If you operate your business as a proprietorship and hire your spouse as an employee… Should you pay W-2 wages to your spouse to make sure that she or he is a bona fide employee? Can you give your spouse a nice fringe benefit by establishing a Section 105 medical reimbursement plan? Can your Section 105 plan be the sole source of your spouse’s remuneration? These are … [Read more...]
How to deduct tax losses if your business fails
You started a new business with enthusiasm and hoped it would succeed. You worked hard and gave it your best shot. But things don’t always work out. Your business may fail, and that’s when the IRS may tell you that the “hobby loss rules apply.” This means you’re going to lose some and perhaps all of your tax deductions for this failed business. But don’t give up hope! If … [Read more...]
Are you a property “investor” or “dealer”? It matters!
You buy a building. You fix it up. You sell it for a tidy profit. Congratulations… but that’s not the end of the story. You see, the IRS will want to know if your building is a dealer property or an investment property. This distinction is not always easy to make… either for you or your tax preparer. What’s more it’s an important distinction that can have huge … [Read more...]
How to survive an IRS rental properties audit
I recently heard from a reader of the Tax Reduction Letter asking for advice. It seems that an IRS auditor had examined the couple’s three rental properties, disallowed their losses, and told them to expect a tax bill for $55,000! My reader asked if there was anything he and his wife could do to successfully challenge the IRS ruling and avoid paying the $55,000. It turned … [Read more...]
The most dangerous place to borrow money
If you ever run short of money there are two places you should never, ever go for a loan. Your friendly neighborhood loan shark. Miss a usurious payment and you could get your legs broken. Ouch! The payroll-tax money you’ve withheld from your employees. Borrow just a little and Uncle Sam will break your legs. Maybe not literally, but you will suffer tremendous … [Read more...]