11 Temmuz 2012 Çarşamba
Are Hunters a Constitutionally-Protected Group? A New York Judge Says Yes
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10 Temmuz 2012 Salı
9 Temmuz 2012 Pazartesi
DON'T LISTEN TO BAD ADVICE
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Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
To contact us Click HERE
These are some of the potential pitfalls that can occur when investors and movie producers get together and make decisions....
Movie Director Sentenced for Abusing Film Tax Credits
A film director and his producer who inflated their movie expenses while shooting two movies on Cape Cod in order to claim larger Massachusetts film tax credits has been sentenced to between two and three years in prison and 10 years’ probation.
Daniel Adams pleaded guilty in April to charges of larceny and making a false claim. Adams received over $4.7 million in tax credits for the 2009 movie “The Lightkeepers,” starring Richard Dreyfuss, and the 2008 picture “The Golden Boys,” with the late David Carradine. They both included scenes on Cape Cod.
Among the inflated expenses claimed was one for $2.5 million to Dreyfuss, when in fact the “Jaws” star only received $400,000.
Movie Director Sentenced for Abusing Film Tax Credits
A film director and his producer who inflated their movie expenses while shooting two movies on Cape Cod in order to claim larger Massachusetts film tax credits has been sentenced to between two and three years in prison and 10 years’ probation.
Daniel Adams pleaded guilty in April to charges of larceny and making a false claim. Adams received over $4.7 million in tax credits for the 2009 movie “The Lightkeepers,” starring Richard Dreyfuss, and the 2008 picture “The Golden Boys,” with the late David Carradine. They both included scenes on Cape Cod.
Among the inflated expenses claimed was one for $2.5 million to Dreyfuss, when in fact the “Jaws” star only received $400,000.
Possible relief for employees working in multiple states!
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Employees who live in one state but who travel to and work for an employer in other states are currently subject to the the income tax laws of the other states while occupying space in the other state. Recent legislation has passed the house that would give these "traveling" employees some relief.
The U.S. House of Representatives has passed the Mobile Workforce State Income Tax Simplification Act of 2012, which, if enacted, would prohibit an employee’s wages from being subject to personal income tax or withholding and reporting requirements in any state other than the employee’s state of residence and a state in which the employee is present and performing employment duties for more than 30 days during a calendar year. The Act would not apply to professional athletes, professional entertainers, or certain public figures. It would be effective January 1 of the second year after the date of enactment.
The U.S. House of Representatives has passed the Mobile Workforce State Income Tax Simplification Act of 2012, which, if enacted, would prohibit an employee’s wages from being subject to personal income tax or withholding and reporting requirements in any state other than the employee’s state of residence and a state in which the employee is present and performing employment duties for more than 30 days during a calendar year. The Act would not apply to professional athletes, professional entertainers, or certain public figures. It would be effective January 1 of the second year after the date of enactment.
Tips are part of wages earned
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I am often asked if tips paid directly to servers by patrons of restaurants and bars are wages or some other form of payment? The IRS is quite literal that tips paid to patrons are part of their compensation and the employer is responsible for payroll taxes similar to wages paid. See the IRS excerpt below:
Section 3121(a) of the Code defines “wages” for FICA tax purposes as all remuneration for employment, with certain exceptions. Section 3121(a)(12)(A) excludes from the definition of wages tips paid in any medium other than cash; section 3121(a)(12)(B) excludes cash tips received by an employee in any calendar month in the course of the employee's employment by an employer unless the amount of the cash tips is $20 or more.
Employer FICA Obligations. Under section 3121(q) of the Code, tips received by an employee in the course of the employee's employment are considered remuneration for that employment and are deemed to have been paid by the employer for purposes of the employer share of FICA taxes imposed by sections 3111(a) and (b), that is, social security tax and Medicare tax, respectively. The remuneration is deemed to be paid when a written statement including the tips is furnished to the employer by the employee pursuant to section 6053(a), discussed below.
Section 3121(a) of the Code defines “wages” for FICA tax purposes as all remuneration for employment, with certain exceptions. Section 3121(a)(12)(A) excludes from the definition of wages tips paid in any medium other than cash; section 3121(a)(12)(B) excludes cash tips received by an employee in any calendar month in the course of the employee's employment by an employer unless the amount of the cash tips is $20 or more.
Employer FICA Obligations. Under section 3121(q) of the Code, tips received by an employee in the course of the employee's employment are considered remuneration for that employment and are deemed to have been paid by the employer for purposes of the employer share of FICA taxes imposed by sections 3111(a) and (b), that is, social security tax and Medicare tax, respectively. The remuneration is deemed to be paid when a written statement including the tips is furnished to the employer by the employee pursuant to section 6053(a), discussed below.
Obamacare Tax Penalty, collectible?
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Odd but true, Obamacare's tax will not be collectible by the IRS in all situations: Strangely, the IRS can’t collect this tax without the taxpayer’s help. If the taxpayer doesn’t fork it over voluntarily, or have a refund against which to apply it, the IRS can’t use its usual collection tools — levies, seizures and so on — to collect it. That means a lot of people will make sure to fiddle their W-4s so they never have an overpayment on their 1040s.
8 Temmuz 2012 Pazar
The IRS, Non-Filers and Substitute Tax Returns
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The IRS computer will operate 24 / 7 is looking for people who are not filed prior year tax returns. The computer adjusts W2S and 1099 information on income and interest from bank accounts to tax returns, you may or may not be needed.
If the computer is not IRS a return, the information begins to look to the IRS with your bank, employer or client (1099) - The computer then matches the task provided to figure out why not give the taxpayer file a return, and a number of notices are out, requested that the taxpayer is sent back to the previous file.
If the taxpayer does not respond, notify the IRS an IRS computer people (Taxpayer Identification Service Representative) Depending on the severity of the non-filed tax returns, the file may be assigned to a revenue officer at your local IRS office. At some point, if the taxpayer does not respond to communications from the IRS, the IRS will prepare a tax return for the taxpayer. This will return as a "substitute" In designing the "substitute return" the IRS will be no additional deductions or exemptions that the taxpayer may be entitled to.
The only way to get the tax to altered (lowered) for compensation for a return to a "real income" for many taxpayers reduce the "effective yield" means the taxes owed and in some cases created a nice file refund. It is always better for the taxpayer to the IRS with respect to non-contact-filed tax returns. It can be 18 to 24 months before the IRS contacts a taxpayer, however, penalties and interest accrual daily. Plus, the IRS has been known to refrain from prosecuting those who file before it contacted.
Editor Tips
This new way of thinking is not the unattainable goal that many people think, it is often. Yes, it takes a little time and trouble concentrating, especially in the run. But if you own this setting, you have the door to reality, you are legally and effectively opened reduce your taxes. Remember, the tax code written to companies and investors favor!
If you have a car that you would think you a good tax write off, you may ask yourself, where you donate your car. You can deduct up to $ 500 for the latest tax laws. Ask to see your tax advisor or CPA to determine whether this has changed, if you decide to go ahead. First of all you want, that you have a car that can be donated.
Legal services: Hire an attorney to draft contracts and other business-related documents is probably the best known example of a deductible legal expenses. All the legal fees you incurred in the unfortunate event of a business application are also deductible. Another common legal fee in those days, the cost of membership in a Pre-Paid Legal Services plan.
If the computer is not IRS a return, the information begins to look to the IRS with your bank, employer or client (1099) - The computer then matches the task provided to figure out why not give the taxpayer file a return, and a number of notices are out, requested that the taxpayer is sent back to the previous file.
If the taxpayer does not respond, notify the IRS an IRS computer people (Taxpayer Identification Service Representative) Depending on the severity of the non-filed tax returns, the file may be assigned to a revenue officer at your local IRS office. At some point, if the taxpayer does not respond to communications from the IRS, the IRS will prepare a tax return for the taxpayer. This will return as a "substitute" In designing the "substitute return" the IRS will be no additional deductions or exemptions that the taxpayer may be entitled to.
The only way to get the tax to altered (lowered) for compensation for a return to a "real income" for many taxpayers reduce the "effective yield" means the taxes owed and in some cases created a nice file refund. It is always better for the taxpayer to the IRS with respect to non-contact-filed tax returns. It can be 18 to 24 months before the IRS contacts a taxpayer, however, penalties and interest accrual daily. Plus, the IRS has been known to refrain from prosecuting those who file before it contacted.
Editor Tips
This new way of thinking is not the unattainable goal that many people think, it is often. Yes, it takes a little time and trouble concentrating, especially in the run. But if you own this setting, you have the door to reality, you are legally and effectively opened reduce your taxes. Remember, the tax code written to companies and investors favor!
If you have a car that you would think you a good tax write off, you may ask yourself, where you donate your car. You can deduct up to $ 500 for the latest tax laws. Ask to see your tax advisor or CPA to determine whether this has changed, if you decide to go ahead. First of all you want, that you have a car that can be donated.
Legal services: Hire an attorney to draft contracts and other business-related documents is probably the best known example of a deductible legal expenses. All the legal fees you incurred in the unfortunate event of a business application are also deductible. Another common legal fee in those days, the cost of membership in a Pre-Paid Legal Services plan.
DON'T DO IT!
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Asa tax preparer, and online tax authority, I am often asked, “What is your best taxadvice?” I have given it much thoughtand decided the best piece of tax advice I can give anyone is DO NOT ACCEPT TAX ADVICE FROM ANYONE OTHERTHAN A PROFESSIONAL TAX PREPARER.
Iusually continue my answer by saying "don’t listen to your brother-in-law, yourcousin Manny, your auto mechanic, your neighbor or co-workers, or a guy youride to work with on the train".
ButI also mean don’t listen to a broker, banker, insurance salesman, or other“financial professional”.
Manypeople in the various financial industries may be experts in their particularfield, but know absolutely nothing at all about federal or state income taxes.Well maybe not nothing. They may have a little knowledge about taxes – but alittle knowledge can be truly dangerous.
Iam a tax professional, but I know next to nothing about insurance and would notthink to offer unsolicited advice about what type of policies or how much coverage you should have.
Whenyou are given advice from a so-called financial professional always considerthe source. Remember, an insurancebroker is a salesman, as is a stock broker and, to a degree, a banker. Theymake their money by selling you something. So take anything they tell youregarding taxes with several grains of salt.
Tobe honest, in many cases a financial professional providing tax advice is doingso out of a genuine desire to help you, and sincerely think he/she knows what theyare talking about. But there are those out there who are only interested inmaking a commission by selling you an annuity or other investment and give youfalse tax advice to try to convince you to give them your money.
Anytimeyou are given tax advice from a financial professional, or anybody else, besure to run it by your tax professional before taking any action.
