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The most overlooked tax deduction (part 1 of 4)

Years ago, the fellow who was running the IRS, told Kiplinger’s Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the tax deductions. With that, we are going to discuss the most-overlooked Tax Deductions for this series of shows. Cut your tax bill to the bone by claiming all the breaks you deserve. Including some you may have forgotten or never even knew about. Let’s take the first 4 on Most-Overlooked Tax Deductions.

1. State Sales Taxes
This write-off makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes or state and local sales taxes. For most citizens of income-tax states, the income-tax deduction is a better deal. If you purchased a vehicle, boat, airplane or even home-building materials, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn’t exceed the state’s general sales tax rate.

2. Reinvested Dividends
If, like most investors, you have mutual-fund dividends automatically invested in extra shares, you must remember that each reinvestment increases your “tax basis” in the fund. That, in turn, reduces the taxable capital gain when you redeem shares. Forgetting to include the reinvested dividends in your basis that which you subtract from the sale proceeds to pinpoint your gain, means overpaying your tax.

3. Out-of-Pocket Charitable Deductions
You can write off out-of-pocket costs incurred while doing good works. The money you spend on ingredients for casseroles you prepared for a soup kitchen, for example. Or on stamps you buy for your school’s fund-raiser counts as a charitable contribution. And also, if you drove your car for charity in 2010, remember to deduct 14 cents per mile.

4. Student- Loan Interest Paid By Parents
Generally, you can only deduct mortgage or student-loan interest if you are legally required to repay the debt. But if parents pay back a child’s student loan, the IRS treats it as though the money was given to the child, who then paid the debt. A child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student-loan interest paid by parents. And the child doesn’t have to itemize to use this money-saver.

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Today let us learn “how getting married affects your taxes”. When you get married, your tax situation changes, either for better or for worse, and there are decisions to make regarding how the two of you should file. Here are the most important things to know.

First, married at year-end means married for the whole year. Your marital status on December 31 determines yyour tax filing options for the entire year. If you’re married at year-end, you have only two choices: [1] file jointly with your new spouse, or; [2] use married filing separate status for a separate return based on your income and your deductions and credits. Most married couples file jointly. It’s because it is simpler. You have to file only one form 1040, and you don’t have to worry about figuring out which income, deduction and tax credit  items belong to which spouse. Other things being equal, simple is good. Besides, it’s often cheaper too. That’s because using married-filing-separate status makes you ineligible for some potentially valuable tax breaks, such as the child-care credit and the two higher-education credits. Therefore, filing two separate returns often results in a bigger combined tax bill than filing one joint return.

Second, if you file jointly, you’re on the hook for your spouse’s tax misdeeds. Despite the preceding advantages, filing jointly is not a no-brainer for one big reason. For any year that you file a joint return, you’re generally jointly and severally liable for any federal income tax underpayments and penalties, caused by your new spouse’s unintentional tax errors or omissions or deliberate tax misdeeds. Joint and several liability means the IRS can come after you for tax underpayments and penalties, if collecting from your spouse proves to be difficult or impossible. They can even come after you long after you’ve become divorced. However, if you can prove you didn’t know anything about your spouse’s tax failings, had no reason to know and did not personally benefit, then you can try to claim an exemption from the joint-and-several-liability rule under the so-called innocent spouse provisions. This is easier said than done.

(continued to How Getting Married Affects Your Taxes (part 2))

continued from (standard, or itemized tax deduction? (part 1)

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So if all those receipts you stashed last year, in the hopes of turning them into tax breaks add up to less than your standard deduction amount, throw them away. There’s no need to waste your time filling out extra forms. But individuals who spend a lot on medical care, mortgagae interest, state and local taxes, charitable contributions or a variety of miscellaneous items generally are better off itemizing. Even purchases might help out some fillers at tax time this year, thanks to the deduction for state sales tax paid. When all of this expenditures exceed the standard deduction, you’ll save on your taxes by filling out schedule “A” along with your 1040.

Now let’s see what itemizing ground rules mean. Last 2010, taxpayers who plan to itemize was not able to do it early; they’ll have to wait for the IRS to reprogram its computers to reflect the new tax law enacted in mid-December of 2010. When you do itemize, there are a few things to keep in mind. First, not every dollar you spend can be subtracted from your income. In the medical category, only expenses that exceed 7.5% of your adjusted groos income can be deducted. If you didn’t spend that much, then none of your costs are deductible. You have to reach a 2% of income threshold before you can use miscellaneous deductions, such as unreimbursed job expenses and invesment and tax-preparation costs. There also are restrictions on how much in casualty losses you can deduct, as well as limits on the deductibility of very large charitable contribution amounts.

