Archive for 'General'

Sep 15

Ninety-four percent of small businesses use QuickBooks software for their accounting records, but the IRS does not have the budget to update its QuickBooks software yearly. Thus, it is unable to accept electronic records from many of the small businesses it is auditing. Without access to electronic records, the audit will be less efficient. Is that good or bad news for the taxpayer and/or the tax practitioner? More later.

Sep 15

The GAO says that since FY 2010, the IRS has lost 10,000 employees and had its budget cut by $900 million. More cuts are proposed for the 2015 IRS budget. Identity theft issues, foreign asset reporting, and Affordable Care Act (ACA) responsibilities will continue to absorb personnel and resources. This budget reality will hamper IRS audit goals, but there are still many audit targets that you will want to discuss with your business clients in the next few months.

The rich and their entities. High-income taxpayers will continue to receive audit attention (at about a 9% rate for those reporting income of $1 million to $5 million). Since these taxpayers often have complex tax returns with income and losses from many flow-through entities, the audit of the owner will often lead to an expansion of the IRS examination into the various entities.

Partnership returns. Partnerships are the fastest-growing segment of all tax returns filed. The IRS hopes to expand its audits of partnership and LLC returns. Flow-through losses from developers and real estate investors will get special attention. The audit rate of partnerships and LLCs was a dismal .42% for FY 2013. The IRS did special training this year to increase the number of auditors with a specialized knowledge in partnership law.

Employment taxes. Employment taxes are a focus this year, and this includes a continuing look by the IRS at:
1. Employee versus independent contractor,
2. Form 1099 compliance, and
3. S corporation reasonable compensation issues.
Remember that when the ACA’s employer mandate takes effect in 2015 and 2016, the employee versus independent contractor determination will become more important. Employer ACA penalties can be up to $3,000 for each misclassified employee.

Cash businesses. The tax gap remains a hot item, so cash-intensive businesses will receive a little more attention from the IRS. The IRS is using Form 1099-K to help it select some of these businesses for audit.

Mar 28

Keep your actual tax returns forever.  They can help when you, apply for a mortgage or disability insurance or need clues to the value of other assets. (You don’t need to keep the originals; you can scan the tax returns and keep a digital copy.

 

The IRS generally has up to three years after the tax-filing deadline to initiate an audit, so you should hold on to supporting documents for at least that long. Those documents include credit-card statements, canceled checks, debit-card transactions and receipts showing deductions; letters from charities reporting gifts; and paperwork reporting mortgage interest, capital-gains distributions and income

 

Most people can safely shred those supporting documents three years after the tax-filing deadline. But people who are self-employed or who have a small business or  income from a variety of sources or complex tax situations should keep their records longer. The IRS has up to six years to audit people who neglect to report more than 25% of their income. Shred the old documents rather than just throwing them away, so you don’t create a treasure trove of personal information for ID thieves.

 

Other tax files you should keep include records establishing the basis of your assets for as long as you own the asset (you should file those records with your tax files for the year you sell the asset).

 

Keep records showing the purchase date and price of stocks and mutual funds in taxable accounts. When you sell the investment, you’ll have to report the purchase date and price so you can establish the basis. Brokers are required to report the cost basis of stocks purchased in 2011 or later and mutual funds and ETFs purchased in 2012 and later, but Ziegler says it’s a good idea to keep your own records even for purchases after those dates in case you switch brokers. Also keep records of reinvested dividends that you’ve already paid taxes on, so you can add them to your basis when you sell and you won’t have to pay taxes on them twice. If you inherit any stocks or funds, keep records of the value on the day the original owner died, which will generally be the basis when you sell it.

 

Keep Form 8606 reporting nondeductible contributions to traditional IRAs until you withdraw all of the money from the IRAs. That way, you’ll be able to prove that you already paid taxes on the contributions and you won’t have to pay taxes on that portion of the money again when you start taking withdrawals.

 

Keep records of your home purchase cost and home improvements. You generally aren’t taxed on home-sale profits if you’ve lived in the home for at least two of the past five years and your profit is less than $250,000 if single or $500,000 if married filing jointly. But if you live in the home for a shorter time or have a bigger profit, you may have to pay taxes on part of your profits, and you can add the cost of major home improvements (not basic repairs) to the basis to reduce your taxable gain.  

 

You can toss pay stubs as soon as the information matches up with your W-2 for the year (but keep your December pay stub if it shows charitable contributions made via payroll deduction). You can toss monthly brokerage statements when the information matches up with your year-end report and your 1099s. You can toss most credit-card receipts that you don’t need for tax purposes after you check them against your monthly bill. And you can usually toss utility, phone and cable bills as soon as the next month’s bill arrives, unless you need them for tax purposes. For example, you should hang on to them if they show self-employed business expenses or they’re used for a home-office deduction, or if you want to show prospective home buyers the average monthly cost of your utilities.

