Top Tax Breaks for Entrepreneurs

Here we are, deep in the midst of tax season. If you haven’t filed your business tax return yet, now is the time to kick it into high gear. To help you finish strong, here are more valuable business deductions to help you save money on your taxes.

Taxes Paid

Let’s start with my personal favorite: TAXES. Yes, most entrepreneurs are able to deduct taxes they pay in operating their businesses. That being said, there are some rules for how and when to deduct:

• Sales taxes paid for business purchases should be deducted as part of the cost of the total item. This holds for all your normal day-in/day-out business purchases – think: supplies. As for larger purchases, a company car, these are capital expenses, and the taxes are added to the car’s cost basis, which is deducted over several years.
• Employment taxes paid for your employees are deductible as a business expense. If you are a sole proprietor or self-employed, your self-employment taxes are deducted on your personal tax return, not your Schedule C.
• If you pay real estate taxes for property used for business, you can deduct those taxes.

Auto Expenses

New business owners are known for putting in some serious drive-time. Most of us think “mileage” when talking about deducting auto expenses, but if you have a newer car primarily for business purposes, you might be better off going the actual expenses route. Instead of tracking miles, you track the actual expenses of operating and driving your vehicle, and that means you can deduct depreciation. Work with your tax professional to find out which method works for you, because once you choose, it can be a hassle to switch.

Starting a Business

If you started a new business in 2010, first, Congratulations! Now, you need to think about deducting the expenses associated with starting a business. Amounts you paid for advertising, supplies, repairs, utilities, etc, prior to opening your doors are deducted as capital expenses. This means there is a cap on how much you can deduct. In 2010, you can deduct up to $10,000, with any remaining amounts deducted over 15 years. Of course, once your doors are open, those costs are deducted as business expenses.

Business Interest

No business can operate without credit, but that credit comes at a cost: interest. Lucky for entrepreneurs, interest incurred for business purchases is 100 percent deductible. So hold on to your credit and loan statements, and deduct the amount of interest you paid in 2010.

Bad Debts

We must also discuss a harsh reality in these tumultuous economic times: bad debts. I think we have all been there, people who order, but never pay. It can take slim profit margins and reduce them to nothing. Fortunately for some, if your business sells actual goods, you can deduct the cost of the items that sold, but were never paid for. On the other hand, if your business is a service, there is no deduction allowed for bad debts. Bummer, but perhaps that little nugget of information can prompt you to evaluate your payment terms and get at least part of the sale up front.

New Equipment

If you purchased new equipment for your business in 2010, you may be able to write off the entire cost this tax season. How? Section 179, baby! I have written about this invaluable tax break before (http://www.womenentrepreneur.com/2009/10/new-tax-laws-equal-tax-savings.html) but the basic idea is that you may be able to deduct up to $250,000 of the cost of new equipment that was put into service by December 31, 2010. There are restrictions and phase outs, but for small business owners who made significant capital expenditures last year, this deduction can be a life saver.

What if you purchased some expensive software last year? Generally, you are required to depreciate the costs of business software over 36 months. However, lucky for you these costs are eligible for the Section 179 deduction, so long as it was purchased and placed into service as of December 31, 2010. This includes any software that came with a new computer system, or was purchased separately.

Charitable Contributions

If your business is an S corporation, an LLC or a partnership (in other words, a pass through entity), the business can make charitable donations, and pass the deduction on to you. This includes gifts of cash, or donated office supplies, like computers and desk chairs. If your business is a regular C corporation, the company can take the deduction itself. There is a caveat here, however. If you donate office furniture or computers, and they have been fully depreciated, your business will not receive a deduction. You can still donate and enjoy the sense of good will, but there is no tax benefit. Either way, it pays – in either tax breaks, or community appreciation – for your business to be charitable.