Manytimes I have asked a client, after the fact, why they did something that wastax stupid – and was told “my banker”or “my broker” or “my insurance agent told me to do it”. Or, when asked why they did not do somethingthat was tax smart, they tell me their banker, broker or agent told them theycouldn’t.
So,to repeat - DO NOT ACCEPT TAX ADVICEFROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER! TTFN
Iusually continue my answer by saying "don’t listen to your brother-in-law, yourcousin Manny, your auto mechanic, your neighbor or co-workers, or a guy youride to work with on the train".
ButI also mean don’t listen to a broker, banker, insurance salesman, or other“financial professional”.
Manypeople in the various financial industries may be experts in their particularfield, but know absolutely nothing at all about federal or state income taxes.Well maybe not nothing. They may have a little knowledge about taxes – but alittle knowledge can be truly dangerous.
Iam a tax professional, but I know next to nothing about insurance and would notthink to offer unsolicited advice about what type of policies or how much coverage you should have.
Whenyou are given advice from a so-called financial professional always considerthe source. Remember, an insurancebroker is a salesman, as is a stock broker and, to a degree, a banker. Theymake their money by selling you something. So take anything they tell youregarding taxes with several grains of salt.
Tobe honest, in many cases a financial professional providing tax advice is doingso out of a genuine desire to help you, and sincerely think he/she knows what theyare talking about. But there are those out there who are only interested inmaking a commission by selling you an annuity or other investment and give youfalse tax advice to try to convince you to give them your money.
Anytimeyou are given tax advice from a financial professional, or anybody else, besure to run it by your tax professional before taking any action.
Manytimes I have asked a client, after the fact, why they did something that wastax stupid – and was told “my banker”or “my broker” or “my insurance agent told me to do it”. Or, when asked why they did not do somethingthat was tax smart, they tell me their banker, broker or agent told them theycouldn’t.
So,to repeat - DO NOT ACCEPT TAX ADVICEFROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER! TTFN
“SUMMER” RERUN: IN THE COURTS – EMPLOYING YOUR KIDS
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{Continuing the theme of summer jobs fordependents, here is another “summer” rerun, slightly updated - rdf}
Employingyour kids is a great deduction for parents of minor children who have a netincome-generating Schedule C business. For2012 a dependent can earn up to $5,950 in wages (or a combination of wagesand up to $300 in “unearned income” – i.e. interest, dividends, capital gains)and pay no federal, and probably no state, income taxes. Contributions to atraditional IRA can add another $4,000.00 to that figure (however, in the longrun, it is probably better to contribute to a ROTH IRA in such a situation).
Plus,if the child is under age 18 you do not have to withhold or pay FICA (SocialSecurity and Medicare) taxes, and probably state unemployment and disabilitycontributions, on the payments. Wages paid by a parent’s unincorporatedbusiness to a dependent child under age 21 are also exempt from FUTA (federalunemployment) tax.
Theparent gets a deduction on his/her Schedule C for the wages paid, which willreduce income tax, self-employment tax, and Adjusted Gross Income.
However,to be deductible the wages must be for actual legitimate services to thebusiness as an employee, the child must actually be paid the wages, and theamount of wages paid must be reasonable for the type of services provided.Routine family chores (see the Court’s discussion below) will not qualify, youcannot just claim a deduction and not actually give the money to the child (ordeposit the money in the child’s IRA account), and you are not allowed to payyour 10 year old son $50 an hour for sweeping up your office.
InMichael D and Christine Alexander vs Commissioner (TC Summary Opinion 2006-127)the parents had three home-based businesses – a tree farm, a tailoringbusiness, and a beagle-breeding business.
Theirson, a 21-year old college student, helped with his mother’s tailoring businessduring summer break. His jobs included getting supplies at a fabric store,general cleaning and shampooing the rug in the sewing room, and accompanyinghis mother to the store.
Theirtwo minor daughters worked in the beagle-breeding business walking the dogs,cleaning and cutting the grass in the beagle yard, hauling garbage, bleachingdog bowls, treating dogs for fleas, clipping nails and hosing kennels.
Noneof the children received an actual pay check. The son received $4,000 over thecourse of the year, most before he actually began work. A type of “drawing account”was kept for each of the daughters. Earnings were accumulated, and the girlswere given money as they needed it, or the parents would purchase items for thegirls and deduct the amount from their “account”. No quarterly (941) or annual(940, W-3, W-2) payroll tax returns were prepared for any of the wages claimedas a deduction.
TheCourt felt that “many of the tasks [the son] performed were in the nature ofroutine family chores such as cleaning, vacuuming, taking out garbage, andaccompanying [his mother] on shopping trips. Such chores are part of parentaltraining and discipline rather than the services rendered by an employee for anemployer.” This, plus the fact that the son’s wages were not paid as earned andthere were no payroll tax returns filed, caused the Court to conclude that thepayments made to the son were not deductible as wages.
WhileI agree with the Court on the son, I felt that the daughters could havequalified as true employees. However, the Court disallowed the deduction for theirwages as well.
Itis very important that you “cross your t’s and dot your i’s” when it comes todocumenting a deduction for dependent wages. You must make sure you pass the“duck test” (if it waddles like a duck and quacks like a duck…). Forget that theseare your kids and treat them as you would any other employee.
·Create a written job description for each “position” outlining the duties andresponsibilities involved.
·Pay the kids on an hourly basis.
·Use a time card to document hours worked and work performed.
·Write a company check as payment each week or every-other week.
·Even though the wages are not subject to FICA and FUTA tax and probably alsostate unemployment and disability contributions, file all appropriate quarterlypayroll tax returns, such as the federal Form 941 (you can indicate that thewages are exempt from FICA on the form), submit an annual federal Form 940 or940EZ indicating the amounts paid as “exempt”, and issue a W-2 in January toreport the wages paid.
·If you have other employees make sure the kids’ wages are included on thequarterly and annual payroll tax returns.
{FYI - this is the type of information discussed in my "The Schedule C Notebook" - rdf}
TTFN
Employingyour kids is a great deduction for parents of minor children who have a netincome-generating Schedule C business. For2012 a dependent can earn up to $5,950 in wages (or a combination of wagesand up to $300 in “unearned income” – i.e. interest, dividends, capital gains)and pay no federal, and probably no state, income taxes. Contributions to atraditional IRA can add another $4,000.00 to that figure (however, in the longrun, it is probably better to contribute to a ROTH IRA in such a situation).
Plus,if the child is under age 18 you do not have to withhold or pay FICA (SocialSecurity and Medicare) taxes, and probably state unemployment and disabilitycontributions, on the payments. Wages paid by a parent’s unincorporatedbusiness to a dependent child under age 21 are also exempt from FUTA (federalunemployment) tax.
Theparent gets a deduction on his/her Schedule C for the wages paid, which willreduce income tax, self-employment tax, and Adjusted Gross Income.
However,to be deductible the wages must be for actual legitimate services to thebusiness as an employee, the child must actually be paid the wages, and theamount of wages paid must be reasonable for the type of services provided.Routine family chores (see the Court’s discussion below) will not qualify, youcannot just claim a deduction and not actually give the money to the child (ordeposit the money in the child’s IRA account), and you are not allowed to payyour 10 year old son $50 an hour for sweeping up your office.
InMichael D and Christine Alexander vs Commissioner (TC Summary Opinion 2006-127)the parents had three home-based businesses – a tree farm, a tailoringbusiness, and a beagle-breeding business.
Theirson, a 21-year old college student, helped with his mother’s tailoring businessduring summer break. His jobs included getting supplies at a fabric store,general cleaning and shampooing the rug in the sewing room, and accompanyinghis mother to the store.
Theirtwo minor daughters worked in the beagle-breeding business walking the dogs,cleaning and cutting the grass in the beagle yard, hauling garbage, bleachingdog bowls, treating dogs for fleas, clipping nails and hosing kennels.
Noneof the children received an actual pay check. The son received $4,000 over thecourse of the year, most before he actually began work. A type of “drawing account”was kept for each of the daughters. Earnings were accumulated, and the girlswere given money as they needed it, or the parents would purchase items for thegirls and deduct the amount from their “account”. No quarterly (941) or annual(940, W-3, W-2) payroll tax returns were prepared for any of the wages claimedas a deduction.
TheCourt felt that “many of the tasks [the son] performed were in the nature ofroutine family chores such as cleaning, vacuuming, taking out garbage, andaccompanying [his mother] on shopping trips. Such chores are part of parentaltraining and discipline rather than the services rendered by an employee for anemployer.” This, plus the fact that the son’s wages were not paid as earned andthere were no payroll tax returns filed, caused the Court to conclude that thepayments made to the son were not deductible as wages.
WhileI agree with the Court on the son, I felt that the daughters could havequalified as true employees. However, the Court disallowed the deduction for theirwages as well.
Itis very important that you “cross your t’s and dot your i’s” when it comes todocumenting a deduction for dependent wages. You must make sure you pass the“duck test” (if it waddles like a duck and quacks like a duck…). Forget that theseare your kids and treat them as you would any other employee.
·Create a written job description for each “position” outlining the duties andresponsibilities involved.
·Pay the kids on an hourly basis.
·Use a time card to document hours worked and work performed.
·Write a company check as payment each week or every-other week.
·Even though the wages are not subject to FICA and FUTA tax and probably alsostate unemployment and disability contributions, file all appropriate quarterlypayroll tax returns, such as the federal Form 941 (you can indicate that thewages are exempt from FICA on the form), submit an annual federal Form 940 or940EZ indicating the amounts paid as “exempt”, and issue a W-2 in January toreport the wages paid.
·If you have other employees make sure the kids’ wages are included on thequarterly and annual payroll tax returns.
{FYI - this is the type of information discussed in my "The Schedule C Notebook" - rdf}
TTFN
DON'T LISTEN TO BAD ADVICE
To contact us Click HERE
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
WHERE THE FAKAWI?
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Iapologize for the lack of non-BUZZ posts lately – but I have been distracted.
FYI– I am moving from New Jersey to Pennsylvania (as I have been “threatening” todo for the past couple of years)! This move will reduce my annual livingexpenses by about $12,000!
Movingwill not affect my 1040 practice. Instead of mailing their “stuff” to my mail drop in NJ next seasonclients will mail their “stuff” to a mail drop in PA.
Ihave purchased a condo – and will close in mid-July. I should be fully moved by mid-August.
Andthis year I will be attending the annual National Conference and Expo of theNational Association of Tax Professionals to be held nearby in Baltimore MDfrom July 9-12 (leaving this Sunday). Iwill be posting here, and also at THE TAX PROFESSIONAL, daily from Baltimoreduring the conference next week – sharing tax info and tax developments learned,and reminded of, at the various educational sessions.
