Owning a property can help you benefit from the property tax deduction. This can actually be broken down in to several separate advantages. This tax deduction is actually a general deduction encompassing many. Some of the areas that advantages can be taken in that are included in the deduction are listed below.

One area that is included in this tax deduction is any interest paid on your mortgage. This is because the interest you collect on your house is also deductible up to a maximum of $1 million.

Another part of this deduction is what is called fee points, which are points that are associated with a home acquisition mortgage. Because each one is worth 1% this can really add up when it comes to taking advantage of this portion of the deduction.

Something else that is part of this deduction is equity loan interest. This interest that is the amount that you would pay on a home equity loan is only partly deductible, not fully. This part of it has a few regulations that must be followed according to the Internal Revenue Service.

A few other things that can be included in applying for the tax deduction includes home improvement loan interest and the home office deduction. With the home improvement interest you cannot include anything considered a repair. But with the home office deduction you can include any part of your home used for business, and can include repairs.

One thing that is a fairly big part of the deduction is the selling costs. These can include the real estate broker's commissions, title insurance, legal fees, advertising costs, administrative costs, and inspection fees. By taking advantage of this part of the property deduction you can lower your taxable capital gains.

This leads us to the capital gains exclusion that is part of the property tax deduction. If you have lived at your residence for at least two of the last five years then you are excluded from having to pay a capital gains tax. Married who file jointly have a limit of $500,000, while single or married filing single have a limit of $250,000 in the amount than keep in profits from any sale.

A small side note regarding moving and this deduction, is that if you relocate due to your job, you can include deductions related to the cost of this move. This deduction though is not quite as easy to take advantage of because of some of the IRS regulations regarding it.

The fact also that your property tax deduction is completely deductible from your federal income taxes among these other benefits, definitely makes it worth looking into.

What is it? - A revaluation is an activity performed by the local tax assessor for the municipality to appraise all real property within its borders according to the prevailing market value. The difference between a revaluation and a reassessment is that the assessor hires a revaluation company to perform the work if it is called a revaluation versus doing the work in house with the staff of the assessor's office in the case of a reassessment.

What is its purpose? - The sole constitutional purpose of a revaluation is to spread the property tax burden equitably among all property owners within a municipality.

What if its not done? - Generally, delays in updating assessments to reflect changing physical and economic conditions lead to Malassessment. Properties once similar in value became dissimilar. Owners of properties with rising value became accustomed to paying a lesser share of the tax burden than would otherwise be the case and after reassessment "suffer" sharply higher property tax payments. Other property owners "benefit" from decreased taxes because the value of their property has declined or only slightly increased - these taxpayers have been paying a higher tax than they should have been.

What causes Malassessment? - Each property in the same municipality with the same market value at a given point in time should be paying the same amount in property taxes. Malassessments or inequitable assessments result from the following situations causing a lack of assessment uniformity:

• changes in neighborhood characteristics;

• changes made to individual properties;

• fluctuation in the economy (inflation, recession);

• changes in style and custom (desirability of architecture, size of house);

• changes in zoning which can either enhance or affect value adversely.

What is wrong here? - Assessors are asked to find "the price" at which a willing buyer and willing seller would agree to transfer a piece of property on October first. Well, common sense tells you there is a whole range of prices at which a willing buyer and a willing seller could transact a sale. So assessments are only predictions, and even the best predictions go astray. The need for a reassessment or revaluation, therefore, grows with the passage of time that erodes the old information based upon which the original assessments were made. Statewide in New Jersey, these assessment predictions or estimates constitute the tax base on which 2/5ths of all our state and local taxes are collected. Its on this set of predictions that local governments in New Jersey collected $19.6 billion in 2005.

Is there a better way? - Yes, first we must realize we have an indefensible tax structure that places too much weight on a property tax base that at best is only a set of predictions. Second, we must make provision for accurate regular assessments by strengthening and beefing up the assessment function with a sound investment in computers, assessment data base management and appraisal education resources for assessors.

Within two weeks, the IRS will turn over data on 12,500 delinquent taxpayers to three collection agencies. The agencies will handles debts of $25,000 or less, with larger debts pursued by the IRS.

The hand-off represents the first step in a broad plan to outsource the collection of tax debts to private companies. The plan is an initiative of the Bush administration.

IRS officials say that the plan is much more expensive than handling debt collection internally, but that Congress refuses to let them hire more revenue officers, who are necessary for collection.

The private debt collection program is expected to bring in $1.4 billion in the next ten years. The collection agencies will retain around $330 million, which equals 22 to 24 cents on the dollar.

If the IRS simply hired more revenue officers, they would collect more than $9 billion each year and spend only $296 million, which equals 3 cents on the dollar.

IRS officials said that these figures, stated to Congress four years ago, remain correct today. However, Congress declined to authorize the hiring of more revenue officers.

Critics of the plan aren't necessarily concerned with the higher cost, but also to the potential for abuse. With private companies involved, debtors are at an increased risk to fall prey to scam artists. The IRS has already alerted taxpayers to many potential scams this year.

To guard against fruad, Brady Bennett, collections director, says that agencies will only contact taxpayers by telephone or mail and instruct them to send all payments directly to the United States Treasury, not the private collection agency.

The three companies are Linebarger Goggan Blair & Sampson of Austin, Texas; Pioneer Credit Recovery of Arcade, NY; and CBE Group of Waterloo, Iowa.

Mortgage interest is probably the most important for homeowners and many home owners may be already be aware of this important tax benefit. Homeowners can deduct the interest payment for their first or second home loan as long as it isn’t over the fair market value of the home. If you’re married filing separately it can’t exceed $500,000 for single returns and $1 million for joint filers. You’ll be limited with home equity loans of $100,000 or more with married couples and $50,000 for single filers. Late charges and prepayment penalty fees can be deducted with the interest.

The refinancing epidemic reached its peak some time ago but you still may be able to purchase points that will lower your rate and make refinancing worthwhile. You can write off the purchase of points for a lower rate on a new loan. Many homeowners miss out on this important opportunity to deduct unclaimed points from a previous refinancing the same year.

Points have to be deducted “proportionally” over the life of the loan. If the terms of your new loan are for 15 or 30 years you deduct 1/15th or 1/30th of your points every year. The points you purchased for the previous loan are paid off with the new loan and can be written off completely. You continue to make the proportional deductions for the new term of the loan.

Interest paid for home equity loans or lines of credit work very much the same way. Homeowners can deduct the interest paid on either, up to $100,000. They only run into problems when the home equity loan exceeds more than what the home is worth. If your first mortgage is for a $160,000 and you take a home equity loan of $35,000 for a property valued at $180,000 you can only deduct interest on $20,000, the real value of the property.

Taxable and non-taxable gains are in an area most homeowners aren’t familiar. If there is uncertainty a tax advisor should be sought. In fact, it is always advisable to consult with your tax advisor before making any significant changes. Capital gains deductions are an issue in more active markets and faster growing markets with great appreciation.

Every two years home owners can profit from the sale of their home and not have to worry about capital gains for up to $250,000 for single homeowners and up to $500,000 on profits from the sale of a home as a couple. The cost of home improvements can’t be directly deducted from taxes but the value added can be written off at the time of sale. Costs associated with improving and maintaining a home office or health related improvements may also be deducted as well as indirect costs of maintaining them.

Real estate property taxes are deductible. State and local property taxes can be deducted for the year they are paid. Your mortgage interest statement should list the taxes and homeowners’ insurance placed in escrow. If you can’t find this information you can contact your local city and court offices. In most cases homeowners can deduct the mortgage interest paid in the tax year from their income.

Buying a home has not become a guarantee for a better life, but for tax purposes, home ownership gives the owner more options and benefits than renting. There is no “golden rule “that will determine deductions. Any tax professional will tell you there are many variables that will influence the amount of interest you pay. A good tax professional or loan officer will be able to give you a good idea of what tax benefits to take advantage of to make your choice of homeownership the clear advantage that it should be. No matter what type of scenario you face, homeownership is more affordable than ever and over the long run the investment can prove much more rewarding.

While many business owners adopt legitimate Voluntary Employee Beneficiary Associations (“VEBAs”), welfare benefit plans (“419(e) plans”), and fully insured defined benefit pensions (“412(i) plans”), all of the foregoing plans are also marketed as a way for owners to obtain huge tax deductions, with the ability to take money out of a corporation tax free, protect assets from creditors, deduct life, health, disability, and long-term care insurance premiums, as well as pass wealth tax free to the next generation. This article will explore those representations.

We have worked with each of these benefit plans for years without problems for ourselves or for our clients. Yet a review of recent Internal Revenue Service (“IRS”) rulings and court cases instituted both by the IRS as well as the Department of Labor (“DOL”) shows that some taxpayers adopting VEBAs, 419 plans, or 412(i) plans have had tax deductions disallowed, been sued, or even worse. Many plans have been determined by IRS to be “listed transactions” (or potentially abusive tax shelters), requiring notifying the Service and the possibility of substantial penalties.

When the various plans are sold and operated properly, they can be very advantageous. However, rather than brave the regulatory minefield, many accountants and advisors would rather simply just say “no”. How can a non-specialist differentiate between a legitimate plan and one that IRS or DOL may attack?

