April 15, The "Anti-Holiday"

By Mark Hunter

Mark Hunter, artist and accountant, offers complete tax preparation and accounting services.

In the collective American consciousness, April 15th has become, a sort of anti-Holiday. The Black Hole of Holidays. We don't celebrate April 15th but we certainly acknowledge it..While not festive, this annual landmark is a reminder, at least in the collective subconscious, that we are all in this together. That being a member of society requires that we pay up for such things as roads and police and education and the infrastructure that keeps the fabric of our society intact.

Cumbersome and at times awkward, the tax code embodies what we value as a society. Actions and behaviors that are considered beneficial to creating and maintaining those values and standards are rewarded. Consider the fact that Interest paid on Home Mortgages or Loans collateralized by Home Equity is fully deductible while Interest on personal credit cards is not. Why? To encourage Home Ownership and to discourage living beyond our means.

Herbert Hoover said "The Business of America is Business." This underscores the industriousness and innovativeness attributed to Americans and our way of life. This is what we value. It should come as no surprise then that our tax laws encourage and reward these attributes.

As artists, creators, healers, merchants, and consultants we shape and often build our lives around developing our businesses. We need to support ourselves. More important is the deeper calling to craft these survival needs and the skills we have acquired into something that benefits society and helps enable us to actualize our potential. So how does the tax code set out to reward such behavior? Let me count the ways.

Well, the ways are too numerous to itemize in these few paragraphs. But the essential question to ask is: "What expenditures have enabled me to create more wealth, more income, more business? What investments have I made, in myself and in my business, to sharpen my skills and improve my services?" Consider every expenditure.

The nominations for this category are, of course, ultimately determined by the tax code.

What's on the average tax payer's mind? Paying less taxes of course. Legally. There are tax shelters (yes even legal and non-controversial ones) and ways to defer income. Deferring income refers to investments or annuities that allow you avoid paying taxes on certain income items until a later date. Tax shelters are devices that redistribute income in ways that maximize tax savings.

The most notable income deferral is an IRA or 401k plan. Monies invested in these retirement plans are not subject to Federal or State income tax until actual distributions are made. Usually when the tax payer is in a much lower income tax bracket. Maximum contributions to an IRA shot up to $4,000 this year and will remain at that level through 2007. Workers can contribute up to $14,000 in qualified company 401k plans. The downside to such plans is early withdrawal where penalty taxes of up to 20% can really take their toll.

There are also deferred annuities to consider. Capital Gains, Interest and Dividends are not taxed on these annuities until distribution time which could be many years down the road when the brackets work much better in your favor.

The penultimate vehicle for paying less taxes is Real Estate. Interest on mortgage and home equity payments, property taxes, the cost of repairs and improvements can knock considerable amounts off of your tax bill. And if you've refinanced don't forget to deduct the points. An investment in Rental Real Estate carries additional deductions for depreciation and rental expenses.

Business owners have great opportunities to decrease their tax bills by taking advantage of all the write-offs afforded them in the tax code. If you still think you're paying an inordinate share of our nation's burden, you may find it advantageous to incorporate.

Renewable energy sources and clean fuel transportation are now beginning to see the light of day on Form 1040 and beyond. 2006 promises to be a brighter year for those investing in the future of our planet as society demands that we take the immediate step of cleaning up our environment and planning for a more sustainable renewable world. Tax credits for Solar panels and Hybrid cars are just part of the agenda.

Other vehicles might include specially designed partnerships in business activities where income flows are not expected until future periods but require heavy initial investments. Many of these vehicles are in such areas as Natural Gas and Oil Exploration or Cattle Breeding. If you've ever wanted to get into the motion picture business you may find some income deferring opportunities. In some cases, those initial investments are allowed to be taken as deductible losses in the early years. In all cases these is considerable risk involved and you may end up having the ultimate tax advantage. Losing everything.

You may even find that it's possible to form a partnership around your family.

If you prepare your own tax return, or are considering it, there are some really good products on the market you can use to accomplish this task. Turbo Tax is the most popular software and offers a convenient format with a step by step, in depth interview process and evens offers e-file tax advice and direct deposit. Many individuals, the vast majority of businesses and most Independent contractors rely on the services of a tax professional to prepare and file their returns.

As for Tax Professionals themselves, expertise and price are variables you must consider. If you are the average tax payer then most tax professionals are more than qualified to make sure you take advantage of all the tax benefits afforded to your situation. In this case, the factors that might help you determine who to hire comes down to who you like, who you trust, and how much do they charge. There are many high end Tax professionals whose price is weighted towards clients with very complex issues requiring detailed analysis of tax law and involve making weighty decisions. For the vast majority of filers, utilizing such services may cost you an arm and a leg and end up getting you about the same results as hiring someone less high profile.

Work with someone you like. Someone responsible. Someone with integrity. Someone concerned with your situation and who utilizes their skills and knowledge towards helping you create more wealth, provide a better service to the community and perhaps play their small role in helping you reach your potential.

Good Luck and Happy April 15th Day!