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Key Tax Tips for Small Business Owners

Although JPMorgan Chase does not provide tax services, they do offer great insight on how small business owners can maintain taxes. Contact IRS Audit Group with questions and we’d be glad to help!

Small businesses are often so focused on generating revenue and keeping operations running smoothly throughout the year that tax-related concerns are procrastinated until tax day comes. Tax mistakes carry some pretty costly expenses, including penalties, a hefty tax bill, or even leaving money on the table in the form of untaken tax deductions.

Here are key tips from business tax experts:

1. Pay the correct amount of estimated taxes

Especially true for new solopreneurs and independent contractors in gig economy positions, just underestimating taxes and creating tax debt can cause significant issues later.

Justine Lackey, founder of Good Cents Bookkeeping Inc. says, “When people make their first foray into entrepreneurship, they do so rather blindly, and they fail to discuss the tax implications with their CPAs or bookkeepers. If it’s someone first rodeo, they may not pay estimated taxes at all, and they end up with a huge, and often unmanageable tax bill when they file their return.”

“A great way to make sure you can pay your taxes, is to squirrel away money,” Lackey advises. “A good ballpark is to save 25 percent all money earned in a separate tax account. Then, once each quarter, remit the money to federal and local tax agencies.”

2. Stay ahead of retirement account contributions

Crystal Stranger, EA, President of 1st Tax and the author of “The Small Business Tax Guide,” says that the limit to contributions in a Simplified Employee Pension Plan (SEP), is generally 25 percent of net income or up to $53,000 for the 2015 tax year, depending on your plan. She cautions that not being mindful of this and not staying on top of net income tallies “can easily lead to making excess contributions, subjecting the taxpayer to an excess contribution penalty in addition to the amounts not being deductible.” Furthermore, “if that excess contribution is not removed, you can be penalized for this every year until the amount is withdrawn.”

3. Document amounts paid to independent contractors

Businesses that outsource specific jobs to contractors are required to file 1099-MISC form with the IRS when payments of $600 or more have been made to the contractor throughout the year. Dave Du Val, VP of Customer Advocacy at TaxAudit.com warns that “without proof of payment these amounts are unlikely to be allowed in an audit.” In addition, “if the required 1099-MISC forms are not issued, penalties are likely.”

The flipside to this is worker misclassification. While classifying an employee as 1099 can have advantages to the business owner, they should be classified as a W-2 employee if the worker is an actual employee with set hours. Failure to classify workers correctly can leave the business liable for past taxes and penalties.

4. Keep great documentation

“Many small businesses, particularly small sole proprietors, keep poor records that end up costing them money in the long run. If good records aren’t kept, the IRS may disallow some deductions and credits, or worse, decide that the company isn’t a business, but actually a hobby. In that case, you end up with all of the tax with none of the deductions!” says Christopher Jarvis of Lone Wolf Financial Services.

Part of poor recordkeeping is often a result of commingling personal and business bank accounts. Jarvis advises, “The IRS is going to want to know how you differentiate between personal funds and business funds, and how you can separate business and personal expenses when it is all in the same account. Ideally, the company should have its own bank account, and all income resulting from work that business does gets deposited into the business bank account. Then the company writes a paycheck to the owner, who deposits it into his personal account.”

His suggestion to small businesses? “Invest in some inexpensive software or apps to help track your records, or pay a professional. And look to get items like bank statements sent to you or access them online instead of relying on a paper statement. The cost of a professional bookkeeper or accountant is often the best investment a company can make.”

Originally published here.

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How to Settle Your IRS Tax Debt

Do you have tax debt, but don’t know what to do about it? You definitely shouldn’t let the letters and notices pile up – especially if they’re coming from collection agencies who are after money owed to the Internal Revenue Service. You also don’t have to face the IRS alone. When it comes to settling tax debt, it helps to have someone by your side.

 

According to Publication 594 of the IRS, “The collection process is a series of actions that the IRS can take to collect the taxes you owe if you don’t voluntarily pay them. The collection process will begin if you don’t make your required payments in full and on time, after receiving your bill.”

 

Sometimes it’s not as easy as paying off what you owe. In most cases, you’ll need the help of a tax professional to negotiate with the IRS. Our enrolled agents have seen countless cases, varying in amount owed and levels of difficulty, but each time they have been successful in relieving taxpayers of monetary burdens.

