IRS Announces New Standard Mileage Rates for 2012

The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
reprinted from www.irs.gov

I-9 Compliance, Quick Guide

http://www.chaselawpdx.com/

I-9 Compliance
Quick Guide ©
The rules for I-9 are always subject to change, but generally, this quick guide will help you keep your business in compliance, thereby reducing the likelihood of fines ranging from $375 to $3,200 per unauthorized worker and $110 - $1,100 for each paperwork or inspection violation. This guide is intended for general use and does not constitute legal advice. If you believe you are not properly in compliance with present I-9 regulations, please consult an attorney.

I-9 Compliance
1. I-9 must be completed at the time of hiring; before the first working day.
2. Should the employer make copies of I-9 supporting documentation, those copies must be maintained for as long as employer is required to maintain the I-9.
3. Employees do not need to provide employer with a social security number unless employer is participating in the USCIS E-Verify program.
4. Employer must verify the employee’s information upon or before any dated expiration of an employee’s work authorization. *If an employee leaves the authorization date blank, employers do not need to reverify supporting documents.
5. Retention: Employers must retain the I-9 and any copied supporting documents for the later of:
a. 3 years after the date of hire, or
b. 1 year after the date employment ends.
e.g.
1. 3 years = Employer hires employee for one year and does not rehire; retain I-9 packet for 2 years after termination of relationship.
2. 3 years = Employer hires employee for two years and does not rehire; retain I-9 packet for 1 year after termination.
3. 4 years = Employer hires employee for 3 years and does not rehire; retain I-9 packed for 1 year after termination.


To learn more about I-9 compliance or to minimize I-9 fines, please contact us at:

Morinaka Law Office LLC
(971) 338-9193
chase@chaselawpdx.com

2011 Year End Tax Deductions, Credits, and Planning Tips

2011 Year End Tax Deductions, Credits, and Planning Tips
reprinted from Tax Debt Help

As the year draws to a close, it's time to squeeze in some tax deductions and credits that might save you money come April 15. If you are looking to reduce your tax liability, here are some 2011 year end tax planning tips or options you may want to consider:

ENERGY EFFICIENCY TAX CREDITS

Last year, a rather generous tax credit for smaller energy efficient home improvements expired. For 2011, a $500 credit was implemented to take its place. This credit is a lifetime limit, so if you already maxed out your credit in 2010 or before, you aren't eligible. However, if you haven't claimed a credit for the cost of such home improvements as energy saving windows, insulation, and other upgrades, you can make those improvements now, before the end of the year, to take advantage of the credit.
And, it is worth noting that the separate tax credit for installing energy efficient power systems, such as solar, wind and geothermal, will be in effect a little bit longer. If you have been thinking about adding one of these systems, you can get a tax credit for 30% of the cost, with no upper limit

HARVEST INVESTMENT LOSSES

Did some of your stocks turn out to be duds this year? If you have some investment losses, you can actually harvest them now. You can offset any capital gains with your investment losses. Additionally, you can offset some of your other income (such as wage income) with your losses (up to $3k a year, or $1500 if filing married filing separately). This can help lower your taxable income. If you haven't already, make sure that you sell before the end of the year, and watch out for the IRS wash sale rule (disallowed losses): You can't buy back the investment within 30 days of selling it if you want to claim the loss.

BOOST YOUR RETIREMENT ACCOUNT CONTRIBUTIONS

If you haven't maxed out your retirement account contributions to a traditional IRA, 401k, or 403b, you can contribute more pre-tax dollars and get a tax deduction, lowering your taxable income. If you have the cash to spare, make some last-minute donations to reduce your tax liability. You can also contribute more to your Health Savings Account if you haven't reached your contribution limit, and claim a tax deduction for that.

CONTRIBUTE TO CHARITY

You can also make a few more charitable contributions. With the holidays coming up, it's a perfect time to help out in the community. You can make your tax-deductible contribution to a charity, or to your church. Even if don't have the money to contribute, you can still get a deduction. Take items, still in usable condition, and donate them to the local women's or children's shelter, or to the Goodwill, and you can get a deduction for the value of your donation. Just make sure that you get a receipt for any donations of money and goods that you make and file it away.

BUSINESS EXPENSES

If you know that you have business expenses coming up, you can make your purchases now, before the year ends. You can offset some of your business income, lowering your tax liability. This can include business travel you undertake, and business supplies you purchase. Here is more information on business tax deductions.

BOTTOM LINE

Now is the time to think about how you can spend a little more to reduce what you owe in taxes later. Consider your upcoming needs and expenses, and take steps to decrease what you pay in taxes.

Oct 17th, FINAL deadline

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Write Off Your Job Hunt! It's no secret that millions of Americans are looking for work, from recent graduates to downsized late-career employees who aren't ready to retire. Far fewer are aware of how Uncle Sam's tax code can be used to blunt the cost of a job search-especially one that may go on for longer than in the past. The tax issues affecting job seekers are numerous, with many parts of the code coming into play. The bottom line: Getting tax help is a wise move for job hunters. "Even a little goes a long way, and a quick phone call could save you a lot of money," says Melissa Labant of the American Institute of CPAs. For more on this story, see our MB Tax Blog. ____________________________ MB Tax Office News October 17th is the final day to file 2010 taxes for Individuals and LLC's. If you are on extension and have the items needed to file your 2010 taxes, please get that material to us and we will do our best to process the returns in the order that we receive completed information. The penalty for not filing on time is considerably more than not paying on time, so our best advice is to have your taxes filed on time, even if you have to create a payment plan for your payments. Our office hours through October 17th are Monday-Friday, 10am-5pm. You are welcome to drop off your material through our front door slot if we are not in the office, email scanned information tooffice@mbtaxpro.com, or you may fax us your information to (503) 282-0513. We hope to see you soon!

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Important Dates October 17th - Deadline for Individual Tax Returns

Write Off Your Job Hunt!

reprinted from The Wall Street Journal

It's no secret that millions of Americans are looking for work, from recent graduates to downsized late-career employees who aren't ready to retire.

Far fewer are aware of how Uncle Sam's tax code can be used to blunt the cost of a job search—especially one that may go on for longer than in the past.

Judi Lacko, a 45-year-old CPA from Denver who has been actively searching for work as a chief accounting officer for months, says, "Looking back, I wish I had thought right away about deductions and record-keeping."

