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The rich are there to make all the money and pay none of the taxes. The middle c lasses are there to do all the work and pay all the taxes. The poor are there to scare the daylights out of the middle class so they’ll keep working and paying th e taxes. George Carlin Income taxes are the single largest expense you’ll encounter in life, bigger then your home or the cost of getting your kids to college. Income taxes are the prev alent barrier to real financial security. You can never build any real wealth wi thout first getting your tax life under control. You may have heard the expressi on “tax freedom day.” That’s the day when we stop working for the government and begin working for ourselves. My experience in working with thousands of families indicates that most could su bstantially reduce the amount of income taxes they pay simply by adopting a soun d tax reduction plan. There are legitimate ways to lessen your tax burden, which frees more of your money to be used for any purpose you choose. The sad fact is that the IRS will never tell you about a tax deduction you didn’t claim. Discovering legitimate deductions is up to you. Every strategy that I hav e explained in this free report will reduce your taxes honestly, legitimately, a nd with the full approval and blessings of the IRS. As you read this report you may recognize tax savings that you failed to claim w hen filing prior tax returns. Don’t worry. You can go back, amend prior tax return s, and claim a tax refund. Amended tax returns must be filed within three years from the date you filed your original return or within two years from the time y ou paid your tax, whichever is later. Our tax system is indeed very complex, and tax laws are ever changing. The Inter nal Revenue Code, the Federal Tax authoritative guide, is a thick book with over 1.3 million words. Albert Einstein was quoted as saying “The hardest thing in the world to understand is the income tax.” Generally, there are two principles in reducing your taxes: Make money you spend tax deductible as you spend it Use the power of retirement plans and investment tax shelters Numerous strategies are identified within this chapter that you can use to subst antially reduce your income taxes. It’s important to realize that tax planning is a year-round activity. With that mindset, you will rethink the day-to-day busine ss and personal financial decisions you make relative to the tax liability they may create. Tax Strategies vs. Tax Loopholes or Tax Cheating In pursuing lower income taxes, it is never necessary to resort to tax cheating or tax loopholes, or even to question the legality of the tax system. There is a big difference between cheating, loopholes, and strategies. This report is not about “tax loopholes” or the “gray” (questionable) areas of tax law. It is not about tax tricks, “tax avoidance,” or “red flags” to get you audited. Tax strategies are positive , legal use of the tax laws to reduce your income taxes. Tax strategies are acti ons you can take that automatically and legally qualify you for additional deduc tions. These deductions are IRS-approved. And each and every one is money in you
You can deduct parking and toll fees. This is education that meets a t least one of the following two tests: The education is required by your employer or the law to keep your present s alary. Other tax strateg ies are just as legal. as well as bus. or other events. Tuition books. but less well understood. repairs. can often use these deductions. The education maintains or improves skills needed in your present work. taxi. and other travel fares that are involved in doing your ch aritable work. Strategy # 2 – Deduct your job-related education expenses You can deduct the costs of qualifying education.r pocket. or job. or outside salespeople who often use their home office as a base. Deductible expenses. Even employees who do adm . you may deduct 55 cents per mile (for the year 2009). just as easy to use. The automobile mileage deduction is taken on Form 2106.prepared tax returns. Strategy # 1 – Deduct your job-related auto expenses and/or charitable mileage When you use your automobile at your employer’s request to run job assignments and your employer does not reimburse you. However. gas. it allows you to deduct 55 cents per mile. you can deduct t he difference. If you are reimbursed less than 55 cents per mile. even if the education meets one or both of the above tests. Certain transportation and travel costs. status. it is not q ualifying education if it Is needed to meet the minimum educational requirements of your present trade or business. maintenance. If you have a second job. You can deduct the expenses for qualifying education even if the education c ould lead to a degree. I come across many people who overlooked this deduction. fund-raisers. The required education must serve a bona fide business pu rpose of your employer. The first. lab fees. You can also take deductions related to charitable gifts and volunteer work. whereby you deduct the business portion of the automobile ex penses such as insurance. and similar items. When reviewing past self . the IRS never lets them know of the missed tax savings. such as costs of research and typing when writin g a paper as part of an educational program Strategy # 3 – Deduct a home-based office when used for your employer People who work for companies whose headquarters or branch offices are not locat ed in the same city as the employee. Two methods are acceptable for deducting automobile mileage expenses. the mileage between the two jobs is als o deductible. You can deduct travel expenses incurred by traveling to charitable organizations fo r meetings. Other educational expenses. Some tax strategies are straightforward and obvious. is the Standard Mileage deduction. The other method is the act ual expense method. supplies. As describ ed above. or Is part of a program of study that will qualify you for a new trade or busin ess. and depreciation. and the easier of the two to use. The following education-related expenses can be deducted. Naturally.
