Your #1 source for tax reduction strategies.

In my South Loop Chicago Tax Preparation office, I often see clients looking for tax savings at years end. Although December 26th is cutting it close, your year-end tax planning doesn’t have to be hard. I have outlined below five strategies that will increase your tax deductions or reduce your taxable income so that Uncle Sam gets less of your 2018 cash.

1.) Prepaying your 2019 expenses right now reduces your taxes this year, without question. While it’s true you kicked the can down the road some, perhaps you have an offset with a big deduction planned for next year. And even if you don’t have such a plan at the moment, you have plenty of time to create one or to put more big deductions in place for 2019.

2.) The easiest year-end strategy of all is simply to stop billing your customers, clients, and patients. Once again, this kicks the can down the road some and makes your 2019 tax planning more important.

3.) Thanks to the new tax laws With 100 percent bonus depreciation and increased Section 179 expensing in 2018, you can make significant purchases of equipment, machinery, and furniture and write off 100 percent of the value. Make sure you place the assets in service on or before December 31, 2018, to get the deduction this year.

4.) Charges to your credit cards can create deductions on the day of the charge. This is absolutely true if you are a sole proprietor or you operate as a corporation and the credit card is in the name of the corporation. But if you operate as a corporation and the credit card is in your personal name, your corporation needs to reimburse you before December 31 to create the 2018 deduction at the corporate level.

5.) And finally, claim all your legitimate deductions. Don’t think you have too many, and don’t try to guess which of your too-many deductions could be a red flag. First, it’s unlikely you could have enough deductions to create a red flag. Second, no one knows what those red flags are. Third, if the deduction is legitimate, it doesn’t matter if the IRS audits it—you’ll win.

As you can see from the five strategies above, there’s much you can do to control your tax bite. Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Tax Topics, Self Employed, Small Business, Tax Deductions, Tax Reduction, Uncategorized, Vehicles

2018 Last-Minute Vehicle Purchases to Save on Taxes

December 17, 2018December 17, 2018 Howard Tax Prep LLC

At our Chicago tax preparation office, we work with a lot of Business owners in the South Loop of Chicago that need business tax preparation. As the year ends, many business owners are looking for tips for year end tax deductions, more commonly referred to as tax write- offs. For business owners looking for tax deductions, I have two questions: Two questions:

Do you need a replacement business car, SUV, van, or pickup truck?
Do you need tax deductions this year?

Here are some ideas for you to consider:

Buy a New or Used SUV, Crossover Vehicle, or Van with a GVWR Greater than 6,000 Pounds

Let’s say that on or before December 31, 2018, you or your corporation buys and places in service a new or used SUV or crossover vehicle that the manufacturer classifies as a truck and that has a gross vehicle weight rating (GVWR) of 6,001 pounds or more. This newly purchased vehicle gives you four big benefits:

Bonus depreciation of 100 percent (new, thanks to the TCJA)
Section 179 expensing of up to $25,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Buy a New or Used Pickup with a GVWR Greater than 6,000 Pounds

If you or your corporation buys and places in service a qualifying pickup truck (new or used) on or before December 31, 2018, then this newly purchased vehicle gives you four big benefits:

Bonus depreciation of 100 percent
Section 179 expensing of up to $1,000,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

To qualify for full Section 179 expensing, the pickup truck must have

a GVWR of more than 6,000 pounds, and
a cargo area (commonly called a “bed”) of at least six feet in interior length that is not easily accessible from the passenger compartment.

Short bed. If the pickup truck passes the more-than-6,000-pound-GVWR test but fails the bed-length test, tax law classifies it as an SUV. That’s not bad. It’s still eligible for expensing of up to the $25,000 SUV expensing limit plus 100 percent bonus depreciation. See Section 1 above for how this works.

Buy a New or Used Qualifying Cargo or Passenger Van with a GVWR Greater than 6,000 Pounds

A new or used cargo or passenger van bought and placed in service on or before December 31, 2018, can qualify for four big tax benefits:

Bonus depreciation of 100 percent
Section 179 expensing of up to $1,000,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Cargo van. To qualify for full Section 179 expensing, the cargo van must

have a GVWR of more than 6,000 pounds,
fully enclose the driver compartment and load-carrying area,
not have seating behind the driver’s seat, and
have no body section that protrudes more than 30 inches ahead of the leading edge of the windshield.