Harry Campbell

Career coaches usually don't help with taxes. "My job is to get my clients back to work as quickly and efficiently as possible," not to dissect deductions, says Win Sheffield, a career coach in New York who is part of a network called the Five O'Clock Club.

The tax issues affecting job seekers are numerous, with many parts of the code coming into play. They also are tricky. One key provision—the "miscellaneous deduction"—can severely limit job-hunting write-offs, while another—the "alternative minimum tax"—denies them entirely.

But there are opportunities, especially for people who can earn some income in a side business. "By starting a consulting practice, taxpayers may convert limited write-offs into full deductions," says David Kautter, who heads the Kogod Tax Center for Small Business at American University.

That's what Steven Milewicz has done. Mr. Milewicz, 50, was the general counsel for a large construction company until this summer. While looking for his ideal permanent position, he is doing contract work for a law firm specializing in construction. "I can take a full deduction for our health-insurance premiums, plus other expenses," he says.

The bottom line: Getting tax help is a wise move for job hunters. "Even a little goes a long way, and a quick phone call could save you a lot of money," says Melissa Labant of the American Institute of CPAs.

Hit or 'Misc'

The first place many job-hunters look for write-offs is the miscellaneous deduction, which includes unreimbursed employee expenses and applies to the recently unemployed as well. It is the go-to slot for deducting travel, entertainment, subscriptions, business cards and other costs.

There is a problem, however. Permitted expenses are deductible only to the extent that they exceed 2% of a taxpayer's "adjusted gross income," which is income minus a few items. On a $200,000 income, that's $4,000.

Close

This is "a killer" if the job hunter has a working spouse, large severance or other income, says Bob Meighan of Intuit's Turbotax team. (Expenses must be deducted in the year incurred.)

If the taxpayer falls into the alternative minimum tax, which was designed to tax the wealthy by limiting deductions, there isn't any writeoff at all. This is often a problem in high-tax states.

There's another limit, too. Job-hunting expenses can count as miscellaneous deductions only if a taxpayer is looking for work in the same occupation. That rules out writeoffs for students looking for a first job, or an accountant who wants to become a screenwriter.

The rule's boundaries are fuzzy, however, and Mr. Kautter says there's room for imagination. If an engineer who managed a couple of people is looking for a pure management job, she could reasonably claim that she was and will remain a manager. But sometimes the IRS takes a hard line.

Go Sole

Fortunately, there's a better route for job-seekers who can earn some income: set up a sole-proprietorship business reported on Schedule C of the tax return. Here taxpayers may fully deduct many "ordinary and necessary" costs of doing business.

Harry Campbell

As a result, deductions for home-office, business-card, travel or résumé-preparation expenses that otherwise would be limited are fully allowed now—as long as the costs are matched against income you'll claim on Schedule C. And there isn't a requirement to stick with your former occupation.

Example: If a lawyer wants to become a chef, he can't claim job-search costs as a miscellaneous deduction. But if he sets up a Schedule C business as a chef and finds a temp job or two, he can deduct his knives and business cards while also looking for a full-time job.

Downsides

The biggest problem with this strategy is that you need income. The IRS frowns on losses from businesses unless they show a profit in at least three years out of five. But even a small profit opens the door to many deductions.

Another issue: business owners must pay both the employer and employee share of payroll taxes on net income—currently 13.3%—and file quarterly tax returns. "People used to getting a paycheck where taxes are withheld are often shocked by this," says Ms. Labant of the American Institute of CPAs.

Winning a client's IRA account may be the key to becoming their lead adviser. Plus, annuities aren't for everyone. And, a look at investing in water. Dow Jones Wealth Adviser's Veronica Dagher reports.

What if you find a full-time job? Nothing prevents a taxpayer from being both an employee and the owner of a Schedule-C business, notes Mr. Kautter. Many employees have consulting businesses on the side.

Record Keeping

One more caveat for job-seekers who plan to take deductions of any type: Get serious about record-keeping. The IRS is a stickler about this.

Mr. Milewicz tucks his receipts into envelopes, and then enters them on a spreadsheet. You don't have to go quite that far, but consider devoting a notebook or diary to your effort, and save receipts. Many an audit or court case has been won on the strength of good records.

Tax Tips

Now for more specifics on the tax treatment of everything from severance pay to home-office expenses. See also IRS Publication 4128, Tax Impact of Job Loss.

• Income. Part of leaving a job is figuring out which of a variety of new income sources—severance pay, unemployment, income from investments—is subject to tax.

Severance pay is taxable, as is accumulated vacation or sick pay, but the former employer is supposed to withhold federal and state taxes. Unemployment pay also is taxable. (Part of it wasn't in 2009, but the provision lapsed.)

Withholding for unemployment isn't automatic, however, and many taxpayers forget this fact. To avoid getting caught short at tax time, file IRS form W-4V with your state. Tax will be withheld at a flat 10% rate.

Those whose income drops significantly also may be newly eligible for "refundable" credits such as the Earned Income Credit or the Additional Child Credit, which provide a refund even if tax isn't owed. See IRS Publication 525.

If your former employer pays employment- and outplacement-agency fees, they don't count as income to you. If you pay these expenses, they count as miscellaneous deductions.

• Investments. There's good news for people who are between jobs and tap investment funds. Those with taxable incomes of less than $34,500 for single filers or $69,000 for joint filers pay no tax on long-term capital gains or qualified dividends. So if you must tap your accounts, at least you don't have to pay Uncle Sam.

• Retirement plans. Many ex-employees make tax-free rollovers of their 401(k) plans into an individual retirement account after they leave a company.

One reason to think twice: Withdrawals from regular IRAs are taxable and also are subject to a 10% penalty if the taxpayer is younger than 59½, except in certain circumstances. But those 55 and older who leave a company can cash out a 401(k) plan and skip the 10% penalty that would apply if the assets roll over into an IRA, says Natalie Choate, an expert with Nutter, McClennen & Fish in Boston. (Tax is still owed.)

Other exceptions to the 10% penalty: some tuition payments; medical insurance premiums for some unemployed workers; and medical expenses if they are greater than 7.5% of adjusted gross income.