WhenI return from Baltimore my attention will be taken up by my move – and postswill continue to be sparse. I will tryto maintain the twice-weekly BUZZ schedule. There will be a regular Saturday BUZZ installment tomorrow.
OnceI have settled in – by the end of the summer – I hope to return to regularposting at both blogs.
“Talk”to you from Baltimore next week!
TTFN
FYI– I am moving from New Jersey to Pennsylvania (as I have been “threatening” todo for the past couple of years)! This move will reduce my annual livingexpenses by about $12,000!
Movingwill not affect my 1040 practice. Instead of mailing their “stuff” to my mail drop in NJ next seasonclients will mail their “stuff” to a mail drop in PA.
Ihave purchased a condo – and will close in mid-July. I should be fully moved by mid-August.
Andthis year I will be attending the annual National Conference and Expo of theNational Association of Tax Professionals to be held nearby in Baltimore MDfrom July 9-12 (leaving this Sunday). Iwill be posting here, and also at THE TAX PROFESSIONAL, daily from Baltimoreduring the conference next week – sharing tax info and tax developments learned,and reminded of, at the various educational sessions.
WhenI return from Baltimore my attention will be taken up by my move – and postswill continue to be sparse. I will tryto maintain the twice-weekly BUZZ schedule. There will be a regular Saturday BUZZ installment tomorrow.
OnceI have settled in – by the end of the summer – I hope to return to regularposting at both blogs.
“Talk”to you from Baltimore next week!
TTFN
7 Temmuz 2012 Cumartesi
Minimizing the Real Cost of a Speeding Ticket-Part II
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In Part I of our discussion on speeding I wrote about the immediate cost and risk to your license of acquiring convictions for speeding and other moving violations. Now we are going to discuss the effect of moving violation convictions on your ability to be insured at a reasonable rate. Insurance companies base rates on the risk they are assuming in issuing a policy. A driver’s record is a key ingredient in assessing how much risk a driver poses. What a driver pays for insurance will be affected by driving history. When a driver gets one or more speeding tickets, they are labeled “high risk” for rating purposes. At a minimum, a driver will lose safe driver discounts and experience rate increases of ten percent or more. The only good news is that these changes cannot take effect during the life of the current policy. So depending on when the ticket is resolved, a driver will have the remainder of the policy period to avoid increases. The opportunity to secure the absolute best rates are reserved for those people with no negative information on their driving abstract. Insurance companies will review driving abstracts when quoting for auto insurance. Additionally the information will be accessed prior to renewal. While each insurance company has its own policy about the level of risk it is willing to accept at different policy levels, you can be sure that even one speeding ticket will affect your cost for auto insurance. Often times the degree of the violation will influence the rate. For instance, a ticket for exceeding the speed limit by ten miles per hour will not have as dramatic effect as a ticket for forty miles over the speed limit or some other reckless conduct. Multiple violations, no matter how minor will result in much high rates and could lead to cancellation of your policy. Bottom-line, if you have received multiple tickets in the last three years you should seriously consider modifying your driving habits.
If you get a ticket, seek out the services of competent counsel. The short-term expense of legal representation will insure your rights are protected and payoff in the long-term by minimizing exposure to fines, penalties and exorbitant insurance rates.
In Part I of our discussion on speeding I wrote about the immediate cost and risk to your license of acquiring convictions for speeding and other moving violations. Now we are going to discuss the effect of moving violation convictions on your ability to be insured at a reasonable rate. Insurance companies base rates on the risk they are assuming in issuing a policy. A driver’s record is a key ingredient in assessing how much risk a driver poses. What a driver pays for insurance will be affected by driving history. When a driver gets one or more speeding tickets, they are labeled “high risk” for rating purposes. At a minimum, a driver will lose safe driver discounts and experience rate increases of ten percent or more. The only good news is that these changes cannot take effect during the life of the current policy. So depending on when the ticket is resolved, a driver will have the remainder of the policy period to avoid increases. The opportunity to secure the absolute best rates are reserved for those people with no negative information on their driving abstract. Insurance companies will review driving abstracts when quoting for auto insurance. Additionally the information will be accessed prior to renewal. While each insurance company has its own policy about the level of risk it is willing to accept at different policy levels, you can be sure that even one speeding ticket will affect your cost for auto insurance. Often times the degree of the violation will influence the rate. For instance, a ticket for exceeding the speed limit by ten miles per hour will not have as dramatic effect as a ticket for forty miles over the speed limit or some other reckless conduct. Multiple violations, no matter how minor will result in much high rates and could lead to cancellation of your policy. Bottom-line, if you have received multiple tickets in the last three years you should seriously consider modifying your driving habits. If you get a ticket, seek out the services of competent counsel. The short-term expense of legal representation will insure your rights are protected and payoff in the long-term by minimizing exposure to fines, penalties and exorbitant insurance rates.
Minimizing the Real Cost of a Speeding Ticket-Part III
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InParts Iand IIof this series we discussed the immediate effects of a speeding ticket as itrelates to auto insurance cost and driving privileges, fines and penaltiesassociated with the accumulation of “points” on alicense. Part III was going to be aboutall the things you can do to mitigate or eliminate the negative effects oftickets. Shortly after posting the firsttwo articles, I received an email from a business associate TomMeilutis of NorthwesternMutual. Tom recommended that I spenda few minutes writing about some of the not-so-obvious negative effects. So, before I move on to mitigation here’s abit more potentially bad news. Your driving record will matter when itcomes to securing life insurance and disability insurance. Even a single ticket can dramatically affectthe rates you pay for insurance or even worse the ability to qualify atall. Life insurers understand that morethan 100 people die each day on the roads in the United States. Life insurance companies take risky behaviorinto account when determining insurability and assigning rates. Even if no questions appear on the lifeinsurance application about driving, you can assume that the company is stillchecking your driving record. You may ask, why do insurance companies “punish”us for a momentary lapse of judgment? The University ofMaryland in a 2007 study of 3.7 million licensed drivers shows that ticketing does not reducedrivers' likelihood of getting another ticket for speeding. In fact it more than doubles the chance ofgetting future tickets. Takenwith previous studies that have shown that people with a documented history ofspeeding are more likely to be involved in motor vehicle crashes, can you blameinsurance companies for considering driving habits. According to the National Highway TrafficSafety Administration, speeding is a contributing factor in 31 percent of allfatal crashes in the United States. So once again I say, slow down. Minimize the chance of getting speedingtickets. If you do get a ticket, it isworth it to get an expert (competent counsel) working for you to minimize theeffects of the ticket.
InParts Iand IIof this series we discussed the immediate effects of a speeding ticket as itrelates to auto insurance cost and driving privileges, fines and penaltiesassociated with the accumulation of “points” on alicense. Part III was going to be aboutall the things you can do to mitigate or eliminate the negative effects oftickets. Shortly after posting the firsttwo articles, I received an email from a business associate TomMeilutis of NorthwesternMutual. Tom recommended that I spenda few minutes writing about some of the not-so-obvious negative effects. So, before I move on to mitigation here’s abit more potentially bad news. Your driving record will matter when itcomes to securing life insurance and disability insurance. Even a single ticket can dramatically affectthe rates you pay for insurance or even worse the ability to qualify atall. Life insurers understand that morethan 100 people die each day on the roads in the United States. Life insurance companies take risky behaviorinto account when determining insurability and assigning rates. Even if no questions appear on the lifeinsurance application about driving, you can assume that the company is stillchecking your driving record. You may ask, why do insurance companies “punish”us for a momentary lapse of judgment? The University ofMaryland in a 2007 study of 3.7 million licensed drivers shows that ticketing does not reducedrivers' likelihood of getting another ticket for speeding. In fact it more than doubles the chance ofgetting future tickets. Takenwith previous studies that have shown that people with a documented history ofspeeding are more likely to be involved in motor vehicle crashes, can you blameinsurance companies for considering driving habits. According to the National Highway TrafficSafety Administration, speeding is a contributing factor in 31 percent of allfatal crashes in the United States. So once again I say, slow down. Minimize the chance of getting speedingtickets. If you do get a ticket, it isworth it to get an expert (competent counsel) working for you to minimize theeffects of the ticket.
Claiming Back a UK Tax Refund - Is it a Myth That You Can Claim Back a Tax Rebate?
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In the UK you will pay 22% tax on earnings above £ 2231 and 40% on any earnings above £ 34,600. If you are a payroll tax (Pay-As-You-Earn) worker, who as a receptionist or a teacher, employer will deduct these taxes from your income. If you are self-employed as a construction subcontractor, you are responsible for your own Tax Return. tax advisor can help you on your tax return and then a refund. The average income Tax Refund for £ 963 and £ 1453 for self-employed people allow. Why not consider a tax expert to determine whether you are a tax refund. Every single application is due process for compliance and any deductions or credits before they go to the Inland Revenue to ensure your tax refund is to you as quickly as possible back.
Student Tax
Only students does not mean that you are exempt from payment. You are liable to pay tax the same as everyone else. What happens often is that students get paid on the wrong code, taxes, and often at the end too much. In this case, you need a student tax refund claim
Visitors to the United Kingdom
If you do not normally resident in the UK and have come here to work then you are still eligible, the tax is payable if you take too much, you also pay a tax refund from HMRC are entitled. The same rules apply to you, like all the others it depends on how much you earn and how much tax you pay. When you come to the right, you also need an additional form, the HMRC said about your entry into the United Kingdom to complete it. Find out how your tax refund claim.
Editor Tips
The old rules about investing in a more expensive apartment of taxes no longer apply to defer. There is no need to reinvest the money. The forgiveness of income from profit primary residence is automatic. If the income does not exceed the maximum sale need not be specified in the 1040 income tax return.
Teddy's father will pull together the $ 5,000 in income on his tax report, but it is the $ 5000 he pays Teddy in the companies, so father will not owe any tax on that income. Moreover, because Teddy is under 18 years, has Teddy's father did not pay taxes to be paid to him.
Here's what it means in terms of numbers: taxpayers who have to fall within the scope of the AMT, pay the highest tax rate on all income, or close it, instead of normal progressive tax rate that is replaced with the 28 percent level only for the portion of their income that more than $ 82,250 (for single filers) or $ 137,050 (for joint filers) in 2009.
