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50 Tax Savings Ideas


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A class I presented at CSUN one night :)

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50 Tax Savings Ideas

  1. 1. Dear Taxpayer:<br /> This is to inform you that we, at the Internal Revenue Service, have lost your file. Unless we find it within thirty (30) days, you will face a $10,000 fine and a jail sentence of not less than five (5) years.<br /> Please advise.<br />
  2. 2. 50 TAX SAVING TIPSPresented By David StoneRenaissance Executive Forums<br />
  3. 3. Donald Alexander, Former Commissioner IRS<br />“As a citizen, you have an obligation to the country’s tax system, but you also have an obligation to yourself to know your rights under the law and possible tax deductions. And to claim everyone of them.”<br />
  4. 4. Our Philosophy<br />The law states tax evasion is illegal. Tax avoidance is what we are supposed to do.<br />
  5. 5. Who Gets Audited<br />
  6. 6. Will Rogers says<br /> “Income tax has made more liars out of the American people than golf” <br />
  7. 7. In Calendar Year 2005:<br />9,533,236 Schedule C's were filed, 3.12% of these were audited <br />2,230,024 C-Corp returns w/assets under $10 mil were filed, 0.8% audited <br />56,877 C-Corp returns w/assets over $10 mil were filed, 18.6% audited <br />2,720,290 partnership returns were filed, 0.4% audited <br />3,715,249 S-Corp returns were filed, 0.4% audited<br />
  8. 8. The Thing to Know<br /> Do what you think is right and fear no man -- except an IRS agent.<br />
  9. 9. Business Tax Saving<br />#1 Hire your Children<br />For Schedule C Tax Payers, you can hire your children and pay them up to $4,600 each year free from taxes. (Income, social security, Medicare and state)<br />Your children must actually work and this must be documented.<br />
  10. 10. Business Tax Saving<br />#2 Hire your spouse<br /> You can establish benefits programs for your business for your employees – such as a medical reimbursement plan or retirement plans. These benefit plans will be deductible from the business income<br />
  11. 11. Business Tax Saving<br />#3 Business Use of Home<br /> If you operate your business out of your home, you may deduct a portion of your rent/mortgage, utilities, maid & pool boy<br /> Don’t be shy, this use to be a red flag but is now acceptable. Don’t be a pig. <br />
  12. 12. Business Tax Saving<br />#4 Meals & Entertainment<br /> You can deduct only 50% of your meals and entertainment. Make sure you classify this correctly<br />
  13. 13. Business Tax Saving<br />#5 Business Travel<br /> There is no law prohibiting you from combining a business trip and vacation<br /> Conventions, client visits, vendor visits<br />
  14. 14. Forbes magazine May 11, 1992<br /> “Politicians tax the middle class for the same reason some people rob banks. That’s where the money is” <br />
  15. 15. Business Tax Saving<br />#6 Vehicle Deductions<br /> Keep track of your mileage for your vehicles. Separate business use and personal use.<br />
  16. 16. Business Tax Saving<br />#7 Work Opportunity Tax Credit<br /> This credit is available for employers hiring individuals from targeted group.<br /> Credit can be as high as 40% for $6,000 ($2400) – Must work at least 120 hours<br />
  17. 17. Business Tax Saving<br />#8 Enterprise Zone Tax Credits<br /> Santa Clarita is such a zone – Pay no state taxes for years to come!!!!<br />
  18. 18. Business Tax Saving<br />#9 Self Employment Tax<br /> If you had self-employment tax, you may deduct 50% of that tax above the line. <br />
  19. 19. Business Tax Saving<br />#10 Health Insurance for the Self Employed<br /> Costs of insurance is deductible above the line<br />
  20. 20. Arthur Godfrey says<br /> “I am proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money”<br />
  21. 21. Business Tax Saving<br />#11 Gifts <br /> The total value of business gifts to any one individual during the tax year cannot be more than $25<br />
  22. 22. Business Tax Saving<br />#12 Uniforms<br /> The cost of uniforms and cleaning are deductible. A uniform is something not acceptable as ordinary clothing in the public. Your embroidered polo shirt may be deductible as advertising. <br />
