Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004? > NetSparsh

Home
>
Tax
>
Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed, nothing is quite so satisfying as an income tax refund." There's no question that saving money in taxes is high on everybody's list of financial priorities, especially small-business owners.

Taxes are an inevitable - and painful - part of every business owner's life. But there are ways to reduce, if not eliminate, your company's tax burden if you know how to use business-expense tax deductions to your advantage.

Most business owners know they owe taxes only on their net business profit - that is, their total profits after they subtract their deductions. As a result, knowing how to take full advantage of your deductible business expenses can dramatically lower your taxable profits.

Here are the 3 mostly overlooked tax deductions:

1. Full home office write-off: The rules allowing a taxpayer to claim the home office deduction have been loosened, beginning January 1, 1999. No longer does the home office need to be the "principal place of business" for the taxpayer. The home office test can now be satisfied if the taxpayer uses the home office for "administration or management activities" and there is no other fixed location in which the taxpayer performs such activities for his business. The home office still must be used exclusively for business purposes to qualify. This will allow more taxpayers who conduct business outside of their office, but use their home to perform administrative tasks, to qualify for the home office deduction.

2. Writing off family medical expenses: This strategy is a little more complicated but is well worth the extra effort. To use this strategy, first you must hire a spouse or other trusted family member to work for your home or small business; either full-time or part-time status will work. Next, you need to set up and sign a medical reimbursement plan. You may need the advice of an accountant to help you with this. This plan allows any sole proprietor to convert all family out-of-pocket medical expenses into legitimate business deductions. Finally, your spouse or family member pays all out-of-pocket medical expenses for the family, keeping receipts and documenting miles driven for medical purposes. At a specified time, your business reimburses your spouse or family member for these expenses and deducts them as a business expense.

3. Writing off your child's college education expenses: If you frown at the high cost of a college education, this tax strategy is for you. You can put your child on the payroll of your business for performing office chores and other business-related tasks.

The most common way to utilize young children in your business is for them to provide cleaning services, or routine copying, filing and typing. These are jobs that even a 10-year-old is clearly capable of performing, and jobs that you'd arguably have to pay someone to do if your child were not available.

In 2005, a child can earn up to $5,000 and pay no federal income taxes on the earnings because of the standard deduction. Your business can deduct wages paid to your child-provided the amount is reasonable and for bona fide work. Bottom line: You'll escape federal income taxes of up to $5,000 of your business income, and if you are a sole proprietorship, you will eliminate self-employment tax on the income as well.

Any income your child earns over and above the $5,000 standard deduction is taxable at your child's rate. Since the 10% tax bracket extends to $6,000 for a single filer, your child could earn an additional $6,000 and owe just $600 of federal income tax on the money. Because your marginal tax rate is likely much higher, the extra money your child earns may result in family tax savings. Even better, if your business is not incorporated, you won't have to withhold or pay FICA (Social Security and Medicare) payroll taxes on the earnings of a child under age 18.

Salim Omar, CPA is author of the newly published book, Straight Talk About Small Business Success In New Jersey. He is a well-known tax and financial educator. More free information can be obtained from his website http://www.OmarGroupCPA.com

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

Forbes
6 Whopping Tax Mistakes That Can Ruin Your Retirement
Forbes
Sadly, tax planning doesn't end when you retire. The Internal Revenue Service (IRS) still wants its share of your retirement earnings. While many live on less in retirement, others may end up spending more. That could lead to higher tax bills ...
3 legit ways to shield your kids from tax burdensYahoo Finance

all 16 news articles »

Payson Roundup
Proposition 126: Taxes on Services
Payson Roundup
Proponents contend there is a real danger that Arizona politicians will try to raise more revenue by imposing taxes on services ranging from haircuts, manicures and car repairs, to child care and medical care and real estate transactions. They warn ...

USA TODAY
Bank of America: Earnings rise on higher interest rates, lower taxes
USA TODAY
NEW YORK – Bank of America said Monday that its third-quarter profits rose by 32 percent from a year ago, as higher interest rates allowed BofA to charge more for loans, and lower corporate tax rates helped it save hundreds of millions on taxes.
Higher Interest Rates, Lower Taxes Boost BofA ProfitsWFAE
Bank of America Profit Jumps 32% on Tax Cuts, Higher Interest RatesTheStreet.com

all 123 news articles »

Vanity Fair
Jared Kushner's Guide to Gettin' Rich: Pay No Federal Income Taxes
Vanity Fair
On the heels of an explosive story detailing years of tax avoidance, tax dodging, and apparent outright tax fraud by his father-in-law, over the weekend it was Jared Kushner's turn to have his payments to the I.R.S.—or lack thereof!— scrutinized by ...
In Trump and Kushner's world, other people pay taxesCNN
Jared Kushner reportedly paid almost no federal income taxes, and CBS News didn't ask Trump about itSalon

all 19 news articles »

CNBC
How you can give away up to $11 million and slash your taxes
CNBC
In 2017, the IRS received 12,711 estate tax returns. Of these, 4,191 addressed gross estates of more than $10 million. The Tax Cuts and Jobs Act raised the estate tax exemption to $11.18 million per individual from 2018 to 2025, roughly double the ...

and more »

WWNY TV 7
Ogdensburg's Proposed Budget Calls For Small Hike In Taxes
WWNY TV 7
The tax hike under the proposed budget would be less than 1 percent. There are almost no job cuts. The city remains on the state's watch list for fiscally stressed municipalities. “We have to right the ship. We have to be fiscally responsible. And that ...

MLive.com
Sushi restaurant owners get probation for pocketing sales taxes
MLive.com
The owners of a West Bloomfield restaurant were sentenced last week to probation and ordered to pay nearly $1 million in restitution for pocketing sales taxes from customers. Sushi Samurai owners Dong Chang and Christina Chang pleaded guilty to ...

and more »

Bloomberg
Top 3% of US Taxpayers Paid Majority of Income Taxes in 2016
Bloomberg
Individual income taxes are the federal government's single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to ...

and more »

Motley Fool
A Foolish Take: Here's Why Your Social Security Taxes Might Go Up in 2019
Motley Fool
The money for those benefits has to come from somewhere, and most of it gets taken out of paychecks in the form of Social Security payroll taxes. Most workers pay 6.2% of their pay in taxes to Social Security, and their employers pay a matching 6.2 ...

and more »

KATV
Monday marks deadline for property taxes
KATV
The vast majority of the property taxes you pay help fund public schools, but city and county government, roads, the jail, police and fire pensions and libraries also benefit. Pulaski County has eight different locations where you can pay in person ...
Today's the deadline for Columbia County taxesMagnoliareporter

all 6 news articles »

Google News

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Tax Tax