Advertising and Promotion

There is a quote credited to advertising legend Steuart Henderson Britt, “Doing business without advertising is like winking at a girl in the dark. You know what you are doing, but nobody else does.” In other words, your business may be exactly what someone needs, but if you are not advertising, they will never find out about you. Because advertising and promotion is so crucial to your business, those costs are all deductible. Remember to keep track of all your advertising expenses, including the costs for designing and producing any advertising, and the costs for placing those ads.

10 Tax Friendly Cities for Small Business Owners

Although some experts suggest that the economy is improving, many small business owners are still struggling, while also nervous about the possibility of an across the board tax increase next year. Fortunately, there are some places in this country that offer significant incentives to small businesses. To help all of the entrepreneurs reading my blog, I have put together the following list of tax friendly cities for small business owners.

Anchorage, AK

Although Alaska may not be the ideal climate for everyone, it can be a great place to do business. Both the income and sales tax rates are zero, and property taxes are normal compared to other cities in the country. Another benefit of living in Anchorage is the dividend payments each resident receives from oil-drilling taxes.

Seattle, WA

Seattle may be one of the wettest cities in the country, but it is also one of the best to do business in. Seattle is also the home of some of the most innovative companies in the world, including Boeing, Microsoft, and Amazon. The state has no income tax, and Seattle is even planning to revise their already business-friendly tax code to encourage more small business owners to move to the city.

Cheyenne, WY

Cheyenne is known for how windy it is, but for business owners a little wind is worth the great tax laws. Cheyenne has one of the lowest property taxes in the country, no income tax, and a low local tax burden.

Eugene, OR

Oregon is infamous for their nonexistent sales tax, and low home prices. Additionally, there is also no retail business license fee in Eugene. Portland is just a couple of hours away, with plenty of great entertainment and dinning options.

Las Vegas, NV

The state of Nevada has the lowest overall tax rate in the country, with no income, estate, franchise corporate, or gift taxes. The city of Las Vegas has an even more favorable tax climate, with low property and sales tax rates. Although the city has been plagued by high foreclosure rates, businesses continue to thrive as tourists continue to pour in from around the world despite the economic downturn.

Des Moines, IA

The city of Des Moines, Iowa has been rated one of the most affordable places to do business in the country. Household incomes are on the rise, as well as employment rates. The cost of doing business in Des Moines is about 15% below the national average, making it the perfect place for a new business owner to set up shop.

Raleigh, NC

North Carolina has a few cities that have been rebounding well through the recession, but Raleigh outshines all of the other nearby cities. Business friendly tax rates, combined with a low cost of living, make the recovering city very appealing to business owners.

Sioux Falls, SD

Like many of the cities on my list Sioux Falls, South Dakota has continued to develop through the recession, attracting new residents and higher business revenue. The city strongly appeals to business owners because of the lack of a state income tax, and other local corporate tax incentives.

Fort Worth, TX

The city of Fort Worth, may be smaller than Dallas, but in many ways it is much better for business owners. They do not charge a license fee for businesses, and property taxes are extremely low. Forth Worth is also the birthplace of American Airlines, and boasts an unemployment rate that is 14 percent below the national average.

Manchester, NH

Manchester offers a very favorable tax structure for business owners and residents alike. Close enough to reap the tourism from Boston, but more affordable to live and run a business in, Manchester is the last tax friendly city on my list. With no income tax, no sales tax, and low property and auto taxes, Manchester is definitely a great city to open a small business in.

Senate Fails to Cut Tax Provision in Health Law

According to the Associated Press, on Tuesday the Senate voted against repealing a new tax reporting provision in the new health care law. Even the White House backed the proposal by a Senator Bill Nelson to exempt companies with 25 or fewer workers and raise the reporting threshold for businesses with more than 25 employees.

It was an inconclusive ending to an early skirmish over repealing part of President Barack Obama's signature domestic policy achievement. But it signaled battles to come if Republicans gain control of Congress in the midterm elections this fall.

Tucked into the health law is a requirement that businesses file tax forms called 1099s with the Internal Revenue Service for every vendor that sells them more than $600 in goods. Business groups say it would create a paperwork nightmare for more than 40 million companies as they struggle to keep going in a weak economy.

