3 Ways to keep the IRS away.

IRS Proof your taxes with 3 simple actions.

 Don't commingle your funds – Make sure your business account and personal account are separate. This makes it easier to keep track of your expenses and income. And it will also allow you to keep track with how your business is doing.  And this will allow you to better evaluate your business productivity.

 Report all your 1099 income with your tax return. The IRS has computers that keep better track of the reported 1099s so it is very important that all of your 1099 income is reported. If not then you will be audited.

Keep good records: You might think this just helps in an audit. However, good record keeping can avoid IRS problems to begin with. Most audits are correspondence audits done by mail. Having good records may well avoid the more intensive in-person audits.

3 simple solutions can keep the IRS away.

Tax Debt reported to Credit Bureaus

Congress to consider allowing the IRS to report bad debt to credit bureaus

Congress is considering allowing the IRS to report tax debt to the three credit bureaus.

Equifax , Experian and TransUnion. The stated reason according to sources is because to promote earlier payment of debt.  I look at it from the standpoint of a bully having backup.

It has been proven that once the IRS audits you and wins (by tax payers giving into the pressure and not appealing the decision or just paying because they don’t want to deal with the hassle) This could possibly place many tax payers in a situation they cannot get out of. How would a tax payer borrow money to pay off the debt if they are not allowed to borrow money because the IRS reported owed debt to the credit bureaus.

 The IRS reporting debt to the Credit Bureaus may create or inflate the following.

• Larger financial burden for the tax payer
• Increase the amount of non filers.
• Increase the fear of the IRS

Allowing the IRS to report tax debt to the 3 major credit bureaus Is another attempt by congress to squeeze money out of the tax payer by intimidation and fear. You may be wondering why the government would allow the IRS to report tax debt, below are some logical (from my perspective) reasons for the government allowing this to happen.

• Lack of government fiscal responsibility
• Not many politicians want to attach their name to raising taxes on the middle class
• About $110 billion of the total debt was classified by IRS as uncollectable.

Possibly allowing the IRS to report tax debt is has no benefit to the tax payers but , it most definitely will help the IRS in their collection process. The question is at what cost?

Starting a Business?

Starting a Business?

 “Some nontraditional things to think about before you start your business”

With the economy in the tank and social security being more social than secure. People are turning to business start-ups. I am a big proponent of starting a business but there are some things one might want to consider before you start down the road of business ownership. What are some of the things to think about before you should start a business?

• How do you manage your personal finances?
• Is there a plan with how you handle the household?
• Are there many unfinished projects in your home?
•  Is your house hold operating with its optimal efficiency
• How do you handle your personal taxes?

You may be asking yourself why he is asking questions about the house hold when the topic is about business start up.

The answer is simple, most business start ups are ran in the same manner as the household is ran.

So what I’m I trying to say?

• If you have horrible money management skills on the personal side then you will have horrible money management skills on the Business start up side
•  
• If you do not have, a plan on how the household is ran than more than likely the business start up will have a less than stellar business plan.
•  
• If there are many unfinished projects around the home then the likely hood of a start up business having any longevity are slim.
•  
• If your household is not operating optimally then your start up business will not run optimally.
•  
• If you let a non professional prepare your personal taxes then you will do the same for your business. (and that’s not good).

This is an observation based on my experience as a tax prepare and business consultant.

There will always be exceptions but, for the most part it is very difficult to run a business start up if you cannot effectively run your home.  Ger your home situation fixed before you start your business.

Lets Talk Audits.

Tax Audits:

 What is an audit? As defined by the IRS.gov: An IRS audit is a review/examination of an organization's or individual's accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate.

In other words the audit is a just a review of what was placed on your tax return, it can also be viewed as method of verification.

OK that was the politically correct answer for and audit, my opinion of the reason for an audit are:

• $          Politicians are not going to raise taxes on working citizens
• $          The government needs the money
• $          During low economic times small businesses grow at the fastest rate and don’t keep good        records thus,  it is the easiest way for the government to get more tax dollars.
• $         Just the mentioning of audits elicits compliance from guilty and non guilty tax payers.

There are some things to remember about an audit notice:

• $         Open all mail from the IRS immediately, the response time to the IRS at the least is a month (30 days) from the date the notice was sent. Not meeting IRS response deadlines could cost you thousands of dollars in fees and penalties.
• $         Always assume you are right, do not allow the IRS notice or auditor to intimidate you.  You have rights. And you are protected.
• $         You are not alone; the audit process for many is not a process to take on alone. There are many experts that may assist you.
• $         You can appeal, as long as you respond in a timely manner from corresponding with the auditor, the manager the audit of appeals or even tax court you can appeal, that is your right,

The one thing I want you to remember if nothing else grabs your attention always, always ,always open your main (especially your IRS mail) on the day you receive it and pay special attention to the response time. I have had to perform damage control for my clients because they waited too long to respond to the IRS and they and the only thing that could be done for them was an offer in compromise request and an appeal for the penalties.  I welcome your thoughts comments and questions. 

Things to consider heading into the new year.

This information was forwarded to me from a fellow Franchise owner, Thank you Mr. Henry Swint.

TO My CLIENTS, FRIENDS, AND BUSINESS ASSOCIATES:

As 2011 comes to a close, economic uncertainty continues to be a hot topic in Washington, D.C. and around the world. The Joint Select Committee on Deficit Reduction (i.e. the Super Committee) created by the Budget Control Act of 2011 failed to reach a bipartisan agreement to address the financial challenges facing the United States. This failure to reach an agreement has left huge tax questions unanswered. The following are selected key issues of interest:

Tax Provisions Expiring at the End of 2011

·            Alternative-minimum tax patch;

·            Social Security tax reduction of 2%;

·            Special accelerated depreciation;

·            Higher education deduction;

·            Home energy tax credit; and

·            Charitable contribution of IRA assets.