Student Tax
Only students does not mean that you are exempt from payment. You are liable to pay tax the same as everyone else. What happens often is that students get paid on the wrong code, taxes, and often at the end too much. In this case, you need a student tax refund claim
Visitors to the United Kingdom
If you do not normally resident in the UK and have come here to work then you are still eligible, the tax is payable if you take too much, you also pay a tax refund from HMRC are entitled. The same rules apply to you, like all the others it depends on how much you earn and how much tax you pay. When you come to the right, you also need an additional form, the HMRC said about your entry into the United Kingdom to complete it. Find out how your tax refund claim.
Editor Tips
The old rules about investing in a more expensive apartment of taxes no longer apply to defer. There is no need to reinvest the money. The forgiveness of income from profit primary residence is automatic. If the income does not exceed the maximum sale need not be specified in the 1040 income tax return.
Teddy's father will pull together the $ 5,000 in income on his tax report, but it is the $ 5000 he pays Teddy in the companies, so father will not owe any tax on that income. Moreover, because Teddy is under 18 years, has Teddy's father did not pay taxes to be paid to him.
Here's what it means in terms of numbers: taxpayers who have to fall within the scope of the AMT, pay the highest tax rate on all income, or close it, instead of normal progressive tax rate that is replaced with the 28 percent level only for the portion of their income that more than $ 82,250 (for single filers) or $ 137,050 (for joint filers) in 2009.
S Corporation Tax Tips - How to Begin Preparing Form 1120S
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If your business is an S-Corporation, you must file Form 1120s U.S. income tax return for an S-Corporation. The purpose of this article is to give you back the start of preparation for this. 1120s form is only four pages, but do not let it not deceive the length. If you make this statement for yourself, you will need help.
The easy part. You can start by using the name and address on the appropriate lines at the top of the page 1 Believe me, then things get a little more difficult.
The rest of the 1st top of page Now keep in mind that there are several information fields to the right and left of the name / address section. These fields, labeled with the letters A through I. Each of these fields is important, this article points A and B. gravity
Point A: S election date. This is the day that your company was the first time an S Corporation. After you set up this company, you should be filed with the IRS Form 2553, the Election by a Small Business Corporation. Suppose you gave this form correctly, would the IRS you have a letter entitled "Notice of Acceptance as an S-Corporation." In this letter, the IRS would have declared the effective date of your status as an S-Corporation. That is the date that you set in point A.
Here there is something to note: The S-Corporation may not be the same date as the date of incorporation. Here's why: You can use your company has started and will initially operate as a regular C Corporation for any number of years and then made the S Corporation election in another year as the year of incorporation.
But if you elected S Corporation status and included in the same year, then it is likely that the date of incorporation and date of the S Corporation election are the same. In any case, you should check your records to determine the correct date for the post, A.
Item B: activity code. The IRS has a chart of dozens of business and industry types. This chart can be found in the Form 1120s Instructions, pages 39 to 41 You can use these instructions from the IRS website. Look through the code and find the one, that best describes your company and make that 6-digit code in Article B.
Editor Tips
You can not claim this credit if you are also claimed the Hope Tax Credit in the same year for the same student (no double dipping). This credit phases in 2009, if your income is more than $ 100,000 (married) or $ 50,000 (single).
ELSS offers benefit tax savings and wealth creation. Some Tax Fund will also medical services. Questions you finance your agent about all the features of your tax savings. If you think your agent is only in the sale of products, then we're interested, you can always contact for your questions.
This is another information online. It is a "yes or no" question: Was it a change in determining quantities, costs, or valuations between opening and closing inventory? My advice: always an answer to this question with a "No." As long as you remain consistent from year to year and over the value of your inventory at your expense, you can answer "No" and move on.
The easy part. You can start by using the name and address on the appropriate lines at the top of the page 1 Believe me, then things get a little more difficult.
The rest of the 1st top of page Now keep in mind that there are several information fields to the right and left of the name / address section. These fields, labeled with the letters A through I. Each of these fields is important, this article points A and B. gravity
Point A: S election date. This is the day that your company was the first time an S Corporation. After you set up this company, you should be filed with the IRS Form 2553, the Election by a Small Business Corporation. Suppose you gave this form correctly, would the IRS you have a letter entitled "Notice of Acceptance as an S-Corporation." In this letter, the IRS would have declared the effective date of your status as an S-Corporation. That is the date that you set in point A.
Here there is something to note: The S-Corporation may not be the same date as the date of incorporation. Here's why: You can use your company has started and will initially operate as a regular C Corporation for any number of years and then made the S Corporation election in another year as the year of incorporation.
But if you elected S Corporation status and included in the same year, then it is likely that the date of incorporation and date of the S Corporation election are the same. In any case, you should check your records to determine the correct date for the post, A.
Item B: activity code. The IRS has a chart of dozens of business and industry types. This chart can be found in the Form 1120s Instructions, pages 39 to 41 You can use these instructions from the IRS website. Look through the code and find the one, that best describes your company and make that 6-digit code in Article B.
Editor Tips
You can not claim this credit if you are also claimed the Hope Tax Credit in the same year for the same student (no double dipping). This credit phases in 2009, if your income is more than $ 100,000 (married) or $ 50,000 (single).
ELSS offers benefit tax savings and wealth creation. Some Tax Fund will also medical services. Questions you finance your agent about all the features of your tax savings. If you think your agent is only in the sale of products, then we're interested, you can always contact for your questions.
This is another information online. It is a "yes or no" question: Was it a change in determining quantities, costs, or valuations between opening and closing inventory? My advice: always an answer to this question with a "No." As long as you remain consistent from year to year and over the value of your inventory at your expense, you can answer "No" and move on.
Tax Relief - What Exactly Is An Offer In Compromise
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Have in today's economy, taxes have become a glaring constant. To minimize this problem, outstanding taxes, the government created the Economic Growth and Tax Relief Reconciliation Act in 2001, which granted several tax relief programs to alleviate the tax burden.
Tax relief is often elderly, low and low-income families offered, and in some cases, married couples. Tax exemption for people who are very hard to foreclose and seize their property and instead of, or putting liens are offered on their salary and bank accounts, the IRS offers a tax relief program called an offer in compromise.
An offer in compromise is a settlement, to which the taxpayer and the IRS, under which taxes are raised, lower than those originally paid. The agreement is attached to the specific conditions are met by the IRS. One is a doubt as to liability, which means there is reason to believe that the tax is not correct. Another doubt about collectibility, the explanation is that the taxpayer believes that he or she will never be able to pay the full amount of taxes amounting things. Another condition is the inability to pay taxes and the resulting penalties because of a personal financial crisis.
Unfortunately, this tax relief program for a growing popularity among the taxpayers and the IRS has twice is strict in the analysis and provide evidence of the inability to pay. This means that in all cases be accepted by the IRS. You have a better chance if you are seeking help from a professional tax relief agent or tax attorney.
Offer in Compromise is a unique opportunity, so settle all your tax, you must get your finances back into the swing, and pay all taxes on the upcoming time and in full in the future.
Editor Tips
Nevertheless, improvements to the land, or a device to the land as separate assets from the country. How could something that is added to a building. A fixture refers to something that is complementary to the land or building, and sometimes things that rest on the land or premises under their own weight are fixed.
However, it is important to remember that these claims in full only by the taxpayers itemize their deductions. Another, less popular tax law change will affect persons who have been displaced from their homes helped. According to the IRS that taxpayers can profit an additional exemption of $ 500 for each claim they are helping displaced persons, with a maximum of $ 2,000.
A recent important case decided in the Full Federal Court on this issue. The highest court in Australia is the High Court case of the tax dispute, the Full Federal Court is one step below the High Court This case was Bamford v Commissioner for Taxation [2009] FCAFC 66th
Zaproponuj lepsze tłumaczenie
Tax relief is often elderly, low and low-income families offered, and in some cases, married couples. Tax exemption for people who are very hard to foreclose and seize their property and instead of, or putting liens are offered on their salary and bank accounts, the IRS offers a tax relief program called an offer in compromise.
An offer in compromise is a settlement, to which the taxpayer and the IRS, under which taxes are raised, lower than those originally paid. The agreement is attached to the specific conditions are met by the IRS. One is a doubt as to liability, which means there is reason to believe that the tax is not correct. Another doubt about collectibility, the explanation is that the taxpayer believes that he or she will never be able to pay the full amount of taxes amounting things. Another condition is the inability to pay taxes and the resulting penalties because of a personal financial crisis.
Unfortunately, this tax relief program for a growing popularity among the taxpayers and the IRS has twice is strict in the analysis and provide evidence of the inability to pay. This means that in all cases be accepted by the IRS. You have a better chance if you are seeking help from a professional tax relief agent or tax attorney.
Offer in Compromise is a unique opportunity, so settle all your tax, you must get your finances back into the swing, and pay all taxes on the upcoming time and in full in the future.
Editor Tips
Nevertheless, improvements to the land, or a device to the land as separate assets from the country. How could something that is added to a building. A fixture refers to something that is complementary to the land or building, and sometimes things that rest on the land or premises under their own weight are fixed.
However, it is important to remember that these claims in full only by the taxpayers itemize their deductions. Another, less popular tax law change will affect persons who have been displaced from their homes helped. According to the IRS that taxpayers can profit an additional exemption of $ 500 for each claim they are helping displaced persons, with a maximum of $ 2,000.
A recent important case decided in the Full Federal Court on this issue. The highest court in Australia is the High Court case of the tax dispute, the Full Federal Court is one step below the High Court This case was Bamford v Commissioner for Taxation [2009] FCAFC 66th
Zaproponuj lepsze tłumaczenie
5 Temmuz 2012 Perşembe
DO THE RICH PAY ENOUGH TAXES?
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Thetop 400 1040 filers reported an average of $202.4 Million of AGI in 2009 -- a25% drop from 2008, according to the latest report from the IRS Statistics ofIncome Division. The average federal incometax liability for these 400 was about $41 Million, about $8 Million down fromnearly $49 million the year before.
Theaverage effective tax rate – total tax liability divided by AGI – on the top400 was 19.9% (up from 18.1% for 2008). About40% paid an effective rate of more than 25%, and about one-third paid aneffective rate below 15.
Arethe rich not paying their fair share of taxes? Is the answer to all our problems, quoting from the Democrat’s script,to tax the rich?
Whatcontributes to a relatively low effective tax rate for the wealthy?
Oneof the reasons is the fact that many higher income taxpayers make a lot oftheir money from investing in the stock market. Long-term capital gains and qualifieddividends are taxed at a maximum rate of 15%, as opposed to 35% for “ordinaryincome” such as wages. BTW, lower incometaxpayers pay a tax rate of 0% on capital gains and qualified dividends. Investing in the stock market helps the economy, doesn't it?
