Small Business Tax Strategies

Do I need to file a tax return for my infant daughter if we have money and mutual funds in her name?

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Are you sitting on a potential small fortune in stocks or real estate? Or maybe you own a business interest that you’re planning to sell at a tidy sum. You’ll have to pay the tax piper one way or another through income tax, estate tax or gift tax … or some combination of all three.

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Despite some huffing and puffing last year, Congress made no major changes in the federal estate-tax law. For now, the law remains the same, but it still includes important changes for 2006.

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For the first time, U.S. businesses will be able to write off expenses
related to “qualified domestic production activities.” The so-called
“manufacturing deduction” (or Sect. 199 deduction) is available even to
many companies that wouldn’t normally consider themselves
“manufacturers,” maybe even yours.

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The first shot in Washington’s tax reform battle was fired earlier this month when the President’s Advisory Panel on Tax Reform issued its long-awaited list of tax-simplification suggestions.

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It’s no fun paying a hefty tax bill when you file your annual return. But Uncle Sam doesn’t want to wait that long for your cash. Estimated-tax rules say you must pay a certain amount of tax during the year. If you don’t, you run the risk of an underpayment penalty on top of your regular tax bill. Fortunately, you can stop the bleeding with some minor band-aids. Following is the who, what, where and when of estimated taxes … and how to avoid penalties.

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Q: I’m interested in the strategy you wrote about regarding collecting rent when you lease personal assets to your company. (See 10/17/05 issue.) If I rent assets to the company, am I then subject to Social Security tax on the net income? J.C.K., Hood River, Ore.

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The Social Security Administration (SSA) announced that the wage and self-employment income base for the Social Security tax will rise next year.

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Estimated-tax penalties are equivalent to the interest you’d pay on tax underpayments.

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The IRS just updated its per-diem rates for business travelers. After inching up by just a few dollars the past few years, the new rates reflect double-digit increases for both "high" and "low" areas. (IRS revenue procedure 2005-67)

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