Abhishek Agarwal asked:


It would be wise for you if you form an LLC or limited liability company if you are interested in doing business. You may save some of your business money if you know how to make proper use of LLC tax savings which come in various forms.

LLC companies should “pass through taxation” laws. In other words, LLC company proprietor shoudl report their profits or share of losses in their company on individual tax returns. That is, the company cannot be taxed as an individual. Unlike C corporations, in which company profits or losses are considered in tax at corporate level, these LLC companies and its shareholders are also taxed upon their individual dividends. Therefore, if your LLC company is small, and has only a few shareholders, then you can save significantly by LLC tax savings whether you are an owner or a shareholder.

You would be taxed individually by the government as a sole proprietor if you are an individual owner of LLC. But if there are more than one owners, then IRS would tax you as per the partnership. However, even if an LLC is owned only by a few people and the company is really the owner then you can avail LLC tax savings because the government policies would not tax both at the corporate level and the personal level.

Moreover, the chances of audit by the IRS are also minimal if you form your company in this way along with LLC tax savings. Statistics obtained by studies depicts that non incorporated tax payers who files Schedule C due to their businesses often run between two to three percent chances of being audited by IRS. However, it has been observed that LLC’s run about 0.33% chances of being audited. It would not be wrong to say that you can avail various other benefits along with LLC tax savings, by forming your company in this way. Most of us always survive to avoid an audit in our company!

You should talk with your attorney and your tax advisor whenever you plan to convert your business into LLC company. You need an attorney to help you with LLC regulations as they differ by state and only an expertise of your state’s laws can deal with this easily. It would be better to confirm with your tax advisor what would be the exact implications as opposed to sole proprietorship ora partnership if you convert your business into an LLC. Once you have gone through all the facts, its time to decide about the right kind of entity for business.

It can be difficult to understand all of the tax implications you would have to incurr of owning a business. Remember that it is always beneficial to stay informed as the way your business would be set up or runs could have a big financial impact on your personal finances and your business too.



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Maurice asked:


Welcome to the First of Seven Property Tax Saving Strategies brought to you by Homes Seekers on behalf of Amer Siddiq.

We know it is rather long – 3 pages – however reading this may well save you money so we feel it is well worth the read.

Strategy 1 – Property Partnerships

A great way to boost your annual income and have an annual holiday courtesy of the taxman!

When I learned of the benefits of partnerships, you can bet your bottom dollar that I quickly changed my investments into joint ownership, just so I could really PAY LESS TAX!

‘Partnerships – Simple, but very tax effective!’

One of the simplest and yet most effective property tax strategies is to/www.homes-seekers.net“> buy a property with multiple owners in the form of a partnership.

The number of partners is irrelevant, but the two most important considerations are that

a) your partners must not be higher-rate taxpayers (by this I mean that they must not be taxed at 40%);

b) they MUST be trustworthy.

If you buy in a partnership, then you MUST make sure that the partners with whom you are purchasing are people that you implicitly trust, i.e., a spouse, your mother or father, etc.

This is not just for tax reasons but is just simply good BUSINESS PRACTICE.

As a golden rule, if you are a higher-rate taxpayer, i.e., YOU pay tax at 40%, then ALWAYS try to purchase with either a lower-rate taxpayer or, even better, with

someone who pays no tax at all.

‘How are partnerships split?’

All property owned jointly between husband and wife is treated as an equal 50:50 split as default by the Inland Revenue.

However, this is not the case for property owned between non-husband and wife. This is because the property ownership must be based on fact, e.g., Jo has funded 10% of the deposit, and Jack has funded 90% of the deposit.

In this case the property would be treated as a 90:10 split in Jack’s favour.

‘Do you have a non-income-generating partner?’

If your partner does not work, then the first £4,745 that your partner earns through property income will be exempt from tax! In addition, the next £2,020 will only be taxed

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The next Tax Strategy – in Seven days’ time!

=========================================

You may be thinking,

‘But what if I can’t purchase in a partnership as I have no trustworthy partner?’

OR

‘Both my partner and I are higher-rate taxpayers, so how can we get a tax saving?’

