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Tax Planning Examples

Question: Why is home mortgage loan considered a tax benefit ?

I am planning to buy a home and wanted to know why everyone thinks that home mortgage loan is tax beneficial.

Example:-
If we are paying around $15,000 a year in interest+property taxes and in tax refund( 15% tax bracket) we get back around $2K-3K and we are happy.

Its like paying government $100 and getting back $15 and we are happy with that.

Correct me if I am wrong

Answer: You're partially wrong.

If you pay $15,000 a year in interest and property taxes AND you are in the 15% tax bracket, you get to reduce that $15k from your income. This means you will pay $2,250 less in federal income taxes. So in other words, you are paying $15k to save $2k. It's not good business sense, but it's better than not saving anything...but that's not the entire story...it gets worse.

You only get to deduct the $15k IF AND ONLY IF you itemize your deductions (instead of taking the standard deduction). If you are married, your standard deduction is $11,400 ($5,700 if you are single).

Since you are paying $15k in interest/taxes, you get to deduct an extra $3,600 than you otherwise would have been entitled to anyway. Therefore, your net tax benefit really isn't $2,250. It's only $540 (15% of $3,600).

But wait...it gets worse...

You are only paying $15k in interest/property taxes the FIRST YEAR of the mortgage. Keep in mind that part of your mortgage payment goes to principle. While your payment each year will be the same, the amount going towards principle and the amount going towards interest will change. Eventually, that $15k payment each year will only be a few thousand worth of interest...at which point there is ZERO tax benefit.

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2009 Tax Planning Tips

Question: about 2009 Tax Rebate Plan and non resident alien?

As the words are there about 2009 Tax Rebate Plan for economic recovery I tried to look into if non resident aliens are gonna get it this year. but as usual, its a No. I was a nonresident alien student in 2008 but in 2009 my tax status became resident alien. i came to US in 2004 jan. will I get the this year’s rebate?
rebate info: http://turbotax.intuit.com/support/kb/tax-content/tax-tips/5462.html

Answer: I'm pretty sure, that you are thinking that in 2009 there is another brand new tax rebate that we will get in the form of a lump-sum amount.
No, it's not true. There is no new tax rebate. The shortcut that you have in your question is actually about RRC ( Recovery Rebate Credit )
The Recovery Rebate Credit exists to allow those who didn’t qualify to receive the maximum Economic Stimulus Payment in 2008 a second shot at the federal government’s coffers in 2009. So, if you would become resident alien in 2008 - you would probably get this rebate.
But, you didn't.
Hopefully, you got your Social Security card by now. And, if you are working, and paying taxes - you are will be eligible for new tax cuts this year: extra $13 in your paycheck, credit for new home buyer, etc.
Congratulations on becoming resident alien !

Tax Tips 2009 #1

Tax Planning Memo

Question: How should I go about doing tax research for this problem?

Client purchases land that has been severely eroded. He plans to fill the holes caused by the erosion with waste material. Can recovery deductions be claimed on this property?

That is the only information given and I am required to use the following:
- 2 Tax Rulings
- Tax Court Case
- Tax Court Memo
Correction: 2 REVENUE Rulings; not tax rulings.

Answer: Dear CPA: Sounds like the problem is trying to get you to identify and cite tax law that can be used to support an argument. Look at www.irs.gov and audit proceedings and support for an argument.

My first inclinations is the Revenue Rulings carry more weight and the IRS is not bound by Tax Court Rulings. It's been a long time since representation 101.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor

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Fundraising Ideas College Organizations

Question: Fundraising ideas for college volunteer organization?

I’m in charge of planning a fall fundraiser for our campus-wide service organization. We are shooting for an end of October, early November 2006 date. We want a fundraiser where we ask from the community and not the students. They pay enough money already. Ideas so far:a trick-or-treat for donations, pumpkin sale, i’d like to get lots more ideas.

Answer: -Wing Fling / Chili Cook Off
Local restaurant and or individuals will compete for the "best wings" or chili in town. Charge people to sample the food and have everyone judge the best food. Sell drinks and other items.

