Many taxpayers think they can save taxes by giving property to a close relative before they die. If you’re thinking about doing this, you could be making a mistake that can cost your heirs a substantial amount of tax money.

Take Ben Williams, for example. For many years, Ben had been the favored painting contractor in his home town. Inside or outside, from doorsteps to double-deckers, Ben Williams got the call when homeowners wanted a first class paint job at a reasonable price.

Ben wielded a mighty paint brush, but his climb up the ladder of success was modest. as he gave a fresh new look to house after house, Ben wondered when he could touch up his financial affairs and buy a house he could call his own. The opportunity finally came in 1990 when Ben, negotiating from atop his painter’s …

The IRS is always on the lookout for misclassification of workers as independent contractors rather than employees. If the workers are independent contractors, the company avoids paying employment taxes. But you must treat workers as employees rather than independent contractors if you exercise control over how, when, and where they perform their duties. Important: Treat all workers doing the same job in the same manner, as either employees or independent contractors. If you treat some as employees and others as independent contractors, the IRS can say they’re all employees and assess employment taxes.

If an occasional trip to the race track is one of your hobbies, you probably know that your winnings are taxable and your losses are deductible only to the extent of your gambling gains. The IRS certainly won’t object to your paying taxes on your race track winnings, but proving your losses is a horse of a different color.

When one horseplayer brought a bag of parimutual tickets to tax court as proof of his losses and asked that their cost be deducted from his winnings, the court declared him a loser because the tickets had footprints on them.

another veteran horseplayer produced a similar collection of losing tickets as proof of his losses. But the court noticed that although the tickets had no heel marks, their  denominations and  serial numbers were so varied that the gambler would have had to buy …

You can deduct actual mileage costs when you use your car for business purposes. as a general rule, you must keep a diary that includes the beginning and ending odometer readings foreach trip, as well as the trip’s purpose. Loophole: The diary entry is sufficient to prove your deduction if you are taking the IRS standard mileage rate for driving costs. You don’t need to collect receipts for gasoline, repairs, insurance and other automobile expenses unless you’re deducting your actual driving expenses rather than the IRS rate.

Many people don’t realize that sound tax strategies are part of a solid personal financial plan. So what’s practical and effective for some taxpayers may not be the best strategy for others. However, regardless of your financial goals, it’s important to look at possible tax strategies now, so you can generate tax savings for the entire year. Here are some of the best ways you can save tax dollars this year.

1.  First,  look  at  the  big  picture. Establish your investment goals and your insurance, education, and retirement needs. Make sure you under- stand the benefits that your company can offer you. Tax savings strategies will only make sense to you when you have a financial plan.

2. Make your retirement plan contribution now. Even if you can’t take a deduction for your contribution, remember that the money you put into the plan will compound on a tax deferred basis. …

Inherited Property

If you sell inherited property at a loss, you can deduct the loss on your tax return.

Example: Your parents leave you a house with an original purchase price of $100,000, and a market value of $300,000. You inherit the house estate tax free, receive a “stepped-up” basis of $300,000, and hold it as an investment (you do not live in it). When you sell the house for, say, $260,000, you can deduct $40,000, subject to annual loss deduction limits. (As mentioned earlier capital losses are deductible dollar for dollar against capital gains and can offset up to $3,000 of ordinary income each year. Excess losses are carried forward to subsequent tax years.)

Added benefit: The loss is deductible even if it is created by brokerage commission payments.

It’s not unusual for closely-held corporations to operate through more than one division and for key employees to be on the payroll of both. If an employee’s combined salary from each corporation totals more than $110,100 excess Social Security taxes might be incurred.

There’s a way, however, to avoid this problem. Instead of each corporation issuing its own payroll check, designate one company in the group as a common paymaster, which can issue one check to the employee on behalf of all the companies involved. To do this, you must meet one of these three criteria:

The corporations involved must have at least 50% common ownership.

Half or more of the officers of one corporation must also be officers of another.

The corporations must share at least 30% of their employees.

The result? Let’s say an employee is drawing a $100,000 annual salary from each …

One of the biggest expenses most people will face during their lifetime is the cost of education, both for their children and for themselves. How­ever, with a little creative planning, you can lower those education expenses with some help from the IRS.

Your children’s education

Buy a second home for your child to live in at college. Instead of paying housing expenses to a college or pay­ing rent to a landlord, your child can live in your second home. If it is your only second residence, you can take several deductions.

You can deduct the interest on the mortgage for your second home as long as the total of the mortgages on your primary residence and your second residence is not more than $1,000,000. You must use the mortgage proceeds to buy, build, or improve the home.

You can deduct the interest on a home …