Last year IRS delayed some refunds till mid February. This year early filers expecting early refunds were disappointed according to the Chicago Tribune.
The early bird does not always get the worm: The Internal Revenue Service says that some taxpayers who filed on or before Jan. 25 may have to wait a week longer than expected for refunds.
The IRS blamed it on new antifraud safeguards being installed on IRS computer systems that required "fine-tuning."
The federal agency had
originally announced that many taxpayers would get their money back as
soon as 10 days after they filed online and had their check deposited
directly.
That still remains true for those who filed after Jan. 26, said IRS spokesman Mike Dobzinski in Plantation, Fla.
Read more by clicking the above link.
Tuesday, January 31, 2012
Congressional Budget Office Predicts A Huge Tax Increase In the Next 2 Years
From CNS Online:
The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.
At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.
“In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”
Click the above link to read more good news.
The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.
At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.
“In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”
Click the above link to read more good news.
Friday, January 27, 2012
S Corporations
Choosing the form of business you will be operating under is
the second most important decision you can make, the first being actually going
into business.
I believe that
operating your business as a Sub Chapter S or Small Business Corporation makes
sense. In fact five businesses I own are
operated as Sub Chapter S Corporations. I am not alone in this belief. This year of the 4,000,000 corporate income
tax returns that will be filed with the Internal Revenue Service, more than
2,000,000 will be Sub Chapter S Corporation returns.
Take a minute to read the discussions from a variety
of experts. Then if you believe that
becoming an S Corporation makes sense, call us.
We will make an appointment to visit with you to discuss your individual
situation.
Thursday, January 26, 2012
Ten stupid things smart people do to mess up their taxes
After every April 15th we kind of shake are heads and wonder why.
How can really smart people, our clients, do such stupid things to their
taxes. Each year we compile of list of mistakes our clients made with
one purpose in mind. Don’t make the same mistake. Learn from their
lessons.
Here is our current list of things to avoid this year.
1. Take money out of their IRA or pension plan and don’t have any money withheld for taxes. If you have to take money out of your tax sheltered plan don’t forget that there is a 10 percent penalty in addition to Federal tax owed on the distribution if you are under age 59 1/2. Don’t ever take money out of these plans without having the most Federal tax withheld from the distribution. Call our office. We can help.
2. Take money out of their IRA or pension plan or 401 K and not roll it over to another tax deferred plan. Back on this subject again. Leaving your job usually means cashing in a pension plan or 401 K. We understand that sometimes the money is needed to pay for day to day activities until you can find a new job. But if you don’t need the money don’t spend it roll it over. We can help you if you don’t know what to do. We can refer you to very competent people that can help with the rollover. Taking the money if you don’t need it means additional tax liability.
3. Sell stocks or mutual funds and not know what they paid for it. If you are dabbling in the market, you need to keep track of what you paid for the security and when you bought each security. We suggest keeping a permanent stock purchase file, and filing the confirmation each time you buy a security. That way, when you sell it you can easily locate the purchase price and purchase date. Remember that you only pay tax on the gain and you can deduct the loss of each security you sell. Stockbrokers are now required to provide you a basis statement each year. However, they may be wrong or are missing information. The best tip is to keep your stock purchase records.
4. Don’t keep any records. Records are very important in our imaginary tax world. Especially for business tax deductions like car expenses. Jotting down on a daily basis in a daily planner or pocket calendar is all you need. Keep a file nearby for tax deductible receipts. Better yet get a credit card that you use only business tax deductions. That way you all the receipts organized for you. Your credit card along with your milage calendar is all you need to make April 15th very less taxing.
5. Give charitable deductions, especially non cash and don’t make an attempt to value the donation. A note about the date and time of your deduction and a short list of the description of the deduction in your tax deduction file is all you need.
