Small Business4u

Are you paying too much in income taxes? Are you getting all the credits and deductions you are entitled to? Here are 7 tips to help you minimize taxes and keep more in your pocket:

1. Participate in company retirement plans. Every dollar you contribute will reduce your taxable income and thus your income taxes. Similarly, enroll in your company’s flexible spending account. You can set aside money for medical expenses and day care expenses. This money is “use it or lose it” so make sure you estimate well!

2. Make sure you pay in enough taxes to avoid penalties. Uncle Sam charges interest and penalties if you don’t pay in at least 90% of your current year taxes or 100% of last year’s tax liability.

3. Buy a house. The mortgage interest and real estate taxes are deductible, and may allow you to itemize other deductions such as property taxes and charitable donations.

4. Keep your house for at least two years. One of the best tax breaks available today is the home sale exclusion, which allows you to exclude up to $250,000 ($500,000 for joint filers) of profit on the sale of your home from your income. However, you must have owned and lived in your home for at least two years to qualify for the exclusion.

5. Time your investment sales. If your income is higher than expected, sell some of your losers to reduce taxable income. If you will be selling a mutual fund, sell before the year-end distributions to avoid taxes on the upcoming dividend or capital gain. Also, you should allocate tax efficient investments to your taxable accounts and non-efficient investments to your retirement accounts, to reduce the tax you pay on interest, dividends and capital gains.

6. If you’re retired, plan your retirement plan distributions carefully. If a retirement plan distribution will push you into a higher tax bracket, consider taking money out of taxable investments to keep you in the lower tax bracket. Also, pay attention to the 59 and one half age limit. Withdrawals taken before this age can result in penalties in addition to income taxes.

7. Bunch your expenses. Certain expenses must exceed a minimum before you can deduct them (medical expenses must exceed 7.5% of your adjusted gross income and miscellaneous expenses such as tax preparation fees must exceed 2% of your AGI). In order to deduct these expenses, you may need to bunch these types of expenses into a single year to get above the minimum. To achieve this, you might prepay medical and miscellaneous expenses on December 31 to get above the minimum amount.

The most important thing is to be aware of the tax deductions and credits that apply to you and to plan for taxable events. And don’t be afraid to ask for help. The benefits from consulting an experienced tax professional far outweigh the cost to hire that professional.

Owning and operating a home based business has many advantages and benefits over working at a regular 9-5 job. There is always the simple pleasure of just being at home in addition to the above average income the self employed usually bring in. One consideration that you may not have fully explored is the qualifying deductions you can make on your tax return.

Home Office Deduction

Your office at home and related expenses are allowed deductions according to IRS guidelines. To qualify, your home must be the primary place where your business is conducted. Additionally, the office space must be used exclusively for your business. It is best to have a room that is obviously equipped for business use only. Should a question arise, there must not be any doubt that the room is used for other purposes. Needless to say, keep the day bed in another room.Details of what qualifies as a home office and what can be deducted is explained more fully in various IRS publications found on their website at www.irs.gov

Home Office Building Expenses

You can deduct home office improvements and repairs. So, if you were to paint your home office, it is considered an expense associated with conducting business from your home and it is deductible.You can also deduct mortgage interest as a percentage of the full mortgage paid on your home. Lets say if your home office takes up 100 square feet of your 1,000 square foot home, you could deduct up to 10% of the interest on your home mortgage as a business expense. This also applies to those who rent. Property taxes paid for your home also qualify at the same percentage rate as the mortgage. Home owners can also depreciate a percentage of the home over 39 years. Home expenses that are not related to your business cannot be deducted.

Utilities

Using the same percentages, you can also write off utilities such as electrical, gas, etcetera.

Phones and Communications

The IRS considers the first phone line in your home to be personal. Additional lines for business use including a cell phone are tax deductible. Internet service fees are deductible as a percentage depending on its business use.

Security

A percentage of the secured home area and its security costs are deductible as a business cost.

Moving Expenses

Form 8829 titled Expenses for the Business Use of Your Home is where you would claim moving expenses related to your business. Again, if 25% of your belongings were business items, that percentage can be written off as a business expense. Unfortunately, a C corporation cannot claim this deduction.

Software

Any software that you purchase for business use can be deducted. You will probably be required to write off over a period of time programs that are over $500 in value though. Check with IRS guidelines for further information.

Insurance

The premium you pay on your home owner\\\’s insurance is partially deductible. Any insurance that covers your business specifically can be deducted as a cost of doing business. An incurred loss not covered by insurance can be deducted fully or partially depending on its\\\’ use.

