Focus on Personal Finance
Tax Tips You May Have Missed
Use this advice to save money and take the edge off next April.

Another April has rolled around, and with it another tax-filing deadline.

But you don't have to dread April 15. This month, we'll offer you several tax tips that can save you substantial dollars. We'll also provide you with a few year-round financial planning pointers that will help you make 2001 a fiscally rewarding experience.

Begin your tax planning now and it will pay handsome dividends throughout the year. Otherwise, you'll pay later through lost tax deductions and aggravation. Some money-saving ideas for you to consider:

• Contribute the maximum to tax-deferred retirement plans. Make your individual contribution by the April 16 (April 15 is a Sunday) due date. For qualified plans, Keoghs and SEP IRAs, you can extend your filing date to as late as Oct. 15 to accumulate the necessary cash to fund your retirement accounts. However, with the exception of a SEP IRA, which can be established after year-end, you must have established your qualified plan prior to last Dec. 31.
  Depending on your compensation level, the maximum contribution in 2000 was $30,000. For 2001, the maximum contribution has been increased to $35,000.
• Open and/or deposit your year 2000 contribution to your traditional IRA or Roth IRA by April 16, 2001. Your contribution to your Roth IRA isn't deductible on your 2000 income tax return, but it must be funded by April 16 to qualify as your year 2000 contribution. Though the contribution isn't deductible from your taxable income in the year of contribution, the entire amount (including the earnings) won't be taxed when you receive the cash in the form of distributions.
• Put your kids on the payroll. Assuming you're self-employed, enjoy one of the best income-shifting techniques by paying your children as your employees. Not only will your business taxes be reduced because the wages are tax deductible, your kids will be taxed on the income at their rates -- which will be lower than yours, or maybe not at all.
• Use the increased expense limitation. In 2001, you may expense up to $24,000 of business use assets placed in service, rather than depreciate them over the term of years of their useful lives. This is called a Sec. 179 expense election on your tax return.
• Consider a home-office deduction. Doctors who consult and perform surgery at several hospitals, clinics and/or ambulatory surgery centers may now qualify for a home-office deduction. But you must use the space only for business.
• Many professionals view the home-office deduction as an "automatic audit trigger." However, with more favorable rules for doctors who don't have a fixed place of employment, you shouldn't fear taking the deduction if you qualify for it.
• Use the increased standard mileage rate. Make sure you're deducting the correct amount for business use of your automobile. If you use the standard mileage rate (cents per mile), the rate is 34.5 cents per mile beginning Jan. 1, 2001. The rate in 2000 was 32.5 cents per mile.
• File electronically. You can file electronically with either Quicken's Turbo Tax or a program your tax advisor uses. You can even have the IRS deposit your refund check directly into your bank account. If you file electronically, you can expect faster IRS processing. That means quicker refunds.
• Find a tax advisor. Taxes is one area of the law that holds numerous traps for the unwary. Unless you're ready for us to perform refractive surgery on you, you may wish to leave tax planning and processing to the professionals. 

Richard J. Alphonso, JD, CPA/PFS, M.S.T., and Anita S. Frank, CPA, are president and tax manager, respectively, of The Financial Advisory Group, Inc., in Houston. The Financial Advisory Group provides personalized fee-only financial planning, investment management and business consulting services.