By investing in a Roth IRA. You cannot deduct you r contributions to this type of IRA. But if you are below those income thresholds. Strategy # 5 – Fund your retirement plans to the maximum Retirement planning and estate planning tips There are many ways you can reduce your tax liability through putting aside mone y for your retirement and planning wisely for the transfer of your estate. you do not ha ve to pay any taxes on the money you withdraw after age 59½. you can save a tremendous amount in taxes in your l ater years. There are rules that must be followed in these cases. If you qualify for a Roth IRA. . At least you will have the advantage for t hat pool of funds.200 before taxes withheld) in the comparable taxable savings plan. Retirement assets will be taxed eventually (upon withdrawal). Strategy # 4 – Take deductions for capital losses If you have capital gains on your investments. you are able to take advantage of the compounding ef fects of your investment returns on a tax-free basis. The trick is in defining capital gain s and losses. you can still take up to $3. The power of tax-deferred compounding Assumes a 28% tax bracket. There are limits to how much income you can make and still be able to contribute to a Roth. vendors. This illustration does not represen t the performance of any particular investment. This example reflects federal income taxes only. you can take any capital losses a gainst those gains and pay no tax on your positive investment returns.200 annual investme nt in the tax-deferred retirement plan (before taxes). Within certain lim its. For instance. however. You traditionally receive divi dends that include return of principal from such investments as real estate inve stment trusts (REITs) or utility stock investments. a constant 8% annual return. you can deduct the contributions you and your wife make to IRA accounts. Your home office must be used to meet with customers. but. and there may be a 10% federal tax penalty for withdrawals made prior to age 59½. money that you get back from an investment that is simply a return of your origi nal principal does not qualify as a capital gain. The regular and exclusive business use must b e for the convenience of your employer and not just appropriate and helpful in y our job.inistrative paperwork in addition to their regular duties that require an outsid e office environment can use their expenses as a deduction. you can put aside as much money as possib le in a Roth while you still qualify.000 of ca pital losses against your ordinary income. as you can see from the table below. Even if y ou have no capital gains from investments. Even if your income begins to go beyond the th reshold as you become more successful. y ou come out with a much greater advantage by allowing your returns to compound t ax-free for the years to come. The office in your home has to be your primary office – you can’t have another o ffice at your employer’s regular business location. and an $864 annual invest ment ($1. Your home office must be in an area of your home that is set aside regularly and exclusively for that purpose. a $1. In addition. Inves ting in tax shelters can pay off handsomely in the long term. Your results may be more or less . you should contribute as much as possible to your Roth. or patients.
writer. Why? If you use the stock itself as the gift. With a defined contribution plan. but the gift of stock can go on appreciating t o much more than the original $13. Many investors have lost their e ntire retirement nest eggs by having their 401(k) plans invested only in one thi ng – usually the company’s stock where they are employed. a doctor.000 worth of stock as your gift. or anyone else w ithout paying federal gift taxes.After your income goes beyond the threshold. If you have a partner. Strategy # 6 – Gifting assets to your children You can gradually take money out of your estate by giving it away. In a d efined benefit plan. Hopefully. lawyer. . If you are en entrepreneur. within certain limits. One note: if you use $13. you give a much more va luable gift to the recipient. give the stock shares away. Self-employment options If you are an independent contractor or if you own your own company. You can contribute to a 401(k) program. or you can ta ke advantage of a defined benefit or defined contribution program your employer may have set up. 000 per year in a mix of these types of plans. but you mus t also establish pension plans for your employees. For very financially affluent individuals. you have a few other tax shelter choices. there are other tax shelters you ca n use for your retirement.000 value. entertainer. He or she will have to pay taxes on the value of t he gift at the time it was given. If your estat e is larger than the normal exclusion amount. or other such entrepreneurial professional. you can use a Keogh plan. do not sell the stock first and give the sale proceeds. You can shelter a total of $30. It’s easy to see why employers would choose a 401(k) over the other two plans.” or after you have stayed with the company for a certain nu mber of years. That means that no matter what happens in the investment markets or the economy. it must find a way to make that contribution no matter what. you can reduce its value by giving away $13. You can tuck away a significant portion of your income in these and other plans such as Keoghs. You can contribute up to 13 percent of your income in a SEP and other profit-sharing plans and up to 20 percent in Keogh and defined contribution plans. But you must be careful to find out whether you are allowed to ma ke other investments than in the company’s stock. these gifts are an excellent way to h elp with the educational needs of their grandchildren or to pass on their legacy without paying undue taxes. One of these is a Simplified Employee Pension pla n. or aSEP plan. thus allow ing a total $26. Man y employers provide matching contributions to some degree to 401(k) contribution s after you are “vested. the employer guarantees the benefits of the plan to you as an employee. If the company experiences a down year. This is b ecause their liability is less with a 401(k) than with either of the other plans . Your spouse can gift money as well. your employer is bound to give you a specific amount of benefit fo r your retirement. employers are bound to a specific percentage c ontribution of the company’s profits to the employees. Many employers have done away with their defined benefit and de fined contribution plans as a result of the more popular 401(k) plans. more than likely you can set up one or more of th ese types of plans.000 gifting capability between the two of you each year per reci pient. grandchildren.000 per year to each of your children. investors will have learned from this mistake and will be more carefu l to diversify their investments both inside and outside of their 401(k) plans.
