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Tax Talk
by
Barry L. Carr
Tax time for some of you may the most
fustrating 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.
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.
"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
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:
You use the space at home regularly and solely for administrative
or management tasks.
You don't have another fixed location where you tend to those
administrative or management tasks.
The home office is your principal place of business, and you use
the office space regularly and exclusively for business.
The home office is not your principal place of business, but you
use it to meet regularly with clients.
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.
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!
The tax
information contained at this site can benefit you but is not intended to replace the
advice of your accountant.
Tax Talk 
RETAINING RECORDS