But Nelson's amendment failed a 60-vote procedural test 56-42. That vote came shortly after the Senate also sidelined, by 46-52, an amendment by Sen. Mike Johanns, R-Neb., that would have repealed the reporting requirement.

"We're stuck on this issue of whether or not businesses are going to have to file these 1099s," Nelson said.

The votes were a sidelight in a debate over broader legislation to help small businesses, but nonetheless they underscored the difficulty of making any substantial changes to the health care law.

Continue reading at Google.com…

IRS Seeks New Issues for the Industry Issue Resolution Program

In a new press release, the IRS encouraged business owners and other interested taxpayers to participate in the Industry Resolution Program by submitting tax issues that are in need of a resolution.

The objective of the IIR program is to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that helps thousands of taxpayers.

Recent submissions accepted into the IIR program include:

• Network assets in the telecommunications industry (unit of property)
• Asset class determination under Revenue Procedure 87-56 for wireless telecommunication assets
• Vendor mark down allowances in calculation of inventory under the retail inventory method
• Network assets in the utilities industry (unit of property)

Guidance issued as a result of the IIR program includes:

• Technical terminations of publicly traded partnerships - procedures for requesting relief, delegation of authority for granting relief, and a sample closing agreement documenting the conditions under which relief is granted. (Industry Director Communication LMSB-04-0210-006)
• Auto Last In First Out - for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars. (Revenue Procedure 2008-33)

Higher Taxes Ahead for Business Owners

I made an appearance on Fox Business News a few days ago, to discuss higher taxes ahead for American business owners. If you missed my segment, you can check it out below or at FoxBusiness.com

Tax-Saving Moves for Small Businesses

There are a lot of important business tax changes on the horizon, and I always encourage my readers to stay up to date on these new developments. By studying the tax code, and planning your finances throughout the year you can save money when next tax season arrives.

The other day the Wall Street Journal posted a great article on easy tax-saving moves business owners can make. I have included a section of the article below, but if you are self-employed or own a business then I highly recommend reading the full text here.

Higher Taxes on Dividends

The maximum federal rate on dividends will automatically leap to 39.6% from the current 15% on Jan. 1 as the Bush tax cuts expire. Although the president has promised more than once to limit the maximum rate on dividends to 20%, the little-known fact is Congress must take action for that to happen. It's no sure thing. Even if it does happen, the maximum rate on dividends will jump again to 23.8% in 2013, thanks to the additional 3.8% Medicare tax that takes effect that year. So you're facing a 59% increase in the maximum federal tax on dividends (at least).

Higher Taxes on Long-Term Gains

Starting Jan. 1, the maximum federal rate on long-term capital gains will automatically increase to 20% from the current 15%. Starting in 2013, it will jump again to 23.8% due to the additional 3.8% Medicare tax. So you're facing a 59% increase in the maximum federal tax on long-term capital gains too.

What Can You Do?

Thankfully, you still have some time to take advantage of this year's historically low tax rates on dividends and long-term gains. Here are three strategies to consider right now. Don't ponder too long, because these ideas will take some time to execute, and Jan. 1 will arrive before you know it.

Strategy No. 1: Take Low-Taxed Dividends This Year

Say your profitable C corporation has a healthy amount of earnings and profits, or E&P. The concept of E&P is somewhat similar to the more-familiar financial accounting concept of retained earnings. While lots of E&P indicates a successful company, it also creates a tax side effect. To the extent of your corporation's E&P balance, corporate distributions to shareholders (like you) count as taxable dividends. Since the 2010 federal rate on dividends can't exceed 15%, dividends received this year will be taxed lightly. That probably won't be true for dividends received in 2011 and beyond. Therefore, shareholders (like you) should weigh the option of triggering a manageable current tax hit by taking dividends in 2010 against the option of absorbing a potentially bigger (but deferred) tax hit on dividends taken in future years.

