Year-End Ideas for Tax Reduction
By Sandy Botkin
As a former legal specialist in the Office of Chief Council for the
Internal Revenue Service, I suggest that home-based business owners and
other small business entrepreneurs examine ways to reduce their 1996 tax
liabilities before the end of the calendar year.
The federal tax laws allow home based business owners to hire their
children and pay them a wage. Not only is the wage deductible, but the
first $4,000 that the kids earn in 1996 is tax free using the standard
deduction on their tax return. If you haven’t started using this
strategy, begin immediately.
And if you are already employing your kids, but haven’t reached the
$4,000 cap, give them a bonus before the end of the year.
Another benefit of employing your children who are under 18, is there is
no Social Security or Federal Employ ment tax on them.
A second strategy to execute before the end of the year is to pre-pay by
credit card as many business expenses as possible. These might include
postage, equipment maintenance contracts, supplies and various on-going
services. By using a credit card, you get the tax benefit this year but
won’t have to make the payment until probably February.
The same credit card strategy can be used for personal deductions, such
as charitable and religious donations. If you can, make donations for
the entire upcoming year. Do it before Dec. 31 of this year, and put it
on your credit card. That way you can deduct it on your 1996 taxes and
you’ll get a month or six weeks before the credit card payment comes
due.
Employers should make sure they set up their pension plans before
December 31. HBM
Sandy Botkin CPA, Esq., is the president of the Tax Reduction Institute
(TRI Seminars) of Germantown, Maryland. He provides continuing education
seminars for real estate professionals nationwide and is the author of
the acclaimed series, ''Tax Advantages for Home Based Business" and "How
To Sell More Real Estate Using Tax Knowledge" He is also the author of
the article, "How to Analyze a Good Network Marketing Opportunity". You
can order either of his nationally acclaimed tax systems by calling
602-874-1719. For questions on his seminars, booking a seminar or
getting a copy of his article on home-based business, call 301-972-3600.
Originally Published at http://www.homebusinessmag.com/
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