Your Standard methods of paying taxes - Tax Impounds

Tax impounds have become the standard method for homeowners to pay their property taxes. Most banks prefer that you pay your taxes with your mortgage payment. Almost every mortgage company will actually charge you if you do not want to pay your property taxes with your mortgage. There is a higher risk for the mortgage company if you pay your own property taxes.

So what happens when you send your property tax payment in every month? Generally taxes are due once or twice a year. An escrow account is created to hold your property tax payments each month until they are due. This account does not make interest for the bank, it is simply a non interest bearing holding account. When the taxes become due the bank or the loan servicing company will pay them for you.

What happens when you refinance? A refi is a bit more complicated. You will be required to pay your taxes that are coming due within generally 90 days from the day your new loan funds. You will be returned any money that was in the escrow or impound account from your previous loan. This will create the need to start a new property tax impound account. The new account will accrue so that there is enough to pay your property taxes when they become due at the next annual or semi-annual payment date. You may need to provide a couple of months to start the new impound account moving forward, but you are being returned roughly the same amount from your old escrow account.

In summary, when you refi you will start a new escrow account. That account will need about the same amount to start as the amount that is in your current property tax escrow account. It is essentially just moving the money around. If you choose not to escrow your taxes you will be charged by the bank, although they generally will not even mention that to you. It is almost a given that homeowners will escrow both the property taxes and the homeowner's insurance into their mortgage payment.
Source:  http://www.articlesbase.com/taxes-articles/tax-impounds-yes-or-no-512164.html

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Typical examples of Texas Sales tax system

Anyone living in Texas will have to acquaint himself with the Texas sales tax system. If you are a new migrant to this state and think that you already have enough knowledge about the sales tax system in other states, you are wrong. Texas has its unique requirements in a number of areas and, if you take chances, you might end up with costly or inconvenient tax mistakes.

 Like many other states, Texas runs its own tax rules. Its sales tax is a combination of the basic sales tax, and the use tax plus other government levies. That puts the sales tax for Texas at around 8.25%.

 There are also exemptions to the sales taxes in Texas. These include medications, bakeries, meats and some other food items.

 If you purchase an item in other states and bring it to Texas, you will still need to pay a so called use tax. This is a unique stipulation, as other states do not tax you from items purchased outsider. So, if you now live in Texas, you should always remember to pay the use tax. Otherwise, you will be fined heavily.


Certain products can be exempted from the use tax. Typical examples include those that are used during the filming of movies or shows. Film cameras and some of their accompanying parts may not be taxed. In the mean time, however, a great many other objects and items that are part of a motion picture production may be taxed. This can include anything from props, tools, tables, chairs and cars.

 To many people, the sales tax system in Texas does appear baffling. It can take you a lot of time figuring out the rules. When you do figure them out, there is a chance that you could have interpreted them incorrectly. You can help avoid a sales tax mess by not doing things on your own. As in any state, there are tax experts in Texas that you can consult or hire for a fee. With the paid option, you can either get someone to answer your tax questions or let him do the whole work for you.

 If you choose not to retain the regular service of a tax expert, you will have to continually look out for yourself. This can be tricky because sales tax laws can vary over the time. Usually, notices will be sent or posted when a change occurs., and you should pay close attention and not to miss any sales tax change announcement.

 Like many other tax policies, Texas sales tax may seem tricky. It is however your duty to learn about and keep track of them. It could be costly for you if you make errors in sales tax computations.
Source:  http://www.articlesbase.com/taxes-articles/texas-sales-tax-facts-373574.html

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Get Best Tax Help and release of Your Problems

Tax relief services, which refers to the relief of the reduced amount of tax due or also it cab be termed as a concessions for tax payers. The government provide this relief to the tax payers, generally these relaxations are not for multi-million dollar corporations or billionaires. There are so many reasons due to which a person need it, may be for personal reason, an individual might be not able to pay all the taxes imposed on him or her. One can be easily benefited by these deductions which are available in the whole system. But one need to make sure that there are some financial as well as social requirements to avail this break-off. Traditionally these reliefs are granted to the victims of some kind of disaster, for instance a tax payer who lost a job, or anything else of value.

If you are unaware of laws related to the tax relief or you don't have time to sought all your financial matters then you can take help from some tax relief company, but make sure yourself about the services they provide, as finding a reputable tax relief company is not an easy task to do. Don't just take service from the company you visit first, it is important to cross check other companies also. Some points are important that must be checked before choosing them like, check their track records, ask them about their consultation fees, also don't forget to check their customer support as dealing with these agencies tend to be very intensive otherwise you might trapped with a forged company.

What is a bank levy? It is the situation in which your bank account is frozen and there are too many reasons of falling into this situation. More importantly one should find out some way to release bank levy as there are so many ways , you can simply accept an installment agreement, if possible then you can also pay the full IRS. There are other ways also but it is important to get out of this situation. If you feel completely helpless then it is better to hire a tax professional, they will surely help you.

