How to Slash Your Tax Bill
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We know just how frustrated you feel having to deal with the taxman. But have no fear, the Dolans are here. We'll show you how to cut your taxes to the bone, protect yourself against IRS audit notices, steps to take when you do get a notice and tips for getting through an IRS audit in one piece. You don't have to go through this alone. We're right here with you!
Before we show you how to deal with the IRS when they come calling, we want to show you how to minimize your taxes now. Here are some quick tips you can use to slash your tax bills:
1. Use every tax-deductible investment plan available. Contribute to an IRA, 401(k) plan, or similar tax-deductible, tax-deferred pension program. Start with whatever plan is tax-deductible and invest as much as possible in this account. If your employer offers any matching funds in your 401(k) plan, take 100% full advantage of them.
2. Double the tax deduction claimed for your kids. Instead of paying your kids an allowance, or having them get part-time jobs somewhere else, hire your kids to work in your part-time business and pay them a salary. What's the benefit? You keep the dependency exemption—and you get a tax deduction for the salaries you pay your kids. Stuffing envelopes, cleaning your office, typing and filing are all bona fide business expenses. Your kids may even want to open their own IRA account—let 'em! They'll be millionaires by the time they're 40!
3. Time the purchase of investments. It usually makes sense to purchase a stock or mutual fund after dividends are distributed. If you buy shares on Monday at $10/share, and a $1 dividend is paid out on Tuesday, the share price drops to $9/share. Reinvest your dividend, and you again have $10 invested—but now you have to pay 28¢ in taxes on your $1 dividend. If you wait until after the dividend is paid out you still have $10 invested, but you owe no taxes.
Sell a stock or mutual fund before dividends are distributed. Sell after the distribution, and you'll get a lower share price plus you'll owe taxes on the dividend. (Stock dividend payout dates are listed in The Wall Street Journal, and mutual fund families will give you the date dividends are declared—just call and ask.)
4. Use your charitable mileage deduction. This is one of the most overlooked deductions. The IRS gives you 14¢/mile (plus tolls and parking fees) for traveling to or from volunteer work. And don't forget the miles you travel to drop off old clothes at the Salvation Army.
5. Give cash or tangible assets the "tax-smart" way. When you make your charitable contributions this year, be a tax-smart Santa. If you have an asset that has gained in value, give the charity the asset outright. You avoid the capital gains tax and you get to deduct a larger charitable contribution. If you have an asset that has lost value, sell the asset, use the loss to offset any other capital gains, then give a cash contribution and take the charitable deduction.
6. Take a tax-deductible vacation by setting up job interviews in the region you're visiting. As long as your interview is for a job in the line of work you're currently in, some of the costs of your vacation may be tax-deductible—even if you don't get the job. These costs include: airfare, car mileage, car rental and passport fees. Remember, your visit has to be mostly business to be tax-deductible. You can't take a deduction for one job interview during a week's trip to the Bahamas.
For more tax advice, click on any of the links below:






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