Posts tagged business taxes
Have employees? Check out our FREE encore seminar
Jan 13th
Criser Gough & Parrish
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Did You Know That . . .
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We know that you try to run your business in an efficient manner and in compliance with state and Federal regulations. But do you know if you are or not? This seminar will provide you with information to help reduce your risk by understanding hot buttons in employment law compliance. This seminar is designed to provide you with a high-level overview of key employment issues including:
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Presenters: Anita Buchanan, MBA, SPHR, Will Stricker, Leslie Neinast
Are You 1099 Compliant?
Jan 4th
by Julie Powers
Are you a sole proprietor, farmer, landlord, partner or shareholder? If so, take note, because included on the 2011 Schedules, C, E and F and Forms 1065, 1120 and 1120-S are two new questions regarding 1099 compliance that must be answered.
The first question is “Did you make any payments in 2011 that would require you to file Form(s) 1099?” Then, ‘If “Yes,” did you or will you file all required Forms 1099?’ These questions are part of the IRS’ ongoing effort to close the tax gap by ensuring that service providers report 100% of their income.
When are you required to file a 1099? A 1099 is required to be filed when $600 or more is paid to any unincorporated business or individual for any of the following.
- For services
- For services combined with providing materials
- For rent
In addition, if you paid $600 or more for legal or health care services, 1099′s need to be issued regardless of the vendor’s entity status (in other words, you must send them to corporations as well.)
Before you decide to simply answer “No” to these questions, keep in mind that the penalties for noncompliance can add up. For “Intentional Disregard” (purposefully not filing the required forms), the minimum penalty the IRS may impose is $100 per 1099 not filed, with no maximum penalty.
To avoid noncompliance be sure to complete a Form W-9 before you pay for services rendered. Examples of services rendered include, but are not limited to repairs, janitorial, accounting, legal, consulting and computer maintenance services. In other words, get the name, address, entity type and Social Security Number or Federal Employer Identification Number of anyone you make payments to for services rendered in the course of conducting your business. Five minutes worth of due diligence can save you hundreds, even thousands of dollars!
BRING US YOUR 1099-Ks!
1099-Ks are now required to be filed by credit card companies, banks and third party networks (think PayPal) to report gross receipts made by credit or debit cards. If you report gross receipts of less than the amounts reported on the 1099-Ks issued to you the IRS will be sure to assess additional tax and penalties. Because of this we must have your 1099-K’s to ensure correct revenue reporting.
The reporting requirements can be complex. Please contact our office if you need clarification on these issues.
IRS Announces 2012 Standard Mileage Rates, Most Rates Are the Same as in July
Dec 12th
IR-2011-116, Dec. 9, 2011 http://1.usa.gov/ttw0ow
The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 55.5 cents per mile for business miles driven
- 23 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
Ten Things to Know about Farm Income and Deductions
Mar 23rd
IRS Tax Tip, March 21, 2011 http://1.usa.gov/dLjkrk
If you have a farming business, there are several tax issues to consider before filing your federal tax return. The IRS has compiled a list of 10 things that farmers may want to know.
- Crop Insurance Proceeds —You must include in income any crop insurance proceeds you receive as the result of crop damage. You generally include them in the year you receive them.
- Sales Caused by Weather — Related Condition If you sell more livestock, including poultry, than you normally would in a year because of weather-related conditions, you may be able to postpone reporting the gain from selling the additional animals due to the weather until the next year.
- Farm Income Averaging — You may be able to average all or some of your current year’s farm income by allocating it to the three prior years. This may lower your current year tax if your current year income from farming is high, and your taxable income from one or more of the three prior years was low. This method does not change your prior year tax, it only uses the prior year information to determine your current year tax.
- Deductible Farm Expenses — The ordinary and necessary costs of operating a farm for profit are deductible business expenses. An ordinary expense is an expense that is common and accepted in the farming business. A necessary expense is one that is appropriate for the business.
- Employees and Hired Help — You can deduct reasonable wages paid for labor hired to perform your farming operations. This includes full-time and part-time workers. You must withhold social security, medicare and income taxes on employees.
- Items Purchased for Resale — You may be able to deduct, in the year of the sale, the cost of items purchased for resale, including livestock and the freight charges for transporting livestock to the farm.
- Net Operating Losses — If your deductible expenses from operating your farm are more than your other income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid for past years, or you may be able to reduce your tax in future years.
- Repayment of Loans — You cannot deduct the repayment of a loan if the loan proceeds are used for personal expenses. However, if you use the proceeds of the loan for your farming business, you can deduct the interest that you pay on the loan.
- Fuel and Road Use —You may be eligible to claim a credit or refund of federal excise taxes on fuel used on a farm for farming purposes.