6. Not filing your taxes because you don’t have the money to pay. Always file, even if you do not have the money to pay the taxes you owe. The IRS considers not paying on time and not filing as two separate issues, and a penalty is involved for each. When you file your tax return, you have several options. You can apply for an "offer in compromise," make monthly payments through an IRS installment agreement, or temporarily delay paying. Whichever is best for you, we will help you contact the IRS right away to let them know you cannot pay. You should pay as much as you can when you file because the IRS assesses penalties and interest on the amount not paid.
7. Ignore those letters from the IRS. Do not ignore mail from the IRS. If you owe taxes, the IRS will collect. Persons who do not communicate with the IRS about inability to pay can expect a "Notice of Federal Tax Lien" to be filed against their property. In lien terms, this is a lien about the size of Alaska. Few carry more weight. The lien attaches all your property, including your house, car and any future property you might obtain. A levy, which is a legal seizure of property to satisfy a tax debt, is another legal means the IRS can use to collect taxes. This means the IRS can seize your car, boat or home and sell it to satisfy your tax debt or it can place a levy on your wages. More good news is that these liens often stay on your records long after the issue has been resolved or until the IRS gets around to removing it. So it's also the gift that keeps on giving!
8. Signing. It's not the toughest part of the tax return, but we have found that one of the most common mistakes occurs on the bottom of the tax form: the place where you're supposed to sign your name. A lot of taxpayers simply forget to do it. And, a return without a signature is like no return at all. Although the IRS won't send back your forms (it doesn't want them to get lost in the mail), everything is put on hold while you're sent a special form to sign certifying that your return is accurate. Only after you sign and send in that form, and the tax agency matches it up with your other forms, can your return be processed -- and any refund check issued.
9. Big refunds. Isn’t that the point of filing? Big refunds. In fact some clients rate the expertise of their tax preparer with the size of their refund. The bigger the refund the better the tax preparer. Nothing can be farther from the truth. Refunds are nothing more than interest free loans of your money, even earned income credit which can be advanced to you from your employer throughout the year, to the government. Then you have to go through the expense and the wait of getting your refund when you file your taxes. Extra withholding doesn’t benefit you, only the government. Don’t stand for big refunds. Stand for bigger paychecks. Your goal should be break even on April 15th.
10. Assuming the wrong filing status. Single taxpayers should be singled out for assuming that they should file as single tax payers when in fact they qualify for the much-more-favorable head-of-household (HOH) filing status. Say you're single and your non-adult child lives with you and pays for less than half of his or her own support. If you pay more than half the household's costs, you qualify. You may also qualify if you are still married and lived with your child but apart from your spouse for at least the last half of 2006. Finally, if you are single and can claim your parent as a dependent, you can probably file as HOH. This is true even if your parent has his or her own place. You are the HOH if you pay more than half the cost of your dependent parent's home.
Here is our current list of things to avoid this year.
1. Take money out of their IRA or pension plan and don’t have any money withheld for taxes. If you have to take money out of your tax sheltered plan don’t forget that there is a 10 percent penalty in addition to Federal tax owed on the distribution if you are under age 59 1/2. Don’t ever take money out of these plans without having the most Federal tax withheld from the distribution. Call our office. We can help.
2. Take money out of their IRA or pension plan or 401 K and not roll it over to another tax deferred plan. Back on this subject again. Leaving your job usually means cashing in a pension plan or 401 K. We understand that sometimes the money is needed to pay for day to day activities until you can find a new job. But if you don’t need the money don’t spend it roll it over. We can help you if you don’t know what to do. We can refer you to very competent people that can help with the rollover. Taking the money if you don’t need it means additional tax liability.
3. Sell stocks or mutual funds and not know what they paid for it. If you are dabbling in the market, you need to keep track of what you paid for the security and when you bought each security. We suggest keeping a permanent stock purchase file, and filing the confirmation each time you buy a security. That way, when you sell it you can easily locate the purchase price and purchase date. Remember that you only pay tax on the gain and you can deduct the loss of each security you sell. Stockbrokers are now required to provide you a basis statement each year. However, they may be wrong or are missing information. The best tip is to keep your stock purchase records.
