Small Business Tax Strategies

Q: I expect to receive a settlement from a securities firm relating to my IRA investments. Can I transfer the funds back into my IRA? K.H., Montclair, N.J.

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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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