Smart Money Choice$

We’re now in the last week of the year, and as we get ready to bid 2007 good-bye, there are a few smart choices that might be right for you when it comes to saving taxes. Here are four quick tips you can use this week (before December 31st) that may help lower your tax bill come April 2008:

1. Clean up your portfolio – We all should keep an eye on how our investments are doing throughout the year, but getting rid of the deadweight in your portfolio now can at least provide some tax benefits to ease the disappointment.
           
   Sell off your mutual funds and stocks that are not performing well to reduce your taxable income. Capital losses are first applied against capital gains, and then up to $3,000 in lossees can be applied to ordinary income. If you have more than $3,000 in capital losses, it will be carried forward to future years until it has been used up.
           
   Hold off until at least January, though, before selling any stocks on which you might realize a gain if you expect to be in one of the two lowest tax brackets (10% and 15%) in 2008. Next year taxpayers will pay no taxes (0%) on profits from the sale of assets they have owned for more than a year.
           
2. Buy what your business needs now – If there is any software or equipment you know your business will be needing soon, buy it before New Years hits, even if you have to put it on a credit card. Also, if you have any unpaid business bills, pay them off before December 31st. You can claim the expense on your 2007 tax return to help reduce your income tax bill. If you are a sole proprietor (filing a Schedule C), this strategy does double duty because it will help to reduce the big bite self-employment taxes takes out of your bank account too.
        
3. Pay State and Local Estimated Taxes – If you’ve been paying quarterly estimated taxes to your state and/or local taxing authorities, and you itemize on your individual tax return (file a Schedule A), then you should consider paying the 4th quarter payment before the end of the year, instead of waiting for the January 15th due date. State and local income taxes are deductible in the year they are actually paid. By making your last payment by the end of this year, you will get that much more to deduct for 2007.
         
4. Remember To Take Your Required Minimum Distribution (RMD) – If you are over 70 1/2 years old and have an IRA account (including SEP IRAs), be sure to take your RMD by December 31st or you may be subject to a nasty penalty.

As always, be sure to consult your tax professional before doing anything you are not absolutely sure will bring you maximum tax benefit. Everyone’s tax situation is different. In fact, contacting your tax person before year end is itself a smart choice, since s/he may be able to suggest other tax-savings strategies that are perfect for your situation.

Welcome to the brand new format for Smart Money Choices!

Since May 2006, this ezine has been published monthly as a simple HTML email newsletter. It’s mission has been to provide cut-to-the chase articles and practical use-it-now information to streamline the bottom line for solo entrepreneurs and self-employed professionals. But beginning with this issue, all that has changed!

I’m so excited to now be publishing Smart Money Choices in this new blog-style format because I know you’re going to just love it! In the weeks and months ahead I’ll be posting multi-media articles, tips and tools you can use to grow and prosper your business in 2008, and beyond. You won’t want to miss a single entry.

This new format is interactive and makes it easy for you to tell me what you think too. So go ahead and ask any burning questions you may have or share your best suggestions. Just use the comments function located at the end of each entry.

There are also a couple of cool features about this new format that you’ll want to check out. As the content builds, you can search to find just what you need when you need it with the search box at the top right of the page. You’ll also find a special Resource area containing some of the best business tools I’ve found and continue to use in my own business. Check them out and see if they’re right for your business too.

Coming up over the next few weeks, I’ll be announcing my brand new QuickBooks training programs for 2008. My convenient training system using cutting-edge technology will make it fast and easy for you to get the most out of your QuickBooks software, without breaking the bank. And you can be assured that all new multi-media classes and programs will be announced here first, before they are relased to the general public. That’s because I want you to get first choice at the limited seating available.

The year ahead is all about growth and improvement, and the new Smart Money Choices will be your connection to the lateast “insider” strategies so you can make the best financial decisions for your business in 2008.

So stay tuned because it’s going to be a great year!

Here’s to your financial success!

     ~Gabrielle

P.S.  To get things rolling, the first article has already been posted with KEY information you NEED to know because it will affect your 2007 income taxes!

As the first article of our new blog format, I wish I had better news to share with you about the fast-approaching tax season. But there is trouble afoot. And it has been brewing for a long time now. At this point, it looks like at least some inconvenience, if not a higher tax bill for literally millions of taxpayers is inevitable.

Way back in 1969 a law was passed that was intended to work as an income tax equalizer. Because the very wealthy are often able to claim a large amount of itemized deductions and perform tax-sheltered transactions so that they actually pay very little proportionatly in taxes, a special tax was put in place to be sure that they pay at least their fair share, compared to everyone else. This is known as the Alternative Minimum Tax (AMT).

This special tax was intended for the wealthy, but it was not indexed for inflation. So now, for 2007, it is poised to affect about 23 million middle-class taxpayers! Additionally, 25 million more taxpayers will face higher taxes for 2007, as 10 tax credits, such as the child tax credit, will expire on December 31, 2007. The truth is, the outdated AMT laws are about to adversely affect almost all taxpayers, one way or another.

Congress has been aware of this problem for many years and has passed what’s call a “patch” annually to extend the credits and protect taxpayers who should not be affected by AMT. But the number of potential taxpayers who will be hit by the tax this year requires a more complex fix than in years past.

So far, Congress hasn’t been able to agree on how to best remedy this situation. Time has run out, and the effects are getting worse with every day that passes without a solution.  

At this point, all taxpayers, even low income families will feel the effects of this problem, because it will cause a delay in all tax return processing by the IRS. At the very least, the IRS requires seven weeks after a new law is passed to update their systems and be ready to accept tax returns.  This means no one will be able to file their tax returns until February or possibly even March! That applies to both paper and electronically filed tax returns. So even those who usually file early because they expect a refund will just have to wait.

Needless to say, everyone who has anything to do with tax return preparation has already got a big headache on their hands. Sadly, all we can do at this point is keep an eye on the news and prepare for the worst. It is expected that Congress will pass a law to handle the AMT problem, but when that will actually materialize is the question.