Late filing of S-Corp returns can be costly
The last couple of years, the IRS has been penalizing late filers of Sub S Corporation tax returns. This despite the fact that late filing of the Sub S tax return (1120S), due March 15th, often does not impact the receipt of the taxes due on April 17th. Those that are getting this "gotcha" penalty are often couples and other small firms who have formed a Sub S Corporation to provide legal protection for their small businesses.
Creating order out of chaos
As important tax records start filling mailboxes, how can you make sure your tax preparation goes smoothly and efficiently this year? Here are some tips.
1. Keep it all in one place. It seems obvious, but how often have you found yourself going through piles of paper looking for that elusive missing 1099 tax form or charitable deduction receipt? If you only do one thing, this is it. Granted if all you do is this, you end up with a massive jumble of paper, but it is better than missing something.
2. Time to sort. The best idea here is to sort your information into the same buckets as your tax return. At minimum sort the information into the basic categories. If you have a lot of something, then sort into sub-detail categories. A basic list of the more common items is here for your use.
After a long transition period, the requirement for brokerage firms and banks to report the cost of investments you sell is now in place. The term the IRS uses for the approved cost is called "basis". This means those 1099-B forms that will start appearing in mailboxes must now include the original cost (or basis) of the investment.
* PAYROLL TAX CUT for employees extended through February 29, 2012. (Social security tax rate on wages up to $110,100 will be 4.2% rather than 6.2%.)
* ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.
* SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.
* STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
* ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000. The ANNUAL GIFT TAX EXCLUSION remains at $13,000.
* 401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
* SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
* IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
* KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
* NANNY TAX threshold increases to $1,800.
* TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
* SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn
up to $14,640 without losing benefits.
* HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional
$1,000 may be contributed by those 55 or older.
Prior to adjourning for the Holidays a spending package was signed into law by President Obama. Key among these provisions are two changes that will impact a number of Americans:
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Dec
23
If you were married, divorced, or changed your name for any reason during the past year, do not forget to file to change your name prior to preparing your 2011 tax return. The IRS automatically conducts a name match on the first few letters of your last name. If the name on your tax return does not match the name on file at the Social Security Administration for your social security number, here's what could happen;
14464 Hits
Dec
12
2012 Standard Mileage Rates (IR-2011-116, Notice 2012-1)(Dec. 12, 2011)
The IRS has released the 2012 optional standard mileage rates that employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes. The 2012 standard mileage rate remains at 55.5 cents per mile for business uses, is reduced to 23 cents per mile for medical and moving uses, and remains at 14 cents per mile for charitable uses. For purposes of computing the allowance under an FAVR plan, the standard automobile cost may not exceed $28,200 ($29,300 for trucks and vans). The updated rates are effective for deductible transportation expenses paid or incurred on or after January 1, 2012, and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer on or after January 1, 2012.
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Dec
09
Action you can take before time runs out
Here are a five last-minute tax saving ideas. But act soon, the tax year is quickly nearing an end.
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Dec
02
What you need to think about now
Currently ordinary dividends are taxed at a maximum rate of 15%. The tax provision that set this lower rate is NOT a permanent part of the tax code. As such, unless Congress acts, starting in 2013 Dividends will once again be taxed as ordinary income, or as much as 39.6%. So what should you think about throughout 2012?
12352 Hits
Nov
25
Hold on for a bumpy ride
Now is the time to review your paycheck to ensure you have proper withholdings for 2012. Tax rate brackets have been expanded in 2012 so more income will be taxed at lower amounts. However, unique to 2012 is the expiration of the social security 2% tax break. As you recall all employees had their social security tax rate reduced from 6.2% to 4.2% for 2011. This one-year tax provision will become a hot topic for the balance of the year in Congress.
13045 Hits
Nov
18
Ensuring your cell phone business use is deductible With the proliferation of cell phones, and the coresponding accessibility of you to your employer, invariably most employees are receiving and making business calls on their cell phones. So how can you deduct your cell phone expenses on your tax return? Here are some ideas and tips:
13020 Hits
Nov
18
Ensuring your cell phone business use is deductible With the proliferation of cell phones, and the corresponding accessibility of you to your employer, invariably most employees are receiving and making business calls on their cell phones. So how can you deduct your cell phone expenses on your tax return? Here are some ideas and tips:
11427 Hits
Nov
11
Are you getting the tax break you deserve?
Taxpayers often overlook and underreport their charitable contributions on their tax return. And while there are no hard statistics, the Treasury Department is not looking out for you to ensure you are reporting all your deductible charitable giving. So what can you do to maximize your deduction?