Andhigh income taxpayers claim far more itemized deductions for charitable contributions,which is allowable under both AMT and “regular” tax, than those in the middleclasses. In 2010 Mitt and Ann Romneydonated nearly $3 Million to church and charity (actually $2,983,974). That is 13.8% of their 2010 AGI. For 2011 their charitable deduction onSchedule A was 19.24% of their AGI ($4,020,572/$20,901,075). Most of my clients are average, middle andupper middle class taxpayers, and, however charitable they may be, except for avery few unique situations I never see charitable contributions anywhere near thesepercentages on their returns. More like 2%or 3%.
TheIRS statistical report also indicated that 6 of the richest Americans owed noincome tax. In total, 42 percent of allfilers (or 58.6 million taxpayers, or 1 in 2.4 taxpayers) paid no U.S. incometax in 2009, and did so by taking advantage of the deductions, credits andloopholes in the Tax Code. Obviously themajority of these “tax non-payers” are on the lower end of the income scale. Many lower income taxpayers actually make aprofit by filing a tax return, thanks to refundable credits. Yet there is minimal outcry about this fact.
Ifit is ok for a person with $50,000 of income to take full advantage of theexisting tax laws so as to avoid paying taxes, why is it not equally ok for aperson with $1 Million of income to do the exact same thing?
Thetop 1% of taxpayers, based on AGI, paid 36.73% of federal individual income taxfor 2009. The top 5% paid 58.66% and thetop 10% paid 70.47%.
Theanswer to our financial situation is not to increase tax rates on the rich –but to substantially reduce the “tax expenditures” that make our Tax Code themucking fess it is. By doing so we canactually have lower tax rates. Under thedreaded AMT many deductions that are allowed under “regular” income tax are notpermitted – and the top AMT rate is 28%, less than the top “regular” tax rateof 35%.
And my final question - why should higher income individuals pay a higher % of their income in tax than the rest of us just because they can? TTFN
Theaverage effective tax rate – total tax liability divided by AGI – on the top400 was 19.9% (up from 18.1% for 2008). About40% paid an effective rate of more than 25%, and about one-third paid aneffective rate below 15.
Arethe rich not paying their fair share of taxes? Is the answer to all our problems, quoting from the Democrat’s script,to tax the rich?
Whatcontributes to a relatively low effective tax rate for the wealthy?
Oneof the reasons is the fact that many higher income taxpayers make a lot oftheir money from investing in the stock market. Long-term capital gains and qualifieddividends are taxed at a maximum rate of 15%, as opposed to 35% for “ordinaryincome” such as wages. BTW, lower incometaxpayers pay a tax rate of 0% on capital gains and qualified dividends. Investing in the stock market helps the economy, doesn't it?
Andhigh income taxpayers claim far more itemized deductions for charitable contributions,which is allowable under both AMT and “regular” tax, than those in the middleclasses. In 2010 Mitt and Ann Romneydonated nearly $3 Million to church and charity (actually $2,983,974). That is 13.8% of their 2010 AGI. For 2011 their charitable deduction onSchedule A was 19.24% of their AGI ($4,020,572/$20,901,075). Most of my clients are average, middle andupper middle class taxpayers, and, however charitable they may be, except for avery few unique situations I never see charitable contributions anywhere near thesepercentages on their returns. More like 2%or 3%.
TheIRS statistical report also indicated that 6 of the richest Americans owed noincome tax. In total, 42 percent of allfilers (or 58.6 million taxpayers, or 1 in 2.4 taxpayers) paid no U.S. incometax in 2009, and did so by taking advantage of the deductions, credits andloopholes in the Tax Code. Obviously themajority of these “tax non-payers” are on the lower end of the income scale. Many lower income taxpayers actually make aprofit by filing a tax return, thanks to refundable credits. Yet there is minimal outcry about this fact.
Ifit is ok for a person with $50,000 of income to take full advantage of theexisting tax laws so as to avoid paying taxes, why is it not equally ok for aperson with $1 Million of income to do the exact same thing?
Thetop 1% of taxpayers, based on AGI, paid 36.73% of federal individual income taxfor 2009. The top 5% paid 58.66% and thetop 10% paid 70.47%.
Theanswer to our financial situation is not to increase tax rates on the rich –but to substantially reduce the “tax expenditures” that make our Tax Code themucking fess it is. By doing so we canactually have lower tax rates. Under thedreaded AMT many deductions that are allowed under “regular” income tax are notpermitted – and the top AMT rate is 28%, less than the top “regular” tax rateof 35%.
And my final question - why should higher income individuals pay a higher % of their income in tax than the rest of us just because they can? TTFN
"SUMMER" RERUN - MY ALTERNATIVE TO THE YARD SALE
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{Arecent BUZZ post referenced Trish McIntire’s post on garage sales, and theToday show recently had a segment on garage sales, stating that many municipalitiesare imposing more regulations on such events. Here is a rerun that discusses my alternative to the agita of having agarage sale.}
In the summer Americans usuallyclean out their closets, attics, basements, and garages to get rid of “stuff”they no longer need or want.
While some items are true garbageand need to be thrown away, many others still have a useful life – and can beput to good use by someone else.
What do you do? You can have asidewalk, yard or garage sale and try to make some extra money. Not what Iwould do. Do you really want the great unwashed masses tramping through youryard or garage, and possibly your house as well? This activity usually wastes afull day, is loaded with potential for agita, and in the end you never get whatyour stuff is really worth. During the last hour of the sale you often end upalmost giving away what is left just to get rid of it.
A better idea is to donate yourunwanted, but still usable, items to a church or charity. With this method youmay ultimately end up with about 1/4 to 1/3 of the current market value of thestuff in your pocket (depending on your federal and state tax brackets) – whichis probably not much less than you would end up in a yard sale anyway – youavoid the agita, and you get to help out a needy cause.
If you itemize you can deduct the“fair market value” of used items donated to charity. According to the IRS,fair market value is the price a “willing,knowledgeable buyer would pay a willing, knowledgeable seller when neither hasto buy or sell.”
You are responsible for determiningwhat the items you are donating are worth. The charity is not required to, andin most cases will not, provide you with a value. There are several onlineguides to help you come up with a number. Click here for the Salvation Armyvaluation guide.
Whenever you make a contribution ofused items you should always make and keep a detailed listing of the items youare donating with the condition and value of each set of items (i.e. 6 pairs ofmen’s pants, good condition, $60.00, 5 pairs of men’s shoes, good condition,$75.00). You may want to attach a copy of the listings to your tax return.
You cannot deduct the contributionof a used item unless it is in at least "good" condition. Donationsof clothing and household items with a minimal monetary value, such as usedsocks or underwear, are also not deductible
When using a local charity’s bin atthe mall to make your donation be sure that what you are dropping off on anyone day is not worth more than $250.00. If the total value of items donated toa charity in a single day is more than $250.00 you must have a writtenacknowledgement from the charity with its name and address, the date of thecontribution, and a description of the items donated. The acknowledgement mustalso indicate whether you received any goods or services from the charity inexchange for the donation.
TTFN
In the summer Americans usuallyclean out their closets, attics, basements, and garages to get rid of “stuff”they no longer need or want.
While some items are true garbageand need to be thrown away, many others still have a useful life – and can beput to good use by someone else.
What do you do? You can have asidewalk, yard or garage sale and try to make some extra money. Not what Iwould do. Do you really want the great unwashed masses tramping through youryard or garage, and possibly your house as well? This activity usually wastes afull day, is loaded with potential for agita, and in the end you never get whatyour stuff is really worth. During the last hour of the sale you often end upalmost giving away what is left just to get rid of it.
A better idea is to donate yourunwanted, but still usable, items to a church or charity. With this method youmay ultimately end up with about 1/4 to 1/3 of the current market value of thestuff in your pocket (depending on your federal and state tax brackets) – whichis probably not much less than you would end up in a yard sale anyway – youavoid the agita, and you get to help out a needy cause.
If you itemize you can deduct the“fair market value” of used items donated to charity. According to the IRS,fair market value is the price a “willing,knowledgeable buyer would pay a willing, knowledgeable seller when neither hasto buy or sell.”
You are responsible for determiningwhat the items you are donating are worth. The charity is not required to, andin most cases will not, provide you with a value. There are several onlineguides to help you come up with a number. Click here for the Salvation Armyvaluation guide.
Whenever you make a contribution ofused items you should always make and keep a detailed listing of the items youare donating with the condition and value of each set of items (i.e. 6 pairs ofmen’s pants, good condition, $60.00, 5 pairs of men’s shoes, good condition,$75.00). You may want to attach a copy of the listings to your tax return.
You cannot deduct the contributionof a used item unless it is in at least "good" condition. Donationsof clothing and household items with a minimal monetary value, such as usedsocks or underwear, are also not deductible
When using a local charity’s bin atthe mall to make your donation be sure that what you are dropping off on anyone day is not worth more than $250.00. If the total value of items donated toa charity in a single day is more than $250.00 you must have a writtenacknowledgement from the charity with its name and address, the date of thecontribution, and a description of the items donated. The acknowledgement mustalso indicate whether you received any goods or services from the charity inexchange for the donation.
TTFN
A TAX PRO TALKS - TRISH MCINTIRE
To contact us Click HERE
Ihad originally planned to post a series of interviews with representatives ofthe four “initialed credentials” that are permitted to prepare income taxreturns under the new IRS regulation regime – JD, CPA, EA, and RTRP - based ona discussion over at Bruce (THE MISSOURI TAXGUY) McFarland’s YouTube “McTax Hangout” a few weeks ago, on the differences between the included thedifferences between the designations and the exemption from proving competenceand currency (i.e. taking the initial competency test and maintaining annualCPE in taxation) given to attorneys and CPAs, as well as other current taxtopics.
Whilenot yet endowed with the RTRP initials, I planned to represent the previouslyunenrolled preparer.
Asof this writing only the Enrolled Agent – Trish McIntire of the McIntire Tax Centerin Arkansas City, Kansas – has responded to my interview questionnaire. Trish writes the blog OUR TAXING TIMES. She often writes very specifically aboutthe tax preparation business. Sheusually has something good and interesting to say, and I often find myselfsaying “Right on, sister!”. A fellow lover of the American Musical Theatre,Trish is very involved in her local theatre group.
There is constant confusion amongthe taxpayer public as to just what is an Enrolled Agent is. An Enrolled Agent is not an agent, employee or representative of the Internal RevenueService. An EA is an independent, private tax professional who is “enrolled” toact as a taxpayer’s “agent” in proceedings with the IRS. An Enrolled Agent is “enrolled” to “practicebefore the IRS” by virtue of taking the Special Enrollment Examination andmaintaining a required amount of CPE credits in the specific area of taxation(and, of course, 2 hours per year in ethics). Both the competency exam and the continuing education requirements forEAs are more extensive than those for RTRPs.
