Posts tagged business taxes
State Tax Nexus: Everybody’s Talking About It, But Why?
Aug 4th
Do you know what states your business or your clients have a taxable presence in? Do you know what activities your business is conducting across the country? Has the activities your business conducts across the country changed?
State tax laws regarding nexus continue to change either through legislation or interpretation by the courts; therefore, it is very important to gain an understanding of nexus, and to determine what states your company has a filing obligation or tax liability exposure.
NOTE: Steps can be taken to mitigate this exposure.
What is “Nexus”?
Nexus, in simple terms, is having a taxable connection or presence with a state.
Why Should I Care?
If you are a corporation, pass-through entity (i.e., LLC, partnership S corporation), nexus will determine what states the entity is required to file returns and pay tax. If you are a partner, member of an LLC, or a shareholder of an S corporation, the nexus determination affecting the entity within which you own an interest, will determine what states you file in as an individual (in addition to your state of residency).
To read the rest of this article by Brian Strahle, please go to http://bit.ly/9KIKHk.
Tax for Truckers
Aug 3rd
If you are a trucker, check out this article by Bruce, aka “taxguy,” at http://bit.ly/cZACwg. He has been part of the truck-diving industry for 22 years. He covers the following topics, which could be important toward your taxes:
- Keep Immaculate Records
- Track the Little Things
- Meal Allowances
- Travel Expenses
- Lumpers
- Truck Weight
- Fuel Taxes
Hire Your Kids, Cut Your Taxes
Jul 30th
The keys to success:
- Your business is not incorporated.
- You hire your children to work for you in your business.
- You pay them reasonable wages.
If you do those three things, you can deduct their wages from your income and shift the money to your children who will be in much-lower tax brackets.
Here’s how my three-step hiring process works:
To read the rest of this article by Jeff Schnepper, MSN Money, please go to http://bit.ly/b2SJkr.
What is Considered “Bad Debt” and How Do I Claim It for My Business?
Jul 28th
Credit enables many customer transactions that would not otherwise be possible. If your business offers customer credit, you’ve most likely had someone unable to repay their debt. If you report these sales as income but cannot collect, the IRS calls this “business bad debt.” In these cases, the IRS allows you to deduct those debts to decrease your federal tax liability. These frequently asked questions will help you understand how to proceed if this happens to your business.
When is a business debt considered “bad”?
There are two kinds of bad debts — business and personal. Business “bad debt” is a loss from an uncollectible loan. These loans can be from clients or suppliers, previous partners, or political parties.
Depending on your accounting practices, credit sales for goods or services that have not been paid in a reasonable period of time may be considered bad debt. If your business uses a cash accounting method, you only report the income once you receive it; therefore, you cannot claim a bad debt because you did not yet count the sale as income. If your business uses accrual accounting, you may have already included the sale as income. In that case, the sales would be classified as bad debts and are subject to deductions.
Not only do some credit sales lead to bad debt, but also debts from a former business, debt acquired from a decedent, and liquidation of a business. If you retained your receivables from a previous business, but then you were unable to collect, those can be considered bad debt. This is the same if you liquidate your business and you do not collect on all of the accounts receivable.
For the rest of the article by Jim D of Business.gov, please go to http://bit.ly/cmqrtG
4 Tips to Get the Most From Your Tax Planning
Jul 19th
I need to begin the article by explaining how many times I have heard a company’s tax adviser make a comment like this after the year is over for which they are preparing the taxes: “If only you would have talked to me last year we could have saved you some taxes.”
In addition to this reality, I have yet to see a business that faithfully and correctly engages in tax planning that does not save a significant amount of money—far in excess of any costs inherent to this planning.
Most entrepreneurs and business owners do not engage in tax planning in a meaningful and high-impact way. To help you overcome the barriers to completing this activity as well as to ensure it is effectively executed, here are four tips to implement to make your tax planning efforts fruitful:
To read the rest of this article by Ken Kaufman, Founder and CEO of CFOwise (R), please go to http://bit.ly/d6zWzB.
New 1099 Filing Requirements for 2011: Truth Serum or More Red Tape?
Jul 9th
For every one dollar in federal income taxes owed, the IRS is only able to collect 84 cents. The missing 16 cents is called the tax gap.
It’s the difference between what individuals and businesses should pay and what they actually do pay. After adjusting for late payments and enforcement actions by the IRS, the “net tax gap” is estimated to be approximately $290 billion a year.
With the federal budget suffering from massive deficits, closing the net tax gap and collecting those additional funds has become a priority.
