Did you know that the recent health care reform act includes so many tax law changes that the Congressional Budget Office says the IRS will need $10 billion and 17,000 new employees to enforce its share of the new rules? It's true! Here are just a few key tax changes:
● Starting immediately, certain small businesses with fewer than 10 employees will get a 35% credit for the cost of providing employee health benefits.
● Starting in 2011, employers will have to report the value of health benefits on Form W-2.
● The penalty tax for Health Savings Account distributions not used for health care expenses doubles, to 20%. This will discourage using HSAs for supplemental retirement savings.
● Starting in 2013, the 7.5% floor for deducting medical and dental expenses climbs to 10% (unless you or your spouse are 65 or older, in which case it remains at 7.5% until 2016).
● Healthcare flexible spending account contributions are capped at $2,500 per year.
● Starting in 2014, businesses with more than 50 employees will have to offer health benefits or pay a penalty of $2,000 per employee.
The reconciliation bill that accompanied the act includes one more unwelcome change, Currently, the Medicare tax is limited to 2.9% of earned income. The reconciliation bill raises that tax by 0.9% of earned income above $200,000 (individuals) or $250,000 (families). It also adds a 3.8% "Unearned Income Medicare Contribution" on investment income (interest, dividends, annuities, royalties, capital gains, and rents) for taxpayers with Adjusted Gross Incomes above those same threshholds. Those new taxes would take effect in 2013.
The complete bill is 1,018 pages long! So it's going to take some time to analyze. But we'll pay close attention and keep you informed as details become available. In the meantime, if you have any questions, be sure to call us at 217-241-4597.
Friday, March 26, 2010
Thursday, March 18, 2010
Turbo Tax CEO doesn't trust Turbo Tax to prepare his taxes so why should you?
From the March 15th USA Today interview with Brad Smith CEO of Intuit:
Q: Do you use TurboTax to file your own tax return?
A: I use it every year to help my mom do her taxes and my brother. (I) have situations with trusts and things, (so) I've used someone to help me with my taxes the last couple of years. I do go through my own taxes with TurboTax and compare it (with my accountant's results).
Having a trust should make a difference????
Or perhaps we should ask Treasury Secretary Timothy Geithner. He blamed his own tax problems on Turbo Tax. Click here for even more details about whether the software was in fact the problem and not his own.
In any case shouldn't any taxpayer think twice before filing on its own?
Are you in danger of being TURBO TAXED?
Are you in danger of being TURBO TAXED?
Wednesday, February 17, 2010
Tax Tips for S Corporations
From Tax Definition.org:
New York, NY (PRWEB) April 5, 2005 --- Tax-Definition.org (http://www.tax-definition.org) is happy to share the following Tax Tips for small businesses / S Corporations -
Tax Tips for S Corporations:
http://www.tax-definition.org/Define-Payroll-taxes.html
Description: The C" and S" corporations refer to the Internal Revenue Codes subchapters. The S" corporation status eliminates the possibility of double taxation on the profits in businesses.
There are many things that you are required to do before filing your taxes if youre small business owner. The IRS tax code has recognized different kinds of corporations, namely, personal service, non-profit corporations, and financial institutions.
The most favorite legal structures for all the tax paying business owners are C" and S" corporations. The C" and S" corporations refer to the Internal Revenue Codes subchapters. The corporations are differentiated by the way in which the incomes are reported.
There are many benefits in selecting the S" corporation status. It eliminates the possibility of double taxation on the profits in businesses. The profits of S" corporations are taxed directly to the shareholders and the business owners. No federal corporate taxes are to be paid; just one annual tax return is supposed to be filed with this status.
On the other hand, C" corporations have to pay the income tax at two levels, one at the corporate level and the profits of individual shareholders at the other. The losses in C" corporation remain within the corporation.
The shareholders in S" corporations take their operating losses on their own returns. The limited liability is combined with the pass-through tax treatment that allows deductions and incomes to go directly to the shareholders. The result is the same as that of a limited liability company, sole proprietorship, or partnership.