VEBAs and 419(e) Plans

VEBAs and 419(e) plans potentially provide a triple tax benefit: (i) actuarially determined contributions to a legitimate VEBA or other welfare benefit plan may be tax deductible (ii) investment income may accumulate tax-deferred, and (iii) benefits paid from the plan can be distributed income tax free, either as life insurance proceeds or for health care expense reimbursement benefits If properly designed and established, the benefits inside the plan are protected from creditors and the death benefits may be excluded from the participant’s estate for estate tax purposes. Look out for plans that offer benefits that appear too good to be true: tax deductible contributions and tax free retirement benefits, severance benefits for the business owner, etc.

419A(f)(5) and (6) Plans

Over the past few years, the Treasury and the IRS have acted forcefully to eliminate so-called “Section 419 plans”. The Section 419 Plans that are in disfavor with the IRS are those plans that claim to be in compliance with Internal Revenue Code Sections 419A(f)(5) or 419A(f)(6).

So-called Section 419A(f)(5) plans are marketed as “union” plans. Some of these use convincing language to persuade employers that they are able to include only key employees and owner-employees in their “union,” and to provide such “union members” with an inviting array of benefits.

Section 419A(f)(6) plans, also called “10-or-more employer plans”, are marketed as exempt from tax deduction limitations altogether. Some such plans even claim to be exempt from nondiscrimination requirements. It appears that IRS succeeded in eliminating most of these plans.

412(i) Fully Insured Defined Benefit Plans

412(i) plans continue to generate both interest and caution following recent Internal Revenue Service and Treasury Department actions to crack down on a number of abusive schemes that had cropped up in this marketplace.

Unlike 401(k) and other defined contribution plans, defined benefit plans, including 412(i) plans, are not subject to the $42,000 contribution limit ($46,000 with catch up salary deferrals).

Maximum contributions to a defined benefit plan may far exceed 100% of compensation. (We have seen cases where tax deductible contributions in excess of $200,000 per year for a single participant were available.) For example, a W-2 wage of $50,000 would permit a maximum SEP-IRA contribution of $12,000 for a person of fifty but will allow a 412(i) contribution of over $75,000!

Defined benefit plans (including 412(i) plans) have tremendous appeal for small, closely held businesses that are profitable and have few, if any, employees. The initial tax-deductible contributions and projected benefits are unparalleled for participants age 40 and older. But care must be exercised to assure that a 412(i) or other defined benefit plan is properly designed and funded. We have seen plans offering tax deductible contributions of $800,000 in a single year! If it looks to good to be true it probably is.

Properly structured 412(i) plans are viable when avoiding the pitfalls and can provide maximum tax deductions and retirement benefits.

Many firms that sponsor 401(k)’s plans have a problem. The owner(s) would like to put away as much money as possible but to do so would require large contributions for the employees. The employees enjoy the ability to defer their salary and have some sort of match but as they realized to their dismay from 2000-2 their plan assets are not guaranteed. One solution that could solve both problems is the 401(k) and Cash Balance “Combo Plan”.

What is a Cash Balance Plan?

When you think of cash balance pension plans you tend to think of IBM and other large companies that have used them to reduce their employee benefit costs. What many people do not realize is that in the right situation, these plans can provide a number of benefits to small business owners as well.

Traditionally, when a small business owner wanted to install a retirement plan for their business they had two options: Defined contribution plans like 401(k)’s, profit sharing, money purchase, SEP, SIMPLE, etc. or defined benefit plans. Defined contribution plans limit the cost of contributions for employees but also limit the tax deductible contribution for the business owner ($44,000 in 2006). Defined benefit plans allow a large contribution for the owner but can also mandate large contributions for employees. Now, cash balance offer another option, potentially large tax deductible contributions for the business owner with low contributions for employees.

Cash balance plans are a hybrid retirement plan designed to combine the best features of defined contribution and defined benefit plans. Like a defined contribution plan, employees have their own accounts with contributions based on compensation and interest which is credited each year based on a formula specified in the plan document. Like defined benefit plans, the retirement benefit is the greater of the benefit that can be provided by the employees account or a minimum benefit as described in the plan document.

Combining a 401(k) with a Cash Balance Plan

Combining an existing 401(k) plan with a Cash Balance Plan can be a way for a the business owner(s) to get large tax deductible contributions without necessitating large contributions for employees. It can also guarantee minimum retirement benefits for employees regardless of what the market does. Here is an example:

XYZ Company has 4 owners, 3 top executives, 7 family members, and 19 rank and file employees. The owners each make $220,000/yr, the executives and family members earn between $45,000/yr and $180,000/yr. XYZ currently has a 401(k) plan but would like a way for owners, top executives, and family members to put away more money without too much of a cost for employee contributions. By adding a Cash Balance Plan on top of the 401k the results were as follows:

Tax deductible contributions for the owners= $86,000/yr for each owner
Total contributions for owners, executives, and family members= $433,770/yr
Total contributions for employees= $67,646
Total plan contributions= $501,416
% of contributions that go to owners, executives, and family members= 86.51%

So in effect, the plan will save the owners approximately $200,000/yr in taxes but the cost of the employees is less than $70,000!

The employees can invest their 401(k) plan assets more aggressively knowing that they also have a Cash Balance Plan that provides a fixed benefit in retirement.

In the right situation, adding a Cash Balance Plan can help employers supercharge their 401k plans.

When you think of cash balance pension plans you tend to think of IBM and other large companies that have used them to reduce their employee benefit costs. What many people do not realize is that in the right situation, these plans can provide a number of benefits to small business owners as well.

Traditionally, when a small business owner wanted to install a retirement plan for their business they had two options: Defined contribution plans like 401k’s, profit sharing, money purchase, SEP, SIMPLE, etc. or defined benefit plans. Defined contribution plans limit the cost of contributions for employees but also limit the tax deductible contribution for the business owner ($44,000 in 2006). Defined benefit plans allow a large contribution for the owner but can also mandate large contributions for employees. Now, cash balance offer another option, potentially large tax deductible contributions for the business owner with low contributions for employees.

Cash balance plans are a hybrid retirement plan designed to combine the best features of defined contribution and defined benefit plans. Like a defined contribution plan, employees have their own accounts with contributions based on compensation and interest which is credited each year based on a formula specified in the plan document. Like defined benefit plans, the retirement benefit is the greater of the benefit that can be provided by the employees account or a minimum benefit as described in the plan document.

Below is an example of the benefits of a cash balance plan. XYZ Company has two owners, age 45 and 48. They also have 5 staff people of varying ages and incomes. XYZ wants a retirement plan that allows the maximum benefit to the owners while minimizing employee costs. The example below compares the tax deductible contribution for a profit sharing plan, a defined benefit plan, and a cash balance plan:

Employee Age Salary Profit Sharing Defined Benefit Cash Balance
Owner A 45 $220,000 $44,000 $92,970 $92,970
Owner B 48 $220,000 $44,000 $119,870 $94,364
Employee A 46 $80,000 $16,000 $49,614 $9,317
Employee B 47 $35,000 $7,000 $21,695 $4,461
Employee C 31 $30,000 $6,000 $10,106 $1,460
Employee D 22 $25,000 $5,000 $6,188 $1,207
Employee E 21 $25,000 $,5000 $6,002 $1,208
Totals $127,000 $306,445 $204,987
% to Owners 69% 69% 91%

In this example, the cash balance plan allowed the owners a tax deductible retirement plan contribution of over $90,000 each and low contributions for employees. In fact, 91% of all contributions to the plan went to the two owners, as opposed to 69% in the other plan designs.

Cash balance plans will typically work well for the following:

 Professional practices and profitable small businesses with stable earnings.
 Companies with 2-25 employees
 Companies where there is a spread between either the ages of the owners and the employees or the salary of the owners and employees.

Because of the benefits these plans provide they are sure to become more popular as more and more small business owners and their advisors begin to understand them.

If you are one of those people who do their own taxes this may be the year to hire an accountant. By now you have probably gotten all of your 1099 forms in the mail from your brokerage accounts and now you need to make sense of it all. There are two major changes to the tax laws for 2003 that could have a large impact on your tax bill and how you manage your money going forward.

Capital Gains

The first change is to capital gains taxes, that is taxes you pay on your gains from selling a stock or mutual fund. Short term capital gains, that is any gain on an investment you sold that you held for less than a year is still taxed as ordinary income. Which means rates can be as high as 35%. Long term gains, gains on investments you held for more than a year are where it gets interesting. Any gain on an investment you held for more than a year and sold before May 5 of 2003 is taxed at 20%. However, if you sold the investment after May 5 it’s only taxed at 15%. Why they chose May 5th I have no idea, obviously somebody up there wants to complicate your life. This makes tax planning quite difficult because short term losses offset short term gains before they offset long term gains and long term losses offset long term gains before they offset short term gains. Confused yet? Because short term gains can be taxed as high as 35% and long term gains are only 15% you want to do a couple of things, first if you can avoid selling something for 12 months do it. Second, if you anticipate short term gains during the year and have long term losses avoid taking long term gains until the next year. Alright, if you weren’t confused before you are now. Because the tax rates are so wide now you need to consider taxes on any sell decision you are making. Bottom line, you can’t do your tax planning on April 14 when your accountant tells you how much you owe, you need to sit down with your accountant and investment advisor in October or November this year to plan this out for 2004.