4. Don’t keep any records. Records are very important in our imaginary tax world. Especially for business tax deductions like car expenses. Jotting down on a daily basis in a daily planner or pocket calendar is all you need. Keep a file nearby for tax deductible receipts. Better yet get a credit card that you use only business tax deductions. That way you all the receipts organized for you. Your credit card along with your milage calendar is all you need to make April 15th very less taxing.
5. Give charitable deductions, especially non cash and don’t make an attempt to value the donation. A note about the date and time of your deduction and a short list of the description of the deduction in your tax deduction file is all you need.
6. Not filing your taxes because you don’t have the money to pay. Always file, even if you do not have the money to pay the taxes you owe. The IRS considers not paying on time and not filing as two separate issues, and a penalty is involved for each. When you file your tax return, you have several options. You can apply for an "offer in compromise," make monthly payments through an IRS installment agreement, or temporarily delay paying. Whichever is best for you, we will help you contact the IRS right away to let them know you cannot pay. You should pay as much as you can when you file because the IRS assesses penalties and interest on the amount not paid.
7. Ignore those letters from the IRS. Do not ignore mail from the IRS. If you owe taxes, the IRS will collect. Persons who do not communicate with the IRS about inability to pay can expect a "Notice of Federal Tax Lien" to be filed against their property. In lien terms, this is a lien about the size of Alaska. Few carry more weight. The lien attaches all your property, including your house, car and any future property you might obtain. A levy, which is a legal seizure of property to satisfy a tax debt, is another legal means the IRS can use to collect taxes. This means the IRS can seize your car, boat or home and sell it to satisfy your tax debt or it can place a levy on your wages. More good news is that these liens often stay on your records long after the issue has been resolved or until the IRS gets around to removing it. So it's also the gift that keeps on giving!
8. Signing. It's not the toughest part of the tax return, but we have found that one of the most common mistakes occurs on the bottom of the tax form: the place where you're supposed to sign your name. A lot of taxpayers simply forget to do it. And, a return without a signature is like no return at all. Although the IRS won't send back your forms (it doesn't want them to get lost in the mail), everything is put on hold while you're sent a special form to sign certifying that your return is accurate. Only after you sign and send in that form, and the tax agency matches it up with your other forms, can your return be processed -- and any refund check issued.
9. Big refunds. Isn’t that the point of filing? Big refunds. In fact some clients rate the expertise of their tax preparer with the size of their refund. The bigger the refund the better the tax preparer. Nothing can be farther from the truth. Refunds are nothing more than interest free loans of your money, even earned income credit which can be advanced to you from your employer throughout the year, to the government. Then you have to go through the expense and the wait of getting your refund when you file your taxes. Extra withholding doesn’t benefit you, only the government. Don’t stand for big refunds. Stand for bigger paychecks. Your goal should be break even on April 15th.
10. Assuming the wrong filing status. Single taxpayers should be singled out for assuming that they should file as single tax payers when in fact they qualify for the much-more-favorable head-of-household (HOH) filing status. Say you're single and your non-adult child lives with you and pays for less than half of his or her own support. If you pay more than half the household's costs, you qualify. You may also qualify if you are still married and lived with your child but apart from your spouse for at least the last half of 2006. Finally, if you are single and can claim your parent as a dependent, you can probably file as HOH. This is true even if your parent has his or her own place. You are the HOH if you pay more than half the cost of your dependent parent's home.
Ten stupid things business owners do to mess up their business.
Ten no 12 stupid things business owners do to mess up their business.