Negotiating offer in compromise can simply be ticket for the debtor to get out of debt and also in restoring your credit rating to boot. But one thing is really important that you should have some income may be steady but it should be there, otherwise price will not be negotiated. In fact some companies can also help in getting reduced amount via negotiations with the IRS, but is is important that you provide correct information as you will be also placed under the review and cannot falsify information to the IRS.
Source:  http://www.articlesbase.com/taxes-articles/need-a-help-in-tax-related-problems-5764398.html

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All Tax saving tips – The Most Common Errors

Overlooked Deductions or Credits

1.     State-tax refunds for AMT taxpayers:

Taxpayers often forget that state tax refunds aren't taxable to those who owe alternative minimum tax, or AMT, for the same tax year, as long as the amount of the refund is less than the amount of state income tax disallowed under AMT.


2. Charitable donations, Part I:

Donors may not deduct labor or time, but they may deduct expenses such as mileage, uniforms and even the cost of taking some underprivileged youths to sports events or movies. Board members or chosen representatives also may deduct unreimbursed expenses for attending a conference or meeting. For details, see IRS publication 526.


3. Charitable donations, Part II:

 Employees who give to charities via payroll deductions at work frequently forget to include them on their personal return. "The number is on the W-2 and there's no letter," says Melissa Labant, an expert with the American Institute of CPAs.


4. Medical expenses
  The disallowance equal to 7.5% of adjusted gross income is a high hurdle, but those who qualify shouldn't overlook all possible expenses, listed in IRS publication 502. Or you might want to consider filing separately if one partner has high medical bills.

5. Sales-tax deduction in lieu of income taxes
  This provision, which Congress has extended through 2011, allows itemized deductions for state and local sales tax instead of state and local income taxes. Taking this is a no-brainer in states without an income tax, and it may work for others if state income taxes are relatively low but a taxpayer had big-ticket purchases such as a car, boat or engagement ring, according to H&R Block (HRB: 16.20, -0.05, -0.31%)'s Tax Institute.



6. Moving expenses
 Taxpayers who moved more than 50 miles for work and stayed employed may often deduct reasonable moving expenses. No itemization is necessary. See IRS publication 521.

4 Common Errors:


1. Overstating charitable deductions
 If you attend a charity event, you may deduct only a portion of the ticket cost, which is usually stated in a letter from the charity. This is true even if you don't attend, unless you donate the ticket back to the charity beforehand.

2. Deducting mortgage "points" incorrectly
 Mortgage fees are fully deductible upfront only for the first mortgage on a house. Points on refinancings must be amortized and deducted over the life of the loan.

3. Overlooking the "kiddie" tax
  Children up to age 23 often owe tax at their parent's rate on investment income over $1,900. Information from the parent(s)' return is required to complete the child's, so it should be finished first. For details, see IRS publication 929.

4. Omitting small interest payments
 Banks and other institutions don't have to provide a 1099 form for amounts less than $10, but they still are taxable income. Why do such small amounts matter? An IRS computer may note the discrepancy, and "any unreported income makes the IRS nervous and can lead to more questions," says Ms. Labant of the AICPA.
Source:  http://www.articlesbase.com/taxes-articles/tax-saving-tips-overlooked-deduction-and-common-errors-5764692.html

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Description about procedure of CPA Exam Study

Most CPA candidates pursue two licensing objectives simultaneously following completion of their formal education requirements. While engaging in CPA exam study, they also satisfy the mandate for work experience under the supervision of a currently licensed CPA.

Most state accountancy boards stipulate that two years of supervised employment in public accounting is required to obtain a CPA license. However, advanced education is normally substituted for one year. Completion of additional education typically provides the CPA candidate with a post-baccalaureate degree. Alternatively, some states allow less education allocated to specific subjects as a substitute for one year of supervised work experience.

A typical CPA applicant obtains experience in auditing services. Accounting firms commonly hire CPA candidates to fulfill roles as staff auditors. Some states mandate that CPA candidates obtain a minimum amount of supervised experience in the areas of auditing and financial statement preparation.

Applicants for CPA certification must present evidence of satisfactory work history. Documentation must support the objective that a CPA possesses the ability to independently conduct a small audit with minimum supervision. Therefore, in addition to mastering CPA exam study materials, a prospective certified public accountant must learn the application of accounting and audit standards.

Although a combination of working plus studying for the CPA exam may entail long hours, the process is facilitated by the structure of a CPA examination study guide. A professionally designed training course is conducive to covering all the elements required to pass the CPA exam.

In most cases, relevant experience obtained during CPA exam preparation is acquired by working with an independent accounting firm. However, state accountancy boards retain some latitude to substitute employment history as an internal auditor at a private company or government entity. Other types of general accounting work may also suffice if the endeavors are devoted principally to comprehensive application of accounting standards and field examination measures.

