TAXS Management

When an individual files their tax returns each year they are able to claim a number of tax deductions. Many times a tax deduction can reduce the amount of money that is owed to the Internal Revenue Service (IRS) or it can create a larger tax refund. The most commonly used tax deduction is the standard tax deduction; however, there are number of other tax deductions that many individuals fail to claim or even consider. Frequently overlooked tax deductions can prevent a taxpayer from getting additional money that they deserve.

Claiming a number of tax deductions often requires receipts or other documentation. For this reason there are many individuals who may be unable to claim some of these frequently overlooked tax deductions on this years tax return. To prevent yourself from losing even more money next year taxpayers are encouraged to spend the whole year preparing for tax season and tax deductions.

One of the most frequently overlooked tax deductions is that of medical expenses. To claim a medical expense deduction the medical expenses must be at least seven and half percent of a taxpayers income. While this may seem like a large amount of money there are some individuals who will definitely qualify for this tax deduction. Families with a large number of children often qualify for this deduction because the total cost of healthcare for multiple children is often high. Taxpayers who recently had a child or were diagnosed with a life threatening illness are likely to meet the deduction requirements due to do multiple checkups and hospital visits.

There are a number of taxpayers who carefully keep track of the amount of money or items that they donate to charities; however, the majority of taxpayers do not which makes charitable donations another frequently overlooked tax deduction. Individuals who donated money, clothing, or household items are able to claim a tax deduction as long as the charity is approved by the Internal Revenue Service (IRS). The majority of most well known charities are approved; however, individuals can obtain a full list by visiting the website of the Internal Revue Service (IRS) which can be found at http://www.irs.gov.

Unfortunately there are a number of taxpayers who will qualify for a natural disaster tax deduction. With the recently active 2005 hurricane season and the dreadful predictions of more to come it is likely that a large number of individuals will qualify for a natural disaster tax deduction. This deduction is used to make up for the amount of property damage that was not covered by homeowners insurance. To qualify for a natural disaster tax deduction the property loss must be at least ten percent of an taxpayers income. It is sad to say, but with the majority of tornadoes, hurricanes, and floods is it not uncommon for a home to be completely destroyed which would allow the tax deduction to be claimed.

With many businesses declaring bankruptcy or laying off their workers there is an increased number of individuals looking for a job. Another one of the most frequently overlooked tax deductions is that of expenses related to a job search. Many job seeker know how expensive looking for a new job can be. It is possible for job seekers to claim tax deductions on their phone expenses that are related to a job search. These phone expenses may include long distance telephone calls to set up an interview or even over the phone interviews. In addition to phone expenses job seekers can also claim the mileage of going to and from a job interview. Other job search deductions may include the cost of having a resume professionally prepared and the costs of mailing or faxing out that resume.

Additional frequently overlooked tax deductions include the amount of money spent on sales tax, tax preparation, gambling losses, property taxes, and more. The best way to become aware about the most frequently overlooked tax deductions is by using a tax software program to prepare your taxes or hiring the services of a professional tax preparer. These are great ways to become aware of commonly overlooked tax deductions and to determine if you qualify for them.

About The Author
Gray Rollins is a featured writer for http://www.taxhelpdirectory.com/.
To learn more about tax deductions, please visit, http://www.taxhelpdirectory.com/taxdeduction/.

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Employers should consider all implications before transferring any ownership interest in the business to employees. Sharing ownership with your employees can create numerous new problems. These problems stem from the new relationships you would have to maintain with the new co-owners. By transferring ownership to employees, you grant new rights to the employees beyond profit sharing. Owners have rights to examine all of the business transactions. As a corporate officer, you would become a fiduciary for these new owners. A fiduciary has a legal obligation to act primarily for the benefit of the other shareholders. This means that you could be sued for various acts such as shifting corporate opportunity or running certain expenses through the corporation. Even if no litigation resulted, the new co-ownership relationship could create added difficulties that would not otherwise exist.

On top of the problems that could arise, the transfer of ownership may not have the intended result. Some employees are motivated by ownership. Others are not. It is possible that some of the employees who acquire an ownership interest will not alter their performance. If you subsequently decide that sharing ownership is not a good idea, it could be difficult to buy back the issued shares.

There are a number of other incentives that could be used to motivate employees without transferring actual ownership. These include profit sharing plans and phantom stock plans.

Tax accountant John Huddleston has a law degree and masters in tax law from the University of Washington School of Law. He has been a guest tax expert on the radio. He advises small businesses in the Seattle Bellevue Kent Everett area on various tax issues. His firm, Huddleston tax accountants, also provides tax preparation service, quickbooks consulting and general accounting and bookkeeping service. Seattle Bellevue tax accountant John Huddleston is a frequent publisher of tax saving ideas.

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What can you expect from a financial adviser?
Instant Expert:
What is the difference between a tax deduction
and a tax offset?

Insights into Successful Investing –

Seek Advice — Part One

If senior executives, sports stars, politicians and entertainers all get expert help to manage their money, why shouldn’t you? There are many reasons why it makes sense to seek advice. Some are just common sense.

Expertise

In an increasingly specialised world there are an ever-increasing number of experts we call on to help us. If you listed the experts you consult every year it would probably include mechanics, accountants, doctors, dentists, pharmacists, optometrists, travel agents and gym instructors. Even sports stars rely on expert coaches to remain at the top of their game.

Why do we rely on these experts? Because they are trained to do certain tasks that we are not - book flights, fix teeth, devise a fitness program, fit contact lenses etc. That training means
that we can rely on them for advice and services that make our lives better and easier. It’s no different with managing our money.

