Author Archives: Kursti Nakagawa

Top Tax Deduction Benefits for Small Business Owners

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Top Tax Deductions for Small Business Owners

One of the benefits of being a small business owner is the tax deductions that are available.  The more tax deductions that you have at the end of the year, the less you owe in taxes…..plus you could even walk away with a few extra benefits. It seems that many small business owners are not aware of important tax deductions that could greatly benefit them. Have you ever wanted to take a holiday, part business and part vacation? Believe it or not, it can be a tax deduction. The same goes for that nice car you may have been wanting.  Here is a list of 7 Tax Deductions for Small Businesses.

  • Automobile Expenses – Your business can own its own automobile or, if you use your car for business, you can deduct some of the costs associated with driving. Basically, you have two choices:
  • The Actual Expense Method would require you to keep a log and track all business related expenses.
  • The other option is the Standard Mileage Rate Method. Each year a standard mileage rate is given. In 2013, the rate is 56.5 cents per business mile (up from 55.5 cents per mile in 2012). Just calculate how often you use the car for business purposes. Many people do not deduct their auto expenses even though it is a great way to save money!
  • Technology and Office Supplies – Small business owners are frequently buying new computers, scanners, phone systems, and countless other items that are part of running a productive shop. Although many people are not aware of it, most of these items can be fully expensed. Just keep an account of all purchases and discuss with your CPA or tax advisor any items that might be used for personal use as well.
  • Mobile Phones – Just a few weeks back I upgraded phones and got a wonderful new phone on our business account. Nowadays, cell phones are used all of the time to do business all over the world. Plus, the IRS issued a new ruling stating that business owners can write off 100% of their cell phone costs as long as they have an established home phone line.
  • Business/Leisure Travel Trips – This happens to be one of the most underused deductions for business owners. This is strange because travel expenses are 100% deductible, while other items like the usual entertainment expenses and meals are only 50% deductible. Yes, this includes hotel, airfare, train costs, rental cars, taxis…….
  • Meals and Entertainment – This is another deduction that is that is not used as often as it could be! Any meal or coffee taken for business purposes can be written off. What if you do not have the receipt? Relax, if it is under $75 you usually do not need a receipt. Plus, it is easy to keep track of records from bank accounts and credit cards bills for write offs as well.
  • Charitable Contributions – If your business is an LLC, a Partnership, or an S Corporation, you can make charitable contribution to the charity of your choice and simply pass it on to yourself to be claimed on your individual tax return.
  • Advertising and Marketing Costs – Ordinary advertising and promotion of your business is deductible as a current expense.  Think business cards, yellow page ads, or sponsoring that little league game.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

 

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The Argument Against Tax Deductions

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Tax Day

A current survey after the 2012 United States tax season showed that a majority of taxpayers were in favor of a tax system where everyone pays the same percentage of their income in taxes. Think about it: After another stressful tax season, in which, decent and fair Americans rush to get all of their information together and out of the door by mid-April, it seems that these taxpayers would like to trade their system in for a more efficient and easy system. How would this work?

The United States tax law is currently 72,000 pages. It is a complicated and always evolving system. One of main factors of the confusion for the taxpayers is all of the deductions and exemptions and tax codes. For this reason alone, our country has 1.2 million tax preparers to assist the people with their taxes.

Let’s look at Schedule A itemized deductions, many experts believe that these items appear as though they are created to aid the wealthier people in society. For example, in 2010 the IRS reported that itemized deductions totaled $1.2 trillion dollars. A staggering number to imagine, in comparison to the total nationwide adjusted gross incomes of $8.1 trillion! If one breaks the itemized deductions down here is the order: Taxes (state, local, and real estate) at $445 billion, interest totaling $414 billion, and then charitable deductions at $170 billion.

When one looks at these numbers they wonder the logic behind these deductions. Would people still contribute to charities if these itemized deductions were not allowed? Is this donating “saving the world?” Where are these donations going exactly? Many analysts have researched that only 10 percent of charities are out there that actually assist people who are actually in need of help. It seems that only another 10 percent went to actually went to education and health combined. Where are the donations going?

It seems as though the wealthy donate less of money to basic needs charities and more of it to the arts and universities. It also seems as though this systems favors the richer individuals. Another investigation showed that most of the people who get the large write offs from their charitable donations are not spending their money on donations that would actually benefit most people. In fact it seems their donations only benefit a specialized few, such as certain schools, colleges, and universities. It seems Colombia University received the second biggest single donation. Two other big donations included the Metropolitan Museum of Art and the Central Park Conservancy.

