PRESENTATION OUTLINE
RR Bradley & Associates PA Hong Kong
Here are 7 interesting (and fun) ways to save even more income taxes...
1. IRA Funding Trick
2. A Special Retirement Plan
3. Make Your Landlord Pay For Improvements
4. Deduct Home Entertainment Expenses
5. Deduct Holiday Gifts Without Receipts
6. Deduct Your Home Computer
7. Have Your Company Buy You Supper
1. Did you know you can use your previously funded IRA to fund the current year's deductible contributions?
Well, you can. If you don't have enough cash to make a deductible contribution to your IRA by April 15th, here is how you can still take the tax deduction. And have until June 12th to make the full 4,000 contribution! To get started, all you need is a previously started IRA.
You begin by having $4,800 distributed to you from your IRA on April 15th. Your bank is required to hold 20% (income tax withholding), so you'll actually receive $4,000. Once you have the $4,000, immediately deposit it back into your IRA. If you do this before April 15th, this counts as your deductible contribution for the year. The best part of this is that you have 59 days to "make up" the withdrawal-or to be taxed. Simply deposit $4,800 "rollback" into the same IRA account by June 12th to avoid taxes on the original $4,000 distribution made to you.
This is a type of short-term loan from your IRA to make this year's deductible contribution before the April 15th due date.
NOTE: Not all banks realize it is required to withhold the 20% from the original $4,800 withdrawn from your IRA. Call to find out which way we can help you work with this "extra" amount. There are many options, so get informed before you miss out on the full benefits of your retirement plan.
2. We have a special retirement plan for you if you are self-employed and involved in more than one business.
This is for you if you are self-employed and involved in multiple businesses, even with partners.
A new tax act has made a change allowing you to contribute to a self-employed retirement plan, on your own behalf, without requiring you to make contributions on behalf of your employees. The new act has repealed the so-called aggregation rules that previously applied to the self-employed retirement plans.
Under the old rules, if a self-employed person owned, or was a part owner of more than one business, and a retirement plan was provided for the employees in one business, law required that a retirement plan be provided for the employees of the other business(es). Beginning in 1997, this law removed this requirement!
If you own two businesses, the law allows you the option of establishing a retirement plan for only one business (with the fewest employees), even if you work by yourself in that business! The only limitation for this new law is that the amount of money you can contribute to a retirement plan is based on the self-employment earnings generated by the business with the retirement plan.
In other words, if the business you own with (no employees) has smaller net earnings than the other business (with employees), the amount you can contribute to a retirement plan will be based on the smaller net earnings.
While the rule change allows you to avoid contributing to a plan for your employees, it also means that you would be limited to making the smallest (rather than the largest) potential contributions to your personal retirement plan.
We want to make sure you are getting the most out of your financial future, so contact us to determine your eligibility and to optimize the plan for you.
3. You can have your landlord pay for leasehold improvements at your place of business.
Instead of paying for leasehold improvements at your place of business, you can ask your landlord to pay for them. In return, you offer to pay your landlord more in the rent over the term of the lease. By financing your leasehold improvements this way, both you and your landlord can save money on taxes.
Ordinarily, you must deduct the cost of leasehold improvements made to your place of business in an even fashion (over a 39-year period!). If the year your lease term ends you move to another location, you can deduct the portion of the improvement cost you have not previously deducted. This normal scenario won't save you tax in the earlier years of the lease. Your landlord will have to put up the initial cash for the improvements, but you will cover that over time with increased payments in your rent. Since your landlord will be paying for the improvements, you will save tax early in the lease and your landlord will benefit as well!
4. Save by deducting home entertainment expenses.
You may not be able to treat your employees to meals at expensive restaurants or offer them season tickets, but you should deduct expenses for entertaining clients at home.
There are two basic kinds of entertainment expenses. The first being direct entertainment expenses and the second is associated entertainment expenses.