(Q) Explain the difference between an RTRP, an EA, a CPA, and a taxattorney – and in what instances a taxpayer would need each with regards to a1040.
(A) RTRP, EA. CPA and Attorneys aregroups that can, with a valid PTIN, prepare tax returns for compensation. Thereisn’t a special IRS designation for “Tax Attorney.” The IRS gives the samerights of representation to all attorneys in good standing with their stateboards. So my brother with his brand new law degree has the same privilegesbefore the IRS as an experienced tax attorney. But I wouldn’t let him handle atax case for me. Holders of the RTRP and EA designations are tested by the IRSwhile CPAs and attorneys are tested on the state level by their state licensingboard. All have continuing education requirements which are set by the samegroup that tests them. All groups have the right to represent clients beforethe IRS but what the RTRP can do is limited by the IRS.
There is no real hierarchy in thedesignations for a taxpayer when it comes to tax preparation. The ability andinterest to do a type of return depends on the preparer and theirpractice. A RTRP might be a wiz at farms(not on the RTRP test) while a CPA doesn’t handle returns with EIC. Inrepresentation, the RTRP is restricted so any of the remaining tax pros mightbe a better choice. Again, other factors need to be considered in choosing arepresentative.
(Q) Currently CPAs, and attorneys are exempt from proving competence andcurrency in 1040 preparation under the IRS tax preparer regulation regime. Regardless of your opinion on whether or notthe regulation regime is a good idea – explain either why the exemption forCPAs and attorneys is appropriate (and how passing the CPA or bar examqualifies one for preparing 1040s) or why CPAs and EAs should not beexempt.
(A) The test for a RTRP designationis a minimum tax competency test. The same material is tested in the EA exam.The question is do any of the state tests for a CPA or attorney license coverall that material in the same depth? From what I’ve heard, it doesn’t. Theother issue is that tax related continuing education is not required forattorneys and CPA. They can take tax courses but they are not required to takethem. We end up with 2 standards and thegroups that the public would assume to be better able to handle tax issues arethe groups who have less testing and no continuing tax education requirements.
(Q) The talk of tax reform (even though only talk at this point) has turnedto eliminating “tax expenditures”. Whatcurrent tax deductions and credits would you keep in a new simpler Tax Code,and what deductions and credits simply have to go?
(A) I would get rid of all thosedeductions for personal expenses that most people can’t use or make them directdeductions. Employee business expenses, personal casualty and theft losses andmortgage interest come to mind. Get rid of Schedule R. Put in inflationadjustments in taxable Social Security. Something needs to be done withcharitable deductions but I don’t know what.
(Q) Is the Tax Code the proper place for providing “social benefits”, suchas tuition subsidy (the education tax benefits), supplemental welfare (theEarned Income Credit and refundable Child Tax Credit), and to encourage energyefficient purchases (the Energy Credit)?
(A) My concern with a blanketremoval of “social benefits” is the Earned Income Credit. If Congress wants topass an incentive for energy, the Dept of Energy should administer it. HUDshould take care of housing incentives, you get my point. I understand the idea for doing it on taxes –it’s quicker, but that’s why we’ve had so much fraud lately. If Congressinsists on using the IRS for processing, keep it separate from the 1040. Kansashas a property tax rebate that is handled by the KDOR but it has its own returnand processing timetable. That way the claim can be double checked and not holdup the KS-40 refund.
That might be the answer for theEarned Income Credit. I have a real problem getting rid of this program. Thereis a lot of fraud but there are a lot of hard working people who need thatmoney. It’s their cushion against medical bills and emergencies (car repairs tokeep working). Yes there are a few who don’t take better work to keep theirrefund maxed out. But so many more would be happy to lose the EIC if theirincome would go up. Administering it through a Federal department might be anoption as long as it stays reasonably accessible to everyone who qualifies.
(Q) Do you think you will see a true simple Tax Code in your lifetime, withtruly minimal deductions, no credits, and either a flat tax or only 2 taxbrackets?
(A) No! We don’t have the people whocan do that. Have you read the book “Showdown at Gucci Gulch”? It’s behind thescenes of the 1986 tax reform. We don’t have the people who are passionateabout the changes or the leadership who are willing to make it work. On top ofthat, lobbyists are much more influential today than in 1986 and would makecutting their credit or deduction impossible.
(Q) I have suggested doing away with the tax deduction for depreciation ofreal property (see my post http://wanderingtaxpro.blogspot.com/2007/11/here-is-something-to-think-about.html).What do you think of this idea?
(A) I would have a hard timeexplaining to a client that they can’t take any part of the new business buildingoff their taxes. They can depreciate thenew tools but not the building. Also, the depreciation might be more necessaryto the business early in the life of the building than the tax on recaptureddepreciation later. And don’t forget, there is a good chance that there won’tbe any recapture later because of death and the stepped up basis. I don’t seethis one happening at all.
(Q) Now that the tax season is finally over, how will you be spending yoursummer vacation?
(A) Still doing returns - an appointmentcoming in this afternoon. I’m also getting ready to direct a show andco-writing a director’s handbook for the theatre. I’m updating the theatre’swebsite for the new season and redoing my office site. And catching up onpaperwork and filing.
Thanks, Trish!
TTFN
Whilenot yet endowed with the RTRP initials, I planned to represent the previouslyunenrolled preparer.
Asof this writing only the Enrolled Agent – Trish McIntire of the McIntire Tax Centerin Arkansas City, Kansas – has responded to my interview questionnaire. Trish writes the blog OUR TAXING TIMES. She often writes very specifically aboutthe tax preparation business. Sheusually has something good and interesting to say, and I often find myselfsaying “Right on, sister!”. A fellow lover of the American Musical Theatre,Trish is very involved in her local theatre group.
There is constant confusion amongthe taxpayer public as to just what is an Enrolled Agent is. An Enrolled Agent is not an agent, employee or representative of the Internal RevenueService. An EA is an independent, private tax professional who is “enrolled” toact as a taxpayer’s “agent” in proceedings with the IRS. An Enrolled Agent is “enrolled” to “practicebefore the IRS” by virtue of taking the Special Enrollment Examination andmaintaining a required amount of CPE credits in the specific area of taxation(and, of course, 2 hours per year in ethics). Both the competency exam and the continuing education requirements forEAs are more extensive than those for RTRPs.
(Q) Explain the difference between an RTRP, an EA, a CPA, and a taxattorney – and in what instances a taxpayer would need each with regards to a1040.
(A) RTRP, EA. CPA and Attorneys aregroups that can, with a valid PTIN, prepare tax returns for compensation. Thereisn’t a special IRS designation for “Tax Attorney.” The IRS gives the samerights of representation to all attorneys in good standing with their stateboards. So my brother with his brand new law degree has the same privilegesbefore the IRS as an experienced tax attorney. But I wouldn’t let him handle atax case for me. Holders of the RTRP and EA designations are tested by the IRSwhile CPAs and attorneys are tested on the state level by their state licensingboard. All have continuing education requirements which are set by the samegroup that tests them. All groups have the right to represent clients beforethe IRS but what the RTRP can do is limited by the IRS.
There is no real hierarchy in thedesignations for a taxpayer when it comes to tax preparation. The ability andinterest to do a type of return depends on the preparer and theirpractice. A RTRP might be a wiz at farms(not on the RTRP test) while a CPA doesn’t handle returns with EIC. Inrepresentation, the RTRP is restricted so any of the remaining tax pros mightbe a better choice. Again, other factors need to be considered in choosing arepresentative.
(Q) Currently CPAs, and attorneys are exempt from proving competence andcurrency in 1040 preparation under the IRS tax preparer regulation regime. Regardless of your opinion on whether or notthe regulation regime is a good idea – explain either why the exemption forCPAs and attorneys is appropriate (and how passing the CPA or bar examqualifies one for preparing 1040s) or why CPAs and EAs should not beexempt.
(A) The test for a RTRP designationis a minimum tax competency test. The same material is tested in the EA exam.The question is do any of the state tests for a CPA or attorney license coverall that material in the same depth? From what I’ve heard, it doesn’t. Theother issue is that tax related continuing education is not required forattorneys and CPA. They can take tax courses but they are not required to takethem. We end up with 2 standards and thegroups that the public would assume to be better able to handle tax issues arethe groups who have less testing and no continuing tax education requirements.
(Q) The talk of tax reform (even though only talk at this point) has turnedto eliminating “tax expenditures”. Whatcurrent tax deductions and credits would you keep in a new simpler Tax Code,and what deductions and credits simply have to go?
(A) I would get rid of all thosedeductions for personal expenses that most people can’t use or make them directdeductions. Employee business expenses, personal casualty and theft losses andmortgage interest come to mind. Get rid of Schedule R. Put in inflationadjustments in taxable Social Security. Something needs to be done withcharitable deductions but I don’t know what.
(Q) Is the Tax Code the proper place for providing “social benefits”, suchas tuition subsidy (the education tax benefits), supplemental welfare (theEarned Income Credit and refundable Child Tax Credit), and to encourage energyefficient purchases (the Energy Credit)?
(A) My concern with a blanketremoval of “social benefits” is the Earned Income Credit. If Congress wants topass an incentive for energy, the Dept of Energy should administer it. HUDshould take care of housing incentives, you get my point. I understand the idea for doing it on taxes –it’s quicker, but that’s why we’ve had so much fraud lately. If Congressinsists on using the IRS for processing, keep it separate from the 1040. Kansashas a property tax rebate that is handled by the KDOR but it has its own returnand processing timetable. That way the claim can be double checked and not holdup the KS-40 refund.
That might be the answer for theEarned Income Credit. I have a real problem getting rid of this program. Thereis a lot of fraud but there are a lot of hard working people who need thatmoney. It’s their cushion against medical bills and emergencies (car repairs tokeep working). Yes there are a few who don’t take better work to keep theirrefund maxed out. But so many more would be happy to lose the EIC if theirincome would go up. Administering it through a Federal department might be anoption as long as it stays reasonably accessible to everyone who qualifies.
(Q) Do you think you will see a true simple Tax Code in your lifetime, withtruly minimal deductions, no credits, and either a flat tax or only 2 taxbrackets?
(A) No! We don’t have the people whocan do that. Have you read the book “Showdown at Gucci Gulch”? It’s behind thescenes of the 1986 tax reform. We don’t have the people who are passionateabout the changes or the leadership who are willing to make it work. On top ofthat, lobbyists are much more influential today than in 1986 and would makecutting their credit or deduction impossible.