In general, the audit work experience should culminate in reports about financial records and statements that a third party may rely upon. Someone with an existing CPA license attests to this employment background. The supervising professional is commonly permitted to possess licensing authority from any state. Hence, an applicant for CPA licensing in one state is usually allowed to present relevant work experience from another state.

CPA candidates often complete their educations in one state and obtain work in whatever regions offer promising prospects. Enrolling in an online CPA examination course results in portability to different locations and self-paced study.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Source:  http://www.articlesbase.com/taxes-articles/description-of-professional-experience-needed-during-cpa-exam-study-5764739.html

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Make the Complicated procedure Easier with Tax calculator

Introduction of the tax calculator has lend a hand in the efficient calculation of tax amount

 At the present times the individuals may make appropriate estimation of their taxes of the year 2010 with most recent introduction of the tax reimbursement calculator. By and large individuals are making use of the tax calculator or estimator for the purpose of calculation of their duties online. Individuals may take the assistance of these days advance technology and may stumble on the innovative tool income tax reimbursement calculator free of any charge and calculate the amount of payable tax.

ITax calculator makes the complicated procedure easier

 Filing a tax is a complicated process and individuals are required to pay off a certain amount of charge while filing their taxes, however, a few tax tools are obtainable online to lend individuals hand in filing their tax returns appropriately. One of such tax help is the online tax calculator that is available to people free of.

In the previous times individuals used to wait elongated time and take painstaking acts just to file the tax. They were needed to opt for the assistance of the tax consultants in order to take suggestion regarding the matters of tax. These tax professionals used to calculate their tax amount and submit those taxes on the behalf of the people. These professionals even helped the people in estimation of the tax refunds as well. But thanks to such a tax help that is introduced in form of the calculator people now can calculate the amounts to be submitted as tax or the amount they will get as refund by themselves with the help of the tool. This calculator has successfully proved itself as the most excellent tax refund help for people.

IAdvancement of technology has helped in making the entire procedure time and money saving

 Previously more than six to seven days were required merely to complete the entire paper work in order to file the taxes due to the enormous amount of paper work that was needed to accomplish before filing taxes. However, at the current times we must thank the advancement of technology, we may make the estimation, computation, preparation in addition to file the tax through the internet that too from the comfort of house. Thus such a tax refund help may lend a hand in saving lots of money as well as time while making the accurate calculation of taxes online.
Source:  http://www.articlesbase.com/taxes-articles/tax-calculator-a-great-tax-refund-help-5766428.html

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You Should Pay all your Taxes on time to be Aware of Troubles

Tax is something about which we are all aware of. Especially the salaried people are the ones who feel the pressure of income tax at the end of every single financial year. Income tax is the amount of money you need to give to the government from your income. The government will further use this money for improving the roadways, for arranging education for the poor etc. Every country's law has a provision to collect income tax from its citizens. There are other types of taxes too like service tax and so on. Whenever you eat in a restaurant you can see this service tax term mentioned in your bill. Some countries add value added tax with different products to increase GDP. Thus taxes are there around us in one way or other. Let us dig deep into the issue.

 You might feel resentment about paying a part of your hard earned salary to the government but the fact is the money is used for your own welfare and hence the if you feel any pressure paying the taxes, there are provisions for rebates too. You can make a tax rebate claim against a number of cases like some countries offer uniform tax rebate and so on. You can get a refund on the amount of tax you have paid against such cases. To understand the procedure, you can take tax refund help from a tax consultant if you find it difficult to go about the process yourself.

 There are a number of tax consulting experts who can advice you on how to save on taxes legally and how to go about the process of tax rebate claim. You can also consult the Internet to get tax refund help from people who have been in the same situation. The advantage of using the Internet for gathering knowledge regarding taxes is that there are numerous users on the Internet and hence you can get many different views and information from various people.

 If you are consulting any tax expert for tax rebate claim or for tax refund help, make sure you understand their payment terms well before getting into any deals. Also check to see if they have government approved license for practicing tax consulting so as to avoid any unwanted situations later on. Hence pay your taxes in time to help your government help you, as well as other citizens, in staying well.
Source:  http://www.articlesbase.com/taxes-articles/pay-your-taxes-on-time-and-stay-on-the-right-side-of-the-law-5766422.html

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How you can Donate your car? – Small Steps

You can donate your car to a wide range of charity organizations, but picking the most representative ones requires getting some previous information. So before actually donating your car, make sure you get some relevant info about the charity organization, its purposes, projects and usage of your car.

 You might find out that there are various organizations that have different goals and you will probably find, among them, a great cause and possibility to donate your car to something meaningful. Even more, make sure that your car is going to go to an eligible organization that is serious in its acts and has valid previous work.

 In order to be sure, speaking directly with the charity agents is the safest way to go. In fact, the IRS requests that the donors are aware of the type of the fundraiser society they choose. When talking to the charity representatives, the most important information regards the exact usage of your car, if it will be sold, fixed up, offered to the less fortunate people and so on.