13590 Hits
Nov
04
Every industry and profession has common terms that are used so often those of us in the business often forget that most people do not have the depth of understanding that a person working within the tax code might have. One of these areas is understanding the differences between the tax terms "deductions" and "credits". Is one better than the other? Top line. Dollar for dollar, a credit is worth more to you than a deduction. Why? A credit is a direct reduction in tax, while a deduction reduces the amount of income that gets taxed. Here is a simple chart showing the difference.
13181 Hits
Sep
12
New Sales and Use Tax Rate
16422 Hits
Apr
15
Don’t forget, Monday, 4/18/11 is the final day to file your taxes for the 2010 tax year.
Procrastinators have an extra three days to work on their taxes this year because the usual April 15 file date is Emancipation Day, a holiday observed in Washington, D.C., to mark the anniversary of the signing of the Compensated Emancipation Act, which president Abraham Lincoln signed on April 16, 1862. The act freed several thousand slaves in the District of Columbia. There are a lot of different options available to help taxpayers file and pay taxes on time, including the option of filing for an extension. Those filing on Monday should make sure they have everything prepared and ready, to prevent any delays that might cost them in fees and penalties.
15000 Hits
Apr
08
New Sales and Use Tax Rates Voters in 13 cities in California have approved new district taxes (transactions and use taxes) that became effective April 1, 2011. The new rates apply only within each city’s incorporated limits. The tax rates outside the incorporated city limits will remain the same. In addition, the City of Scotts Valley Transactions and Use Tax (SVGF) will end on March 31, 2011, resulting in a tax rate decrease within the city limits of Scotts Valley.In Sonoma County, the countywide Sonoma County Open Space Authority (SCOS) 0.25 percent district tax will end on March 31, 2011. Beginning April 1, 2011, the Sonoma County Agricultural Preservation & Open Space District (SAPD) 0.25 percent district tax will take effect. Therefore, the tax rates throughout Sonoma County (exception: City of Santa Rosa) will remain the same. The table below summarizes the new sales and use tax rates.
*The rate is higher in the following cities which have additional district taxes and their codes have changed: Sebastopol (260), Cotati (261), Rohnert Park (262), and Santa Rosa (264). For More Information
16003 Hits
Feb
13
Due to the late enacted tax legislation, e-filing has been delayed for some time, for most taxpayers, especially those itemizing their deductions. This delay was to end on Monday, February 14, 2011. As a result of the IRS staged transmissions over the course of the week of Feb. 14-18, some clients may experience delays in return processing and in the time it takes to receive their refunds. However, we expect that all processing should be back into the standard processing flow by Friday, Feb. 18.
14940 Hits
Jan
19
The Small Business Jobs Act of 2010 (2010 Jobs Act) requires information reporting for rental property expense payments of $600 or more that are made after December 31, 2010. This reporting requirement is one of several revenue raising provisions that are included to offset the $12 billion cost of tax relief provided by the legislation.
Generally, if a person (payor) makes payments to another person (payee) in connection with the payor’s trade or business totaling $600 or more during a calendar year, the payor is required to send the appropriate information return to the IRS and the payee. Under the 2010 Jobs Act, any individual taxpayer who receives real estate rental income is considered to be engaged in a “trade or business” for purposes of the information reporting requirements. This is true even for individuals engaged in a “passive investment activity” under general tax rules and principles. The reporting obligation applies if the total of all payments made by the payor in any tax year is $600 or more, even though the amount for any class of payment by itself is less than $600. Payments that must be reported include: • salaries, wages, commissions, fees, incentive awards and other forms of compensation; and • interest, rents, royalties, annuities, pensions, and other gains, profits and income. Form W-2, Wage and Tax Statement, is the information return used to report payments to employees, whereas Form 1099-MISC, Miscellaneous Income, is generally used to report other types of payments. An exemption from the filing requirement is extended to members of the uniformed services or employees of the intelligence community who rent out their principal residence on a temporary basis. In addition, the IRS is authorized to issue regulations that exempt individuals whose rental income falls below a minimum threshold or who meet certain hardship standards. Failure to comply with these requirements may result in the imposition of penalties, including penalties for failure to file the information return and failure to furnish payee statements. The new information reporting rules may increase the paperwork and filing burden, as well as the related costs, for your rental property. Because the rules apply to payments made after December 31, 2010, we would like to discuss recordkeeping and other compliance issues as soon as possible. Please call our office at your earliest convenience to arrange an appointment.
15084 Hits
Dec
07
The Internal Revenue Service issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
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