Dividends

Dividends are also taxed differently now. In the past dividends were ordinary income which could be taxed as high as 35%. For most people the maximum tax rate on dividends that qualify is now 15% but just like capital gains it’s not so simple. First you need to hold onto the stock on which dividends where paid for more than 60 days. The holding period is actually much more complicated than this but I don’t want to confuse you too much more. If you are a buy and hold investor you probably don’t have to worry, if you are an active trader however you will have a tougher time with this. The other key point is that not all dividends qualify but it is up to you to determine if yours do or not. The key ones that don’t are dividends from mutual funds that are actually short term capital gains or bond interest. Another thing you need to know is that if your brokerage firm lends your shares out (which they can do if you have a margin account) your dividends won’t qualify either. You need to call your broker to find out about this. This also brings up an important planning point. If you are like most people you have some stocks and some bonds. Your stocks might pay dividends and you may sell them generating long term capital gains, all taxed at 15%. Your bonds pay interest that can be taxed as high as 35%. You need to figure this in when you decide how to hold these different investments. If you have 401k’s or IRAs these accounts grow tax deferred so they are the perfect place to put your bonds. If you have other accounts that are taxable, like joint accounts or individual accounts you can put your stocks in those. This allows you to take maximum advantage of the tax law changes.

All told these changes give investors some great way to save some money but you need to know how to take advantage of them for maximum effect.

An examination of a taxpayers' tax return(s), in the United States, is an event that should be approached in a professional manner with a good grasp of fundamental ground rules. A successful approach includes a solid feel of IRS agent psychology, so that said agents' attitudes and anticipated behaviour are fully familiar to the taxpayers' representative. Additionally, the average taxpayer should elect the option of not appearing face-to-face at an IRS examination; they send their legal representative instead (CPA, Attny, etc.) Said rep knows how to valuate the issues that arise, how to get them "put on the table", and then negotiate in a fashion which IRS agents can save face, net the t/p the best bottom-line dollar results, and satisfy said IRS with an acceptable closing of the tax case.

Unknown to the general public, IRS agents are evaluated on the number of cases closed; not the amount of EACH individual case closed. A large case assessment by an agent may provide them with some bragging rights around the water cooler; but it is not what their superiors use in evaluating the "productivity" of individual agents. The above is just a sampling of the long list of variables that come into play during an individuals' tax audit. Hence, it is with an objective point-of-view that I suggest using professionals when a t/p finds themselves at mercy of IRS.

A short anecdote: Upon the completion of an unsatisfactory phone conversation re tax issue of one of my clients; I stated "that is just not "fair". Their blunt reply was: "We (the IRS) never claimed to be fair"!

The IRS issued a warning on Wednesday against scammers who pose as private debt collectors looking for unpaid tax debts.

The IRS has designed its new private debt collection program to minimize the risk of fraud, "because we know what it's like out there with regard to identity theft nowadays," said Brady Bennett, IRS director of collection.

Critics of the new program, which assigns unpaid accounts to private collection agencies, say that consumers can easily be taken advantage of by fraudulent collection.

The IRS plans to start assigning 12,500 accounts with unpaid tax debts to three private agencies starting next month. Approximately 40,000 accounts will be turned over to private agencies by the end of the year. These accounts are limited to taxpayers who owe less than $25,000 and don't dispute the debt.

Anyone contacted by a private collection agency has the right to insist that they only deal with the IRS on their account. Bennett said that taxpayers shouldn't worry about working with the private agencies. The IRS has performed background checks and has designed special training for collection agency employees, he said.

The agencies will not have access to the tax returns, only basic account information, including names, addresses and Social Security numbers.

The selected taxpayers will receive a letter from the IRS that gives the name of the company handling the debt. The letter will advise taxpayers of their rights. The collection agencies will then send letters telling the taxpayers that they will be contacted for payment of the debt.

The selected taxpayers will only be contacted by telephone or through the mail. The private collections agencies will try to locate taxpayers who have moved or changed phone numbers.

Taxpayers who are uncertain or want to verify communications are urged to call the IRS at 1-800-829-1040.

The IRS and the collection agencies will not communicate with taxpayers through e-mail, and will not ask for passwords or PIN numbers.

Bennett cautions taxpayers to make checks and money orders payable to the US Treasury, not the private company, and to send the money directly to the IRS. Collection agencies can arrange payment agreements that allow installments, if necessary. They will provide this information to the IRS.

So how do you get started claiming a daycare tax deduction? You have your own children to take care of, but for some reason you've decided to help other parent's out and take care of theirs too. You've decided to run a daycare out of your home. There is some good news in this, because of this you can apply for a daycare tax deduction on your taxes. Following are a few suggestions that should help you get started.

A good thing to know is that there are certain qualifiers to really be considered a daycare in the sense that will qualify you for the daycare tax deduction. In order to properly qualify you must be correctly certified or have valid exemptions. Obviously if you do not have these or your license has been revoked or rejected for any reason you are no longer qualified for this exemption and cannot legally apply for a daycare tax exemption.

Of course there are also a few factors that you need to know before calculating how much you can correctly deduct and use in qualifying for a daycare tax exemption. Anything related to the facility, in this instance your house that you used to run the daycare could be included. However, in order to calculate this properly you need to figure out what portion you use for business and what is used for living expenses. In this way you can use a portion of the amount you pay on your general bills, such as electricity, that may be employed in running your daycare. Only the amount used when running the daycare can be used to qualify for the daycare tax exemption.

Also included in expenses that can be claimed are any food you may use to feed the children or any employees. In fact you can deduct 100% of the employees meals and use this as part of the calculation for the daycare tax deduction. Of course this is only their salary or wages don't already have a food allowance included. There needs to be careful records in order to use these amounts for the daycare tax deduction. It may be easier to keep a standard rate for all meals and snacks provided as part of the daycare. You can use this up to three snacks a day, beverages and three meals, but you cannot include any non-food items used to prepare the meal.

Therefore, in the end, not all is bad when it comes to running a daycare out of your home. By taking advantage of the daycare tax deduction you are gaining many benefits from running the daycare out of your personal residence. In addition, with careful calculations and a little extra work, you can make the daycare tax deduction work the best for you as it possibly can. So good luck!

Federal income tax deduction, you've heard the term before, but what is it exactly? Well, what a federal income tax deduction is a statutory requirement of the United States law. Every single United States citizen must pay it, as long as they fall in a tax bracket, which is determined by the United States government. The way income tax reduction is calculated is by removing excluded income, exemptions and permissible deductions from gross income.

There are a few exemptions from having to pay the tax deduction. These include any money from life insurance earned, any money from gifts or inheritances, money from any personal injury settlements, and any interest earned on state or municipal bonds. There are some considerations when trying to take advantage of any of these exemptions in regards to the income tax deduction, so it is best if you have a tax preparer help you in these instances.

There are few other reasons you may have additional deductions beyond the federal tax deduction. In fact the tax deduction is considered the standard deduction. The following are called 'above-the-line' deductions. These include, trade and business expenses, alimony, IRA contributions, net capital losses and any money used on property that is used to generate an income. Someone who has a reduction may or may not be able to take advantage of these other deductions, but you should have a tax preparer help you with these if at all possible.

Those who earn over a certain amount and have a federal income tax deduction has something called an alternative minimum tax they can take advantage of. Because of having an income that exceeds a certain amount the person may have to pay more on their tax rebate then would allow for them to be able to take advantage of other deductions and credits. Therefore they have the option of claiming an alternative minimum tax instead.

There is one last option for almost anyone; to paying the federal tax deduction straight out and this itemized deduction. This can include state and local income and taxes, donations to charity, employee transfer costs, medical expenses, casualties and any loss that may have been incurred from this and any interest paid on mortgages. Itemized deduction can be a bit more of a hassle than it's worth though, depending on how many of these you qualify for, so check with your tax preparer ahead of time.

In the end is up to you whether or not you will go with just the standard deduction or with a more detailed one such as itemizing. But either way, at least now you hopefully will have a better understanding of some of things involved with a federal income tax reduction.

It's come time to make some improvements on your house and the prospect seems daunting. However, there is some light in the darkness, a home improvement tax deduction is available in the right instance. One of the first and most important things to know before trying to qualify for a house improvement tax deduction is the difference between repairs and improvement. The reason being is that repairs will not help you at all when it comes to the tax reduction. Home improvement as defined to qualify for the home improvement tax reduction is any addition that improves life and quality to your home. Some examples include, adding a fence, driveway, swimming pool, new heating or cooling systems, adding a room, building a garage, adding insulation, a new roof or new landscaping.

