Marcel V. Kuper
                   CPA - PFS - CFE

500 W Palatine Road - Wheeling,  Illinois 60090 - (847) 215-8630 - Fax: (847) 215-8632

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Tax Planning, CPA, PFS, Tax Planning Services. Certified Public Accounting Firm Offering Individual Tax Planning, Business Tax Planning.

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Life Time Planning, Inc., Individual & Business Tax Planning

Individual & Business Tax Planning 

Tax Planning Strategies

Tax Planning Strategies

As times change, it's quite possible that your tax situation will change too.  There some significant provisions in the 2001 Act that may affect you.  Changes in your personal life or business situation may also reshape your tax picture.  In both cases, tax planning can help you understand what to  expect.

Individual Tax Strategies

Focusing on Tax Rates

Knowing your tax bracket allows you to estimate how a particular tax strategy will affect your tax bill.  For example, an individual in the new 30% tax bracket who claims an additional $ 1,000 deduction will save $ 300 in taxes ($ 1,000 X 30%).

The former tax rates above 15% are being reduced over six years.  To the extent possible, take advantage of the rate cuts by deferring taxable income to a future tax year.  For example, You might ask your employer to delay paying a year end bonus until after the first of the year.

Transferring income producing assets to children in lower tax brackets can reduce your family's tax burden.  The new 10% tax rate makes this strategy even more beneficial.  Consider limiting annual gifts to each recipient to $ 11,000, so that the gifts won't be taxable ($ 22,000 limit if your spouse agrees to split the gifts; these estimated annual exclusion amounts may be adjusted for inflation in future years).  Be mindful of the "kiddie tax" rule that applies to children under age14.  Under this rule, a child's unearned income in excess of $ 1,500 is taxed at his or her parents top rate.

Planning For Life's Changes

While staying on top of the tax law changes that may affect you is important, you should also consider changes in your life that may alter your tax situation.

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Paying For Education

As you plan your taxes, several education related tax incentives may be of interest.

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Planning For Retirement

Having adequate retirement savings is an important financial goal.  Various tax favored plans can help you build your nest egg.

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Minimizing Capital Gains Taxes

If you invest outside of a tax deferred plan, your current taxes may be affected.  For example, you may have a taxable capital gain when you sell securities at a profit.

When you buy shares of the same stock or mutual fund over a period of time, you typically pay different prices.  If you sell only some of your shares, you should be able to identify the share you want to sell to achieve the best tax results.  If you don't identify the shares or choose to use an average cost method, a first-in, first-out rule applies

* If you trade securities online, check to see whether you can designate the shares you want to sell.

Track Down Your Deductions

As you plan for the year, become familiar with the types of expenses that are potentially tax deductible.

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Contact us for information on how to optimize your tax situation.  We welcome the opportunity to help you reach your goals.

Business Tax Strategies

Minimizing Corporate Taxes

That tax rates that apply to regular "C" corporations are shown in the accompanying table below.

Corporate Tax Rates

Taxable Income

Rate

Up to $ 50,000 15%
$ 50,001 - $ 75,000 25%
$ 75,001 - $ 100,000 34%
$ 100,001 - $ 335,000 39%*
$ 335,001 - $ 10 million 34%
$ 10 million - $ 15 million 35%**
$ 15 million - $ 18,333,333 38%***
Over $ 18,333,333 35%
* Includes additional 5% "recapture" tax under 1986 law.
** Personal service corporations pay tax at a flat rate of 35%
*** Includes additional 3% "recapture" tax under 1993 law.

A corporation may also be subject to alternative minimum tax.  The corporate AMT rate is 20%.  A $ 40,000 exemption amount is subject to phase out and is not available for a corporation with an alternative minimum taxable income of $ 310,000 or more.

Some small corporations (generally, those with average gross receipts of $7.5 million or less) are exempt from AMT.  A lower $ 5million threshold applies for a corporation's first three tax year period beginning after 1993 and ending the current year.

Accumulated Earnings Tax

A regular C corporation that retains earnings and profits of more than $ 250,000 ($ 150,000 for a personal service corporation) instead of paying dividends to shareholders may have to pay a 38.6% penalty tax in 2002.  Such a company can try to avoid the penalty by explaining in it's corporate minutes the reasonable business requirements for the retained earnings.

A family owned company may be able to retain excess earnings - and avoid the accumulated earnings tax - if the earnings are being held for possible redemptions of dissenting minority shareholder's restricted stock.