 

Dec 19

The Internal Revenue Service has been doing business with nearly 1,200 vendors that owe back taxes, including one unnamed contractor that owes a whopping $525 million, the new inspector general’s report says.

 

The IRS’s 1,168 vendors owed back taxes totaling $589 million as of July 2012, according to the report released Tuesday.  Only 50 were in a payment plan to pay off their debt.

 

Apparently the IRS checks whether vendors owe back taxes when the agency awards contracts but it doesn’t continually monitor their tax bills after the contracts have been awarded.

 

The inspector general’s office is prohibited by law from revealing the name of any delinquent vendor, including the one that owed $525 million. The report says most of the back taxes, including the biggest, were delinquent for less than a year.

 

The report also excluded back taxes that were being contested, counting only those that either agreed to by the taxpayer or ordered by the court.

 

The IRS stated, “The vast majority of vendors that conduct business with the IRS meet their federal tax obligations.  We appreciate (the inspector general’s) acknowledgement that IRS has effective controls in place to prevent suspended and debarred vendors’ from receiving IRS contracts.”

 

Huh? What planet are they on?

 

Dec 11

Unknown

Nov 29

IRSTargetsThousandsOf Small BusinessesForExtraScrutiny – In 3 Parts

 

Part I – What the IRS is doing.

 The IRS has always been able to match individual tax returns against information statements and propose under reporter adjustments that come in the form of CP2000 notices. ?? But things are changing, and a new era at the IRS is upon us. ?? Now, the IRS is using information statements to find under reporting on business returns.

 

Thetaxagencyisdoingsome targetingofitsown,fingeringatleast 20,000smallbusinesses. Andthatnumber willgrow. Thescrutinyonthisgroupandinthisway isalittlefrightening.   Smallbusinesspeople acrossAmericaarereceivingIRSnotices. Morewillbecoming.TheIRSgathersdata frommanythirdparties-including credit cardcompanies-toseeif youpickedup everynickelofincome. Remembertorecordandpay

tax on all transactions?

 

In September, the IRS started its first information return-matching program for business return Forms 1120, 1120S and 1065. This program matched business return incomes to the total amounts reported on all information returns. ??  That would include merchant reporting of credit cards and third party network payments and cash reporting.

 

This year, business taxpayers also started receiving Form 1099-K, Merchant Card and Third-party Network Payments, reporting amounts received from payment settlement entities (from debit/credit cards and third-party network payers such as PayPal). To avoid taxpayer burden, the IRS stated in a letter to the National Federation of Independent Business on Feb. 9 that it will not require taxpayers to separately report amounts from Forms 1099-K on returns, and has no plans to in the future. ??

 

Wait a minute; not everyone is convinced. One Congressman, Sam Graves (R­ Mo), Chairman of the House Committee on Small Business, notes that the IRS’s first sentence begins, “Your gross receipts may have been underreported.” Says Congressman Graves that sounds like the IRS is looking for more than just additionalinformation. It soundslikeitcouldmeanmoretaxes,penalties andinterest,Sam Graves wroteinthislettertothe agency.

Mr.Gravessuggeststhattheletterscouldintimidate businesses.Hesaysthatasmallbusinessowner receivingthisnoticemaybealarmedandfeel threatened. TheIRSnoticegoesontosayyour receiptsareofffromanIRSaverage. Within30 days,pleaseprovidedocumentationtoprovewhy yournumbersdon’tfallwithinIRS’sstandard,the IRSasks.

 

YettheIRSdoesn’trevealitssourceanddoesn’tsay

whatthestandardisorwhereitcamefrom. It soundslikeyouarebeingaskedtoprovethat youdidn’tunderreportyourincome. That’s provinganegative,andcouldrequireextensive correspondenceanddocumentation.

 

AsaresultofForm1099changesandtheever-increasingwebofreporting,theIRSreceives detaileddataaboutcredit-anddebit-card transactions. TheIRSminesthedataandmaythink thatahighpercentageofcardtransactionsmay meanyouarenotreportingall thecashyoureceive.

 

‘Pleaseexplain,’theIRSmayask. – go to Part II

Sep 05

Tax collectors throughout history haven’t been as popular as athletes or entertainers–or even garbage collectors. But even against the decidedly lukewarm standard applied to most tax collectors, the IRS isn’t looking too good. It isn’t on most people’s favorites, and these days is at a low ebb.

 

The targeting scandal is three months old and is still going strong. Smack in the middle of it is Lois Lerner, famously invoking the Fifth Amendment. Then there were all the expense issues, the pricey conferences and the team building.

