse earn the 1099 income and having the other spouse work as an employee.

Birthday Party Prospecting

To deduct a birthday party as a business expense, you must convincingly demonstrate a direct association with business activity.

Section 105 Plan for Rental Properties

When a couple owns an LLC, they can obtain the benefits of a section 105 medical plan by filing as a single member LLC.

Section 179 on a Pickup Truck

The section 179 deduction can allow a write-off of up to $250,000 on a Toyota Tundra truck. The big write offs are easy to lose if the truck is not kept and used correctly and for the appropriate amount of time.

Court Calls Deductions “Beyond Belief”

The Langers owe almost $70,000 in taxes and penalties after claiming their swimming pool and other household items as incentive program deductions for Mrs. Langers’ piano teaching business. Mr. Langer is a former IRS agent.

2009 IRS Standard Mileage Rates Released

The IRS has issued the 2009 standard mileage rates that self-employed taxpayers and employees may use for deductions in the use of business cars, vans, pickups, and panel trucks.

Benefiting from the Bailout Game

The federal bailout is going to create tremendous opportunities and some selective pitfalls during 2009.

Buy Your Office

If you are currently renting your office, you should consider buying it. When your business purchases your office, you avoid most of the tax law hardships imposed on the purchase of a rental property. Use the Rent/Buy Office Analyzer, a program included in your subscription to this newsletter, to see the answers to all the qualifying questions. It also puts everything into numbers you can understand, the biggest of which is your “annual compound profit.” This is huge.

Your Business Stimulus Expires Soon

Take advantage of the government stimulus package in 2008. You need to buy and place in service a business vehicle, business equipment, or a business-related building before the end of the year. Generate fifty percent bonus depreciation, up to $250,000 Section 179 expensing, or an $8,000 increase in first-year luxury car depreciation.

When You Benefit with Travel Per Diem (or Not)

Just as it has standard mileage rates, the IRS has standard per diem rates for daily travel costs. There are situations where you might benefit from the mileage rates and the travel per diems. This article explains how the per diem rules work for you as a self-employed taxpayer, and gives you the ability to make an informed decision on whether or not to use the per diem rates.

Bailout for Incentive Stock Options

After buying stock with incentive options, many choose to gamble with the capital gains treatment. By holding on to the stock for one year, one can save money with the AMT. But, when the dot-com bubble burst, many people lost a lot of money with this gamble. Read about this, and how the government is now bailing them out!

Preferred Stock Bailout for Banks and Other Financial Institutions

The big $700 billion bailout is right in your face, but there’s more. There are also billions of dollars in side bailouts, including the preferred stock bailout, which helps out owners of preferred Fannie and Freddie stock. Only some financial institutions benefit though, you don’t.

Court Rules Records Adequate for Mileage-Rate Deductions

Learn about Gary Larson’s legal fight to deduct his business gas mileage. His logs ended up satisfying the court, but you can do better to avoid what he went through – by keeping good records! Also, take a look at Tax Diary System. This training tutorial gives excellent tax record-keeping tips, whether or not you use this system.

Rent Home Office to Corporation

You may not deduct any home expenses when you rent office space to your employer. This is the law. However, you can avoid this law and get additional tax benefits by following our outline on how to deduct a home office for your corporation. Do it right and avoid a red flag.

Bad Loan

There are two types of bad debts: business and nonbusiness. Nonbusiness bad debts are deductible in the year the loan is worthless. A business bad debt is deductible either in the year it becomes worthless or to the extent you can prove its decline in value. This is far easier. But, you need to prove your writeoff to get the deduction. We’ll show you how.

No Expensing Allowed on Purchase of Leased SUV

Buying the vehicle you lease destroys any opportunity to claim Section 179 expensing.

Beware of AMT Mortgage Interest Rules

Beware! Learn how the Alternative Minimum Tax (AMT) taxes the mortgage interest deduction that lawmakers granted you under the regular income tax. Ouch!

Deductible Business Expenses: Wins Computer, Loses Mileage Write-Off

In court, David Choe succeeded proving that his laptop was business use, but a bad mileage log took away all his automobile deductions. Ouch! Learn how to avoid this egregious error.

Gym Fees as Travel Expenses

Contrary to popular opinion (and an IRS official), you can deduct gym fees when traveling for business. See the evidence and read how to deduct gym fees as travel expenses.

Single Lawyer’s 105 Plan

Which is better: paying medical insurance out of your pocket, or forming a C corporation to deduct the insurance costs? The extra tax on the corporation might outweigh the insurance deduction. Or, it might not.

Medicare as a Self-Employed Insurance Cost

Under tax law, Medicare B can be deducted as health insurance. We have proof. Also, we show you how to get the Medicare premium to qualify as an employer plan, and how to relate it to the earned income of your business.

Tax Cheats Steal $58 Billion of Your Money

Over 1.6 million businesses collectively owe the IRS more than $58 billion. Who to blame: cheating government contractors, a lenient IRS, irresponsible lawmakers, dishonest businesses. What to do, and how to protect yourself against a dishonest payroll service.

Cohan Estimates Useless for Most Small Businesses

Gone are the days of estimating deductions for expenses. Today, you need better tax records than ever. We give you a chart to help you avoid common mistakes, and to see what you need and why you need it.

Use Imputed Interest Rules to Increase Profits on Sales of Property

Do you own an asset whose sale will produce a capital gain to you? Are you going to take back a note for some of the sales proceeds? If so, consider the “imputed interest” rules as a net-worth building opportunity. You can get up to 57 percent reduction in your tax bite, without changing the buyer’s out-of-pocket spending.

Deductions When You Turn In Your Leased Vehicle

Are you turning in a leased vehicle? For the business use of the vehicle, you can deduct excess mileage charge and the early termination fees.

New Ruling on Investment Interest Above the Line

A new IRS rule says that you may deduct investment interest above the line when you pay interest on debt incurred in the conduct of certain trade or business activities. Above the line interest reduces your gross income. This is good news.

No Extension for Extenders

Extenders delay the expiration of a tax law for one year, effectively hiding huge amounts of government spending. Currently, the government is hiding almost $100 billion of spending with extenders. Learn about how they effect small business, and what you can do to stop this type of spending.

Rangel to Pay Back Taxes

NY Congressman Charles Rangel failed to report foreign earnings. Rangel is the chief tax legislator in the country. He should know better.

Court Recaptures Section 179 Deductions

Learn from Michael Birdsill’s mistakes: keep good records of your business vehicle use, and report it on your taxes. Birdsill’s court case proves that you must do this to receive deductions for mileage. Follow our four rules for claiming Section 179 expensing to make sure you do it right.

Fix for Charity Mileage Rate?

Lawmakers finally let the IRS deal with deducting charitable mileage! The IRS annually updates its deduction rates for mileage, but lawmakers haven’t updated their charitable mileage rate since 1997. Read how a new law applies the IRS rates for charitable mileage, and how this affects you.

Turbo Tax Error Corrected

When using tax preparation software, be alert to automatic calculations that could place improper amounts on your tax returns.

No Deduction for One-on-One Investment Training

Learn from one taxpayer’s mistakes: know the details regarding seminars and training! Investors cannot deduct training, so you have to follow a few of our tips to help make one-on-one seminars deductible. Also, we give you important information about tax reform and tax changes.

Home Office as Second Office

You can deduct your home office, even if you have another office. We have proof from the tax law that makes it possible. See the details and do it right.

Vitamins to Recover from Cancer

Section 105 uses a definition of medical that is broader than that for an itemized deduction. This broadening allows you to deduct supplements and over the counter drugs to treat injuries and illness.

New Housing Rescue Law Destroys Vacation and Rental Home Sales Strategy

Before this new housing rescue law, the savvy taxpayer could convert his old rental or vacation home into a principal residence, live in it for two years, and then sell it to take advantage of the $250,000 and $500,000 exclusion of gain rules. Now, you need to make revisions to that old tax plan to cope with this new law.

Nine Clear Rules on Golf Deductions

You may deduct your business golf when you do it right. In fact, golf that qualifies for the special sporting event deduction produces double the tax benefit of regular business golf.

New Tax Breaks and Traps in Housing Rescue Law

The new housing rescue law (1) creates a $7,000 tax credit for first-time home buyers; (2) creates up to a $500 property tax deduction for the taxpayer who does not itemize deductions; (3) destroys some or all of the $250,000 tax-free exclusion for sales of vacation homes and rentals converted to principal residences; and establishes 1099-style reporting to the IRS of gross income from credit card receipts.

Wow! Proposed Common-Sense Legislation

Help this new bill pass into a law. H.R. 6601 proposes reasonable reform on home office use, cell phones, and business meals and entertainment.

IRS Grants Extension to Group Rental Properties

Mr. and Mrs. Clark hired a new tax advisor. He told them that because they qualified as being in the real property business, they had available to them the tax law option of “group or not group” your rental properties and that grouping could release tax deductions currently trapped by the passive loss rules.

Increase Deductions with More Business Mileage

Pay attention to the rules on what makes a business mile and what makes a personal mile so that you can achieve the best possible vehicle deductions.

Is a Facelift Tax Deductible?

With one exception, you may not deduct a facelift as a medical expense because you use your face for both business and personal purposes. As to deducting the facelift as a business expense, this has not worked out so far.

IRS Increases 2008 Mileage Rate to 58.5 Cents

The new IRS mileage rates give you an extra $1.60 per gallon. Does this mean that gas prices will go higher? Also, don’t forget to log your mileage correctly to get those deductions.

The IRS Mileage Rate Checklist

The IRS standard mileage rates might save you more money in lieu of actual expenses. Note, though, that there are important details regarding who qualifies, what the mileage rate includes. Also, there are a number of common pitfalls to avoid.

Many Mortgage Brokers About to Suffer the AMT

Believe it or not, but the AMT could tax mortgage brokers more than their annual income. That’s right: they could make less than $0 this year. We show you why, and how they can avoid this tax disaster.

Think and Plan Before Loaning Money to Your Corporation

Traps set by a 1986 tax law still haunt taxpayers today. We can help you avoid some “reforms,” like huge taxes on personal-corporate loans. Instead, make an additional contribution to capital.