In IRS jargon, failing to pay your tax liability — the amount you owe — is called “non-compliance”. There are three types of non-compliance that cause the tax gap:
- Underreporting of one’s tax liability by inflating your expenses or failing to report a portion of your income.
- Underpayment of one’s tax liability by not sending the IRS the full amount you owe when its due.
- Non-filing of one’s return and failure to make any kind of payment towards what you owe.
Underreporting is estimate to account for 82 percent of the net tax gap. Across all three types of non-compliance, businesses account for 70 percent. To address this situation, 1099 filing requirements have been expanded.
To read the rest of the article, please go to http://bit.ly/9YbwEu.
Paying Your Attorney: What’s Tax Deductible
Jul 6th
Small businesses use legal services for a variety of reasons, and the fees for these services can be hefty.
Small businesses, for example, are particularly vulnerable to frivolous lawsuits designed essentially to extort a settlement (a few years ago more than one-third reported that they had have been sued) and they incur substantial legal fees in these actions.
Unfortunately, not all legal fees are immediately tax deductible. The tax treatment of legal fees usually depends on what you incur them for.
For the rest of the article, please go to http://bit.ly/9tilF1.
Paperless Payroll Can Save Money
Apr 26th
Everyone seems to be trying to go “green” these days, which is a good thing. Going paperless with your company’s payroll can help with the “going green” issue today. It can also save you money. Pay-Perks has developed a Paperless Payroll Calculator in connection with the American Payroll Association to show small businesses how much they can save by going paperless with their payroll.
It has been estimated the average company can save approximately $75 per employee per year going paperless. This sounds like a great idea and one you might want to consider.
A Win-Win Tax Break: Buying Company Assets and Leasing Them Back to the Company
Apr 12th
Owners of a C corporation are sometimes hit with a double tax whammy. The corporation pays tax and the owner is taxed personally on dividends received from the company.
One potential tax break for both is to have the owner buy property and assets personally and then lease them to the company. By doing this, the owner is paid deductible lease payments instead of nondeductible dividends. The business owner’s income is offset with depreciation or amortization deductions.
The company benefits by gaining cash it may need for expansion. In addition, the business can deduct rental payments. Money paid to the owner in dividends is not deductible for the business.
There are five basic requirements for such a deal to satisfy the IRS that the transaction is legal.
Source: Small Business Strategies, March 2010
Tax Info You Should Know for Your Business in 2010
Jan 8th
Vehicles
Mileage: If you drive your personal car or truck for business and opt to deduct costs based on the IRS standard mileage rate (rather than your actual costs), note that the rate for 2010 is much lower than it had been for 2009. The 2010 rate is 50 cents per mile, down from 55 cents per mile in 2009.
New vehicle purchase: If you purchase a new vehicle in 2010, the IRS has yet to announce depreciation limits (these probably will not be available until February). Based on projections that do not foresee an extension of bonus depreciation rules, expect the dollar limit for a car to be $3,060 and for a truck or van to be $3,160 (up slightly from 2009 levels).
Retirement plans
If you already have a 401(k) or other qualified retirement plan, be sure to note that contribution limits remain the same for 2010 as they were in 2009. Thus, the top contribution to a SEP for 2010 is $49,000.
There is a new retirement plan option available in 2010, and businesses with existing plans and those with no plans might consider this new option, called a DBk. It combines a modest defined benefit (pension) plan with a 401(k)-like option. As the year progresses, look for financial institutions to start offering DBk products.
Health plans
Health savings accounts (HSAs), allowing small business owners to provide affordable health coverage, have new contribution limits for 2010. The annual contribution limit for self-only coverage is $3,050; it’s $6,150 for family coverage. The contribution can be increased by $1,000 for each person age 55 or older by the end of the year. To be eligible to make an HSA contribution, a person must be covered by a high-deductible health plan. In 2010, this is a policy that has an annual deductible of at least $1,200 for self-only coverage and $2,400 for family coverage. If you provide an HSA for your staff and make the contributions, they are deductible and are not subject to FICA and FUTA taxes.
Expired provisions
A number of important business-related tax rules expired at the end of 2009. The House has passed a bill that would extend some of them for one year; the Senate will probably pass a similar measure early in 2010 and make the changes retroactive to January 1, 2010. Key extenders include:
- Research credit
- 15-year amortization of qualified leasehold, restaurant, and retail improvements
- Expensing of environmental remediation costs
- Employer credit for wage differential payments to employees called to active duty
- Enhanced deductions for charitable donations of food inventory, book inventory, and computer technology
For more information or to get answers on any questions you have, please contact CGP at (916) 685-1040.
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