While repairs on the other hand is something you to slow down or stop any depreciation that may be occurring on your home or property. This does not qualify you for the tax reduction. Just so you know, some examples of home repair that do not qualify you include, repainting, any fixing, plumbing or leaks or fixing any broken items. Of course there is one thing that may make you exempt in regards to home repairs and them not qualifying you for a home improvement tax reduction, and that is in the case of remodeling. In this instance you can include anything under a general improvement of the home to qualify you for the deduction. Just make sure the expenses are closely related.

Something else that can be done when qualifying for a tax deduction involves your interest rate on any loan you may receive to make the improvements. By deducting any loan points in the year you got the loan you can benefit even more. In addition, if you decide to refinance your house to improve it you can deduct the loan points that year. The amount that you use is proportional to the amount of loan points that may be deducted and proportional when calculating the house enahncement tax reduction.

Therefore, now that you are aware what qualifies as improvement and what does not you are all set in qualifying for a home improvement tax deduction. In addition, by knowing what exactly to do to benefit the most from the house enhancement tax deduction you are on your way to saving money, and who doesn't like to do that?

The home office tax deduction can help you lower your taxes with some basic requirements. Having an office at home can be more convenient and helpful than just the ease of being able to work at home. It is a good way to qualify for a home-based office tax reduction if you know how. This can also include some basic things such as rent, utilities, repairs and improvements.

Of course part of the requirements for the home office tax deduction is that you use a certain area and only a certain area of your home for your business. This helps show that you use this space regularly on a regular basis every week. This can definitely be a step in helping you qualify for the tax reduction.

Another important thing that is required in qualifying for a home office tax deduction is that there is no personal activities taking place in the office space. One exception to this is storage of anything related to the business. This can involve personal space with no repercussions.

Another thing you must know in qualifying for a home-based office tax reduction is that the business that is being run from the home must show clear profits and/or losses to be considered. Something that can be considered more of a hobby, but can be run like a business does not help you when it comes to qualifying for the home office tax deduction.

To be sure that you are good to go in qualifying for a tax deduction make sure that your home office is your main office. This means that if you have more than one office, most of the office duties must be performed from the home office to qualify for the tax reduction. Just performing all the administrative and management duties from the office can help in this manner.

Another good idea is to have some proof that indeed you are using part of your home as an office for business. These steps can be taken, even if they seem unnecessary to help in this matter. Drawing up a diagram or taking photos, making sure business mail is coming to that address, having your business cards and anything like that with your home address on it, having a separate phone line and keeping records of clientele who visit. Keeping good records can greatly increase your chances of qualifying for a home office tax deduction.

As you can see, besides making it more easy and convenient to work from home, there are many other benefits. One the best of these benefits is the home-based office tax reduction. Now that you know how to qualify for a tax reduction you are on your way to saving money.

Being environmentally conscience can be an advantage when it comes to saving you some money on your taxes with the fairly new hybrid car tax deduction. This is a new provision, since 2004, under the Working Families Tax Relief Act that allows for a hybrid automobile tax reduction. It can only be used once, but if you have recently bought one you could qualify for the tax reduction.

The way it can be taken advantage of is for those owners who bought them from the year 2004 and 2005 only. There is a limit when it comes to the car tax reduction, and that is $2,000, unfortunately that will decrease in 2006, when the car tax reduction limit will only be $500.

There are some improvements that are trying to be made in the hybrid car tax deduction. For one thing in August 2005 a revised energy bill was put into place to help increase incentives in buying a hybrid car. This bill helped exceed some of the limitations of the original hybrid automobile tax reduction by creating full dollar tax credits, which are an even greater advantage.

Going back to the car tax reduction that is in place right now, how much is dependent on the tax bracket you fall into. You can claim up to $2,000 but what comes off depends on where you fall in the tax brackets. The higher percentage tax bracket the more you will receive from the reduction and vice versa.

If you bought a hybrid car within three years of 2004 you can also apply for the car tax deduction. Of course this requires going back and modifying the original claim within three years of the return date or within two years of when any taxes were paid.

One good thing about claiming a tax reduction is you don't have to itemize. You can basically do your taxes as you normally would. The only thing is you must use a 1040 form and classified as 'clean fuel'. Other than that claiming this type of deduction is relatively simple and in the end can save you a good amount of money. As simple as it is, claiming a tax rebate is well worth it.

Now that you know what exactly qualifies you for this type of deduction you can see the benefits far outweigh any effort on your part it may take. Being environmentally conscience can not only help us all in keeping our planet clean, but can also help you personally by saving you money. So why not buy a hybrid and save with the hybrid car tax deduction?

Wage garnishment laws have been passed by states as well as the federal government. The purpose of these laws is to provide a way for debts owed to creditors to be recovered. IRS wage garnishment is the most common application of these laws.

Garnishments against wages can be levied by any agency and is not limited to the IRS. Private creditors, federal government departments, or even an ex-spouses can claim garnishment of the money overdue. Garnishments can also be in cases of overdue child support expenses. For most agencies apart from the IRS, a court order is required to enforce the garnishment law.

Garnishment is taken as a part of the payroll process. An order of importance been stipulated by law. According the garnishment law, the garnishment due to towards the federal government is to be collected first. Thereafter the money due towards state tax or local tax jurisdictions will be collected, and lastly garnishment for credit cards and other private debts will be paid.

Garnishment law in some states like Pennsylvania, North Carolina, Texas, etc do not allow wage garnishment at all except those related to taxes, child support, court order fines, and federally-guaranteed student loans. Other states allow all kinds of garnishments, even those levied by the private creditors. In some states garnishment law states that a maximum 25% of the disposable earnings can be levied as an amount due towards payment.

The money withheld by an employer from any individual's paycheck is handed over to the creditor or the agency towards which the amounts is due. As per the garnishment law, the wage garnishment remains in effect during each pay period until the total amount due is paid in full. That is not necessarily true in the instance of an IRS wage garnishment. An offer in compromise can be negotiated, or a payment plan can be agreed upon. Most tax professionals can get the IRS to agree to a provisional release of the levy against wages based upon a negotiated agreement.

According the wage garnishment law, an individual's salary, wages, or other income can be levied. Garnishment law prevents the employee from being fired from his or her job. If the employer fires the employee because of garnishment proceedings, then it is violation of garnishment law. The employer can be fined for doing so. The Wage and Hour division of the Department of Labor determines the violation of the law. The IRS does not do this job.

There are at least two methods of removing an IRS wage garnishment. One is to make an arrangement with the IRS. You can do this yourself through the use of an offer in compromise. Or, you can hire a tax attorney to negotiate an arrangement with the IRS on your behalf. Another method is to do a fair amount of research into your case, and others like it, to find instances where the IRS has violated proper procedure in their dealings with you.
The tax law is very complex. It is highly likely that you do not know every detail contained in the thousands of pages of tax law. Believe it or not, neither does the IRS agent. They very often violate their own rules. This is so common that it would be laughable if it wasn't such a serious matter. Nonetheless, with some research and investigating, you'll likely find an instance where the IRS has erred in their actions. When you find an error that they have made, you have what you need to get the IRS wage garnishment removed.
There are many cases where people tried to sue the IRS under all kinds of different theories. The courts continually dismiss those cases. The solution to not having your case dismissed is found in 26 USC § 7433 and 26 USC § 7432. In 1988, the United States waived sovereign immunity in 26 USC § 7433 and made it possible for someone to sue the U.S. when IRS agents fail to follow the statues or the regulations while they are involved in tax collection activity. Section 7432 made it possible to sue when the IRS refuses to remove a lien that is legally unenforceable.
If you intend to sue the IRS you are required to send a letter noticing the U.S. of your intent to sue as required by the statute to obtain the waiver of sovereign Immunity. Without the waiver of sovereign immunity, your case will automatically be dismissed.
Now, once you are aware of this little-known fact, it changes the way that you can approach the IRS. Most people do not know of this requirement. And the IRS knows that most people don't know of it. When someone who has been wronged by the IRS threatens to sue them, the IRS can basically chuckle and think to themselves "Go ahead, your case will only get dismissed from court anyway. You're wasting your time and money."
However, by knowing this fact, you can send a letter to the Technical Compliance Officer as required to obtain the waiver of sovereign Immunity. By doing so, your case becomes credible, and the IRS will take you seriously. Your case may have merit. You may actually win a court judgment against the IRS.
Just as court cases are expensive and a big hassle for you, they are the same for the IRS. The IRS wants to avoid all of the effort and time that is required to try a case in court (unless of course, your case is high-profile and the sums of money involved reach into the millions of dollars.)
The Technical Compliance Officer has 3 things in mind when receiving your letter: 1) The federal courts are overloaded with cases; 2) The U.S. Attorney's office is overloaded with cases; 3) Congressmen and Senators enacted legislation so they would have to deal with fewer constituents that had complaints about the IRS.
Here comes your credible threat to sue in the form of a letter in compliance with the statute. The Technical Compliance Officer reads down through it and asks himself, what would make more sense, have a lawsuit, or make the issue go away? The next thing you find is that the IRS releases the wage garnishment.
There is no perfect argument is to get every instance of an IRS wage garnishment removed. You will have to find some error or some mistake that the IRS made where they failed to follow the regulation or the statute; or, they wrongly interpreted the statute or the reg. You then take your arguments of why the wage garnishment is invalid, put them in the form of a notice of intent to sue, and you send it to the Technical Compliance Officer, the motivated target.
And if he wants to avoid the hassles of a law suit, then he's going to figure out a reason to call up the IRS agents that are hassling you, and tell them, leave this person alone because they're threatening to sue and we don't need any more lawsuits.
To have your IRS wage garnishment released, simply analyze your own case. Compare what the IRS did on your case with the statute and the regulation, and see where they have made errors. They can hardly ever get it right.
Your letter may get the IRS to release the garnishment of your wages. It may not. Your other option is to file suit. Once your suit is filed, it is no longer a possible hassle for the IRS, it is guaranteed. They will have even more reason to negotiate.
Or maybe you'll be one of these people that just really gets diligent and you'll take it all the way to trial. Maybe it's there that they'll just give you damages for everything they have done to you, and not only will your wage garnishment be released, but the IRS may have to return property that was taken from you.

