Deducting Meals and Entertainment Without Getting Audited

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Some of the biggest business decisions and connections that business owners make are done over lunches or on the golf course. My business partner and I find that going to lunch is a great way to get out of the hustle and bustle of the office so we can clear our heads and discuss different things like management of office staff to specific tax issues there may be with different clients.  We often take potential clients out to eat to get to know them better and to see if they want to use us as their accountants.  This is great for us because one of the best ways we grow our business is through networking, and a good way to get into networks is to take people out on the golf course or out for a nice meal.

Using meals and entertainment to build business is very common to most business owners.  The important thing to remember is to keep accurate records, so as you are using different meals and entertainment to grow, expand, and maintain your business, you can also get tax deductions. The IRS has specific rules and specific things they want you to record in order to correctly document meals and entertainment so that they can be tax deductible. That is why keeping accurate records is so important.  The last thing you want is to be audited for a golf game.

To find out more about how to make your business meals and entertainment deductible, how to properly record these deductions and to learn more about other tax deductions you may qualify for, visit http://avoidbeingaudited.com.

Separating Business and Assets: Tax Savings and Liability Protection

It has recently become a popular liability protection strategy to divide your business assets by placing your business in one entity and your equipment and/or building in another entity.

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Let me illustrate this by using an example.  One of our clients owned an insect and pest control business.  They had been in business for many years—handed down from father to son.  The business had two locations in two different counties.  They put each location in a separate corporation. The buildings were placed in separate LLCs.  Their trucks and spray equipment were put in still another separate LLC. Doesn’t that seem a bit much?  Just think of all the bookkeeping and checking accounts and tax returns!

One day one of their employees made a mistake while mixing the chemicals and a little girl got sick.  She fully recovered, but the parents were angry and filed a lawsuit.  The company had a perfect reputation for many years and felt bad about the error and wanted to be fair and kind to this customer.

However, the parents had dollar signs in their eyes.  Long story short, because they had strategically placed their assets in separate places, the sue happy parents were only able to go after one corporation.  They received compensation for their daughter’s illness, but were not able to take everything and the company was able to recover—with extra precautions in place, of course.  The moral of the story is that separating your assets gives you the opportunity to do the right thing without loosing everything.

Separating your business and assets can not only be a liability protection but there can be some tax benefits as well. For example, if your building and business are in separate LLCs, you can use your businesses income to pay rent to your building LLC.  By doing this you can save on Social Security and Medicare because rental income is taxed differently than business income.

Visit http://avoidbeingaudited.com to learn about a 12 CD set that will teach how to utilize this tax strategy and separating your assets as well as many other tax saving secrets.

A Look at Cost Segregation and Tax Savings

This week we are going to tell you a little about one of the best kept secrets of the IRS.  It is called Cost Segregation.  Your first question is probably, “What is Cost Segregation?”

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Cost segregation relates to depreciation of commercial buildings.  Normally, a commercial building is depreciated over 39 years.  What cost segregation does is take the whole building and it breaks the building up into various parts that can be depreciated between 7 to 15 years. For example, the carpet and flooring in a commercial building wears out before 39 years, so we can depreciate it in much fewer years.  The benefit from this is you get a huge tax break.  Instead of taking a small deprecation deduction over 39 years you take a large deduction over 7 to 15 years.  There are parts of the building that will still be deprecated over 39 years, but you will get a much higher depreciation deduction the first 7 to 15 years.  You can start cost segregating your building even if you have owned for several years.

There is one potential drawback from cost segregation.  That is if you decide to the sale the commercial building, it can cause a taxable event in where you will have to recapture the deprecation from previous years as income. You can avoid this or at least prepare for it by making sure you are proactive in your tax planning and consulting with your accountant.

Here is an example of the savings of cost segregation. One of our clients bought a rather large commercial office building.  He put down a large down payment to purchase it.  Since the down payment on real estate is not tax deductible and since a commercial property is typically depreciated over 39 years, his tax deduction was rather small, and he had a large tax liability for that year.  We suggested doing a cost segregation.  What this entailed was hiring an engineer and grouping the cost of the various parts of the building together.  Then it was possible to depreciate the building over fewer years thereby being able to take a bigger deduction the first years of owning the building.  In the end, doing a cost segregation saved our client $20,000 in taxes.

For more information about how cost segregation might work for you and to learn more about other tax deductions you may qualify for, go to www.avoidbeingaudited.com

Deducting Your Medical Expenses for 2010

 

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Medical Expenses are one of the more difficult deductions for people to take when preparing their taxes.  The Medical Expense deduction is limited to the expense over 7 1/2 percent of your adjusted Gross Income. In other words, you have to have little to no insurance or be really sick to be able to claim medical deductions.  Because of this, people just assume that they don’t qualify to take the deduction.

However, often people aren’t aware of all the expenses that can be deductable under medical expense, and consequently miss valuable deductions and tax savings.  Some of the most commonly missed medical deductions are eyeglasses, dental, medical miles, and lab tests. You would be amazed at how quickly these add up.

At Soulence we have 37 years of experience preparing taxes, and we have had many experiences with clients where taking the time to add up medical expenses made a difference.  For example, one of our clients consistently owed taxes every single year.  Each year we would try to convince them to add up their medical expenses, and each year they were certain that they couldn’t possibly have spent enough.  One year they once again owed money at tax time.  We finally convinced them to try adding up their medical expenses.  We gave them a list of everything they could deduct and sent them on their way with assignments like getting the total amount paid for prescriptions from the pharmacy.

A few days later they came back amazed at how much they had spent in medical throughout the year.  In this particular case they saved about five hundred dollars in taxes just by taking some time to research what they had spent on their medical expenses.

The medical expense deduction is only one of the many overlooked tax deductions that people are missing out on.  There are so many more deductions that you can take—more than you realize.  And you don’t have to have a technical knowledge of the tax system.  There is a audio CD program that will teach you everything you need to know about saving thousands on your taxes.  To learn more about it, visit www.avoidbeingaudited.com.