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Carver Communications - Index

Carver Communications - 4.1.08 - Index

During the last two weeks, SABOR
hosted six town hall meetings and a
Broker-Manager meeting educating
REALTOR® members on taxes and other
topics pertinent to their profession.
Michael Essick, CPA of Essick &
Associates, spoke at all of the town hall
meetings and provided REALTORS®
with many helpful hints to reduce their
taxes. An estimated 700 people attended
the sessions.
Mr. Essick began each presentation
by stating that everyone should find a system
of recordkeeping that works well for
them. He also emphasized the importance
of categorizing receipts and documenting
all business expenses.
Mr. Essick explained that there are
many ways to capitalize on deductions for
your 2007 tax return. Advertising for
your business, for example, is one deduction.
Any commissions or fees you pay
also qualify as a tax write-off, as well as
communication expenses. You are only
able to deduct phone lines, however, if
you have at least two lines in your home.
By Bob Leonard
Chairman, San Antonio Board of REALTORS®
Town Hall Meeting Recap
Countrywide Bank, FSB
Internet connections and cell phones used
for business are deductible, and if you
have a bundled package of Internet and
phone, you can itemize those business
costs and deduct them if applicable.
Dues and membership fees are
other items you can deduct. This includes
SABOR and TAR dues, as well as continuing
education fees.
Depreciation, including Section
179, and employee benefit programs are
two items Mr. Essick elaborated upon.
The Internal Revenue Service allows you
to expense depreciable items you purchase
and put into service during the year
for the benefit of your business. Under
Section 179, you are able to write off an
asset at 100% of the cost. Any merchandise
that is expected to have one year of
life or more must be capitalized and
depreciated. You may deduct up to
$110,000 worth of assets (new purchases)
for 2007.
Mr. Essick explained that you can
expense your vehicle by one of two ways
– by taking actual expenses or claiming
April 1, 2008 REAL ESTATE NEWSLINE 3
mileage. If you decide to deduct actual
expenses, you must maintain this method
of deduction on your tax return until you
sell the vehicle. If you decide to use the
mileage method, you must show your
miles in three categories – business use,
commuting and personal. Mr. Essick
encouraged REALTORS® to document
mileage in his or her planner when they
attend appointments. For 2007, the
mileage rate was 48.5 cents per mile. This
may prove to be the more advantageous
way for you to deduct your vehicle
expense in 2007, since your mileage may
give you a higher deduction than actual
expenses. You can switch from the
mileage method to the expense method at
any time, but you cannot do the reverse
until you sell the car.
In reference to employee benefits,
Michael Essick said that having a retirement
plan will help you maximize your
tax reductions. He also said that hiring
your spouse can open a lot of doors to
deductions if you are a sole proprietor. He
emphasized the importance of documenting
your spouse’s time, salary, what they
did, etc. to make sure it is a justifiable
claim. He also explained that your spouse
does not have to be a full-time employee.
Opening a SEP IRA (Simplified
Employee Pension Plan) allows you to
deduct 25% of your net self employment
income, after a few adjustments, up to
$45,000 for 2007. One advantage to this
particular IRA is that if you file an extension,
you have until October 2008 to make
contributions that will be tax deductible
for your 2007 return. A SEP IRA works
just like a regular IRA in that if you pull
the money out before you turn 59 1 ⁄2, there
will generally be a 10% tax penalty.
Other items you can expense on
your 2007 tax return include health insurance
for you and your family, office supplies,
software and updates to that software,
travel, meals and entertainment.
You must document who, what, when and
where to receive 50% back on meals and
entertainment and 100% on travel. When
giving gifts, you can deduct up to $25 per
person. If you are giving a gift to a couple,
it would be a $50 total deduction.
Also note that you can allocate part of
your gift as a business promotion, but
again, all of this must be documented.
The last item Mr. Essick focused on
was audits. There are two types of audits
– a non-compliance audit and a compliance
audit. The first type is where the IRS
wants to see certain sections of your tax
return. A compliance audit, although
rare, is where the IRS wants to analyze
every line of your tax return. Mr. Essick
stressed that if you are ever targeted for an
audit to be sure and hire a professional.
The CPA can have you sign Form 2848,
Power of Attorney, which allows the CPA
to represent the client to the IRS and so
that the scope of the audit can be controlled.
For more information on what
you can and cannot claim on your 2007
tax return, contact Michael Essick at 210-
862-9292 or visit his Web site at
www.cash4notes2u.com.
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