Tax Provisions Expiring at the End of 2012

·            Top 35% income tax rate;

·            Top 15% long-term capital gain and qualified dividend rates and

·            Estate and gift tax rates and exemption.

Tax Provisions Taking Effect in 2013

·            3.8% tax on net investment income for joint filers with adjusted gross income more than $250,000

·            ($200,000 for single filers). This additional tax applies to taxable interest, dividends, capital gains,

·            rents, royalties and some annuities;

·            Personal exemption phase-out;

·            Itemized deduction limitations; and

·            Reduction in flexible spending account limits.

WITH UNCERTAINTY COMES OPPORTUNITY. The best way to take advantage of the changing legislation landscape is to understand your options and be ready to act. I SUGGEST that you investigate all planning opportunities before year-end.YEAR-END TAX PLANNING is not complete without a review of your RETIREMENT AND ESTATE PLANS. Early planning is key to making the most of your opportunities. I am available to help with your planning. Please contact me if you would like my assistance in developing a strategy for you before the year is out or in the future.  Remember life constantly changes and so do our plans.  Properly planning for taxes and life events helps ease the burden.  Tax evasion is against the law.  Tax avoidance is your civic duty.

         

Here are 10 things you can do before the year is over for increased tax savings:

1.       Donate to Charity (Fall into Spring cleaning, remember to get a receipt for donations)

2.       Sell off bad investments (up to $3,000 loss)

3.       Pay your December mortgage Payment in December

4.       Hold off on bonuses and extra income until the New Year.

5.       Max out your 401(k) ($16,500 tax free maximum)

6.       Pore over out of pocket medical costs

7.       Get Married (get it legally activated now, have the ceremony later

8.       State Sales Taxes for large purchases (for buying cars, boats, planes etc.)

9.       Energy efficient  home improvements (not all qualify)

10.    Military reservists travel expenses

And many more…If you or someone you know need tax planning advice please don’t hesitate to call.

Enjoy a HAPPY NEW YEAR by starting your tax planning now.

THE IRS HAS BEEN BUSY……..HAVE YOU?

  The IRS have hired an additional 15, 000 agents for the upcoming tax season. In the state of Virginia alone  in 2 years 7,000 agents were hired. The government needs money and they have elicited the help of the IRS to help collect. They are serious and focused on targeting small businesses. Some items the IRS are requesting when they audit small businesses are:

•          Invoice and receipts
•          Logs to track miles
•          Income and expense ledger
•          Proof travel was taken for business.
•          Daily business calendar or Tax Diary
•          Proof of home office deductions
•          Many others

It is very important that the information above answers the following questions:

•          Who
•          What
•          When
•          Where
•          Why/How

I have always believed that too much information is better than not enough information.

When a small business is audited by the IRS, the questions that need answers are: 

•          Who were you with / whom did you visit (if any one)?
•         What was the purchase or the event for?
•          Where did this event or purchase take place?
•          When did the purchase or event take place?
•          Why or how does it pertain to the business?

I think it is better to have the answer to a question not asked then not have an answer to an asked question. 

To put it simple, if a business owner keeps thorough records in anticipation of an annual IRS audit then the business will not have anything to worry about.

Having thorough and organized records makes it more affordable for the tax lawyers, tax professionals or accountants to counsel a business during an IRS audit.

Why are the Middle Class Bullied by the IRS?

 My honest but humble opinion of the basic ideology of the thee classes that exist (poor, middle class and wealthy) gives insight to that very question. The mind sets of the 3 classes are:

• The poor are trying to survive. 
• The middle class are maintaining. 
• The wealthy are looking to surpass. 

An old cliche' that has been repeated often (especially by me) is if you are not moving forward you are automatically moving backwards. The government and the IRS in particular understand this cliche' and keep track of  who are maintaining and and moving forward by conducting audits on every tax return every year. Most people are not aware of that fact. 

  The economy, politics and budget cuts have given the government another reason to search for more revenue. Unfortunately the middle class are the the target of such "financial bullying". I think one of the biggest reasons for such an assault is the middle class are an easy target. 

Like previously stated the middle class are considered "maintainers". Once the nature of a person or a group to maintain  is understood then it is easy to see why the middle class are the target of choice. On a whole they will do what ever it takes not to loose what they have.

 The fear of loss will encourage compliance with what ever is presented even if it the presented information is wrong. 

Example: The IRS sends a letter stating that there's an error on the tax return. The letter basically states that IRS records don't match the tax payers tax return so the refund is smaller than what was reported on the tax return. The "maintainer mentality" is.... , "ok I dodged a bullet so I will let them have what they want, I still get a refund check ".  There may appear to be nothing wrong with the above response. Lets look at it from a different perspective. How would the middle class respond to:

• The cashier gives $5.00 dollars change but should have given $10.00 dollars in change
• The ATM disperses $80.00 dollars instead of $100.00 and debits the account $100 dollars.
• The bank financing the car loan auto withdraws $350.00 from the account instead of  $300.00.

I think it is safe for me to assume that most people would not let any of those things happen without doing something to correct the issue. So why do middle class allow the IRS to bully them?

• Little to no knowledge of tax payers rights
• Public misinformation /perpetuated by the media,family members and friends.
• Fear of the IRS.

If  the the middle class does nothing to stop the bulling it will only get worse. I am just saying....