Wayne's "MAKE MY LIFE LESS TAXING!" eZine... ...the bi-weekly publication dedicated to helping you pay the least amount of tax required by U.S. tax law. And not a penny more. Week of March 10, 2003 =========================================================== This has been quite a Tax Season. -- My ebook is selling like hotcakes (my children are calling me "The Next American Tax Idol"). -- My 11 year-old daughter's basketball team finished the season undefeated. -- but alas, I've yet to beat my 6 year-old son at the Pokeman trading card game (28 straight losses, but who's counting). I've always liked March. I make lots of money, my wife and I celebrate our anniversary (March 30 will be, uh, let me think, oh yeah, 18 years!). . . . . . and my dear Grandmother celebrates her 89th birthday. Whoa, I wonder what the tax code will look like when I'm 89 (I'm 45 now). I'm sure it will be simplified by then, don't you? Speaking of my Grandmother, here's a story I think you'll enjoy. =========================================================== Taxes and Potatoes -- by Wayne M. Davies Copyright 2003 Wayne M. Davies Inc. =========================================================== I'll never forget the day my Grandma was too sick to go to church. As a child, my sister and I would regularly spend Saturday night at my Grandma's house. Then, on Sunday morning we'd go to church. One week my Grandma got so sick she just couldn't go. My sister and I were shocked. So Grandpa took us. We got home from church around noon. Grandma was feeling better by then and managed to prepare Sunday dinner. She felt bad about missing church and was eager to hear all about it. "Well", she said. "Tell me about the sermon. What did the preacher have to say?" My Grandpa was a man of few words, and when it came to religion, well, he rarely had anything to say. He just shrugged and continued serving the mashed potatoes. "Com'on. Tell me what the sermon was about," Grandma pleaded. "Sin", replied Grandpa. "Well, what did he have to say about it?" asked Grandma, growing impatient. "He was against it", said my Grandpa. "Pass the gravy." ========================================================== What does this story have to do with taxes, you ask? Plenty. Taxes. Are you "for" them or are you "against" them? Obviously, we're all against'em. But that's usually as far as the conversation goes. We hate them. We despise them. But what do we do about them? Very little. Virtually nothing. Think about yourself. What have you done in the past year to reduce your taxes? Anything? Well, maybe you've purchased (and even read) my ebook, The Tax Reduction Toolkit. But what have you done to implement the tax-reduction strategies presented in my ebook? Have you used the $395 worth of tax planning coupons yet? Have you scheduled your free 60-minute phone consultation to discuss your tax situation with me? Have you sent me your previously filed income tax returns so I can review them for potential tax-saving strategies that perhaps you've overlooked? Or maybe you haven't read my book. For some reason you chose not to take me up on my outrageous guarantee: my ebook will reduce your taxes by $2,000 or your money back. If you haven't read my ebook, my question to you is this: What are you going to do this year to reduce your taxes? Where are you going to find the info to put an extra $2,000 in your pocket this year? It's just a mouse-click away: http://www.YouSaveOnTaxes.com/toolkit.html =========================================================== Wayne M. Davies is author of the new eBook, "The Tax Reduction Toolkit: 29 Little-Known Legal Loopholes That Will Reduce Your Taxes By Thousands (For Small Business Owners and Self-Employed People Only!) Don't file another tax return until you visit: http://www.YouSaveOnTaxes.com/toolkit.html =========================================================== Reader Q&A: QUESTION: Can I contribute to a ROTH IRA if I'm already contributing to a SIMPLE IRA? Scott Wolfington, CEO BoogieTools, Inc. http://www.boogietools.com ANSWER: Yes, provided your income is less than the following amounts, depending on your filing status: Married filing joint: $150,000 Single, Head of household: $95,000 ------------------------------------------------------------ QUESTION: My husband and I own a golf-oriented LLC which we have elected to treat as a partnership. We are both members of the LLC. My husband is also employed as a golf sales rep and he uses his vehicle to make sales calls. He became a company employed rep in July of 2002. Previously, he was independent and filed a Schedule C. Starting in July, his company began reimbursing him for his gas bills for his car and travel expenses. When he makes