People who run a small or home-based business now qualify for a greater array of tax advantages than any other category of taxpayer!
Even the super-rich, with their high-priced tax lawyers, can't get the tax breaks that We can, simply by operating a "side-business" that may take you only a small amount of time to run.
Congress wants to encourage taxpaying Americans just like YOU to have a home-based business because it is
good for the overall U.S. economy. So, they passed legislation that allows you HUGE tax breaks if you do. They'll even let you take tax deductions on losses from your home-based business.
A 1031 tax exchange is an exchange in which capital gains tax deferral is possible to real estate owners who sell their investment, rental, business or vacation real estate, and reinvest the net proceeds in other real estate. Real Estate held for these purposes are called 1031 properties. Sometimes they are called like kind sales.
With the Section 179 Deductions property for business has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year.
But there is a way to immediately receive these income tax savings in one tax year. The provisions of Internal Revenue Code Section 179 allow a business, sole proprietor, partnership or corporation to fully expense tangible property in the year it is purchased.
A 401k is a defined contribution retirement plan that allows employees to have part of their pre tax pay deducted from their paycheck and put into an account that will be held tax exempt until such time as the money is actually used. In some cases, the employer agrees to match each dollar that the employee contributes to the 401k plan, up to a certain percentage that the employer determines, with a contribution to the account. There are two basic types of 401k plans, a bonus or profit-sharing plan, and a thrift plan.
A 529 Savings Plan for education is a state-sponsored program designed to help finance education expenses. Section 529 plans are administered by certain investment companies and subject to contribution requirements and investment guidelines. Withdrawals from the account are taxed at the child's tax rate, and anyone can contribute to a Section 529 plan, regardless of their income level. Within the 529 Plan, the money can be invested in a portfolio of various types of investments, such as stocks, bonds,mutual funds or a combination of all. Most states offer Section 529 plans. The proceeds can be used only for education purposes. Withdrawals for non-educational purposes trigger taxes and a 10% penalty. The investment company administering the account will be in control of how the money is invested, and will charge an ongoing fee for its services.
We have worked our whole lives building a business and paying taxes. Why should the Government tax our hard work, for a second time, once we have moved on? This is double taxation.
In 2001, after ten years of debate, Congress passed legislation that will repeal the federal estate tax, a tax imposed on the assets left by the nation's residents and many Small Business Owners. The full repeal, however, will not take place until 2010, and it is possible that Congress could revive the tax in some form before then. And in 2011, the estate tax will come back unless Congress votes to extend the repeal. Meanwhile, though, estate tax rates will go down and exemptions will go up.
A health savings account is a new tax exempt health account. Under a health savings account employees or the self employed can accumulate pre-tax savings inside their health savings account for smaller expenses such as co-payments, non-covered health services, or medical services before the deductible are met.
Audit-proofing techniques can be used effectively to prevent audits, penalties and the wasting of time. The techniques are simple, and should be used especially since the IRS produces a special audit-proofing form you can use. Form 8275. Audit-proofing is based on the principal of providing with your return the information relevant to a claim in your return. You provide information for claims you think could raise a red flag and cause an audit.
The cost of doing business is an important part of calculating your Small Business Tax Savings and/or your Home Business Tax Savings. Use this checklist to ensure that you're maximizing your income tax deductions in this category of business expenses.
Are you thinking of selling or trading in that old car, boat or RV? Why not donate the car or veheicle instead? As a charitable contribution your donation of a car could make a big difference.
Designated charities are able to accept most cars and vehicles running or not (exceptions include older cars and vehicles whose value would not offset the cost of towing). Most organizations will make arrangements to conveniently and quickly pick up your car donation at no cost to you. The charitable organization will handle the car title transfer requirements and provide you with a tax deductible car donation receipt at the time of pick up.
The Health Coverage Tax Credit (HCTC) is a program that can help pay for nearly two-thirds of eligible individuals' health plan premiums. To be eligible, taxpayers must be enrolled in a qualified health plan, which includes COBRA, state-qualified health plans, or if the taxpayer is enrolled under a spouse's work plan and pays more than 50 percent of the total health care costs.
LLC and Taxes- An LLC is not a separate tax entity like a corporation; it is what the IRS calls a pass through entity, like a partnership or sole proprietorship. All of the profits and losses of the LLC pass through the business to the LLC owners, who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, but some states do charge the LLC itself a tax.
Offer in Compromise - OIC
An offer in Compromise is when you receive a notice from the IRS that you owed them a lot of money and perhaps they are threatening to take your home or garnish your wages.However you cannot come close to paying what they say you owe. AND, the IRS is demanding a payment for the entire amount owed.
In 2001, the tax laws were changed to lower the tax rates across the board and create a new 10 percent income rate. Beginning in 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerates further tax rate reductions that were to take effect in 2006.
The American Jobs Creation Act of 2004 provides taxpayers with the option to claim state and local sales taxes instead of state and local income taxes when itemizing deductions. The sales tax deduction option is only available for the 2004 and 2005 fiscal years.
However, Self Employment Tax is a much larger amount than what comes out of your paycheck as an employee. As an employee, 7.65% is deducted from your pay. The Self Employment Tax amount you will pay is almost twice what you pay as an employee. The reason for this is that your employer matches what comes out of your check so that 15.3% actually gets paid in to the Social Security Administration on your behalf. When you are self-employed, you are essentially both the employee and the employer. Since there is no one else to pay the other half for you, you get to pay them both. You do get a couple of breaks so that the amount is not quite double. We'll get to that in the computation section.
If you conduct business as a corporation with a fiscal year-end of December 31st, you are required to file your 2004 tax returns on or before March 15, 2005. You can get an automatic extension, however, by filing form 7004 before the March 15 deadline. Form 7004 applies both to "C" and "S" corporations and grants you an automatic 6-month extension to September 15, 2005.
Congress wants to encourage taxpaying Americans just like YOU to have a home-based business because it is good for the overall U.S. economy. So, they passed legislation that allows you HUGE tax breaks if you do. They'll even let you take tax deductions on losses from your home-based business.
Most of the best resources for tax software can be found on the internet. The initial step is to decide what your tax software needs are. You then will need to locate a tax software package that provides all of the features and functionality that you are looking for.
Under the new law, allowable deductions for charitable contributions of vehicles, boats and airplanes (collectively referred to as "assets" in this summary) for which the claimed value exceeds $500 will depend how the asset is used by the recipient charity. If the organization sells the asset without any significant intervening use or material improvement, the donor’s deduction is limited to the gross sales proceeds received by the charity. But, if the organization uses the asset in direct furtherance of its charitable purpose the donor may deduct the "fair market value" of the asset. (According to the IRS, the donor, not the recipient charity, must determine the "fair market value" which the IRS describes as the price that a willing buyer and willing seller would agree upon if neither were pressured to do so.
For most of us the actual difference between 1099 Independent Contractors and W-2 Employees is clear cut for several reasons. But there are many of us out there that have never encountered it or never even thought to discover and understand their differences. In this article, I will convey to you the proper and necessary information so that you may determine which situation is best suited for you.