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Small Business Tax Strategies

Q: My bank told me that it reports any cash deposits above $10,000 to the IRS. But that money doesn’t represent taxable income from a job or an investment; it’s nobody’s business but my own. Does the bank have to report that? J.H., Plymouth, Mass.

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Q: I own a rental home that I could sell for $100,000. Excluding land, I have depreciated $20,000. I know I have to recapture the $20,000 depreciation at 25 percent. Does it matter if I am in the 15 percent tax bracket? I.G., Louisville, Ky.

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Q: We’re interested in setting up an ESOP for a small corporation. Do we need a lawyer or CPA to handle the paperwork? W.S.B.

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Q: I hired a contractor to build a deck on our house for $15,000. We gave him $5,000 up-front for materials, etc. Now he’s skipped out and we can’t find him. Can I deduct the $5,000 deposit as a casualty loss deduction? R.S., Blawenburg, N.J.

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Q: I gave my daughter stock shares that I bought for $10,000. On the day I gave her the shares, they were worth about $12,000. Now, it’s jumped to about $16,000, and I’ve advised her to sell. Is her taxable gain the full $6,000? P.L.A., Santa Barbara, Calif.

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Starting June 27, if you set up a charitable remainder trust (CRT), you’ll need to jump through new IRS hoops.

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Before you know it, summer will be over and another school year will be under way. In our last special report, we focused on deducting your child’s education costs. But what if you are the one going back to school or enhancing your learning in conferences or seminars? As long as you make the tax grade, you can deduct the work-related education cost as a business expense. But it’s easy to flunk out when you file your return. Read on to learn the rules.

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Q: In a recent Mail Call answer, you said a person can deduct donations to some charities in Canada, Mexico and Israel. (5/30/05 issue) Do you have authority for that statement? M.L.

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Q: I’ve been working for a company that is rapidly losing money. I’ve heard through the grapevine that the owners haven’t paid the employment taxes for the past year. Could that cause me trouble personally with the IRS? E.L.C., Cleveland

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When payments are made in return for goods or services, that payment should be considered income to the recipient, not a gift.

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