When you run your own business, paying taxes can really take up a lot of your earnings. However, there are ways in which you can save on tax and the 1031 tax exchange is one of them.

The 1031 tax exchange is one of the most common types of tax deferral strategies used today. This allows you to sell either an investment property or a business and then attain a property or business at the same, or for a higher, price. This has to be done within 180 days. It is the ideal way for real estate developers to save money on their taxes.

What You Should Know About 1031 Tax Exchange

Many people have never heard of the 1031 exchange and so they have no idea whether they could benefit from it or not. Basically, the 1031 tax exchange was created in 1990 and it was designed to help real estate investors. They benefit by re-investing the gains they make on similar properties which they exchange for their old ones. While it may seem like a simple tax deferral procedure, it is vital that you learn all about the 1031 exchange rules.

The capital made on the exchange should be dealt with through a qualified intermediary. That way you cannot be accused of keeping the money for financial gain. You have to invest the money into an account which should stay untouched until the end of the tax year. Now in order to benefit from the exchange, properties have to be identified within 45 days of the sale of your previous property. Then the purchase should be completed within 180 days. Any property purchased later than that and you will not be entitled to the tax deferral.

While the benefit of capital gains is substantial within the 1031 tax rules, there are also a few other benefits that are not always noticeable straight away. These include:

You can add to your assets
You could upgrade to a property with a higher value
You can benefit from investing in lesser known markets

All of the above can really help you out. It is always a good thing to have more assets. Also if you follow the 1031 tax properly rules you could benefit by gaining a higher priced property. This is because as your existing property appreciates in value, you can then exchange the property for a higher value property because of the increased cash flow.

Finally if you have a rental property which has appreciated in value in a good market, you could re-invest the property into a lesser known market which is set to become a hot in the near future. This could potentially get you a lot of money.

So if you are looking to benefit from this type of exchange then ensure that you acquire the properties within 180 days of the sale of your old one. The 1031 exchange rules have to be followed closely. If they are, you really can benefit from tax deferral at the end of the year.

To learn more about 1031 Exchange Rules Check out this
1031 Tax Exchange Information.

When is a Reverse 1031 Exchange the Right Choice?
Tax-deferred exchanges are great opportunities for real estate investors. In a typical property transaction, the seller is hit with the capital gains tax. Fortunately, section 1031 of IRS code stipulates that no gain or loss will be recognized in a qualifying exchange. A tax-deferred exchange is not as simple as swapping properties though. There ar...

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A smart tax saving tool that is gaining popularity among the real estate investors by enabling them to defer the entire capital gains tax is 1031 Exchange. Established in 1990 by the Internal Revenue Code Section 1.1031, it gives them an opportunity to defer their capital gain taxes on the sale of a property by re-investing the proceeds into like k...

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Introduction This article provides a very brief introduction to two different methods and approaches for the computation of the basis of replacement property receive in an Internal Revenue Code Section 1031 (IRC1031) exchange. It should be noted that these methods are relatively simple, when compared to more complex IRC1031 exchanges. This is be...

What are parents to do in this financial climate in so far as educating our dear children? As always, the answer is right before our very eyes. We need only to look, listen, and seek knowledge that is understandable and practical. Welcome to my show and the MWIB series regarding financial studies. Please read and learn and be sure to ask lots of questions.

For those of you who havent heard, the kiddie tax is extended to the age of 18 starting in 2006. This means that if a child has more than $1,600 of unearned income (interest, dividends, etc), he or she will pay tax at the parents top marginal tax rate. Prior to 2006, the age was children under 14. The strategy was to try passing income down to the children to take advantage of the lower tax rates to help with funding education. The kiddie tax prevents this from happening.

To tell you the truth, I never thought much of this strategy anyway. I always keep my eye on the big picture leading my clients proactively through the mish-mosh of financial strategies. I feel the very same about the 529 plan. In the proper set of circumstances, the 529 plan works very nicely. If one happens to be quite wealthy, I think the 529 plan provides additional asset protection and wealth preservation when considering estate-planning issues. Because of one being wealthier, I think it is less troubling to me to duplicate strategies in a given portfolio. If one has a retirement plan along with a 529 plan, the investment strategies will be identical. This is unreasonable in my view, as middle income families can not afford to duplicate investment strategies. Instead, the middle income family is better off saving for education by adding to its portfolio outside of the retirement plan. This should be through a combination of tax exempt and high growth vehicles that will minimize tax consequences. By keeping excellent records and understanding such topics as the wash sale rules and capital gain and loss netting, one can further reduce exposure to income tax in the first place (see my article and instructional CD regarding capital gain and loss issues). I also think the 529 plan works for contributing grandparents.