Find Hidden Deductions When You Trade In Your Vehicle on a Lease

The trade of a vehicle on a lease is not a like-kind exchange. It is more like a cash sale, which has its benefits. You can get big deductions if you do it right.

IRS Makes Deducting Start-Up Expenses Easier

Learn how the IRS just made your life easier. You can deduct more than you thought for starting a business. You can deduct “start up” expenses and “thinking about starting up” expenses. There are important details, however, so read closely.

Parts of Sloppy 105 Plan Survive

The Section 105 Medical Plan is filled with important details that you can’t afford to miss. Learn from the Knowles’ problems in court to see what you can do better.

SUV Recapture

You can avoid recapture with a Section 1031 deferred exchange or a delayed exchange. You can also make your Section 1031 deferred exchange strategy forever, making your deductions permanent.

1031 Exchange to Avoid Recapture

If you sell an asset, you should know the details about depreciation and Section 179 expensing. You can sell or trade, and choose if you want an intermediary. The result: you could save a lot of money.

This Might Be the Perfect Time to Buy Your Rental Property

Good prices and low interest rates make this a good time to buy real estate. Also, tax law favors investing in real estate over stocks and bonds. Use the after-tax adjusted rate-of-return formula to see your after-tax results of your investment.

Section 105 Plan Checklist

This is our grand summary of the inner workings of Section 105 medical reimbursement plan. Use it wisely!

Examination of Documents at IRS Appeals Level

Be careful when appealing an IRS case to a higher level. Usually cases are for the technical merits of your issue or facts; seldom does it result in an expansion of the examination.

IRS Releases Guidance on IRA Transfer to HSA

A new 2006 law allows a one-time transfer of money from your IRA to an HSA. If you do it right, you can avoid income taxes or penalties. We’ll show you how.

S Corporation 105 Plan

We answer one taxpayer’s question about S corporation medical benefits. We also help him decide which is better for his wife’s business: S corporation, C corporation, or single-member LLC.

Vacant Rental Property

Rental property treatment starts on the day you place the property in service for rental use, not when you install a tenant. We answer one taxpayer’s questions about reporting a rental house for which he found no tenant.

Medicare

You might be able to deduct Medicare payments as medical insurance premiums, but it depends which type of Medicare you have.

Passive Losses for Doctor

Learn from one doctor’s situation. You can deduct passive losses of real estate every year, despite a high income. Forming a C corporation also might provide welcome relief.

Trip to Canada

It is surprisingly easy to deduct a trip to Canada, even if you only work one day while there. Use the sandwich rule, and you can deduct even more.

How Self-Directing Your Retirement Plan Can Work to Your Benefit

Don’t waste time and money in a bad retirement plan. Your IRA can accumulate great wealth for your retirement when done properly. A self-directed retirement might be the answer for you.

Husband-and-Wife Joint Venture Election Does Not Apply to LLCs

The IRS just posted the limits on its website, but there is still one way to elect single-member status. We give you the details and planning strategies.

Cut Your Taxes by 32.1 Percent by Making Cheaters Pay Taxes

Not all taxpayers have been paying their taxes, which costs each person $2,000. We show you why this happens, and how you can help.

NY Taxi Loses Cab Deductions

Learn from this taxi driver’s mistakes: keep good records. His court case shows you why.

Court Gives Roadmap to Vehicle Logs

Learn from one couple’s court case: keep good records! It’s easy, but important. Follow our strategy to make sure you don’t miss a critical element.

Doctor’s Case Highlights Passive Loss Strategies

Learn from Dr. Uy’s mistakes: prepare your taxes correctly. In his case, he should have hired a tax advisor and preparer that would have saved him thousands of dollars. See what you can do to avoid his mistakes.

Individual Proprietorship or Partnership

Even accountants can be wrong about tax law. Learn for yourself the difference between partnerships and proprietorships. See what the law says, and why it’s important.

Home Sale and Easement Proceeds

If you have a land easement on the property you are selling, you can get up to $250,000 tax-free. We show you how to do it with a home sale exclusion

105 Medical Plan

It is so important to know the law. We give support to a good CPA against an unreasonable IRS auditor about part-time employees’ medical benefits under Section 105.

CPA Incorrectly Says No to 105 Plan

CPAs are not always right! One couple tries to get Section 105 benefits, and is incorrectly refuted by their accountant. We give evidence to support our position, and advice on how to get Section 105 benefits.

Zero Interest on Car Loan

There is no such thing as zero interest for tax purposes.

Husband-and-Wife Business Election

To file for joint partnership of a business, you must attach a written statement to your 1040. There is no official form to use, so we give you an example of what you can say.

How the New Law Stimulates Your Business

This could be the perfect year to buy that rental property or building for your office. The new 50 percent bonus depreciation, new $250,000 expensing limit, and new higher luxury limit make 2008 the year to seriously consider making business purchases.

How a Buy-and-Sell Strategy Combined with Section 179 Expensing Can Put Self-Employment Tax Dollars in Your Pocket

You can take advantage of Section 179 expensing to put money in your pocket! By working the tax law, you can arrange your business assets to decrease your self-employment tax and save money.

How Trade-ins Avoid Taxes

The trade-in of an old business asset on the acquisition of a like-kind replacement business asset is a tax-deferred exchange, exempt from depreciation and Section 179 recapture. Use this to your advantage and save money every year until you die.

Don’t Do the Worst Thing You Can Do to Your New Vehicle Deductions

Don’t blow your deduction – use your vehicle more than 50% for business. If you don’t, you must recapture Section 179 deductions and recapture MACRS deductions. Aim gun, shoot foot.

New Safe Harbor for Tax-Deferred Exchanges of Annuity Contracts

Big changes have happened to financial instruments in the last few years. You can take advantage of a new tax law that allows one to exchange one annuity for another, and save in tax deferments.

AMT Crushes Bad Debt Deduction

The AMT taxes the deductions you claim on your regular tax return. No, you are not in the Twilight Zone, you are right here in the good ol’ U.S.A. Learn the details of this outrageous act.

Loans to Corporation Denied as Bad Debts

Douglas Bynum lent his corporation money before it went bankrupt. He filed to deduct this bad debt, but did it incorrectly. Learn from his mistakes and know the details to do it right.

Cost of MBA Lost as Education Deduction

With some tax planning, you can pretty well put together an education deduction for an MBA. As long as it enhances your career and doesn’t set you on a new career path, the MBA is deductible.

Section 105 Plan Fails Without Reimbursement

The Section 105 medical reimbursement plan is a terrific tax-planning tool for the husband-and-wife business. But, as with any tax-reduction tactic, doing it right is critical.

Cruise to Alaska

It is easy to deduct business trips within the US. We have a series of criteria and tips to help you plan your next (business) trip.

Hunt Doctor Courses

You need a solid plan when you want to combine deductible education with deductible hunting.

Home Office

One taxpayer’s CPA is totally wrong about three things: deducting a home office for multiple offices, net square footage, and using the office for rental properties.

Dealer or Investor

One taxpayer fixed up a house to sell it for a net loss. To save money on taxes, he can file as a real estate dealer, and not as an investor. Precedents and technical definitions help his case.

Pocket Self-Employment Taxes by Renting from Your Spouse

If you are single, forming an S corporation can be your “no-hassle spouse.” Rent from the corporation, and you can save money in self-employment tax.

Is Your S Corporation Adding to Your Bottom-Line Profits?

The major tax benefit to operating your business as an S corporation is the possible savings on self-employment taxes. As a single-owner or husband-and-wife-owned business, an S corporation might be right for you.

WOW! IRS Creates Safe Harbor for 1031 Exchanges of Vacation Homes and More

The two most magic words in tax law are “safe harbor.” Why? Clarity! There is nothing better than true clarity in the tax law. The IRS has created a safe harbor for exchanges of homes, and gives us very clear parameters on how to use them.

IRS Releases Luxury Vehicle Depreciation Limits for 2008

The IRS posted its new luxury limit tables for autos. Also, new vehicles bought in 2008 qualify for the 50% bonus depreciation from the stimulus package.

Renting to Your Corporation Does Not Produce Passive Income

Learn from one taxpayer’s court case: know the rules about renting to your corporation before claiming passive income.

IRS Audit

One taxpayer is in big trouble: he owes $61,000 in overdue taxes. Why? Bad records. We give him recommendations on what to do, but he is not in good shape.

Fishing Trip with CE

A continuing education group of dentists is going on a fishing trip to Alaska. We help them make the trip deductible by going over the nuts and bolts to make it substantive in scope and content.

Good News for 105 Plans

In an ISP, the IRS asserted that the Section 105 medical reimbursement plan may not reimburse the employee-spouse for the cost of health insurance purchased in the employee-owner’s name. This court case held that this IRS position is wrong and that the owner may deduct the cost of medical insurance purchased in his name when that insurance is covered by the Section 105 medical reimbursement plan.

Audit Guide for Your Self-Employed Section 105 Plan

Answering “yes” to the 11 puts you on the road to audit-proof status for your Section 105 medical reimbursement plan.

 

No Mercy for You When 1031 Exchange Intermediary Goes Bankrupt

When you use an intermediary to complete a Section 1031 exchange, you sell one property and place the cash on deposit with the intermediary. If the intermediary goes bankrupt causing your exchange to fail the time test, you are on the hook for the taxes.

AMT More Likely to Hurt You in 2008

In upcoming years, taxpayers with cash income greater than $50,000 are more likely to pay the AMT than taxpayers with cash income of $1 million or more. Fixing this will require a large tax package.

 

GAO Tells Senate: “Fiscal Outlook Is Bleak and Action Is Needed to Avoid Serious Economic Disruption”

In testimony before the Senate on January 29, 2008, the Government Accountability Office (GAO) said: “Under any plausible scenario, the federal budget is on an imprudent and unsustainable path. This budget imbalance will necessarily result in tax increases and spending cuts. (And all this is before Treasury Secretary Paulson’s first $700 billion bank bailout.)