Well. if you are, then this is great as it means YOU ARE thinking about saving on property taxes!



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Maurice asked:


Welcome to the Second of Seven Property Tax Saving Strategies brought to you by Homes Seekers on behalf of Amer Siddiq.

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Strategy 2 – Using Property Management Companies

to Slash Your Tax Bill!

Set up your own property management company

and save £pounds in income tax!

==========================================

I really hope that you have already benefited from the FIRST Property Tax Strategy and have already appreciated that you can pay less tax to the taxman just by purchasing a property in a partnership!

Well, I am now going to demonstrate another way to make an even greater tax saving, regardless of whether you buy properties in your sole name or as a partnership!

Remember, one of the easiest ways of making money through property is to PAY LESS TAX!

Just like the previous Property Tax Strategy, I recommend that you print off and file this strategy away so that you have easy access to it whenever you are off-line!

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Ever wanted to have your OWN company?

==========================================

I am sure you have!

In fact, most entrepreneurs aspire to having their own company and one day being able to refer to themselves as being a ‘company director.’

But what better way than to be a director of your own company?

Setting up a company to MANAGE your/www.homes-seekers.net“> property portfolio can be an excellent strategy to make sure you pay less tax!

So, let’s take a look at exactly how it could possibly benefit YOU!

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Are you a middle-band taxpayer?

==========================================

Do you pay tax at the rate of 22% or less?

The average income for a person in the UK is just under £22,000. So, in all fairness, most of us are middle-band taxpayers, i.e., we pay tax at 22%.

We all aspire to have higher incomes. But, unfortunately, along with a higher income usually comes more tax.

What if you could have a higher income, yet pay no additional tax? Does this sound too good to be true?

Well, it isn’t!



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Tom Wheelwright asked:


eople view April 15th as the end of tax season and enjoy the idea that they don’t have to deal with their taxes for another year. I look at April 15th a little differently. I see April 15th as the time to start planning your taxes for the next year (and the next year and the next year).

The best potential to create massive tax savings comes from planning your taxes not only throughout the year, but years in advance.

This doesn’t mean you have to treat your tax planning like a part-time job (although I’ve seen tax savings that yield more than a part-time job!). It simply means take a few hours now to create a tax strategy that is specific to you, then integrate your strategy into your daily routine and take a few hours a month to keep it on track.

I think most people dread tax planning because it’s something they have found to be boring and confusing (and sometimes painful) in the past. Traditional tax planning can be all of this!

This is why I’ve made it my mission to make taxes more understandable. I’ve just recently taken the hundreds of strategies I use with clients and broken them down into 5 secrets that cover the scope of how to create massive tax savings.

5 Secrets to Massive Tax Savings

Secret #1 Rules the IRS Won’t Tell You

Secret #2 Creating Permanent Tax Savings

Secret #3 Forming Your Personal Tax Strategy

Secret #4 Tax Saving Entity Structures

Secret #5 Reducing Your IRS Audit Risk

I’m so excited to share this information!

I’m going to share more about each of these secrets over the next few weeks, but before getting into those details, this week I want to share the common theme behind each of the secrets.

Behind Every Secret is… Knowledge! Now, I’m not referring to the type of knowledge that will have you quoting Internal Revenue Code sections – that falls into the category of boring and confusing. The knowledge I’m referring to is the type of knowledge that makes you aware of what creates massive tax savings so you begin to see your daily routine a little differently.

Here is an example most people can relate to:

Have you ever noticed that right after you buy a new car, you see that same car everywhere and you don’t remember ever seeing that many before? The reality is the cars have always been there, it just takes awareness to see them. Once you become aware of the car, you see it everywhere.

The same is true for tax savings! The opportunities are there, it’s just a matter of being aware of them.

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Abhishek Agarwal asked:


For sure, every tax payer is looking for helpful tax saving tips. The burden of paying tax has taken its toll among honest tax payers given the great amount of taxes that are being paid every year. And of course, tax saving tips are much more needed in these times when every price seems to rise. Tax saving tips are very much helpful for families who are limited by the income that the breadwinner has. Enumerated below are some expenses which we did not realize to be tax deductible.