If the van passes the GVWR test but fails one of the other qualifying tests listed above, the law deems it an SUV.

Passenger van. If the van has a GVWR of greater than 6,000 pounds and seats more than nine people behind the driver’s seat, it is a tax law–defined passenger van, not an SUV, and it qualifies for full Section 179 expensing of up to $1,000,000 and 100 percent bonus depreciation.

Buy a Depreciation-Limited New or Used Car, SUV, Truck, or Van

If you or your corporation buys and places in service a new or used passenger vehicle such as a car (or a pickup, SUV, or van with a GVWR of 6,000 pounds or less) on or before December 31, 2018, then you or your corporation may claim up to $8,000 in bonus depreciation.

Tax reform increased the 2018 luxury passenger vehicle depreciation limits to

$10,000 for the first taxable year in the recovery period,
$16,000 for the second taxable year in the recovery period,
$9,600 for the third taxable year in the recovery period, and
$5,760 for each succeeding year in the taxable period.

Here’s how this works: Say you buy a car. You add the $8,000 in bonus depreciation to the $10,000 car limit, for a 2018 limit of $18,000. To get to this limit, you can use a combination of bonus depreciation and regular depreciation. You reduce the $18,000 limit by any personal use.

The vehicle tax rules can be confusing. Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Tax Topics, Tax Debt, Uncategorized

Get rid of Tax Debt Fast!

December 11, 2018May 15, 2019 Howard Tax Prep LLC

Author Trudy M Howard

Nothing can be more distressing than receiving a letter from the IRS. Having tax debt can cause stress, high blood pressure, sleepless nights, and it can also cause a break down in family relationships (we see this often in marriages). At Howard Tax Prep, in our Chicago South Loop tax office, we help clients resolve their IRS tax debts and State tax debt once and for all.

So what can you do you need to solve tax problems? Here are the Top 5 things that you can do when you owe the IRS, and have tax debt.

In plain English your options are:

Don’t over pay!
Ask for a settlement.
Ask for A payment plan.
Ask them to waive the Fees.
Tell them Don’t blame me!

In IRS Speak and complicated tax language, your options are:

1. Have a competent, and experienced tax consultant review your return for MISSED DEDUCTIONS! I once found $6,000 in missed deductions that put my client into a lower tax bracket, netting her a large tax refund of over $2,000! To be honest, I was actually shocked that I found such a large tax deduction, because the missed tax deduction was something that every good Chicago tax preparer should know! 101. In plain English: Don’t over pay!

2. IRS Offer in compromise. We’re sure that you’ve heard the commercials promising to “settle your tax debt for pennies on the dollar.” While every good tax debt consultant dislikes the phrase “pennies on the dollar” in some cases you can settle your tax debt with a low payment. We’ve seen cases such as: $150,000 tax debt settled for $4,000; $20,000 tax debt settled for $50; and $200,000 tax debt settled for $10,000! Not only can you possibly lower your tax debt, while the IRS considers your offer, you have a little more time raise money for your tax debt. In plain English: Ask for a tax settlement.

3. IRS Installment agreement. When most people receive a letter from the IRS the very first thing they do is think of ways to pay down their tax debt. The IRS offers 3 types of installment plans for tax debt. IRS tax debt installment plans, are basically agreements to pay what you owe on a continual basis, over a defined period of time. In plain English: Ask for a tax debt payment plan.

4. IRS Abatement of penalties. This can reduce or eliminate your penalties. In plain English: Waive the Fees.

5. IRS Innocent spouse relief. This can free you from liability if your spouse (or ex-spouse) is the reason for your tax problems. In plain English: Don’t blame me!

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

Self Employed, Small Business, Tax Reduction, Uncategorized

Lower Your Self Employment Taxes. Little known secret…

December 10, 2018 Howard Tax Prep LLC

Author Trudy M. Howard

Become A S-Corp To Save On Taxes

Howard Tax Prep often works with Chicago residents that have to pay self-employment taxes. Although we are a nationwide tax firm, because our office is located in the South Loop of Chicago, we attract more Chicago tax preparation clients.