 

Tool Allowance Fails

New tax rules have pretty much killed the once-common tool and car allowances as expense reimbursement methods.

 

Rental Loss Not Deductible

Carolyn Federson lost all of her rental property loss deductions when the court rejected some of the details of her rental property time records and made its own estimate of the time she spent on her rentals.

 

IRS Levies IRA for Back Taxes

Anti-alienation provisions prevent ordinary creditors from levying pension payments. The IRS does not suffer these provisions.

 

No Meal Receipts Equals No Deduction

This taxpayer lost $5,503 in meal expenses because she could not produce receipts or other records to prove the meal deductions.

 

Gift of Business SUV

When a business vehicle is given away as a personal gift, it is subject to recapture on any expensing or depreciation deductions in excess of straight-line depreciation.

 

Son Pays the Mortgage Interest

Your son may not deduct the interest on the mortgage payments he makes on your behalf. You need to reconsider and restructure this arrangement.

 

Husband and Wife Joint Venture

The husband and wife who work together must consider the joint venture election if they want the business treated by the IRS the way they think it should be treated.

 

Fireproof Safe

Purchase of a safe or file cabinet to protect business tax records is deductible, but only to the extent of business use.

 

Cruise to Mexico

Taking a cruise ship to Mexico for a business meeting is an acceptable, and deductible, form of travel.

 

Home Office as Second Office

The accountant who is telling you that you may not deduct a home office because you have an office outside the home is wrong. It makes no difference how adamant he is about this. He is wrong.

 

Solo 401(k) for Employee-Wife

This proprietor paid his employee-wife $12,000 in wages. Now, she wants to contribute the entire $12,000 as an elective deferral to her 401(k) account but she no longer has $12,000 because of payroll taxes. With some mechanical adjustments, the employee-wife may contribute the full $12,000.

Tax Guide to Gambling Income and Losses

Gambling requires good strategies not only in your gambling activity, but also for tax purposes. You need to report your gambling income and losses in your tax returns and keep tax records whether you win or lose, whether the gambling is legal or illegal, and whether the gambling is a tax defined business or hobby.

 

Solo 401(k) with Your Employee-Spouse

The combination of a Section 105 medical plan and a $15,500 salary to the spouse generated a $32,875 tax deduction for the business, no taxable income for the spouse, and a cash contribution to the spouse’s 401(k) retirement account of $19,375.

 

Real Estate Commission Rebates Are Not Taxable

The IRS ruled that this real estate broker who gives commission rebates and commission reductions at closing does not have to give Form 1099s to his customers who receive the rebates and reductions.

 

AMT Patched, Mortgaged

In what is becoming an every year outrageous event, lawmakers patched the alternative minimum tax (AMT), adding $50 billion to the federal deficit.

 

Peanuts for Mortgage Relief

Despite the new law’s press, the Mortgage Forgiveness Debt Relief Act of 2007 only offers relief to a limited number of qualified homes.

 

Lawmakers Increase Penalties

To pay for the “Heroes Earnings Assistance and Relief Tax Act of 2007,” lawmakers increased the minimum penalties for failing to file a tax return.

 

Jail Time for Tax Evasion

Terry Gerber was sentenced to two years and six months in federal prison for tax evasion.

 

Lack of Knowledge Costs Home-Office Deduction

The taxpayer in this case relied on his lawyer, but that lawyer did not know the home-office rules. Then, the judge misapplied outdated rules to his home-office deduction, costing this taxpayer $7,000.

 

Quitting Business

When you claim Section 179 expensing or MACRS depreciation, you make a contract with the government. When you quit your business, you probably violate the terms of your tax-law contract and, thereby, trigger recaptures taxes.

 

Dutch-Treat Entertainment

Under the “objective test,” entertainment does not mean only the entertainment of others. The objective test sanctions Dutch-treat entertainment.

 

Entertaining My Husband

Talking business with your husband does not create a tax deduction for entertainment. For this to work, you need to create a situation where you can use the closely connected rule.

 

Depreciation on Home Office

The IRS applies a recapture tax, even when no depreciation is claimed.

 

When Deductible

Technically, cash basis taxpayers deduct checks when they are delivered and negotiable. For the most part, the courts and the IRS employ practical applications to make this rule easy for you.

Commissioned Employees Beat AMT by Claiming Independent Contractor Status

The dreaded alternative minimum tax (AMT) taxes the regular tax deductions claimed for employee business expenses. These taxpayers said, “enough” and took their cases to court where they won their deductions by claiming employee business expenses on Schedule C.

Standard Mileage Rate 50.5 Cents for 2008: Gift or Rip-Off?

Compare IRS rates with actual expenses to find what’s best for you. Should you choose IRS mileage rates, keep this one key point in mind: when you sell, you have gain or loss to consider. You might save thousands and thousands by knowing this one simple rule.

Bad Mileage Log Kills Vehicle Deductions

Robert Walters’ auto deductions sank from $10,878 to $966 because of poor record keeping. Do the best thing you can do for yourself. Keep a good mileage log next to your appointments. This can be easy, and it will save your bacon if you get audited.

Corporate Payments of Disability Policy Cause Court Case

Take it from Richard Cotler: if you operate as a corporation, make sure to keep your personal and corporate expenses separate. Asking a court of law to separate your personal and business expenses is an expensive and time-consuming task. And you absolutely should keep the personal expenses clearly identified or, better yet, not on the corporate books at all.

Meal Replacements Are Not Deductible as Medical Expenses

Meal replacements, diet foods, and dietary supplements are substitutes for the food individuals normally consume, making them nondeductible personal expenses.

Defined Destruction of Home Produces Sale for Exclusion Purposes

At what point is a home destroyed so that it is eligible for the “involuntary conversion rules and the $250,000 ($500,000) exclusion of capital gains rules? In this chief counsel advice, the IRS gives some clarity.

105 Deduction for Inversion Table

An inversion table lets someone hang upside-down by the ankles to alleviate back pain. According to tax law, it can be deducted as a medical expense.

Deducting Golf Lessons

Golf lessons, in this taxpayer’s case, can be deducted as a business expense. The golf lessons improve the business skill he needs in his prospecting.

Bad Year Deductions

One spouse’s business losses can be written off against the other spouse’s income. Think like this: In a loss year, the business spouse provides tax shelter.

15 Last-Minute Tax Planning Tips for 2007

You have very little time left to impact your 2007 taxes. Here is a meat-and-potatoes list of last-minute opportunities.

Antiques Can Make Smart Assets for Your Business

Furnishing your office with antiques can actually make you money. Instead of buying new, depreciable furniture, furnish your office with antiques. Though they have a higher price tag, they can yield 36 times more money than new furniture.

Missing 1099 Creates Trouble

Uriah Jones’ employer was late and didn’t send him his 1099 in time; he didn’t send it to the IRS, even late. Not surprisingly, he was audited. He then took that matter to court and lost. Always report your income, even when you don’t receive the 1099. It’s taxable, regardless of 1099 receipt.

Get Your SUV Deduction on the Right Tax Form

Getting your numbers on the right tax forms is critical to properly filing your tax return and claiming your money. This means that you need to pick a preparer who knows what he or she is doing, and you need to know enough yourself to know that your preparer is right.

Capital Gains Are Biggest Tax Expense

A government committee identified the capital gains’ 15% rate as the biggest tax expense from 2007 to 2011. This expense is growing, and just might prod some lawmakers to increase the rate that’s now available. Take advantage of current rates!

New Rules on Contingent Fees

With four exceptions, tax law prohibits contingent fees with regard to any matter before the IRS. The beauty of the contingent fee for the taxpayer is the certainty that you don’t pay if you don’t get a positive monetary result. This certainly beats the alternative: big payments, no results.

Putting Tax Practitioner’s Feet to the Fire

A new law makes tax preparers subject to higher penalties for errors, and establishes high standards for claims made on tax returns. The moral: if your tax advisor examines your issue and tells you that you can claim that deduction, you have a very solid claim.

IRS Audit

One taxpayer is audited, and told incorrect information by an IRS agent. We give her proof to support her position.

Teeth Whitening as a Business Expense

You probably should not try to deduct teeth whitening. The law generally disallows a teeth whitening–type of expense because it has both a personal and a business benefit.

Joint Venture Taxed as Partnership

As a two-person team that splits costs and commissions, these two people are a partnership for legal purposes. They have three choices: file as a partnership, C corporation, or an S corporation.

Real Estate Joint Venture

As a two-person real estate team, these two taxpayers are real estate dealers, according to the tax law. They have two choices: file as a partnership or as an S corporation.

105 Deduction for Back Chair

Deducting a piece of furniture, like a back chair, is tricky. You can do it, but you have to be very precise. For example, we recommend supporting your position by getting a prescription, and building proof that this chair would not be used generally as an article of furniture

Tax Guide for Debtors on Foreclosure of a Home

Tax law treats foreclosure as a sale of your home. If you sell your home, you have a gain or loss. Most gains are taxable. Losses on a foreclosure or other sale of your personal home are not deductible.

 

Tax Guide for Debtors on Foreclosure of Rental Property

Tax law treats foreclosure on your rental property as a sale of your rental property. When you sell a rental property, you have a capital gain or loss, or a Section 1231 gain or loss. This differs from a home.

 

IRS Audit of Rental Properties

The ability to deduct rental property losses can alter investment returns by as much as 40%. In many cases, the ability to deduct the losses can make the sole difference in making a profit or incurring a loss on the rental.

Tax Guide for Vacation Rentals

If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property, tax law might consider your property a hotel. The purpose of this article is to alert you to the tax issues that surround a vacation-home hotel.

Tax Quiz—Are You a Stock Dealer, Trader, or Investor?

As a person who buys and sells stocks, you will see a huge difference in how the law treats you if you’re a dealer, trader, or investor.

1099s Tell Story on Dentist

Steven Olmos thought he could slip past the IRS when he changed states. It is not very complicated: the IRS knows if you do not file taxes.

Court Rules Horse Activity Is Advertising Component of Design Business

Tracy Topping saved $251,462 in taxes when she proved that her horse activity was not a hobby, but a promotional tool for her business.