Automobile tax deduction, what exactly is this and what kinds of automobiles will qualify you for it. Under federal law in the United States there are two ways to qualify for it. One is by owning what is called a clean fuel vehicle and/or a gasoline-electric hybrid car. A different kind of car tax deduction is related to donations made to a charity that involve an automobile.
Those who have decided to receive an automobile tax deduction because of a clean fuel vehicle must realize that they qualify for a one-time tax deduction of up to $2,000, only if the fuel is at least 85% alcohol or ether, for example like E85. On the other hand those who have an electric vehicle or electric hybrid vehicle can qualify for an automobile tax deduction of one time up to $4,000.
One thing to know about this kind of car tax deduction is that this is only for those who purchased their vehicle in 2005. If you purchased one in 2004 you may have to fill out an amended tax return in order to receive credit.
There are a few other specifications to completely qualify for this type of automobile tax deduction. For example the car that is purchased must be new when bought and for personal use only, you cannot by it in order to turn around and sell it again. In addition, the car must be driven mostly in the United States. A very important thing to qualify for the car tax deduction of this sort is that the car must meet all federal and state requirements for pollution and emissions. The car must actually be a car that runs on the road and has four or more wheels and therefore this rules out trains of any sort. If any of these things change within three years of the original purchase, the person who received the automobile tax deduction may owe the government some money back.
Just so you are aware, this type of care tax reduction is only valid until December 31, 2005, after which there are some different types of federal income tax credits that will be available.
Another type of automobile tax deduction occurs when a vehicle is donated to a charity. There is a bit more rules and regulations when it comes to this deduction. It all depends on how much the person who donated claims the gift was worth and how the charity then proceeded to use the car. These two factors influence how much of a deduction will occur. There is a $500 on the value of the donated car, but there are even more rules and regulations if it exceeds that amount. An interesting thing regarding this type of car tax reduction is that the person who donated can take another deduction called a fair market deal deduction if the charity increased the value of the car in any way.
In most instances you should concern yourself primarily with the first type of auto tax deduction, is definitely the one that is worth most of your time and effort to receive. Now you know how having a car might just be able to help you receive an automobile tax deduction.

The business expenses tax deduction can be a workers best friend if they know how to properly take advantage of it. What exactly is a business expenses tax deduction and what can qualify you for it or can be claimed under it? First you will need a Schedule A, Form 1040 to get started and the ambition to itemize your deductions. After this it is almost limitless, as long as it can be claimed as a business expense, such as transportation, lodging and food and gifts, there's a pretty good chance it can be claimed under a business expenditure tax reduction.
One thing that pretty much can be ruled out when considering the business expenses tax reduction is local travel or commuting. There are however a few exceptions to this rule. They include if you are traveling between two work sites, including if you have a home office and you are traveling between there and another office. Another exception to this would be if you are traveling to a temporary work site, which is considered some place for less than a year. In these instances only would local travel qualify under the tax deduction?
However when traveling outside of your city you can claim any mode of transportation. Under the expenses tax deduction you claim airfare, cab fare, train fare or bus fare, and even gas if you drove your own vehicle. Gifts that you may have been required to buy for clients may also qualify under the tax deduction. There are many rules and regulations regarding this, so be careful. Make sure you understand exactly what can and cannot qualify for a biz expenses tax deduction in regards to this matter.
One last thing to consider is if the business has allowed for an advance for the businesses expenses, because then you could be liable for taxes. If you are careful in how you account for these you should be fine when trying to qualify for a business expenditure tax reduction.
When it comes to working it shouldn't have to be as much work to figure out what kind of deductions you qualify for in regards to expenses you may incur in trying to do your job. If you care about saving as much money as you can, you should follow these easy steps and be on your way to deducing as much as you can and getting the most out of your tax return. Being able to qualify your business expenditures under the tax deduction is a great opportunity to give your self a tax break.

You want to donate your car and take advantage of the car to donate for tax deduction, but it seems really confusing trying to figure out this deduction. Don't worry you aren't alone. The two main things you need to know when it comes to donating a car for tax deduction is that the actual amount depends on the person who is donating and their claim as to the value of the car, but also on the way the charity puts the car to use. There is one other thing you should know about the car to donate for tax deduction. If the car happens to be worth more than $500 and the charity decides to sell the car that may affect the limit of the person applying for the car to donate for tax reduction and the limit to the access on the gross profits from the charities sale.Wanting to get the most out of the car to donate for tax deduction requires some knowledge on the matter. There are a few points that may be significant in how well you will benefit.The first thing to know is that you need to be able to verify the eligibility of the organization that you are donating to. A library or Publication 78, which is an online resource, can help you pinpoint the charities that qualify to be used to take advantage of the car to donate for tax rebates. This will save you time and effort in the long run.You also must remember that when it comes to claiming the car to donate for tax deduction you must itemize your deduction. You can no longer just stick to the standard deduction. To be able to fully maximize your advantages you must itemize.A good place to look is a used-car buying guide; these are invaluable at determining the fair market value of the car in question. Being able to correctly determine this will help you maximize the amount of your car to donate for the purposes of tax reduction. Once you have correctly estimated the fair market value, deduct it. Unfortunately this is all you can, not the full value. When applying for the car to donate for tax deduction you must also file a Charitable Contribution Deduction. As well as this you must be immaculate in keeping records of all your receipts and forms. This will help you to achieve the most from the car to donate for tax reduction.

A charitable tax deduction seems like a pretty straightforward proposition. It can definitely lend itself to a pretty good size deduction if you carefully itemize your deductions. There are also some things you should know about before trying to qualify for a charitable tax reduction. Following are a few tips in regards to a charitable tax deduction.
One thing you should double check is that the organization you are claiming for the tax deduction is eligible and recognized as a charity that is considered for this type of deduction. The Internal Revenue Service has an online guide called Publication 78 that can help you find a list of organizations that do qualify for the charitable tax deduction.
A few generalizations on what kind of places do not qualify you for the charitable tax deduction are as follows. They include individuals, political organizations or leadership and also if the means in how the money was raised includes holding a raffle or bingo or any gambling type of game can it be claimed as a charitable tax deduction.
It's not just money either that can be claimed as a tax deduction. Any kind of product or service provided to the charity can be claimed. Provided that the fair market value of any such item or service is all that is claimed for the deduction. It must also be taken into consideration that it must be the fair market value of the item or service at the time that the gift was given.
One interesting fact in regards to any household item or personal item when it comes to charitable tax reduction it can only be claimed for the price it may have gotten at a garage sale or flea shop. In this instance if it is over $250, a receipt is required to qualify.
There is also available some provisions in regards to deductions that involve cars, planes and boats being donated. The value is calculated at the resale price when it was donated. Yet if it goes over $500 and then sold after being donated, the person who donated it is limited to only the amount of gross profits earned from the sale and cannot claim it as a tax deduction in that case.
The year that you are doing your taxes for is the only year you can use in order to claim a charitable tax reduction. Remember though that if you are using credit or writing a check for the donation, that it doesn't matter when they show up on your statement, but rather the original date. So now that you know what can and cannot qualify as a charitable tax deduction it's time to look into whether or not you qualify.