Enough about my thoughts regarding the 529 plan. Lets talk about some other strategies for educating our children. What if the family owns a business? I love the idea of putting children on the payroll I really, really do. The catch is, the child should perform some service for reasonable compensation. Suppose your child is paid $5,150 in 2006. This just happens to equal the standard deduction. The parents business will gain a deduction and sonny boy will not have to pay income taxes because the standard deduction will reduce taxable income to zero. This money can then be used to build junior a portfolio for college. In addition, if the parents business is unincorporated and so long as the child is a minor, there will be no social security tax to pay. Man, do I ever love this stuff. Even when the kid reaches the age of majority, I like this strategy. In many instances, the adjusted gross income of the parents will be too high to take advantage of the hope and lifetime learning credits. In this event, paying our beloved offspring will provide us a tax deduction at the business entity level and will provide income for the student. Remember that wages paid must be reasonable for services rendered. The student will then file his or her own tax return taking use of the standard deduction and one of the educational credits. Notice that I did not mention exemption allowance. This is because the exemption is allowed only to the parent as they are providing support for the child. The parent will be giving up the exemption in order to give the use of the educational credit to the child. Remember that the parent has already gained a deduction by paying wages to the child through the business.

What if there isnt a business? In this case, my thought is for the parents to build their own portfolio using inside and outside retirement plan theories. Understanding capital gain and loss rules can help reduce tax exposure outside of the retirement plan and can allow for wealth building and having funds available for helping our children. The parents may be able to take the educational credits but can still pass it on to the child if tax planning dictates. The student may work while in school (a concept that has yet to kill any young student) and the educational credit could be of some benefit to he or she if the parents adjusted gross income is too high.

Dont be concerned about the extension of the kiddie tax. And dont be overly enthused by the 529 plan. Follow my lead and provoke deeper thought into how to mange educating your children with the other aspects of portfolio building. Use all of your attributes to their maximum potential. Now really, dont you think this article is well constructed and carefully contrived? I told you my way is better.

Ron Piner, CPA

William R. Piner, Jr, CPA
Host of the Most Complete Business Program on Radio
Better Business on WBIS am 1190 (http://www.wbis1190.com)

Greetings, My name is Ron Piner and I have been a practicing CPA since 1988. I host the most complete business program on radio, “Better Business”, Saturday mornings at 10 on WBIS am 1190 (http://www.wbis1190.com). Come join in the fun and the education.

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Considering the complex and confusing nature of tax codes using a tax advisors service may be just what the doctor ordered. Every year millions of people have to file their taxes. It is a time of year that many people dread, however it is the law and it has to be done. For many people, tax time is a nightmare from which the need to be rescued from. It is the most nerve wrecking experience of the entire year. If you use the EZ form, or are single, you may skate through with no problem. However for the basic rule applies to all the more you make the more you pay. No matter how you look at it, it will definitely be a very taxing experience.

When tax time comes, everyone, no matter who they are, gets a feeling of dread. It you make even one little mistake, it could end up costing you thousands of dollars or even jail time if the mistake is large enough. For this reason, tax advisors offer their services to those who are less knowledgeable about tax matters.

Most tax advisers charge a fee for each form that they have to fill out, and for some it can be quite expensive. However it may end up costing you more if you do your own taxes wrong. They know the ins and outs of all the tax laws and applications, so you will be confident that your taxes are prepared correctly. You can find these tax preparation professionals very easily. Many offer face-to-face service or even a phone interview. Many people have found their tax advisors online and have been very please with their services. A simple Google search will yield you thousands of links to qualified tax advisor websites.

On your first appointment, you will be asked for all of your financial documents for the previous year. It is important that you provide everything that is asked for as they have many clients and have to delegate their time very carefully. Providing everything that is asked for in a timely manner will get your refund to you faster. Taxes are very intricate because of all the laws and a tax advisor has the skill and knowledge to use them all.

It is very important that you choose the right individual tax advisor. There will be many of them, and after you have narrowed your choices, it is recommended that you check out the company with your local better business bureau to make sure that he or she is reputable. Ask friends and family which tax adviser that they use and always ask for references.

You may not think that these step are necessary, however when you stop and think about it, you are the only one who will suffer in the end if your taxes are not prepared correctly. Save yourself the headache and consult a professional tax advisor.