Court Declares $68,796 Rental Loss Passive

To win your rental property deductions you need proof of the time spent. This taxpayer had inadequate proof.

Dealer or Investor?

Dealer versus investor tax status is a heavily litigated issue. Choosing between dealer or investor status is often a tough call, as is in the case of this taxpayer. There can be a huge tax difference between classification as a dealer or classification as an investor.

New Law Requires a Tax Plan for Husband-and-Wife Proprietorships, LLCs, and Partnerships

The new Iraq war funding law contains a new tax law section on “family business tax simplification.” If you and your spouse work together in the business, it is time to pay attention and examine this new law.

Capital Gain Triggers AMT

When planning your taxes, always consider the AMT. This creepy tax seems to come out of the woodwork and attack when you least expect it. For example, in 2002, Kevin Moore sold his farm, and, because of a tax law error, he owed AMT. Had he sold in 2004, after tax writers fixed the glitch, he would have had no AMT.

Proof of Accounting Fees Fails

If you claim business deductions, you better have the proof to back up your expenses. Gary Colvin provided insufficient evidence for his $1,750 deduction for tax preparation, and the court denied his entire deduction. Keep good records!

No Mileage Log, No Deduction

Again, Colvin fails to provide sufficient evidence for his deductions. This time, it’s a $6,000 auto deduction, for which he was denied all but $780.

S Corporations Fail with Assignment of Income

Tax law contains specific rules on the recognition of S corporations. Make it easy on yourself: if you are thinking of operating as an S corporation, know the rules before you start.

Wrong Setup Causes Tax on Disability Payments

Millard Thomas got hurt on the job and qualified for total disability from his labor union. Properly structured, disability payments for an injury are not taxable. Unfortunately, the labor union filed his disability incorrectly, and his disability pension benefits were taxed.

 

Previous Audit Does Not Bless Deductions

From a legal standpoint, income taxes are levied on an annual basis, so that each year represents a new liability and a separate cause of action. Under this principle, taxpayers do not establish entitlement to deductions in one year merely on the basis of allowance of similar deductions in a previous year.

Withhold Taxes?

If you must start taking minimum IRA distributions, you decide to have the IRA withhold the taxes or not. If you are not currently making any estimated tax payments, it might be a good idea to have them take care of that paperwork for you, but if you are currently paying estimated taxes, pay more with each estimate.

Deduction for Family Wedding

Trying to deduct the expenses for a wedding? Good luck. We don’t think it’ll work. You’ll have a much better shot at deducting it if you can make it a business trip, and still attend the wedding,

$25,000 Expensing of SUV

If your SUV qualifies as a truck, you can write off up to $25,000. What qualifies as a truck, however, is very specific. It must pass the weight test, be a legal gas-guzzler. The bed size is important, too.

Husband-and-Wife Corporate Meetings

As owners of an S corporation, you probably are allowed to forego the stockholders’ and directors’ meetings. However, you may not want to. By skipping these meetings and other “corporate” activities, you appear less like a corporation in the eyes of the law.

Erratic S Corporation Salary

If you own your own S corporation, make sure you look like a corporation in the eyes of the law. The IRS is cracking down on S corporations using this status to save self-employment taxes.

Goodbye, SUV Expensing?

The $25,000 SUV expensing might disappear in 2008. We won’t speculate on what might happen next year, but the current rules still apply until the end of 2007.

Business Club Deductions

Business meals, like those consumed at Lions Club and Rotary meetings, ARE subject to the 50% rule. We have proof.

Coffee for Employees

You may deduct coffee and sodas in the workplace, as long as you file them correctly.

Tail Insurance

As a surgeon, you might get malpractice tail insurance (insurance that covers malpractice claims should you quit and go to another hospital). We suggest having the hospital pay the insurance costs, even if they deduct your pay, to protect yourself from the AMT.

Add to Your Net Worth with Cost Segregation

Good tax planning tells you to accelerate your deductions and defer your income. Cost segregation can add tremendous acceleration to the depreciation deductions you claim on a building. That puts money in your pocket.

Equipment Found in a Real Property Building

Cost segregation can save you a lot of money. You can separate the building and the equipment inside to increase your deductions. We include a list of items that count as equipment.

Marriage Qualifies for Part of $250,000 Home-Sale Exclusion

The $250,000 home-sale exclusion is a major tax break. To qualify for the exclusion, you must have owned and lived in your home for two of the past five years. You can get out of the “two out of five year” rule by unforeseen circumstances, like, say, marriage.

Receipt of Check Destroys Tax-Deferred Exchange

Tax-deferred exchanges apply to insurance as well as real estate. There are very specific rules about the transfer of funds, so make sure you do it right.

Lack of a Time Log Destroys Real Estate Loss Deductions

Andrew D’Avanzo had one very bad day in court. He did not group his rental properties, and had an insufficient time log that did not satisfy the court. He lost a lot of money. Learn from his mistakes: know the details about tax law!

1031 Exchange of Vacation Homes Fails

You can use the 1031 exchange to defer taxes when you exchange one rental property for another. Specific rules apply when determining whether a vacation home is a personal residence or a rental property, though, so make sure you know the rules. A slip up here could mean a lot of money in taxes.

105 Medical Plan Fails

Darwin Albers employed his wife and claimed an $8,216 section 105 medical reimbursement plan deduction. He lost every penny of his claimed 105 medical reimbursements because of a few easily avoided errors.

Spreadsheets and Credit Card Receipts Not Close to Correct Evidence

The IRS has very specific rules regarding record-keeping for deductions. One husband-and-wife team lost over $31,000 because of bad records. Know the law!

Tax Law Shows No Mercy to Victim of Payroll Embezzlement

The IRS is not a forgiving entity. Even if a fraudulent payroll service is charged criminally, as in this case, you are still responsible for the taxes you owe. We give you a sound strategy to avoid payroll fraud.

Deductions When Home Office Fails

If you do not have a home office, you may not deduct things related to the home, like gas bills or homeowners’ insurance. However, the law allows you to deduct office assets that could produce tax benefits because they would not be considered part of a dwelling.

Home Office with More Than One Business

To deduct things in a home office, they must be used exclusively for business use. Not one minute can be personal use. Should you have a use that fails the exclusive business-use requirement, that one failed use disqualifies your home-office deduction.

Proof That Wins

You can deduct items in your house, like a desk in the den. The tax rules are specific, though, and you must log the usage meticulously. The IRS does not like approximations.

IRA Donation to 501(c)(3)

If you want to donate money from your IRA to charity, there are two ways to do it: you can have the IRA send the money directly to the charity, or you can do it an alternate way. We recommend sending the money directly to save money on taxes. There are important details, however, so read closely.

Make Sure the New 2007 Business Vehicle Luxury Limits Don’t Stick It to You

The government penalizes you if you drive a luxury vehicle. Further, the government’s idea of luxury and the reality do not match.

New Law Changes Kiddie Tax to Destroy College Funding Strategies

Lawmakers wiped out tried-and-true tactics for getting the government to help with the cost of your child’s college with the new tax law in 2007. You can do a lot to mitigate the damage if you get after this problem right now.

Lack of a Time Sheet Kills the Section 105 Plan

If your spouse is working for your company, you need proof that s/he is a legitimate employee. It is not hard, but you need to have good, solid proof to ensure that your deductions and medical reimbursements will be honored by the IRS.

Who-Paid-the-Bills Mystery Sinks Section 105 Plan

Learn about one couple’s problems with Section 105 medical reimbursement. You must document all payments. The reimbursement of the employee-spouse for every medical bill is easily done and a audit-proofing tactic. Make this an absolute requirement.

Expense Allowances Can Be Dangerous

Save yourself time and trouble. Reimburse employees for actual expenses. Forget those two troublemakers: per diems and allowances.

Taxation of Social Security

Be alert to, and beware of, government studies. The result of a tax study is almost always bad news for you. In this case, we foresaw the problems with the 1986 tax “reform.” What’s on the radar next: the new social security study group and the AMT.

Incorporation to Increase Business Mileage

The best strategy for this subscriber: do nothing. He is considering forming a corporation, but we think that will not help him with what he wants to do. Sometimes the best solutions are the easiest.

Coaching Girls’ Softball

One couple coaches a girls’ softball team and puts up advertisements for their company. It is a good strategy that is good for business. We show them how to deduct coaching expenses like bats, balls, tees, and a pitching machine.

Your First Home Could Be Your Best Investment Ever

To rent or to buy? That is a question. Use this easy software that comes with this article to find what’s best, after taxes—no guesswork. Identify 12 reasons why renting is best. Identify 11 reasons why buying is best. Consider everything in just a few minutes.

Dentist Goes to Prison for Tax Fraud

Roy Lewis, a dentist from California, was sentences to 2 years in prison for tax evasion. He was involved with Tower Executive Resources, a Denver-based company that set up a failed tax-evasion scheme with false invoices, bogus tax deductions, and secret offshore bank accounts.

Tax Guy Commits Fraud; Client Pays the Government

Vincent Allen hired a tax preparer to file his tax returns. The preparer was charged with fraud. Although the IRS did not bring the fraud charge against Allen, users of fraudulent preparers could easily be charged and convicted of fraud themselves.

Convention Boondoggle Area Expanded

Tax law divides conventions into two areas: the North American area and everything else. When you are outside the North American area, the rules do about everything possible to make your convention trip nondeductible. So, if your group is not a worldwide group, attend only conventions in the defined North American area. However, there are a lot of locations that count as North America in which you can attend a conference and deduct.

Tax Quiz—IRS Audit

4% of Americans are audited each year. Do you know what two line-item expenses are most vulnerable to a Schedule C audit? Take our quiz and find out!

No Good Deed Goes Unpunished

Do not use your Social Security number to collect income on behalf of any other person. This will create nothing but trouble for you.

Jail Time for Not Filing Tax Returns

Anthony Lee was sentenced to seven months in prison and three months of home detention for failure to file his tax returns. He owed $76,853 in taxes and an extra fine of $10,000. Know the law!