If you’re a sole proprietor, a 1 member LLC (SMLLC), or a general partner in a business, you know that the 15.3 percent self-employment tax can eat up your profits in a hurry. For example, let’s assume you operate a sole proprietorship and you earn $100,000 of net income. You must report your income on Schedule C of your tax return, which creates a self-employment tax liability of $14,129.55 in ADDITION to your personal income tax! In order to lower self-employment taxes some self-employed Chicago residents have our firm apply their business for the IRS Subchapter S taxation status.

What Is an S Corporation?

The Subchapter S Corporation is a special IRS election that has to be requested during a very narrow 75-day window of time that begins on the day the business owner forms the corporation or LLC. Many of our self-employed Chicago tax clients choose to keep their legal entity as a corporation or a LLC, but have their taxable entity become an S corporation.

For federal tax purposes, your S corporation is a pass-through entity, meaning that the corporation’s income, deductions, and tax credit items are passed through to you, the shareholder, on a Schedule K-1. For some business owners, this is the best of both worlds: liability protection with personal taxation.

S Corporation Special Rules

To elect S corporation status, the LLC or corporation must be: To qualify for S corporation status, the corporation must meet the following requirements:

· Be a domestic corporation

· Have only allowable shareholders

· May be individuals, certain trusts, and estates and

· May not be partnerships, corporations or non-resident alien shareholders

· Have no more than 100 shareholders

· Have only one class of stock

· Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

Is Sub Chapter S A Good Fit For Your Business?

No matter how they make look the same, every tax situation is different. S Corporations are great for businesses that:

· Provide services (insurance agents, consultants, etc.);

· Do not have large start-up costs;

· Won’t be making any major equipment purchases before operations begin;

· Generate lots of revenue with minimal effort and expense.

S Corps are typically not recommended for holding real estate due to debt basis issues, transferring of real estate, and unfriendly tax treatment upon death.

If you want to know how much you can save on taxes by lowering your self-employment taxes, call our office today. Howard Tax Prep can provide you with tax reduction strategies for your business taxes, in addition to your personal tax return.

Learn More

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Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 1-855-743-5765 Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

Uncategorized, Vehicles

Business Mileage: Be aware of IRS assertions of Metropolitan Area.

November 30, 2018November 30, 2018 Howard Tax Prep LLC

The IRS has ruled that you “may deduct daily transportation expenses incurred in going between your residence and a temporary work location outside the metropolitan area where you live and normally work.”

In this favorable ruling, you find two possible impediments:

1. Temporary work location
2. Metropolitan area

Temporary Work Location

The “temporary work location” is a location where you realistically expect that the work at this location will, and does in fact, last for one year or less. The temporary work location rule applies both inside and outside your metropolitan area.

Metropolitan Area

In an audit of Edward Harris, a surveyor, the IRS disallowed 23,000 business miles because Harris was inside his metropolitan area when he drove from his home to work locations that required round trips of 100 to 162 miles. In this audit, the IRS considered the Los Angeles Metropolitan Area as Harris’s metropolitan area.

Harris took the IRS to court, where he lost. But Harris thought the court decision unfair; he appealed it, and the Ninth Circuit in an unpublished opinion overruled the lower court on the metropolitan area definition and remanded the case back to the Tax Court.

Result. Harris kept the 23,000 deductible business miles for his trips from his home that were outside his metropolitan area.

So, what is the radius of your metropolitan area for this rule? Fifty miles from your home may be a good rule of thumb because:

• IRC Section 162(h) defines 50 miles as the local area for state legislators.
• Reg. Section 5e.274-8(a) defines 50 miles as the local area for a member of Congress.
• The federal government defines “metropolitan area” for IRS personnel and other federal employees as a mileage radius of not greater than 50 miles within or outside the limits of the physical location of an IRS office. This is consistent with the regulations in 5 CFR 550.112(j) and 5 CFR 551.422(d), and it’s found in Internal Revenue Manual section 6.550.1.1.7—Time Spent Traveling (last revised: 12-10-2009).

How to Totally Eliminate the Metropolitan Area Problem

If you have an office in your home that qualifies as a principal place of business within the meaning of section 280A(c)(1)(A), you may deduct daily transportation expenses incurred in going between your home and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.

The principal office in the home creates:

• Business miles for trips from your home to your regular office
• Business trips to all temporary stops, whether inside or outside your metropolitan area—regardless of the distance

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Author Trudy M. Howard

Become A S-Corp To Save On Taxes

Learn More

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