With a Roth IRA, the account owner may withdraw his or her own contribution free of income tax. But the 10% penalty (and exceptions) mentioned earlier applies if the account was converted from a regular IRA within the previous five years. And if you withdraw Roth earnings—as opposed to principal—before age 59½, both income tax and the 10% penalty may apply. Keep good records.

For more information, see IRS Publication 590.

• Medical expenses. This is a crucial issue for many. Unreimbursed medical expenses (which include insurance premiums) are deductible only for those who itemize, and only to the extent that they exceed 7.5% of adjusted gross income (or 10% if you are subject to alternative minimum tax). With income low, it may be easier than usual to get over this high hurdle.

People trying to take this deduction should consult IRS Publication 502 for a list of allowable expenses, which is much broader than the costs many insurance companies reimburse. Examples: contact-lens solution and breast-feeding equipment qualify; health-club memberships usually don't.

For taxpayers who set up a Schedule-C business, health-insurance premiums may be fully deductible, as Mr. Milewicz noted. See the instructions to Form 1040.

• Home offices. Deductions for a home office, including supplies and equipment such as a computer, may get a better break if taken on Schedule C, whereas they will be limited if they qualify as miscellaneous expenses.

To be deductible, a home office usually must be used exclusively and regularly as a principal place of business. (No weekend football-game watching or kids doing homework.) Appropriate services and supplies—business cards, resume preparation, cell phone, professional fees—for the business or the job hunt are often deductible as well.

Equipment, such as a computer, may need to be depreciated over time. If there is personal as well as business use, expenses may have to be allocated between the two. For more, see IRS Publications 587 and 946.

• Travel and entertainment. Finding work, permanent or part-time, often requires prospecting near and far. As with home offices, qualified travel and entertainment deductions often get a better break on Schedule C.

The rules are fuzzy, but job seekers who want to deduct travel would do well to spend more than half their time looking for work while they are traveling. (Travel time also counts as work.) Thus for many, evenings or weekends aren't part of the equation.

For drivers, the IRS allows 55.5 cents per business mile, or else actual costs such as depreciation, gasoline and maintenance. Taxpayers who want to go the latter route should probably seek expert help, because this quickly gets complicated, especially if there is personal use involved.

What about meals and entertainment? The allowed deduction starts with 50% of their cost, and you should keep excellent records—say, a short note as to what was discussed—in case IRS agents come calling. For more, see IRS Publication 463.

• Education. Would more education help a job search? For those without a college degree, the most useful tax break is likely to be the American Opportunity Tax Credit, which can be claimed even if you don't have income.

What about graduate or professional-enrichment courses? At least nine benefits exist, all with different requirements and income limits.

Two of the most commonly used are the Lifetime Learning Credit and the so-called Tuition and Fees Deduction. For a useful chart comparing all tax benefits for education, see IRS Publication 970, Appendix B.

• Moving expenses. Unreimbursed moving expenses may be written off even if a taxpayer doesn't itemize deductions. But the new job usually has to be at least 50 miles away from the old one.

A taxpayer also must hold a new job for a certain period after a move, which differs depending on whether he or she is an employee or self-employed. For details, see IRS Publication 521.

• Don't even try. Kogod's Mr. Kautter says few if any taxpayers have ever gotten away with taking deductions for work clothing (except uniforms), a briefcase, commuting costs, dry cleaning, haircuts, cosmetics or cosmetic facelifts.

Write to Laura Saunders at laura.saunders@wsj.com

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10 Tax Deductions You May Not Have Thought of If You Are Self Employed

reprinted from Freelance Switch

Tax time can be especially stressful for freelancers: despite paying estimated tax payments throughout the year, it’s rare that a freelancer doesn’t still have to come up with some money for April 15 — or come up with a long enough list of deductions. There are quite a few deductions available to freelancers that may not seem obvious when you first sit down with all those 1099s and receipts. But as long as you have the right documentation, you can write off plenty of deductions you may never have thought of.

1. Unpaid Invoices

Did one of your clients disappear over the course of last year, leaving you with an unpaid invoice or two? The IRS allows you to write off those invoices as bad debts. Writing them off as a freelancer is a little more complicated than for other types of businesses: that invoice must be included in your gross income, which means that you must use the accrual method of accounting (reporting income as you earn it). If you use the cash method, you didn’t need to report an unpaid invoice to the IRS at all. For more information, look at IRS Publication 535.

2. Niche Research

If most of your business comes from a specific industry — like a website designer who primarily creates websites for real estate agents — you can write off research into that area. Conferences, books and other research-related expenses are deductible. You’ll want to hang on to receipts for your research expenses.

3. Meetings at the Coffee Shop

Do you head to the local Starbucks whenever you want to discuss a project in person? If you buy coffee for the pleasure of meeting with a client, partner or other business contact, you can write off half of your expenses. It may seem like a small amount, but if you’re a freelancer who routinely uses a coffee shop as a work space, coffee costs can add up. Keep your coffee receipts and, to make things easier if you have to go back through your receipts later on, make a note directly on the receipt of who you had coffee with and why.

4. Job Hunting

Any payments you make to access job boards and other lists — even if they aren’t for permanent jobs — are deductible. The same goes for any costs associated with joining a website that lets you bid on projects or other methods of buying leads on new opportunities. You’ll want to hold on to your receipts for any such expenses. If they’re online, either save them as PDFs or print them out.

5. Paypal Fees

Businesses are able to deduct credit card convenience fees because they’re a necessary cost of doing business. You can write off PayPal’s fees if you accept payment through that website, no matter how much or how little business you’ve transacted over the site in the course of the year. The easiest way to document those fees is to wait until the end of the year and print out your account history.

6. Virtual Assistants and Other Subcontractors

Subcontracting part of a project to another freelancer or hiring a virtual assistant can be an easy way for a freelancer to take on more work and make more money — and the expense to do so is tax deductible. You’ll want to document any such transactions carefully so that you can prove that your use of freelancers and virtual assistants is purely a contract arrangement, rather than employment — which you would have to pay extra taxes for. You’ll want an invoice from whoever you work with, as well as a record of when you paid the invoice.

7. Your Home Expenses

If you work out of your house, you can deduct part of what you pay towards utilities, insurance and mortgage interest. The home office deduction is one of the more complicated deductions you can take, but it’s worth it. You’ll need to use IRS Form 8829 in most cases to document your use, and you’ll need to know the exact area of your home as well as of the space you use as an office — you’ll figure the percentage of your expenses you can claim based on the percentage of your home you use as office space.