1. No mailing list to their existing customers.
2. Relying on quickbooks for their accounting.
3. Getting complacent.
4. No relationship with their bankers.
5. Stop learning.
6. Not being honest and dependable.
7. Not having a goal in mind about what your business will look like when it is done.
8. Not picking the right
9. Not leaning from their mistakes.
10. Not taking action. Any action
11. Depending on marketing sales people to focus on your advertising and marketing.
12. Not realizing that sales are the most important thing. That sales are the answers to all your problems.
1. No mailing list to their existing customers.
2. Relying on quickbooks for their accounting.
3. Getting complacent.
4. No relationship with their bankers.
5. Stop learning.
6. Not being honest and dependable.
7. Not having a goal in mind about what your business will look like when it is done.
8. Not picking the right
9. Not leaning from their mistakes.
10. Not taking action. Any action
11. Depending on marketing sales people to focus on your advertising and marketing.
12. Not realizing that sales are the most important thing. That sales are the answers to all your problems.
Wow federal workers failed to pay billions in taxes in 2010
According to Investors Business Daily federal workers have failed to pay more than $3.4 billion dollars in taxes last year.
How embarrassing this must be for President Obama, whose major speech theme so far this campaign season has been that every single American, no matter how rich, should pay their "fair share" of taxes.
Because how unfair -- indeed, un-American -- it is for an office worker like, say, Warren Buffet's secretary to dutifully pay her taxes, while some well-to-do people with better educations and higher incomes end up paying a much smaller tax rate.
Or, worse, skipping their taxes altogether.
A new report just out from the Internal Revenue Service reveals that 36 of President Obama's executive office staff owe the country $833,970 in back taxes. These people working for Mr. Fair Share apparently haven't paid any share, let alone their fair share.
How embarrassing this must be for President Obama, whose major speech theme so far this campaign season has been that every single American, no matter how rich, should pay their "fair share" of taxes.
Because how unfair -- indeed, un-American -- it is for an office worker like, say, Warren Buffet's secretary to dutifully pay her taxes, while some well-to-do people with better educations and higher incomes end up paying a much smaller tax rate.
Or, worse, skipping their taxes altogether.
A new report just out from the Internal Revenue Service reveals that 36 of President Obama's executive office staff owe the country $833,970 in back taxes. These people working for Mr. Fair Share apparently haven't paid any share, let alone their fair share.
Sunday, January 22, 2012
January 1, 2012 Client Newsletter
It is New Year’s Day as I write this newsletter. Somehow the lack of any New Years Day college football bowl games has motivated me to write to you. Lesson one; never underestimate the power of the National Football League and the BCS.
I am a little gun shy of making predictions. In 2008 we predicted a stock market rally that of course never happened. Last year we predicted $5.00 a gallon gas at the end of the year, (It didn’t come close to that price but apparently is headed that way this year) a Chicago Cubs World Series, the increased value of the Internet in just about everything we do including marketing your business, and more doom and gloom in the Public Sector. Two out of four I guess is not bad.
With some certainty I predict the tough economic times will continue. The new year will bring continued misery to millions of Americans, including the jobless, those facing housing trouble and many who had hoped to retire but must work on — if they're lucky enough to have a job. After the recession and the lost decade of the 00s, the typical American household’s real income is back at 1997 levels.
Very slow growth makes it almost impossible to rescue this situation for years. Indeed, the danger of long-term contraction — and how does a society based on fairly high growth manage it — is real.
As you have probably already heard the temporary reduction in the amount of Social Security Tax you withhold from your employees remains in effect until February 29, 2012. That means the amount of Social Security tax you withhold continues to be 4.2% of wages paid through the end of February. Your matching portion of Social Security taxes remains unchanged at 6.2%.
January is always our busiest month. We generate hundreds of your employee’s W-2 forms and quarterly taxes. In addition, at the end of the month we prepare any 1099 forms you may need to furnish your independent contractors. Technically the W-2 and 1099 forms have to be sent to the recipients until the end of January. However, the IRS continues to maintain a policy that will allow employers an additional two weeks to furnish these forms. Sometimes we take advantage of it.