1. Child Care—This is considered as one of the effective means of tax saving. There are basically two ways in doing so. The first one is through a spending account that is flexible. With these kinds of accounts which are employer-sponsored, you will be able to contribute to your child care expenses on a pre-tax set-up. This is known to reduce an individual’s taxable income for the current year. Meanwhile, the second means of reducing your taxes is claiming your child care expenses at the end of the year. Of course, expenses in day cares are counted and even summer camps attended by kids. Summer camps are counted, but many parents do not know this. The summer camps are counted for as long as the main reason was that you had a work or schooling so you let your kid attend the camp. The fees you shelled out in these camps is actually deductible to the tax that you have to pay.

2. Health Care—Along with child care expenses and health care expenses could actually save you from paying a great amount of tax. Just like the child care expenses that you may have, this could be paid on a pre-tax basis or could also be deducted at the end of each year. Just bear in mind that you have to keep track of your health care expenses for the entire year including those over the counter medicines if you are planning to deduct the expenses at the end of the year. Meanwhile, if you opted for a flexible spending account, consider these expenses and have a reimbursement.

3. Know the code—Laws that govern taxes changes from time to time. You should be familiar with all of the changes since every year, there may be some new deductions which your family could enjoy and benefit from. If you do not have the luxury of time in reviewing the tax code changes annually, have your taxes be prepared by professionals. The professional you hired will be informed on the changes and could even find some tax saving tips that you do not want to miss.

Ask your financial planner to look for effective tax saving tips that would benefit your family. There are a lot of ways just waiting to be revealed.



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Maurice asked:


This is just a very quick message to let you know that over the next Seven weeks I will be sending you One Tax Saving Strategy every Seven days. We have permission from Mr Amer Siddiq to share his invaluable Tax Saving Tips with you. I have been receiving emails from Amer regularly with Tips that have really made a difference to my/www.homes-seekers.net“> property portfolio.

More information can be found on his site at www.property-tax-portal.co.uk

The first of the Seven Deadly Tax Saving Strategies starts today.

NB. Sometimes emails get blocked by service providers that contain certain words.

If any of the strategies do not arrive then please drop me an email at….

>>>> alvaro@homes-seekers.net

… and I will email the strategy to you again.

Hope you enjoy them.

’til next time,

Alvaro de Ferranti



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Maurice asked:


Welcome to the Fifth of Seven Property Tax Saving Strategies brought to you by Homes Seekers on behalf of Amer Siddiq.

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Strategy 5 – Will a Ltd. Company Improve YOUR

Tax Position?

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Some of the most burning tax questions property investors have are

- ‘Should I buy my property through a Ltd. company?’

- ‘Should I move my properties into a Ltd. company?’

- ‘If I own my properties in a Ltd. company, will I avoid paying property tax?’

If you have not already asked these questions, then I am certain you will be doing so in the near future, especially if you intend to continue investing in property and growing your portfolio.

To be honest, answering these questions is not straightforward (tax never is!), and the answers depend on your

a) chosen investment strategy;

b) personal and financial circumstances/ambitions;

c) for how long you intend to hold the properties.

However, before you even decide whether a Ltd. Company will improve your tax position, there are some very basic rules/guidelines that must be understood.

In this strategy, Ian McTernan, one of my property tax gurus and author of our best-selling guide ‘How to Use Companies to Cut Your Property Tax Bills,’ will tell you what you must consider before you can decide if holding your properties through a Ltd. company will benefit YOU!

>>> http://www.property-tax-portal.co.uk/index.php?tpl=indexCutPT

So, let’s get cracking with this strategy and learn from Ian’s words of wisdom!

Just like the previous Property Tax Strategy, I recommend that you print off and file this strategy away so that you have easy access to it whenever you are off-line!

Take it away, Ian…

==========================================

Already a property investor?

==========================================

Do YOU already own investment properties?

Are you already on the buy-to-let investment ladder?

If the answer is YES and you are now wondering whether moving your properties into a Ltd. Company is a good idea, then consider the following FACT:

*** Properties must be transferred into a Ltd. company at market value! ***

Yes, that’s RIGHT!