-Karaoke Night
Plan a special night either at your school or a local "hang out". Charge admission to the event and for a person to sing. (To make it even more fun, offer others the chance to pay for someone NOT to sing.) The person who sings the best wins a prize. Serve pizza and drinks or snack items for additional revenue.

-Old Fashion Movie Night
Hold an outside movie event. Rent the old projectors and show some of your favorite cartoons and movies. Sell tickets in advance. Serve pizza, popcorn, candy bars and drinks for an additional cost.

-Parents Night Out
Offer to sit the kids for a parents' night out. Serve dinner, movies and have simple craft items for kids to take home. Charge parents for sitting the kids. Don't forget to have the parents fill in an application with emergency numbers. (This idea works great around the Christmas Holidays)
Needed: Application with emergency numbers. Also, tell parents if they are late picking up their child that you will charge an additional cost per 5 minutes!

-Womanless Beauty Pageant Fundraiser
Recruit men to dress as a “beautiful woman” and participate in a womanless beauty pageant. Contestants wear makeup, evening gowns and even have a talent competition. Area contestants turn into raving beauties and the crowd never stops laughing. Donations come from ticket sales as well as food items.

-Breakfast with (Insert Person)
Have breakfast with a costumed character such as Smokey the Bear, Sparky the Fire Dog, the Easter Bunny, Santa Claus etc. Sell Polaroid photos of children posed with the character.

-Las Vegas Night
Casino nights are a relatively easy and an inexpensive way to raise funds. The members of your organization can be the dealers and run the other games of chance you wish to run. Since it is illegal to gamble real money, you can charge a cover and give out funny money that may be used to gamble. At the end of the night the funny money can be used to bid at a silent auction or to buy door prizes. Area vendors can donate such prizes or each member of your group could contribute a prize to the pot. (Funny money may not be redeemed for us currency after it has been purchased as that would be a violation of state gambling laws.)

-Door/Yard Decorating Contest
Pick a theme and see who can be the most creative. Charge a dollar per vote to select a winner.

-Pet Parade
Why have a regular fashion show when you can give it a twist? Create a fun event for local kids by hosting a pet pageant. Find an animal-friendly locale (try a local park), and recruit students to show off their pets on the "runway" one weekend afternoon. You can concentrate your publicity on local grade schools or PTAs. Have judges award prizes (you can make sashes, or stick to catnip and bones) in lots of different categories: Silliest Pet, Slimiest Pet, Sleepiest Pet (you get the picture…)

-Honey-Do Fundraising
Each raffle ticket entered the buyer into a drawing to win a crew of "Habitat Helpers" to help with a home improvement project. Helpers could paint a room, organize a closet or pantry, install a light fixture or small appliance, plant a garden in the spring, or help with garage or basement cleaning, but no housework. You could also suggest a project, and a team leader would assess its feasibility. Raffle tickets were $5 each or five for $20.

-Flamingo Flocking
Purchase 10 pink plastic flamingos (lawn decorations). Pick 10 yards in your community to be the lucky recipients. Attach cards to the flamingoes' necks with a phone number along with all the pertinent information regarding your group. State that for a $10 donation, the flamingos will be removed but for $15 they will be moved to the lawn of their choice. Make sure you also place a sign that has a contact name and phone number among the flamingos for those who drive by and would like to have the flamingos placed in a friends yard. (Also give the option to simply pick up the flamingo gratis, since some people have no sense of fun.) It takes some organization, but is lots of fun. An additional fundraising idea is to sell "Pink Flamingo Insurance" for $10 to protect yourself from the invasion of these pink pests.

