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Save your family money on your taxes with these tax tricks

The Huffington Post The Huffington Post 7/03/2016 Julian Block
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Nail down bad debt deductions for loans to friends and family. These being the troublesome times they are, friends or relatives who are strapped for funds may try to tap their lines of credit at the Bank of You. Before doling out dollars, do the paperwork necessary to establish that the transactions actually are loans. Be sure to have debtors sign agreements or notes stipulating amounts advanced and repayment provisions as well as when they must make interest payments. Charge a realistic rate of interest--say, whatever your money would earn in a savings account if it weren't out on loan.
At Form 1040 time, you'll be rewarded for your foresight: Loans that later become worthless are deductible under the rules for short-term capital losses. What if you just shake their hands and skip the paperwork? Expect skeptical tax collectors to throw out write-offs for "loans" that really were nondeductible gifts.

Profit from paying your kids
. Can your children help out with some of the chores connected with your business? Then a savvy way to take care of their allowances or spending money--at the expense of the IRS--is to pay them wages for work they do on behalf of the business. This is a perfectly legal way to keep income in the family, while shifting some out of your higher bracket and into their lower bracket. For this business expense to withstand IRS scrutiny, your children must actually render services and you must pay them reasonable wages.
Another break is that you sidestep Social Security taxes on the wages you pay your children under the age of 18. To qualify for the exemption, you must operate as a sole proprietorship, meaning the lone owner of a full-time or part-time business that's not formed as a corporation or partnership or do business as a husband-wife partnership. Put another way: No exemption for a family business that's incorporated or a partnership with a partner other than a spouse.
Write-offs for wages paid children enable self-employed people to save more than just income taxes. They also reduce self-employment taxes.
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Julian Block writes and practices law in Larchmont, N.Y. He is frequently quoted in the New York Times, the Wall Street Journal, and the Washington Post, and has been cited as: "a leading tax professional" (New York Times); "an accomplished writer on taxes" (Wall Street Journal); and "an authority on tax planning" (Financial Planning Magazine).
His tax guides include "Tax Deductible Travel and Moving Expenses," "Tax Tips for Marriage and Divorce," "Easy Tax Guide for Writers, Photographers, and Other Freelancers," and "Home Seller's Guide to Tax Savings." For information about his books, go to julianblocktaxexpert.com.

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