 

Learn about the several ways to pay or reduce costs and let us know how we can help:

  • Installment Agreement/Payment Plan – Similar to a monthly credit card payment. The IRS payment plan would allow you to pay off your unpaid back taxes in installments instead of all at once.
  • Offer in Compromise – Settle your tax debts for less than what you owe. This could save you thousands of dollars in taxes, penalties and interest if you are given the opportunity to pay that small amount as a full and final payment.
  • Not Currently Collectible – This means that a taxpayer has no ability to pay their debts. The IRS can declares them “currently not collectible” only after the receiving evidence that there is no ability to pay.
  • Bankruptcy – You should consider bankruptcy only if you meet the requirements for discharging your taxes. Income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code.
  • Fresh Start Initiative – Under the new and more flexible rules issued by the IRS, taxpayers do not have to disclose extensive financial details to the IRS to judge their paying ability. This initiative offers several advantages.

 

If you are familiar with our services then you know IRS Audit Group can help you with any of the options listed above. With our advice, you’ll be one step closer to achieving financial stability and getting back on your feet. We are experts in tax debt resolution and are ready to work on your case. Call us today to get started!

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Beware of IRS Scammers

As always, scammers who impersonate Internal Revenue Service officers are still a threat to taxpayers. They have been tricking innocent people and robbing them of money and peace of mind. We’ve compiled a list to help you determine real IRS representatives from fake ones so you can protect yourself:

 

  • The IRS is NOT aggressive in their approach. Scammers are typically rude over the phone and easily agitated.
  • The IRS does NOT initiate contact with taxpayers by email, text messages or social media channels.
  • The IRS does NOT mention law enforcement efforts such as: local police or immigration officers.
  • The IRS mails notification letters to taxpayers if they owe any taxes and do NOT request immediate payment via wire transfers. (Payments must only be sent to United States Treasury)
  • Taxpayers can request credentials for the representative to prove they are there for an IRS visit.

 

Following these tips will keep you safe, but if you find yourself in a sticky situation you can always give IRS Audit Group a call. We’ll help you avoid this in the future and verify that your information is in good hands. Also, share this blog so your family and friends can steer clear of scammers as well.

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Upcoming Tax Deadline

If you’ve requested a six-month extension to submit your taxes then your deadline is coming up quick! October 16, 2017 is the last day to file your individual or corporation return. This includes the 1040, 1040A and 1040EZ or 1120 tax forms. Beware of penalties for late payments or filing.

Don’t let this extra time go to waste. Be sure that you file your return immediately and see if you qualify for common credits and deductions. Low and moderate income families may be eligible for special tax benefits as well.

According to the IRS, you could also receive credit if you’ve paid college tuition or fees in the last year. Same goes for those that have made their homes energy efficient.

E-filing will reveal guides and tips to help you complete your return, but you can also call us for a one-on-one consultation with a tax professional. If you’ve missed important deadlines in the past or fear you won’t get the paperwork done in time for the upcoming deadline please give IRS Audit Group a call to learn how we can help resolve your tax issues ASAP.

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Business Tax Deadline is Almost Here!

If you got an extension on your taxes earlier this year, the time has now come to submit your returns. The business tax deadline is approaching on September 15 and you don’t want to miss it!

If you want to be sure everything is done quickly and accurately, then contact us today! IRS Audit Group is ready to help and we are just a call or click away. Don’t waste another second wondering how you will complete all the paperwork in time – we got you covered.

For those of you that have yet to file, remember that the Personal Tax Extension Deadline is coming up as well on October 15.

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Tax Limits: Be Cautious Of Advertisements

Year-end tax planning is approaching, which means thousands of ads are going to flood your computer while browsing the web with suggestions on what to do in order to help you prepare.

 

The fact of the matter is that somehow and somewhere; you’re going to collect information and put it to use. However, we want to make sure you’re choosing the right sources to consume information from.

 

Being a business owner, you understand that taxes are a mandatory and vital component of operating a business. One small mistake can cost you a nice chunk of money. And proper preparation can save you tons of money as well.

 

Your tax money is used for mostly government functions. But, that’s beside the point. The point is that you need to be more involved and educated in order to make sure you consume the right information and make the right decisions when preparing for tax season. The good thing is that this can be accomplished by becoming active in credible organizations such as; The National Small Business Association, or the local state and National Chamber of Commerce.

 

When it comes to consuming information, you only need to trust reliable sources like the ones mentioned above. Just because a person is a; friend, neighbor, or relative doesn’t mean they’re educated in taxes and finances. Sorry to burst your bubble. They could be consuming the wrong information as well, since there’s so much false information circulating around in society anyway.

 

So, if you can’t rely on people close to you such as relatives or friends, who do you go to? The simple answer is to hire a CPA. Although, there are definitely untrustworthy and inexperienced CPA’s, this is your best bet. But, figuring out who to trust all comes down to your best judgement.