Questions for the Tax Lady: May 31st, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: How difficult is it to get a tax ID number for my business?

It is actually a pretty simple process. You just need to complete and file IRS Form SS-4, which can be done electronically at IRS.gov. After you complete the form you will be your EIN (employer identification number) immediately. However, you can also simply apply online at the IRS website.

Question #2: How do I get a tax lien released?

The only way to have a tax lien released is by paying your original tax debt in full or paying your liability through an Offer in Compromise. Upon the occurrence of either of the previously mentioned events, the IRS will release the lien within 30 days. For more information you should visit the IRS’s website.

IRS Data Show Tax Agency Audits Big Firms Less Often

According to new data from the IRS, there has been a 20% drop in number of audits being performed on companies with more than $250 million in assets over the past decade. As Kevin McCoy of USA Today explains, although these numbers are surprising, the data could be somewhat misleading as the total number of returns filed changes every year.

The data confirm a downward trend identified in a critical analysis this week by the Transactional Records Access Clearinghouse, a non-partisan research organization based at Syracuse University. The IRS provided the data to USA TODAY after questioning TRAC's conclusions.

"There's been a steady decline in IRS audits of the largest corporations," said TRAC co-director Sue Long.

The drop is significant for taxpayers — who face a midnight deadline to file their personal income tax returns — because TRAC found the IRS identified nearly $28.6 billion in tax-underreporting by the nation's largest firms in fiscal year 2009.

The IRS said audit percentages are an imperfect measure because they include tax returns filed, a changing number the agency can't control. The annual number of large corporation audits rose more than 22% in the last decade, IRS data show.

Continue reading at USA Today.com…

Feeling Blue About Pink-Slip Taxes

From the Wall Street Journal:

With pink-slip taxes increasing, more small-business owners may be motivated to appeal claims for unemployment benefits filed by former employees who quit or were fired for cause—but such appeals can sometimes backfire.

U.S. employers are required to make regular tax contributions toward unemployment insurance. They're taxed at a rate that varies by state and the size of their payroll. That rate can increase as a business lays off more employees.

Rashelle LeCaptain says she has appealed four unemployment-benefits claims successfully.

"It's an experience-rated system," says Jeffrey Wenger, associate professor of public administration and policy at the University of Georgia at Athens.

So far this year, businesses with fewer than 500 workers shed 29,000 jobs, while their larger counterparts cut 18,000, according to payroll company Automatic Data Processing Inc.

Due to rising jobless claims, at least 35 states hiked their tax rates or wages subject to unemployment taxes this year, concludes a 2009 survey from the National Association of State Workforce Agencies.

While workers who leave jobs voluntarily or get sacked for poor behavior are typically deemed ineligible for unemployment insurance, some seek it out anyway. But the upcoming tax hikes mean employers may want to be diligent about appealing unwarranted claims, experts say.

Why a $14/hour Employee Costs $20

Although we all hear about how expensive it is to be a business owner, most people rarely consider how costly it can be to hire new employees. CNN Money posted a very interesting article on why an employee making $14 per hour can really cost their employer as much as $20 an hour.

You probably cost your boss a lot more than you think you do.

For Jim Garland, who owns a corporate aircraft cleaning and support services company, a $14 per hour worker has a true cost of $19.63 per hour, or about 40% more than base pay. This so-called "loaded rate" includes fixed expenses -- federal and state taxes, health insurance, workman's compensation, uniforms, and paid time off -- along with soft costs like the time spent training a new hire.

Washington's lawmakers are throwing a lot of ammo at reducing the jobless rate, including a new tax break for hiring the unemployed. But no matter what incentives the government offers, it's hard to convince business owners to hire until they're absolutely certain they need to. Employees are often the most expensive investment a business makes.

"Our entire existence revolves around two numbers: revenue and payroll," Garland said of Sharp Details, in Dulles, Va., which he launched out of his car trunk in 1991. Payroll for 60 workers accounts for around 70% of his firm's operating costs.