Renting Property to Your Corporation Problem

Section 280A(c)(6) forbids the home-office deduction when you rent home-office space to your corporation. Whenever you have transactions with or your owned corporations, partnerships, and other entities, you face rules in the tax . As Gary and Delores Beecher recently , of the related-party rules produce harsh results.

Getting More Vehicle Deductions

We help one business owner plan her vehicle purchases. She uses her husband’s car on occasion, and wants to purchase a new SUV for her business. We give information both on the larger-scale, and specific to her case.

Putting the IRS Audit Manual’s Home-Office Section to Work for You

The IRS puts out its audit manual every year. It not only contains information on how to audit, but also gives information on disallowing deductions. We dissected the audit manual and give you 11 audit-proofing tactics to ensure you get the deductions you deserve.

Why Incorporation Makes Your Home-Office Deduction Less Subject to an IRS Audit

You have probably read that the home office increases your chances of IRS audit. We’ve read that, too, but we don’t believe it. Regardless, there are a few things you can do to make your home-office audit-proof.

Home Office for Corporate Owner Requires Convenience of Employer

If you operate your business as a corporation and claim the home-office deduction, you need to prove that you use the home office for the convenience of the employer, your corporation. You must pass the convenience-of-the-employer test whether or not you are having the corporation reimburse you for home-office expenses.

Loans to Your Corporation Could Be Hazardous to Your Financial Health

If you are an owner-employee of your corporation, be careful loaning money to your corporation. If it goes under, you might not be able to deduct your bad loans. One solution is to make an additional contribution to capital, but that still doesn’t fully solve the problem.

Your Chances of Audit Are Increasing

In March 2007, the IRS released its latest audit statistics. Your odds of avoiding an audit are getting worse.

Tax Freedom Day

The percentage of income going to taxes has been increasing since 1900. April 30th, Tax Freedom Day, is the day that the average American has completed working to pay all of his or her taxes. Make sure your Tax Freedom Day comes as early as possible.

Tax Quiz—Sell Stock at a Loss to Your Daughter

If you sell stock to your relatives at a loss, don’t lose possible deductions – know the related party rules!

Tax Preparer Loses Records, Taxpayer Pays the IRS

Dr. Rinker lost over $60,000 of deductions when her tax preparer lost her records. Don’t lose your tax records, and don’t give your original records to anyone, not even your tax preparer!

Day Trading Produces Capital Losses

Shahrooz Jamie, a physician in West Virginia, had a side-business as a trader of securities. In his court case, he tried defending his net operating loss carryovers to offset the net income from his medical practice. The court ruled against him, imposing substantial overstatement penalties.

MLM Deductions Lost

Yung Chong worked a full-time regular job, and had a Section C side business. His records, while present were not enough to satisfy the court, which disallowed all of his nearly $10,000 in deductions for his side business. This case makes it clear: even if you have some records, if you do not have all the required records, you get no deductions.

Sponsoring Sports Teams

Revenue ruling 70-393 allows you to deduct the expenses of sponsoring a sports team.

Value of Time As a Contribution

If you donate cash to a charity, it is deductible. However, try and deduct the value of your time or services, and you run into problems with the law.

Reimbursement of Mileage for 105 Plan

For employees under the Section 105 Medical Plan, the law authorizes a medical deduction for transportation to receive medical care. You may reimburse any medical expense that you could otherwise deduct on your Form 1040.

New Entity to Manage Properties

One subscriber asks about making a corporation for his rental houses, and then using a proprietorship to do the management. He would charge a fee to the rentals. We don’t think this is a good idea because it will increase his taxes.

Guide to Aircraft Deductions for the One-Owner Business

Many people, through keen knowledge of the tax law, have been able to use the law to their advantage and buy personal aircraft. Unfortunately, lawmakers changed the rules for deducting personal aircraft. We summarized the new rules for you.

IRS Simplifies Phone Tax Refund for Businesses

You are entitled to tax refunds for the excise tax you paid on your business long-distance phone services from March 2003 through July 2006. To calculate your tax credit for these 41 months, you may use the actual excise tax from the phone bills, or use the newly released formula.

Car Deduction

To calculate the deductions for a business vehicle when you sell it, you must divide the car into business and personal parts, find your adjusted basis for business purposes, and find your loss deduction.

Filing Tax Return Late

Even if you do not owe any money, you move right to the front of the line for an IRS audit if you do not file your taxes on time. Always file a tax return, even if you cannot pay the tax.

Avoiding Recapture of Social Security

A personal-service corporation, like that of an accountant, is taxed at the maximum corporate tax of 35%. Instead, consider the S corporation strategy for saving on Social Security.

Reimburse S Corporation Owner for Section 179 Deduction

If you personally own the vehicle that your corporation uses, the IRS authorizes the reimbursement of the vehicle expenses. To make this work, you must submit an expense report and mileage log to your corporation.

Laser Eye Surgery

The tax law allows you to deduct the cost of laser eye surgery, as long as it produces a business benefit. There are specific details that apply, though, so read carefully.

S Corporation 105 Plan

You get no business benefit from the section 105 plan at the S corporation level. However, you do get a big personal benefit when you steer the medical insurance through the S corporation to give yourself the medical insurance as a guaranteed payment.

How Much Could You Bank If You Turned Your Charitable Contributions into Business Expenses?

If you do not itemize your deductions, pay self-employment taxes, or suffer deduction phaseouts, you will likely benefit from making your donations deductible as business expenses. But if you decide to make business contributions to charity, make sure you know how to make your proof stand up to scrutiny.

Nontaxable 1099

Not reporting the 1099 information is always a mistake. If you have a rental property that you rented less than 15 days this year, it is not taxable. If you do get a 1099, you should include it in your tax return, but follow our strategy to avoid any problems.

Bad Records Cost $78,775

Mr. Lam, a financial planner, lost every penny of his claimed $240,985 in deductions either because he had no proof or because both the IRS and the court declared his proof inadequate. Know the rules! Keep good records!

You Lose When You Answer Late

Learn from one taxpayer’s mistake: if you hire a lawyer for tax court, hire a tax lawyer.

Vitamins

Vitamin use falls into two different categories depending if you reimburse them under Section 105 Medical Plan or file them in your tax returns under your 1040.

105 Medical Plan

Here’s an example of a perfect plan for using the Section 105 Medical Reimbursement Plan for an employee-spouse in a single proprietorship.

The Value of Documents When You’re Arguing with the IRS

IRS auditors do most of the audits. They are not accountants (IRS agents are accountants); they might be wrong about tax law. It’s your responsibility to know the law and use it to prove your point. This article tells you how to use court rulings and documents that enforce your rights in your tax-law partnership.

Build Proof That You Filed Your Tax Return

Answer this question: Could you prove that you filed last year’s tax return? Is your proof credible enough that it will stand the scrutiny of the IRS?

AICPA Proposes Revenue Ruling on Health Insurance for S Corporation Owners

Many S corporation owners are improperly deducting their health insurance on page 1 of the 1040. The American Institute of CPAs submitted a proposed revenue ruling that it would like the IRS to issue concerning health insurance for the S corporation owner. The proposed revenue ruling does nothing to alleviate the problem in the headliner; instead, it would formalize the problem.

IRS Issues New Rules for Fixing Depreciation

Revenue procedure 2007-16 allows you to make a change in depreciation after you sell, trade, or abandon property. The new procedures make some prior procedures obsolete and make revisions easier.

IRS Releases Fees for 2007 Private Letter Rulings

Getting the IRS to give you an advance ruling on a transaction or deduction can be very worthwhile. It now costs money, but it might be worth getting the opinion you seek. If your ruling does not fit into the three major categories they list, your fees may vary. The highest fee is $50,000 for a pre-filing agreement.

S Corporation Loses Child Care Deductions

Tax court and the IRS establish that child care is not an ordinary and necessary expense and, thus, is not deductible. This ruling, though sloppy (we show you why), establishes a precedent. However, under section 129 in the tax law, the employer may provide child care benefits.

Tax Lawyer Fails Deductions

William Lenihan, a well-educated tax lawyer, lost every deduction he claimed on both his Schedule C consulting business and his Schedule E rental businesses because he did not keep good records. Know the law! Keep good records!

Reasonable Mileage

The law contains no reasonableness test for mileage. There are very specific rules for recording mileage. We recommend that you keep a mileage log for three consecutive months to prove your business-mile percentage.

Home Office as Administrative Office

You cannot qualify for the home office deduction if you have two administrative offices, one at home and one at your other office. Also, the rules only apply to you, not your staff.

Subaru Outback As a Truck

There are very specific regulations regarding what qualifies as an SUV for the $25,000 expensing. Does a Subaru Outback qualify?

Murray Test

Murray Test of Snippet

How Safe-Harbor Rules Can Audit-Proof Your Cruise to the Caribbean

Ask yourself two questions: First, would you like to take a cruise? Second, would you like to get a tax deduction for the cost of your cruise? If you answered “yes” to both questions, this article is for you.

Extenders Extended Again

Extenders delay the expiration of a specific tax law, which hides budget costs and allows lawmakers to shirk their responsibility to make good law. We summarize the current extenders to inform you of where you stand with the tax law.

Extenders Law Adds New Extender for Mortgage Insurance

In the latest installment of gimmicky extenders, lawmakers have created a one-year tax benefit window for deducting mortgage insurance. What are the lawmakers thinking? Presumably, they hope the mortgage insurance deduction will boost the housing market in 2007. If this works, look for an extension to 2008.

Is Failure a Hobby?

If you have a business that goes under, and want to deduct it, you will need to prove to the IRS that it indeed was a business, and not a hobby. Assets, rental space, time spent, and other details will support your position.

Section 105 Benefits

It is possible to save big on medical insurance if you use the Section 105 Medical Reimbursement Plan. If you navigate the tax law correctly, you might be able to save $4,000, like one taxpayer. Knowledge is power.

One Place Never to Borrow Money

Business owners, do not be tempted to “borrow” payroll taxes to contribute to the company. This is not only illegal (with penalties), but might leave you personally liable for the stolen money.