Now let’s see how filing status affects figures. Filing status sometimes affects your deduction method and amount. Married couples who file separately, for example, must work together when it comes to deciding which deduction route to take. Even though each partner will fill out a separate return, if one spouse decides to itemize, the other must do so, too. Similarly, if someone claims you as an exemption on his tax return, the amount of the standard deduction you can take on your own return may be limited. Finally, your deduction decision isn’t a lifelong commitment. As long as you meet the other guidelines discussed above, you can claim the standard deduction one year and itemize the next. Again, use the deduction method that gives you the lowest tax bill.

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In this opportunity, let me help you decide between, “standard, or itemized tax deduction?”. Deductions reduce your taxable income. Less income means a smaller tax bill. What’s the best way to reach the smallest possible taxable income level? Is it should be with a standard or itemized deduction? Well, it depends on your personal circumstances.

The Internal Revenue Service (IRS) says most taxpayers use the standard deduction. The amount is different for each filing status and is higher for blind taxpayers and thse who are ages 65 or older. The amounts are also adjusted for inflation each year.

When can we say that standard deduction amounts has increased? Married couples who’ve been submitting joint returns for a while, will notice their standard deduction amount has jumped sustantially in recent filing years. They can thank inflation adjustments, as well as tax law changes in place through 2012, that are designed to help ease the marriage penalty. And some older and visually impaired taxpayers may be able to cut their tax bills with even larger standard deduction amounts by simply checking a couple of boxes on their tax returns. That means the standard deduction might now be appealing to even more taxpayers. Remember, you always want to use the deduction method that gives you the biggest tax advantage.

continue to standard, or itemized tax deduction? (part 2)

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The next step once you decide what kind of business you’ve got after you got a business plan is choose your accountant. After you choose the right accountant for your business, you need to know your employer identification number and get your federal tax identification number, tell the government that you are a part of the business. But if you are a single member with no employee, you’re not required to have federal identification number. Because they will look at you as the owner of the business, not as a legal separation.

The next thing you need to have is a licenses, certainly professional licenses. The next step is self-employment tax, which mean if your business is for yourself and you want the government pay the secure tax employment income. The next one is employment taxes. Bact to few years ago, when government set up taxes in 1913, they though that people is just gonna pay their taxes. So if you made a thousands dollars, then the government at that time thinks that you gonna sent them the 1% which mean your $10. But after a few of time, people were won’t doing this, so the government looking for a way to cure the situation. Then come this idea, make the employers responsible for what holding from the employee. So that you hold taxes from all of your workers, and then you send that money to the government. Then, the unemployment taxes is kind of a pert of employment taxes,  so if someone lose their job, they can use the employment benefits.

The next one is sales taxes. Actually, the sales taxes is also include the use taxes. You pay your sales taxes usually when you buy something. But, in case, for example you buy a computer on the internet, but they don’t take the sales taxes on youu, you supposed to npay the use taxes to the government where you use the computer you’ve bought. There’s the property taxes on the next step. The property taxes is create a property that really worth. And the last one is state taxes, which is the income taxes that we pay to the states. If you do business and other local activities, then you’ve got to pay the state taxes. If you make money on one state, you have to pay the taxes to that state.

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paying taxes for a business Paying taxes is not very fun, but it absolutely sensual if you gonna stay in business. Paying taxes is tipically that you’re gonna have an accountant, do that for you especially at start up situation. You have to find a good CPA, that you get along with and you could get advice from, and they gonna file your taxes for you. So, really focus on your financial of your business. Is less important early on, you wanna have good profile low statement about how she has forecast and places so you know what your of cash is gonna look like. You want your CPA gonna kind of looking down the road cause you don’t wanna have a path-hole, until the path-hole coming up and you gonna have a short cash, then you wanna know how the time so you can make plan for that. But in terms of creating the financial for your company to help run your business. And the other reports that the bigger you get, the important that becomes. But the excellent operation for your small company is just grow, it’s really about growing up the sales. And as you started to grow and got more sales, reporting is become a lot of more important.

Report is getting more important. And the report that we wanna see are really the road maps that gonna helps you guide your company. It’s telling you how you spinning your money and what sort of return you gaining your money. You can spin a dollar and get a dollar in return, or you can spin a dollar and get 5 dollars in return. But at least you got to have the system to measure how you spin your money and your result of how you spin that money. You really don’t know what kind of return you getting, i like to as the best return as possible in invest my money. So, your report is grow more important, but early it’s really about sales and you can outsource a lot of that account.

