Making Tax Time Less Taxing : Part Four--Take Your Deductions!

----------------------------------------------------------------------------------------

You may freely distribute and publish this article as long as the resource box at the end is included with complete and clickable links. You may not alter the contents in any way (except minor formatting to fit your publication). You may not sell this article.

Words : 903 (inc. resource and pub. box) Wrap : 60cpl

----------------------------------------------------------------------------------------

When filing your taxes, don't forget to take any credits, or deductions, you are entitled to. This sounds like a no-brainer, but tax law is constantly changing and there may be new credits or deductions that you qualify for. Alternatively, you may qualify for a credit that you were unable to take the previous year. This can happen if your income drops dramatically, due to a loss of employment or other situation. The Earned Income Credit, as an example, is available to everyone, regardless of their marital status, if their total income is below the Federal guideline.

Did you contribute to an IRA this year? The amount you can contribute to an IRA has been increased from $2000 to $3000 in recent years. You may be able to contribute even more in the form of "catch up" contributions depending on your age. IRA contributions are fully deductible, depending on your income. As long as you make your contribution on, or before April 15 you can choose which tax year it is for. But, you must tell your broker that you want it for 2003 tax year, or they will assume you want it for 2004!

The capital gains laws have been "simplified" again--making more work for you if you want to avoid paying the highest tax rate on capital gains from stocks and mutual funds. Any gain from an investment sold after May 6, 2003 qualifies for the new, lowered tax rates. How much lower depends on whether the gain is long-term or short-term. If you sold a block of stock that was acquired at various times, it is to your benefit to sort this out and get the lowest tax rate that you can--instead of paying the highest rate on the entire block. Your broker should be able to supply you with the dates you need.

Are you self-employed? Did you pay self-employment tax? You can deduct 50% of this tax on your Federal return. You will need to complete Schedule C to find out if you owe any self-employment tax. If you are self-employed you can contribute to a SEP plan, similar to an IRA. You may also be able to deduct the cost of your health insurance.

Did you overpay your estimated taxes, if any? Did you underpay? If you underpaid you will owe a penalty. To avoid this in the future, check your estimate before each quarterly reporting date and make payments or readjust it as necessary. Or, just make one estimated payment at the beginning of the year--check it quarterly to make sure you do not owe any tax. If you have a job in addition to your business, consider increasing the withholding on that check to lessen the possibility of having to make estimated payments. Unless you will owe more than $1000 in taxes at the end of the year you do not need to make estimated tax payments.

Did you have a business loss this year? Business losses are fully deductible on your Federal return. Also, you may be able to claim any "carryover" losses from the previous year. Be sure to claim all business expenses you are entitled to--especially if you have dedicated a portion of your home to your business. An accountant can tell you if you qualify for additional deductions for the use of your home in your business.

Are you a Direct Seller? Check IRS Publication 911 to see if you are--there are tax advantages to being a Direct Seller. If you are a Direct Seller be sure to fully account for all unsold inventory when calculating your costs of goods sold. You may be able to depreciate unsold inventory and certain office equipment, such as computers, if you are a Direct Seller. Again, check with your accountant.

Did you have very high medical expenses, or any other large financial expenses or losses? If you did, it may make sense to itemize deductions instead of just taking the standard deduction. Don't do this just to pick up a few bucks though, it takes a lot more time to itemize.

Did you donate money to a church, or other charitable organization? Did you donate clothes, or other goods? All of these are deductible on your Federal return.

Finally, have you checked the IRS website for updates on the latest tax law changes? You can search for, and download, any form or publication having to do with Federal Income taxes. The IRS website also has many free training resources to help owners of small businesses, go to www.irs.gov/smallbiz for more details.

--------------------------------------------------------------------------------------

John M. Hanevy is an affiliate of SFI, Strong Future International.

SFI markets many products for business and personal use : IAHBE memberships, wireless plans, multivitamins, Purjava coffee, and more! Become an affiliate free, no membership or start-up costs. Training, websites, support provided. Join SFI Today

-----------------------------------------------------------------------------------------