8. Cell Phones and Skype

According to the IRS, you can’t deduct the expense of the first telephone line in your home, regardless of your use your home for business. However, in addition to any second phone line you might have, you can deduct your expenses for your cellphone (assuming you use it primarily for business) and applications like Skype.

9. Professional Advice

If you find yourself in a situation where you need to consult with a lawyer or an accountant, for any reason related to your freelancing, you can write off those professional fees. Documenting such expenses is just a matter of having an invoice or receipt.

10. Payments to Non-Profits

While charitable donations are not deductible as business expenses, you can write off payments you make to non-profit organizations. The IRS’ favorite example is paying for an ad in a local church’s directory, but the cost to attend networking events held by non-profits and similar expenses are all deductible as well. You’ll need receipts. And, by the way, just because you can’t write off donations as business expenses doesn’t mean that you can’t write them off at all — they’re personal deductions instead.

It's Not Too Early to Start Thinking About 2011 Taxes

The George W. Bush-era tax cuts have been extended, the alternative minimum tax is patched and capital gains rates are set. Tax breaks are in place for students and teachers, and for the most sizable estates. Congress established some of the parameters for the 2011 tax year even before the year began. The big question confronting lawmakers was whether to extend the Bush tax cuts and for whom. Democrats had argued that the nation's richest taxpayers should be excluded from any extension. But as a part of a compromise deal worked out with President Barack Obama, Congress approved an extension for all taxpayers through 2012. The net result: Workers won't see their take-home pay reduced because of taxes.

In fact, they'll actually see an increase.

Congress declared a 2 percent payroll holiday in 2011, temporarily reducing Social Security withholding. People who are self-employed will see the savings when they file their estimated taxes.

"People are going to spend it or they're going to save it" depending on their goals and financial situation, said Greg Rosica, tax partner with Ernst & Young. "It's a great opportunity to look at it as an opportunity to increase their 401(k) or make an IRA contribution."

"That could multiply tax savings," said Barbara Weltman, author of tax guides for J.K. Lasser. "If they give to charity, it's tax deductible. If they put it into an IRA, that's deductible."

Other options could be to put it in a 529 plan to save for a child's education, or open a Roth IRA and create tax-free income for retirement. A note of caution: Roth IRA contributions are not tax deductible.

The reduced withholding for Social Security took the place of the Making Work Pay tax credit, which had been in place for 2009 and 2010. That credit was worth up to $400 for individuals and $800 for married couples filing jointly, but was phased out for those at higher incomes.

For those people and others, the payroll holiday will work out better. Earnings up to $106,800 are subject to the Social Security payroll taxes. That means a maximum savings from the payroll tax holiday of $2,136. Also, unlike the Making Work Pay credit, the payroll holiday does not phase out at higher incomes.

Some lower-income workers will be worse off, however, said Weltman. A married couple earning less than $40,000 a year or an individual earning less than $20,000 gets a smaller benefit under this year's tax break.

For tax year 2011, the standard deduction increases slightly to $11,600 for married couples filing joint returns, $8,500 for heads of households, and $5,800 for singles and married couples filing individually. The personal exemption increases to $3,700, up $50 from 2010.

Congress in December patched the alternative minimum tax to adjust for inflation for tax years 2010 and 2011. The AMT exemption for 2011 is $74,450 for joint returns, $48,450 for singles and heads of households, and $37,225 for married couples filing separately. Without the patch, millions more Americans would be subject to the AMT.

Other 2010 tax provisions in effect for 2011 include:

* A top capital gains rate of 15 percent.

* Personal exemptions and itemized deductions won't be phased out for higher-income taxpayers.

* The American Opportunity credit, an expansion of the Hope credit. Qualified taxpayers can get a credit of up to $2,500 toward tuition and other fees at colleges and universities.

* The maximum $4,000 deduction for qualified tuition and fees.

* The option of deducting state and local sales tax, geared mainly toward taxpayers in places that don't have state income taxes.

* The maximum $250 deduction for out-of-pocket expenses incurred by teachers in grades kindergarten through 12th grade.

* The deduction for mortgage insurance.

Some of those credits and deductions phase out at higher incomes.

By the same token, some credits and deductions in place for 2010 were allowed to expire and are unavailable to taxpayers for 2011.

Among them is the first-time homebuyers credit. A smaller homebuyers credit for people who had owned homes before also expired. An exception was made, however, for active duty military and members of the Foreign Service or intelligence community stationed overseas. They may still qualify for the maximum $8,000 credit if they enter into a contract to buy a home by April 30, 2011. There are income limits and limits on the price of the home.

For those already in their homes, a limited credit is available for new windows, doors, furnaces or other energy-efficient improvements installed in 2011. A more-generous credit for energy-efficient improvements expired at the end of 2010.

A year from now, when it's time to do your 2011 taxes, remember that professional tax preparers will have been required not only to register with the IRS, but also to have passed a competency exam. Certified public accountants and others who meet other qualifying standards are exempt from the exam.

Since many things already are in place for 2011, Rosica says people should do some planning now. For example, if you're thinking about selling your home in the next year or two and the value has increased, should you sell it in 2011 since the lower capital gains rate are in effect only until the end of the year? The same with selling a business. "All items ought to be on the list to be examined," he said.

There's one big caveat: The economy, political environment and many other factors can change. And Congress still has a full year to amend the tax laws.

Read more: The Marietta Daily Journal - It s not too early to think about next year s taxes

10 Steps to Be Prepared for 2011 Taxes

Plan Now for Next Year's Tax Season

reprinted from SmallBusinessComputing.com

"Once you've completed 2010 taxes, set aside time -- while this year's paperwork challenges are still fresh -- to establish better habits for 2011," said Alice Bredin, small business advisor to American Express Open, a credit card company and the home of AcceptPay, an online electronic billing and payment acceptance program for small businesses. "A little work now on better tracking income and expenses will make next year's tax season go much more smoothly."

Certainly starting early makes it easier to file your taxes, but there is another striking advantage as well. With all the tax changes for 2011, you can get many of the things you previously thought you couldn't afford -- such as more employees, new equipment and more-affordable health insurance.