Hiring Children

Hiring your children can be a really good move. If you have a sole proprietorship or a husband and wife partnership, you can save a lot of money in taxes. Be careful, though, with corporations, LLCs, estates, and partnerships.

Repairs to Make the Home a Rental

If you make repairs to your home for the purpose of making the home a rental property, you may deduct them, if you do it right. You cannot, for example, deduct repairs made to your home (not rental property). You might also consider filing the improvements as capital expenditures.

Wages on Schedule E

Schedule E allows wages, but it does not have a separate line item for them. So, when you are hiring your spouse to work on your rental properties, file the work as “ordinary and necessary expenses to save money on taxes.

Wages and 105 Plan

If you hire your spouse, you can save a lot of money in taxes by not paying him/her a wage. Instead, cover him/her and your family with medical benefits under Section 105.

Travel Deduction for Educational Seminars

When you combine business and personal travel, tax law contains specific rules on what you can and cannot count as a business day. These rules determine if your transportation, lodging, and meal costs are deductible in full, partially deductible, or not deductible at all.

Boots Deduction Lost

While testifying at his trial, this taxpayer learned how to deduct business clothing, gloves, and boots--too little, too late.

Poor Arguments Cause Demise of Home-Office Deduction

You need to know the rules to protect yourself not only from the IRS, but also from the courts. If you don’t take the proper position on your home-office deduction, neither the IRS nor the courts give consideration to the arguments you should have raised that would have won your deductions.

Actor Wesley Snipes Indicted for Tax Fraud

It matters not that you used a paid tax preparer to help you, you commit tax fraud and face jail time when you take illegal tax protestor positions on your tax returns.

Home Ownership Denied

When the seller does not transfer legal title to the buyer, the buyer can still be the owner when the buyer passes the beneficial ownership tests.

How Jones Brought Himself to the Attention of the IRS

When you receive a 1099 or a W-2, you should file a tax return even if no return is required.

Lack of Proper Records Crushes Deductions

Section 274 is merciless. You need a mileage log and the required elements that prove your overnight stays. Having your CPA prepare these records after the fact fails.

Tax on Children

The kiddie tax applies to unearned income. It does not apply to earned income.

Fiscal Lunacy Award #19

The federal budget is understated because it does not include amounts for tax extenders—tax laws that are scheduled to expire, but that will not expire because they will be extended. Yes, it’s lunacy.

IRS Sets 2007 Mileage Rate at 48.5 Cents

As an individual (not as a corporation), you may use IRS mileage rates in lieu of actual expenses to deduct vehicles you own or lease. The IRS rate has two components: one for operating expenses and the other for depreciation.

Unibody SUV

You may amend your tax return for missed Section 179 expensing on a unibody SUV. The truck chassis is not required for an SUV to qualify as a truck for purposes of the SUV deduction.

401(k) at Age 74

Although required to withdraw money beginning at age 70½, this age 74 taxpayer should continue to invest in his 401(k) to take advantage of tax-free compounding for an additional 12 plus years.

Real Estate Investment Seminar

This real estate boot camp deduction is allowed to the taxpayer who is classified as being “in the business” of renting real estate, but not to the taxpayer classified as an “investor in real estate.”

Mortgage Insurance on Rental

Although IRS publications give you no guidance, you may deduct mortgage insurance on your rental properties. The IRS confirms this in its answers on its Website.

Depreciation of Home Office

Claim the proper amount of depreciation on your home office to take advantage of the time value of money and avoid problems.

Payroll Service Took Taxes on Child Hire

Vigilance pays off. This payroll service did not know this rule: wages paid by a parent to his under-age-18 child are exempt from payroll taxes.

Solo 401(k)

The solo 401(k) is one great retirement vehicle for the independent contractor.

Does the SUV Built on a Unibody Frame Qualify for $25,000 Expensing?

You may Section 179 expense up to $25,000 of your business cost when you buy a more than 6,000 pound gross vehicle weight rated (GVWR) new or used crossover vehicle or SUV built not on a truck chassis, but on a unibody frame in a manner that qualifies the vehicle as a truck for purposes of the gas guzzler tax.

The Back-End Vehicle Deduction Tax Reduction Plan

You need a tax plan for the sale or trade-in of the business vehicle you are driving today. You also need a tax plan for the business vehicle that will replace your current business vehicle. You need this tax plan if you use IRS mileage rates, actual expenses, Section 179 expensing, MACRS depreciation, or bonus depreciation.

Court Rules Taxation of Injury Settlement Is Unconstitutional

Winning a court case for physical or nonphysical injuries triggers tax laws that can dramatically impact the after-tax value of any cash you receive for injuries or damages.

Fiscal Lunacy Award #9

By using outside collection firms instead of IRS personal, the government is going to lose $8.6 billion a year in revenue.

Fiscal Lunacy Award #17

Government whacks 157 estate tax lawyers at a cost to taxpayers of $2.6 million a day.

700,000 Fail to Claim Sales Tax Deductions

Lawmakers enacted a special two-year sales tax deduction to benefit taxpayers who live in states with no income tax. According to the Treasury Inspector General, over 700,000 taxpayers failed to claim the deduction.

Sign on Car

Advertising your business on your vehicle does not change either your business or personal use of the car.

Top Producer Trip

When you win a top producer award trip to a fancy resort or location, create educational events for yourself to qualify your trip for business travel deductions. When you get this right, you offset the 1099 award value with bona fide business travel expenses.

Gift of Home

The $250,000 exclusion on the sale of this home is complicated by the mother and daughter owning this home together.

Solo 401(k) Could Be the Perfect Retirement Plan for You

Incorporated and unincorporated businesses can use the solo 401(k) to benefit the owner (including a husband and wife). In most cases, the solo 401(k) allows the one-owner or husband-and-wife owners to put away more than they could in other plans (up to $49,000 this year, depending on age and earnings—adjusted for inflation in future years).

New Rules for Writing Off Leasehold Improvements

New rules increase the tenant’s ability to first use shorter depreciation periods during the life of the lease and then write off the undepreciated balance of leasehold improvements at the end of the lease. The proper application and intertwining of the new rules enable both landlords and tenants to put cash in their pockets.

Getting a 100% Deduction for Meals Served to Independent Contractors

Meals served to your employees and independent contractors at training sessions and incentive award trips are subject to the 50 percent cut that applies to entertainment and meals. To qualify for a 100 percent deduction, you need to include the meal as compensation to the employee or independent contractor. That’s what many Fortune 500 companies do.

Qualifying for the 1031 Exchange on a Vacation Home

The tax rules make your vacation home either a personal residence or a rental property. When you qualify the vacation home as a rental property, you then may use the Section 1031 rules to defer taxes and build more net worth.

Records Lost in Fire

If your tax records are destroyed in a fire, the IRS allows you to reconstruct the records. Reconstruction takes a big effort. Protect your records so that you don’t have to reconstruct them.

Four Major Rental Property Questions Answered: (1) Deducting Rental Losses, (2) Grouping Properties, (3) Tracking Rental Property Time, and (4) Material Participation

To treat your rental property as a tax shelter and deduct your rental property losses against non-passive income, you first need classification as a real estate professional and then you need material participation on the individual properties, or if grouped, on the group. Good and proper tracking of time spent by you and, if married, your spouse is required to prove both your real estate professional status and material participation.

New Law and New Times Require a Close Look at Your Retirement Funds

This new law requires that you look at your retirement plans through new eyes. Caution is one watchword here. You have much to consider, including how to obtain a strong rate of return on your retirement assets and factors outside your control like the pension bailout of the airline industry. With the new rules, the 401(k) looks better and better, especially if you have employees.

New Law Attacks and Changes Many Charitable Deductions

Public Law 109-280 makes tax deductions for donations to charity far more difficult. Here is one example of the changes: dropping $5 in the collection basket at Church on Sunday is no longer deductible. Now you need a cancelled check or a receipt to claim that deduction.

Tax Planning Quiz

You need to spend an appropriate amount of time on your tax planning.

The AMT Attack Creates Two Surprise Casualties

The AMT taxes the deductions you claim on your regular tax return. For example, the AMT taxes the deductions you claim for state income and sales taxes. Further, the AMT taxes the personal exemptions you claim for yourself, your spouse, and your dependent children. This is not a typo. It’s true. The AMT is the most unfair tax since direct confiscation of assets.

Assignment of Personal Commissions to His Corporation Crushes Insurance Agent

Assigning your personal commissions to your corporation does not work. In this court case, this insurance agent had unfiled tax returns and unpaid taxes for the years he assigned his 1099 income to his corporation.

Business Trumps Medical Mileage

Good tax planning for a trip to the medical doctor includes making a properly-targeted business stop the primary purpose of the trip.

Husband and Wife Business

When the husband and wife work together in the business, but report that business on one Schedule C, they create a tax problem for themselves. Is this a partnership or joint venture where both husband and wife have earned income subject to self-employment taxes? You can avoid this problem by hiring the spouse not reporting on a Schedule C. You then can avoid payroll taxes on the wages to the employee-spouse by making the compensation non-W-2 income.

New Law and “Hire Your Child”

The expansion of the kiddie tax to children under the age of 18 has zero negative effect on the hire-your-child strategy.

1031 Exchange of SUV for Hybrid Car

The SUV is like-kind property to the hybrid car. Thus, you can trade or use an intermediary to complete a Section 1031 tax-deferred exchange of an SUV for a hybrid car.

Upside Down Trade of SUV

You apply the new trade-in adjustment rule to find your new depreciable basis. When you have the combination of an expensed asset and an upside down loan balance, you can generally ignore your personal use and follow the cash outlay to your new basis.

Medical When You Have Two Businesses

When designing the medical plan, you need to consider all your and your spouse’s proprietorships, LLCs, and corporations as one business. If employees exist in one of these businesses, you have employees in all businesses. Plan your discrimination or nondiscrimination accordingly.

