Small Business Tax Strategies

It’s not too often that we advise you to turn up your nose at a tax break. But if you’re selling real estate this year, you may want to pay more tax than required up-front. Why? Because you’ll end up ahead of the game in the end.

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Q: We’re a midsize company and plan to introduce a SIMPLE plan for our employees. But we’re close to the 100-employee maximum. Do we have to count part-timers even if they won’t be eligible for the SIMPLE plan? E.M., Corpus Christi, Texas

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Does your teenage child have a summer job? Even though the pay may be paltry, the job is a valuable life experience. Now, you can teach your child another lesson … about tax savings.

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Just before Congress ran home for August recess, it passed a major energy bill that includes a few tax breaks aimed at consumers, manufacturers and home builders. President Bush signed the bill on Aug. 8.

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Q: I retired earlier this year, but I’m starting a consulting business as a sole proprietor. In my line of work, I’ll need to use subcontractors. But won’t I be taxed in full on the 1099s that I receive from my customers? L.L., Pittsburgh

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Q: I’ve been a hands-on owner in a machine shop for the past 30 years. Because of the noise in the shop, I had to buy a hearing aid that cost me about $5,500. Can I deduct that as a business expense? R.M.A., Grand Rapids, Mich.

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Q: We just got married and are looking to buy a house. If we buy at the end of the year, we may not have enough expenses to itemize our deductions for 2005. Can we still deduct any points we might have to pay on a mortgage? J.V., Leesburg, Va.

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Q: I bought stock years ago in a company that recently merged into another company. The shares I received back are worth less than my original cost. Can I deduct that as a capital loss? J.S., Park City, Utah

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If you plan to use an increasingly popular estate-planning tool—a charitable remainder trust (CRT)—be aware that you’ll need to jump through some new hoops to preserve the trust’s tax benefits.

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So-called "donor-advised" funds have become immensely popular with wealthy charitable donors. But that tax strategy is now under the gun. The IRS is trying to ferret out which funds benefit donors themselves rather than fulfilling charitable intentions.

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