Drew Miles Tax Planning Advice and Tax Savings Tips

The House of Representatives voted on December 3, 2009 to extend the estate tax rate for 2009 into 2010. The estate tax is the transfer of property to heirs or family members and the exemption amount is the amount each person can pass free of federal estate taxes.

The estate tax extension plan was enacted under the George W. Bush administration as the Economic Growth and Tax Relief Reconciliation Act of 2001. Initially, the act provided an increase in exemption tax rates followed by a gradual decrease per year.
The scheduled exemption rate per year was 50% for 2002, 49% for 2003, 48% for 2004, 47% for 2005, 46% for 2006, 45% for 2007, 2008, and 2009. The estate tax amount would have fazed out to 0% for 2010.

Under this tax plan, there would have been a 0% estate tax rate for 2010. The revised extension allows a $3.5 million exemption per individual ($7 million for married couples) and a top rate of 45 percent.

The repeal of the estate tax rate is critical but the Senate is likely to go along with this temporary fix, while preserving the option to adjust the permanent levels further later and to add a provision for inflation indexing of the exemption amount.

Drew Miles says to document everything right to avoid a tax scam.  Drew grew up working in a family business on Long Island, NY.  After passing the New York State Bar, Drew established his own firm where he practiced for 18 years.  In 2006, he set out to concentrate solely on his commitment to serve his clients and expand Pathfinder’s scope of programs.

His unique approach combines what he has learned, not only from his formal legal education, but also his “informal” business education and 25 years of entrepreneurial experience, in the development of programs designed to educate people in the fine art of building and preserving wealth.

Drew is an author, teacher, and international speaker.  His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success.  He has been featured in Forbes, the Dallas Morning News, American Banker, and Yahoo Finance.  To date, he has helped over 5,000 business owners save over $100 million dollars in taxes.  That’s why he’s known throughout the United States and Canada as the “Tax Saving Attorney”.

Everyone wants to be financially free or as Robert Kiyosaki states, “to get out of the rat race”. Drew Miles and Pathfinder Business Strategies encourage clients to avoid using what some would say are tax scams but instead reduce their debt by paying the correct amount on taxes instead of over-paying them. Taxpayers reduce their current business and personal debt and gain income that can be applied to long-term retirement plans. The road to increased tax savings is to audit proof your expenses through a well-documented system using a six-column tax diary, organized files and a reimbursement log.

The “burden of proof” is the taxpayer’s responsibility to the IRS. IRS examiners are not required to help you keep your records. The consequences of not following the IRS tax guidelines are huge to the taxpayer. Possible actions are one-half of one percent a month delinquency penalty during the period that you fail to pay the proper amount taxes, 20% of underpayment attributable to negligence, disregard of the rules, and unreasonable deduction claims. Additionally, 75% of any underpayment attributable to fraud and loss of deductions on interests paid to the IRS, if they were due to a business deduction on your Schedule C.

Pathfinder Business Strategies’ tax record system shifts the burden of proof from the taxpayer back to the IRS. Three separate and distinct tax records are used: permanent files, regular files and a daily tax diary. This applies to all forms of business entities: “S” corporation, “C” corporation, LLC, or a sole proprietorship.

Permanent Files are the prior year’s tax returns, stock purchases and sales, equipment purchases and sales, and similar entries.  Generally, you want to keep any record that relates to more than one tax year in your permanent file including property purchase documents, closing statements, deeds, and other related expenses. Regular files are time sheets, part-time help records, receipts, invoices, canceled checks and other comparable evidence.

A tax diary is the most important of the documentation system. This consists of a permanent record that is separate from the receipts you keep for each item. The tax diary six-column strategy is detailed in the article, Drew Miles on Six-Column Tax Strategy for tracking Business Tax Deductions (Archives, August 2009). Details of expenses are logged into six columns labeled who, what, when, where, how much and mixed deductions. Examples of items for the six-column tax diary are pictures of your office (showing that it is separate from your living area), a printout from your realtor showing comparable cost of office space in your area, meal receipts for business dinners and training expenses, and auto expenses for mileage. Keep your plane tickets, parking and cab receipts (especially if over $75), and the training materials from the promoter to log in travel expenses.

Other elements to tracking expenses are a separate business checkbook with a three-part check and a reimbursement log.  The three-part check method is to send part one, the original of the check to the vendor; staple supporting evidence such as receipts or invoices to part two of the check and file it alphabetically in the vendor file; and to file part three in a numerical file for later reference. A reimbursement log tracks cash outlays and reimbursement expenses by date, description and amount.

Keeping a good documentation system is a worthwhile investment of time and consistency. It justifies business tax deductions, updates and organizes business records and audit proofs your business so that you save money.

Drew Miles is an attorney, author, teacher, and international speaker. He concentrates solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. Visit http://www.pfbs.com for more information.
His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.