Taxable Parts of Rental Property Sale

Taxpayer sells this rental property for $199,000 with $6,000 in closing costs. He paid $118,500 for the property over 10 years ago and has claimed $50,000 in depreciation deductions. As part of this sale, the taxpayer takes back a second mortgage in the amount of $19,400 payable in five years with interest paid annually at 10 percent a year. There are five easy steps to this installment sales tax calculation.

Court Rules Horse Activity a Hobby

You do not want a hobby for tax purposes. The fact that hobby losses are not deductible is minor compared to the other problems caused by the hobby. For example, you report hobby income above-the-line and hobby expenses below-the-line as miscellaneous itemized deductions where they suffer the 2 percent of adjusted gross income floor, or, worse yet, the AMT.

Court Crushes Slot Machine Winnings

Hobby gambling can trigger taxes when you have a zero income because the law makes your winnings reportable above-the-line and losses deductible below-the-line.

IRS Puts Screws to S Corporation Health Insurance

The more than 2 percent owner of an S corporation may not benefit from a fringe benefit like corporate paid health insurance. Further, this owner-employee is not “self employed” for purposes of deducting self-employed health insurance on page 1 of IRS Form 1040. This leaves the more than 2 percent owner with only one IRS approved method for gaining the maximum deduction from health insurance.

Scuba Diving

Nothing explains how to deduct “associated entertainment” better than the deduction of scuba diving. Why? Associated entertainment is strictly fun—no business discussions take place in this non-business entertainment setting. Scuba diving fits this definition perfectly. Tax law allows the deduction for scuba diving as associated entertainment when you connect the scuba diving to either directly related entertainment or a business meeting in a business setting.

Helping Hurricane Victims

Follow this golden rule: Do not make charitable contributions to individuals. Make your donations directly to the qualifying charitable organizations.

Health Insurance on Form 1040, Not Schedule C

In Chief Counsel Advice, the IRS clarified its position that a sole proprietor may deduct the cost of health insurance on his or her Form 1040 regardless of whether the insurance is purchased in the individual’s or the proprietorship’s name.

How Depreciation on Your Business or Rental Property Works

How you depreciate property has significant effects on your after-tax cash realization. Further, the punitive effects of depreciation recapture taxes make the Section 1031 exchange possibilities more and more appealing. That’s why it is important to remember the eight financial planning principles about depreciation.

Making Mold Removal a Repair and Not a Capital Expenditure

The difference between a deductible repair and a capital expenditure in today’s tax law is huge. The time value of money is one part of the added benefit for the repair. But the biggest deal is that you have no recapture tax with a repair. Thus, when removing mold from a building, you want the tax law to treat that removal as a repair. There are specific steps you can follow that help ensure mold removal classification as a tax-favored repair.

Heavy SUVs Still Tax Favored

Tax law continues to favor the heavy SUV over the typical passenger automobile. The heavy SUV qualifies for additional first-year expensing of up to $25,000 and it’s exempt from the gas guzzler tax.

Tax Breaks When You Total Your Vehicle

Tax law calls the wreckage and totaling of your vehicle both an involuntary conversion and a casualty. Special rules allow you to treat the involuntary conversion as either a sale or a trade-in. Thus, your first step in this process is to find your gain or loss and then decide how you want to claim your tax benefits.

New Law’s $70 Billion in Tax Cuts Requires Little Planning

For most self-employed taxpayers, Public Law 109-222 requires no major shifts in tax planning for their businesses. This new law extended tax breaks, such as the lower rates for capital gains. The increase in the kiddie tax age group is probably the biggest impact of this new law on the one-owner and husband-and-wife owned business—and that age expansion has little or nothing to do with most business deductions.

IRS Says Protect Your Tax Records—It’s Hurricane Time

Today’s computer and Internet technology give you a variety of new safeguards that you can use to protect your tax records. When thinking about your records, keep this one overriding rule in mind: no records, no deductions.

IRS Revokes Letter Ruling

It is highly unusual for the IRS to revoke a private letter ruling. You can protect yourself from a revocation by making a proposed transaction the subject matter for the ruling.

Any Personal Use Destroys the Business Rooms at a Bed and Breakfast

Tax benefits for the bed and breakfast require adherence to the transient, vacation home, and hotel rules. Under these rules, personal use can destroy deductions. Further, the length of transient stays determines the types of services you need to provide, if any, to qualify the bed and breakfast for tax-favored hotel benefits.

Woe to the Taxpayer with Bad Records

Bad records can cost you just about every tax deduction. You can testify as to your deductions, but without the records that turns out worthless. When it comes to your taxes, paper talks.

IRS Employs Bank Deposits Method to Tax Income

If you don’t have the tax records or if you are just not cooperative, you could enable the IRS to use the bank deposits method to determine your taxable income. This is a bad thing. When the IRS uses the bank deposits method to determine your tax liability, you generally pay a whole lot more tax.

W-2 for Section 105 Plan

The W-2 reporting requirements exempt the Section 105 medical plan reimbursements from entries on the W-2.

Long-Term Capital Gains Trigger AMT

The AMT can trigger additional taxes on your capital gains despite the fact that the capital gains tax rate for both regular and AMT purposes is identical. Your status as single or married and the amount and nature of your income determine the extra AMT hit. In general, the middle income can suffer the worst AMT impact.

Will the S Corporation That Owns Rental Property Terminate with Too Much Passive Income?

At a meeting of landlords, the guest lawyer stated that the S corporation terminates with too much passive income. Many attendees heard this comment incorrectly. The too much passive income termination problem applies to S corporations which were previously C corporations.

Filing Returns for Past Years

Not filing your tax returns on time because you lost or misplaced your tax records is going to make your tax life miserable. The trouble is so bad that you need to consider an “offer in compromise.”

Business Airplane

Tax law classifies the business airplane in the listed property category. This means the law requires a log of business and personal use. You deduct your business percentage. To obtain and then retain maximum benefits, you need your business use at greater than 50 percent. Further, the airplane is personal property and that makes it eligible for Section 179 expensing.

Why Tax Planning Is Important for the Self-Employed

The one-owner or husband-and-wife owned businesses can gain significant income by learning how to reduce the largest expense they pay during their lifetimes (taxes). In this respect, the self-employed are both cursed and blessed. Cursed because they pay a larger percentage of their net income in taxes than anyone else in the country. Blessed with business deductions that, when used properly, not only balance their taxes with those of the average employee, but actually mean (if they are paying attention) that they pay a whole lot less.

Winning the Combined Business- and Personal-Trip Deduction

This taxpayer won his deduction for going to the library located 36 miles away from his home and next to his parent’s home. The IRS lost its argument that the taxpayer should have used the library near his home rather than drive 36 miles to the library where he also could visit with his parents.

Best Strategy for SUV Saves Self-Employment Taxes

Say you are going to buy a replacement SUV that qualifies for Section 179 expensing. Should you trade your old vehicle or sell it outright? The selling outright strategy can save self-employment taxes. Many Schedule C taxpayers pocket thousands with this little-known strategy.

Hard Disk Crash Ruins Deductions

When you lose your tax records for any reason—including floods, theft, hurricanes, and earthquakes—you will find that the tax law grants no mercy to your lost records. You simply have the right to substantiate your deductions using a reasonable reconstruction of those records.

IRS Doubles Audits of Sole Proprietors and Independent Contractors

The IRS fulfilled its promise and audited twice as many Form 1040-Schedule C taxpayers and S corporation returns. Your odds of audit vary by both choice of entity and gross receipts in that entity.

Personal Car Used for Corporate Business

When you operate your business as a corporation, you need to reimburse the business use of the personal car as a reimbursed employee expense. The corporation may use either the IRS mileage method or the actual expense method for the corporate reimbursement to the employee-owner.

Letter Requiring Home Office

When you operate your business as a corporation, you claim the office-in-the-home deduction as an employee. The law requires that this employee use be for the convenience of the employer. Generally, you want the convenience of the employer reason in writing.

Selling the Home That Contained the Office the Corporation Deducted

When you have your corporation reimburse your home office as an employee business expense, you treat the home as if you had claimed the office-in-the-home deduction personally.

Corporate Reimbursement of Condo Fees and Mortgage Payments

The corporate reimbursement of the owner-employee for office-in-the-home expenses includes condo fees and mortgage payments.

100% Deductible Entertainment

Many sporting events qualify for a 100 percent entertainment deduction rather than the traditional 50 percent. This is true for both participants and spectators. To qualify for the 100 percent entertainment deduction, the net proceeds of the event must go to charity—as they do in a PGA Tour golf tournament.

How to Make Golf Deductible

Golf does not qualify as a deductible expense just because you talk about business on the golf course. Golf does qualify for a deduction as associated entertainment when you have the right business discussion in a valid business setting before or after the golf, generally the same day.

Roadmap for Producing a Deductible Section 105 Medical Reimbursement Plan

This court case provides a great roadmap to the Section 105 medical reimbursement plan. The taxpayer hired her husband as a part-time employee. The husband had another job as a full-time employee where he elected a payroll deduction for a medical plan that covered himself and his family. In her proprietorship, the wife put a Section 105 medical plan in place that covered the employee-husband. He elected family coverage, and presto, the monies he paid to his full-time employer for medical coverage became a Section 105 medical reimbursement, deductible by the wife’s proprietorship.

Pyramid Scheme Costs Deductions

When you start a new business activity or you do a business activity on the side, you must establish a profit motive. One easy way to demonstrate the profit motive is to show the time you spend on the activity. This taxpayer had no proof of time worked, so he looked suspicious to the court.

Corporate Reimbursement of Depreciation on an Office in the Home

The corporate reimbursement to you, the employee, for the business use of your home office requires that you recognize the depreciation component of the reimbursement as if you had claimed the office in the home on your personal tax return.

Doctor-Prescribed Golf

The physician’s prescription often justifies a tax deduction, but not always. There are tax principles involved that need alignment for the deduction to prevail.

C Corporation Golf Problem

The one-person corporation is a separate legal entity from the owner. This means separate books for the corporation and expense reports from the owner-employee to prove business expenses. When you fail to document your golf or other expenses, two bad things happen.

