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9 tips for filing your 2003 business return

by on
in Employee Benefits Program,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

1. Self-employed? Deduct full health premium

Finally, self-employed people can write off 100 percent of their health insurance premiums (up from 70 percent in 2002). Note: You can reap significant additional tax savings by making your spouse an employee of your sole proprietorship or single-member LLC and setting up a medical expense reimbursement plan. That strategy could let you deduct all your family's health costs (including uninsured expenses) on Schedule C, plus it could lower your self-employment tax bill.

2. Know your NOLs

If your business generated a net operating loss (NOL) in a tax year that ended in 2003, you can carry back the NOL to only the preceding two tax years. Under a temporary rule that's now expired, NOLs generated in tax years ending in 2001 and 2002 could be carried back five years.

3. Deduct maximum business miles

You can deduct 36 cents per mile for business-related driving in 2003, down from 36.5 cents for 2002. To take advantage of this simple method, you must not have claimed accelerated depreciation on the same vehicle in any earlier tax return. (For 2004, the business mileage allowance jumps to 37.5 cents.)

4. Earn huge write-off for 'heavy' vehicles

Don't overlook this oversized write-off: If you bought a new or used "heavy" SUV, pickup or van in 2003 and used it more than 50 percent for business, you can deduct up to $100,000 of the cost under the newly expanded Section 179 deduction. "Heavy" means a gross vehicle weight rating above 6,000 pounds. To read a list of vehicles that qualify, visit www.taxpayer.net/TCS/whitepapers/SUVtaxbreak.htm.

5. Gain top depreciation for other vehicles

Giant vehicles earn giant write-offs in 2003. (See tip 4.) For other business vehicles put into service in 2003, the top first-year depreciation allowances are as follows: pre-owned auto: $3,060; pre-owned light truck or van: $3,360; new auto acquired before May 6, 2003: $7,660; new auto acquired after May 5, 2003: $10,710; new light truck or van acquired before May 6, 2003: $7,960; and new light truck or van acquired after May 5, 2003: $11,010.

6. Offer tax preparation as an employee perk

More businesses are adding completely subsidized (or cut-rate) income-tax preparation to their lineup of employee benefits. Strike a deal with a local, reputable accountant to handle your workers' returns.

7. Night owls: Tap the IRS for help

The IRS taxpayer assistance hotline, (800) 829-1040, is staffed 24 hours a day during tax season. Even better, call the new hotline for business owners, (800) 829-4933. If you want forms sent to your fax, call (703) 368-9694 from your fax machine. Finally, the IRS has merged all individual filing-related info on its site, www.irs.gov, to a 1040 Central section.

8. Know what year it is

If you use the Internet to piece together your 2003 return, make sure you're reading information and downloading forms that relate to the 2003 tax year. The IRS site, www.irs.gov, and other tax-based sites also post forms, publications and advice from previous years, plus guidance for the 2004 tax year.

9. Don't draw extra attention to your return

If you mail your return, arrange your forms and schedules based on the attachment sequence number in the upper right-hand corner (not by the form number itself). If a form has no sequence number, put it last. Also, make sure you use enough postage. Nearly 2 million people a year send returns with insufficient postage. To check where to send your return, visit www.irs.gov/file.

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