Posts Tagged "tax-deferred growth"

Hiring family can cut taxes

Posted on Jun 8, 2012

As a boss, you may hire family members and pay reasonable salaries for the work they do in your business. For example, you could hire your son or daughter to perform routine clerical or cleanup tasks. Your child’s salary would be a tax-deductible business expense, and your child’s income would be tax-free up to that year’s standard deduction amount for a single taxpayer ($5,950 for 2012). Wages in excess of that amount would be taxed at your child’s rates, which are probably lower than yours. You can compound the benefits of this strategy by having your child contribute to an IRA, which is likely to enjoy many years of tax-deferred growth. Wages paid to a spouse by a sole proprietor are subject to payroll taxes; those paid to your children who are under the age of 18 are not. Compensation paid has to be reasonable for the services...

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Tips to get the most from an IRA

Posted on Mar 16, 2010

* There is still time for a 2009 IRA. If you didn’t make contributions to an IRA in 2009, you can still set up and contribute to an IRA for 2009. The deadline for doing so is April 15, 2010. An IRA is a great way to save for your retirement while you cut your current tax bill.  * If your 2009 IRA wasn’t fully funded by December 31, 2009, and you make any IRA contributions prior to April 15, 2010, designate to the bank or trustee that these 2010 contributions are for 2009 (up to the maximum allowed). You can then deduct these amounts on your 2009 income tax return for a quicker tax benefit.  * Make your 2010 IRA contributions as early this year as possible to maximize the time you have for tax-deferred growth in the fund.  * Consider converting a traditional IRA to a Roth IRA this year. The previous rule that excluded taxpayers with incomes over $100,000 from doing a conversion to a Roth is eliminated as of January 1, 2010. You’ll have to pay tax on the amount converted, but qualifying distributions from the Roth IRA are tax-free thereafter. Furthermore, you won’t have to take annual distributions from your Roth IRA when you reach age 70½ if you don’t want...

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