We have already started in December processing your quarterly forms for this month. Some clients will be paying their federal tax liability electronically, while others will not. New IRS mandates to pay all taxes electronically are now in place. Unless your liability is very small, IRS now requires employers to pay and file electronically. We are on top of the new mandate and will notify you of any changes that may apply specifically to you. As usual 1099 forms will be processed last. Don’t expect any 1099 forms mailed to you until very late in January.
We are rushing to complete our mega redesign of our two tax internet sites 1taxes.com and the smallbizwiz.com. Both sites are scheduled to be up and running by the end of the month. We are trying to make more resources available to our existing clients while still making them a key in our marketing message to new clients.
Lastly, I wanted to say thanks for everything in 2011. It was a tough year for a lot of reasons and I won't miss it, I appreciate all of the support from our fabulous clients, the goodwill from you fine people is always heartening. Thank you and Happy New Year.
"Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual. Yesterday, everybody smoked his last cigar, took his last drink, and swore his last oath. Today, we are a pious and exemplary community. Thirty days from now, we shall have cast our reformation to the winds and gone to cutting our ancient shortcomings considerably shorter than ever. We shall also reflect pleasantly upon how we did the same old thing last year about this time. However, go in, community. New Year's is a harmless annual institution, of no particular use to anybody save as a scapegoat for promiscuous drunks, and friendly calls, and humbug resolutions, and we wish you to enjoy it with a looseness suited to the greatness of the occasion." - Mark Twain
I am a little gun shy of making predictions. In 2008 we predicted a stock market rally that of course never happened. Last year we predicted $5.00 a gallon gas at the end of the year, (It didn’t come close to that price but apparently is headed that way this year) a Chicago Cubs World Series, the increased value of the Internet in just about everything we do including marketing your business, and more doom and gloom in the Public Sector. Two out of four I guess is not bad.
With some certainty I predict the tough economic times will continue. The new year will bring continued misery to millions of Americans, including the jobless, those facing housing trouble and many who had hoped to retire but must work on — if they're lucky enough to have a job. After the recession and the lost decade of the 00s, the typical American household’s real income is back at 1997 levels.
Very slow growth makes it almost impossible to rescue this situation for years. Indeed, the danger of long-term contraction — and how does a society based on fairly high growth manage it — is real.
As you have probably already heard the temporary reduction in the amount of Social Security Tax you withhold from your employees remains in effect until February 29, 2012. That means the amount of Social Security tax you withhold continues to be 4.2% of wages paid through the end of February. Your matching portion of Social Security taxes remains unchanged at 6.2%.
January is always our busiest month. We generate hundreds of your employee’s W-2 forms and quarterly taxes. In addition, at the end of the month we prepare any 1099 forms you may need to furnish your independent contractors. Technically the W-2 and 1099 forms have to be sent to the recipients until the end of January. However, the IRS continues to maintain a policy that will allow employers an additional two weeks to furnish these forms. Sometimes we take advantage of it.
We have already started in December processing your quarterly forms for this month. Some clients will be paying their federal tax liability electronically, while others will not. New IRS mandates to pay all taxes electronically are now in place. Unless your liability is very small, IRS now requires employers to pay and file electronically. We are on top of the new mandate and will notify you of any changes that may apply specifically to you. As usual 1099 forms will be processed last. Don’t expect any 1099 forms mailed to you until very late in January.
We are rushing to complete our mega redesign of our two tax internet sites 1taxes.com and the smallbizwiz.com. Both sites are scheduled to be up and running by the end of the month. We are trying to make more resources available to our existing clients while still making them a key in our marketing message to new clients.
Lastly, I wanted to say thanks for everything in 2011. It was a tough year for a lot of reasons and I won't miss it, I appreciate all of the support from our fabulous clients, the goodwill from you fine people is always heartening. Thank you and Happy New Year.
"Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual. Yesterday, everybody smoked his last cigar, took his last drink, and swore his last oath. Today, we are a pious and exemplary community. Thirty days from now, we shall have cast our reformation to the winds and gone to cutting our ancient shortcomings considerably shorter than ever. We shall also reflect pleasantly upon how we did the same old thing last year about this time. However, go in, community. New Year's is a harmless annual institution, of no particular use to anybody save as a scapegoat for promiscuous drunks, and friendly calls, and humbug resolutions, and we wish you to enjoy it with a looseness suited to the greatness of the occasion." - Mark Twain
November 27, 2011 Client Newsletter
While I was cleaning my locker at the Y last week I found a gem of a book I completely forgot that I was reading for some reason. Buried way deep under a pile of old books I read when spending time working out on the cross trainer was “No B.S. Time Management for Entrepreneurs” written by one of my favorite small business gurus Dan Kennedy. Although my copy was written in 1999, a new update edition is now available.
It’s clear why he brands his books “No B.S.” — he pulls no punches! There is quite a bit of no-nonsense practical advice in this book (along with the occasional rant), but I have to admit that I’m still scratching my head at how Kennedy has practically eliminated the use of cell phones and emails from his business life as methods of communication (he opts for faxes because he says people put more thought into the content of them).
Inside this book are several great nuggets of wisdom about time management and success….words worth typing up and posting on your wall or somewhere else where you can see them and remind yourself regularly. Not burying it in your locker at the Y.
Some of my favorites:
- Self-discipline is the magic power that makes you virtually unstoppable.
– Delegate or stagnate.
– No one who is good at making excuses is also good at making money. The skills are mutually exclusive.
– The more decisions you make and the faster you make them, the more productive you are.
– Good enough is good enough.
Kennedy talked about a technique he uses to focus and avoid majoring in minor matters: Identify and write down the three most important, most significant, most productive, most valuable things you can do to foster success in your particular enterprise. Then translate them into three actions you can take on each day. He noted that even though some people may find writing down lists to be confining, he’s never known or met a successful entrepreneur who wasn’t a list maker.
To illustrate the importance and benefits of taking massive action, he shared a story about how a dentist with a struggling practice made a list of 300 things he needed to implement to turn things around. He simply did 10 items from the list each and every week for 30 weeks and without increasing marketing or advertising expenses he managed to QUADRUPLE his business!
We all know that sometimes we fail to hit our goals. When we do fail, some people will reset the same goal with a new deadline and others may create fewer aggressive goals. However, Kennedy handles these situations a bit differently by creating a similar but bigger and more exciting goal with a new deadline. This way he’s able to stay motivated and focused rather than lower the bar or waste time with disappointment.
I would like to share Kennedy’s excellent definition of productivity and four of the many time management techniques discussed in the book. I suspect you’ve heard some or all of these before but it never hurts to remind yourself because we can all do better with our time management!
Definition of productivity: Productivity is the deliberate, strategic investment of your time, talent, intelligence, energy, resources, and opportunities in a manner calculated to move you measurably closer to meaningful goals.
Four Time Management Techniques Really Worth Using
It’s clear why he brands his books “No B.S.” — he pulls no punches! There is quite a bit of no-nonsense practical advice in this book (along with the occasional rant), but I have to admit that I’m still scratching my head at how Kennedy has practically eliminated the use of cell phones and emails from his business life as methods of communication (he opts for faxes because he says people put more thought into the content of them).
Inside this book are several great nuggets of wisdom about time management and success….words worth typing up and posting on your wall or somewhere else where you can see them and remind yourself regularly. Not burying it in your locker at the Y.
Some of my favorites:
- Self-discipline is the magic power that makes you virtually unstoppable.
– Delegate or stagnate.
– No one who is good at making excuses is also good at making money. The skills are mutually exclusive.
– The more decisions you make and the faster you make them, the more productive you are.
– Good enough is good enough.