ONE FARM
Fifty years ago, this fall, I was ten years old selling pumpkins in front of my father's farmhouse, on route 130, in South Brunswick Township, in Middlesex County New Jersey. It was 1956 and the corn had not yet been cut. My father was a state trooper that received two weeks of vacation each year. One week of vacation in the spring he took off to plant the corn and then he would take one other week off in the fall to harvest it.
Those 30 acres of corn helped to pay the property taxes on the farm. Farm taxes had increased substantially because of a very large new housing development built on the western side of town called Kendall Park. Kendall Park was called the plywood jungle because the homes were all made of plywood. Was I ever shocked to discover that my first house in Whiting New Jersey in 1976 had only plywood corners. Back to the farm, the corn crop just about paid the property tax bill. The price for most farm commodities, including corn, has not increased much since that time.
RATABLE GROWTH AND TAX PRESSURE
Now, that new development called Kendall Park was really starting to put a big strain on the local school system and a new high school was going to have to be built. The town's mayor and council realized the town had not been revalued in many years and called for a revaluation of all property in town. Well the son of the owner of the revaluation company, who was running his first revaluation job for his father's revaluation company, made a mistake and valued my father's total 50 acre farm at its full housing developmental value. This value was based on other road front lots that had been sold off by local farmers. Even though my father's farm had minimal road frontage for a 50 acre farm he was assessed as if all 50 acres fronted on route 130. No downward adjustment had been made for the infrastructure costs associated with developing the property for a housing development tract.
After speaking with the local tax assessor that valuation mistake was corrected for my father and other farmers in the area. Between the soaring school taxes to build the new high school and a higher post revaluation assessment our farm's taxes skyrocketed upward. My father and his farmer friends were not happy with the resulting high annual property tax burdens they were facing. The annual corn crop would no longer pay the high annual property tax on our 50 acre farm. Now when the new high school opened its doors in 1961 many new teachers had to be hired and again the property tax bill on the farm increased substantially.
TRENTON RESPONDS TO FARMER'S TAX PROBLEM
About this time the local farmer's grange started to invite their local assemblymen and state senator from middlesex county to the local grange hall to have discussions about this property tax problem the farmers were having. Many of the farmers attending these grange meetings were gentle giants, they had meat claws for hands from years of hard farm labor, had skin like leather from years working under the hot sun, and were as strong as an ox. When a local legislator was buttonholed (they actually did stick their index finger in the button hole of their legislator's jacket) they stayed buttonholed. When the local legislators returned to Trenton they reported the anger over the property tax that they encountered there in South Brunswick Township at the local farmer's grange to their legislative leadership.
I suspect that this scene of legislators speaking with unhappy farmers was repeated many times throughout the state ... at many different venues. The reason farm property was given lower differential property taxation treatment quickly under the "Farmland Assessment Act of 1964," without the benefit of a constitutional amendment to satisfy the uniform valuation standard in the state's constitution, may have had something to do with the heat that local legislators were feeling from their farm constituents
NEW JERSEY'S UNIFORMITY STANDARD
The New Jersey Constitution states "Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed . . . shall be assessed according to the same standard of value, except as otherwise permitted herein . . .."
The phrase otherwise permitted herein now refers to two other constitutional provisions. One, authorizing: an agricultural or horticultural use value standard for qualified farms (adopted in 1966 as a constitutional amendment in New Jersey by the voters). And, a second one, a cost value standard used when abatement from taxation on buildings and structures is granted, in areas declared in need of rehabilitation, in accordance with statutory criteria
BACK ON THE FARM.
By 1966 my father had taken his state pension and was living on one half pay. The taxes on the farmhouse and the modest taxes under the farmland assessment act were now an even bigger burden on him. By 1973 my father could no longer afford the property taxes on the farm and he sold the farm to a large corporation. As was common in farmland sales contracts of the day "any and all rollback taxes owed on the farm" were paid by the buyer. Generally, the buyer paid less for a farm because three years of rollback taxes had to be paid. But I believe in the case of my father's farm sale that was three times the going price for comparable farmland that the buyer ate the rollback tax completely.
ROLLBACK TAX
In 1966 the statewide total property tax rate after adjusting it to a market value tax rate was about $3.00. Therefore the average buyer who paid three years of rollback taxes paid about 9% of the purchase price of the farmland sales price to the municipality wherein the farmland was located. In 2006, 40 years latter, the statewide market value tax rate is about $1.75. Therefore today, the buyer pays about 5.25% of the purchase price of the farmland sales price. That amounts to only 58.3% of the rollback tax that was paid 40 years ago in 1966. Could the lack of legislative interest in adjusting this rollback tax on home developers to the original year of the program have anything to do with the fact that one of the largest political contributors to both political parties in Trenton are the home developers?
GOVERNOR CORZINE
Recently, Governor Corzine said that property tax reform had to go forward notwithstanding the 600 pound gorilla special interests in Trenton. Well, easy for him to say with his personal wealth, he does not have to go to the home developers for political contributions to get re-elected. To adjust the rollback tax program to the standard used 40 years ago would entail changing it from a three year roll back period to a five year rollback period. Fat chance that will happen to help the muncipalities pay for the extra planning and zoning board work the new housing developments cost .. not to mention the new service demands they create leading to higher property tax costs.
THE REST OF THE STORY
On with the farm had to be sold story. The corporation that bought the farm, and a few other corporations who owned it afterwards, paid local farmers to continue to farm the property to keep it under the farmland assessment act. So, after my father's farm was sold in 1973, the land was banked by different corporations as an investment and latter sold to a housing developer. That housing developer started to break ground for his housing development in 2003 ... 30 years after the farm was sold by my father.
Many people traveling down route 130 over the years enjoyed the visual open space scene of the farm being farmed, sometimes hunters were permitted to hunt on it, over those thirty years no school children had to be educated who resided on that property, it required little if anything in the way of municipal or county services ... it was a cheap ratable for the local government as far as service demands were concerned. It was also a cheap taxpayer ... under the farmland assessment program the owners of the farm paid only about 10% of what other non farmland qualified farm property paid in property taxes in the early years and maybe as little as 1% in the latter years. Yes, some owners of vacant land did not sign up for the farmland assessment program because they could not meet its requirements or did not want to be subject to its three year rollback tax provision.
That is the story of one farm that had to be sold because of property taxes. The price received per acre for that 50 acre farm in 1973 is about the same price as a single home buyer now pays for a single home located on that farm.

Go on admit it, you’ve often contemplated what it would be like to keep most if not all of your paycheck instead of being fleeced by the Taxman. It doesn’t have to be just a daydream because there are many strategies and shelters for your hard earned money. Before you get sweaty palms and start looking over your shoulder to see if Big Brother was watching you read an article called Cheating the Taxman, understand it is only a figure of speech. I do NOT want you to cheat the Taxman. That is against the law and it is called Tax Evasion. What I’m talking about here is Tax Avoidance or Tax Deferment.
I know people who think that they are being better citizens by paying their full portion of their taxes. In my opinion this is both naïve and stupid. I’ve yet to meet anyone who has received a commendation from the government for sending them more than he or she had to. There are lots of tax shelters available to the public and our government put them there. It isn’t cheating the Taxman if you take advantage of a policy that was developed for your benefit. The wealthy in our country pay only what they’re required to pay and not a penny more. The poor or uninformed are constantly giving thousands of dollars in what amounts to be a donation to the Taxman.
If you have a home based business you can legitimately claim against your earnings from your regular job. By having a dedicated area for an office in your home you can claim a portion of the expenses that would go for such an office. This could include utilities, computer, internet, property taxes, mortgage or rent payments. If you use your vehicle you may be able to claim the portion of costs involved for your business. This could include loan or lease payments. By all means check with your accountant for all possible tax deductions.
Your children can also be useful in helping you hold on to your money. If you have the home-based business you can hire them as employees and claim against their wages. Obviously they have to be able to do work that is considered valuable to the business. You can also consider Registered Educational Savings Programs.
There are the good old stand-bys like Registered Retirement Savings Programs and contributing to a 401K to siphon off money before taxes. If you are an American citizen then you’ll want to check out the IRS Publication 502 for a full list of items that allow you to save on your taxes. These categories are designed for self-improvement and include things like prescribed weight-loss programs, stop-smoking classes, acupuncture, chiropractic care, therapy, braces, and eyeglasses just to name a few.

The first thing you want to do before seeking out the assistance of a tax preparer for your small business is to ask yourself why you need a tax preparer. In theory all of us are capable of preparing our own taxes. I said “in theory”. We hire professionals do it for us for one or more of these three reasons.
1. Their money saving strategy
2. Their accuracy despite complexity
3. Their speed
Before you go looking for a tax preparer, make sure that you have a good look at why you are considering one in the first place.
If speed is what you’re looking for go with a franchise
If speed is the main reason you want to hire a tax preparer to handle your small business taxes, you should probably go with a franchise. H&R Block, and Liberty Tax service get your return done so fast that it’ll make your head spin. Last time I was in there I noticed they even talk fast. The main problem with a franchise is their possible lack of professionalism or accuracy. As with most things, you get what you pay for.
One way to avoid inaccurate preparers is to, first get your return prepared well before deadline, and second ask if your preparer is a CPA, or has any advanced training in small business taxes under their belt.
If it’s a customized money saving strategy you want consider a CPA
Franchise employees typically don’t expect to see return business, so a long term money saving strategy for your small business isn’t one of their priorities. If a long term money saving strategy is your goal, and it should be, find a licensed professional. An enrolled agent or certified public accountant can spend a little more time looking at your everyday business practices and make suggestions that will certainly save you a bundle in the future.
Before you ‘umm’ and ‘aw’ your way out of hiring a professional, remember that they typically work freelance. This means there is no middleman involved in their fee. A private CPA typically charges little more than a franchise would for similar service. When you consider the long term tax savings of having a long term tax strategy tailored to your small business, a licensed professional in your corner is well worth the extra dough.
What if my small business tax returns are wildly complex?
With all the different health care options for employees and different types of billable services, even small business owners can face very complex tax situations. In this case a franchise is financial suicide, but you already knew that. The good news is that nearly every tax professional specializes in a particular field. Finding an accountant that can handle your particular field shouldn’t be too much of a problem.