However, those tax benefits come with strings, primarily in reporting and percentage-based requirements. Therefore, you need to start tracking your actions now. The easiest way to do all this is to use accounting software and to plan ahead using these helpful tips.

10 Easy Steps to Prepare for 2011 Taxes

1. Sync Small Business Accounting Software with Your Accountant

Sync your small business accounting software with your accountant's, which simply means either use the same software he or she does or a compatible program. By doing so, everything from payroll taxes to quarterly P&L statements and end-of-year tax filing becomes automatic.

Several software programs allow your accountant access (with your authorization, of course), so the accountant can access your books and do his work without you having to do anything. Other software programs let you send the data to your accountant with just a few clicks. In any case, you want to use accounting software that provides an IRS-approved electronic audit trail, such as Peachtree Accounting or QuickBooks, so that even a tax audit becomes a no-brainer, less-stressful affair.

2. Use Online Banking

Online banking can help you keep records straight for tax time and help you stay on track from month to month. Most accounting software lets you automatically import data from your online checking account, but there are other ways to use online banking info, too.

"Most banks will let you download your transactions into an Excel spreadsheet or some type of electronic, sortable format," said Karla Dennis, a Licensed Enrolled Agent and CEO of Cohesive, a California-based tax preparation and consultancy firm. "If you download your transactions using your iPad, desktop or laptop, you can then put a 'T' next to the items that are tax related. If you do this every month, you will have a nice record of tax deductible items when it's time to file your 2011 tax return," she said.

3. Record Everything Electronically

"Scan bank statements (if you're not using online banking), vendor statements, receipts, credit card statements, everything. Scan it all as soon as you receive it," said Andrea Moe, senior director of product management and marketing at Sage, the makers of Peachtree Accounting. By creating an archive of all your records, you'll always have everything you need, anytime you need it.

4. Backup Electronic Records

To prevent financial ruin as a result of man-made or natural disasters, or even from a spiteful employee or an errant finger stroke, make sure you backup everything routinely and regularly. "Don't just back it up on a flash drive or CD, back it up to a remote location," said Moe. "That way, if your building burns or floods, your backup isn't destroyed along with your primary records."

There are a number of programs that can automatically back-up everything on your computer --including some that come pre-installed on new computers such as Dell DataSafe Online -- and others that you can downloaded, such as Mozy and Carbonite. Check to see if your accounting software supplier also has an automatic backup service -- several do. The added advantage to backing up online is that you can access your financial info any time -- even when you're away from the office.

5. Track Health Insurance Policies

The Small Business Jobs Act entitles a sole proprietor to reduce self-employment tax by the amount of deductible health insurance premiums. "For small businesses that pay at least half of their employees' policies, there are substantial tax credits available. Check with your accountant for details, but do track policy costs throughout the year. That way you'll have an exact record if you change insurance companies or coverage.

6. File Online -- It's the Law

"Small businesses are now required to file 941 forms (quarterly payroll taxes) and unemployment forms electronically," said Moe. "If you're not using automated accounting software or a third-party payroll company, you may find it really difficult to file these electronically." Be warned, the fines for failing to file online and on time can be significant.

7. Use Electronic Calendars

Odds are you already use an electronic calendar on your computer or smartphone. You can also use it to jog your memory as to which trips and meals qualify as tax deductible -- thus giving you a good way to double-check your deductions at tax time.

"Make a note of any appointment that is tax related by indicating so with a 'T' right in the subject line," said Dennis. "At the end of the year, you can print out your appointments, and anything with a 'T' next to it is something you need to follow up on for your taxes."

8. Profit by Hiring

In the current economy, many businesses are reluctant to hire employees. However, the government is offering employers a $1,000 tax credit for each employee hired. "The business owner must retain the new employee for at least a year," said Mike D'Avolio, senior tax analyst at Intuit, the makers of QuickBooks.

"Also, the employee's wages during the last 26 week period must equal at least 80 percent of the first 26 week period." In order to benefit from this tax credit, it's important to track length of employment and to calculate earnings against this rule – a task some accounting software will do for you automatically. In comparison, the shoe box won't track this at all, and you can end up working short-handed and paying more taxes.

9. Buy More Assets with Tax Credits

The government is encouraging small businesses to purchase assets by expanding several incentives. Businesses can claim a 100 percent bonus depreciation deduction for new assets purchased in 2011. "Personal property, such as machinery and equipment, qualifies; but real estate does not," said D'Avolio.

Even though the purchase of used property does not qualify for this 100 percent bonus depreciation provision, D'Avolio said it does qualify for a section 179 expense deduction. There is a $500,000 limit for 2011. Certain types of real estate qualify for the section 179 expense deduction with a $250,000 limit.

10. Avoid Huge Penalties for Late Reporting

According to Greatland, the parent company to tax-filing software such as FileTaxes.com and speedEfiler, the Small Business Jobs and Credit Act of 2010 will increase 1099 and W-2 reporting penalties across the board. This will apply to information returns filed on or after Jan. 1, 2011, and therefore, all payments made in 2010.

The maximum failure-to-file penalty increases to $500,000 (up from $100,000) The maximum penalty for issuing corrections within 30 days increases to $75,000 (up from $25,000) while the penalty for issuing corrections more than 30 days past the due date, but before Aug, 1, increases to $200,000 (up from $50,000).

Additionally, a new provision in the healthcare reform legislation is aimed at improving reporting and closing the tax gap. "It will require all businesses to not only issue a 1099 to document income paid to contract workers, but also issue a 1099 form to any business from which they purchase at least $600 in goods or services," said Bob Nault, Greatland's CEO. "Some estimate that this change will have the average business seeing its 1099 reporting increase tenfold -- a burden expected to only be compounded next year if businesses don't begin to prepare in 2011."

Accounting software can automatically issue these 1099s for you. If you fail to start issuing 1099s and W2s according to these new laws, the penalties could rob you of your business. In the end, you could be left with nothing but your shoe box of receipts.

The Easiest Way to Get Rich

reprinted from Paul's Tips

Judging by their behavior, most people have an obsession with wealth. Politicians promise to create it, most popular magazines are filled with gossip about those who have it, and the average person spends much of their adult life trying to obtain it. We are creatures obsessed with money, partly for what it can buy, but also as a thing of value in itself.

