Small Business Tax Strategies

This refers to your recent article on vacation homes. (May SBTS) In Example 1, it’s my understanding under Pub. 527 that, if the taxpayer fails the 14 day/10 percent usage test, the rental portion of the applicable mortgage interest and taxes would still be deductible, even if there is a net loss. Is this true? P.W., via e-mail

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I recently invested in several bond funds. These funds pay out dividends before the end of the year. Are the dividends tax-free? C.W., Portland, Ore.

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In a recent item, you stated that the IRS is cracking down on home-based businesses. Yet, your publication often touts deductions for home offices. Does this still make sense? A.L.T., Baltimore

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I was audited for my 2003 return pertaining to self-employment tax. This was resolved in my favor. Now, the IRS is questioning the same aspect of my 2004 return. Don’t they have to drop this because of the prior result? E.L., via e-mail

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On May 5, officials from 19 states signed on to the Streamlined Sales
Tax Project (SSTP), a collective effort among 42 states and the
District of Columbia to impose sales taxes on remote sellers of
products and goods over the Internet.

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The IRS says it will stop collecting the federal excise tax on
long-distance telephone service and will refund excise taxes paid—plus
interest—since Feb. 28, 2003.

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We bought U.S. Savings Bonds for my
daughter when she was born, and she also received EE bonds as gifts.
Now that she is in her freshman year at college, we want to use the
bonds to pay for tuition. Should she cash in all the bonds this year?
Isn’t the interest tax-exempt if the money is used to pay for college?
A.R.S., Massachusetts

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The IRS doesn’t want you to be hooked in a phishing expedition: It’s
taking steps to scare away the anglers. The IRS has established an
electronic mailbox—phishing@irs.gov—for you to forward
suspicious-looking e-mail claiming to be from the agency. (IRS internal release 2006-49)

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As a small business owner, you generally can deduct 100 percent of your family’s medical insurance costs even if you’re self-employed. But you can do better tax wise by taking an unusual approach.

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Taxes may be the last thing on your mind when you’re bogged down in a messy legal battle. But errors in the way you draft a settlement agreement could mean thousands of dollars going to Uncle Sam instead of into your pocket.

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