Category Archive for "Tax Tips"

Wondering about how tax deductions are handled for your new Start Up?

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The most important thing to understand is that most expenses incurred before a business begins functioning cannot be deducted or amortized until the year when the business does become active. Start-Up Costs Include Amounts Paid for the Following: An analysis…

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More Lessons From Tax Court: Capital Losses

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While capital gains receive favorable tax treatment, capital losses can only be used to offset capital gains of up to $3,000 of ordinary income each year. (Losses can be carried forward indefinitely.) Ordinary losses, such as from selling business property…

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Tax Tips: Make your hobby a Business-Carefully!

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Many people dream of making money pursuing a favorite hobby. By starting a sideline business, you could be eligible for a treasure chest of tax deductions. If you follow certain rules, you can deduct the expenses related to your venture,…

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Case Study: Can You Deduct Loans Gone Bad?

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The IRS is always skeptical when individual taxpayers claim deductions for bad debt losses. Why? Losses from purported loan transactions often fail to meet the tax-law requirements for bad debt loss deductions. For example, a taxpayer might try to write…

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Lessons from Tax Court: Bad Records, Bad Outcomes

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Federal tax law allows deductions for many items, such as legitimate business expenses and charitable donations. But, if you claim deductions on your tax return, you also must maintain adequate records to support them. If your tax return is audited,…

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Can MBA Costs Be Deductible?

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As an employee or self-employed individual, can you deduct the cost of getting a Masters in Business Administration (MBA) degree? Good question. The answer usually depends on whether the degree maintains or improves skills needed in your current business or…

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Lesson from Tax Court: Don’t Trap Yourself!

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Are you considering buying or selling a business? The IRS is often interested in the details of these transactions and by scrutinizing them, may find that sellers aren’t reporting all income. If you’re selling, make sure your books are in…

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How C Corporations Can Pass the Reasonable Compensation Test

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More Lessons from Tax Court: When a C corporation’s shareholder-employees are given generous salaries and benefits, the corporation should be prepared to fight IRS claims that some of the compensation payments are actually disguised dividends, which were paid according to…

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Lessons from Tax Court: Brothers Should Have Filed a Partnership Tax Return

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For federal income tax purposes, an unincorporated joint venture (or other arrangement under which several participants conduct a business or investment activity and split the income and expenses) is generally treated as a partnership. This general rule applies even if…

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IRS Rules for Deducting Home Mortgage Interest

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Unlike most other types of personal interest, home mortgage interest that meets the definition of “qualified residence interest” can be claimed as an itemized deduction on your federal income tax return. Here’s a closer look at the terminology underlying this…

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