Tax Tips - Loopholes & Working Capital
This Month's Tax Tips & Loopholes Avoiding Capital Gains Taxes on Investment Property? Avoiding taxes on Investment Property can be done legally. It will take time, an Attorney and planning. Example: You want to sell your income property. The capital Gains will be around $491,000, you purchased the home for $89,000. Selling price is $580,000. You invested $35,000 in remodeling cost. Your bases is $124,000, your gain is $456,000 minus selling cost. Your tax liability will be approximately 20% (+ Based upon your income tax bracket) or $91,200. You may want to rethink your plan, unless you don't have a problem giving Uncle Sam $91,200. If you have a good Tax Professional, he/she will tell you about the 1031 Exchange - you will hire the appropriate Attorney and they will make it happen. BUT, what the Attorney may not explain to you is: If you sale the exchanged” property within 2 years IRS may come back and ask you for the capital gains tax on the rental property that you sold! Solution: Rent the “1031 Exchanged property for two years, then live in your Exchanged property for two to three years, then sale the property as your primary residence and have the gain excluded from capital gains taxes? (Talk to your Attorney) Or if you were really planning ahead, the Exchange Property is your dream retirement property! Congress votes on up to 100 or more new Tax Laws every year - lets hope this loophole does not come up! (Next Month's Tax Tips: Turning your Business Miles into a BIG Deduction - Standard Mileage rate for Business went down?)
Working Capital Turn Your Government Contracts into CASH Note: Congress added an amendment referring to Accounts Receivables in every Contract that has been awarded. (Assignment of Claims Act, (31 U.S.C. 3727) 1986 - This act states that a Government "Contractor or its assignee may assign its rights to receive payment due as a result of performance" to a Financing Institution..... - So Bid With Confidence - And remember that ALL Cost involved with turning your Contracts into Cash are Tax deductible.
What Employers Should Know About Withholding Lock-in Letters from IRS Under the new Withholding Compliance Program, the IRS no longer needs Form W-4, Employee’s Withholding Allowance Certificate, before issuing a “lock-in letter”. The Service is using information reported on Forms W-2, Wage and Tax Statement, to more effectively identify employees with withholding compliance problems. When serious underreporting is identified, the Service may issue a lock-in letter to the employer specifying the maximum number of withholding allowances permitted for the employee. Headliner #171 explains employers’ responsibilities in this process
Tips On Avoiding Audits The use of round numbers for deductions - $1,000 or $12,000, instead of $987 or $12,127 is an indication that you are estimating deductions rather then keeping good records. Article What is Factoring? Working Capital Without a Credit Check purple monkey; e-publication
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