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

---

Electronic Commerce Taxation and Pakistan

Assume a buyer in Pakistan downloads software from the Internet... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

How to Check the Status of Your Tax Refund Online

So, you were pleasantly surprised to learn that you are... Read More

Insider Guides to IRS Audits!

Ever wish that, as a business owner, you knew exactly... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

Tax Tips - Which Tax Form Is Right For Me?

IRS Tax forms can be confusing.Am I a 1099 or... Read More

Organizing Your Taxes

Does this scene sound familiar? It's April 7. You haven't... Read More

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Tax Time Tune Up

Excerpted from the new book, "How to Do Space Age... Read More

Get Uncle Sam To Pay $36,000 For Your Childs Education!

Let's assume that you would like to begin saving for... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

Tax Reduction Tips

In the rush to get tax returns prepared and filed... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

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,... Read More

Tax Deduction for Alimony Payments? - Yes!

Over 50% of marriages end in divorce in the United... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction

Most people look forward to getting their tax return, but... Read More

About Income Taxes; Tidbits

1812The first attempt to impose an income tax on America... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Taxation of Isle of Man Companies from April 2006

At the present time a company incorporated in the Isle... Read More

Need a Copy of Your Tax Return Information?

Taxpayers have two easy and convenient options for getting copies... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

The Internal Revenue Service has certified the 2006 Toyota Highlander... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

Keeping Your Own Money ? NOT Handing It Over To The Taxman

Most people trying to make a crust online (or offline... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

Are You Overpaying Taxes If You Use Tax Preparation Software?

For many business owners the answer to this quandary is... Read More

SFR Substitute for Returns: IRS Action on Non-Filers

In the latest Star Wars episode, the evil empire executes... Read More

Understanding Basic Tax Terms

If your like many, you don't always understand what people... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More