 

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One report said some IRS Brass Spent $100K Each On Travel. And who can forget the kitschy Star Trek, Gilligan’s Island and line dancing videos. Then there were the abused credit cards. Who wouldn’t like a charge card with bills direct to Uncle Sam? And this-  Audit Finds $119 of Unused Nerf Footballs in IRS Cabinet.

A watchdog report found little oversight. Another report from the Treasury Inspector General for Tax Administration said 30% of IRS Seizures of don’t comply with the law. In short, this isn’t your parents’ IRS.

 

Sure, the President now has a so-called turnaround expert in line to run the , er IRS. But you have to wonder, what’s the behemoth agency’s turning radius?  In the meantime, Congress–or at least Congressional Republicans–are sharpening up their axes to do a little IRS Profiling of their own.

 

If you aren’t too happy with the IRS right now, you’re not alone. House Republicans aren’t either, so passed an Internal Revenue Code-sized passel of bills by voice vote before their August recess. If nothing else, you have to love the names:

 

STOP IRS Act, H.R.2565. Actually, this bill has an alternate handle too, the Stop Targeting Our Politics Act. If passed, this law that would expand the existing grounds for firing an IRS employee. New firing offenses would include performing, delaying, or failing to perform (or threatening) any official action–including an audit–for purposes of personal gain or for a political purpose.

 

The Stop Playing on Citizen’s Cash Act, H.R.2769. This proposed law would impose a moratorium on any IRS conference until the Treasury Inspector General for Tax Administration submits a report to Congress certifying that IRS has implemented all the recommendations set out in its report covering the now notoriously expensive 2010 IRS conference . See “Review of the August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California.”

 

Government Spending Accountability Act of 2013, H.R.313. This proposed law would limit any government agency from spending more than $500,000 to support a single conference.

 

Government Customer Service Improvement Act of 2013, H.R.1660. You have to love this name. This bill would require the Director of the Office of Management and Budget (OMB) to develop government-wide standards for customer service delivery.

 

The Taxpayer Bill of Rights Act of 2013, H.R.2768. This bill would amend the tax code to say the duty of the IRS Commissioner is to ensure that IRS employees are familiar with and act in compliance with certain taxpayer rights.

 

Will all these bills actually pass and be signed into law by President Obama? Unlikely. Will any of them pass and be signed by the President? Maybe, but even that is far from clear. Stay tuned.

 

Thanks Forbes

 

Aug 12

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents. Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.
Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.
Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.
Here are some steps employers can take to protect themselves from unscrupulous third-party payers.

 

  • Enroll in the Electronic Federal Tax Payment System  and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.
  • Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS. It also gives employers a way to monitor the third-party payer and easily spot any improper diversion of funds.
  • Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS on IRS.gov for more information.
  • For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. They are also required to provide employers with a written statement detailing the employer’s responsibilities including a reminder that the employer, not the reporting agent, is still legally required to timely file returns and pay any tax due. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.
  • Become familiar with the tax due dates that apply to employers, and use the Small Business Tax Calendar to keep track of these key dates.

Give us a call we can answer your questions and we also have a payroll service specifically designed for the small business.

Jul 24

Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, movie or free software development, and scientific research.

Crowd funding can also refer to the funding of a company by selling small amounts of equity to many investors. This form of crowd funding has recently received attention from policymakers in the United States with direct mention in the JOBS Act; legislation that allows for a wider pool of small investors with fewer restrictions. The JOBS Act was signed into law by President Obama on April 5, 2012. The U.S. Securities and Exchange Commission has been given approximately 270…

The Donald is getting into crowdfunding.

The Donald announced Wednesday that he is backing a new crowdfunding service called FundAnything, which is similar to Kickstarter. The major difference is that there are no restrictions on the types of projects one can fund (as long as they’re not deemed offensive) and it lets users keep the funds they raised even if they don’t meet their target goal. Trump himself will back new projects on the site each week.

In typical Trump fashion, the announcement carried all the hallmarks of a publicity stunt. Trump gathered a crowd together at the Trump Tower (Where else?) on Fifth avenue in New York and proceeded to give out “suitcases filled with cash” to fund three projects featured on FundAnything.

http://www.fundanything.com/en

http://www.kickstarter.com/

Crowdfunding, as its name suggests, is a funding method where common people like you and me, henceforth the crowd, fund your personal or business project with their own money. There’s a term that we commonly use to describe this money-giving action; it’s called a donation.

The main difference between crowdfunding and donation is that crowdfunding is tied to the American JOBS act that allows online sales of small stock to a huge pool of investors, although the act has not been passed yet. Nonetheless, you could still embrace the crowdfunding method to raise your project funds, as long as you don’t sell any kind of stock.

Different crowdfunding site could have different a purpose or approach , but overall the concept is simple – you post your project to a large group of site users, or “potential investors”, and they will fund your project with money if they are interested in the project. you can start a crowdfunding exercise for free as you will only be charged when your project has raised some funs or the full amount. There’s nothing to lose and this is great for publicity.

