Some Business Tax Tips For 2010
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Keep in mind that
I am not a CPA nor am I a tax professional but I am, like many business owner, facing a lot of confusion in this arena, especially given the last two plus years of financial distress in the country and the constant changes to the tax code to generate more state and federal income.
Properly managing for taxes can really help a business survive from one year to the next. Do not get blindsided by your tax obligations and fatally hurt your business.
First things first: Understand how your form of business organization will be taxed. Some forms of organization are pass-through entities where all business income flows through to the individual owners’ personal tax returns (regardless if actual cash makes it into personal bank accounts) like partnerships, S Corporations and sole proprietorships while others are taxed as if they are separate, individual entities like C corporations.
So, while not covered here, business owners must therefore understand their state tax requirements. Some states have similar tax policies to that of the federal income tax, some states only certain tax income like capital gains from the sale of assets and some have completely different tax regulations where they only tax business asset values – but not income. Thus, know your state.
The first thing
a business should do is attempt to reduce its taxable income. This can come in the form of taking additional depreciation on business assets – look into the expanded Section 179 deduction – or from charitable contributions (make sure that the net effect benefits the business) or even from just realizing all business expenses that can be taken prior to the year’s end or the filing deadline (if permitted).
The following are some of the top issues businesses will face this tax year:
vs. Employees. Contractors. One of the biggest issues that businesses face is deterministic mining if a person is an employee and subject to taxes through the business or is an independent contractor responsible for their own taxes. The subject IRS provides detailed information on this. But, as a business owner, you do not want to have to make up for all the payroll taxes of a person who you thought was on independent contractor but the IRS deemed an employee simply by how that person was treated in the business.
Schedule K-1s – those, like some LLCs and partnerships and S Corporations must provide many accurate Schedule K-1 to the IRS. The main issue here is to match what those schedules to partners, members and owners show on their individual tax returns.
W-2s – it is the employer’s responsibility to file W-2s with the Social Security Administration showing total wages paid to employees. Further, those businesses with more than 250 employees MUST file their W-2s electronically.
Smaller business owners, earning less than 800 may qualify for the Earned Income Tax Credit (EITC).
Spouses. Many small businesses are operated by husband and wife teams and the IRS, depending on how each spouse is treated in the business, may tax these spouses differently. Some will be treated as partners or owners while other can be treated as employees (requiring the business to account for and pay Social Security and Medicare on their behalf not via their payroll – regardless if your business generates or payroll).
Lastly, regardless if you can pay your tax obligation or not, you should always file your business tax returns. This will go a long way in Ensuring that these taxing entities will work with you not against you, especially if they think you are trying to avoid paying your taxes.
Some Helpful Resources:
Score
offices, SBA offices and Small Business Development Centers – all of which are free to use and offer classes and seminars conducted by local tax professionals.
The IRS website which provides useful information for nearly every business tax issue as well as offers webinars that cover some of the most common tax issues for businesses.
Local
state sponsored resources. The IRS and many states have local offices in and around major cities in every state. These offices can be visited via in person or the phone and internet.
Lastly, the IRS, via its website, offers numerous ways to file for free your business should not be too complicated. Visit the IRS’s website and look for the Free File logo.
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How to Get Business Tax relief from an IRS Installment Payment Plan
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It’s no secret that
the Internal Revenue Service is making a huge effort to collect every last cent of unpaid employment taxes or unpaid payroll taxes the government is owed. In that spirit, the IRS is cracking down on small businesses with unpaid payroll taxes and past due employment taxes, which until recently have flown Largely under the radar. Any company with unpaid employment taxes or payroll taxes delinquent has committed a federal crime and can expect devastating results. If you have unpaid employment taxes or unpaid payroll taxes and are in need of business tax relief, here is what you need to do.
Unpaid employment taxes / unpaid payroll taxes tip # 1: Understand the gravity of your situation.
The IRS does not care Whether you stay in business or not – just as long as all unpaid employment taxes or payroll taxes owed past due are accounted for. You need business tax relief and negotiating a properly structured payment plan or IRS installment plan can help you manage your cash flow and cut in half new penalties.
Unpaid employment taxes / unpaid payroll taxes tip # 2: Get professional advice NOW. You might be tempted
to represent yourself before the IRS in your bid for business tax relief. Do not. This is the equivalent of defending yourself against murder charges without a lawyer. You are in over your head and have too much to lose.