But most people misunderstand money. They don't really know how to obtain it, or how to hold onto it once they have it. If you're interested in getting rich, I'm going to give you the simplest formula for doing so. In fact, if you follow it you're virtually guaranteed to build enough wealth to get you into the top 5% of society. As the shampoo advertisement says: "It won't happen overnight, but it will happen".

The hardest way to get rich
Before I go into my formula, let me tell you about hard ways to get rich.

One of the hardest is to be born into it. Of course, if you happen to enter this world as a Hilton, a Gates or a Windsor, then life is sweet. But since 99.9999% of the population aren't that lucky, I'm assuming you didn't win that particular lottery. And speaking of lotteries, gambling is another very difficult way to get rich. Sure, some people buy a lottery ticket and win big, but most don't. You can gamble your entire life and you'll most likely end up broke rather than wealthy. When I was younger, I thought the easiest way to get rich was to become famous through some kind of creative act. Stephen King got rich writing horror novels, so why not me? I'm now much wiser and realize that the vast majority of novelists never even get published. Of those who do, most wallow in obscurity. Only very few make it anywhere near the best-seller list, and only one in a million will achieve any kind of serious wealth.

The same fate awaits the majority of musicians, software company founders, sportspeople and website creator. For every Google that makes its owners billions, there are a million websites that lose money. Creativity is the most fun and rewarding way to get rich, but it's also a very difficult way. The reason the media raves about and idolizes those who've built wealth through creativity is because they're so rare. You don't hear about the vast majority who wallow in obscurity and poor pay, because they're not interesting. "Young genius makes $1 billion from website" is a great headline "Ten thousand young geniuses make nothing from their hard work" isn't. I'm not saying you shouldn't keep your dreams alive. It's one of the best parts of life. But this article isn't about the most fun way to try and get rich - it's about the easiest way.

Okay, here's the system.

Step 1: Get a well-paid job
This is a reasonable amount of work, and takes a few years, but it's a virtually guaranteed way to make a good income. If they're willing to put in the work, almost any intelligent person can get a job paying $100,000 or more within the space of a few years. While it's not easy, it is by far the easiest and most likely way to secure a good income. In fact, I've already written an entire article on how to get a job paying more than $100,000 a year for those who wish to pursue this avenue.

Step 2: Get good tax advice
However you make your money, your number one expense is likely to be funding the government. In most developed countries, the average worker pays around 30% of everything they earn straight into the taxman's pocket. If you've taken my job advice, you'll most likely pay even more than that.

While taxation is necessary to fund the good things governments provide, you don't do yourself any favors by paying more than your fair share. If you're serious about building wealth, get a good accountant who understands how to legally minimize your tax bill.

Step 3: Save 20% of everything you ever earn
As soon as you get paid, arrange to have 20% of your income removed into a savings account. Many banks can do this automatically for you. Keep your savings account separate from your spending account, and you'll barely miss this money.

There's a saying in economics "expenses rise to meet income". This means money that's easily available to you is certain to be spent. That's why most people's paychecks disappear before their next payday. They get used to having a certain amount to spend, and habitually run down their bank account.

Have your savings moved somewhere it's a hassle to get them out of to avoid this risk. Many high interest accounts require you to give them a few days notice, which is ideal for this purpose.

Step 4: Conservatively invest the funds that build up in your savings account
Once a month, go into your savings account and divide the money by investing it into the three core conservative assets: shares, property and cash. Open a mutual fund account for shares, a property fund for property, and a money market fund for cash. Look for share and property funds that invest in a broad range of assets and most importantly charge very low fees. An index fund is ideal for the shares. An index of property funds is ideal for property.

Put an equal amount into each account. This will diversify you against risk in any one particular asset. If you're younger, this rule is a little bit flexible, allowing you to take a little more risk and put more into shares and property if you like.

Step 5: Reinvest any income you get from your assets straight back into buying more assets
Mutual funds and property funds pay dividends. Money market accounts pay interest. Don't take this income into your spending account. Instead, select the option to have it reinvested into the fund that generated it.

Step 6: Never touch these funds and do your best to ignore them
The business press, like the mainstream press, loves a crisis. "Shares to skyrocket" or "Property to plummet" headlines will sell many more copies than "Things to continue steadily". All markets go up and down. Every day, some speculation will be published about some crisis or opportunity.

Ignore it all.

Just keep putting the 20% into your assets. Sometimes they'll go up and sometimes they'll go down in value. But over the long term, they'll almost certainly go up.

Step 7: Wait a decade
Do what I've outlined above and in a decade you'll be rich. Sure, you won't be Bill Gates, but you'll almost certainly be in the top 20% of wealth holders. Wait another decade and you'll be in the top 5% or higher.

That's the plan. It's not the most exciting or glamorous way to build wealth, but it's the easiest. Quite simply, this is how most rich people got there.

You too can join them, if you follow it.

5 Wealth Lessons from 20 Percent of a Millionaire

reprinted from www.stevepavlina.com



While I’ve long dreamed of becoming a millionaire (who hasn’t?), it was only last year that I began taking it seriously. What motivated me wasn’t the thought of buying lots of stuff or quitting my job (what job?!?) and retiring. Instead I got inspired by the idea that if I could figure out how to earn a million dollars, I could share what I learned and hopefully help a great number of people.

After a solid year of working at it, it’s a bit unclear whether or not I’m a millionaire yet. If I add up my cash, cash equivalents, and tangible assets, my net worth is roughly $200K, so I’m at least 20% of the way there. However, Erin and I own several online assets that are likely worth much more than that. It’s entirely possible that StevePavlina.com could receive a paper valuation of over $1 million due to its income (about $40K/month), its continued growth potential, and its extremely low operating costs. One blog valuation tool estimates this site as being worth over $1.6 million. I have no intention of selling this business though, so I don’t see that figure as particularly meaningful. Consequently, I’ll stick with the 20% of a millionaire tag for now.

I suggest we leave the labeling issues to those who enjoy obsessing over such matters, and I’ll proceed to share the wealth-building lessons I’ve found most valuable. Then you can make up your own mind about how helpful they are to you:

1. It’s damned hard to earn a million dollars from scratch.

This is just common sense, but I have to say it to counter the scammers who preach that you can earn a million dollars via their fast, easy, foolproof methods for only 3 easy payments of $19.95.