Tax Preparation Expenses

You might be able to deduct the cost of having your taxes prepared even though it may not be specifically about your home based business. Any software that you purchase to help you prepare your taxes for your business may also be deductible.

Retirement Account

Contributions to a self employed retirement account may also help reduce your tax liability. Inquire with a qualified specialist like a CPA to determine current laws regarding this special benefit.

Educational Expenses

Any monies spent on learning skills that are specific to your home business are usually tax deductible. If you purchase a course in gift basket making for example as a precept to starting your gift basket home business, that would be tax deductible.

Transportation

You can write off transportation expenses related to your business. Traveling to and from a clients place of business, for example, would qualify. The IRS allowed 37.5 cents per mile for the 2004 tax year. You must keep detailed records though. A journal kept in your car with odometer readings should suffice.

Meals and Entertainment

If you entertain while conducting business even if it just over a meal it is deductible. While you can only deduct 50% of the cost of meals and entertainment, it is well worth keeping records. Additionally, you can deduct your meals if you are conducting business out of town. Please remember to stay within IRS guidelines to avoid awkward questions later.

Summary

Most home businesses do not take all the deductions that they are legally entitled to mainly because the idea of an audit is so fear invoking. Just stay within the IRS guidelines, keep receipts and accurate records. If you have any questions or doubts, call and ask the IRS. You can also consult with a tax preparer to help you discover, implement, and plan on what deductions you can legally take.

Remember, tax deductions are a way to foster the growth of your business. Take advantage of your legal right to legally minimize your tax liability, your home based business will be glad you did.

A report by Pune-based ValueNotes, estimates that as many as 360,000 US tax returns were prepared in India in 2006. It anticipates further growth, estimating at least 1.6 million returns will be prepared here in 2011. The estimates are conservative and the potential is much larger at 22 million returns per year by 2011, but actual offshoring will be limited by CPA firms’ inhibitions about offshoring. However, competitive pressures could force many more firms to offshore.

Says Glen Keenan, President of Xpitax, a facilitating outfit “The whole outsourcing business requires quite a shift in thinking for the CPA firms, so comfort factor has to be really high in order to do that”

The accounting and audit services are relatively new in offshoring and are gradually gaining maturity with each passing tax season. Unlike other services, which are traditionally outsourced due to cost pressures, the demand for Returns offshoring is stems from the lack of accountants and excessive workload during the “tax season”. The number of CPAs and other qualified accountants in the US are just not enough to meet the increasing demand from increasing tax compliance, SarbanesOxley related work, estate planning, advisory etc. The demand-supply mismatch has led to severe competition for experienced accountants and salaries are skyrocketing, even at starting levels. CPA firms are discovering that offshored Returns are not only turned around faster, but are also 40% to 60% cheaper. CPA firms after initial success with Returns preparation is slowly sending more work offshore: bookkeeping, financial statements analysis etc

Adds ValueNotes CEO, Arun Jethmalani, “The industry will quickly move beyond 1040s. Both the vendors and buyers are at an inflection point on the maturity graph, and we expect tax returns preparation will drive penetration into a wider range of offshored professional accounting services.”

The Indian offshore services provider landscape consists of captives of the Big Four audit firms (KPMG, PriceWaterhouseCoopers, Deloitte and Touché and Ernst & Young), American facilitating firms / agencies (Xpitax, SurePrep, CCH, IFR), Tier-1 multi-service BPOs (MphasiS, Datamatics, OPI), Tier-2 BPOs (PB Tech Impact Solutions, Cosmic Internet Technologies) and F&A BPOs owned/ controlled by Indian Chartered Accountants (GKM Management services, Business Accounting Services, Accountant Anywhere, Enablizer)

Pratibha K, analyst at ValueNotes feels “Facilitators like Xpitax and SurePrep are best positioned to service CPA firms, while Indian CA BPOs are well placed to operate as complete back-offices for accounting firms”

Based on analysis that included extensive primary research, ValueNotes has picked three winners from the current crop of vendors: Xpitax, GKM Management Services and Business Accounting Services.

Karthikeyan, MD, GKM Management Services opines, “As Chartered Accountants, we feel our biggest advantage is that we can speak the global language of accounting with the CPAs. We feel this is a good differentiating factor for us compared to the large corporate vendors. CPAs are bound to trust us more than the tech companies because of our common accounting background.”

The ValueNotes report titled “Offshoring Tax Return Preparation to India” suggests that return preparation will set the stage for other accounting services to be sent to India.