Tax preparation can be confusing and stressful get more information on Tax Write Offs And Deductions as well as other resources related to tax preparation and tax resolution at Tax Preparation Help here: http://www.tax.totalinfoguide.com

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While accountants are reaching for aspirin, millions of Americans are reaching for some fast cash this tax season. Unfortunately, those who reach for fast cash in the form of a refund anticipation loan are getting hit with interest rates and fees that are out of this world.

The tempting ads are plastered in newspapers and on television for fast cash refunds, express refunds, or instant refunds. The ads offer to get your refund in a day or two, or in some cases even instantly.

What is a refund anticipation loan? Its a loan that borrows against your anticipated tax refund from the IRS. Refund anticipation loans, or RALs as they are known in the tax industry, carry annual percentage rates (APRs) of about 60% to over 700%, a fact that many consumers either dont realize or simply overlook.

RALs are marketed to people who need money the most such as low and moderate income workers. A report by the National Consumer Law Center notes that about 40% of the 12 million refund loan customers in 2000, were families who received the Earned Income Tax Credit, the largest federal poverty assistance program. And since the RALs often use the term refund in their ads, many of those who take the bait dont realize that theyre receiving a loan and not their actual refund from the IRS.

The fees associated with RALs are expensive. For example, lets say the IRS owes you a refund of $2,000. In order to get a RAL you pay the following: RAL loan fee = $75, Electronic filing fee = $40, tax preparers fee = $100. Total fees associated with your RAL = $215 which is more than 10 percent of your estimated refund. The APR on your refund loan equals a whopping 142 percent!

Many low and moderate income workers are without bank accounts and wind up paying an additional fee to set up a one-time-use account so that their IRS refund can be direct deposited.

Before giving in to the temptations of refund anticipation loans, ask yourself if you really need your money that quickly. If you can wait just a bit longer for your refund youll line your own pockets with extra cash rather than forking it over to a RAL lender.

A great way to save money at tax time is to go to a Volunteer Income Tax Assistance (VITA) site. VITA sites provide free tax preparation to low and moderate income taxpayers and are sponsored by the IRS. They can be found in libraries, community centers and other locations during the tax season. To find a VITA site call the IRS general help line at 1-800-TAX-1040 or visit www.tax-coalition.org.

About The Author

James H. Dimmitt

James is editor of “TO YOUR CREDIT”, a weekly free newsletter with personal finance news and tips. You can subscribe to the newsletter by visiting http://www.yourfreecreditreportnow.com. He is also author of Identity Theft - How to Avoid Becoming the Next Victim! available at http://tinyurl.com/bc45

jimdim815@aol.com

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Its a moment every person dreads. You pick up the mail and there is an envelope from the IRS. Its not a refund check. What do you do?

Dont Panic

Each year, the IRS sends out millions of correspondence audits to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. These audits normally cover a very specific issue, often notifying you of additional small amounts of income for which you owe tax. Each letter and notice provides specific instructions explaining what you should do if action is necessary to satisfy the inquiry.

Most correspondence can be handled without calling or visiting the IRS. You simply follow the instructions in the letter and the matter is put to rest. Alternatively, you can contact the IRS to contest the matter. Simply call the telephone number indicated on the letter or write an explanation as to why you disagree. Make sure to include copies of any supporting documentation you want considered by the IRS. Typically, it will take the IRS between one and two months to respond. During the first quarter of the year, it can take two to three months.

Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you. Be sure to keep copies of any correspondence with your records. The IRS has been known to lose track of actions involving a taxpayers account.

Worse Case Scenario

Everybody has a few really bad days in his or her life. You know, the car breaks down, you spill coffee on your shirt while driving to workyou get notice of a full blown audit from the IRS. The first step you take should not be drinking to excess or driving for the border. You have rights when the IRS comes calling and one of them is particularly important.

Representation

You have the right to be represented by an accountant or attorney at your audit. Under no conditions should you even consider going to an audit by yourself. Doing so would be like throwing red meat to a lion. Instead, spend the money to get representation and let them handle the audit. In most cases, you wont even have to go to the audit.

Nightmarish tax audits are generally a thing of the past. A letter from the IRS should not cause you to faint. Usually, the news isnt that bad. If it is, hire representation and let them handle it.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

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We are a migratory society. When we move, each of us goes about the joyous task of trying to get our mail forwarded to our new address. Ah, but what about your taxes?

Moving is more or less the definition of misery. At least in my opinion. Simply put, I hate it. You probably feel the same or at least close. One of the problems I have with moving is dealing with my mail. Yes, I submit the forwarding notice to the post office, but they seem to take about 30 days to get around to it regardless of what date I list on the notice. This ultimately causes problems since bills usually have a date you have to pay by.