Moving properties into a company is treated in the same way as if you were selling the properties!

What this means is that if you bought your investment property five years ago and you would now like to move it into a Ltd. company, then you are likely to have to

pay an IMMEDIATE capital gains tax liability.

This is purely due to the fact that property prices have significantly increased over the past few years!

The exception to this rule is if the property is your principle private residence.



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Kent Irwin asked:


This time of year, now through the first quarter of next year, you will see articles offering year-end tax planning tips. Tax planning tips can increase income in future years, so be careful. Many tax tips often involve accelerating deductions, deferring income, or last-minute charitable deductions (the first three following tips).

For example you may be compelled to make a large charitable contribution this year by December 31st. However if you could be in a higher tax bracket next year because your income is going up because of a substantial raise or bonus, you would have been better off to make the contribution next year. Some may say this is heartless, but I say just the reverse. If you pay less in taxes because of good planning, your will be better off financially and able to give more in the future.

If you have volatile income, before you use the tax savings tips here and in other articles, you may want to run projections for this year and next. A good accountant will run these calculations for you, but understand that tax law changes from year to year and from one administration to the next can often make predicting tricky.

1. Defer income

If you are able to defer income, such as commissions and bonuses until next year, you might be able to pay lower income taxes this year. However, you must consider what your income and taxes will be next year to be sure that you are not actually increasing your taxes.

2. Accelerating deductions

Accelerating major deductions such as state income taxes, property taxes, and mortgage interest may help anyone, especially during a high-income year. If you don’t think your personal income tax bracket will be higher next year, and you’re not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year.

3. Charitable Contributions

Consider making chartable deductions before the end of the year to receive a deduction. You must make the contribution by 12/31/2007.

Donate appreciated property such as real estate or stock instead of the proceeds of the sale. You may be able to receive a deduction for the value of the contribution without paying tax on the growth portion resulting from a sale, then a gift. If you intend to transfer appreciated property, begin early since it will take several weeks to make the change.

4. Alternative minimum tax traps

Many people face large AMT bills compared to previous years. Be warned if you have larger than usual medical expenses, non-federal income and real estate taxes, or miscellaneous itemized deductions; or if you have exercised large stock options, to name a few.

Year-end tax planning strategies can backfire under AMT. Be very careful accelerating some deductions and exercising stock options at year end. See a tax professional for information on your specific tax situation.

5. Be careful when investing new money in mutual funds at the end of the year

Call the mutual fund and find out when the distribution date is. You may want to purchase after the distribution date to avoid owing taxes on fund shares that you owned only for a short period of time and had little to no gain.

6. Contribute the maximum to retirement accounts

Contribute the maximum allowable to employer-sponsored defined contribution retirement plans, such as profit sharing, 401(k), 403(b) and 457(b) plans. This not only provides an excellent tax deduction, but it also helps you to plan for your future retirement.

You may want to contribute to an IRA; up to $2,000 is fully deductible if you did not participate in a company-sponsored retirement plan or if your income falls below certain levels.

If you are self-employed, you can contribute more to a pension plan than into an IRA. You have until December 31 to set up the plan.

7. Investment Losses

If your investment portfolio has stock that has depreciated in value and is worth less than when you originally purchased it, you may want to consider selling it. You may be able to use that loss to offset capital gains and ordinary income.

Be careful though; investment decisions should not just be for tax purposes. Make sure that you do your research before selling any investment. Some people react too quickly when investments lose value; others sometimes hold on too long. If you decide to sell and invest in something new, make sure that you examine your portfolio to ensure that you have the right mix of investments to match your investment profile, risk propensity and asset allocation model.

8. Save for College

Consider contributing to your child’s college savings into a 529 plan. The contributions are not deductible on your Federal return, but parents may be able to write off contributions up to a certain dollar amount on their state income tax return. Log on to SavingforCollege.com to find out information about your state.

