How to deduct Solo 401k contributions

How to deduct Solo 401k contributions

The answer depends on whether you offer to match your employees' retirement contributions. If you don't offer an employee match, you need to report your contributions to the solo 401(k) on the 1040, not the Schedule C. Report any amounts you put into the 401(k) on line 28 of form 1040, where it says "Self-employed SEP, SIMPLE, and qualified plans.

If you do offer your employees a 401(k) matching contribution, then report that information on the Schedule C, under the pension line 19, he says.

FICA needs to be paid on entire income-

SE taxes

Put on ScheduleC to avoid SE taxes

Dividends paid to S-Corp don't need to pay SE taxes. But can S-corp have Solo 401K?

 

Todo: tax sheltered businesses

Calculate amounts: http://www.sepiracalculator.com/

Tax Breaks for Landlords

Readers are advised to do their own research & consult tax advisors and not take suggestions from this blog:

Every year, millions of landlords pay more taxes on their rental income than they have to. Why? Because they fail to take advantage of all the tax deductions available for owners of rental property. Rental real estate provides more tax benefits than almost any other investment.
Often, these benefits make the difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of small residential rental property.

1. Interest:

         interest on mortgage & any improvements done on house. Example: interest on credit cards for goods or services used in a rental activity

2. Depreciation

Deduct cost of real estate through depreciation over several years.

3. Repairs

         The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

4. Local Travel

     
Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses.
If you drive a car, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have two options for deducting your vehicle expenses. You can:

• deduct your actual expenses (gasoline, upkeep, repairs), or
• use the standard mileage rate (51 cents per mile for 2011; up from 50 cents per mile in 2010). To qualify for the standard mileage rate, you must use the standard mileage method the first year you use a car for your business activity. Moreover, you can't use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle.

5. Long Distance Travel

If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.
However, IRS auditors closely scrutinize deductions for overnight travel -- and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.

6. Home Office

Provided they meet certain minimal requirements, landlords may deduct their home office expenses from their taxable income. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or apartment or are a renter.
For the ins and outs on taking the home office deduction, see Home Business Tax Deductions or Every Landlord's Tax Deduction Guide, both by Stephen Fishman (Nolo).

7. Employees and Independent Contractors

Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).

8. Casualty and Theft Losses

If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.

9. Insurance

You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers' compensation insurance.

10. Legal and Professional Services

Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.

Did You Know?

Did you know that:

• Landlords can greatly increase the depreciation deductions they receive the first few years they own rental property by using segmented depreciation.
• Careful planning can permit you to deduct, in a single year, the cost of improvements to rental property that you would otherwise have to deduct over 27.5 years.
• You can rent out a vacation home tax-free, in some cases.
• Most small landlords can deduct up to $25,000 in rental property losses each year.
• A special tax rule permits some landlords to deduct 100% of their rental property losses every year, no matter how much.
• People who rent property to their family or friends can lose virtually all of their tax deductions.

Tax bills in 2009 at lowest level since 1950

Tax bills in 2009 at lowest level since 1950
By Dennis Cauchon, USA TODAY

Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found.
Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.

Federal, state and local taxes — including income, property, sales and other taxes — consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress. The real problem is spending,counters Adam Brandon of FreedomWorks, which organizes Tea Party groups. "The money we borrow is going to be paid back through taxation in the future," he says.

Individual tax rates vary widely based on how much a taxpayer earns, where the person lives and other factors. On average, though, the tax rate paid by all Americans — rich and poor, combined — has fallen 26% since the recession began in 2007. That means a $3,400 annual tax savings for a household paying the average national rate and earning the average national household income of $102,000.

This tax drop has boosted consumer spending and the economy, which grew at a 3.2% annual rate in the first quarter. It also has contributed to the federal debt growing to $8.4 trillion.

Taxes paid have fallen much faster than income in this recession. Personal income fell 2% last year. Taxes paid dropped 23%. The BEA classifies Social Security taxes as insurance payments and excludes them from the tax calculation.

Why the tax bite has eased:

• Stimulus law. One-third of last year's $862 billion economic stimulus went for tax cuts. Biggest reduction: The Making Work Pay tax credit reduced income taxes $800 for married couples earning up to $150,000.

• Progressive tax rates. Presidents Clinton and Bush pushed through a series of tax changes — credits, lower rates, higher exemptions — that slashed income taxes for poor and middle-class families. A drop in income now can trigger big tax breaks and sharply lower rates, sometimes falling to zero.

• Sales tax. Consumers cut spending sharply in this downturn, thereby paying less in sales taxes.

A Gallup Poll last month found that 48% thought taxes were "too high" and 45% thought they were "about right." Those saying taxes are "too high" remain near a 50-year low.

The lower tax burden should last at least through 2010, says Roberton Williams of the Tax Policy Center, a think tank in Washington, D.C. "Virtually all the stimulus tax cuts expire at the end of the year," he says. "So the key decision is whether to extend them into 2011."

http://tinyurl.com/2cusaq4

Need to file last minute Extension?

Do it for Free! Turbotax online version offers quick and easy way to file Federal extension:
http://extension.intuit.com

Remember, it takes 24hours - 48 hours to know if your extension was submitted successfully to IRS or not :-(

What I did, was that I filed for extension & then mailed in my printed copy as well. Did not want to be too lazy.
Would let you know what the results were for both approaches .....

Taxes on Bonds

If I buy a bond in between the interest dates, the accrued interest from before I buy the bond will be included in My 1099-INT as taxable income. I can deduct the accrued interest from the 1099-INT amount on My tax return. If I have over $1,500 in interest income and need to file Schedule B, I would have one line that reports the full amount of the 1099-INT then the next line I would write down Accrued Interest and enter the amount of accrued interest as a negative to reduce the taxable amount of interest income. For example, I buy a company's bond that pays out interest once a year on January 1st. If I buy the bond in the middle of the year on July 1st and the company pays I $1,000 in interest on January 1st, I will receive a 1099-INT from the company for a full $1,000. Since I only owned the bond for half the time period the interest was accruing, only $500 of the bond interest would be taxable income on My tax return.

For tax filing purposes, look carefully at 1099-INT issued to you. Box 1 will show all interest, go to section where my broker describes accrued interest. Have a worksheet to deduct accrued interest from tolat interest.

On details of 1099INT, there are two entries from my broker:
1) Accrued interest on Sale of Bonds
2) Accrued interest on Purchase of Bonds

Question: Should I deduct both 1 & 2 above or just 2

http://www.costbasis.com/bondsnotes/discountpurchase.html

How to do free taxes:

 

I have found taxact software easiest to use. I download taxact & do taxes offline. I often print my returns & send it to IRS.

 

I found other free tax software available are:

H&R Block

Completetaxes

Turbotax

 

Use all tax info at your own risk. Author is not suggesting to use any of the services, but merely author is familiar with these services. Use these sites at your own risk.

 

 

 

Becoming Tax Preparer in Oregon

Tax Preparers prepare tax returns for individuals or small businesses. They may work in an office or established tax return firm. They do not have the background or responsibilities of an accredited accountant or Certified Public Accountant and they must work under the direction of a Tax Consultant or Certified Public Accountant.

Oregon.gov allows ; after finishing basic education requirement in tax laws (80 hrs) and continued education credit, tax preparer's license can be obtained and maintained.