Even though an S" corporation is not considered to be a tax-paying entity, it has to report taxes. Form 1120S has to be filled while filing the annual corporation tax return. The form gives the details of the income, expenses, profits, and losses of the corporation. The shareholders of this corporation are issued separate forms known as the Form K-1s. This form reports about the income that the shareholders get from the corporation along with their tax returns.
The people employed with an S" corporation also get taxed and their taxes are filed along with the company. The S" corporations are supposed to file their state tax returns though. It is important to meet the deadlines for filing your taxes. You are supposed to file the Form 2553 with the IRS before the 15th day of the third month after the taxable year for your corporation begins.
If youre unable to file your tax on time due to a plausible reason, you are given additional six months time. In case of further delay, for about a year, youre given the choice of electing the S" corporation status in the next year. Youre not supposed to fill up the Form 2553 till the corporation charter is granted by the state. Usually, the President of an organization is supposed to file the tax returns.
Financial Records Information:
http://www.tax-definition.org/Define-Financial-records.html
The S" corporation is supposed to file and pay the employment taxes, where the shareholders are spared from the pay-estimated taxes. To elect the S" corporation status, you need to get consent from the shareholders, present as well as prospective. Unless and until all the shareholders give their consent, the election for S" corporation remains invalid.
Reprint rights: You are free to use / reprint this article - please just include the below copyright and URL / link to website:
(C) 2005 Tax-Definition.org
http://www.tax-definition.org
Tax Tips for S Corporation
The S" corporation status eliminates the possibility of double taxation on the profits in businesses.New York, NY (PRWEB) April 5, 2005 --- Tax-Definition.org (http://www.tax-definition.org) is happy to share the following Tax Tips for small businesses / S Corporations -
Tax Tips for S Corporations:
http://www.tax-definition.org/Define-Payroll-taxes.html
Description: The C" and S" corporations refer to the Internal Revenue Codes subchapters. The S" corporation status eliminates the possibility of double taxation on the profits in businesses.
There are many things that you are required to do before filing your taxes if youre small business owner. The IRS tax code has recognized different kinds of corporations, namely, personal service, non-profit corporations, and financial institutions.
The most favorite legal structures for all the tax paying business owners are C" and S" corporations. The C" and S" corporations refer to the Internal Revenue Codes subchapters. The corporations are differentiated by the way in which the incomes are reported.
There are many benefits in selecting the S" corporation status. It eliminates the possibility of double taxation on the profits in businesses. The profits of S" corporations are taxed directly to the shareholders and the business owners. No federal corporate taxes are to be paid; just one annual tax return is supposed to be filed with this status.
On the other hand, C" corporations have to pay the income tax at two levels, one at the corporate level and the profits of individual shareholders at the other. The losses in C" corporation remain within the corporation.
The shareholders in S" corporations take their operating losses on their own returns. The limited liability is combined with the pass-through tax treatment that allows deductions and incomes to go directly to the shareholders. The result is the same as that of a limited liability company, sole proprietorship, or partnership.
Even though an S" corporation is not considered to be a tax-paying entity, it has to report taxes. Form 1120S has to be filled while filing the annual corporation tax return. The form gives the details of the income, expenses, profits, and losses of the corporation. The shareholders of this corporation are issued separate forms known as the Form K-1s. This form reports about the income that the shareholders get from the corporation along with their tax returns.
The people employed with an S" corporation also get taxed and their taxes are filed along with the company. The S" corporations are supposed to file their state tax returns though. It is important to meet the deadlines for filing your taxes. You are supposed to file the Form 2553 with the IRS before the 15th day of the third month after the taxable year for your corporation begins.
If youre unable to file your tax on time due to a plausible reason, you are given additional six months time. In case of further delay, for about a year, youre given the choice of electing the S" corporation status in the next year. Youre not supposed to fill up the Form 2553 till the corporation charter is granted by the state. Usually, the President of an organization is supposed to file the tax returns.