If you moved last year, there is probably one other item you forgot to give notice on. Yep, your taxes. Despite the various conspiracy theories out there, the IRS is not watching you on a daily basis. If you moved, they probably dont know about it. As we approach the tax filing dates this year, what do you need to do to get the problem worked out? The answer is pretty simple.

Your first option is to actually go ahead and notify the IRS of your move like a responsible adult. Since we are talking about the IRS, you know what is coming next. Yep, another form. In this case, you want to get a copy of form 8822, fill it out and send it in. You should be able to download it off the IRS website.

Your second option is what I like to call the lazy adult option. That would be me. When you file your taxes this year, simply write in your new address. The IRS will automatically update it. Make sure you print it and do so clearly. Otherwise, some little grandma in Illinois may get audited!

As you can see, the change of address process is pretty simple. There is one other thing you should keep in mind. If you had a tax refund due last year, did you receive it? If not, it may be because you moved and the IRS cant find you. Think it doesnt happen? The IRS often ends up with millions upon millions of dollars in refund checks it cant deliver. Tax refund checks are not forwarded by the post office, so you might go check to make sure you received your refund. If not, contact the IRS and let them know. They will hold the refunds for three years. After that, you forfeit the right to receive them.

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I am often asked whether there is a way for a taxpayer to be accepted for an offer in compromise when there appears to be enough income to make payments to the IRS. When you peel the layers back, a lot of times you see there are valid reasons for the IRS to grant an offer in compromise that do not fall into the two most common offer formats: doubt as to collectibility and doubt as to liability.

Congress has established an alternative to the traditional offers based on doubt as to collectibility and doubt as to liability when an offer should be based on effective tax administration. The IRS is authorized to accept an offer in compromise based on effective tax administration when the collection of the full liability would create a hardship, exceptional circumstances exist that the collection of the full liability would be detrimental to voluntary compliance by taxpayers, and compromise of the liability would not undermine compliance by other taxpayers.

The IRS considers several factors in determining whether to accept an offer on this basis. All of the factors are weighed, but none are conclusive for acceptance or denial of the offer. Some of the factors include: the taxpayers inability to work due to disability, liquidation of taxpayers assets would prevent the taxpayer from being able to meet basic living expenses, or the sale of assets would have adverse consequences and more than likely, the collection activity would be unlikely. It is also helpful when the taxpayer can show that you have never had a problem filing and paying your taxes in the past, you have not deliberately tried to avoid paying these taxes, and you have not encouraged others not to file their taxes. This offer in compromise based on effective tax administration will allow some taxpayers with exceptional hardships the opportunity to have their tax liabilities reduced even though they technically can pay the full balance. However, the taxpayer should keep in mind that the IRS often has a difficult time looking past the technical aspects of each case.

Tripp Atkins is a Greenville, South Carolina lawyer practicing in the area of IRS Tax Resolution.

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The IRS has obtained civil injunctions against more than 100 promoters of illegal tax avoidance schemes and fraudulent return preparers in an ongoing crackdown that began in 2001. Many of the injunctions, obtained in cooperation with the Department of Justice, also order the promoters to turn over client lists and to cease preparing federal income tax returns for others.

Signaling a renewed fight against tax fraud, the federal government stepped up the use of civil power four years ago. Civil injunctions have subsequently been used to stop:

1. Abusive trusts that shift assets out of a taxpayers name but retain that taxpayers control over the assets.

2. The misuse of Corporation sole laws to establish phony religious organizations.

3. Frivolous Section 861 arguments used to evade employment taxes.

4. Claims of personal housing and living expenses as business deductions.

5. “Zero income tax returns.

6. Abuse of the Disabled Access Credit.

7. The claim that only foreign-source income is taxable.

The IRS identifies abusive tax promoters through a variety of means, including ongoing examinations, Internet and media research or referrals from external sources such as tax professionals. If the findings of an investigation support a civil injunction, the IRS refers the case to the Department of Justice.

If the Justice Department concurs, it files suit against the promoter requesting that the court order the promoter to refrain from the fraudulent activity. Depending on the facts and circumstances of the case, the court may issue a temporary restraining order, a temporary injunction or a permanent injunction.

At present, the courts have issued injunctions against 99 abusive scheme promoters 81 permanent injunctions and 18 preliminary injunctions. They have issued permanent injunctions against 17 abusive return preparers. The Justice Department has filed an additional 49 suits seeking injunction action 28 against scheme promoters and 21 against return preparers.

