PHOENIX, Sept. 5, 2001 (PRIMEZONE) -- September not only means back to school and full work schedules, but it's also the time to get business plans and taxes in line to avoid cramming and cringing at the end of the year. This year's economic slowdown doesn't necessarily have to affect taxpayers as adversely as they might think, provided they take a few steps to financial freedom and use loopholes in the tax laws to help them. Many tax tips are listed on www.legaltaxloopholes.com, but below are a few tips to do at this time of year, according to Tax Strategist Diane Kennedy, CPA, and author of "Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax."
Education
-- Educational IRA Consider putting aside up to $500 per year into an Educational IRA for your children's future education costs. The money grows tax-deferred. The allowable portion of the IRA does phase out as personal income rises.
-- Educational Expense for a Business Educational expenses making the owner more effective in his or her business (including anything from interpersonal behavioral training to accounting) are deductible.
-- Educational Assistance Plan for a Corporation Put an Educational Assistance Plan in place for your Corporation that will allow your Corporation to provide, tax free, more than $5,000 per year. The new 2001 Tax Plan has added graduate work as a covered expense under the Educational Assistance Plan.
Starting a Business?
"For those starting a business, that's the best. Good for you!" said Kennedy. "The sad truth is that there are very few legal tax deductions available for employees. But, as soon as you move into the business arena, it's a whole new set of rules," she added. Here's a few tax tips to get new business owners started:
Most Commonly Missed First-Time Deductions
The most commonly missed first-time deduction is for the items that are "contributed" by the owner into a business. This would include:
-- Legal and accounting costs to set up the business
-- Contributed furniture & equipment such as computer, software, fax, desk, table, cellular phone and file cabinets
-- Cost to investigate the business (includes travel, research expense, financial analysis)
-- Interest costs for financed items for the business
Back to Business
As the holiday season approaches, thoughts turn to ... promotion! Promotion is deductible. Plus, for those charitably inclined, they are limited by the individual's income. Even worse, if they have a Schedule C, Sole Proprietorship, the deductions don't reduce the amount of net profit subject to the onerous 15.3% self-employment. One tip is to look for a promotional aspect to charitable contributions to get a full deduction.
Most Avoided Legal Deduction
The most avoided expense is for a home office. The home office expense is back on again, after a hiatus due to a contrary Supreme Court ruling. But, it's legal again, and for some reason, many people still aren't taking this legal deduction.
To qualify for a home office deduction, the space must be:
(1) Exclusively business. There is allowed a small, "de minimus" personal use, but this can be risky. It's better to set aside a separate room and call it a business room.
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(2) Regularly used to conduct administrative or management for the trade or business
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(3) Regularly used to conduct client meetings.
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(4) A separate building structure.
Once qualified, business owners can take a pro-rata portion of their home expenses, such as home mortgage interest, property tax, mortgage insurance, insurance, utilities, janitorial and other home-related expenses.
Kennedy is the founder and owner of DKA, a leading tax strategy and accounting firm based in Phoenix, and is the co-owner of TaxCents(tm), a tax education company designed to encourage individuals to make informed tax-advantaged financial decisions. TaxCents(tm) provides do-it-yourself tools and education so all taxpayers can take advantage of the legal loopholes they are entitled to and decrease their taxes. At www.legaltaxloopholes.com, TaxCents offers books, tapes and seminars, and the latest in what's hot in tax loopholes.
Note to Editors: You are invited to Diane Kennedy's presentation at The NY Investment Expo at Sheraton NY Hotel (811 Seventh Ave.) Sept. 16, 4 p.m. Kennedy is available for in-person interviews Sat.-Tues, Sept. 15-18. Please call contact above to arrange.
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CONTACT: Klein Communications
Sherri Klein, APR
(203) 323-2600
sklein@kleincomm.com