Oh my how I procrastinate!

The holidays got the best of me but here I am right on time because we all know, as soon as the ball drops, it's time to start getting those deductions and tax plans in order!

We had Free Money Part 1 and Free Money Part 2.  Here are the final two tips:

#10 - The best way to save tax dollars is to reduce your income before you pay taxes. So how about getting a miscellaneous fringe benefit from your employer instead of cash? Often an employee wants that green stuff that they often miss the bigger picture.

Not sure what I'm trying to say? Let me explain: You get your paycheck after paying all of your taxes or so to get to work every day you must ride a bus so you buy a pass for $120 dollars a month. Now instead of that let's have your employer give you a discount fare card up to $120 a month.  This is considered a de minimis fringe benefit plan (it's tax free) so not only do you get this for free but it does not show up as income so you are keeping more of your paycheck in your pocket.


#11 - Free Money isn’t always about what you can get for yourself but what you can give to someone else and in return you pay less in taxes therefore you put more money in your pocket. Gifts, Bequests and inheritances do not constitute taxable income but any money you earn from that money is taxable so one way to reduce those taxes is to give some of those earnings to a charity then that will reduce your income and your taxes. Sometimes to give you actual get and this is one of those times. This is also a great way for anyone that itemizes to reduce their taxes.  Just be sure you document what you're giving and if you are using an IRA or some other retirement account have them send the check directly to the organization then you avoid taxes on those distributions.

I do encourage you to always check with your tax planner to be sure you are keeping all or as much as you can of your hard earned money. 

Have a safe, happy new year, and I hope this helps you with reducing your taxes for 2009!

More Free Money Tips Part 2

Consider this my Christmas present to you! Picking up where we left off last time...

 - Group Life Insurance
Group term life insurance coverage $50000 or less provided to you by your employer is excludable from your income. You are not taxed on the cost of group term life insurance protection of more than $50000 if the coverage is provided after you have retired and are disabled, Your employer is the beneficiary of the policy for the entire period or the only beneficiary of the amount over $50000.00 is a qualified charitable organization for the entire period the insurance is in force during the tax year by naming a charitable organization as the beneficiary of the policy.

 - With the holidays coming how about making your employee really happy by giving them FREE MONEY that’s right I know too good to be true but you can give your employees a distribution that is excludable from their income if it is not of substantial value and is given for substantially non compensation reasons. So the IRS policy allows you to give each employee up to two non-cash gifts per year, tax-free, for a special occasion Gifts up to $500 per employee so think outside of the box cash isn’t everything and you can sure enjoy thing just as much as money especially when it is FREE.

Also think about setting up awards, be sure all employees can participate the IRS policy is the cost of the awards to $500, including taxes Awards up to $500 per employee.

- Which brings us to Employee Awards/ Achievement Awards

This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. For this exclusion, treat the following individuals as employees: 

• A current employee.
• A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee.
• A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.

In addition, the pay must meet both of the following tests.

Test 1. It must be reasonable.

• The duties performed by the employee.
• The volume of business handled.
• The character and amount of responsibility.
• The complexities of your business.
• The amount of time required.
• The cost of living in the locality.
• The ability and achievements of the individual employee performing the service.
• The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation.
• Your policy regarding pay for all your employees.
• The history of pay for each employee.

Test 2. It must be for services performed.

• Achievement awards. .
• Length-of-service award. An award will qualify as a length-of-service award only
• Safety achievement award.

- EXPENSES of YOUR Employer
The IRS does not tax reimbursement expenses that are true reimbursements for expenses you paid on behalf of your employer. The IRS recognizes the impossible administrative verification problems in auditing such expenses. For whatever reasons, therefore, they are nontaxable. So here is an example let’s say your employer arranges for you to work from 11am to 7pm instead of 9 to 5 and your boss agrees to provide you with dinner money, these personal supper expenses therefore can be converted into nontaxable income. In effect, no matter what tax bracket you are in. you have arranged for the irs to buy you dinner.

Check back, I'll have the rest of the tips for you before Christmas hits!