• Corporate Payment of Shareholder Expenses
• Hire your kids, cut your taxes
• Don't be fooled
• Implication of tax law
• Setting up your business?
• Smorgasbord of Benefits
• Tax planning
• Tax traps
• Travel expenses
• True impact of tax cut

Tax Traps

Many 401(k)s offered by publicly held companies include employer stock on the menu. No matter how bright you think your employer's prospects, you should avoid having too much of your portfolio exposed to just one stock.

Strategy., If you have a choice, keep your investment in employer stock down to no more than 10% of your 401(k) holdings. In some cases, your employer will match your contribution with its stock rather than cash. What’s more, you may be restricted from selling any of that stock before age 50, for example. If so, sell the stock as soon as you can to get down to (or even below) the 10% mark. Don't take risks with your retirement be-cause of misplaced "loyalty."

Borrower beware. Many 401(k) plans allow participants to borrow from their account.

Trap I. Double taxation. Loan repayments are made with after-tax dollars. And, you'll pay tax again when you withdraw money from your account.

Trap II. If you leave your company, any outstanding loan needs to be repaid. If you can't repay, the loan will be treated as a distribution, subject to income tax and possibly a penalty before age 591/2.

Strategy. Use your 401(k) plan as a lender of last resort. If you need money, and bank loans aren't available, a 401(k) loan is better than a credit card loan with interest rates up to 21%.

Cost cutting. When you select funds, lean toward funds with low expense ratios, as revealed in the prospectus. Low turnover rates can lead to low transaction costs. Over time, such economies can increase your returns dramatically.