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Underreporting income tax

Underreporting income tax

Credit and debit cards are nearly as common as cash. Nearly everyone in the USA has at least one in their wallet, including business owners. Customers often swipe a card to pay for their purchases. This seemingly simple act could help attract unwanted attention from the IRS. If your business has low cash sales the IRS may send you a “Notification of Possible Income Underreporting.” The IRS has sent the letter to thousands of small business employers, asking them to review and confirm that they accurately reported their income on last year’s tax returns. So far, some 20,000 employers across the country have received the letter, according to The Washington Post. IRS Notice Underreporting Income The IRS Notice CP 2000 is referred to as the Notice of Proposed Adjustment for Underpayment and is the most common notice sent out by the IRS. The IRS reports that document mismatch inquiries were sent to more than 4.3 million taxpayers in the 2010 fiscal year; more than $7.2 billion in additional taxes...

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Tax audit focus on small business partnerships

Tax audit focus on small business partnerships

Do you have a small business? Is it structured as a partnership? You may not realize that the IRS tax audit focus has shifted to your business. Speaking at the American Institute of CPAs last week, IRS Small Business/Self-Employed divisions head Faris Fink said the agency will be shifting its auditing focus from corporations to small business partnerships, which have grown significantly in number over the last six years. From 2007 to 2011, the increase was more than 15% according to the IRS.  IRS to audit more small businesses A new study used by the IRS to determine its auditing priorities shows small business owners in a handful of metropolitan areas are particularly likely to cheat on their tax returns. The study puts particular scrutiny on sole proprietorship, whose owners do to report income the same way most individuals report their wages. As a result, experts say those business owners often have more opportunities to cheat the tax system (as reported by the Associated Press).  Do you have a...

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Small business tax tips

Small business tax tips

Many entrepreneurs ask me what are my top small business tax tips. Well, tax planning is an ongoing process that changes with the needs of your business. But, if I had to emphasize a few points they would be the following: Keep good records Proper record keeping year round is the first step to ensure taxes are filed accurately. I know we are in the digital age but electronic records need a backup. Either make several copies of your electronic records or have a paper copy somewhere. Remember you can be audited up to three years after you file your return. For most entrepreneurs business occurs at a fast pace. As such, sometimes you can’t remember what took place one week ago much less three years ago. If you should find yourself of your company being audited the IRS does not allow deductions based on the fact that you are a good person and you have a good business that helps the local community. All deductions are based on...

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Small business tax rate

Small business tax rate

The Small business tax rate is a point of much concern to small business. Especially when the New York Times reported that President Obama was reviewing an old proposal to lower the corporate tax rate to 28% (and 25% for manufacturers) less than a year after he raised the top individuals income tax rate paid by many small businesses to 39.6%. Indeed, the National Federation of Independent Businesses and the S Corporation Association found that two of the most common types of small businesses pay a percentage of their income to the government that is more than double that of large corporations.  Are you a small business? A small business is any business that has no more than 100 employees. In addition to conventional small businesses, this category includes (for tax purposes) people who earn income through rents, royalties, partnerships and limited liability companies. This definition may have surprised you. Hopefully, you took advantage of all the tax deductions and benefits available to you. If not, there is still...

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Small Business Health Care Tax Credit Scenarios

Small Business Health Care Tax Credit Scenarios

The Small Business Health Care Tax Credit is calculated on a sliding scale. The is up to 35% of the employer’s eligible premium expenses for tax years 2010 to 2013. Employers with 10 or fewer employees, paying annual wages of $25,000 or less, qualify for the maximum credit. Healthcare benefits plus a tax credit If you have never considered adding health care benefits to your employees this tax credit will help you provide this benefit at a reduced cost. Employees consider healthcare benefits to be an important factor in job selection. Even if you managed to attract your current employees without having health insurance chances are they may consider moving to another employer because you do not offer healthcare benefits. Retaining top talent for your business is key to being successful. Exploring your healthcare tax credit options may help your business stay ahead of the competition.  2014 healthcare tax credit Going forward in tax year 2014 the maximum tax credit increases to 50% of premium expenses and coverage must...

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Small Business Healthcare Tax Credit

Small Business Healthcare Tax Credit

The Small Business Healthcare Tax Credit can help you save money. Through 2010 to 2013 the maximum credit is 35% of premiums paid for small business employers and 25% of premiums paid for small tax-exempt employers such as charities. This means up to 4 million small businesses that offer healthcare coverage to their employees may be eligible for a tax credit. This is a great way to differentiate yourself from the competition in procuring talent for your business. Remember, your businesses success relies on the efficiency, expertise and customer service provided by your employees. Beginning in 2014 or later: the maximum credit will increase to 50% of premiums paid for small business employers and 35% of premiums paid for small tax exempt employers to eligible for the credit a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) marketplace the credit will be available to eligible employers for two consecutive years. How to qualify...

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