The taxman cometh: Are you really ready?

WASHINGTON – Sept. 19, 2007 – There are just three months left for self-employed real estate professionals to make the right moves to cut taxes without provoking the Internal Revenue Service.

The IRS has announced that it will scrutinize more small-business returns to collect what it estimates to be $68 billion in revenue lost because owners underreport their income.

The safest way to deal with the IRS is to report everything you make and take every deduction to which you’re entitled.

Here are four things to do now to take your hard-earned cash out of the clutches of the tax collector.

• Stock up on office supplies, computers, cars. Business owners can take a tax deduction of up to $125,000 for equipment they buy in 2007 without having to depreciate it, says Mildred Carter, a senior tax analyst with research firm CCH.

• Feed your retirement plan. A solo or small business 401(k) shelters more money than most other retirement plan options, but it has to be set up by the end of the year, says Tom Ochsenschlager of the American Institute of Certified Public Accountants.

• Pay now; get paid later. Pay all the bills you can by year-end, while pushing as much income as possible into 2008. The money you pay out this year is deductible; the fees you don’t collect until January won’t be taxed until 2008.

• Tidy up your records. The IRS can demand proof of every purchase and compare receipts to bank accounts. Make sure you get it right.

Source: Newsweek, Linda Stern (09/17/2007)

© Copyright 2007 INFORMATION, INC. Bethesda, MD (301) 215-4688

Questions, comments or suggestions on this article? Have a news tip? Send a letter to the editor to: Newseditor@floridarealtors.org.