 Besides these, you should check up if the charity organization is qualified and in order to know that for sure, you can review the organization’s state registrations and financial situations, administrative costs and charitable programs.

 Charitable donations and car evaluations

 Another important thing before donating your car is evaluating it in a correct way. There are various guides on the market that offer elaborate instructions, in order to establish the valid value of your car, depending on its general condition, accessories, age and mileage. After making sure that you selected the correct charitable organization and the optimum evaluation, you should be aware of the fact that you are required to complete and attach an IRS form to your tax return, in case you are claiming a car donation that values 500 $ or above.

 More info on www.cardonationexpert.com Donating a used car to charity is a great solution if you are planning to purchase a new car or if you are simply willing to contribute to a charitable activity. Knowing and following some steps before the actual car donation avoids further worries, as it makes the process a safe and fulfilling one.

 Are there any hidden facts about used car donation that I should be aware of?

 First of all, not every used car donation programs are functioning legally. Before you make your used car donation, you should check with the IRS if the charity is a non-profit organization listed under paragraph 501 (c) (3) in the IRS Publication 78.

 Secondly, check out if the used car donation program is run in-house by the charity itself or by a third party. If a third party is operating the used car donation program, you should ask what percent of the profit made by selling the donated cars actually goes to the charity. Often, third-party operated used car donation programs produce small amounts of money for the charity.

 Smaller charities do not afford the costs of transportation and storage for the donated cars, not to mention the costs involved in charity auctions. This is the main reason why charities accept to have their used car donation programs run buy third-party brokers.
Source http://www.freearticles.com/article/Charity-Car-Donation-–-Steps-To-Take/438

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If You are a Anxious Taxpayer - Tax Debt Relief Tips

Not even famous celebrities, powerful politicians, and wealthy businessmen are exempt and invulnerable to the all-reaching arms of the Internal Revenue Service (IRS). Thus, it’s entirely normal and understandable why an ordinary taxpayer like you is virtually reduced to tears by pressing tax debts to the IRS. There’s no need, however, for your tax-induced misery to last. Simply following our easy-to-do tips, you’ll be free from tax debt sooner than you think.

 Don’t Panic
 Getting in trouble with the IRS is indeed scary, but panicking and doing nothing won't make your problems vanish. Stay calm and start thinking rationally.

 Self Help or Need Help
 Before anything else, ask yourself whether you wish to solve your tax debt problems by yourself, or with the help of a professional. Relying on your own efforts is rewarding but can be quite challenging. Hiring the services of a professional is the shortcut to success but it’s going to cost you some money.

 Are the Numbers Correct?
 Even the IRS makes mistake. Study present and past tax returns. Compute each item carefully. You might find out that you owe the IRS less than what’s written on paper. If it turns out that you owe more than the stated amount, well, we’ll let your conscience figure out what to do next.

 Have You Taken Advantage of All Tax Benefits You’re Legally Entitled to?
 You’ll be surprised with the number of tax benefits you’re entitled to once you dig deeper for the truth. If you don’t think you can discover the answer to this all on your own, don’t hesitate to hire a professional.

 Don’t File…Yet.
 Filing your income tax returns when some of the points in your return are still questionable will be tantamount to giving up and acknowledging that every amount stated in your income tax return is accurate and accounted for. If there’s any chance that your tax debt might be reduced, don’t file your return just yet.

 Choosing the Best Payment Option
 Contrary to popular opinion, the IRS isn't coldhearted in general. It actually allows users to choose which payment option they’d prefer to settle their debts in a no-fuss manner. Choose wisely!
 Installment – Choose this only if you are good at budgeting.
 Partial Payment Installment – When you meet certain conditions required for this plan, you’ll be able to take advantage of a longer term for paying and the amount of your debt reduced.
 Offer in Compromise –You’ll be required to either pay a lump sum or agree to a short term plan.
 Not Currently Collectible – You will be given a short reprieve from tax collection.


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Own Taxes Deduct

As a practicing tax accountant I am often asked what can I deduct on my taxes? During the past 18 years of tax preparation I have tried to answer this question to best suit the needs of the particular client. The deductions described in this article are intended to help you with this question.

 Did you change jobs last year? If you satisfy certain tests you are able to deduct the expenses relating to the move. These deductions include storage of personal house hold items, house hunting, transportation and lodging expenses.

 Did you try your hand at self employment last year? Success or failure does not govern the deductibility of many items. Cell phone, computer expense, wages to children and spouse, internet costs, and home office are only the tip of the iceberg for self employed individuals. Consult with your tax adviser to ensure you structure your personal situation to maximize these deductions.

 This next one is one of my personal favorites and one that most tax professionals are not even aware of. Within the past 1 to 2 years have you loaned money to a family member or friend and not been repaid? Amazingly you can deduct this as a worthless debt on your personal tax return.