As implied it seems that those citizens of Manhattan seem to largely benefit from the tax deduction. In fact, New York itself had 40 percent of the 50 million dollar plus donations of 2012. However, if you live in rural North America you may be out of luck!

The schedule A deductions is just one example of how the wealthy can benefit and tweak the tax system. Some experts have the opinion that the tax codes, deductions, and exemptions needs to be simplified not only to make tax day easier, but to make it more fair.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

 

 

 

Online Sales Tax Bill To Pass

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The Senate just passed a bill that will make certain large retailers charge sales tax to online shoppers.  The bill will allow states to collect sales tax from goods sold via the internet. If it passes the House of Representatives and is signed into law, this law will mark the end of an era where large retailers such as Amazon and EBay benefit from a twist in the system that allows them not to collect sales tax from goods ordered online.

The U.S. Senate, overwhelmingly and with strong bipartisan support, passed the Marketplace Fairness Act of 2013 by a vote of 69-27. This bill will benefit states by allowing them to collect sales and use taxes on sales made to customers over the internet. Many felt that it was just a matter of time before this bill was actually passed.

Prior to the passage of this bill, there were several failed attempts to get around a 21 year old Supreme Court decision that banned sales tax on online purchases. EBay has been one of the most vocal companies pushing lawmakers to go against the bill. They, and many others, feel that small business owners will be the ones that feel the pinch of the online taxes.

The bill, if it is signed into law, will allow a state to require certain remote sellers to collect sales and use taxes on sales made to customers within the state. States that are members of the Streamlined Sales and Use Tax Agreement (SST) would automatically be granted this authority. Those in favor of the bill argue that it will benefit the states by giving them more money. White House Press Secretary Jay Carney said the Obama administration, after reviewing the bill and listening to the overwhelming support “from governors, mayors and the business community on the need for federal legislation to level the playing field,” is in favor of the bill.

Although the bill provides an exception for businesses with annual remote sales of $1 million or less, many feel that the bill will be the end of small businesses who sell goods over the internet. They argue that there will be a lot more work for each sale due to the required tax filings and the paperwork that accompanies them. In the end, they maintain, it may be too much work for the money.

How it the tax charged? This seems to be the only easy piece to this puzzle.  Each state will give online retailers complimentary software that will calculate the sales tax owed based on the buyer’s zip code.

The legislation now moves to the House of Representatives where its fate remains uncertain. It will likely be referred to the Judiciary Committee for consideration.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

 

 

 

How To Endure An Audit

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Tax season has come to an end and now audit season is about to commence. People always fear that they will be audited, but in reality the chance of being audited is fairly low. About 1 out of 100 people are actually audited. Read below on how to endure an audit.

However, if you do happen to be one of the unlucky people, here are a few easy steps to take to make the process go smoothly:

Don’t Ignore Mail From the IRS – Although it may be frightening, it is always best to open mail from the IRS. It is best to face the problem head on and resolve the issue. You are usually given about 30 days to respond to the letter. Keep in mind that if you ignore such information, the IRS will simply keep adding penalties to the amount owed.

 Contact a Tax Professional – You will want to a hire a tax professional to represent you and to communicate directly with the IRS on your behalf. Tax law is very complicated so, in the case of an audit, it is important to hire a licensed CPA or other tax professional that specializes in IRS audit defense representation. It is important to keep your tax preparer up to date on everything as well. 

 Get All Records and Documentation in Order- Find out what part of your tax return is in question and gather all of the necessary paperwork.  All tax documents should be kept for three years but, if you are missing a file, you can always get a copy. If you have lost a receipt, you can usually get a duplicate copy depending on the type of business that issued it. For example, doctor’s offices and charity services usually keep good records and will be able to supply you with a copy of your receipt.

 Remain Calm – One of the best pieces of advice for handling an audit is to be polite and respectful to your assigned IRS agent. It is never helpful to begin an audit by being rude and difficult. The process will be much smoother if you approach it with the assumption that the IRS agent is simply doing their job.  Also, no matter what you do, do not hide or cover anything up. It also will serve you well to be upfront and honest.

Tax returns are selected for audit in a variety of different ways including random sampling. If your return is selected for an audit, it is important not to panic and to realize that many IRS audits can result in the acceptance of a return without change or perhaps even a refund when they are handled properly. When faced with an IRS audit, selecting a qualified Certified Public Accountant to provide IRS audit defense is well worth the investment.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

 

 

Infographic: Interesting IRS Tax Refund Facts

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IRS Refund Facts

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