(Q) I have suggested doing away with the tax deduction for depreciation ofreal property (see my post http://wanderingtaxpro.blogspot.com/2007/11/here-is-something-to-think-about.html).What do you think of this idea?
(A) I would have a hard timeexplaining to a client that they can’t take any part of the new business buildingoff their taxes. They can depreciate thenew tools but not the building. Also, the depreciation might be more necessaryto the business early in the life of the building than the tax on recaptureddepreciation later. And don’t forget, there is a good chance that there won’tbe any recapture later because of death and the stepped up basis. I don’t seethis one happening at all.
(Q) Now that the tax season is finally over, how will you be spending yoursummer vacation?
(A) Still doing returns - an appointmentcoming in this afternoon. I’m also getting ready to direct a show andco-writing a director’s handbook for the theatre. I’m updating the theatre’swebsite for the new season and redoing my office site. And catching up onpaperwork and filing.
Thanks, Trish!
TTFN
SPECIAL SUMMER SAVINGS FOR TAX PROS
To contact us Click HERE
Tocelebrate the beginning of summer I want to make a very special offer to taxprofessionals.
Asyou probably know, I have been preparing 1040s since 1972. Over the years Ihave developed a collection of forms, schedules and worksheets that have provenvery helpful in my practice.
Someof my “homemade” forms are given to clients to help them provide me with theinformation I need to properly prepare their returns. Some are used as “memos”to the client’s copy and my office file copy to back-up items reported on thereturns. Others are used as attachments to the returns.
Igenerally offer this compilation for $6.00. As a special summer offer you canhave this forms package for only $3.00 if your order is postmarked by July 31,2012!
Thepackage will be sent as a “word document” email attachment, so you may edit andrevise them as you see fit to personalize them to your firm, customize them bemore relevant to your particular practice or clients or specific professions,or update them for annual COLAs or tax law changes.
Hereis a listing of what is included in the package.
SCHEDULEA –
1. Supplementto Schedule A2. MedicalExpense Worksheet3. MedicalExpenses – Out of Pocket Anaylsis 4. CharitableContribution Listing – for non-cash contributions5. CharitableContribution Record – for cash contributions (2 pages)6. CharitableMileage Record7. ContributionWorksheet8. EmployeeBusiness Expenses – generic format, can be customized 9. EmployeeBusiness Expenses – Police Officer – example of customized10. Conventions,Conference and Education11. MiscellaneousExpenses #112. MiscellaneousExpenses #213. Summaryof Casino Gambling Activity Log
SCHEDULEC – (some of these forms can also be used for employee expenses)
1. Allocationof Expenses 2. AutomobileExpense Worksheet 3. AutoMileage Log4. BusinessExpenses of a Freelance Writer5. BusinessTravel Record 6. ComputerUse Log7. Electionto Deduct Organization Expenses 8. EmployeeExpense Report9. Employee Time Card 10.Home Office Deduction Worksheet11.Cell Phone Log - in “landscape” format - sent separately.
SCHEDULED – 1. Cost Basis Worksheet
SCHEDULEE –
1.Owner-Occupied Multi-Unit Rental Property Expense 2.Statement of Rental Income and 3.Statement of Rental Income and Expenses – Vacation Property4.Multi Family Building
GENERAL–
1.Alternative Minimum Tax Worksheet2.Does Not Have To File3.Statement of Dividend Income4.Statement of Pension Income – in “landscape” format- sent separately
Pleasebe aware that these forms, schedules, and worksheets are copyrighted material,and are for your internal use only – and cannot be “shared” with other tax prosor firms.
Sendyour check or money order, payable to TAXPRO SERVICES CORPORATION, for $3.00 andyour email address to –
TAXPROFORMS TAXPROSERVICES CORPORATIONPMB30472VAN REIPEN AVENUEJERSEYCITY NJ 07306-2806
Hey,for $3.00 you can’t go wrong!
TTFN
Tocelebrate the beginning of summer I want to make a very special offer to taxprofessionals.
Asyou probably know, I have been preparing 1040s since 1972. Over the years Ihave developed a collection of forms, schedules and worksheets that have provenvery helpful in my practice.
Someof my “homemade” forms are given to clients to help them provide me with theinformation I need to properly prepare their returns. Some are used as “memos”to the client’s copy and my office file copy to back-up items reported on thereturns. Others are used as attachments to the returns.
Igenerally offer this compilation for $6.00. As a special summer offer you canhave this forms package for only $3.00 if your order is postmarked by July 31,2012!
Thepackage will be sent as a “word document” email attachment, so you may edit andrevise them as you see fit to personalize them to your firm, customize them bemore relevant to your particular practice or clients or specific professions,or update them for annual COLAs or tax law changes.
Hereis a listing of what is included in the package.
SCHEDULEA –
1. Supplementto Schedule A2. MedicalExpense Worksheet3. MedicalExpenses – Out of Pocket Anaylsis 4. CharitableContribution Listing – for non-cash contributions5. CharitableContribution Record – for cash contributions (2 pages)6. CharitableMileage Record7. ContributionWorksheet8. EmployeeBusiness Expenses – generic format, can be customized 9. EmployeeBusiness Expenses – Police Officer – example of customized10. Conventions,Conference and Education11. MiscellaneousExpenses #112. MiscellaneousExpenses #213. Summaryof Casino Gambling Activity Log
SCHEDULEC – (some of these forms can also be used for employee expenses)
1. Allocationof Expenses 2. AutomobileExpense Worksheet 3. AutoMileage Log4. BusinessExpenses of a Freelance Writer5. BusinessTravel Record 6. ComputerUse Log7. Electionto Deduct Organization Expenses 8. EmployeeExpense Report9. Employee Time Card 10.Home Office Deduction Worksheet11.Cell Phone Log - in “landscape” format - sent separately.
SCHEDULED – 1. Cost Basis Worksheet
SCHEDULEE –
1.Owner-Occupied Multi-Unit Rental Property Expense 2.Statement of Rental Income and 3.Statement of Rental Income and Expenses – Vacation Property4.Multi Family Building
GENERAL–
1.Alternative Minimum Tax Worksheet2.Does Not Have To File3.Statement of Dividend Income4.Statement of Pension Income – in “landscape” format- sent separately
Pleasebe aware that these forms, schedules, and worksheets are copyrighted material,and are for your internal use only – and cannot be “shared” with other tax prosor firms.
Sendyour check or money order, payable to TAXPRO SERVICES CORPORATION, for $3.00 andyour email address to –
TAXPROFORMS TAXPROSERVICES CORPORATIONPMB30472VAN REIPEN AVENUEJERSEYCITY NJ 07306-2806
Hey,for $3.00 you can’t go wrong!
TTFN
DON'T LISTEN TO BAD ADVICE
To contact us Click HERE
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
4 Temmuz 2012 Çarşamba
TAX: Failed to file proper Sub-S Election? IRS Proc. 2003-43
To contact us Click HERE
So...you are frustrated! Your sub-s company receives an IRS Notice and an IRS Letter from your accountant apologizing for an odd problem -- it appears that your IRS form 2553 (Election by a Small Business Corporation) was not received in time for this years taxes. Despite having filed the taxes timely, and sent appropriate K-1's, the IRS is now considering the company as a standard "C" corporation. This has devastating consequences for taxes and the treatment of corporate income.
You are not alone. Misfiled, lost, or not-filed elections are quite common in small business. If the IRS processes your company as a "C" corporation instead of an "S" corporation, the most obvious result is that pass-thru income is no longer a valid tool in your corporate tax tool-box. The firm itself will now owe taxes on the net income earned by the company. Individuals who received distributions from the company will still owe taxes on the amount earned. This is the cursed "double taxation" in corporate America, and the key reason for "S" corporation (and LLC's which were developed later, and receive the same tax benefits).
So what is the remedy? The IRS has several regulation that govern an "oops, I missed the filing of my election" situation. If you have a valid excuse (hard to imagine, but they do exist), then Revenue Procedure (Notice) 97-48 allows you to correct this without a direct ruling by the local district manager. If the error was inadvertent only (i.e. no excusable cause), file under Revenue Procedure 2003-43 which allows for a mistake in filing if you correct the error timely (24 months from the date the original election was due), and you are not behind on any of your corporate taxes. You will need to complete the form 2553, write across the top of form 2553 "FILED PURSUANT TO REV.PROC. 2003-43" and include (1) a statement that the filing is late because of an inadvertent filing error, (2) the principal of the business needs to sign a letter indicating that to the best of his/her knowledge, the corrected filing is accurate, (3) and each shareholder must sign that they understand and agree to the election of the Sub-S status dating back to the first taxable instance where such a status is desired.
What happens if your 2553 is rejected (after filing under REV.PROC. 2003-43)? You may always petition for a letter from the IRS director granting you an exception. These are generally granted, but unlike the 2553 avenue, you have to pay (I believe it is currently $180) for this letter ruling.