 

Owning a business and dealing with highly complex tax returns will require education and experience in an accountant. We understand the importance of hiring an advisor or accountant to handle your financial affairs. However, the dilemma that most business owners face is choosing whether or not to hire an individual accountant, or a firm.

 

This decision will all come down to how much fire power will be needed for the job. For example, paying $400/hr to a tax analyst for a simple 1040EZ is wasteful. That’s a simple job that shouldn’t require you to pay an arm and a leg. Therefore, it all comes down to how complex your situation is.

 

Another good rule of thumb is making sure your tax advisors main focus is tax pro. We’ve have seen many individuals try to have a tax auditor prepare their taxes, and it just doesn’t work out the way they want it to all the time. This is due to many advisors having different primary practices. Even if you’re paying top dollar, that doesn’t mean you’re going to get the best results if their primary practice is different than what you require.

 

Besides being wary of the advisor you hire, be careful of ads on the radio and TV as well. There are many companies who spend tons of money on advertising, using the money they made from previous clients they charged. Simply put, you want to hire people with experience and not because they engaged in a marketing blitz to make themselves seem credible.

 

Your chances of getting positive results this tax year will drastically increase when hiring the appropriate person, and being cautious of who and where you consume information from. Consider all of these options, and you will have much success this filing season.

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Haven’t Filed Taxes For Years? The IRS May File On Your Behalf.

Have you ever wondered what would happen if you didn’t file your tax return? Well … You basically lose your refund (if you pass the three year tax deadline date) which for some people can be a significant loss. Also, you put yourself at risk of having the Internal Revenue Service (IRS) file for you.

Don’t wait on the IRS to file your taxes on your behalf. Let IRS Audit Group file your taxes in full compliance with the IRS. We will collect all the information from tax authorities, review it with you and file your tax return.

According to the IRS, substitute for return (SFR) and delinquent return procedures were developed to deal with taxpayers who do not file required tax returns. They use this to assess the correct tax liability by either:

  1. Securing a valid voluntary tax return from the taxpayer (delinquent return), or
  2. If securing a return is not possible, computing tax, interest, and penalties based upon information submitted by payers, or based on other available information (SFR).

If the IRS files a return, it will be based on the information they have available through existing records and it is usually done automatically. The downfall to this is that whether you were married filing jointly, had dependents you could claim for that year or whether you had any deductions are not taken into consideration. You’d sacrifice any of the credits that could lower your taxes and may end up owing substantially more taxes based on the SFR than if you filed your own tax return.

This triggers the snowball effect: If you fail to pay the taxes the IRS has assessed against you, the IRS will begin collection proceedings to collect the taxes. Which could include issuing levies against your bank account or wages and filing liens against your property.

Don’t face the risk of increasing your tax liability – contact IRS Audit Group today to file your returns or for help on other tax issues. You still have options in cases like this and our team of tax professionals would be happy to guide you through them!

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Best Payment Option for Taxpayers

Do you have a problem with the Internal Revenue Service (IRS)? Specifically when it comes to your payment options? You should opt for a payment plan! This way, you don’t need to wait until you can pay off the total amount which can easily add up due to penalties.

 

This is the ideal option for those looking to save their money and are trying spend wisely while on a budget. The best part? You can apply for individuals and businesses. This provides the opportunity to pay in installments or online.

 

We understand that taxpayers have plenty of costs to cover which is why we want to help you get set up with affordable payments. This process is quicker and much simpler; rather than dealing with larger amounts, you’ll owe what you can pay within a certain time frame.

 

The IRS states that individuals must owe $50,000 or less in combined individual income tax, penalties and interest to be eligible and businesses must owe $25,000 or less in payroll taxes. Both must have filed all required returns as well.

 

Call IRS Audit Group at (888)330-6670 and we can set up a payment plan for you to immediately break down your costs. We know exactly what to do! As experts in negotiation, we can and will communicate with the IRS on your behalf.

 

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Benefits of IRS Payment Plan

If you’re worried about how to pay your dues to the Internal Revenue Service (IRS), you’ll want to review all your options. A good choice would be to make monthly payments through an installment agreement. This would help reduce or eliminate penalties and interest fees and your wallet won’t take such a big blow.

 

In order to qualify, the IRS requires that you file all required tax returns prior to applying. You may be eligible for an online payment plan if you owe $50,000 or less in combined individual income tax, penalties and interest or if your business owes $25,000 or less in payroll taxes.

