Small Business Tax Strategies

Q: You recently said that miscellaneous itemized deductions include gambling losses. (See 10/17/05 issue.) But isn’t that true only if the losses exceed the winnings? R.B.

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The IRS just launched a new online information service that can help you comply with the complex tax rules and regulations for private foundations. (IRS internal release 2005-121)

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Suppose you’re staring down the barrel of a big estimated-tax payment coming due this year. You can lower that payment and avoid a penalty. How? If you can’t bring Mohammed to the mountain, bring the mountain to Mohammed.

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For too many people, the tax season is a February-to-April affair. But trying to plan your tax strategies after Dec. 31 is as futile as a football team drawing up its game plan with two minutes left in the fourth quarter: You can’t do much to affect the score.

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If you’re the big cheese at your company, you can control your own tax destiny to a certain extent. For example, you can usually time year-end bonuses to your personal tax advantage.

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U.S. tax laws provide a variety of tax breaks for higher education expenses, but high-income people are usually shut out of these goodies. Example: Joint filers can’t claim the above-the-line deduction for tuition expenses if their adjusted gross income exceeds $160,000 ($80,000 if you are unmarried).

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Social Security taxes take a big bite out of your paycheck. That’s why it’s a huge relief to highly paid employees when autumn finally rolls around. Reason: Once they clear the Social Security wage base for the year, they won’t need to pay any more Social Security tax for the year.

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Question: My wife and I operate separate self-employed businesses. This year, I expect to show a big profit, so I plan on buying new machinery and tools before Jan. 1 that I can expense. My wife’s business is likely to show a loss. Will her loss reduce the amount I can claim under Section 179? If so, what can I do about it? — C.S., Rochester, N.Y.

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The new bankruptcy law that took effect Oct. 17, protects funds held in a qualified retirement plan from outside creditors. There’s no limit on the amount you can shield from creditors.

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Roth IRAs

by Small Business Tax Strategies on October 31, 2005 12:00am

in Small Business Tax

Although Roth IRAs have been around for a few years, some taxpayers are still spooked by this newfangled version of the traditional IRA. As you’ll see, 2005 may be an especially good year to look at different ways you can put money into a Roth IRA before year-end.

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