Perhaps you can earn a million dollars by using emotional manipulation to sell people useless, overpriced information products, but assuming you’re not a scam artist, you’re going to have to earn the money by providing a million dollars worth of real value. For most people, including me, that’s a huge challenge.

Respecting the magnitude of this challenge actually helps though. If you take this goal seriously, you’ll realize you must make a massive commitment to have a real chance of getting there.

People who say they want to become a millionaire but are unwilling to back it up with hard work are only fooling themselves. It’s not going to happen by itself. If hard work is a dirty word to you, don’t bother.

However, the great thing about this goal is that it’s achievable. People in far worse positions than you have already done it. It’s hard but definitely not impossible. If you accept this, it becomes something of a game. You don’t have to fear failure because you’re expected to fail, and that makes success all the more exciting.

2. Self-interest is insufficient motivation.

Given the magnitude of this challenge, tremendous motivation is required to lay in the course and persevere through the inevitable obstacles.

I found that wanting to become a millionaire for the benefit of myself or my family just didn’t cut it. I just don’t need more money or stuff badly enough to justify the effort. On a scale of 1-10, my level of materialism is about a 3. Even my friends could agree on that during a recent game of Therapy. Give me a fast PC and a high-speed Internet connection, and I’m good to go. I’m sure some people can get excited about earning a million dollars for all the cool stuff they can buy… or maybe for the status and recognition, but those aspects don’t do it for me. I’d rather play disc golf.

Unfortunately, this goal requires a lot more than mediocre motivation. You need to be seriously driven. Anyone who tells you otherwise is probably about to pitch you on 3 easy payments of $19.95. But where is that drive going to come from?

After some serious soul searching, I gave up on the idea of becoming a millionaire for myself. I just didn’t want it badly enough. If I did I’d have done it years ago with my computer games business, which I believe was entirely capable of getting there. I felt like a dolt for dropping this goal, but I also felt a sense of relief about the whole thing. It freed me up to focus on more important priorities like service and contribution.

Ironically it was the decision to put contribution ahead of wealth that led me full circle. Eventually I realized that becoming a millionaire could dramatically enhance my ability to help others.

By sharing what I’m learning along the way (as I’m doing right now), I can potentially inspire others to generate income by providing value instead of thinking they need to scam or trick people to get ahead. If even a small fraction of this website’s 1.5 million monthly visitors increase the value they provide to others as a result of the info I share, something truly wonderful will have occurred.

I also started thinking about what I could do with a million dollars. One idea I find very inspiring is to found a non-profit personal development organization, which would ultimately have thousands of individual groups all around the world. In structure I imagine it being similar to Toastmasters International, which has 200,000 members and 10,000 clubs worldwide. You could find a local group near you filled with people dedicated to helping and supporting each other grow, very similar to a mastermind group. In fact, the Local Groups forum on this site is a very basic first step towards the realization of that long-term vision. Forum members are already having local meet-ups in cities around the world. I’m so excited to see this happening. Best of all it’s 100% free for everyone.

Considering the contribution aspects helped shift the millionaire goal from my head to my heart. I finally got enough leverage on myself to seriously commit to it. I realized this goal was potentially something much bigger than just me and my family, and taken in that light, I felt like I’d have to be a real schlub not to give it my all.

Even though it seems like earning a million dollars is a totally selfish goal, I’ve found that it’s just the opposite. Contribution is a far more powerful motivator than enlightened self-interest.

3. Focus on providing value to others, and the money will follow.

I figured that earning a million dollars should be pretty easy if I could determine how to provide at least a million dollars worth of value to others. Unfortunately I don’t know how to provide a million dollars in value to a single person (and get paid for it), so I figured I’d have to make it up in volume… maybe by providing $1 of value to a million people. I know I can create something that’s worth at least $1 to someone – one good article should do it — so the key is figuring out how to get that value into the hands of as many people as possible.

I think the best way to provide $1 of value (or thereabouts) to as many people as possible is to give it away for free. Who isn’t going to accept a free dollar? While you’d go bankrupt doing this with a tangible product, this can be done sanely with digital content. And thanks to the Internet, it’s possible to reach a large audience at extremely low cost. As for the details of how to create valuable online content, check out How to Build a High Traffic Web Site.

Once you can generate value and get it into people’s hands, the income part is relatively easy by comparison. It’s not automatic, mind you. You still have to set up systems to do it right, but that can be achieved via trial and error if necessary.

Consider this analogy: Suppose you own an empty warehouse, and you have thousands of people passing through it each day. Could you generate some income from those visits? Of course you could. You could sell lemonade, sell sponsored billboard ads on the walls, sell car insurance, solicit donations, etc. Some methods will bomb, but some will prove very effective. Given enough trial and error, testing, and refinement, you’ll eventually establish a reasonable income stream. Generating that foot traffic is the hard part, but in the online world it’s a lot easier because you can offer something valuable for free that doesn’t cost you anything to give away. OK, it does cost you a little because you have to pay for web hosting and bandwidth, but for me that expense is about 1/100 of a cent per monthly visitor. Going back to the empty warehouse analogy, you could do just about anything and earn more than a penny for every 100 visitors.

This site only earns about 3 cents per visitor per month on average, so I can say without conceit that it’s giving a lot more than it receives. I have to believe the 500+ articles here are worth more than 3 cents to virtually anyone who can read. Have you gotten your 3 cents worth from this site yet? What do you estimate it’s actually worth to you?

The upside is that this value imbalance generates massive referrals. It’s the main reason this site has blown past the web traffic levels of every famous pro speaker or author in the field of personal development, even though I’ve never spent a dime on marketing. While others firewall their value behind those 3 easy payments, this site’s content is free. It’s hard to compete with free.

To generate a million dollars in this situation, I can either find a way to provide even more value, or I can get better at monetizing the existing value. My plan is to actually do a little of both by making some changes to the business model this year. Rest assured the articles will remain free. Check back at the end of 2007, and we’ll see how well it worked.

I’m sharing this info with you, so you can understand the underlying strategy of generating income by providing genuine value. Forget about trying to get a million dollars, and focus your energies on providing a million dollars worth of value. If you can do that, the money will come.

