1. Did you know you can use your previously funded IRA to fund the current year's deductible contributions?
Well,
you can. If you don't have enough cash to make a deductible
contribution to your IRA by April 15th, here is how you can still take
the tax deduction. And have until June 12th to make the full 4,000
contribution! To get started, all you need is a previously started IRA.
You
begin by having $4,800 distributed to you from your IRA on April 15th.
Your bank is required to hold 20% (income tax withholding), so you'll
actually receive $4,000. Once you have the $4,000, immediately deposit
it back into your IRA. If you do this before April 15th, this counts as
your deductible contribution for the year. The best part of this is that
you have 59 days to "make up" the withdrawal-or to be taxed. Simply
deposit $4,800 "rollback" into the same IRA account by June 12th to
avoid taxes on the original $4,000 distribution made to you.
This is a type of short-term loan from your IRA to make this year's deductible contribution before the April 15th due date.
NOTE:
Not all banks realize it is required to withhold the 20% from the
original $4,800 withdrawn from your IRA. Call to find out which way we
can help you work with this "extra" amount. There are many options, so
get informed before you miss out on the full benefits of your retirement
plan.
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2. We have a special retirement plan for you if you are self-employed and involved in more than one business.
This is for you if you are self-employed and involved in multiple businesses, even with partners.
A
new tax act has made a change allowing you to contribute to a
self-employed retirement plan, on your own behalf, without requiring you
to make contributions on behalf of your employees. The new act has
repealed the so-called aggregation rules that previously applied to the
self-employed retirement plans.
Under the old rules, if a
self-employed person owned, or was a part owner of more than one
business, and a retirement plan was provided for the employees in one
business, law required that a retirement plan be provided for the
employees of the other business(es). Beginning in 1997, this law removed
this requirement!
If you own two businesses, the law allows you
the option of establishing a retirement plan for only one business (with
the fewest employees), even if you work by yourself in that business!
The only limitation for this new law is that the amount of money you can
contribute to a retirement plan is based on the self-employment
earnings generated by the business with the retirement plan.
In
other words, if the business you own with (no employees) has smaller net
earnings than the other business (with employees), the amount you can
contribute to a retirement plan will be based on the smaller net
earnings.
While the rule change allows you to avoid contributing
to a plan for your employees, it also means that you would be limited to
making the smallest (rather than the largest) potential contributions
to your personal retirement plan.
We want to make sure you are
getting the most out of your financial future, so contact us to
determine your eligibility and to optimize the plan for you.
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3. You can have your landlord pay for leasehold improvements at your place of business.
Instead
of paying for leasehold improvements at your place of business, you can
ask your landlord to pay for them. In return, you offer to pay your
landlord more in the rent over the term of the lease. By financing your
leasehold improvements this way, both you and your landlord can save
money on taxes.
Ordinarily, you must deduct the cost of leasehold
improvements made to your place of business in an even fashion (over a
39-year period!). If the year your lease term ends you move to another
location, you can deduct the portion of the improvement cost you have
not previously deducted. This normal scenario won't save you tax in the
earlier years of the lease. Your landlord will have to put up the
initial cash for the improvements, but you will cover that over time
with increased payments in your rent. Since your landlord will be paying
for the improvements, you will save tax early in the lease and your
landlord will benefit as well!
During the same time, your landlord
will gain depreciation deductions for the cost of the leasehold
improvements. When you leave, your landlord will still have the improved
property to offer other future tenants. It is a great opportunity for a
win-win situation giving you faster access to invested monies.
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4. Save by deducting home entertainment expenses.
You
may not be able to treat your employees to meals at expensive
restaurants or offer them season tickets, but you should deduct expenses
for entertaining clients at home.
There are two basic kinds of
entertainment expenses. The first being direct entertainment expenses
and the second is associated entertainment expenses.
If you
entertain at home for the purpose of business, and if the business takes
place during the entertainment, then the cost of entertaining at your
home is deductible as a direct entertainment expense. However, if the
entertainment occurs immediately before or after a business meeting, the
cost is deducible as an associated entertainment expense. These
expenses are 50% deductible.
Many businesses are already enjoying
this wonderful type of deduction and are benefiting from it with a more
social climate for conducting their business.
Ask us about your options concerning this fun deduction. You might be pleasantly surprised about what you have been missing!
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5. You can deduct $25 Holiday gifts to associates even without a receipt!
When
you prepare your income tax return, don't overlook the deductible
benefit of holiday gifts. Whether you are a rank-and-file employee, a
self-employed individual, or even a shareholder-employee in your own
corporation, you can deduct the cost of gifts made to clients and other
business associates as a business expense. You can do this any time of
the year. The limit of the deduction is set at $25 in value for each
recipient for which the gift was purchased with cash.
A few years
ago, the Tax Court allowed an independent salesperson to deduct gifts to
buyers, even though the buyers' employers prohibited the acceptance of
such gifts. The Tax Court felt the gifts were not bribes but were a
legitimate business expense. Because the gifts were small (less than
$25, but totaling more than $2,000!), the taxpayer was not required to
document the cash expenses with receipts. The entries in the
salesperson's daybook was acceptable proof.
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6. Deduct your home computer.
This
is an approach for saving more on your income tax return for people who
purchase a computer and use it for work-related purposes. A recent Tax
Court ruling may give you a tax deduction on your home computer. If you
are an employee and want to deduct your computer, you first have to meet
the requirement stating that the computer is used for convenience and
as a condition of your employment. As a result of the Tax Court ruling,
if your employer limits your access to a computer at work (for security
reasons) but still requires that the work be completed, then you can
deduct the portion of the cost of your computer that is allocable to
business use.
It is important that you ask us if you qualify for this deduction.
Please call us for more information concerning this opportunity.
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7. Have your company buy you supper.
If
you are in a partnership or a shareholder-employee in a regular C or S
corporation, and you have to work overtime, your company can, on
occasion, provide you with dinner. The cost of such a dinner is 100%
deductible for your company, and you don't even have to pay personal
income tax on the value of the meal!
On top of this, your company
does not have to provide this fringe benefit to other employees who work
late. But your company does not have to directly pay you for the meal.
Instead, it can provide you with supper money. In order for this to
work, the amount of dinner money has to be reasonable.
If the IRS
decides that the amount of money you received was unreasonable, the
whole amount will be considered taxable personal income and will not be
deductible.
We will be glad to answer your questions concerning
deductible dinners and any other questions you have, so call today so we
can help you start with this Section 132 "de minimis" fringe benefit.
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