Those small business owners, who like to save money, would do well to check out the small business tax deduction. This deduction is a way to lower the amount of tax you would have to pay. The way this is possible is through deducting some of the costs of running your small business. As long as these expenses fall in line with the Internal Revenue Service's Code 162 that states "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" then you are sure to be able to take advantage of the tax deduction.
A general list of some of these costs includes traveling, entertainment, rentals and allowances for employees. Yet the Internal Revenue Service is a bit more conservative in their allowance of what can be claimed, one important thing to remember is that these costs shouldn't be unreasonably large. This means you should be careful in how much things cost, and make sure the costs match the claim of what you say something costs and never claim personal expenses. Doing either of these things will disqualify you for the tax reduction.
Something else you may want to be careful about is not making any payments to relatives, no matter if it is warranted. It seems that the tax auditors from the Internal Revenue Service can be very picky when it comes to this matter.
There are a few things that can actually qualify you for the business tax reduction. These can include any costs regarding any vehicle. This claim can be figured out one of two ways, either standard mileage which is a formula written by the Internal Revenue Service or by the actual expense. Either way can be used to qualify you for the tax deduction. Besides gas you can also claim any depreciation or maintenance charges as part of the tax reduction.
Something else that can be claimed under the deduction is the cost of entertaining clients. This can only be claimed up to 50 percent but can include things such as tickets for games, concerts, a dinner or even having a barbecue at your house and any related costs. Make sure you keep excellent records though because everything will have to be verified in order to claim the tax rebate.
It is an interesting thing to know that you can also deduct current expenses for the current year as part of your small business tax deduction. These include your everyday costs to keep the business open such as rent, office supplies and electricity.
Now that you are an aware of just what you need to claim these deductions, you have a good place to start from. Make sure you keep very careful records in case of auditing. Other than that if you own your own small business, you are on your way to savings with the tax reduction.

One thing you can always count on is the standard tax deduction. This deduction is one almost everyone can take advantage of it is an amount that is taxable as a flat amount. Those who may not be able to take advantage of the tax reduction are those who may benefit more by an itemized tax deduction. Because of laws you can only do one or the other, not both. Those who go with itemized deductions can take advantage of medical expenses, charity and such while those who go with the reduction cannot.
Commonly the brackets for the standard tax deduction are updated every year, so the maximum advantage can be taken, that reflects current inflation. But the deduction that actually gets taken into consideration can vary with the filing status of each individual taxpayer. This means that the tax reduction can vary depending on if you are married filing single or jointly or as single head of household. It can vary by several thousand dollars, so you should take into consideration how you file very carefully if you are going to go with the standard tax deduction.
Those who are considered senior citizens, age 65 or older, have additional advantages when it comes to the reduction. For these individuals they are allowed a higher deduction. This higher deduction can also apply to those people who are legally blind. Yet another group of people who claim this higher deduction in the standard deduction are spouses of the blind or individual who is 65 or older.
One thing you should also consider in a tax rebate is if you are part of someone else claim to a deduction. If you are you cannot claim as high a deduction on your own reduction. Those who are students can claim scholarships and grants as part of their deduction under the heading of income.
The standard tax deduction is also not available to those whose spouse itemizes their deductions. It is also not something available to those who may file a tax return for a short tax year or to those who may be a non-resident or dual-status alien. The only exception is if the non-resident alien is married to a United States citizen.
Because the deduction is simpler and more straightforward it is something a lot of people choose to use. If you are someone who is itemized but can easily qualify you may want to take a second look at the standard reduction instead, it could be well worth it.

Being a student with a loan can be a huge hassle, but with the student loan interest deduction you can make it less of one. With the student loan interest deduction you can use it for up to $2,500 of the interest you might have paid on your loan and it's interest. One exception is with student loans that may be nullified, in that case you can completely exclude the total from your income.
When it comes to the interest reduction it has to be claimed on a loan that was to pay for qualified higher education programs only. On the other hand it can be one used for you, your spouse or your kids, meaning any dependents.
Claiming things such as fees, tuition, supplies, equipment, room and board and transportation can be done when claiming a loan interest reduction. It can be used for a college, university or even a vocational school. A couple other things to take into consideration when looking into the interest deduction is that the student must be at least a half-time student in a degree, certificate, or any other qualified program, as long as you are legally obligated to pay it back.
There are a few things you should realize though before claiming interest reduction that may effect whether or not you qualify. These include if another person can claim you as a dependent, you are married but file separately, for any reason you are not legally allowed to clear the loan or a relative took out the loan. All of these can mean you cannot qualify for the deduction.
Something else you may want to know before trying to qualify for the deduction is that there are some instances where costs may be incurred and have to be reduced. This occurs when there are non-taxable distributions from a Coverdell education savings account, or from a qualified tuition program, if there is interest from US Savings Bonds that are non-taxable, parts of scholarships and fellowships that are non-taxable, any kind of veterans education assistance and any non-taxable amounts (excluding gifts, bequests or inheritances). Make sure you check into any connection to any of these things before applying for a student loan interest deduction.
One last thing that should be considered is if you are paying on any loans after 2002, you have a different option in claiming payments for the reduction. This is because the "first 60 months" requirement on interest is no longer part of loan agreements after this date. This allows for deductions on voluntary interest payments, instead of only on required ones.
Having the option to save on student loans and the interest they incur, can greatly help a lot of families who want to give their children a better education and future. By taking advantage of the loan interest reduction they are allowing themselves the chance to do just that.

With all the options in tax deduction software it is hard to distinguish which ones are offering the best deals. A lot software is web-based, but there are still a few that can be loaded onto your personal computer. Let's take a look at a few the most common ones.
A few good software tools that are popular include Turbo Tax Premier and Complete Tax. These two are best for those who have complicated tax returns. For example those who run their own business, rent properties, or have invested in stocks or partnerships may find they have better luck with these two examples of tax deduction software. For further information regarding these two software programs you should know that both are web-based, but Turbo Tax also has a version for your personal computer. Turbo Tax also happens to be the best one for those who have rental income. For those who happen to be very active investors the best software is Complete Tax, which is compatible with Gainskeeper.
If you have a pretty easy tax return the best tax deduction software for your needs seems to be Tax Act. This includes those who have any interest from banks or dividends or mutual funds and also receive W-2's from a job. When use Tax Act as your software you can easily calculate your returns but also see any penalties you might incur. Tax Act online charges $7.95 for each return, including state and federal taxes. Another good tax deduction software that may be good for more straightforward needs is Snap Tax. Both of these can be e-filed.
Because of some unique situations in terms of filing taxes it is not possible to have a software program that can fully handle all situations. In these situations it is probably best to hire a professional. However Turbo Tax Premier is as close to ideal in these situations, even though you still have to rely on your own judgment some.
There are a few options as well when it comes to free software. The Internal Revenue Service has partnered with some software companies and created programs that are free or close to it for those who meet certain requirements. These include Complete Tax, Free File, Tax Act Online (one of the fastest ones), Tax Engine (which is actually available free to everyone with Federal returns) and H & R Block Free File for those whose gross incomes are $34,000 or less. Also Online Taxes can be used for free by anyone who makes less than $150,000 and therefore is more widely available to more people.
As you can see it can be hard finding the right tax deduction software. But with a little research and effort it can be fairly simple to find the right one to meet your specific needs. In the end using a software program can easily save you a lot of money if you know how.

The IRS has announced the availability of an additional postponement of filing and payment requirements to businesses in the Gulf Coast. The filing extension comes as part of the continuing effort to assist victims of Hurricane Katrina.
The Agency has decided to postpone the filing and payment deadlines for certain businesses to October 16, 2006, after meeting with tax practitioners and IRS employees located in the disaster areas.
Taxpayers located in the designated disaster areas will be eligible for the postponement. Businesses in seven Louisiana parishes and three Mississippi counties will automatically qualify. Taxpayers in other locations can obtain filing and payment postponements by self-identifying themselves to the IRS.
According to the IRS, the postponement applies to tax payments, including estimated tax payments, due on or after August 29, 2005, but before October 16, 2006. The failure to deposit pentalty will also be waived for taxpayers who are unable to make their deposits during the aforementioned time period.
The filing and payment postponement will apply to individula, corporation, partnership, estate, trust, S Corporation, generation-skipping, employment and certain excise tax returns with original or extended due dates that fall on or after August 29, 2005 and before October 16, 2006.
While the agency said that it can postpone the time to file the 2004 and 2005 returns until October, the law will not authorize it to grant additional interest and failure to pay penalty relief for the 2004 tax year.