A little known deduction is miles driven to and from doctor and hospital visits. Also miles driven for a charity such as a church are deductible. Consult your tax adviser for the rates as they change each year but start keeping track of them now so you will not miss out at year end.

Educator expenses found on line 23 of the 1040(2007) is one that applies primarily to teachers. When a client who is a school teacher asks me what can I deduct on my taxes I immediately make them aware of this deduction. Consult with your tax advisor for current year limits and proper documentation.

 Deducting your dependent children is done by everyone but are you aware of the different credits available for these children. I know of the child credit you say but are you also aware of the additional child credit. If you have been preparing your own tax return it is possible you have been missing this one.

 Did you know you can deduct expenses relating to an S-Corporation or Partnership that you materially participate in? You are allowed the same deductions as other self employed individuals and you can take these deductions on Schedule E. Be sure to let your tax preparer know if you have expenses that have not been reimbursed by the S-Corporation or Partnership.

 If you work for someone else and incur expenses that are not reimbursed by your employer you can deduct these on your personal tax return. These deductions include cell phone, mileage, home office, meals and entertainment, internet, computer and equipment costs and many others.
Source:  http://www.articlesbase.com/taxes-articles/what-can-i-deduct-on-my-taxes-533000.html

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Do not forget To Keep Your Books Ready For The IRS

As a business owner, you should deposit all business receipts in a separate bank account. If possible, you should also make all disbursements by check. In regard to all business entities, with the exception of corporations, a disbursement from the business account is not necessary to qualify the expenditure as a business expense. A check written on a personal account for business purposes will qualify if that expense is otherwise allowable. It is important to document both business income and business expenses.

 Write checks payable to yourself only when making withdrawals of income from your business for your own use. Avoid writing business checks payable to cash as it is important to identify which disbursements are business and which are personal. In the event of an IRS audit, this is an area that will get close scrutiny. The IRS auditor will not only look at each check to see to whom it was paid, but will also look at the reverse of the check to see by whom and how the check was endorsed. If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. If you cannot get a receipt or a cash payment, put a statement in your records at the time of the transaction to explain the payment.

 Get receipts for all business expenditures. For all business trips, make sure always to get receipts from hotels and motels. Toll receipts can also help to substantiate travel expenses. Obtain receipts from the post office when you purchase stamps and mail larger envelopes and packages. You should establish a petty cash fund for small expenses. All business expenses paid by cash should be clearly substantiated by documents showing their business purpose.

 Support your entries with sales slips, invoices, canceled checks, paid bills, duplicate deposit slips, and any other documents that explain and support entries made in your books. File these materials in a safe place. Memorandums or sketchy records that approximate income, deductions, or other items affecting your tax liability will not be considered adequate by the IRS. Remember, where the IRS is concerned, the burden of proof is on the taxpayer. You will not be given the benefit of the doubt.

 Classify your accounts by separating them into five groups:

 1. Income
 2. Expenses
 3. Assets
 4. Liabilities
 5. Equity (net worth).

 For your assets, record the date of acquisition, cost or other basis, depreciation, depletion, and anything else affecting their basis. Basis is the amount of your investment in a property for tax purposes.

 Keeping Records: You must keep the books and records of your business available at all times for inspection by the IRS. Records must be kept as long as they may be needed in the administration of any Internal Revenue law. Keep records supporting items reported on a tax return until the period of limitations for that tax year has expired. Usually, this is the later of:

 1. Three years after the date your return is due or filed; or
 2. Two years after the date the tax was paid.

 However, you should keep some records indefinitely. For example, if you adopt the last-in first-out (LIFO) method of valuing your inventory or change your accounting method, records supporting these decisions and approvals from the IRS may be needed for an indefinite time.

 You should also keep records that support your basis in property for as long as they are needed to figure the correct basis of your original or replacement property (including capital improvements). Keep copies of your tax returns. They will help you in preparing future tax returns and in making computations if you later file an amended return or a claim for a refund.

 Using Microfilm For Recordkeeping: Microfilm and microfiche reproductions of general books of accounts (such as cash books, journals, voucher registers, and ledgers) are accepted by the IRS for recordkeeping purposes if they comply. If your micrographic system does not meet the requirements of Revenue Procedure 81-46, you may be subject to penalties.

 Using Computerized Recordkeeping: If you maintain your records with an automated data processing system, you must be able to produce legible records from the system to provide the information needed to determine your correct tax liability. You must keep a complete description of the computerized portion of your accounting system. This documentation must be sufficiently detailed to show the applications being performed; the procedures used in each application; or the controls used to ensure accurate and reliable processing; and controls used to prevent the unauthorized addition, alteration, or deletion of retained records. These records must be retained for as long as they may be material in the administration of any Internal Revenue law.

