Virtual Currency...Every Bit Counts

In recent Internal Revenue Service Notice 2014-21, virtual currencies like Bitcoin have been classified as property. The IRS is aware of the growing popularity of this medium of exchange and that it is not considered legal tender by any government. The IRS notice hopes to clarify how you must treat your use of this new technology. The outcome for users is not good. Here is what you need to know;

You must take care to plan your retirement plan withdrawals to avoid a potential 10% early withdrawal penalty. Unfortunately, each retirement account type has different rules. Here are some tips for Roth IRAs.

Roth IRA basics

Roth IRA accounts differ from other IRAs in that your contributions are made in after-tax dollars. If you follow the Roth IRA rules, your withdrawals of any earnings in the account can be tax-free. Generally, to take advantage of the tax-free distribution from a Roth IRA:

Keeping your company profitable when the economy slows down is a challenge for every business. You may be able to boost your bottom line with the following financial controls.

* Watch your customer credit. Use an accounts receivable aging report to flag past due accounts. Follow up with a customer immediately when you spot a delinquent bill. Don't extend any more credit until the customer brings the account up to date.

It is no surprise that states audit their small business community as a productive way to increase revenue for their state coffers. Should you receive the dreaded notice of one of these audits, here are some ideas that can make this a more pleasant experience:

1. Review the sales tax rules. Know the rules in your state and locality. Pay special attention to areas that are not taxed. A quick internet search on sales and use tax audits for your state should yield examples of areas the auditor will focus their resources. Pay attention to the terminology used in these documents. Use the same terminology when talking with the auditor.
2. Conduct a self-audit. Prior to the arrival of the auditor, audit yourself. Begin with your sales receipts, migrate to capital purchases, and then finish with your bills. Pay special attention to internet sales and purchases you make with your credit card.
3. The best defense is a good offense. You may find areas in your self-audit where you paid tax when none was due. Perhaps you have production equipment and your energy providers charge you sales tax on all your power. You may be due a sales tax refund for up to three years of this production energy use.
4. Watch out for capital equipment. The sales tax rules on capital equipment can vary dramatically. Some vendors may be required to collect and send in sales tax on equipment purchases that are not taxable. You must then file to collect a refund.
5. The expense report trap. An easy way to have the auditor pay for their time is to review your expense reports. Often you do not keep receipts of items purchased at a retail store. An auditor could assess you sales tax on items purchased at Walmart, simply because you did not keep the receipt. This despite the fact that a Walmart retail store always collects sales tax.
6. It’s not usually taxes on your sales that gets you. Remember, it is not often the collecting and transmitting taxes on your sales that gets attention in an audit, it is the payment of use tax and sales tax purchases you make and potentially overlook.
7. Pre-determine scope of audit. Prior to the audit please inquire what the scope of the audit will entail. If the timing of the audit will create a hardship, request a time that is better for you and your business. Consider recommending sampling a defined period of time versus a full review of all your records.
8. Get help. Finally, please consider that you will typically encounter an audit of this type once or twice during your career. The auditor does this every day. So get help as soon as you receive the audit notice.

Remember, all states share information with each other. They know sales and use tax audits of small businesses often generate more income than the state pays their auditor. Knowing this, it is best to be prepared.

We're happy to offer guidance and help you make smart tax decisions.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com

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Unemployment compensation can provide a welcome buffer while you're transitioning to a new job. But with the help comes a tax effect, because the benefits provided under federal or state laws are usually includable in your income in the year you receive them.

As a result, depending on the amount of unemployment you expect to receive, you may want to complete "Form W-4V, Voluntary Withholding Request," to have federal income tax withheld from your benefits.