sales calls, he usually discusses both his company and business for the LLC. The expenses for the vehicle he drives will be deducted on the Sched C for the first half of 2002. Can we deduct anything for the vehicle on the LLC return for the last half of 2002, and couldn't we transfer the vehicle to the LLC from now on? We also use our home office for the LLC business and for his rep office. Can the LLC take a deduction for this? Once again, the first six months of the year are tied to the Schedule C. I will be interested to hear your approach to this perplexing issue. ANSWER: Re: taking a deduction for the LLC for the last half of 2002, the key to this question is the statement: "his company began reimbursing him for his gas bills for his car and travel expenses." By "his company", I assume you mean his employer. Therefore, because of this reimbursement, you have no out-of-pocket expense for car and travel. No expense, no deduction. Make sense? You came out way ahead here, though. It's much better to get reimbursed than to get a deduction. Which would you rather do: A) Spend $1,000 on travel and get it all back vs. B) Spend $1,000, get no reimbursement, and get a deduction for $1,000 which saves you approx $300 in taxes (assuming your total federal & state income tax rate is 30%). In Scenario A your out-of- pocket expenditure is zero. In Scenario B your out-of-pocket is $700. See the difference? You could get an additional deduction for the LLC whenever the car is driven exclusively for LLC purposes. Just keep track of that mileage and take the mileage deduction (for 2002, it's 36.5 cents/mile). I do not recommend transferring the vehicle to the LLC. Having the business own the vehicle usually makes sense when the vehicle is used 100% for the business. But the vehicle is being used by your husband for his employer activities for which he is being reimbursed. If the vehicle is owned by the LLC, the vehicle expenses would be deductible only to the extent that the vehicle is used for the LLC, which might not be very much. You'd have to keep track of mileage driven for the LLC vs milege driven for other purposes and allocate the LLC use accordingly. ---------------------------------------------------------- Discover How To *Eliminate* Your Business Tax Nightmare... FINALLY you can easily get rid of that record-keeping nightmare you face every Tax Season (regardless of how big or new your business is) AND take advantage of every lucrative tax deduction available to you, resulting in a potential windfall in tax savings. Find out how easy it can be at: http://www.internettaxhelper.com/g.o/wmdctp ----------------------------------------------------------- QUESTION: I have a new internet business...about a year old. I make a small amount each month in affiliate sales. I don't sell hard goods myself (but that will change in the near future when my ebook is finished). Should I have a business license through the state? Are there state tax implications for me that I'm unaware of? I'm not trying to avoid anything, I'm just new to all of this and a bit ignorant! ;-) I'm assuming I'll need a business license, registered with the state, once I begin selling hard goods because of the state sale's tax. How does that work with an e-business? I don't ever recall paying for "sale tax" when I've purchased various ebooks from various marketers. ANSWER: Currently there is no sales tax on internet purchases -- hopefully it will stay that way! But if you start selling product in a fixed location to other residents of your own state (in other words, open up a retail-type operation), then you will have to collect and remit any state sales tax. Your question re: a business license depends on 2 major factors: 1) what state you live in (the laws very greatly from state to state) and 2) what type of legal entity your business is: sole proprietorship, partnership, LLC, or corporation. I would contact the Secretary of State's office -- most states have a free "new business guide" that spells out the particular requirements of forming a business in your particular state. ------------------------------------------------------------ I welcome your feedback and questions. If you have a tax question that's got you stumped, send it my way and I'll do my best to answer it in a future issue. Until next time, Many Happy Returns, Wayne =========================================================== Contact Information: Wayne M. Davies Inc. 4660 W. Jefferson Blvd., Suite 220 Fort Wayne, IN 46804 Tel 260-459-3858 / Fax 260-459-00124 TOLL FREE 866-543-5257 email: Wayne@YouSaveOnTaxes.com http://www.YouSaveOnTaxes.com http://www.MagneticMarketing.biz ======================================================