1. Kickstarter

Probably the hottest crowdfunding site on the Internet is Kickstarter, which raised a total of $220 million from 61,000 launched projects so far. Thousands explore its listed projects every second waiting to give away their money to the project they think is most deserving! According to the guidelines, Kickstarter accepts all major kinds of creative projects but not for causes or awareness campaigns, charity or scholarships, and definitely not for vacations or a new digital camera.

2. Indiegogo

Indie is the short form of ‘independence’, so from the name you already know that this crowdfunding site is aimed to help you raise funds and make you personal project ‘go-go-go’ without any difficulty. The site’s layout is similar to Kickstarter so it’s easy to adapt to if you have tried Kickstarter. Unlike Kickstarter though, you can kick-start any project including donations for charity. Its “Backer Rewards” feaure is known as “Perks” here.

3. Crowdfunder
Crowdfunder is the crowdfunding platform for businesses, with a growing social network of investors, tech startups, small businesses, and social enterprises (financially sustainable/profitable businesses with social impact goals).

Crowdfunder offers a blend of donation-based and investment crowdfunding from individuals and angel investors, and was a leading participant in the JOBS Act legislation. The company has localized crowdfunding and investment to help develop entrepreneurial ecosystems and access to capital outside Silicon Valley. Its unique CROWDFUNDx initiative in cities across the US and Mexico connects local investors with local entrepreneurs both online and offline, and does the work to validate top local companies in each city across the US and Mexico.

4. RocketHub
Rockethub powers donation-based funding for a wide variety of creative projects.

What’s unique about RocketHub is their FuelPad and LaunchPad programs that help campaign owners and potential promotion and marketing partners connect and collaborate for the success of a campaign.

5. Crowdrise
Crowdrise is a place for donation-based funding for Causes and Charity. They’ve attracted a community of do-gooders and and fund all kinds of inspiring causes and needs.

A unique Points System on Crowdrise helps track and reveal how much charitable impact members and organizations are making.

6. Somolend
Somolend is a site for lending for small businesses in the US, providing debt-based investment funding to qualified businesses with existing operations and revenue. Somolend has partnered with banks to provide loans, as well as helping small business owners bring their friends and family into the effort.

With their Midwest roots, a strong founder who was a leading participant in the JOBS Act legislation, and their focus and lead in the local small business market, Somolend has begun expanding into multiple cities and markets in the US.

7. appbackr
If you want to build the next new mobile app and are seeking donation-based funding to get things off the ground or growing, then check out appbackr and their niche community for mobile app development.

8. AngelList
If you’re a tech startup with a shiny lead investor already signed on, or looking for for Silicon Valley momentum, then there are angels and institutions finding investments through AngelList. For a long while AngelList didn’t say that they did crowdfunding, which makes sense as they have catered to the investment establishment in tech startups, but now they’re getting into the game. The accredited investors and institutions on AngelList have been funding a growing number of select tech startup deals.

9. Invested.in
You might want to create your own crowdfunding community to support donation-based fundraising for a specific group or niche in the market. Invested.in is a Venice, CA based company that is a top name “white label” software provider, giving you the tools to get started and grow your own.

10. Quirky
If you’re an inventor, maker, or tinkerer of some kind then Quirky is a place to collaborate and crowdfund for donation-based funding with a community of other like-minded folks. Their site digs deeper into helping the process of bringing an invention or product to life, allowing community participation in the process.

These  crowdfunding sites cover most campaign types or funding goals you might have. Go check out the sites here that grab your attention.

So you’ve browsed through a list of quality crowdfunding sites, but in the end you still prefer to let an Angel Investor fund your company. If you need help getting their attention, Crowdfunder can help. Crowdfunder allows U.S. startup and small businesses to raise funds by selling equity, debt and revenue-based securities, while attracting Angel Investors and Venture Capital to your company.

CrowdFunding

Feb 07

Most start-ups fail because these 20 questions were not adequately considered, maybe not even considered at all . . .

  1. What kind of business and I planning
  2. What products/services will my business provide?
  3. Why am I starting a business?
  4. What is my target market?
  5. Who is my competition?
  6. What is unique about my business and my products/services?
  7. How much money do I need for set up and start up?
  8. Will I need to get a loan or outside financing?
  9. Do I have a financial plan and business plan?
  10. How will I price my product compared to my competition?
  11. How will I market my product/business?
  12. How will I set up the legal structure of my business?
  13. How will I manage my business?
  14. Where will I house my business?
  15. How many employees will I need to start up?
  16. Who are my suppliers and what are their costs?
  17. What kind of insurance do I need to invest in?
  18. Do I need tax planning advice and how do I ensure my taxes are being paid correctly.

Get these questions down pat and reconsider!

Then, you’re ready to roll and good luck!