Financial Records Information:
http://www.tax-definition.org/Define-Financial-records.html
The S" corporation is supposed to file and pay the employment taxes, where the shareholders are spared from the pay-estimated taxes. To elect the S" corporation status, you need to get consent from the shareholders, present as well as prospective. Unless and until all the shareholders give their consent, the election for S" corporation remains invalid.
Reprint rights: You are free to use / reprint this article - please just include the below copyright and URL / link to website:
(C) 2005 Tax-Definition.org
http://www.tax-definition.org
Audit 6 red flags you should know
From Yahoo finance
If history is any indicator, less than 1% of Americans will be audited by the Internal Revenue Service in the coming year. And while some of these audits are totally random, and there's nothing that the individual taxpayer can do about them, many audits are actually instigated by the taxpayers themselves.
Read more by clicking the above link
If history is any indicator, less than 1% of Americans will be audited by the Internal Revenue Service in the coming year. And while some of these audits are totally random, and there's nothing that the individual taxpayer can do about them, many audits are actually instigated by the taxpayers themselves.
Read more by clicking the above link
Monday, February 8, 2010
February 8, 2010 Client Update
Another update. We have finished virtually all W-2 forms and have turned our attention to 1099 forms for your non-employees. Remember that all forms have to be mailed no later than February 16, 2010 to avoid any IRS inquiry. We will mail any necessary copies to the IRS and the Social Security Administration on your behalf. We do strive for perfection but occasionally we miss. Please let us know if there is a problem or any questions about your employees W-2 forms.
Interestingly the IRS changed the deadline last year for mailing 1099 brokerage and retirement accounts to February 15th or later if the 15th falls on a weekend. Congress in 2008 changed the law, requiring brokers to include cost basis statements for securities sold when they send their annual 1099 forms to their customers. This later due date has frustrated some clients expecting refunds when it came time to file their taxes, no 1099, no filing, delayed refund.
Speaking of delays, the Illinois Department of Revenue has yet to release, as of today, the final version of its 1040 and schedules to mail/file your 2009 income tax return. Although you can efile the Illinois return, you cannot mail it in. Unbelievable.
If the IRS Commissioner has his way, Congress may legislatively fix the Internal Revenue Code to match the modern-day use of employer-provided cell phones. Currently, when an employee engages in personal use of an employer-provided cell phone, the employer is required to report that personal usage as income to the employee. For many employers, such as you and me, distinguishing between business and personal use is so burdensome that they simply have neglected to comply with the law; risking the consequences if audited by the IRS.
However, IRS Commissioner Doug Shulman recently issued an announcement declaring that the current law is so obsolete, the IRS has asked Congress to enact legislation so that the personal use of employer-provided cell phones will no longer be taxable. Importantly, the Commissioner’s announcement does not suggest that the IRS will not enforce the current law. Indeed, last June, the IRS issued Notice 2009-46 seeking comments on three suggested approaches for determining the amount of personal cell phone usage to be included in employee income: minimal personal use requiring an employee to keep track, safe harbor percentage method, perhaps 75 %, or statistical sampling of the employee's usage. It should be mentioned that the aforementioned Notice and its three methodologies was not well-received by the general public, let alone employers and their tax advisers.
Remember the due date for your corporate return is March 15, 2010. If you do not want us to apply for an automatic six month extension for filing your income tax return, please let us know.
Interestingly the IRS changed the deadline last year for mailing 1099 brokerage and retirement accounts to February 15th or later if the 15th falls on a weekend. Congress in 2008 changed the law, requiring brokers to include cost basis statements for securities sold when they send their annual 1099 forms to their customers. This later due date has frustrated some clients expecting refunds when it came time to file their taxes, no 1099, no filing, delayed refund.
Speaking of delays, the Illinois Department of Revenue has yet to release, as of today, the final version of its 1040 and schedules to mail/file your 2009 income tax return. Although you can efile the Illinois return, you cannot mail it in. Unbelievable.