How many times have you done your taxes, and a week or a month later realized you forgot a deduction? The tax law is very complicated, so it’s easy to miss a deduction or two. In my experience, these are the top 5 missed deductions.

1. Non-Cash Donations

Did you clean out your closets this year? Chances are you donated those items to Goodwill or a similar non-profit organization. The value of donated items (clothing, furniture, etc.) is deductible. You will need to get a written receipt and assign a value to these items, but the tax savings are worth the effort.

2. Points on Refinancing

With interest rates so low the past few years, there have been a record-number of houses refinanced. If you refinanced, you may have paid points to get a lower interest rate. These points are deductible over the life of the new loan. In addition, if you incurred points on an old refinancing, any unamortized points are deductible in the year of the new refinancing.

3. Educator Expenses

If you’re a qualified educator (teacher, aide, instructor or principal), you can deduct up to $250 for materials you bought for the classroom. Qualified expenses include books, supplies, and computer equipment. This law is set to expire in 2006, so take advantage of it now if you qualify.

4. Investment and Tax Expenses

Expenses for tax planning and investment advice are deductible as a miscellaneous deduction, subject to the 2% Adjusted Gross Income (AGI) limitation. Expenses that qualify include tax preparation fees, safe deposit box fees, fees paid to investment advisors, legal and accounting fees related to tax planning, broker and IRA fees paid directly, investment publications, and more. Many people assume that they won’t have enough miscellaneous expenses to exceed the 2% AGI floor, but all of these expenses combined can be substantial, especially if you have unreimbursed employee expenses to add to these expenses.

5. College Savings or 529 Plan Contributions

Depending on which state you live in, contributions to 529 college savings plans may be deductible on your state income tax return. Because this deduction is only available on the state return (no deduction available on your federal return for 529 contributions), many people fail to include this deduction on their state tax return.

Tax return is the official entry related to the financial expenses of an individual or a company in a given financial year. Any individual who has an income is supposed to pay taxes annually to the government. The amount that a person, a company or any business has to pay as the tax amount differs depending on various factors. The tax preparation season in the United States witnesses hectic activity in the office of the accountants and CPAs. Everyone wants to pay their taxes in time and become tax free as soon as possible. Tax return outsourcing is the best bet for accounting firms to deal with this heavy influx of customers during the tax paying season.

Outsourcing means to give out the work of your firm to a third party. Outsourcing is one of the most successful business processes that have been undertaken in recent times. The amount of success and profit associated with this is immense and everyday many new businesses are undertaking this process. Paying taxes in time is very important if you want to rest easy during the tax paying season. And to pay taxes in time, you need to have your tax return prepared well in advance. There is no point in rushing to your accountant’s office at the eleventh hour.

If you have an accounting firm and are looking forward to undertake tax return outsourcing, there are certain things you need to take special care of. Any individual who works in the United States of America is required to file tax returns and pay income tax by the 15th of April every year. So, your accounting firm must be prepared very well to deal with this and tax return outsourcing is the appropriate means for this. First things first, you have to find out the best outsourcing firm that will do the work for you efficiently without any fault.

Due to the advancement in the field of science and technology, communication has become very easy no matter in which corner of the globe you are in. Outsourcing work is also done using these advanced means of communication. The third party that does your tax return outsourcing work begins the work once you have provided them with all the documents containing the financial details of your customers. While transferring the financial details of your customers you have to be very careful about the security of that data. For this you will have to check out the security features that the outsourcing company has in place to protect your customer information.

While doing tax return outsourcing through a third party, you are basically handing over a very important aspect of your business to them. So it becomes all the more important for you to do this entire process systematically and in a well planned manner. The very success and failure of your business depends on the kind of outsourcing work that you undertake for your accounting firm.

Im going to be preparing taxes for friends and family, and dont want to charge them upfront.

If I'm understanding the question correctly, you can't. Preparers are not permitted to receive a portion of their client's refund directly from the IRS.

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Someone sent this to me and it was too good not to pass on.

How many zeros in a billion?

 
This is too true to be funny.

The next time you hear a politician use the
word ‘billion’ in a casual manner, think about
whether you want the ‘politicians’ spending
YOUR tax money.

A billion is a difficult number to comprehend,
but one advertising agency did a good job of
putting that figure into some perspective in
one of it’s releases.


A.
A billion seconds ago it was 1959.

B.
A billion minutes ago Jesus was alive.

C.
A billion hours ago our ancestors were
living in the Stone Age.

D.
A billion days ago no-one walked on the earth on two feet.

E.
A billion dollars ago was only
8 hours and 20 minutes,
at the rate our government
is spending it.
While this thought is still fresh in our brain…
let’s take a look at New Orleans
 It’s amazing what you can learn with some simple division.