To get tax relief
business, it is vital to get professional help from a tax attorney or Certified Tax Resolution Specialist to protect you, your company and employees. A qualified professional will be able to negotiate for business tax relief in the form of an IRS payment plan or IRS installment plan for your unpaid payroll taxes or unpaid employment taxes. A good tax attorney or Certified Tax Resolution Specialist will tell you how best to move forward so you can get the business tax relief you need and keep your livelihood.
Unpaid employment taxes / unpaid payroll taxes tip # 3: Move fast to protect your business.
If you are a candidate for business tax relief, contact a tax attorney or Certified Tax Resolution Specialist today. The penalties assessed on unpaid payroll tax / unpaid employment tax deposits or filings can dramatically increase in a matter of months. If you do not take immediate business tax relief action to deal with payroll taxes past due or unpaid employment taxes (and their escalating penalties) and get yourself on and IRS payment plan or IRS installment plan, you will find yourself out of business.
Unpaid employment taxes / unpaid payroll taxes tip # 4: Be prepared to defend your proposal for yourself as well as your business, point by point.
A tax attorney or Certified Tax Resolution Specialist will be able to analyze and articulate the real value of your business, taking every factor into consideration unique. The IRS will likely require you to submit a full set of financials for the business as well as for yourself. Your tax attorney or Certified Tax Resolution Specialist will submit a proposal for a business tax relief or IRS payment plan IRS installment plan and negotiate every federal objection point by point.
Unpaid employment taxes / unpaid payroll taxes tip # 5: Do not settle when seeking experienced and expert tax relief. In this weak economy
, many businesses – both big and small – are struggling to make their payroll tax deposits and many are falling behind. Delinquent employment taxes can be the “kiss of death” for many business owners as IRS payroll tax penalties can add up quickly. Payroll tax debt should be taken not lightly – IRS levies on wages and bank accounts can cause you to lose your business. Fortunately, there’s a solution to every problem.
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Home Business Tax Deductions You Should Take
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In any home business you definitely have more tax advantages than if you were self-employed. The tax advantages become substantial when you consider how you can improve the profitability of your business by declaring all of the home business tax deductions you are entitled to.
You may be
missing some very important deductions. You must itemize your deductions for your home business operation on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to can save your home business hundreds of dollars a year.
Here is some background information on how your income tax amount is arrived at by the IRS.
The U.S.
taxation code states that almost all income is subject to federal income tax The way that you, as the owner of your home business, arrive at the final amount of income tax is as follows:
Gross Income – (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income.
Taxable Income X (Your Tax Rate) = Income tax for the fiscal year.
Here is a quick definition of the terms in the above taxation equation:
Gross Income = The total of all income for the year after the cost of the inventory has been paid for.
Expenses = All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies and interest on business loans, etc. To find out if at expense qualifies as a legitimate business expense, consult your accountant or the IRS.
Depreciation = This is the way of spreading out the deductibility of an asset over a period of more than one year.
The IRS has certain different depreciation schedules for different business property. This is done for assets like real estate, equipment and other assets with a long economic life. This method of taxation write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. These rules are subject to change by the Congress and the IRS.
Miscellaneous Deductions:
This is an often misunderstood and overlooked way to save a lot of money on taxes. Remember that these types of expenses must be Totaled up and declared on a separate schedule of your income tax forms.
Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if you are audited by the IRS!
Here is a list of some of the things you can deduct from your income taxes:
Business related expenses include:
1 Air fares2nd Auto expenses3rd Books and Magazines4th Educational Expenses5th Home Office Space * + a portion of utilities, telephone, and maintenance costs6th Office Furniture7th Cleaning Expenses8th Meals with Business Clients9th Laundry Expenses (When Traveling)10th Advertising11th Impairment-Related Expenses12th Licenses and Regulatory Fees
* If you own your home you must use the IRS depreciation rules to mine this deterministic deduction. If you rent then you may deduct a portion of your rent
Check IRS Publication 535
to find out if you can deduct any or all of the above.
As you can see there are many deductions that are allowable for your home business. The best way to get more information on tax deductions and related information on income taxes is to go online to www.irs.gov. There you will find a helpful search engine containing thousands of government publications that you can research and print out if you need to.
Now you have a good idea of the deductions you are entitled to take. So do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year.
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