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Tax Talk
               by Barry L. Carr

Tax time for some of you may the most frustrating time of year. If your a small business owner, you probably find preparing tax returns a monumental task. Perhaps the best advice I could give to anyone who detests tax preparations is to seek an expert early in the year and let them prepare the return.  

Tax Glossary   Tax Calendar

There are two good reasons for using a tax expert. First, it gives you more time to run your business. and second, good advice can save you money during the year. Some tips to make sure next year is hassle-free: have a meeting early in the year with your accountant. Your accountant should advise you on the latest tax laws and how they relate to your business. This ensures you will make the right decisions before a tax crisis occurs. Keep good records during the year. Most accounts send their "clients" an organizer booklet that explains what records and information is needed at year-end. Using the "organizer" eliminates last minute frustrations. Nothing dismays an accountant more than to have a client show up with a shoe box full of checks and bills. If you have any questions during the year, ask them. A small fee to answer a question in July is better than a large fee to reconstruct data the following April. Take full advantage of your accountant's expertise throughout the year and save money.
 
Barry L. Carr is President, CEO of TeleVideo Multi-Media Inc.

barry carr

"The best advice I could give to anyone who detests tax preparations is to seek an expert early in the year"

 

 
RETAINING RECORDS
  Most records have to be held for only three years after the due date of
  your tax return. That's when the statue of limitations expires for tax
  audits by the IRS and refund claims by the taxpayer. But some records
  should be kept indefinitely especially those relating to the acquisition of
  property whether by purchase, gift, or inheritance. The reason for this is
  that if you ever sell the property you can't figure profit or loss on the
  sale without proof of its original cost or other tax basis
.

Joseph  Anthony

5 ways to qualify for a home office deduction
By Joseph Anthony

Deducting the cost of an office in your home is one of the most common tax-saving options available to entrepreneurs. It's also one of the most misunderstood. It's relatively easy to qualify for this deduction. Here are five conditions that will help determine if you are eligible:

  1. You use the space at home regularly and solely for administrative or management tasks.
  2. You don't have another fixed location where you tend to those administrative or management tasks.
  3. The home office is your principal place of business, and you use the office space regularly and exclusively for business.
  4. The home office is not your principal place of business, but you use it to meet regularly with clients.
  5. The home office is not your principal place of business, but it is in a structure separate from your home that you use regularly and exclusively for your work.  more...

How To Turn Non-Deductible Commuting Mileage Into A Legitimate Business Expense
By Wayne M. Davies

  
For most folks, commuting mileage is a non-deductible expense -- unless you know the little tax trick I'm about to reveal.

The non-deductibility of commuter miles is painfully true for the employee who fights rush hour traffic every day, twice a day, for 5 to 10 hours a week.

All that hassle, and what does he have to show for it? Just gas money down the drain, not to mention the wear and tear on both his vehicle and his stress-o-meter.

You can deduct virtually all your mileage, including the miles you log from your home to the office or other place of business, if you meet the following two criteria:

1. You are a small business owner or self-employed person, and

2. You have two offices or work locations: one outside the home (Office #1) and one inside the home (Office #2).

Having two offices is very common for today's self-employed professional. The store owner, the shopkeeper, the salesman, the plumber, the consultant -- all these folks are typically self-employed and have two offices: one where they meet with the public (Office #1), the other at home, where they get their paperwork done (Office #2).

Here's how it works:

Every day you get up and "go to work." But you don't get in the car and drive to Office #1 right away. If you did that, even as a self-employed person, you would be racking up non-deductible commuting miles, just like the employee.

Instead, you grab a cup of coffee and head to Office #2 first, which takes all of 30 seconds.

After working in Office #2 for awhile, then you hop in the car and head to Office #1, where you work for the bulk of the day.

Then, when you're done at Office #1, you get back in the car and go "home" -- except when you get inside your house, you don't head for the living room, you go straight to Office #2, where you finish up your daily routine with a few final minutes of paperwork.

What have you just done?

You daily round-trip "commute" is now a business deduction, due to a simple tax loophole that says:

Any miles driven between two business locations are deductible business miles.

The fact that one of those two locations just happens to be your Home Office is fine and dandy with the IRS.

By following this route each day, you can save hundreds, even thousands of dollars in taxes.

The proof is in the pudding:
Your round-trip "commute" is 20 miles per day.
20 miles X 5 days = 100 miles per week.
100 miles per week X 50 weeks = 5,000 miles per year.
5,000 business miles X .36 cents = $1,800 deduction

So, you just got yourself a nice $1,800 deduction -- a deduction that you've probably been entitled to for years but didn't know it.

$1,800 deduction X 32% income tax rate = $576 in actual tax savings (27% federal income tax + 5% state income tax)

Five-hundred and seventy-six bucks. . . every year. . .

. . . Hmm, mmm, good! Now that's a tasty little morsel!


                                                                         
  
TAX TIP:
The Right to an "Installment" Agreement

If you do end up owing the IRS money, things can get ugly … and fast. Their notices make it clear they want the money now -- all of it. What they don't make clear is your right to an installment agreement.

To negotiate a reasonable payment, get a copy of IRS Form 433-A, the Financial Statement. This lists your income, expenses, assets and liabilities, and will accurately present how much you're able to handle paying.

Unfortunately, the IRS now charges a $43 user fee on installment plans. But, paying $43 is better than having to come up with big money you don't have right now.
 
 

 

Note: The tax information contained at this site can benefit you but is not intended to replace the advice of your accountant.