March 5, 2012 Client Newsletter

The one thing I learned many years ago living in our imaginary tax world is that nothing is black or white only gray. Deductions can happen or can’t.  Credits are available and sometimes not.  Income is taxable and then it isn’t.

Most of my small business clients file their taxes as either a small business corporation or sole proprietor.  In both cases the draw that you take from your business is not taxable.  In both cases you are taxed on the net income of your business.  You have what we call basis in that money you draw out of your business.   In other words you are going to pay taxes on that money already,  so you are entitled to take it out of your business.

Small business corporations have a little more complicated rules.  Essentially you are allowed to take money out of your corporation up to your investment, adding your income, subtracting your losses, subtracting your draws (we call them distributions other than dividends) and adding a Heinz 57 list of additions before paying any tax on the money you draw from your business. The bottom line is that with a few exceptions....the gray...you do not have to pay taxes on the money you draw out of your business.   Glad we could clear that up.

The due date for your 2011 corporate tax return is March 15, 2012.  If you have already prepared your corporate return we have already filed it and we are moving on to another year.  We will file an automatic six month extension for you if you haven’t filed by the March 15th deadline.  You don’t have to do a thing.  We will take care of it for you.

As time ticks closer to April 17th tax filing deadline we encourage to you to get your information to us sooner rather than later.  Filing earlier allows us to do a better job for you.  Filing earlier means you will get your refund sooner.  And if you owe money, filing earlier means you can prepare how to pay your tax liability.

Today we received notice that there is going to be a “slight increase” in the fees’ charged for our Paycycle online payroll service.  I haven’t had a chance to review the new fees, nor make a decision as whether we will absorb them at our end or pass them on to our clients.  More than likely we will take a look at it after the filing season.