  23. 23. Business Tax Saving<br />#13 Advertising<br /> Tax court allowed the sponsor of an amateur basketball team as an advertising expense. <br />
  24. 24. Business Tax Saving<br />#14 Medical Expenses<br /> Employee medical plans and benefits will lower the company portion of social security and Medicare <br />
  25. 25. Business Tax Saving<br />#15 Employer-Provided Educational Assistance<br /> The employer may provide up to $5,250 each year in tax free education assistance to each employee. <br />
  26. 26. Dan Coats, U.S. Senator<br /> “In the last decade, taxes have been raised four times explicitly for deficit reduction. In the year following each hike, the deficit actually increased. “<br />
  27. 27. Business Tax Saving<br />#16 Bonus Out Profits<br /> Corporations need to bonus out profits at the end of the year to minimize double taxation <br />
  28. 28. Business Tax Saving<br />#17 Pay & File your Taxes Timely<br />Failure to Pay Penalty = 1%/month (25% max)<br />Failure to File Penalty = 5%/month (25% max)<br />Failure to Deposit Penalty = 3% - 15%<br />Interest = 8% (approx) compounded daily<br />
  29. 29. Business Tax Saving<br />#18 Extension of Time to File<br /> This does not give you an extension of time to pay. Interest starts on the due date of return. <br />
  30. 30. Business Tax Saving<br />#19 Retirement Accounts<br /> There are accounts that we can set up for business owners allowing a postponement of taxes of $100,000 each year. <br />
  31. 31. Business Tax Saving<br />#20 Record Keeping<br /> It is important to separate business expenses from the following expenses:<br />The expenses used to figure the cost of goods sold,<br />Capital Expenses, and<br />Personal Expenses.<br />
  32. 32. Gerald Barzan, humorist<br /> “Taxation with representation ain’t so hot either”<br />
  33. 33. Business Tax Saving<br />#21 Creative Deductions<br /> A stripper got a deduction for surgically enlarged breast.<br />
  34. 34. Business Tax Saving<br />#22 Accelerate Depreciation<br /> Parts of the code allow you to write off certain assets in the year of purchase. Consult with your accountant for year end strategies.<br />
  35. 35. Business Tax Saving<br />#23 Defer Income<br /> If income is expected to be lower next year, defer income into the next year<br />
  36. 36. Business Tax Saving<br />#24 Real Estate<br /> Corporations should never own real property. (There is a double taxation if it is) Real property should be held in the name of a LLC. <br />
  37. 37. Business Tax Saving<br />#25 Incorporate<br />Less chance of being audited<br />Owner benefits are deductible above the line<br />Protection from creditors<br />
  38. 38. Individual Tax Saving<br />#26 Interest Income<br /> High dollar amounts may prompt you to look at investments. You may want to consider investing in Municipal bonds (This may trigger the alternative minimum tax) or tax deferred annuities<br />
  39. 39. Jeff Schnepper<br />“Congress has a lot of respect for logic – They use it so sparingly”<br />
  40. 40. Individual Tax Saving<br />#27 Capital Gains<br /> Capital gains taxes are at historic lows. However, you can write off capital losses against your gains. You can also write off $3,000 in capital losses against your ordinary income.<br />
  41. 41. Individual Tax Saving<br />#28 IRA Deductions<br /> Savings for Americans are at an all time low (Near 0%, China is at 23%). You may be able to put funds into your IRA and either defer the taxes OR defer the income (Roth IRA) on that money<br />
  42. 42. Individual Tax Saving<br />#29 Itemized Deductions<br /> Many people leave money on the table because they do not itemize their deductions for their taxes. Add up what you paid in state income taxes, real-estate taxes and mortgage interest. If the total is more than the standard deduction, you know what you should do next year.<br />
  43. 43. Individual Tax Saving<br />#30 Sale of your home<br /> You can exclude $250,000 ($500k married) on the profits of the sale of your home.<br /> Sell your primary residence every two years + other rules<br />
