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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 (April 17th in 2018), here is how you can still take the tax deduction for that tax year. To get started, all you need is an existing IRA.
Begin by having $6,000 distributed to you from your IRA. Once you have the $6,000, 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 60 days to "make up" the $6,000 withdrawal (and avoid penalties and taxes). To do this, simply deposit a $6,000 "rollback" into the same IRA account by June 14th to avoid taxes and penalties on the original $6,000 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; however, you can only do this once in a 12-month period. If you don't replace the money within 60 days, you may owe income tax and a 10 percent withdrawal penalty if you're under the age of 59 1/2.
As a self-employed small business owner, there are several retirement plan options available to you, but understanding which option is most advantageous to you can be confusing. The "best" option for you may depend on whether you have employees and how much you want to save each year.
There are four basic types of plans:
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.
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 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 over a 39-year period (similar to that of depreciating real estate); however, up to $250,000 in qualified leasehold (as well as restaurant and retail) improvements can be expensed using the Section 179 deduction (subject to certain rules), thanks to the passage of the PATH (Protection of Americans Against Tax Hikes) Act.
In addition, the 15-year recovery period for leasehold, retail, and restaurant improvements was made permanent by the PATH Act as well.
During the same time, your landlord will gain depreciation deductions for the cost of the leasehold improvements. When you leave, your landlord will still have the improved property to offer other future tenants. It is a great opportunity for a win-win situation giving you faster access to invested monies.
If you entertain at home for the purpose of business, and if a business discussion takes place during the entertainment, then the cost of entertaining at your home is a deductible expense. In general, you can deduct only 50 percent of your business-related entertainment expenses, but there are some exceptions. If you have any questions, please don't hesitate to call.
When you prepare your income tax return, don't overlook the deductible benefit of business gifts during the holidays or at any other time of the year. Whether you are a rank-and-file employee, a self-employed individual, or even a shareholder-employee in your own corporation, you can deduct the cost of gifts made to clients and other business associates as a business expense. The law limits your maximum deduction to $25 in value for each recipient for which the gift was purchased with cash.
If you purchased a computer and use it for work-related purposes, you may be able to deduct the cost as long as you meet certain requirements: your computer must be used for convenience and as a condition of your employment, for instance, if you telecommute two days a week and work in the office the other three days.
If you are self-employed, another deduction you can take advantage of even if you don't claim the home office deduction, is the Section 179 expense election, which allows you to write off new equipment in the year it was purchased as long as it is used for business more than 50 percent of the time (subject to certain rules).
If you are in a partnership or a shareholder-employee in a regular C or S corporation, and you have to work overtime, your company can, on occasion, provide you with meal money for dinner. The cost of this "fringe benefit" is 100 percent deductible for your company under Section 132 of the Internal Revenue Code and you don't have to pay personal income tax on the value of the meal.
Your company can pay directly for the meal or can instead, provide you with dinner money. But, in order for this to work, the amount of money you receive for your meal must be reasonable. If the IRS decides that the amount of money you received from your employer was unreasonable, the entire amount will be considered taxable personal income and will not be deductible.
We will be glad to answer your questions concerning deductible meals related to overtime and any other questions you might have about the Section 132 "de minimis" fringe benefit.