Trade-In of Car on Lease

The trade of a car on a lease is not a like-kind exchange. This is a sale of the old car and a lease of the new car. The sale part gives you a gain or a loss. In addition, the sale part generates a prepayment on the lease where you benefit with an amortization deduction.

How the Business Condo Escapes the Tough Tax Rules

The properly used business condo does not run up against the vacation-home, passive-loss, or entertainment-facility rules.

Big Price for Bad Records

Making a lot of money is no excuse for keeping bad records. Top off the bad records with failing to give adequate documentation to your CPA and you add to your misery index with negligence penalties. The taxpayer in this court case had to shell out about $5 million in taxes and over $1 million in penalties.

Terminated Insurance Salesman Subject to Self-Employment Tax on Renewal Commissions

In this court case, the taxpayer was self-employed when he made the original sales. The original sales produced the renewal commissions. Thus, the taxpayer was self-employed with respect to the renewal commissions.

Bad Records Destroy Deductions

The law requires the taxpayer to maintain records sufficient to establish his income and deductions. In select circumstances, estimates provide a rational basis for deductions. With respect to vehicle, entertainment, meals, travel, and gifts; estimates are out and neither the court nor the IRS may grant your deductions without the prescribed records.

Three New Rulings Where Home-Sale Profits Are Protected by Hardships

Wow! In one day, the IRS released three private letter rulings that provide a roadmap to the $250,000 (single) and $500,000 (married) home-sale profit exclusions for taxpayers who fail, because of hardship, the 2-out-of-5-year tests for ownership and use.

Deducting Golf

The discussion on the golf course does not make the golf deductible. What makes the golf deductible is the connection of the golf to the business discussion in a business setting.

Pencil Okay for Calendar

Both the IRS and the courts have approved pencil as adequate for tax entries.

Home Office

A marketing activity in the administratively qualified home office does not destroy the office in the home deduction.

How Shared Equity Protects the Rent-to-Own Arrangement

Shared equity is tax law’s officially designed rent-to-own your home program. For this to work, it takes two parties: (1) a landlord-investor and (2) a tenant-investor. The landlord-investor benefits because he has no vacancies, few hassles, no management fees, and a known cash flow. The tenant-investor benefits because he gets into this home with little or no down payment, builds equity while paying rent, and gets detailed knowledge about the property while living there. At some agreed future point in time, the landlord-investor sells his or her interest in the property to the tenant-investor or the two of them sell the property to a third party.

No Chance in Court

The taxpayer’s tax preparer told him to create an “Affidavit of Facts” to support his tax deductions. This was a useless exercise. This tax preparer, the one who recommended the useless affidavit, lost his enrolled agent status, and the time of this trial was forbidden by the United States government to prepare tax returns.

Home Mortgage Interest Deductions Denied

Interest paid on a life insurance loan to buy a home does not count as deductible mortgage interest.

Bed and Breakfast Joke

Personal use of your bed and breakfast includes use by your tax-law defined relatives, including those relatives who pay fair rent.

Death Taxes the IRA

At death, IRAs are not treated like homes, which pass to the heirs at fair market value with no income tax issues. Instead, the IRA faces both the estate tax and the income tax. In this court case, the combined estate and income taxes devoured $1.6 million and the heirs had $1.1 million left to spend.

Self-Employment Tax

The 15.3 percent self-employment tax is not really 15.3 percent because the tax calculation includes only 92.35 percent of self-employment income. Thus, the true self-employment tax rate works out to 14.13 percent.

Problem with In-law Suite

To deduct mortgage interest, (1) you must have title, (2) the mortgage must be in your name, (3) the home must secure the mortgage, and (4) you must make the mortgage payments from your money.

Early Social Security

When you take early retirement and your income is greater than the thresholds, your Social Security benefits are subject to (1) recapture by the Social Security Administration and (2) taxation by the IRS. Tax planning to avoid both benefit recapture and taxation of benefits involves the possible use of an S or C corporation.

Jack Up Your Profits with Tax Credits

Historic rehab tax credits can put you in Donald Trump’s self-proclaimed favorite spot. Tax credits often exceed the cash you invest in the project making the historic rental or office building a “nothing down” deal for you. Add nonrecourse financing to the package and you have no personal risk. None of your cash in the deal and no personal risk—this is Mr. Trump’s favorite spot. You might do as many Congressional leaders do: Donate your personal home’s historic facade to charity so can realize big tax credits.

New 2006 Standard Mileage Rates

You probably should hate the IRS for the mileage rate. First, the mileage rate creates the illusion that you don’t need a mileage log (wrong!). Second, individuals who start in business think that the mileage rate makes their tax life easy and that it doesn’t make much difference financially (generally, wrong). Third, mileage-rate addicts think that the mileage rate takes care of everything—then they cost themselves money by failing to deduct a loss on the sale of a business vehicle and overlook the business person’s tax deduction for interest on a car loan.

New $94,200 Base for Self-Employment Creates Need for Better Planning

In 1935, the self-employment tax topped out at $60. In 2006, the first part of the self-employment tax tops out at $14,413, but the 2.9 percent Medicare part continues after that without limits. Good tax planning for the self-employment tax is like an annuity. It gives you monetary returns—year after year—every year you are in business. So, plan now and consider everything from choice of entity to hiring your children.

Proving Basis in the Home

The couple in this court case did not keep the right records to prove the improvements they made to their home. This failure to keep the records probably saved them some personal time, but it cost them taxes on $101,907 of capital gains. What do you suppose the hourly cost of this failure—considering that the time spent to keep these records has to be very few hours? You really do need the right tax records and it takes very little time when you know what to keep.

Pension Coverage for Employees

You often have many alternatives when it comes to pension coverage for you and your employees. This is an area where you should speak with several individuals, including your tax advisor and life insurance agent, before making a decision.

Commission Rebate

Rebates have become common. The tax treatment of a rebate by the salesperson depends on whether you write a check or receive a reduced commission and whether you do this rebate for charitable or promotional purposes.

1031 Exchange

The commission on sale does not make or break a Section 1031 exchange. The trick to the Section 1031 exchange is in the first step.

Beware of Tax Reform

Tax reform always sounds great. For example, the 1986 Tax Reform Act dropped the top tax rate from 50 percent to 28 percent. That sounded great. But this tax reform also reduced the after-tax rate of return on a real estate investment by 60 percent. If you were making a 20 percent return on your rental before the reform, you were making 8 percent afterwards. Students of this tax law sold their properties before the nonstudents heard about this cut in profits.

Estate Planning for 2006 and Beyond

Current law deletes the federal estate tax in 2010 and then reinstates it at higher rates in 2011. The year 2010, when there is no estate tax, contains its own unique planning requirements. If you are concerned about taking care of your loved ones and protecting what you have worked so hard to build, free your mind of a major worry by getting your federal estate plan in order.

$500,000 Exclusion

You do not need to be married during the 24 months of residential use to claim the $500,000 exclusion of profits on the sale of your home.

Fake 1099 on Auto Purchase Creates Trouble

The auto dealer sent this customer a bogus 1099 because the customer refused to return to the dealership and redo the “no interest” loan to an interest bearing loan. The dealer made a mistake originally and then wanted the customer to help fix the problem—at the customer’s expense. The customer said, “No.” Later, when the bogus 1099 showing interest income from the no-interest loan showed up in this customer’s mailbox, the customer took this dealership problem to the IRS.

Victim Not Entitled to Embezzler’s Estimated Tax Payments

This taxpayer embezzled money from his employer, got caught, and died in jail. Before he died, the embezzler sent the embezzled money to the IRS as an estimated tax payment.

Van Donation Valued at Sale Price, Not Blue Book or Appraised Value

The IRS told lawmakers that a number of people were cheating on vehicle donations and that some changes in the rules could put a quick stop to that. This court case explains why lawmakers went along with the IRS and enacted the changes that are in effect today.

Are Corporate Advances to the Owner Loans or Dividends?

To make sure that the IRS will treat the C corporation’s advances to the employee-owner as tax-favored loans rather than tax-penalized dividends, make sure you can answer “yes” to the seven questions.

Shaky Proof in Gambling Income and Loss Case

When you win more than $1,200 at the slots, the casino must report your winnings to the IRS. In this court case, the taxpayers mistakenly reported gambling income of $21,100 and the IRS received 1099s showing income of $44,464. This difference in reported income did not look good in court. But these taxpayers fared far better in court than anyone in their right mind could expect because they had proof that this court liked.

Home Office for Corporation

The IRS audit manual states: “If you rent all or part of your residence to your employer and use the rented portion when performing services for the employer, you cannot deduct home-office expenses attributable to the rental.” Thus, forget the rental to the corporation and use the corporate-reimbursement-to-the-employee strategy for maximum benefits.

Who Owns This Property?

When you receive property in which you had an interest as a result of a family member’s death, make sure you clarify your income-tax basis in this property right away.

Interest on Refinanced Rental

The security for the loan does not determine if the interest is tax deductible or not.

Both CPA and IRS Wrong on Audit of Home Office

This taxpayer had his CPA with him during the IRS audit of his tax return. When the home-office deduction came up, the CPA agreed with the IRS that this taxpayer did not qualify for the home-office deduction under Soliman—a Supreme Court case that lawmakers made obsolete in 1999 with enactment of a new law. Thank goodness this taxpayer was a subscriber to this newsletter and, because of that subscription, knew the rules on the home office.

Mortgage Interest

This taxpayer takes out a $4 million mortgage and makes the interest on $1 million of the mortgage deductible as home-mortgage interest and the interest on the remaining $3 million of the mortgage deductible as investment interest.

Life Insurance Loan

Interest paid on a loan used to buy an investment is considered investment interest. Investment interest is deductible to the extent of investment income. The loan used to buy this life insurance is not a loan to buy an investment.

Auditor Gives 80%

During an audit, the IRS can pretty much allow or disallow whatever it wants. In this first stage of the audit process, the burden of proof is on you.

$75 Rule on Vehicles

Under tax law, your vehicle is considered “listed property.” The IRS has a regulation that applies the $75 receipt rule to listed property.