Still some tax options left
In these tough economic times, planning ahead may mean a hefty return on investment for your business and family.
Taxpayers have fewer than four months to consider measures and options that will help them squeeze the most out of their assets and credits during 2003.
The deadline passed yesterday for companies who filed for extensions in 2002 to pay their taxes. Individuals who applied for more time with the Internal Revenue Service have until Oct. 15 to pay on their 2002 returns.
And the more than 8 million people of 130 million U.S. taxpayers who filed for extensions may do so electronically at http://www.irs.gov.
But IRS agents and tax consultants want to remind 2003 taxpayers there are credits and incentives on the books that will get them through rough times.
For example, teachers who buy supplies for their classrooms can write off up to $500 this year. Last year, the amount was half that.
South Tahoe Middle School teacher Holly Greenough said she used every penny available to her on her 2002 return to get her into a new school year.
“I could have used more,” she said. “You walk into any classroom and of course you’ll see something.”
Like her colleagues, Greenough has taken money out of her own pocket to pay for pencils, paper, poster board, tissue, water and even treats for her students.
But IRS spokesman Bill Steiner said he’s surprised more teachers haven’t taken advantage of the credit.
“It’s so new people haven’t take advantage of it,” he said.
He hopes word will also catch on that the credit for raising children under 17 has increased from $600 to $1,000 this year.
The capital gains taxes have also been reduced by 5 percent.
Steiner recommends individuals and businesses try every angle to save money for a few reasons.
For one thing, the economic uncertainty has prompted many businesses to cut back on their investments — a measure that critics say could hurt them in the long run.
Secondly, the tax law and payment structure established by the Jobs and Growth Tax Relief Reconciliation Act of 2003 end in 2011.
“The whole thing sunsets in 2010. Then, deductions and savings go back to (those from) the year 2001,” Steiner said.
The income bracket of 38.6 percent for the top wage earners comes down in 2003 by 2.4 percent, but it returns to 39.6 by 2011.
“The key thing is to take a look at what you’re having to spend money on anyway,” IRS agent Bob Meyer said.
For example, businesses looking to upgrade their existing technology may want to do so before the year ends to get a 20 percent credit on research and development deductions.
And if a company intends to fund a pension plan, it’s advised to get the benefit in place by the end of the year.
“What we’re finding with most credits is they’re not being used much except by the big guys,” South Shore tax consultant Robert Huckaby said. “But as times get tougher, people look for more options.”
About a quarter of his clients are corporations.
But Huckaby strongly suggests companies start looking at all the options they can to help put their finances in the black — especially in a day and age when off-the-charts workers’ compensation insurance rates are driving businesses into the red or out of California.
“That’s made a huge impact on the cost of doing business,” he said.
— Susan Wood can be reached at (530) 542-8009 or via e-mail at firstname.lastname@example.org