Louisiana Senator,
Mary Landrieu (D)
is presently asking Congress for
250  BILLION DOLLARS
to rebuild New Orleans   Interesting number…
what does it mean?

A.
Well… if you are one of the 484,674 residents of  New Orleans
(every man, woman, and child)
you each get $516,528.

B.
Or… if you have one of the 188,251 homes in
New Orleans , your home gets  $1,329,787.

C.
Or… if you are a family of four…
 your family gets  $2,066,012.

Washington, D. C
< HELLO! >
Are all your calculators broken??

Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax < BR>Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Tax
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Service charge taxes
Social Security Tax
Road Usage Tax (Truckers)
Sales Taxes
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Tax
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago…
and our nation was the most prosperous in the world.

We had absolutely no national debt…
We had the largest middle class in the world…
and Mom stayed home to raise the kids.

What happened?
Can you spell ‘politicians!’

I hope this goes around the
USA
at least 100 times

What the HELL happened?????

Tax season is one of the most nerve-wracking times of the year. From putting together all of the necessary tax documents to finding the right accountant, taxes can be time-consuming, frustrating, and a major challenge. Add in a home-based business and taxes can be downright overwhelming. However, there are some things you can do to make your tax season a breeze.

Choose your accountant wisely

One of the most important decisions you’ll make as a business owner is who you will choose to help you with your bookkeeping and accounting needs. Research accountants in your area and look for one that specializes in small business taxes. Ask if they will prepare both corporate and personal returns if needed. Make sure your accountant is clear on how they charge for their time – especially for questions over the phone.

I once worked with accountants who worked with large corporations. They were used to having very little contact with their clients, however with a new corporation I had many questions about how things worked. Needless to say it didn’t go well. Our current accountant specializes in small businesses and is available by phone or email if I have a question.

Set up your business accounts properly

I was told early in my business career that I must make sure to keep my business accounts and personal accounts separate. When I first began running my own business I simply added a second checking account to use for business purposes. There was no cost to do so I was able to set my income aside in this separate account.

I also set up a savings account to set aside my taxes each month. This was a big help at the end of the year knowing that all of my taxes were set aside and I could relax instead of scrambling to come up with the money.

Keep good records

Another way to keep tax season stress-free is to keep business receipts throughout the year. I keep a separate file in the filing cabinet next to my desk just for this purpose. This way I have everything in one place when tax season arrives. If you don’t have room for a filing cabinet, consider an expandable folder categorized A – Z. That way you can still divide up the taxes by topic, and won’t have to do that come tax season.

Keep records of your business expenses throughout the year. Request a list of items from your accountant or tax professional, so that you will know what items to track. Be sure to ask what counts as “business expenses.” There are certain deductions that you can take for your home, car, and utilities. Consult your tax professional about these deductions.

Know Your Tax Facts

It’s important to know the date that your taxes are due. Many S corporations are surprised when they discover that some of their tax forms need to be filed by March 15th and not April 15th. Another surprise to some home-based businesses is that if you pay subcontractors over $600.00 a year, you need to send them a 1099 by the end of January.

There are many places online to find more information about taxes. One great place to find more information is the Internal Revenue Service (IRS) website at www.irs.gov. They have sections with helpful information on both personal and business taxes. They also list contact information for local IRS offices where you can also find help.

Don’t ignore the taxes involved with running a home-based business and hope it will all work itself out. It takes planning and effort to be prepared for tax season. Do your homework when it comes to taxes and find an accountant that you trust to guide you through the tax maze. With the right preparation and help your tax season can be stress-free.

I also don't have any contact information for the person who had been doing my taxes for the last several years (it's with all the lost paperwork). Is it still possible to file correctly this year without that information?? Help!
Yes. I mean my previous years' tax filing paperwork…sorry.

If by previous you mean previous years, yes you won't need that unless you are doing some complex stock averaging or something like that. For a typical return all you need are this years (2006) tax records…1099's, employer information, banking records, mortgage info, etc.

I live in Michigan and passed the H&R Block course a few years ago. I have PTIN #, but no other formal certification.

You will need to become certified by completing and passing a certified tax course. Once completed you may need to join a professional orginazation but that depends in what state you are in. You are required to carry bond insurance. You will need to apply for tax id numbers for federal and state purposes. Then comes the time to purchase your tax hardware so you can be set up for electronic filing. After all of the above you can finally hang your sign. Thereafter to maintain your status as a certified tax preparer, you must have a certain number of hours of tax education every two years.