If you have questions or need help addressing a tax law question, please do not hesitate to contact us! We are experienced immigration, tax, and bankruptcy attorneys who can help with questions from any state in the US. S
Sean R. Hanover, Esq
HanoverLawPC.com
Contact Us ------------- SUMMARY OF THE CODE: In part, Rev.Proc 2003-43 reads: SECTION 1. PURPOSE This revenue procedure provides a simplified method for taxpayers to request relief for late S corporation elections, Electing Small Business Trust (ESBT) elections, Qualified Subchapter S Trust (QSST) elections and Qualified Subchapter S Subsidiary (QSub) elections. Generally, this revenue procedure provides that certain eligible entities may be granted relief for failing to file these elections in a timely manner if the request for relief is filed within 24 months of the due date of the election. Accompanying this document is a flowchart designed to aid taxpayers in applying this revenue procedure. . . . .02 Eligibility for Relief. Relief is available under section 4.04 of this revenue procedure if the following requirements are met: (1) The entity fails to qualify for its intended status as an S corporation, ESBT, QSST, or QSub on the first day that status was desired solely because of the failure to file the appropriate Election Under Subchapter S timely with the applicable service center; (2) Less than 24 months have passed since the original Due Date of the Election Under Subchapter S; (3) Either, (a) the entity is seeking relief for a late S corporation or QSub election and the entity has reasonable cause for its failure to make the timely Election Under Subchapter S, or (b) the S corporation and the entity are seeking relief for an inadvertent invalid S corporation election or an inadvertent termination of an S corporation election due to the failure to make the timely ESBT or QSST election and the failure to file the timely Election Under Subchapter S was inadvertent; and (4) Either, (a) all of the following requirements are met: (i) the entity seeking to make the election has not filed a tax return (in the case of QSubs, the parent has not filed a tax return) for the first year in which the election was intended, (ii) the application for relief is filed under this revenue procedure no later than 6 months after the due date of the tax return (excluding extensions) of the entity seeking to make the election (in the case of QSubs, the due date of the tax return of the parent) for the first year in which the election was intended, and, (iii) no taxpayer whose tax liability or tax return would be affected by the Election Under Subchapter S (including all shareholders of the S corporation) has reported inconsistently with the S corporation election (as well as any ESBT, QSST or QSub elections), on any affected return for the year the Election Under Subchapter S was intended; or (b) all of the following requirements are met: (i) the entity seeking to make the election has filed a tax return (in the case of QSubs, the parent has filed a tax return) for the first year in which the election was intended within 6 months of the due date of the tax return (excluding extensions), and (ii) all taxpayers whose tax liability or tax returns would be affected by the Election Under Subchapter S (including all shareholders of the S corporation) have reported consistently with the S corporation election (as well as any ESBT, QSST or QSub elections), on all affected returns for the year the Election Under Subchapter S was intended, as well as for any subsequent years. .03 Procedural Requirements for Relief. (1) Procedural Requirements When a Tax Return Has Not Been Filed for the First Year of the Intended Election Under Subchapter S. If the entity seeking the election has not filed a tax return for the first taxable year of the intended Election Under Subchapter S, the entity may request relief for the late Election Under Subchapter S by filing with the applicable service center the properly completed election form(s). The election form(s) must be filed within 18 months of the original Due Date of the intended Election Under Subchapter S (but in no event later than 6 months after the due date of the tax return (excluding extensions) of the entity (in the case of QSubs, the due date of the tax return of the parent) for the first year in which the election was intended) and must state at the top of the document "FILED PURSUANT TO REV. PROC. 2003-XX." Attached to the election form must be a statement establishing either reasonable cause for the failure to file the Election Under Subchapter S timely (in the case of S corporation or QSub elections), or a statement establishing that the failure to file the Election Under Subchapter S timely was inadvertent (in the case of ESBT or QSST elections.) (2) Procedural Requirements When a Tax Return Has Been Filed for the First Year of the Intended Election Under Subchapter S. If the entity seeking the election has filed a tax return for the first taxable year of the intended Election Under Subchapter S within 6 months of the due date of that tax return (excluding extensions), then the entity may request relief for the late Election Under Subchapter S by filing with the applicable service center the properly completed election form(s) and the supporting documents described below. The election form(s) must be filed within 24 months of the original Due Date for the Election Under Subchapter S and must state at the top of the document "FILED PURSUANT TO REV. PROC. 2003-XX." Attached to the election form must be a statement establishing either reasonable cause for the failure to file the Election Under Subchapter S timely (in the case of S corporation or QSub elections), or a statement establishing that the failure to file the Election Under Subchapter S timely was inadvertent (in the case of ESBT or QSST elections.) The following additional documents must be attached to the election form (if applicable): (a) S Corporations. An entity seeking relief for a late S corporation election must file a completed Form 2553, signed by an officer of the corporation authorized to sign and all persons who were shareholders at any time during the period that began on the first day of the taxable year for which the election is to be effective and ends on the day the election is made. The completed election form must include the following material: (i) Statements from all shareholders during the period between the date the S corporation election was to have become effective and the date the completed election was filed that they have reported their income (on all affected returns) consistent with the S corporation election for the year the election should have been made and for all subsequent years; and (ii) A dated declaration signed by an officer of the corporation authorized to sign which states: "Under penalties of perjury, I declare that, to the best of my knowledge and belief, the facts presented in support of this election are true, correct, and complete."Visit the Hanover Law firm at www.hanoverlawpc.com
You are not alone. Misfiled, lost, or not-filed elections are quite common in small business. If the IRS processes your company as a "C" corporation instead of an "S" corporation, the most obvious result is that pass-thru income is no longer a valid tool in your corporate tax tool-box. The firm itself will now owe taxes on the net income earned by the company. Individuals who received distributions from the company will still owe taxes on the amount earned. This is the cursed "double taxation" in corporate America, and the key reason for "S" corporation (and LLC's which were developed later, and receive the same tax benefits).
So what is the remedy? The IRS has several regulation that govern an "oops, I missed the filing of my election" situation. If you have a valid excuse (hard to imagine, but they do exist), then Revenue Procedure (Notice) 97-48 allows you to correct this without a direct ruling by the local district manager. If the error was inadvertent only (i.e. no excusable cause), file under Revenue Procedure 2003-43 which allows for a mistake in filing if you correct the error timely (24 months from the date the original election was due), and you are not behind on any of your corporate taxes. You will need to complete the form 2553, write across the top of form 2553 "FILED PURSUANT TO REV.PROC. 2003-43" and include (1) a statement that the filing is late because of an inadvertent filing error, (2) the principal of the business needs to sign a letter indicating that to the best of his/her knowledge, the corrected filing is accurate, (3) and each shareholder must sign that they understand and agree to the election of the Sub-S status dating back to the first taxable instance where such a status is desired.
What happens if your 2553 is rejected (after filing under REV.PROC. 2003-43)? You may always petition for a letter from the IRS director granting you an exception. These are generally granted, but unlike the 2553 avenue, you have to pay (I believe it is currently $180) for this letter ruling.
If you have questions or need help addressing a tax law question, please do not hesitate to contact us! We are experienced immigration, tax, and bankruptcy attorneys who can help with questions from any state in the US. S
Sean R. Hanover, Esq
HanoverLawPC.com
Contact Us ------------- SUMMARY OF THE CODE: In part, Rev.Proc 2003-43 reads: SECTION 1. PURPOSE This revenue procedure provides a simplified method for taxpayers to request relief for late S corporation elections, Electing Small Business Trust (ESBT) elections, Qualified Subchapter S Trust (QSST) elections and Qualified Subchapter S Subsidiary (QSub) elections. Generally, this revenue procedure provides that certain eligible entities may be granted relief for failing to file these elections in a timely manner if the request for relief is filed within 24 months of the due date of the election. Accompanying this document is a flowchart designed to aid taxpayers in applying this revenue procedure. . . . .02 Eligibility for Relief. Relief is available under section 4.04 of this revenue procedure if the following requirements are met: (1) The entity fails to qualify for its intended status as an S corporation, ESBT, QSST, or QSub on the first day that status was desired solely because of the failure to file the appropriate Election Under Subchapter S timely with the applicable service center; (2) Less than 24 months have passed since the original Due Date of the Election Under Subchapter S; (3) Either, (a) the entity is seeking relief for a late S corporation or QSub election and the entity has reasonable cause for its failure to make the timely Election Under Subchapter S, or (b) the S corporation and the entity are seeking relief for an inadvertent invalid S corporation election or an inadvertent termination of an S corporation election due to the failure to make the timely ESBT or QSST election and the failure to file the timely Election Under Subchapter S was inadvertent; and (4) Either, (a) all of the following requirements are met: (i) the entity seeking to make the election has not filed a tax return (in the case of QSubs, the parent has not filed a tax return) for the first year in which the election was intended, (ii) the application for relief is filed under this revenue procedure no later than 6 months after the due date of the tax return (excluding extensions) of the entity seeking to make the election (in the case of QSubs, the due date of the tax return of the parent) for the first year in which the election was intended, and, (iii) no taxpayer whose tax liability or tax return would be affected by the Election Under Subchapter S (including all shareholders of the S corporation) has reported inconsistently with the S corporation election (as well as any ESBT, QSST or QSub elections), on any affected return for the year the Election Under Subchapter S was intended; or (b) all of the following requirements are met: (i) the entity seeking to make the election has filed a tax return (in the case of QSubs, the parent has filed a tax return) for the first year in which the election was intended within 6 months of the due date of the tax return (excluding extensions), and (ii) all taxpayers whose tax liability or tax returns would be affected by the Election Under Subchapter S (including all shareholders of the S corporation) have reported consistently with the S corporation election (as well as any ESBT, QSST or QSub elections), on all affected returns for the year the Election Under Subchapter S was intended, as well as for any subsequent years. .03 Procedural Requirements for Relief. (1) Procedural Requirements When a Tax Return Has Not Been Filed for the First Year of the Intended Election Under Subchapter S. If the entity seeking the election has not filed a tax return for the first taxable year of the intended Election Under Subchapter S, the entity may request relief for the late Election Under Subchapter S by filing with the applicable service center the properly completed election form(s). The election form(s) must be filed within 18 months of the original Due Date of the intended Election Under Subchapter S (but in no event later than 6 months after the due date of the tax return (excluding extensions) of the entity (in the case of QSubs, the due date of the tax return of the parent) for the first year in which the election was intended) and must state at the top of the document "FILED PURSUANT TO REV. PROC. 2003-XX." Attached to the election form must be a statement establishing either reasonable cause for the failure to file the Election Under Subchapter S timely (in the case of S corporation or QSub elections), or a statement establishing that the failure to file the Election Under Subchapter S timely was inadvertent (in the case of ESBT or QSST elections.) (2) Procedural Requirements When a Tax Return Has Been Filed for the First Year of the Intended Election Under Subchapter S. If the entity seeking the election has filed a tax return for the first taxable year of the intended Election Under Subchapter S within 6 months of the due date of that tax return (excluding extensions), then the entity may request relief for the late Election Under Subchapter S by filing with the applicable service center the properly completed election form(s) and the supporting documents described below. The election form(s) must be filed within 24 months of the original Due Date for the Election Under Subchapter S and must state at the top of the document "FILED PURSUANT TO REV. PROC. 2003-XX." Attached to the election form must be a statement establishing either reasonable cause for the failure to file the Election Under Subchapter S timely (in the case of S corporation or QSub elections), or a statement establishing that the failure to file the Election Under Subchapter S timely was inadvertent (in the case of ESBT or QSST elections.) The following additional documents must be attached to the election form (if applicable): (a) S Corporations. An entity seeking relief for a late S corporation election must file a completed Form 2553, signed by an officer of the corporation authorized to sign and all persons who were shareholders at any time during the period that began on the first day of the taxable year for which the election is to be effective and ends on the day the election is made. The completed election form must include the following material: (i) Statements from all shareholders during the period between the date the S corporation election was to have become effective and the date the completed election was filed that they have reported their income (on all affected returns) consistent with the S corporation election for the year the election should have been made and for all subsequent years; and (ii) A dated declaration signed by an officer of the corporation authorized to sign which states: "Under penalties of perjury, I declare that, to the best of my knowledge and belief, the facts presented in support of this election are true, correct, and complete."Visit the Hanover Law firm at www.hanoverlawpc.com
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