Don’t forget to pay your estimated tax payments on or before June 17th. If you need our assistance in calculating how much you should pay please give us a call. If you need an estimated tax voucher please click on following link.
House of Representatives Ways and Means Chairman Dave Camp and Senate Finance Committee Chairman Max Baucus have teamed up to launch TaxReform.gov, a new website dedicated to obtaining input from the American public on United States tax reform. Developed in partnership with the Joint Committee on Taxation, TaxReform.gov will serve as a platform for the American public to weigh in on tax reform. Visitors to the website can learn about tax reform and submit ideas on how to improve the tax code. The site has been built around three sections: Why reform the Tax Code? What’s already underway? Share your story and ideas. Mr Camp commented: “The tax code is littered with special interest provisions that Washington has put in over the last 27 years. It is time to go line-by-line through the tax code and clean it up.
This tax season again brought an active conversation regarding business structures and taxes. This is a good time to think about the issue; to ask the right questions.
The current hot topic for small businesses seems to be the “S Corporation.” The question I am hearing is: “How do I convert my small business to an “S Corporation”?
I think a better question is: “Should I convert my small business to an S Corporation?”
The answer to that question will give you the answer to: “Will my conversion to an S Corp put more after tax money in my pocket?”
There can certainly be advantages for certain businesses but S Corp election is not a “one size fits all” solution. S Corps come with disadvantages as well and you should think them through before changing. Some of them are:
- Extra Tax Return and Legal Fees ….corporations need professionals: tax professionals, bookkeepers, lawyers
- Extra Paperwork….The S Corporation entails extra structure, formalities, and compliance obligations for the solo entrepreneur with a “payroll of one.” You need to set up a board of directors, file annual reports and other business filings, hold shareholder’s meetings, keep records of your meeting minutes, and generally operate at a higher level of regulatory compliance than your business might need or want to deal with.
- The shareholder must receive reasonable compensation. If you try to cheat the system by paying yourself a lower salary and higher distributions you might claim a tax advantage for the year, but the IRS takes notice of such red flags. If the IRS reclassifies your distributions as wages you’ll be back to paying the higher employment tax and you will be on the IRS’s radar screen for some time to come.
- Transfer of Assets: the assets are owned by the S Corporation. They are not yours. Taking them from the S Corp could easily trigger a taxable action.
- In case of your death, proving the fair market value could be difficult, expensive, and complicated for your heirs.
- Some benefits that shareholder/employees receive can be written off as business expenses. Nevertheless, if such an employee owns 2% or more shares, the benefits like health and life insurance are deemed taxable income and additional bookkeeping/accounting is required.
The tax savings and solidity of the S-Corp also come with a price and you should know what it will be for your business. Don’t rush into a new and more complex business structure on vague promises of lower taxes. It is not that simple! The more information you have, the better!!
Now that tax season is coming to an end:
If you receive a letter from the IRS or DRS let us know, don’t assume they are right.
The IRS will never send you an email. If you receive an email from the IRS do not respond and do not give any financial information.
And…thank you for your continued support! It is greatly appreciated.
Small businesses sometimes barter to get products or services they need. Bartering is the trading of one product or service for another. Usually there is no exchange of cash. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services.
The fair market value of property or services received through a barter is taxable income. Both parties must report as income the value of the goods and services received in the exchange.
Here are four facts about bartering:
1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the internet
2. Bartering income. Barter and trade dollars are the same as real dollars for tax reporting purposes. If you barter, you must report on your tax return the fair market value of the products or services you received.
3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place.
4. Reporting rules. How you report bartering varies depending on which form of bartering takes place. Generally, if you are in a trade or business you report bartering income on Form 1040, Schedule C, Profit or Loss from Business.
If you want to address this further…we are here to help!
If you believe you are due a refund we are advising our clients to get their information in to us as soon as possible. With the “sequestration” looming, across –the-board federal spending cuts will fall on the IRS during this tax season. The IRS is formulating a plan should sequestration occur. By Friday, just one third of the anticipated 149 million federal tax returns were processed and seven out of 10 filers are due a refund, said IRS spokesman David Stewart. All IRS activities at the 110,000-employee agency are on the table, he said. He did add that it’s too early to conclude that sequestration will slow return processing.
But, from our perspective…why delay your refund?
The IRS has stepped up its efforts to collect tax debts from OJ Simpson. Two different tax liens $179,435.07 for 2007 to 2010, and $17,015,99 for 2011 have been issued on Mr. Simpson, however, because he is in prison serving 33 years for kidnapping and armed robbery, the IRS has been unable to recoup any of its money. Mr. Simpson despite being behind bars still receives an NFL pension of $19,000 a month, although due to legal obligations that money cannot be tapped.
Remember last month when we wrote saying that we are all responsible for paying a sales tax (Use Tax) to the state of CT when making Amazon purchases?
On Mon, Feb 4, Governor Malloy’s office announced that Amazon will begin collecting sales tax in the state of CT. According to the governor’s office Amazon will begin collecting sales taxes on CT purchases in November, 2013. This will relieve the taxpayer of the burden of calculating and paying the so-called Use Tax; but, guarantees that Amazon will be charging CT sales tax on Amazon purchases and shipping.
Now that your small business has gone through the painful process of gathering information for the annual end of the year 1099 process, we are here to offer some guidance to help make it easier when you hit the end of 2013.
This is not a process that can be ignored any longer. You are now required to indicate on your tax return if you have filed your 1099′s. If you do not have the information to provide your service providers with a 1099, “backup” withholding is required. This is not a requirement that you want to ignore; it can be very costly!!
Start now. Don’t issue any checks to your vendors until you have an accurately completed W-9 form. Rest assured, if you hold the check, you will promptly get the completed form. But…If that doesn’t work ….tell your vendor that you are required to hold back 28% for Federal tax….and be prepared to do it. I am guessing one of these methods will work and will help to reduce your business stress just a little more!
2012 Tax Season is in full swing! By now you should have received our 2012 Tax Organizer in the mail. If not, click here to go to our website and download the forms you need.
Due to last minute tax law changes, there is a delay in IRS accepting returns. We will keep you posted. Don’t procrastinate, we can still input all your information. This will allow us to e-file your tax return as soon as the IRS starts accepting them.
If you need to speak with us, feel free to give us a call at 203-245-6175.