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So many people don’t understand anything about how the tax system works, how your taxes are figured, and so many times we just hands up to a CPA then they give you your tax returns. But you need to have an understanding, because when it comes to your investing, when it comes to your financial situation, you have to understand how your taxes works, or you were in a trouble. So, i wanna show you two things.

I’m gonna show you the tax bracket. That for whatever reason, america is not fair because we have the progressive tax system instead of everybody is paying the same thing in taxes. We all pay different based on how much money you make. You can agree with that, or disagree, i’ll give you as many reasons why that is unfair. Let see how does our tax system works. The tax code is a stair-step, as you earn more, you’ll pay progressively more tax.
Now i’m talking about a married couple, because if you’re single, the tax bracket is cut in about half. Now, gor the first sixteen thousand dollars worth the money as tax that at 10% and whe the tax code changes, there wasn’t a 10% tax bracket, this was created to get the tax code which they called the bush tax code pass. They created the 10% tax bracket so who knows if that’s will stay.

Then, the next fifty thousand, is taxed at about 15%. So you have tax more income from 16-68 thousand. The next step up is from dollars 68-137 thousand, you taxed at 25%. Now that’s what happen in the years of 2011, the tax bracket is a 3% step back. Now you may say that you underneath $ 250,000 bracket, that the president said that i’m not supposed to get hit by the tax increase. Well, i don’t know how they gonna classified this exactly, because it comes back next year.
The next step is from 137-208 thousand, then your tax right now is at 28% and it goes to 31% so i have nothing’s done at the end of this year. Next is from 208-373 thousand, your tax is at 33% on that money and soon to be 36%. So think about it, one-third of your money that you’re in there goes back to ‘uncle sam’. And finally, the 373 thousand dollars and above, is taxed at 35%. This is actually changing earlier because the health-care bill, the congress and the president  to the 39.6%. that’s the strategy right now.

Why do i show you all of that? Because it is very important when you come to your investing, your financial person would be telling you what affects these things have on your finances. Mutual funds are very poor invesment, because the mutual funds, if it’s helped outside the IRA accout, the all buying, selling, and turning that thing over, the avarege return point of the rate is over than a 100%. It’s meaning that their buying and selling inside that mutual funds. You think, by buying and holding, you just have your mutual funds. But they are buying and selling. Whatever people buying and sell things, there’s a tax consequences. What happened is that at the end of the year? You got this little 99 in the mail, which says you made money. And so that it falls in at these tax at this various bracket, whereever your last dollar are. Because whenever you comes to investing, you look at all of your income from the front part of your tax return. So,
whenyour all income is $ 100,000, you’ll get $ 11,400 deductions and $ $ 3,650 exemptions.

It’s how you look at your taxes. Don’t fall stray for prey to the idea of effective tax bracket. Cause the effective tax bracket is taking all of your income and then figuring out why you have pay all of the taxes. And most of you will see that it’s like 9-10% of your income. The problem is when it comes to your investing, anything that you do is always affecting the very last dollars. Any changes that you make for the good are changes that you make for the bad, and their gonna affect you on your last dollars. So when you come to your investing, you have to planned and designed what you trying to achieve. Look at your tax code and make it work for you.

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Did you know that one of the largest bail out programs ever introduced by congress is about to become available to people that earn $ 100,000 or more per year. Would you like to earn tax for income for the rest of your life? Of course you would. In 2005, the US congress pass the tax increase provention and reconciliation that. This program is going to let you converge yourself directed IRA into a tax free roth IRA. Now, in addition on this program, I gonna tell you where you can earn double digits returns on your roth IRA. This invesment is not tie to the wallstreet, and it has a risk level of the city or money market.

In the past, people like you that earn $ 100,000 or more per year coulsn’t even take advantage of the roth IRA program. But that’s all is about to change. Congresses decided to give you a one year opportunity to convert to a tax free roth IRA. Now you maybe wondering why convert? Well, the answer is simple, what’s better? Tax free income for the rest of your life, or income that’s gonna be taxed?? I don’t know how about you, but i have a feeling that we’re gonna see taxes grow up in the future and not down.