Kennedy talked about a technique he uses to focus and avoid majoring in minor matters: Identify and write down the three most important, most significant, most productive, most valuable things you can do to foster success in your particular enterprise. Then translate them into three actions you can take on each day. He noted that even though some people may find writing down lists to be confining, he’s never known or met a successful entrepreneur who wasn’t a list maker.
To illustrate the importance and benefits of taking massive action, he shared a story about how a dentist with a struggling practice made a list of 300 things he needed to implement to turn things around. He simply did 10 items from the list each and every week for 30 weeks and without increasing marketing or advertising expenses he managed to QUADRUPLE his business!
We all know that sometimes we fail to hit our goals. When we do fail, some people will reset the same goal with a new deadline and others may create fewer aggressive goals. However, Kennedy handles these situations a bit differently by creating a similar but bigger and more exciting goal with a new deadline. This way he’s able to stay motivated and focused rather than lower the bar or waste time with disappointment.
I would like to share Kennedy’s excellent definition of productivity and four of the many time management techniques discussed in the book. I suspect you’ve heard some or all of these before but it never hurts to remind yourself because we can all do better with our time management!
Definition of productivity: Productivity is the deliberate, strategic investment of your time, talent, intelligence, energy, resources, and opportunities in a manner calculated to move you measurably closer to meaningful goals.
Four Time Management Techniques Really Worth Using
- Tame the phone: Take few if any incoming calls. Return calls at your convenience. This is the number one source of interruption and distraction for most people.
- Block your time: Make inviolate appointments with yourself. Block out time to handle specific recurring aspects of your business. If you block time for important, high-value functions you perform, you prevent demands of others from moving these activities from number one to number ten on your list over and over again. This one technique has enabled Kennedy to write at least one book per year publish two monthly newsletters for eight consecutive years.
- Practice absolute punctuality: Being punctual gives you the right — the positioning — to expect and demand that others treat your time with respect. Kennedy feels so strongly about this one that as a general rule of thumb, he will use a person’s punctuality (or lack thereof) to decide whether he wants to do business with them.
- Profit from “Odd-Lot” time: Turn driving time and waiting time into educational times to learn a foreign language, improve your memory, or essentially learn about any and every topic from experts. Take advantage of audio books and pod casts.
The number one IRS audit risk for S Corporations is salary and wages paid to officers of the corporation.
This is probably the most important letter I will write to you this year. There is no doubt that you, as an S Corporation owner have made very good tax move. The popularity of S Corporations is growing each year. More than six million S Corporation returns will be filed this year. They offer more advantages than any other choice of business entity today. You have chosen wisely.
However, there is one rather large S Corporation pitfall that I am required by IRS Circular 230 to warn you about.
The number one IRS audit risk for S Corporations is salary and wages paid to officers of the corporation.
Here is what the IRS says about wages and salary paid to officers of Subchapter S Corporations:
Although this IRS interpretation of reasonable salary just recently updated in October 2011, is somewhat arbitrary, it is extremely important not to overlook paying yourself a salary before the end of the year.
What should you do? Don’t panic.Call us. We can help. There is still time to fix any oversights.
Remember what Ben Franklin said an ounce of prevention is worth a pound of cure. He also said that there are only two certain things in life: death and taxes.
However, there is one rather large S Corporation pitfall that I am required by IRS Circular 230 to warn you about.
The number one IRS audit risk for S Corporations is salary and wages paid to officers of the corporation.
Here is what the IRS says about wages and salary paid to officers of Subchapter S Corporations:
Corporate officers are specifically included within the definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code. When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes. S corporations should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions, payments of personal expenses, and/or loans rather than as wages.
Although this IRS interpretation of reasonable salary just recently updated in October 2011, is somewhat arbitrary, it is extremely important not to overlook paying yourself a salary before the end of the year.
What should you do? Don’t panic.Call us. We can help. There is still time to fix any oversights.