-Shower With Flowers
This is a fundraising event similar to the flamingo flocking. Our symbol is the daisy, so we use flowers instead of flamingos; we like to use the term "Shower with Flowers". We scatter 40-60 brightly colored flower pinwheels throughout the front lawn of various homes. We started with club members initially but it didn't take long before we were "Showering" outside of our small group of women. We just stared this fundraiser this July and we have been averaging one home per week. We recently ordered more flowers and have begun an additional committee. Our system is much like the flamingo flocking. We charge a $5.00 donation for simply removing the flowers, $10.00 to remove and select someone to send them to next, and $15.00 to remove, resend, and find out who sent them to you. Most people choose the $15.00 option. This has been our most enjoyable and successful long-running fundraising idea, so far.

-Pumpkin Festival Fundraising
Have a fundraising pumpkin festival in November with pumpkins for the children to paint. Cover a table with newspaper (tape it down with masking tape so it stays covered). Set out liquid tempera paints, paintbrushes and plastic yogurt containers filled with water for rinsing the brushes. Let the kids paint goofy or creepy faces on the pumpkins. Add in pumpkin baked goods including a pumpkin pie bake-off. Serve pumpkin pie along with hot beverages, raffles and other complementary activities. The result is fun and fundraising!

-Blind Auction Fundraising
A blind auction is mostly about fun but can also raise funds for your group. It works best as part of an ongoing event such as a luncheon or dinner meeting. Here's how it works. Get as many people as you can that will be attending the event to bring a wrapped package. The contents could be humorous or something of actual value. Think of the possibilities! You can get rid of that ugly "xxx" in the back of your closet for a worthy cause.
Donors can weight the boxes with a brick to disguise the contents, have an oversize box for a very small present, or wrap boxes within boxes to increase anticipation. You get the idea! Announce that at least one of the boxes contains a '$x" bill or something of value that is small enough to fit in all the boxes. The dollar value will depend on your group and anticipated bidding amounts.
As guests arrive they place their boxes on a display table so potential bidders can examine them and speculate on what they contain. Whether you use a live or silent auction fundraising, make sure everyone has time to pick them up and shake them before the bidding. Guessing the contents is much of the fun.
At the specified time, the boxes will either be auctioned individually or the results of the silent auction announced. If you have a live auction, make sure you have a couple of "valuable" prizes auctioned first to stimulate the bidding. Above all, make sure you allow time to let everyone to open his or her box in front of the group.

9/11 MEMORIAL AT LEHMAN COLLEGE

Fundraising Ideas College

Question: What are some fundraising ideas for guys at a college looking to fund an inline hockey team?

All suggestions will be helpful, but please don’t mention carwash. It’s a pretty obvious one. Only serious responses will be considered.

Answer: Having played for a rugby team before a neck injury re-introduced me to hockey, a few things we did (all of which work):

1) Calendars work. I can't tell you how many rugby teams have put out calendars (often times showing a little cheesecake/beefcake). The upfront cost is minimal. Market the calendar wisely and you can do well. Have fun with it.
2) If you're of legal drinking age...celebrity bartending nights at your local bar/pub. You guys work, and you keep a portion of revenues.
3) Program/scorecard sales at games. If you have an NHL team nearby, contact them about doing this. You volunteer your time, and keep a portion of what you sell.
4) Volunteer to scorekeep and help out youth hockey. Youth teams always need scorekeepers, referees, etc. Get on good terms with the hockey community, and it helps. Plus, the local rink(s) might then be inclined to help you with costs.
5) If you can, sell sponsorships (not sure the legality of this with a college). Your team has to have a website, and put links to their site on yours. Offer to promote their company (my rugby team's sponsor (a local pub) bought us a full playing kit and put their logo on our shirts)
6) Amazon and NHL.com have free marketing programs. People go their sites through your website, and if they buy stuff, you get a percentage of what they buy. Complete no-brainer (I volunteer with a greyhound adoption group in the GTA, and we do this with Amazon.ca; last year we earned just over $1,000 from this).

As a bigger picture...befriend your local community. Volunteer your time. Be visible. A group of polite young men in hockey sweaters donating their time to a charitable cause buys you a lot of goodwill. If the only time people see you is when you have your hat in hand...not so good. Scratch someone else's back and they'll help you.

Fundraising Ideas for Animal Causes