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Only For Real Estate Investors! Tax Strategies

YOU SHOULD ALWAYS DEFER PAYING TAXES

As a rule of thumb, it is best to defer payment of taxes to a later date because:

•You'll be paying with inflated dollars. During periods of inflation, obligations paid at a
later date are, in effect, paid with inflated dollars. For example, if a $100
tax bill can be deferred for five years, the purchasing power of those dollars,
when paid, will only be worth $75 (assuming a 5 percent annual inflation).The
IRS's loss can be your gain if you've invested wisely during those five
years.

•More investment dollars will be at your disposal. The fewer dollars expended for taxes, the more will be available to investments. "Before tax dollars" investments will net a higher rate of return than those made with "after tax dollars." Simply, you have more money to work with. In a tax-deferred exchange involving "gross equities," more investment dollars are available to work with to substantially increase your net worth.

•The government giveth and taketh away. Take advantage of every-thing and anything the IRS gives you whenever it's given. You'll never know whether or not it'll be taken back. This has always been my philosophy. Make it yours, too.

HOW TO NOT PAY ANY TAXES ON CAPITAL GAINS

Based on a new tax law, you can avoid capital gains  on the sale of apartment investments if you follow these strategies:

Example one: If you have a rental income property and you sell it for$3 million and your
cost is $1.5 million, your profit will be $1.5 million. Your taxes on the profit will be between $500,000 and $700,000. You and your spouse or significant other can avoid paying those taxes by trading for three single-family rental properties—Property A, Property B, and Property C. You then rent them out. If you try to rent Property A and you can't, live in it for two years and sell it, the $500,000 profit based on the new tax law, is excluded. Then you move to Property B and live in it two years. When you sell it, you do not pay any taxes
on the $500,000.Then, live in Property C for two years. Sell it and you don't have to pay any taxes on the $500,000 either.

Example two: Sell your rental income property for $3 million to a limited partnership whose
partners are not blood relatives. Take $1 down and a note for $2,999,999. The tax on that dollar is 33 percent. The limited partnership sells the apartment investment  property for fair market value to an unrelated third party for $3 million. The tax is zero because the basis is $3 million. The partnership can pay you installment principal payments on your note, and you'd be paying percent taxes on that profit. But you'd bespreading income over a number of years. You can gift portions of that note to individuals, thereby spreading the income over entities. Or you can leave it in your estate; it is possible that you will not have to pay taxes on it at all.

CATCH-UP DEPRECIATION

New IRS tax lawsallow you to take what's called catch-up depreciation deductions that you have not previously taken. This procedure allows you to take the entire deduction on your real estate investment in the current year. The election must be made in the first half of the tax year in which the catch-up deduction will be taken. This method benefits anyone who is allowed to take a depreciation deduction. For example, if you didn't take deductions in the prior years for one reason or another, and you decide, based on your in-come, to offset an anticipated increase in income with catch-up depreciation, you may do so. This is called grouping income and deductions.

LANDLORD/LEASEE TAX STRATEGIES

Instead of paying for the lease improvements, have your landlord pay for any lease
improvements. The landlord can write these lease improvements off on your real estate investment  over a 39-year period. If you made the lease improvements and paid the cost of the improvements, you would have to write them off over 39 years. To increase the deduction, pay for the cost of these improvements by increasing the rent. Therefore, you're accelerating the rent expense instead of deducting the lease improvements over39 years. The landlord is reimbursed for the improvements in the form of rent payments and also enjoys the annual deduction for the appreciation. Instead of spreading the cost of these
improvements over 39 years, you're actually spreading them over the life of the lease which could be less than 39 years.

HOW TO MAKE A TAX DEDUCTIBLE GIFT

If you give your children a gift every year for tax purposes, it is not deductible. But you can
instead treat your child's home as your second home and make the mortgage payment on it. This only applies if you don't own a second home yourself. The same strategy can be used to make gifts to your parents or certain other family members. Make the home mortgage payments for them and deduct the mortgage interest portion of the payment on your tax return. This will free up cash for your children or parents that they would otherwise have used for mort-gage payments. In this way, you're indirectly making a tax-deductible gift to your children. Interest payments must be legally enforceable debt; therefore, you
must co-sign the loan. This strategy is called spreading the income and deductions to entities.  If your family members are in a higher income bracket, it won't work. It doesn't have to be made on the same house each year. For example, if you have five family members and you co-sign on all five loans, you can make loan payments in any one year to any one
of the five. Children are not the only ones who qualify.  You can also have this arrangement for your parents, grandparents, grandchildren, or your brother or sister.

GIVE THE BOOT TO BOOT

Based on an IRS revenue ruling, it is now possible to offset boot (see Glossary) with other
transactional expenses. For example, if an investor traded down his real estate investment from a $500,000 property to a $400,000 property, a $100,000 boot would be recognized. When the transaction is reported, he automatically reduced the amount of the $100,000 boot by all transitional cost, such as commissions and other closing costs incurred.