If the IRS Commissioner has his way, Congress may legislatively fix the Internal Revenue Code to match the modern-day use of employer-provided cell phones. Currently, when an employee engages in personal use of an employer-provided cell phone, the employer is required to report that personal usage as income to the employee. For many employers, such as you and me, distinguishing between business and personal use is so burdensome that they simply have neglected to comply with the law; risking the consequences if audited by the IRS.
However, IRS Commissioner Doug Shulman recently issued an announcement declaring that the current law is so obsolete, the IRS has asked Congress to enact legislation so that the personal use of employer-provided cell phones will no longer be taxable. Importantly, the Commissioner’s announcement does not suggest that the IRS will not enforce the current law. Indeed, last June, the IRS issued Notice 2009-46 seeking comments on three suggested approaches for determining the amount of personal cell phone usage to be included in employee income: minimal personal use requiring an employee to keep track, safe harbor percentage method, perhaps 75 %, or statistical sampling of the employee's usage. It should be mentioned that the aforementioned Notice and its three methodologies was not well-received by the general public, let alone employers and their tax advisers.
Remember the due date for your corporate return is March 15, 2010. If you do not want us to apply for an automatic six month extension for filing your income tax return, please let us know.
Friday, January 29, 2010
Free Tough Times Seminar Invitation
We know that times are tough…we know that it is harder to make a profit in today’s economy than ever before, and that attracting and keeping customers is more difficult as they have less to spend. We also know that you opened your business to pursue a dream, and that, even though it may be challenging right now, you still have what it takes to turn your dream into a success.
That’s why we’re offering business owners like you the opportunity to meet with some of the area’s top tax and business accounting professionals to share some of their tips with you. Over the years, we have noticed that business owners in particular do not always take advantage of some of the tax breaks that are available. These tax breaks are not “loopholes”; they are incentives built into the tax code to allow you to keep more of your income so that you can continue to grow your business.
Please join us at one of our FREE upcoming seminars so that we can help your business succeed and grow. Our February seminars are scheduled for:
Wednesday February 3rd at 5:30 PM
Thursday February 11th at 5:30 PM
Saturday February 20th at 10:00 AM
In addition to offering tax planning and preparation, we can help in other areas of your business operations including:
- Payroll services: Tax Partners’ payroll services are far less expensive than other providers and less time-consuming and frustrating for business owners than doing it themselves. We ensure that your payroll and paperwork is done right and on time.
- Marketing services: ALM Direct Marketing Solutions offers free evaluations of your sales and recommends marketing that fits your budget and achieves the desired results. We are in the business of connecting companies to customers and can help you reach new customers or communicate more effectively with the ones you already have.
We will also be prepared to discuss these areas and more during our time together! We hope that you’ll have time to join us for an informative, idea-filled session that will help you achieve your goals and dreams. Space is limited, so please RSVP today by calling 217-241-4597 or emailing us at taxpartner@gmail.com
If you are interested in learning more about how we might help you, but can’t attend any of the seminars listed above, please call us to schedule a free personal consultation at a time that is convenient for you! We’d be happy to help!
Tuesday, January 26, 2010
Why we had second thoughts and finally said no to refund anticipation loans.
A client came into the office last week and wanted us to prepare his taxes again this year. Good news. However, he said he didn't want to go the refund anticipation loan route like he did last year. Why? He couldn't cash his refund loan check. So the allure of getting his money quicker...approximately seven days...after paying a hefty bank fee, turned into a real problem.
"Nobody would cash my check without paying an additional fee" he said. " So I finally deposited the money into my bank and waited five business days until they released the funds. I wasn't really ahead of the game. I lost money."
Refund anticipation loans (RAL) are bank loans secured by taxpayer's refunds. They are marketed to moderate and low income consumers, those who we believe can least afford it. They have proven to be huge source of revenue to the largest tax preparation firms in American. Hundreds of millions of dollars for H & R Block. Never popular with consumer groups, the IRS, or state regulators because of their high costs, refund anticipation loans are generally filed by those taxpayers elgible to received earned income credit. Earned income credit is designed to assist low income working families by supplementing their refund based on family size and income earned. The Consumer Federation of America estimated that various fees and charges drained $2.1 billion from the earned income credit program last year.