Efficiency

Given time, a certain amount of natural talent and a lot of training, we could do a lot of things that we pay others to do. We could spend time researching nutrition, learning biomechanics and anatomy and devise our own exercise program. Or sweat over books till we knew enough of the latest tax laws and accounting legislation to do our own taxes. The reason we don’t is that it’s inefficient. It’s more cost effective - in time and money - for us to specialise in what we do best and use other experts when we need help.

Tiger Woods makes a lot of money from playing golf. Which is the best use of his time and energy? Learning international tax law or improving his putting? Researching investment products or practicing his bunker shots?

Insights into Successful Investing -
Seek Advice — Part Two

What do you get from your financial adviser?
So what are the most important services you get from a financial adviser?

A holistic approach

A financial adviser can help you take a holistic approach to your finances. They help you to understand your existing financial position, clarify what your goals are and devise a strategy to help you achieve them. Most importantly, they build a financial plan that is about YOU - your age, your plans, your investment experience, your risk tolerance and your lifestyle.

That means that all your financial decisions fit into a logical framework and that the products and services you choose work together to meet your needs.

Asset allocation

Asset allocation is the art and science of allocating your investment between shares, property, bonds, cash and other asset classes. Many different experts believe asset allocation is the single most important investment decision.

Your financial adviser can work with you to devise an asset allocation structure that suits you, helping you use the mix of growth and defensive assets that meet your needs. Ongoing
consultation with your adviser also helps you to stick with your asset allocation strategy in the face of short-term events, such as the tendency to become too defensive when markets are falling or too aggressive when they are rising.

Security selection

There are literally thousands of shares, managed funds, trusts, super and retirement income products to choose from. Which is best for you? Your financial adviser has access to the latest professionally-compiled research that allows them to compare these products against each other. That means they can choose the best products for you both in terms of performance, fees and in terms of quality of management and how they fit into your portfolio.

An education

One final and often misunderstood role of a financial adviser is to help you learn more about investing.

No-one will do it better because they are by your side as you make crucial life and investment decisions.

It makes sense to hire an expert and even more sense to learn from them.

Source: BT Financial Group - Extract from “Ten Investing Truths “

Instant Expert: the part when you can learn interesting things
and dazzle your guests at dinner parties
What is the difference between a tax deduction and a tax offset?

Tax deductions are items of expenditure or allowances that are deducted from an individual’s (or an entity, such as a company’s) assessable income, in order to determine the amount of income on which tax will be calculated (referred to as taxable income).

Deductions may include a range of general or specific deductions and will generally include expenses incurred in gaining or producing assessable income, or expenses necessarily
incurred in carrying on a business for the purposes of gaining or producing assessable income.

Examples of legitimate tax deductions include: rent paid to lease a business premise, interest paid on money borrowed for investment purposes, expenses incurred in repairing an
investment property, premiums paid for salary continuance insurance, contributions to superannuation made by an employer or a self-employed person (subject to age based limits),
donations to certain charities, approved agricultural investments and the like.

By way of example, let’s look at Jonathan’s financial position. His assessable income is made up of the following:

Salary $45,000

+Investment income $ 7,500

=Assessable income $52,500

Jonathan is able to claim a number of deductions including:

Work related expenses $ 2,200

+ Interest on investment loan $10,000

+ Donations to charity $ 1,500

=Total deductions $13,700

From this example, Jonathan’s taxable income will be $38,800.

Based on the 2005/06 tax scales, Jonathan will pay $7,500 in tax, plus the Medicare levy.

Turning now to tax offsets (or tax rebates as they are also commonly known). Where a deduction reduces the amount of income on which tax is calculated, a tax offset is deducted from the actual amount of tax payable.

Tax offsets may arise for a variety of reasons and include such things as a dependants offset, low income and senior Australians offsets, superannuation pension offset, medical expenses offset, mature age workers offset, and others.

If we take the example above and assume that Jonathan is over 55 years of age and qualifies for the mature age workers offset by being over 55, receives income from employment of less than $53,000, and lodges a tax return - he will qualify for a tax offset of $500.

So instead of Jonathan having to pay $7,500 in tax, the offset of $500 will reduce his tax payable to $7,000. (A tax rebate of $500 will be broadly equivalent to having a tax deduction of around $1000 for someone on the highest marginal rate of tax.)

Tax offsets are available for a multitude of purposes and can deliver significant savings to taxpayers where they qualify. It is very important to ensure you get reliable taxation advice to
ensure that you are receiving maximum entitlement to deductions as well as tax offsets that you may be entitled to.

Contact your Financial Planner for more details.

Source: Professional Investment Services

Coming up in a future issue:
How to be an Heroic Investor,
How you can enjoy the tax deductions of a Primary Producer,
Which Financial Planner was once a professional ballet dancer?
How you can legally pay 3% tax, without moving to a foreign country.

Disclaimer

The information contained herein is of a general nature only, does not take into account your particular objectives, financial situation or needs. Accordingly the information should not be used, relied upon or treated as a substitute for specific financial advice. Whilst all care has been taken
in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither BT, Professional Investment Services nor its employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information. Jeremy Britton is an Authorised Representative (#298825) of Professional Investment Services, ABN 11 074 608 558, AFSL 234951. Approval # H172.
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Jeremy Britton is an Authorised Representative of PIS Pty Ltd, AFSL 234951. He is an active Financial Planner and a lazy investor. Jeremy never checks his stocks in the newspaper and likes to relax around the Sunshine Coast. He can be contacted via http://www.invest.org.au or on 0410 INVEST.
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