UNLIMITED REAL ESTATE INVESTMENT LOSSES FOR REAL ESTATE PROFESSIONALS

The new law now makes individuals eligible to deduct real estate losses if:

1. More than half of all personal services they perform during the year are for real estate trade or businesses in which they materially participate.

2. They perform more than 750 hours of service per year in those real estate activities.

Unlimited loss deductions are adjustment to adjusted gross income (AGI), and they're not
subject to the same limitations as deductions from adjusted gross income. Rules in a calculation can be complicated.  For a specific advice, it's recommended that you contact your accountant or your tax attorney.

LIKE-KIND EXCHANGES INCLUDE LEASES

General short-term leases (less than 30) do not constitute a like-kind ex-change with
real estate property. However, lease hold interest with 30 years or more remaining at the time of transfer may be treated as a like-kind interest for the purpose of the 1031 tax-deferred exchange (see next section). Tax considerations may vary based on who gives and receives the lease as to rents and the nature of the transaction. Arrange the lease to be initially six years with five additional renewal options. The options are exercisable without obtaining consent from the lessor.

TAX-DEFERRED EXCHANGES

A fantastic way to take all of your profits from a sale of mid size apartments and put it into a
new property without having to initially pay taxes is done through 1031 tax-deferred exchange. Funds from the sale should be held by a qualified intermediary or an accommodator until the exchange transaction is complete and the requirements have been met. You have 45days from the date escrow closes to identify an "up property" and 180 days to complete the exchange. The 180 days includes the 45-day identification period. If you receive cash or reduction in the mortgages, it's considered boot and you have to pay capital gains taxes on it. One of the advantages of doing a tax-free exchange is that you retain more of the funds for investment and defer taxes to a later date. Postponing the
taxes is a good investment tax strategy because, when the taxes are finally paid, they're generally paid with inflationary dollars. The longer the payment is delayed, the lower the present value of the taxes and the larger the benefit of the deferment. Also, when the property is transferred at death, the basis is adjusted to current market values, thus all or mostly all of the deferred capital gains tax liabilities can be eliminated.

REVERSE EXCHANGES

The IRS allows investors to do a tax-deferred exchange in reverse. Basically the guidelines are the same as a forward exchange. The reverse ex-change avoids both time and
constraints by closing the purchase of the replacement property prior to the sale of the existing property. In doing a forward exchange, the investor cannot take control of the proceeds or the exchanged property. The accommodator takes control of the property and the proceeds. Basically, the "up property" is purchased prior to selling the existing property. The forward exchange and the reverse exchange are complicated and we recommend that you use the services of a qualified accountant or attorney and a qualified intermediary or an accommodator.

DEPRECIATING LAND COST

The cost of land cannot be written off for tax purposes until the land is sold. Yet under certain conditions, some land improvements can be depreciated over 15 years. This
depreciation deduction can provide substantial tax savings.

Not all real estate property is real estate under Modified Accelerated Cost Recovery System (MACRS). For example, single-purpose agricultural structures are in the seven-year class. More importantly, land improvements are not included in the definition of 27.5-year residential property. Land improvements such as parking lots, sidewalks, roads, landscaping and fences have a 20-year midpoint, and are 15-year recovery properties under MARCS. Thus land improvements, a major expense of any large project appear to qualify for 150 percent declining balance recovery over a 15-year period.

PAYING CAPITAL GAINS...A GOOD STRATEGY

The capital gains rates at this printing are being reduced from 20 percent to 15 percent. It
just might be wise for the real estate investor to pay the capital gains and take a greater basis for the depreciation deduction on the "up property." This should be considered in your tax planning. On the other hand, if you happen to be in the 10 percent to 15 percent regular income tax bracket, the rate for capital gains starts at 8 percent. For assets held for at least a five-year period and sold after December 31, 2000, it might behoove you to just pay the
capital gains taxes at the lower rate and not be subjected to the time constraints of a 1031 tax-deferred exchange. You might possibly find a much better deal given enough time.

SUMMARY

This  is by no means a complete guide to real estate taxation. Its primary purpose is to make you aware of areas in the tax codes that are important to investing in apartment buildings.

Choose a tax consultant knowledgeable in real estate taxation. The explanation of accrued
interest is comprehensive because of its significance in tax savings. References to IRS codes will be of assistance toy our tax advisor.
Source:  http://www.articlesbase.com/taxes-articles/tax-strategies-for-the-real-estate-investors-5770227.html

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Fair Tax Plan Modifications

Thousands of so called intellectuals in Washington and on TV and all we get regarding serious issues are talking points and political rhetoric. Clearly "Washington" needs reining in and the only way to control the money hungry, egocentric politicians is by controlling their ability to spend, spend, and spend.

The first step is tax reform. Without a simplified tax plan, a balanced budget amendment, and other reforms including term limits and reasonable pensions, our society and democracy is doomed to collapse.