In speaking a taxes, did you realize when you retire and take money from your IRA, you’re gonna have to pay 20-40% in income taxes for every dollar that you take out. That’s mean if you need $ 60,000 a year to live on, you’re gonna have to take out $ 80-100 just to pay the taxes. Your kids are gonna hhave to pay 30-60% in inheritance tax if you past along your IRA. And when you hit 70, you’re gonna be required to take mandatory distribution bust in your income meaning you gonna have to pay even more taxes. That’s just away too much money to pay in taxes.
Earning tax for income is really important, but lets talk about the investment side. From the chart of the Dow’s industrial from 1997-2008 that we called ‘the lost decade’ for obvious reason. At the 1997, the Dow has about 8,200, he was on highest 13,000. And then came to crush on 2008, right back down 8,200. Now, this crush for most people about ten years behind their retiremen. And waiting for the market to come back may not work for you, it doesn’t for everybody. So you need to consider the alternatives to this high risk gamble that wallstreet offers.

The investment that we recommend has been paying annual double digit returns for over 17 years. Warren Buffett & Berkshire Hathaway has over 6 billion invested in this program if you trust Warren and listen what i’ve got to show you.  So, here’s the quote from the wallstreet journal on 2005 about the investment that we suggest, ‘the industry’s 16 years history of annual double digit returns of 10-15% first attracted europian and asian investor’. Then, see the quote from the wallstreet journal on 2009, it says ‘even before the current financial crisi, this investment was offering its clients low double digit returns. Those returns are now closer to mid-double digits returns’.  Now imagine combining the roth IRA program and the investment program together. The power of the roth IRA are the tax free growth, tax free income and the ability to pass it along heirs tax free. Combine that with the investment program that has contractual returns and
17 years history of annual double digit returns. Then you gonna have 1 power house of the program.

So, for quick recap, if you earn $ 100,000 or more, this is a once in a life time opportunity from the US government. Where in 2010, you have one year window, to convert yourself directed IRA, 403B, 401k, Sep IRA, 510 or pension plan into a tax free roth IRA. And by the way, you don’t have to pay the convertion taxes untill 2011 & 2012. You can combine that with the double digit investment, then this is 1 program that you can not afford to miss.

(continued from Tax Liens, Tax Deeds, and Tax Deed Overages)

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3.      Front running tax deed sales

Is also known as “grabbing the deed.” There are two ways to profit from this strategy. Work numerous tax deed sales in advance by seeking to contact current deed owners. Send out large numbers of letters asking owner to quit claim the deed over to you before the auction day. Perhaps, 1 in 100 will respond. Once you have the deed you are the new owner. You don’t have to bid for it, and you get it for taxes and fees owed. Or, you can let it go to auction and receive 100% of the overbid moneys in 30 to 60 days.

Front running will get you the deed for taxes and fees owed, with very litle cost, and in a short time frame.

 4.     Overages from a tax deed sale

Overages are what occurs after the tax deed sale. Overages are also known as excess funds. Working this strategy involve skip tracing skills to find former owners. These leads are usually cold and dead leads, with about 1 in 200 responding. If you’re lucky enough to find the owner and the power of attorney is given to you, you may get up to 50% of the refund. This is lucrative when it does occur, but it can cost you skip tacing and attorney fees.

Overages can also take too long, and can be very frustrating and time consuming to see a return of only 50% of the overbid excess funds, after skip tracing and attorney costs are incurred.

 Out of four strategies, only two that give you opportunity to own the deed. Those are front running and the tax deed sale. If your goal is to own the deed, front running and buying at a tax deed sale are the best strategies to focuson. Because, if you own the deed, you have collateral, and a poptential sale at a greater profit at a later date. Once the economy reboundsyour newly acquiredreal estate assets will also increase in value.

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The following tips will help you sharpen your skill and increase your earning power. There are many differing ways to turn a profit by investing in the USA property tax system, and four immediately come to mind. As a prospective investor, or as a new investor who would like to know more about the industry, the question that remains to be answered is “which is the best strategy?” well, all of them are good. However, there are advantages and limitations to each, let’s take a look.

1.      Tax liens sales

Tx liens sales are perfect for the institutional and cashed up investor as investing large sums of money are necessary to see a good return. You may get lucky and even get the deed, however, the limitations are that you rarely get the deed, as 97% are sold at a tax deed sale. And, you may have to wait up to two years to get paid. Also, you can not approach the owner in any way. This means you can not work front running as you are prohibited by law to approach the owner.

Tax lien investing takes too long to return a profit, and gives too little of a return on the investment, unless you’re investing large sums of money.

2.     Tax deed sales

It is a straightforward public bid auction. If you have done your research and due diligance, and are the highest bidder, you own the deed. Tax deeds are often picked up for taxes owed, and for under $ 1,000. Simple, straightforward and easy.

The tax deed sale will get you the deed for the highest bid, often for only the taxes and fees owed.

(continued to Tax Liens, Tax Deeds, and Tax Deed Overages (part 2))