- Farmer’s Tax Guide — More information about farm income and deductions is in IRS Publication 225, Farmer’s Tax Guide, which is available at http://www.irs.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).
Links:
IRS Publication 225, Farmer’s Tax Guide
Health Insurance Tax Breaks for the Self-Employed
Mar 15th
IRS Tax Tip 2011-51, March 14, 2011, http://1.usa.gov/fiCYe7
Here is some information from the IRS about a special tax deduction for the self-employed. You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:
- A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
- A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., box 14, code A.
- A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.
The insurance plan must be established under your business.
- For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
- For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
- For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
For more information see IRS Publication 535, Business Expenses, available at http://www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
IRS Publication 535, Business Expenses ( PDF)
The 2010 Tax Relief Act – An Overview
Dec 22nd
After much speculation and anticipation, Congress finally passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act). The President signed it into law on December 17. The Act, in essence, is an extension of the 2001/2003 Bush-era tax cuts for two years. Also, the Act provides a payroll tax holiday for 2011 and a change in the exemption amount and maximum tax rate for estate taxation. The Act extends and modifies many of the provisions first enacted in the 2009 American Recovery and Relief Act. Finally, the Act incorporates many individual extensions of the so-called annual extenders. The following is a list of individual provisions that will certainly affect your tax liability for 2011, 2012, and possibly 2010, as well. More >
Driving for Business in 2011
Dec 15th
by Barbara Weltman
If, like most small business owners, you use your personal car for business, be sure to follow tax rules so you’ll get the biggest write-off you’re entitled to.
There are two ways in which to figure the deduction of your business driving costs: track the actual expenses for use of your car on business or rely on a standard mileage rate fixed annually by the IRS.
Standard mileage rate
The standard mileage rate is fixed each year by the IRS and relieves you of the chore of keeping receipts for car-related expenses. This rate takes the place of deducting the cost of gasoline, oil, repairs, lease payments (if you lease), depreciation (if you own), and other car-related expenses.
The standard mileage rate for 2011 has been set by the IRS at 51¢ per mile. Thus, if you drive 20,000 miles for business in 2011, your deduction for business use of your car will be $10,200.
If the cost of gasoline rises substantially during 2011, the IRS might issue a second rate for a portion of the year, as it did in 2008. You may recall that in 2008, there was one rate for the first half of the year and another rate for the second half of the year.
In order to maximize your deduction for driving, you’ll need to retain receipts for car-related expenses so that, when you file your return, you can opt to use the standard mileage rate or the actual expense method.
Note: Whether you deduct driving costs using the standard mileage rate or actual expense method, you can also separately deduct parking fees and tolls.
Substantiation
Regardless of which method you opt to use, be sure to maintain a record of your business driving. The record should be made at the time of each business trip and indicate the date of each trip, the odometer reading, the purpose of the trip, and the destination. Start the new year off right by recording your odometer reading and maintaining records faithfully throughout the year.
To read the rest of Ms. Weltman’s article, which includes how to keep a record for tax purposes and what is business driving, please go to http://bit.ly/eKoAIF.
IRS Helps Small Employers Claim New Health Care Tax Credit; Forms and Additional Guidance Now Available on Small Business Health Care Tax Credit
Dec 3rd
IR-2010-117, Dec. 2, 2010, http://bit.ly/enp6Lw
WASHINGTON — Yesterday the Internal Revenue Service released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Yesterday’s release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.
New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T are now available on IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82 , both of which are designed to help small employers correctly figure and claim the credit.
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.
The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.
In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.
Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.
Tax-exempt organizations will first use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.
More information about the credit, including a step-by-step guide to claiming the credit and answers to frequently asked questions, is available on the Affordable Care Act page on IRS.gov.
Why, and How to Keep Your Business and Personal Banking Separate
Sep 24th
Whether you are working on your business part-time, operating as a sole proprietor, or starting a business with a more formal structure such as a partnership or corporation – it’s vital that you keep your business banking separate from your personal finances.
Keeping the two separate, not only provides your business with credibility, it reduces your personal liability (a must if you are incorporating your business as a distinct and separate legal entity under its own name), and helps you manage your taxes, bills and other payments.
Below are some reasons why you might want to consider a business bank account, and how to go about finding the right one for you.
To read the rest of this article by Caron Beesley, please go to http://bit.ly/cwbH1Z.
31 Small Business Tax Deductions
Sep 1st
Since deducting expenses from your top-line revenues reduces your tax burden, it’s easy to be too aggressive in claiming them. However, not deducting all that you are allowed leaves money on table. Use the following checklist of rules to reduce your taxable income as much as legally possible.
To read the rest of this article by Greg Go, the cofounder and CTO of Wise Bread, a top personal finance community, please go to http://bit.ly/dcPMuT.
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