This year the refund anticipation loan world became even dicier.
Panic struck the tax preparation industry on Christmas Eve 2009 after it was revealed that just weeks away from the beginning of the tax season rush, California-based Pacific Capital Bancorp, a major player in the lucrative refund anticipation loan business, was ordered by federal banking regulators to halt its RAL origination services.
The announcement was a shock to the tax prep industry, which includes big names such as Jackson-Hewitt Tax Service, Liberty Tax and H&R Block, all of which rely on RALs for a healthy percentage of their income.
A troubled bank these days isn't catastrophic except for the fact that fewer than a handful of banks fund RALs, loans sold to customers in advance of their government tax refund. Such a small number of RAL originators leaves little wiggle room should one find itself in trouble, as is the case with PCB's Santa Barbara Bank & Trust.
Now we learn that Illinois, Gov. Pat Quinn has barred currency-exchange stores from offering the loans without state permission. Is more regulation on the way?
This month, the IRS said it would review RAL practices and its own Debt Indicator program and refund delivery service as part of its efforts to protect taxpayers using tax-prep services.
And finally we learn that some lenders are now saying it will take two to three weeks before some taxpayers to get their refund anticipation loan because of new scrutiny by the remaining lenders. So what is the point when you can get your refund in about ten days electronically filing your tax return with a direct deposit.
So does this mean an end to the refund anticipation loan program?
Probably. But the current recession has seen somewhat of a resurgence in popularity of the program with some tax preparers.
We weighed the possibility of losing some billing by opting out of the program this year versus the long term client good will by saying don't spend all that money to get your refund back this year. We landed on the side of our clients.
"Nobody would cash my check without paying an additional fee" he said. " So I finally deposited the money into my bank and waited five business days until they released the funds. I wasn't really ahead of the game. I lost money."
Refund anticipation loans (RAL) are bank loans secured by taxpayer's refunds. They are marketed to moderate and low income consumers, those who we believe can least afford it. They have proven to be huge source of revenue to the largest tax preparation firms in American. Hundreds of millions of dollars for H & R Block. Never popular with consumer groups, the IRS, or state regulators because of their high costs, refund anticipation loans are generally filed by those taxpayers elgible to received earned income credit. Earned income credit is designed to assist low income working families by supplementing their refund based on family size and income earned. The Consumer Federation of America estimated that various fees and charges drained $2.1 billion from the earned income credit program last year.
This year the refund anticipation loan world became even dicier.
Panic struck the tax preparation industry on Christmas Eve 2009 after it was revealed that just weeks away from the beginning of the tax season rush, California-based Pacific Capital Bancorp, a major player in the lucrative refund anticipation loan business, was ordered by federal banking regulators to halt its RAL origination services.
The announcement was a shock to the tax prep industry, which includes big names such as Jackson-Hewitt Tax Service, Liberty Tax and H&R Block, all of which rely on RALs for a healthy percentage of their income.
A troubled bank these days isn't catastrophic except for the fact that fewer than a handful of banks fund RALs, loans sold to customers in advance of their government tax refund. Such a small number of RAL originators leaves little wiggle room should one find itself in trouble, as is the case with PCB's Santa Barbara Bank & Trust.
Now we learn that Illinois, Gov. Pat Quinn has barred currency-exchange stores from offering the loans without state permission. Is more regulation on the way?
This month, the IRS said it would review RAL practices and its own Debt Indicator program and refund delivery service as part of its efforts to protect taxpayers using tax-prep services.
And finally we learn that some lenders are now saying it will take two to three weeks before some taxpayers to get their refund anticipation loan because of new scrutiny by the remaining lenders. So what is the point when you can get your refund in about ten days electronically filing your tax return with a direct deposit.
So does this mean an end to the refund anticipation loan program?
Probably. But the current recession has seen somewhat of a resurgence in popularity of the program with some tax preparers.
We weighed the possibility of losing some billing by opting out of the program this year versus the long term client good will by saying don't spend all that money to get your refund back this year. We landed on the side of our clients.
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