9. Home Improvements

Here is a great deal. How about saving energy and the environment, lower utility bills, increase the value of your home and save on taxes  all at once. Projects for the home’s shell (insulation, windows, sealing) and heating and cooling may qualify for a one time tax credit of $500. However you are running out of time, since they must be in place by the end of 2007. So while crawling around your attic looking for ornaments, think of adding insulation. If you made home improvements over the last couple of years, be sure to dig up your records; you may already be eligible.

Before moving forward on one of these projects, make sure that you get full information about these and other energy efficient tax incentives from The Tax Incentives Assistance Project at http://www.energytaxincentives.org/. There you will find more information about Home Shell and Heating & Cooling as well as Hybrid Passenger Vehicles and Solar Energy Systems.

10. If self-employed, buy equipment and supplies

Have you been putting off buying needed business equipment and supplies, or do you know that you will soon need them? Now may be the time to invest in your business and save taxes as well. Business tax can be complex; therefore it may be wise to first call your accountant prior to large purchases.

11. Give gifts to children

When you give to friends and family, it is usually not taxable to the recipient or the giver. Many people do not realize though if that gift exceeds $12,000 per person it is taxable to the giver, and at a high rate. Therefore, if you intend to give anyone more than that amount, you could give some this year and some next. The second tip is that you and your spouse can both give $12,000 per person, doubling the amount not subject to tax. Be sure to consult your legal and tax advisor prior to making all gifts.



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dipendra asked:


Tax planning has changed radically over a period of time. Since its time for filling income tax returns for 2007-2008 as the end date (31st march’ 08) is approaching. As a tax payer you need to understand the best way through which you can make use of the exemptions provided by the government. Earlier people had limited choice of tax saving instruments to be used for the purpose of tax planning. But now with the ELSS (Equity Linked Saving Schemes) launched by most of the mutual fund companies, the whole approach towards tax saving has changed. With mutual funds tax planning had become more important part of over all investment planning. With equity linked saving schemes the tax exemptions can be used in a manner such that you not just disciple your investments but also create good corpus through equity investment.

Tax planning for resident Indians

We recommend tax saving funds, also referred to as Equity-Linked Saving Schemes (ELSS). One such reason is that their benefits are too much to ignore as they hold almost all the benefits of an equity mutual fund.

For one, they do not have any restrictions. If you choose to, you can invest the entire Rs 1 lakh available under Section 80C in these ELSS funds.

They give you the benefit of higher returns. You can get 8 per cent with your PPF and NSC. But if you can get a 40-50 per cent return, coupled with a tax benefit, what’s wrong with it?

How do you invest in an ELSS scheme?

It is as simple as investing in any other mutual fund schemes. You just need to fill the form of particular ELSS scheme in which you want to invest. Submit it through any transaction point with the required document i.e. usually PAN card and KYC form. That’s it your work is done. You can know more through website. In this you can get the understanding of selecting any scheme and filling the form.

The benefit 3 Years lock in period for ELSS schemes.

Secondly, if you hate blocking your money for years on end, then this one surely made for you. The lock-in period for ELSS funds is just three years. When you sell after three years, you pay no capital gains tax. So, you get the tax benefit when investing and you pay no tax on your profits.

The best way to invest in a mutual fund is investing systematically through out the year using SIP. So you commit to putting away a fixed amount every month in mutual funds. This is an automatic savings habit that will hold you in the long run and help you not only to save but also invest regularly and continuously in the capital market through equity linked saving schemes (ELSS).

You need to be consistent in your investments to do well. The wonders which a disciplined investment can do cannot be replicated by even the best of investment strategies.

Want to know about the top mutual funds for Tax Saving?

Most of the Mutual fund companies have come out with tax saving funds. They are Equity Linked Saving Schemes (ELSS). The funds collected under this tax saving schemes are invested in equity instrument, thus providing better returns. Many of these ELSS funds generate as much returns as a diversified equity fund. With the awareness been increasing among the investor class, the equity linked saving schemes are gaining popularity among the investor class. To know more you can visit Godmind and get the collection of recommended tax saving funds which is been provided by Godmind advisors. Also you can ask the Mutual fund Advisors on which ELSS (Equity linked saving scheme) fund to invest in.

Take step towards informed mutual fund investment by investing with care and due diligence.



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