 

The trickiest part of this agreement is getting approved – IRS Audit Group can help you understand the process and will stay on top of deadlines. Negotiating with the IRS is easier with the help of a tax professional who will represent you and is willing to speak effectively on your behalf.

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IRS Guidlines To Audit Small Businesses

IRS agents are trained on specific audit techniques for different industries. The guides that these agents are trained to use are referred to as Audit Techniques Guides (ATGs), and they focus on providing guidance for examiners in different market segments. These guides are so crucial to the IRS because they create consistency in their audits, since everyone is using the same guidelines.

 

The ATGs usually consist of; common and rare industry issues, techniques for examinations, jargon for that particular industry, business practices, and any other information that can assist them in the examination process.

 

Once you receive a notice of an audit, it would be wise to review the ATG for your industry in depth with your representative. The reason any business owner can find value in these guides is due to the abundance of information you can find. The audit target will give you an advanced view of what to expect in the exam, that way you can prepare a strong defense instead of walking into the exam blind. These documents even give the revenue agent resources within the IRS database to find out; credit scores, currency transaction reports, and information returns that were provided to the taxpayer by third parties.

 

And if you’re thinking about trying to hide sources of income, think again. These reports are so in depth, that they provide methodologies for finding any cash income that went unreported. So, to ensure the best possible outcome in the case of an audit, it’s essential for the taxpayer to perform a thorough review of the appropriate ATG.

 

The guides below can be viewed at the IRS website address: Remember to find the most appropriate guideline for your business.

 

NOTE: The dates that these guides were issued are shown next to them. These guides are up to date as of October, 2016.

https://www.irs.gov/businesses/small-businesses-self-employed/audit-techniques-guides-atgs

 

1. Aerospace Industry; 01/05
2. Air Transportation; 04/08
3. Architects and Landscape Architects; 08/2011
4. Art Galleries – Audit Technique Guide; 01/2012
5. Attorneys Audit Technique Guide; 03/2011
6. Business Consultants; 07/2011
7. Capitalization v Repairs; 11/2010
8. Cash Intensive Businesses; 04/2010
9. Child Care Provider; 03/09
10. Coal Excise Tax; 05/05
11. Commercial Banking; 5/01
12. Conservation Easement; 11/2011
13. Continuation of Employee Healthcare Coverage; 03/2012
14. Construction Industry; 05/09
15. Cost Segregation; 01/14/05
16. Credit for Increasing Research Activities (i.e. Research Tax Credit) IRC§41; 06/05
17. Entertainment Audit Technique Guide; 10/2015
18. Equity (Stock) – Based Compensation Audit Techniques Guide; 08/2015
19. Excise Tax on Indoor Tanning; 7/2012
20. Executive Compensation – Fringe Benefits; 02/04/05
21. Factoring of Receivables; 06/06
22. Farmers; 07/06
23. Fishing Audit Technique Guide; 08/2011
24. Foreign Insurance Excise Tax; 04/08
25. Golden Parachutes; 02/04/05
26. Hardwood Timber Industry; 12/2012
27. IC-DISC Audit Guide: 03/2012
28. Inland Waterways: 12/08
29. IRC 162(m) Salary Deduction Limitation: 02/04/05
30. IRC § 183: Activities Not Engaged in For Profit: 06/19/09
31. The Laundromat Industry: 6/00
32. Lawsuit Awards and Settlements: 01/11
33. Low-Income Housing Credit – Guide for Completing Form 8823: 08/2015
34. Ministers: 04/23/09
35. New Markets Tax Credit: 05/2010
36. New Vehicle Dealership Audit Technique: 1/05
37. Non-Qualified Deferred Compensation: 06/15
38. Obligations Not in Registered Form: 6/06
39. Obligations Not in Registered Form D: 06/2006
40. Oil and Gas Industry: 5/96
41. Ozone Depleting Chemicals (ODC) Excise Tax: 9/07
42. Partnerships: 3/08
43. Passive Activity: 02/05
44. Placer Mining: 7/99
45. The Port Project: 8/95
46. Real Estate Property Foreclosure and Cancellation of Debt: 2/15
47. Reforestation: 8/95
48. Rehabilitation Tax Credit: 12/02
49. Research Credit Claims: Credit for Increasing Research Activities §41: 5/08
50. Retail Industry: 2/09
51. Sections 48A and 48B – Advanced Coal and Gasification Project Credits: 5/09
52. Split Dollar Life Insurance: 3/05
53. Wine Industry: 05/2011

 

Simply put, it will be in the taxpayers’ best interest to thoroughly review these ATGs with their representative when the IRS decides to open an audit.

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