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Most known tax deductions

These are some of the most known and popular tax deductions there are out there.

1. Auto Expenses

If you are a small business owner, then you are able to deduct some of your automobile expenses. You may also be able to expense the cost of a vehicle if you were then to use it for your business. You should always keep track of all your business related automobile use for your own benefit. You also may be able to deduct a certain amount for mileage if you get lucky. You may also deduct for tolls and parking costs.

2. Entertainment Expenses

You may deduct for entertaining clients and prospective business contacts or going out for cocktails all for the clients benefit. You may do so as long as business is discussed during the event and it is business related in any sense. The most common entertainment expense occurs when taking business contacts out for meals drinks and parties.

3. Expenses

If you are one who would travel a lot for work, you are one lucky nut. You can deduct some of your travel expenses as well.These expenses include things like airfare, car or taxi usage, lodging, meals, calls and faxes. If i were you, i would go to those travels expos now.

4. Charitable Donations

In some cases, depending on the type of company, you may be able to deduct for charitable donations and gifts to charity. If your company is a Partnership, S-Corporation, or Limited Liability Company you can deduct for cash donations. This would benefit you in any case that your company does charity events for those charities and orgs.

5. Advertising and Marketing Expenses

When in Advertising and marketing, the costs directly related to your business may be deductible. Some of these may include business cards, radio, television or print ads and promotional activities. Anything that would have to do with a form of advertisement would be deductible.

6. Software Deduction

You can deduct software purchases for your small business if you purchase and use the new software within the same year for your business of course.

7. Equipment Expenses

Lastly, smaller business owners would then often have a good amount of equipment, which would mean that deducting equipment expenses is key. Some equipment that you may be able to deduct include things like personal computers, laptops and office furniture.

As a small business owner, you should consult in house or outside consultants as well as the tax code to get more information on what is or is not tax deductible. Especially your financial advisers.

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Ways to make a tax exempt org

A 501(c)(3) nonprofit corporation is basically a type of charitable organization that the Internal Revenue Service would recognize as tax exempt. This type of corporation would not exactly pay income tax on its earnings or on the donations it receives. Also, any time a taxpayer makes a donation to a so called or more known as 501(c)(3) nonprofit, they can reduce their taxable income by the amount of their donation if they are able to itemize their deductions on their federal income tax return. This incentive encourages private charity and makes it easier for nonprofits to raise money for their own rightful benefit.

The best reason to form a 501(c)(3) nonprofit corporation is because you have basically determined that it is the most effective way for you to pursue a charitable goal which is easy for you. Maybe there is a need that is not really being fulfilled by existing organizations or maybe you think you have a better idea that will meet a need which is more effective than what any existing organization is doing. You need to think about whether you will best be able to meet your goals by forming and running a new organization or maybe whether you could do more good by donating your time and/or money to any existing organization which you may know off. Once you have been able to determine that you want to proceed and you have also determined that your organization roughly meets the IRS requirements, then you would know that it is time to start dealing with the red tape. Decide if you want help since you may hire a lawyer if you have the resources, you can even use a do it yourself legal service like LegalZoom.com (a popular site for this) if you do not. A lawyer can actually provide you personalized guidance if you were to choose and help you avoid costly mistakes, but there are some people who do manage on their own. To add to that, following the official required steps, it is not a bad idea to make a business plan or plan out your moves, just like you would if you were starting a for profit business. Although your organization will be a nonprofit organization, you will still have to operate in the dark or back seat if you want to keep your organization running. Nonprofits are allowed to be profitable as well. They just need to be able to use those profits to further the organization’s public purpose. In an effect to contrast that, a private corporation exists to enrich its employees, managers and shareholders as well.

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Understanding tax exempt organizations

There are rules to be followed by citizens in any society. To help things run smoothly, rules have been set to benefit a community as a whole.

Others help us learn and abide by these rules as individuals and as we grow. In our young age, we were taught that we are to pay for a chocolate bar we want in a candy store. That we cannot just take what we want when there is a tag price attached to it. We know that at the age of 18 we can register and vote. And we’ve learned that come April, we need to fill out those agonizing forms. But we also know where we can go for help if doing it for the first time. Terms such as “total taxable income” and “earned income” can be perplexing for a first timer.

WHAT DOES IT MEAN TO BE NONPROFIT AND TAX-EXEMPT? ARE NONPROFIT AND TAX-EXEMPT STATUSES THE SAME?

These two terms are not the same. But are related. Many non-profit organizations long to be tax exempt and this sometimes causes confusion when referring to the 2 terms being talked described here. Charitable organizations more often than not, described as  nonprofit organizations and therefore are tax exempted and this is recognized by the federal government. There are processes in becoming non-profit or tax-exempt.  This are done at different times and by different government agencies. Generally, by applying for the status, an organization can become tax-exempt but this entails a long process. There is approximately 30 pages to application form (Form 1023 for 501(c)(3) organizations; Form 1024 for others) is approximately 30 pages, and the IRS suggests that it (1023) to begin with and this can take about eight hours to completed. A status is granted after several months.