The truth about amended returns is that they are not an automatic invitation to an audit Very few. you can give the stock. and. You can minimize the risk of an audit by sending back-up documents with your 1040X (the form used for mak ing amendments). which is common and understandable. most importantly. if you are giving the gift to a child under age 14. is still quite low. Generally. Make note that when you amend your federal tax return. The audit rate for amended returns.and dependent-care credit covers expenses for the care of children un der age 13 (or an incapacitated dependent of any age) while the parents are at w ork. Strategy # 9 – Filing amended tax returns Finding hidden treasures in prior years’ returns is a very exciting process. It could lead to an even bigger tax refund. Only day camp costs count.Or. in fact. Do You Engage in Tax Planning Year-Round? . prevents many taxpayers from get ting refunds they are entitled to. and with the complexity of the new tax laws. The cost of sending a child to sleepover camp isn’t eli gible for either the child tax credit or payment through flexible-spending accou nts. Any salary set aside in an FSA to pay eligible de pendent-care expenses is exempt from income tax and Social Security tax. A good tax preparer is hard to find. too.800 for two or more dependents. while higher then that regular returns. inform you of new tax-saving opportunities and alert you to danger ous tax traps. Strategy # 7 – Write-offs for children’s summer camp Day camp costs are eligible for the child-care tax credit and employer-sponsored “flexible spending arrangements” (FSA). Most taxpayers are afraid that they’ll trigger an audit if they file an amended return.000 a year for the ca re of one child and up to $4. Many types of amendments are proce ssed routinely. This will help make the most of the gifts you give for the child’s col lege education. m ore and more help will be needed. Almost 65 percent of taxpayers use a tax preparer. are ever audited. Many working parents who are sending their younger children to day camp this summer can count on the tax code to help subsi dize part of the cost. your state tax liability from that year may be affected. then let the child sell it under his or her tax rate instead of yours. This fear. guide you through financial transactions. He or she is an aggressive tax preparer who is up-to-date on all the new tax laws and the ir interpretation. though. Such a tax preparer can help you rethink your tax situation i n light of the new tax laws. especially if the child is very young and several years will bef ore the money will be needed. is to give t he stock and allow it to appreciate into a much more valuable long-term gift for the child. FSAs also provide tax savings. The child. Sending a child to day camp is also an eligible expense for employees who are paying child-care expenses through flexible spending arra ngements at work. Some amendments are safer than others. Strategy # 8 – Choose an aggressive and knowledgeable tax preparer or none at all Whether you use a tax preparer is strictly a matter of choice. which wil l be a much higher tax rate than the child’s. the cost of day camp is eligible for the child and de pendent care tax credit. For children under age 13. the credit applies to expenses of up to $3. The best thing.
lower taxes were promised. if you make tax planning your year-round concern . and have you documented your business use mileage? Can you arrange for more of your entertainment expenses t o be business related? Have you listed the business purpose on each receipt? Do you make business and personal purchases. Can you make some changes to turn your hobby into a moneymaking business? Can yo u use that extra room in your house as a home office for your business? Can you arrange to use your car more for business purposes.com My final word of tax advice Changes in tax laws in this country are ongoing. you will sa ve a fortune in taxes. 1928 Danny Mueller & Samantha Plank CPA Plus+ . Don’t miss the boat (yacht)!!! “Of course. By rearranging your affairs to account for tax implica tions. Enjoy the potential tax savings through implementing some of the tax breaks and strategies that I have identifi ed in this report while these breaks exist. Call us at (405) 285-7701 if we can hel p or visit us on the web at www.mycpateam. But taxes have gotten big ger and their boats have gotten larger until now the president crosses the Delaw are in his private yacht.” Will Rogers. However.Many people worry about their taxes only during tax season. you will save a fortune in taxes. but that has been promised by every preside nt since Washington crossed the Delaware in a rowboat. investments. legally. do you consider the tax consequences? Make year-round tax planning part of your business management mindset and thus e njoy maximum tax savings. and other expenditures with tax savings in mind? Do you document your expenses well so that they would survive a tax audit? Whenever you are faced with a business or personal financi al decision.