The IRS is currently investigating more than 1,000 additional promoters for possible referral to the Justice Department and conducting individual examinations on thousands of tax scheme participants.

Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.

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A corporation is a designated entity where the individuals related to it, and the company, have different legal identities. The reason most companies prefer to incorporate is asset protection incorporation protects your personal assets from seizure during a lawsuit.

If you decide to incorporate your small business, you can choose the S corporation, C corporation or LLC model. Before choosing any kind of corporate model, you should look at the tax rules and regulations related to a corporation.

Tax Laws for Various Corporations

Tax laws vary from country to country and state to state. You need to go through them before and after incorporating. In general, all countries have mandatory tax requirements from companies. Your corporation needs to pay taxes on the profits it earns. Even if your corporation is registered abroad, you may need to pay taxes if you reside in your home country.

1) C Corporations have to go by standard corporate tax laws. They need to pay taxes on their profits, subject to certain deductions depending on their shareholding structure.

2) S Corporations are the best option if you have a startup company or a small business. S corporations do not have to pay income tax, and get to enjoy the advantages of being a standard corporation. The eligibility condition is that your small business should have less than 75 shareholders who are all citizens of the US. To get the benefits associated with the Subchapter S Corporation, you need to file an application with the tax authorities. If you want to submit taxes under LLC structure, you need to submit another application before the current financial year-ends.

3) Limited Liability Partnerships, or LLC, are preferred by businesses that need streamlined allocation of profits and losses. This facility is not available to S Corporations. LLCs need to file form 100 ES and Form 100.

S Corporation Taxes

Since this article is primarily concerned with entrepreneurs and small businesses, it would be relevant to go into the details regarding the S-corporation. If you decide to register yourself as an S-corporation to avail tax breaks, you need to keep in mind the eligibility conditions. Apart from the conditions already discussed, you need to remember that you have to use the calendar year as the financial year of the company. In addition, any shares your company sells have to be of a single kind.

Advantages of Being an S Corporation

1) The best thing about the S Corporation status is that the shareholders shoulder the responsibility for paying the tax as their personal income tax. Therefore, the corporation need not pay income tax twice over- first as a company and secondly as individual shareholders. In fact, most S corporations do not pay any tax.

2) It reduces the need for extensive paperwork when filing tax returns or declaring income.

If you wish to incorporate your small business and need more information about tax structures of various corporations, you can consult a small business advisor or tax consultant. Choose the type of incorporation carefully, as taxes will apply to your business based on that. Get yourself educated on the advantages and disadvantages of each type of incorporation vis–vis tax laws. This will help you reap the benefits of a corporation without having to pay huge taxes.

Alexander Gordon is a writer for http://www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.

Business Owners all across the country are joining “The Community of Small Business Owners to receive and provide strategies, insight, tips, support and more on starting, managing, growing, and selling their businesses. As a member, you will have access to true Millionaire Business Owners who will provide strategies and tips from their real-life experiences.

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The IRS is offering a new split tax refund option this year for parties that choose direct deposit for their tax refunds. Why? The agency wants to promote savings.

Lets be honest. What is the first thing you do when you get a tax refund? Do you pay off bills? Do you put it in your savings? Buy some stocks? Nah. Most people go out and buy something with it. In highly technical financial terminology, this is known as blowing it.

Americans are infamous for their saving habits. Specifically, they have no such habits. As a society, we save almost none of our savings. This makes many in the government very nervous because they know sooner or later we will be looking to them for money. Social security is already a mess and an aging population is not going to help. As a result, the government takes extraordinary steps to get us to save. This is why we have 401(k) and IRA retirement options.

This year, the IRS is getting into the fray. It is offering a split tax refund option for people that choose to have their refund deposited directly into their bank account. If you file form 8888, the IRS will split up your refund as you indicate and send it to as many as three different accounts.

You are probably wondering why the IRS would do this. Well, the lack of savings issue is starting to get very worrisome. The idea is to try to get you to put some of the money in your bank account to be spent, but also some in a savings account. Yes, things are that desperate. So, does it work? A Harvard Business School study showed a significant number of people would actually use the split refund to put at least some money in a savings or investment account. Walla! Now you can.

Is the split refund option going to solve our national savings problems? No. It should, however, give you a wakeup call in relation to how worried the government is about the issue. Social security is not going to be able to carry us all.

Richard A. Chapo is with BusinessTaxRecovery.com - providing daily tax tips.

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