Let’s examine a house of worship. It’s possible for members to deduct evangelism travel expenses, even if the charity (a church in this example) never initiated, controlled, supervised, or assisted with the trips. The church fostered missionary work in general. Before the trip, the church provided the taxpayers with letters of commendation serving as introductions to other interfaith groups during the trip. And after the trip, the charity publicized the member’s efforts to the other congregations. This allowed the taxpayers to deduct mileage at the prescribed IRS rate, air fare, lodging, and meals while on their missionary trip.

Consider the potential deductions for those taxpayers involved as board members to a charity, or simply significantly involved. In a recent decision, the Tax Court noted “control” by the charity is only one of the factors to be considered. You don’t have to necessarily be controlled or directed by the charity to make your deductions stand up. But there should be a strong affiliation with the charity, and the taxpayer must be accountable to the charity.

There are recordkeeping requirements, of course. Noncash contributions greater than $250 must be acknowledged by the charity. The taxpayer will likely have to request this from the charity with a simple form, one which the charity will to be happy to complete in order to secure your deduction and advance the mission of the charity.

Looking for a secret code? You’ve found it! It’s “GOBULLS”. For more information on this and other tax deductions, contact us.

Nevertheless, you can lighten the financial burden of putting your children through school by taking advantage of certain tax-favored vehicles. These techniques are generally available to grandparents as well as parents. Here are four prime examples:

1. Section 529 plans: There are two main types of Section 529 plans. With a “college savings plan,” you can make generous contributions to a special account established for a designated beneficiary. Every state offers its own versions of these plans. With the second type, you may arrange to pay future tuition costs in today’s dollars through a “prepaid tuition plan.”

Funds contributed to a Section 529 plan may accumulate without any current tax, and distributions are tax-free if the money is used to pay for qualified higher education expenses. When an older beneficiary (such as your first-born child or grandchild) graduates, you can transfer the remaining balance in the account to a younger beneficiary.

2. Custodial accounts: A custodial account established under controlling state law is a more traditional way to save for college. Typically, you create a bank account in a child’s name and manage the assets until he or she reaches the state-mandated age. The income is taxed at the child’s tax rate, which is usually lower than your rate. Caveat: Under the “kiddie tax,” unearned income above an annual threshold ($1,900 for 2011) received by a child under age 19, or a full-time student under age 24, is generally taxed at the top marginal tax rate of the parents.

3. Section 2503(c) trust: This type of trust (sometimes called a “minor’s trust”) avoids kiddie tax problems because the income it generates is taxed directly to the trust. Furthermore, unlike a custodial account, you can set up the trust to continue past the state age of majority, as long the child doesn’t exercise a limited right to withdraw the funds. The trust must comply with all the legal requirements.

4. Coverdell ESAs: The Coverdell Education Savings Account (ESA), initially dubbed the “Education IRA,” is essentially an IRA used to pay for education expenses. This type of account may be used for elementary and secondary school expenses as well as college. However, the annual contribution limit for Coverdell ESAs is only $2,000, as opposed to Section 529 limits usually reaching six figures. Also, eligibility is phased out for high-income taxpayers.

Contact us if you would like us to help you determine the best approach for your situation. Looking for a secret code? Check out one of our other bogs — you’re close!

The revised rates are 55.5¢ per mile for business driving and 23.5¢ for medical and moving driving. The rate for charitable driving is fixed by law and remains at 14¢ per mile.

The rates for the first half of 2011 (January 1 through June 30, 2011) are unchanged: 51¢ per mile for business driving and 19¢ per mile for driving for medical or moving reasons.

If you have questions concerning how to calculate mileage for your business, contact us.

What can you do to reduce the risk of losses? The textbook answer is “internal controls.” This refers to things such as standard procedures for approving and paying bills. It includes segregation of duties – having more than one person involved in preparing, signing, and reconciling checks. Unfortunately, many small companies don’t implement proper controls – either because there’s not enough staff or because they think it’s too much trouble.

Regardless of the size of your business, here are some steps you can take:

* Maintain a strict rule that ALL invoices MUST have an approval signature before being paid. Nothing focuses a person’s mind like having to sign his or her name on something.

* Have a policy that ALL employee expense reports MUST be signed off by a higher-level employee.

* Make it a rule that the person who prepares a company check CANNOT sign that check.

* Ask your bookkeeper or accountant to give you written confirmation each month affirming that the bank statement has been reviewed and balanced.

* On occasion, ask to see the bank statement and canceled checks for the prior month and then review them in detail. Not only will this increase your chances of spotting fraud, but it will also remind you just what the company’s cash is being spent on.

* Follow up personally to make sure that these procedures are being followed.

