How To Get An Amazing Tax Refund

In June, 2010, John and Julie Moneybags received a Federal tax refund of $9,932, directly deposited into their bank account, and between them they only had wage withholdings of $1475 in 2009! Their refund consisted of:

Earned income credit of	$5,657
“Making Word Pay” credit of	800
Child Tax Credit of	2,000
Withholding of	1,475

	$9,932

In May, 2010, Sam and Sadie Wealthy received a Federal Tax Refund of $14,382, sent to them by check, broken down as follows:

First Time Homebuyer’s Credit of	$8,000
“Making Work Pay” Credit of	800
Child Tax Credit of	1,100
Child and Dependent Care Credit of	1,200
Withholding of	3,282

	$14,382*

While not everyone can qualify for all of these credits, these taxpayers, and most others who obtain very good results on their tax returns, utilized these simple tax planning strategies:

Incorporate your business. Incorporation, in addition to providing limited liability and an excellent marketing tool for your business, providesremarkable tax benefits for the owners of the business.A corporation enables self-employed individuals to lower their overall tax bracket by dividing income and deductions between two entities (the corporation and your personal return), and avoids the “self-employment tax” of the sole proprietor
Pay yourself a salary from your incorporated business. Not only is payroll the compliant way for corporate officers to take funds from their corporation, but paying yourself a salary also may help you qualify for the “earned income credit,” a fully refundable credit available to taxpayers whose “earned income” falls within certain ranges, depending upon filing status and number of dependents
Set up a corporate Medical Reimbursement Plan. Most taxpayers, due to limitations, do not qualify for deductions for medical expenses. But corporate shareholders who have a Medical Reimbursement Plan can deduct without limitation all medical expenses, including over the counter drugs, medical aids and supplies, and any other expenses related to health, including the cost of gym memberships and weight loss programs.
Deduct aggressively. The tax law allows you to deduct any ordinary and necessary expenses incurred while running your business, and allows employed individuals to deduct any unreimbursed expenses incurred in furtherance of their employment. If you are not deducting the following costs that you pay in the course of business or employment, you may be missing some significant tax savings:
a. Vehicle expenses incurred for business, other than commuting;
b. Home office expenses, usually a percentage of your total household expenses;
c. Meals and Entertainment expenses;
d. Cellular (and land line) telephone expenses;
e. Internet and computer expenses;
f. Supplies you purchase to use in business;
g. Courses, dues, periodicals, books related to your business;
h. Client gifts;
i. Printing
j. Postage
k. Advertising, including classified ads, promotional expenses, and networking expenses

*The examples given in this article are from real 2009 individual tax returns prepared for my clients. These taxpayers have employed legitimate, well-accepted, every day tax strategies that many taxpayers simply fail to utilize.

Susan Carter
Tax Advisor
http://www.sgcarterco.com