For more on generating income by providing value, read Making Money Consciously.

4. Becoming a millionaire requires a significant identity shift.

To become a millionaire, you must become comfortable thinking and acting like a millionaire. If you can’t get there in your mind first, you won’t get there in your reality.

I realized that if I became a millionaire, I’d have to be comfortable managing larger sums of money. At the time I started on this path, $10,000 was a lot of money to me. But to a millionaire, it’s a relatively puny sum, only 1% or less of their net worth. So I began imagining that $10,000 was just a small amount of money and thinking about what that would feel like. Eventually I began to really believe it.

Secondly, I realized that if I were a millionaire, I’d carry more cash in my wallet. At the time I was comfortable having $50-70 in my wallet. $100 felt like a lot. So I went to the ATM and took out $200 and put it in my wallet. It felt uncomfortable to carry that much cash, but I got used to it after a few weeks. Over time I gradually raised my baseline until it felt normal having $300-500 in my wallet. Now when I have only $200 in my wallet, I sense a desire to go to the ATM.

Thirdly, I realized that to a millionaire, any sum below $100 or so is essentially irrelevant. If you’re already a millionaire, a few dollars here and there just don’t matter. Worrying about those kinds of sums is like fussing over pennies. I started telling myself that there’s no financial difference whatsoever between a $20 dinner and a $50 dinner. Going to a $9 movie is nearly identical to seeing a $90 show on the Las Vegas Strip. Those amounts are just pennies anyway.

As I gradually integrated these internal shifts, my income began to soar. Over a period of 12 months, StevePavlina.com’s monthly revenue went from $2K to $40K. As I made small changes to pretend like I was already a millionaire (in a safe and low-risk manner), I began attracting opportunities to earn more money.

Let’s be clear that I didn’t suddenly adopt foolhardy spending habits, even on low amounts, because a millionaire wouldn’t spend money foolishly. I kept my expenses reasonable, but I learned to stop fussing over amounts that really didn’t matter, like whether or not I should order a drink (non-alcoholic of course) with dinner. I’m never going to miss the $2 whether I become a millionaire or not.

Today any expense below $100 is effectively meaningless to me. $100 isn’t even 10% of a day’s earnings. This makes many purchasing decisions easier, since if the price difference between two items is less than $100 (such as the difference between two iPod models), I don’t even worry about it — I just buy the better model. The price difference is only pennies anyway.

It’s fascinating to me that I adopted this mindset first, and then the income manifested to fit the mindset. I suppose the next step is to start thinking of even larger sums as essentially irrelevant. It might seem counterintuitive that this method works, but it just does. If you want to be wealthier, start thinking like you’re already there.

5. Financial trolls must be shown no mercy.

In the terminology of online forums, a troll is someone who “intentionally tries to cause disruption, often in the form of posting messages that are inflammatory, insulting, or off-topic, with the intent of provoking a reaction from others.” (source: Wikipedia)

After launching the forums on this site over two months ago, the moderators and I gradually developed our troll-squashing shoes. At first we opted to be fairly lenient, giving polite warnings and reminding trolls to follow the posted etiquette guidelines. That never worked. All it did was embolden the trolls to keep on trolling. Every troll ended up getting himself banned eventually, but only after wasting a lot of people’s time. Eventually we learned the best approach was to banish trolls immediately on sight. It seems obvious in retrospect, since the kind of person who’d resort to trolling in the first place isn’t someone who’d genuinely care about personal development, but it was an important lesson nonetheless.

A financial troll is a close cousin to the forum troll, except that financial trolls strive to sabotage your financial pursuits. These trolls can be internal or external. They’re the people who make comments like, “Wealthy people are so greedy. They only care about themselves and will take advantage of anyone to make money.” Financial trolls are also the internal voices that say, “If you make too much money, people will judge you harshly for it. They’ll assume that’s all you care about.”

It’s tempting to listen to financial trolls because their statements are crafted to bait you into pointless arguments. Whenever you take the bait, you lose no matter what because trolls don’t care about arguing logically. If you agree with a troll, you lose. If you disagree with a troll, you lose. You’ll never convince a troll of anything no matter how hard you try. A troll’s agenda is to boost his own ego by making you wrong and by wasting your time. The more time you invest in dealing with the troll, the more you lose.

The only effective way to deal with trolls is to delete them from your life, no questions asked. Just nuke the sucker and move on. With face-to-face trolls, simply leave the room. If you really need a parting shot, consider the way Debra on Everybody Loves Raymond glares at Ray and then delivers the line, “Idiot!” If that isn’t your style, a simple eye roll works pretty well too.

Every once in a while someone sends me an email like, “Oh come now. It’s obvious you’re just in this for the money. Don’t even pretend you care about helping others. That’s just a load of self-serving B.S. You’re such a phony.” My external response is to simply hit the delete key. But my internal response is to recall a line from the movie Ruthless People: “This could very well be the stupidest person on the face of the earth.”

There’s a huge difference between constructive criticism and trolling. The former can be genuinely helpful. The latter never is. By all means listen to constructive criticism, but when you know the other person doesn’t actually have your best interest at heart, hang up on them and get back to work.

Show no mercy to financial trolls, whether they be internal or external. Once you recognize you’ve got a troll on your hands, hit the delete key and be done with it. Invest your time in making a contribution instead of becoming mired in a troll’s trap. When it comes to dealing with trolls, even when you think you’ve won, you’ve lost.

There are more lessons than these, which I’ll probably share in a future article, but the five above should get you off to a good start in generating greater financial abundance. For the most part these items are common sense, but in practice they’re fairly uncommon.

How often do you ignore your common sense and succumb to traps like wishful thinking, with its promise of fast and easy results; trolling, with its lure of intelligent debate; and penny pinching, with its prideful certainty that saving five dollars is better than earning five hundred? If the financial advice you’ve been getting hasn’t proven itself effective, then toss it out and rebuild your financial beliefs from ground zero. If you want to become a millionaire in 10 years or less, you can’t subscribe to the 40-year skimp-and-save approach. Sure you can save your way to a million in 40 years, but you can earn your way there a lot faster.

IRS Increases Mileage Rate to 55.5 Cents per Mile

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/11	Rates 7/1 through 12/31/11
Business	51	55.5
Medical/Moving	19	23.5
Charitable	14	14