Please contact our office for details or for assistance in improving controls over your company’s cash.

For example, maybe you’ve bought a house for the first time. Did you know that the deductible mortgage interest could reduce your taxable income? That means you might need less tax withheld from your paycheck every month. Or maybe you refinanced last year, in which case your interest deduction could be lower and you might want more dollars withheld.

Even if your financial situation hasn’t changed, your withholding could be higher than it needs to be. Many people like to have extra withheld so they receive a large tax refund each year. That’s fine if you’re worried about being surprised by a big tax bill, but it means you’re making an interest-free loan to the government. If you’ve consistently received a large refund for several years, consider reducing your withholding. But don’t just fritter away the extra take-home pay. Use the money wisely by paying down credit card debt or boosting your retirement contributions.

You can adjust your withholding by asking your employer for a new Form W-4 and filling out the simple worksheet. If you need help figuring out the right withholding level, contact our office.

A word of caution: If part of your account is invested in company stock, get details on the tax issues before you withdraw or roll over funds.
The bottom line: Do all you can to keep your savings in a tax-favored account. You’ll be glad you did when you reach retirement age. Please give us a call at (813) 514-8273 or send us an email at wrobelcpa@gmail.com if you’re facing this situation. We’ll be happy to advise you on your options!

In the past, 401(k) plans were typically offered by larger corporations. Employees could make pre-tax contributions by payroll deduction. The company would then usually match a percentage of those contributions. Investments grew tax-free until withdrawn at retirement. One advantage of a 401(k) plan is the relatively large amount you can contribute each year – $16,500 in 2011 with an extra $5,500 catch-up if you’re 50 years old or older.

Now you can establish the same type of plan if you’re self-employed or run an “owner only” business. That’s a business with just you and possibly your spouse, but no employees. You can save more with a solo 401(k) than with the traditional SEP, SIMPLE, or Keogh plans. That’s because you are able to make two types of tax-deductible contributions. First you make the usual employer contribution as owner of the business. Then you can make an additional salary deferral as an employee. As a result, you could potentially shelter up to $49,000 of your 2011 self-employment earnings from tax. If you’re eligible for the over-50 catch-up, that rises to $54,500.

Solo 401(k) plans are flexible and relatively simple to administer. If you think this plan might be right for you, please contact our office. We can tell you more about it and help show you how much you could save.

So, should you incorporate?

You might not need to incorporate. Depending on the size and type of your business, liability may not be an issue or can be covered by insurance. If so, you could join millions of other business owners and operate as an unincorporated sole proprietor.

If you do decide to incorporate, you’ll face a choice of corporate forms. All offer limitation of your liability, but there are differences in tax and other issues.

C corporation

The traditional form of corporation is the C corporation. C corporations have the most flexibility in structuring ownership and benefits, and most large companies operate in this form. The biggest drawback is double taxation. First the corporation pays tax on its profits; then the profits are taxed again as they’re paid to individual shareholders as dividends.

S corporation and LLCs

Two other forms of corporation avoid this double taxation: S corporations and limited liability companies (LLCs). Both of these are called “pass-through” entities because there’s no taxation at the corporate level. Instead, profits or losses are passed through to the shareholders and reported on their individual tax returns.

S corporations have some ownership limitations. There can only be one class of stock and there can’t be more than 100 shareholders, none of whom can be foreigners. State registered LLCs have become a popular choice for many businesses. They offer more flexible ownership than S corporations and certain tax advantages.

Whether you’re already in business or just starting out, choosing the right form of business is important. Even established businesses change from one form to another during their lifetime. Some companies use more than one type of corporation – for example, an LLC to hold the business’s real estate and an S corporation for other operations.

Contact our office for guidance in selecting the form that is best for your business. If you do not already have an attorney for your business, we will be happy to recommend someone.

* If you have summer travel plans and the primary purpose of your trip is business, you can deduct all the travel costs to and from your business destination and all other business-related costs even if you add on a few extra days for pleasure. You can’t deduct costs related to the pleasure portion. Including a spouse or friend on your trip is permissible, but you can’t deduct the additional costs for that person.

* If you itemize your deductions, you can deduct the mortgage interest and property taxes paid for your vacation home. A boat or RV can qualify as a vacation home if it has sleeping quarters, cooking facilities, and a bathroom. If a retreat also serves as rental property, you can control your tax deductions by changing the number of days you use it for vacation.

* If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

* If you own a business, consider hiring your child for the summer. Your child can earn up to $5,800 tax-free this year, and your business is entitled to a deduction for the wages paid. If your business isn’t incorporated, a child under 18 is not subject to FICA taxes.Be advised, however, that you must pay your child a reasonable wage for actual work performed.