Remember what Ben Franklin said an ounce of prevention is worth a pound of cure. He also said that there are only two certain things in life: death and taxes.
Our 30th version of the same story.
Sally Smith, was a smart businessperson, she knew the basics of year-end tax planning.
1. Postpone income to next year.
2. Pay as many expenses as possible this year.
3. Keep inventory level low.
4. If you are going to make a capital investment, do so before the end of the year.
5. Double check for missing deductions.
6. Invest in an IRA for similar type account.
Sally owns a retail store and faced the year end with her eyes wide open. Sally knew that a few strategies would pay big dividends on April 15. Here is what she did to reduce her tax liability:
Since Sally was operating her business on a cash basis and relied upon cash sales through her cash register, she did not have the opportunity to postpone much income. She has established a policy for many years to close her books on December 28, which gave her opportunity to defer three days of sales to next year.
Sally then reviewed her bills. She started to write out checks for her expenses. She wrote checks for all expenses due, even if some expenses were due in January. She dated her checks for December 28, 2011 to be sure that the expenses were recorded for this year on December's bookkeeping. Her checks written totaled to almost $10,000. Her one simple strategy, accelerating expenses meant that Sally saved over $4,000.00 in income tax this year.
Since you pay tax on your inventory at the end of the year, Sally knew that reducing her inventory to the lowest amount possible was important for her. First, she decided to review her inventory to see if she had things that have been gathering dust. She found items that in fact had been sitting around for more than three years. She decided to mark those items down and immediately started an inventory reduction sale for those items. She knew that the value of her inventory was based upon her costs of the items, not the selling price. She also knew that items that were partially used or supplies not for resale did not count as part of her inventory.
Sally had been debating whether to purchase a new computer for her business. The local computer store was offering a "six-months same as cash" financing offer for the purchase of new computers. Sally decided to purchase the computer now, electing to take advantage of the special financing offer. She knew that she could deduct the full purchase price of the computer on her tax return, even though she did not pay for it right away. When you purchase something using a credit card or borrow the money, as Sally did, you get to deduct the amount when you purchase the item. The $3,000 computer saved Sally $1,200 in income tax.
As part of her year-end review Sally took a minute to see if perhaps she has recorded all her business expenses as part of her monthly record keeping. She knew that the credit card that she had been using exclusively for business had some interest payments that were not included. She made a note to record her year-end statement from her credit card company to make sure that it was included as interest paid on her year-end documents to her accountant. In addition, she decided to review her automobile mileage and other receipts for expenses that she might not have had for her business and had a chance to record in her monthly record keeping.
Sally also knew that she had time to make her annual IRA contribution until April 15 of next year. She decided not to make it till next April. She also made a note to talk to us about Roth IRA accounts and analyze the different options available to her. One of her options was a self-employed Pension Plan commonly called a SEP. IRA's. SEP. IRA's do not have to be opened or funded until the due date of your return. That means that Sally doesn't have to open or make a contribution to a SEP. IRA for the 2011 tax year until April 15, 2012. She can also contribute a larger amount to her SEP. IRA than she could to her regular IRA. However, she was reluctant to open one because she also knew that she would have to contribute an amount to her full time employees. She made a note to ask her accountant what that contribution would be and what her resultant tax savings would equal. She also thought her accountant might have ideas on how to "cushion" the employee's contribution issue.
Sally knew that her year end review of her tax situation saved her almost $7,000 this year. She made a note to review her year end information before we prepared her tax return in 2011.
SAVE TAXES...REMEMBER BEFORE JANUARY 1, 2012
1) Postpone income to next year.
2) Pay as many expenses as possible this year, even if you do not send the checks off till January, be sure to write the checks for the expenses.
3) Keep inventory at a low level.
4) If you are going to make a capital investment, do so before the end of the year.
5) Double check for missing deductions.
6) Invest in an IRA or similar type account.
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