If you decide to be environmentally conscience and buy a car with a gasoline engine and electric motor you should be able to take advantage of the vehicle tax deduction. You can also take advantage of the tax reduction if you have bought a car that runs purely on electricity. The first kind of car can get you a one-time tax deduction with a limit of $2,000, while the other can get you one with a limit of $4,000.
There are a few requirements to qualifying for a vehicle tax deduction though. One of these requirements is making sure your car runs on certain types of fuels. These fuels include natural gas, LNG, LPG, hydrogen or one that is at least 85% alcohol. In qualifying for a deduction you must also realize you cannot benefit the same as an electric car when you are using a hybrid to qualify.
In case your car happens to run on two types of fuel, you can still take advantage of the deduction. The way you can do this is by using whatever the cost is to convert your car into a clean-fuel car as your deduction. This cost is only allowed up to certain stated limits.
Of course there are a few other requirements when it comes to the deduction and taking advantage of it. One of these is making sure you bought your car brand new, not secondhand as well as making sure that it's primary use are within the United States. Also you must make sure the vehicle has at least four wheels and is for personal use only. Most important is if any of these requirements change within three years, any amount you may have saved with the tax deduction must be returned.
As far as donating and receiving a vehicle tax deduction there are certain requirements involved with this matter. The estimated value that you make on the car must be exactly what the current market value is and not a cent more. Your deduction in this case also depends on how the charity decides to use the car. The charity has to also be a recognized charity by the tax agencies. Also in cases where the charity sells it for a lesser price then the stated value, you will get the lesser amount on your deduction.
As you can see there are many advantages to be environmentally conscience and charitable. Both of these qualities can help you save money through a vehicle tax donation, and at the same time can help more than just you.

The introduction of a child care tax deduction is an incredibly pleasing idea to most parents' ears. The expense of raising a child can cost a lot. It can overwhelm most if not all of the other bills. Having to settle on a lesser day care because of the expense of it can be a disappointing and frustrating prospect. However, when you have the tax deduction, this can make the prospects a bit brighter.
Previous laws got updated in 2001 when Bush cut back taxes; this increased the tax deductions. Now parents are entitled to use the child care tax reduction and claim up to $1,000 per child. Being able to use this deduction can open up better options in day care for parents and their children.
The child care tax deduction is aimed mostly at helping out the middle class. The middle can fall in the gaps a lot when it comes to day care and this child tax deduction aims to correct this problem. Even with certain qualifying factors regarding income, the middle class can benefit from the child care tax reduction.
Of course to have your child qualify for the child care deduction you must meet the following requirements. First they must be claimed as a dependent on your taxes. They must be 16 or younger at the end of the year. They must also be a United States citizen, alien, or resident to qualify. They must also be related to you by birth, adoption, marriage, or as foster children. There are only two limits that may disqualify you from using the deduction. One if your income exceeds $75,000 for single or widow, $110,000 for married filing jointly or $55,000 married filing separately, you cannot use the deduction. If you do exceed any of these amounts you may still be able to apply for a tax deduction, but it must be calculated to reflect your income. Your tax liability can also affect your qualification as well.
Being able to use the child tax reduction to help in the daycare of your child can be worth more than you would think. Not only does it bring you peace of mind, being able to choose a day care that you are comfortable with, but it can also save you money in the long run. If you qualify, remember to apply for the child tax deduction, it's worth it.

If you own your business and you have children between the ages of seven and seventeen you could use child tax deduction laws to get the most out of employing your children. Yes, having your children work for you could actually save you money in your taxes! Do you want to know? Well keep reading.
A standard deduction for most kids is $4,570. Because of this, children are exempt from having to pay taxes on the first $4,570 they earn. Taking advantage of child tax reduction you can pay your child up to this amount and basically use it tax-free! Because the amount is deducted from your business, you just saved money.
In regards to being able to work at such a young age, the child can legally be hired by their parents starting at age seven, if the work is within their means to easily achieve. As long as the child is paid fairly, you can start taking advantage of this means of child tax deduction.
Another form of child tax rebate you can take advantage of is on social security taxes. If a child is a minor and a sole proprietor or partnership pays them, you don't have to pay social security taxes. This type of child tax deduction is an excellent benefit! As long as you do not pay them out of a corporation, you can easily take advantage of this tax deduction.
In order to take advantage of this child tax deduction you must fill out and send it a form 941 four times a year. One other thing you have to do take advantage of this is issue a W-2 at the end of the year. However, these seem like simple and of little consequence, in order to save money, do they not?
A few more things you need to do to take full advantage of the child tax reduction include carefully monitoring the amounts spent by your child from their wages and on what. One very important thing to know is that they don't exceed spending 49% of their wages on their expenses, after that and you will not longer be able to use them as an itemize deduction on your return.
This information is such a benefit, it's a surprise that more people don't know about child tax deductions and how to take advantage of them. By following a few simple steps and following some easy rules you can easily benefit from child tax rebate and save yourself a lot more money in the end.

Working from home or starting a business from home can be a huge task to undertake, but if you know how to take advantage of things such as the home-based enterprise tax deduction, it may be a worthwhile endeavor. There are many different ways to qualify under the provisions of the home business tax deduction. Let's take a look at a few.
First of all you can deduct your home office when applying for the tax deduction. The best way to do this is to include those things, which you use exclusively for your home business. There are only just a few things you can use to qualify that you used indirectly, and this requires careful record keeping on your part. However, being able to benefit the most from the home-based enterprise tax deduction may include a little work that in the end will reap many rewards.
Another option in home business tax deduction is your car. If you use it in any way to help your business or in any way that your business benefits from it can be used. The tax deduction allows for your actual costs, which include any operating and maintenance expenses, or you can use the IRS mileage rate, whichever benefits you best.
Another thing that can be used in the home business tax deduction is what is called personal assets. This includes computers or any telephone lines you may use. You must be able to apply the percentage of use that this includes.
Travel costs can also be included in a home-based business tax reduction. It can be applied either to you or any employee, client or partner in the business. This can include, tickets, hotels, transportation, shipping and even tips are included. However, any actual meals are only qualifying up to half the total amount.
One really nice thing that can also be included in a home business tax deduction is that up to 50% of any gifts you may purchase that are related to the business, such as to win a new client, can be included in calculating this deduction. This may include any expense on meals or tickets.
There seems to be quite a few advantages to running a business out of your home, especially when it comes to home biz tax reduction. As you can see, if you are careful and responsible, you can easily get the best deal when it comes to deductions and the benefits of home-based biz reduction.

2006 is a little more than half way over but we have already seen some major changes in the IRA rules. This article will summarize two of these changes and what they mean to you.
Income Limit for Roth IRA Conversion Repealed
Clients often ask me whether they should do a traditional IRA or a Roth IRA. Contributions to a traditional IRA are tax deductible while contributions to a Roth IRA are not. Traditional IRAs grow tax deferred (any money you take out is taxed as income) and you must start withdrawing money by April 1 of the year after the year you turn 70 ½. Roth IRAs grow tax free and money doesn’t have to be taken out during your lifetime. You are allowed to convert a traditional IRA to a Roth IRA (and pay taxes today on the amount you convert), and for many people this makes a lot of financial sense. However, under current laws, if you make over $100,000/year you cannot do a Roth conversion.
Effective in 2010, all taxpayers regardless of income will be able to convert to a Roth IRA. Furthermore, the tax due on conversions done in 2010 can be spread out over two years and paid out in 2011 and 2012.
Obviously, Congress realizes that Roth IRAs are a good thing and they want to make it as enticing as they can for you to do a conversion. Since this rule opens up the possibility of a Roth conversion to everyone, you should put a note on your calendar to have a discussion with your advisors on January 1, 2010 about whether a Roth conversion makes sense for you.
Company Sponsored Retirement Plans Can Now Be Rolled Into Inherited IRAs by Non-Spouse Beneficiaries
The Stretch IRA is a very powerful concept. Properly structured, your non-spouse beneficiary (your spouse can always just rollover your IRA into their own and treat it as theirs) can take small distributions each year, and pay taxes on them, and leave the balance or your IRA growing tax deferred for their lifetime. However, in the case of a non-spouse inheriting a company sponsored retirement plan (401k, 403b, TSA, etc) they usually have to take the money out over a short period of time and pay taxes on it, forfeiting a lifetime of tax deferred growth.
Effective in 2007, a non-spouse beneficiary (your kids, grandkids, cousins, etc) can roll over a company sponsored retirement plan into a properly titled inherited IRA. The new rules will now allow non-spouse beneficiaries the ability to stretch distributions, and taxes, out over their lifetime.
The new rules also allow company sponsored plans to be transferred into trusts that can stretch out distributions. In the case where you do not trust your beneficiaries to make smart choices with the money, a trust can be used.
There are a couple of key details with the new rules; The company has to allow the transfer, which it may not, and it must be a direct transfer to the inherited IRA.
This new rule means that if you want to leave money in a company sponsored plan after you retire it will not take any tax advantages away from your beneficiaries. Of course, there are still a number of other issues that might argue for rolling the company sponsored plan into an IRA----required minimum distribution simplicity, more investment options, less paperwork, etc.
Congress seems to understand the important roll IRAs play in retirement savings, and so far this year they have been very accommodating on making the rules easier and more attractive. This area of the law is constantly changing so stay tuned.
Matthew Tuttle, CFP®, MBA, is the author of “Financial Secrets of my Wealthy Grandparents”. For more information or to subscribe to his free newsletter, please visit his website at http://www.Matthewtuttle.com
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.