Wednesday, March 21, 2007

Tax Tips

Here’s my number one tax tip of all time. Keep receipts. Keep records. I’ve prepared tax returns for several decades now. And of all the laws, all the regulations, all the angles and all the angles and dangles, this is the #1 biggest reason I’ve seen for JQ Public (that’s you) not to get all the breaks that you can get is lack of proper records. Come in and give us accountants the records and we can figure something out. But get records, please!

The biggest area where people fall short is keeping track of auto mileage. Last year’s rate for business was 44.5 cents per mile. This means that if you drive your car for just a little over 2 miles, you’ve racked up a whole dollar’s worth of deductions. This year the rate jumps up to 48.5 cents per mile. You can also deduct mileage (at lower rates) for charitable work, medical, and moving.

Do you have investments you want to unload? Is it because they are loosing money for you? Timing the losses can be important. If you are having a good year, then now might be the time to put those losses to use, offsetting your other income. There are passive activity loss rules. Basically, you need passive gains to offset your passive losses. Thinking strategically here can help.

If you are going to owe the IRS money at the end of the year, you need to be making payments in advance. Pay quarterly using form 1040-ES.

File returns even if you can’t afford to pay. Non-filing penalties and even late-filing penalties bump your tax bill way up. File the returns and then contact the IRS. You can even arrange an offer in compromise. If you just can’t pay, you can ask the IRS to look at your situation and forgive some of your tax bill. Of course, that means you will have to keep current with your taxes in the future.

Finally, here’s the best tax advice that I can give. Stay out of jail. That means don’t be afraid to go into some gray areas, just don’t cross the line. Don’t do things that are clearly wrong. Remember, pigs get fat; hogs get slaughtered.


For further info, here is a link to some tax tips straight from the IRS.