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  Tax Tips

Daniel E. Siri
Daniel E. Siri, CPA
363 Village Square
Orinda, California 94563-2505

email: dan@desiricpa.com




Tax Tips


Tips

A tip on how to lower your taxes

How To Double Your Property Tax Deduction

In most states, property taxes are paid a year behind the year they are assessed (keep in mind some states have no property tax and therefore this would not apply).

In order to double your property tax deduction for this year, pay this year's taxes before December 31. If you can't afford to pay property taxes twice in one year, remember that funds are usually escrowed with your mortgage payment specifically to pay taxes. If you decide to pay additional property taxes, check with your mortgage company to see what your escrow balance for taxes is at that time. Then when you pay the taxes at year end, take the receipt issued by your department of property taxation and submit it to your mortgage company for reimbursement. They must refund the balance when you show proof of payment of the taxes.

If you can pay additional property taxes, it's a good idea. That deduction may be eliminated, but it won't happen until after the election if it happens at all. Paying now means you will secure at least an extra deduction that others won't.

This technique is great for salespeople who find themselves closing that big deal at year-end, thus experiencing extra cash. It lowers your tax in the time of plenty, and at the same time lowers expenses for the next year which may not hold such fortune. Pre-paid tax deductible expenses provide a good way to manage taxes for anyone who has up and down trends in their income.


Returns

How to audit-proof a tax return

Audit-proofing techniques can be used effectively to prevent audits, penalties and the wasting of time. The techniques are simple -- especially since the IRS produces a special audit-proofing form you can use. Audit-proofing is based on the principal of providing with your return the information relevant to a claim in your return. You provide information for claims you think could raise a red flag and cause an audit.

Charitable contributions, mileage claims for a small business, unusually high entertainment costs, a home office reduction, or unusual medical expenses are among those deductions that are highly scrutinized.

By providing proof in the case of a potentially suspect deduction with the return, you eliminate the need for the return to be audited. Proof may include copies of canceled checks, copies of receipts, or an affidavit explaining how you arrived at certain deductions.

Form 8275 is a form the IRS would rather you did not know about or use. It is called the Disclosure Statement. When filed with the return, it calls attention to a claim made and says "I claimed this based on these specific grounds." In short, it allows you to prove your claim without going through an audit.

By proving your case before an audit, you greatly reduce the need for an audit, and the scope of an audit if there are other claims called into question later. The IRS would rather not audit those who are informed and prepared to quickly respond.


Assets

Appreciated assets/charitable gifts

Both you and a charity can benefit if you give appreciated assets to the charity instead of selling the assets and donating the after-tax proceeds. The amount of the savings will depend on how much capital gains tax you would have paid on the sale. For example, suppose you are in the 39.6% bracket and plan to make a charitable gift of appreciated securities worth $100,000 with a cost of $40,000. You must choose between gifting the securities outright or selling the securities and gifting the cash proceeds. The gift of stock allows you to permanently avoid $12,000 of tax on the appreciation ($60,000 appreciation 20% capital gains tax rate).



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Daniel E. Siri, CPA

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