Compensation

C corporation shareholder employees often prefer to withdraw corporate earnings in the form of tax deductible salary and bonuses instead of nondeductible dividends.  However, a company can deduct only reasonable amounts of compensation.  Whether a certain compensation is reasonable depends on several factors, including the employee's role in the company and how the employee's salary compares to those paid by similar companies for similar services.

Leasing business property or equipment to your corporation is another way to draw out earnings on a tax deductible basis.  Your corporation can deduct the rent expense; you declare the rent as income.  Here too, amounts charged for rent should be reasonable.

S Corporation Elections

Corporate shareholders can elect to be taxed under the provisions of Subchapter S of the Internal Revenue Code.  With a valid S corporation election, corporate income, deductions, credits, and losses are passed through to the shareholders for inclusion on their separate tax returns.

S corporation shareholders can deduct losses allocated to them by the corporation only to the extent they have sufficient "adjusted basis" in their stock and any loans they have made to the corporation.  If you expect your S corporation to show a loss in 2002, you should confirm that you will have enough basis to deduct the loss.  If you need additional basis, you might consider advancing money to the corporation.

Sponsoring A Retirement Plan

Sponsoring a retirement plan for your employees can be an effective way to attract and retain talented workers and may serve as an excellent tax shelter for your own retirement savings.  When all requirements are met, contributions to employer sponsored are tax deductible and participants are not taxed on the contributions of investment earnings until they receive benefits from the plan  Various changes made by the 2001 Act - including increased contribution, benefit, and deduction limits - make sponsoring a retirement plan more attractive than ever.

The 2001 Act provides a new tax credit to eligible small businesses that establish retirement plans after 2001.  The credit can be claimed for 50% of the top $ 1000 of qualifying administrative and retirement education expenses (maximum $ 500credit) in each of the three plan years.  Most types of plans can qualify for the credit.

Writing Off Business Assets

Your business may invest large amounts of money in machinery, equipment, furniture and fixtures, real property, and other assets.  Recovering some of costs through tax deductions is an important tax benefit.

Depreciation

If your fixed asset costs are properly segregated, you may be able to depreciate certain items in a newly acquired or constructed business facility faster than the lengthy 39 year depreciation period which generally applies to commercial buildings and their structural components.

Maximizing Business Deductions and Credits

Try to take advantage of all the tax deductions and credits available to your business

Business Automobiles

One way to compute tax deductions for business related use of a vehicle is to keep track of the actual expenses.  The other way is to multiply the number of business miles driven by the standard mileage rate (3405 cents per mile for 2001, subject to adjustment for 2002).

Using the standard mileage rate simplifies record keeping, but won't necessarily produce the largest deduction.

Home Office Expenses

To deduct the expenses of maintaining an office in your home (e.g. utilities, repairs, and depreciation), you generally must use the space exclusively and regularly as your principal place of business or as a place where you meet patients, clients, or customers.

Self Employed Health Insurance

A self employed sole proprietor, an S corporation shareholder, or a partner in a partnership can deduct 70% of insurance premiums paid for individual or family medical coverage provided by the business in computing his or her AGI.  The 70% deduction will increase to 100% in 2003 and later years.

Child Care Assistance

Beginning with 2002 tax years, employers may claim a tax credit equal to 25% of qualified expenses for employer provided child care and 10% of qualified expenses for employer provided child care resource and referral services, up to a maximum $ 150,000 credit per tax year.

Many tax law changes are in store for 2002.  The sooner you start planning for your 2002 taxes, the better.  We would be happy to review your situation with you.

Marcel can also personally assist you with financial planning.  Contact us to learn more about the broad range of services we offer.

For more information please feel free to browse around our web site.  We are always happy to answer any questions, or to schedule a consultation contact:
Email Us or call us at 847-215-8630.

 

 

 

Tax Planning, Individual Tax Planning, Business Tax Planning. Tax Planning, CPA, PFS Tax Planning Services. Certified Public Accounting Firm Offering Individual Tax Planning, Business Tax Planning.

Tax Planning, Individual Tax Planning, Business Tax Planning. Tax Planning, CPA, PFS Tax Planning Services. Certified Public Accounting Firm Offering Individual Tax Planning, Business Tax Planning.

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Nothing on this web site should be construed as providing specific financial, investment, insurance, business, tax or legal advice.  You should consult with a CPA, accountant, tax advisor, insurance representative, or legal counsel prior to making such decisions.  We do not collect, sell, trade or distribute any personal information, of visitors to this web site.  If you choose to email Marcel Kuper at Life Time Planning, Inc. for further information, any information you disclose will be treated as confidential.

M.V. Kuper P.C.

500 W Palatine Road Wheeling,  Illinois 60090

(847) 215-8630  Fax: (847) 215-8632

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