I have outlined a simple, and fair system that benefits every American - Low, middle and upper income levels alike. The outline focuses initially on the revenue side of the equation. Spending cuts will clearly be required and it should all be tied to a balanced budget act so that our representative in Washington are forced into making real decisions. Not the politically motivated spending on what gets them the most votes.

The Fair Tax
or what I'm calling the "Modified Fair Tax" might be the single greatest chance to simplify our system of taxation and save the country from financial failure. The "Modification" nullifies the liberal complaint that the "fair tax" in unfair to lower income classes. The criticism is that lower income people pay a higher percentage of their income out for basic needs; housing, food,healthcare, etc. So, the "Modification" to the fair tax addresses these needs and keeps the "fair tax" fair.

The Plan:

The folowing outline is a proposed starting point – in dollars for illustration – without benefit of CBO scoring so exact numbers would likely vary slightly. The final numbers would be indexed to inflation and modified in the final version to reflect some pre-determined estimate of the cost of necessities like food, shelter, healthcare, etc.

First, we start with the "fair tax" or consumption tax rate. The number widely used is around 23 percent so we will start there. In a fair tax system every pays 23 percent on everything they purchase. Since a person who earns $20,000 spends less that the person earning
$100,000, the higher the income the higher the spending and the more they pay in taxes. That part is plain, simple, and "mostly" fair. The primary criticism is it adds a new significant burden to lower income individuals. Agreed, so let's modify and fix this burden.

The Modifications or Equalizers:

In the modified version of the "fair Tax" lower income individuals and families will see their take home pay rise as we eliminate the "payroll" (social security and Medicare taxes) at the lower income levels, and exempt basic needs like food, shelter, and healthcare for all Americans. Here are the simple and fair details to make that happen:

1st – We raise the start and end points on individual payroll taxes to $25,000 up to $200,000 for individuals as we work to eventually eliminate the payroll and Social Security Tax altogether. That will be covered in the next article – Employers still pay from the first $1.00
earned. The limits on the high end would have to go up to make up for the loss in revenue, but the net is that only those making over $136,000 would see any net increase – about $5,175 for individuals making over $200,000. (A 2.6% tax increase)  Everyone under $136,000 would see a decrease or neutral tax effect. The result is a huge tax break for lower
and Middle income individuals.

2nd Housing expenses would not be taxed – including rental payments - up to $1200/month/individual. A couple would get $2,400 in untaxed housing payments. This effectively saves the mortgage interest credit and extends it to renters at all income levels up to the prescribed limit. Those in upper income levels living with rent or mortgage payments over $2,400/month would pay the fair tax rate on the amount over $2,400 eliminating any technique to shelter taxes by over financing huge estates. Everyone, rich and poor, gets
the benefit of basic housing needs - untaxed. Those who can afford more pay tax above the basic need level. This also maintains some incentive to purchase, since in theory, a mortgage payment will be higher than most rental payments, maximizing the tax free amount. This would apply to the first or primary residence only.

Total untaxed housing income per individual = $14,400 per year. ($1,200
per month x 12 months)

3rd No tax on utilities used to cool/heat a primary residence up to $300. Untaxed basic utility credit - $3,600.

4th No tax on most food items purchased in the grocery store. Snack, convenience, restaurants and other like items would be taxed. Of course this would vary by individual but the "fairness" would again carve out the basic needs for every individual. For example, an individual spending $100 every week on groceries would effectively get another $5,200 per year exempt from the "fair tax". Single parents and young families who spend more would
obviously receive a higher level of fair tax savings.

So far with just basic needs addressed we have $23,200 in income under the modified fair tax that would be exempt from taxation. ($14,400 – Housing, $3,600 – Utilities, $5,200 – Food –per individual)

5th Healthcare, including health insurance premiums would be exempt from the fair tax. Premiums up to $2,500 and all expenses related to healthcare would be exempt from taxation. This provides enough tax exempt premium to provide a high deductible insurance policy for every American. Tangential benefit to society – lower healthcare cost as the number of uninsured Americans is reduced. (See healthcare solutions articles 1, 2,
& 3)

6th Savings and investment would not be taxed. Families struggling to save for retirement or college educations would have more dollars left over to apply to these needs. Those disciplined to maximize this opportunity would benefit greatly. A significant incentive for middle income and working families. Interest, dividends and Capital gains would be taxed like everything else – when it is spent!

I don't see how someone could argue this modified "fair tax" as unfair to anyone. Every individual gets the same basic needs exemption – roughly $25,000/year for everyone. Those smart, creative, or just plain lucky to make larges sums of money will spend it or investment
it. Ultimately paying more taxes, and creating more jobs. The frivolous spenders will have the freedom afforded under the U.S. constitution to spend whatever they earn on whatever they desire.

This plan should solve the liberal complaint of bias at lower income levels. Only this way we do it in a fair a reasonable fashion.
Source:  http://www.articlesbase.com/taxes-articles/the-modified-fair-tax-plan-5770332.html

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