Once status has been granted. A “letter of determination” is sent by the IRS. This letter can now be used by your organization as proof of your tax-exempt status on a permanent basis. The letters will come of use when he need arises to show foundations during application for grant. It can also be used whe applying for state tax-exemption.

There are 2 additional ways of securing tax-exempt status. They are: automatic recognition and a fiscal conduit.

 

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Tax filing for you gifts

Start by asking yourself when you would know your donation is deductible. To know when your donations or contribution are deductible, you need to take the incentive and ask the organization directly if your contribution is tax deductible. More popularly, under federal income tax laws, all or at least part of your charitable donation may be deductible, or it may not be deductible as well at all under certain circumstances. Moreover, please note that if a group tells you it is “tax exempt,” that does not immediately mean your contribution is tax deductible. Tax exempt is something that simply means that organization does not have to pay federal income taxes. You should contact your local IRS office or the organization directly if you are not sure about an organization’s tax status or the tax deductibility of contributions. Now from your mailing list, while there is still no known or proven foolproof way of eliminating your name from all mailing lists due to advanced technology, there are some simple steps you can take to cut down on the amount of charitable solicitations that you may usually receive.
You can actually write or telephone the organization directly and file a request that your name be removed from its mailing list. One thing to remember is that you cannot simply return the mailing you received with a written note, something like saying “please do not send future solicitations and emails to me,” because most charities use non profit postal rates that cover one way delivery only. In turn, you must add additional postage or the letter will not be returned to the charity, and your name will then not be removed from the charity’s mailing list, putting all your efforts to waste. Now, when you decide to make a donation, please do not forget to include a note to the organization requesting that your name should not be rented or sold to other organizations, because this may happen. If you have contributed to a certain charitable organization in the past, your name is more likely placed on a something called a donor list. Then, your name will be exchanged or sold to other nonprofit organizations who are interested in sending their appeals to known donors, or to direct mail marketers.

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Tax deductions 101

What is tax deduction exactly? So tax deduction is actually a reduction of the income which is subject to tax, for various items, especially things that include expenses incurred to produce income.

It is often pointed out that the deductions are subject to some limitations or conditions as well. A deduction which is from gross income that arises due to the various types of expenses which is incurred by a taxpayer. You must know that these tax deductions are removed from taxable income and then adjusted gross income, and thus lower the overall tax expense liability. Usually, different regions would have different tax codes which would allow a variety of expenses to be deducted from this taxable income. The tax deductions we talk about are often used to entice taxpayers to be able to participate in programs which have a societal benefit. An example of this would be, charitable donations and the expenses which are incurred to make one’s home more environmentally friendly can sometimes be deducted from the taxable income.

There are actually a lot of systems which reduce taxable income for personal allowances or even provide a range of income which is subject to zero tax. To add to that, some systems allow deductions from the tax base for items and the tax levying government would desire to encourage. Some systems would even distinguish these things among types of deductions for example something like a business versus a non-business.

For some of these non business sectors, many of the systems would allow a deduction for loss which is done on sale, on exchange, or on the abandonment of both business and non business income, which are what is producing those assets. This deduction though, may be limited to gains which are from the same class of assets. In the U.S. For example, a loss on non business assets would be considered a capital loss already, and deduction of the loss would then be limited to capital gains. Also another example is, in the United States, a loss which would happen on the sale of the taxpayer’s principal residence or some other personal assets would not be allowed as a deduction except to the extent due to things like casualty or theft.

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Tax exemption and rules

For you to be able to avail for a tax exempt status, non stock, and non profit organizations are required to be able to secure confirmatory rulings or things such as certificates of tax exemption which should come from the Bureau of Internal Revenue or more known as the BIR. The tax exemption privileges which are of these organizations are not really absolute if that is what you are thinking, and this is because it does not cover all types of income and activities as well. Now for tax exempt corporations which are usually found or listed under Section 30 of the 1997 National Internal Revenue Code, as amended, are the exempt from income tax, this is apart from those whose income was earned from activities and were conducted for profit. However, the tax exemption which is granted under the law is also not exactly automatic and absolute, which is what people usually mistake.

Now to add, the RMO is the one that provides the following causes of revocation of the tax exemption certificate or ruling. Some of these are if there are material changes in the character, in the purpose, or in the method of operation of the corporation or of the association which are more or usually inconsistent with the basis for income tax exemption and which are confirmed in the tax exemption ruling. Next would be the on renewal and non revalidation of the tax exemption certificate. And lastly if the corporation which has been issued a tax exemption ruling fails to file something known as an annual information return. There are also several different approaches which are supposed to be used in granting exemption to organizations. Different approaches may be used within a jurisdiction or especially within sub-jurisdictions. Some jurisdictions usually grant an overall exemption from taxation to organizations which usually are meeting certain definitions. The United Kingdom, as an example, would provide an exemption from rates or property taxes, and income taxes for entities governed by the Charities Law. Lastly, the overall exemption may be somewhat limited by something known as the limited scope for taxation by the jurisdiction. Some jurisdictions may levy or rely only a single type of tax exemption from only a particular tax.

 

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