  44. 44. Russell B. Long, U.S. Senator<br /> “A tax loophole is something that benefits the other guy. If it benefits you, it is tax reform”<br />
  45. 45. Individual Tax Saving<br />#31 Marriage Dissolution <br />Alimony is deductible (Taxable to the recipient)<br />Child Support is not deductible (Not taxable to the recipient)<br />
  46. 46. Individual Tax Saving<br />#32 life Insurance<br /> Life insurance proceeds are not taxable<br />
  47. 47. Individual Tax Saving<br />#33 Earned Income Credit<br /> This is a refundable credit available until your income reaches:<br />2 qualifying children - $38,348<br />1 qualifying child - $34,001<br />No qualifying children - $14,120<br />
  48. 48. Individual Tax Saving<br />#34 Child & Dependent Care Credit<br /> Congress is attempting to help people out with this expense. If you have kids, there is a credit on your return which you may qualify for. <br />
  49. 49. Individual Tax Saving<br />#35 Adoption Credits<br /> Up to $10,960 credit to help pay for the costs of adoption<br />
  50. 50. Individual Tax Saving<br />#36 Child Tax Credits<br /> A qualifying child may lower your taxes. (Not a great reason to have kids and the credit is usually not high enough to pay for the kid on an annual basis) <br />
  51. 51. Individual Tax Saving<br />#37 Qualified Performing Artist<br /> Income less then $16000 and at least 10% of that is from acting or… You can deduct the costs of this business from your income<br />
  52. 52. Individual Tax Saving<br />#38 Employee Business Expenses<br /> If your employer has a reimbursement policy and you do not take advantage of it, it is still not deductible on your taxes. <br /> If they do not reimburse then you may get a deduction on your tax return. <br />
  53. 53. Individual Tax Saving<br />#39 Student Loan Interest<br /> You may be able to deduct the interest paid on your student loan from your income. <br />
  54. 54. Plato<br /> “Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” <br />
  55. 55. Individual Tax Saving<br />#40 Retirement Plan Payments<br /> You may be able to deduct contributions made to your IRA, SEP IRA, Keogh plan, Simple IRA<br />
  56. 56. Individual Tax Saving<br />#41 Moving Expenses<br /> If you are moving 50 miles closer to your new job, you may be able to get a deduction for the cost of moving.<br />
  57. 57. Individual Tax Saving<br />#42 Medical Expenses<br /> You may deduct medical expenses as an itemized deduction (everything over 7.5% of your income. If income = $100,000 then deduct everything over $7,500) <br />
  58. 58. Individual Tax Saving<br />#43 Sales Tax Deduction<br /> You have a choice on the tax return to deduct state income taxes or state sales taxes. Be sure to tell your accountant about big ticket item purchases. <br />
  59. 59. Individual Tax Saving<br />#44 Alternatives to earned income (non-taxed) <br /> Participate in your companies hospitalization plan, group life insurance plan – these are usually paid to you in pretax dollars.<br />
  60. 60. People who complain about taxes can be divided into two classes: men and women <br />
  61. 61. Individual Tax Saving<br />#45 Inheritances<br /> If you inherit a house that has appreciated you may receive it free from taxes. If you receive title while that person is still living, you will pay taxes on the capital gains upon sale. <br />
  62. 62. Individual Tax Saving<br />#46 Mortgage Interest & Points Paid<br /> Points paid on a refinance are deductible over the life of the loan. <br /> Can only deduct interest on the first million dollars of debt. <br />
  63. 63. Individual Tax Saving<br />#47 Casualty Losses<br /> A loss from an identifiable event that is unexpected and unusual in nature. <br />
  64. 64. Individual Tax Saving<br />#48 Alternative Fuel Vehicles<br /> Hybrid and other credits<br /> Solar Energy<br />
  65. 65. Individual Tax Saving<br />#49 Shifting Income <br /> Shifting Capital Gains and other income to other family members<br />
  66. 66. Individual Tax Saving<br />#50 Sales & Use Tax<br /> When making a purchase over the internet from an out of state vender, you are required to report that purchase on your tax return and pay the use tax.<br />