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TAX ALERTS will be posted regularly on the website. If you chose to be notified when these are posted (no more than once a month) please sign up for that free service right here on my website.
The website will be updated almost daily for changes - but the Tax Alerts are a monthly summary of the tax and financial changes that will affect most Taxpayers. It does appear that they could be one of the largest tax bills ever (one to rival 1986) coming up sometime in the next year - so, it will be interesting (have to say somthing nice about it).
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Tax Alerts
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Written by Cathy Cavanagh
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Sunday, 25 July 2010 22:28 |
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The IRS and Department of Revenue have really increased the auditing of all small business activity. In addition, the IRS is auditing Schedule C's and Sub-S corporations that have anything at all appearing to be understating income. As if that is not enough, a huge number of small business taxpayers are having to go into short sales, foreclosures or even bankruptcy. AND, this all tends to create more law suits and divorces.
As a result of the above, it has become clear that if the liability and property protection of assets held in Limited Liability Companies can be pierced, there are those that will try to do that. It cannot be emphasized enough that Managing Member and Owners of LLC's need to do the following:
1. Review your Operating Agreement with a professional that is up to date on all these issues. Most Agreements will need to be amended to provide adequate protection in a legal situation.
2. It is now recommended that LLC's do have Annual Meetings and keep minutes. All changes in Members need to be properly documented.
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Tax Alerts
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Written by Cathy Cavanagh
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Saturday, 05 June 2010 19:06 |
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It’s difficult to know where to start with major issues in 2010 affecting all taxpayers and businesses. I am going to give you a punch list and will try to publish more details on each issue as the year goes along:
1. There is a bill in Congress right now that will require all Sub-S corporate tax filers with 3 or fewer Shareholders to pay Social Security and Medicare on 100% of the Income Distributions. Currently they are required to pay themselves “reasonable compensation” in the form of payroll, but adding this requirement will double the amount of FICA most Sub-S Shareholders will have to pay. This means that the “Return on Investment” from investing in staff, websites, equipment etc. will be subject to FICA – huge cost and change to the “small guy”.
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Tax Alerts
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Written by Cathy Cavanagh
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Tuesday, 22 December 2009 19:18 |
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Net Operating Loss Carrybacks: There will still be a lot of Net Operating Loss (NOL) (i.e. net losses on tax returns) for 2009 which will be eligible for carryback refunds if Taxpayers owed taxes in two prior tax years. Otherwise, the NOL will be carried forward.
IRA Distributions: If you have a regular IRA and think you will have a net loss on your 2009 and/or 2010 tax return – you might want to consider rolling a portion of the IRA to a Roth IRA. Typically you have to pay ordinary income tax on that roll over, but if you have a loss to offset the rollover amount, there would be no tax due. In addition, there would be no tax due when you pull the funds from the Roth out. If you are over 59 ½, you may want to simply pull IRA funds out (with no penalty) without the roll over to extent they would be non-taxable. There are lots of rules regarding transferring or pulling out Regular and Roth IRA funds and there is lots of misleading information about that in the news. Make sure you know all the ramifications before you make those moves.
Up to $100,000 can be transferred from an IRA tax-free during 2009 to qualified charities.
Social Security and Medicare: We have more Seniors than ever and with that comes a lot of planning on how to utilize their Social Security and Medicare benefits to the maximum advantage. Many Taxpayers make financial decisions (i.e. gifting assets to children which could be attached later for nursing home care) without checking on the potential ramifications later. There are lots of resources that can assist you in sorting those financial options out. |
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Tax Alerts
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Written by Cathy Cavanagh
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Thursday, 31 December 2009 17:56 |
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NEW BUSINESS MILEAGE RATES for 2010 will be .50 cents per mile, medical mileage rate will be 16.5 cents per mile and Charitable Contribution rate will be .14 cents per mile.
IRS LETTERS AND AUDITS have really increased in the past year. We are seeing lots of clients recieved bills for not filing on time when in fact they did. You have to send copies of your extension with proof of certified mailing (which we have at the office). Quite often a phone call and fax will take care of this. I think they are counting on a lot of people simply assuming they owe it and paying it. Also, IRS is auditing Schedule C's (Sole Proprietorship) more than ever. Good records and proof of business intent is extremely important. This, again, makes consideration of filing all businesses as Sub-S Corporation a serious consideration.
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Tax Alerts
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Written by Cathy Cavanagh
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Tuesday, 22 December 2009 19:06 |
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The IRS is really evaluating continuing business losses to see if these are in fact “Hobbies”. One of the major tests to determine if a business is really a Hobby is to review the past five years of Taxable Income from the business. If the business shows income 3 out of the 5 prior years than it would be considered a business.
A lot of businesses will be showing losses for at least 2008 and 2009, but there are many more that show losses year after year. Here are some of the questions the IRS considers beyond the 3 out of 5 years of profit situation:
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