Garland outsources his entire human resource department. Joe Sherrier, director of human resources for Employment Enterprises -- the company that manages Garland's HR -- said that as a general rule, business owners should to expect an employee to cost an additional 25% to 30% on top of base salary each year.

Continue reading at CNN Money.com…

Oregon Approves Tax Increase on Top-Earners, Business

The State of Oregon approved a $727 million tax increase on businesses and high-earners this week, hoping to bridge some of the gap in the States budget. Well known for being a State with out a sales tax, it is not uncommon for Oregonians to approve taxes increases elsewhere. Checkout the following article on the development courtesy of Bloomberg.com.

Oregonians voted to keep taxes enacted by Democratic Governor Ted Kulongoski in July, according to a count of ballots cast by more than half of the state’s registered voters. Measure 66, which raises taxes on households earning $250,000 or more, passed by 54 percent. Measure 67, which increases corporate levies, garnered favor of 53 percent.

Legislators enacted the tax boost last year to help close a $4 billion hole that the U.S. recession opened in the state’s budget. The levies spurred a challenge from foes who gathered enough signatures to force the referendum. By targeting businesses and the wealthy, proponents parried resistance from voters who twice defeated tax increases in the wake of the 2001 recession.

“It’s a go-after-the-rich strategy,” said John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California in Los Angeles. “It shows that some voters have switched their minds and they’re more likely to go after the rich.”

The results are from an unofficial count of 1.12 million ballots released by the Secretary of State’s office by 11:15 p.m. local time yesterday. That accounts for 55 percent of the state’s registered voters, who cast ballots in a mail-in election that concluded yesterday.

Continue reading at Bloomberg.com…

Questions for the Tax Lady: December 21st, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: I have a small business with a few employees. If I throw a holiday party for them can I write off the expenses?

Yes, the IRS will let you deduct all expenses related to throwing a holiday office party. You could also deduct the costs of presents for your employees, as long as you do not give out cash or items easily exchangeable for cash, such as stocks.

Question # 2: What are some last minute ways to lower my taxable income for the year?

There are lots of quick ways you can lower your taxable income without leaving your computer. First of all, you could make a charitable donation. The Hannah Rose Foundation, a cause near to my heart, accepts donations online. Just remember to print out your receipt. You could also make an extra mortgage payment, or order energy efficient appliances online. For a list of 10 ways to lower your tax liability in under 10 minutes, check out this article on the RDTC Tax Help Blog.

Questions for the Tax Lady: December 14th, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: My husband and I are purchasing a new home. We already own another property, so will we be eligible for the new $6,500 credit if we close before the end of the year?

Yes. The Homeownership and Business Assistance Act of 2009 was signed into law on November 6^th, 2009, and became effective immediately. As long as you and your husband have been living in your principal residence for five years you should qualify for the credit. However, keep in mind that the credit does begin to phase out for couples making $245,000 or more per year.

Question #2: My business had a really profitable month. Do you have any ideas on last minute expenses to help lower my taxable income?

Depending on how many purchases you want to make, you could consider office furniture or computer equipment. Alternatively if you are looking for something cheaper, you could pay your January office rent early, or any other major bills such as your telephone service fee. On the other hand, you could defer some of your income until next year by waiting until after the end of the month to cash a check or two.

House Passes Tax Extenders Bill

From ABC.com:

The House passed a bill Wednesday that would extend for one year more than $31 billion in tax breaks. Among the 45 deductions and credits for businesses and individuals, which are set to expire at year's end:

A sales tax deduction that mainly benefits people who live in the nine states without a state income tax. The states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming. Cost: $1.8 billion.

An additional standard deduction for state and local property taxes for taxpayers who don't itemize their deductions. Cost: $1.5 billion.

A deduction of up to $4,000 for college tuition and related expenses. Cost: $1.5 billion.

A deduction of up to $250 for teachers who spend their own money for books and other classroom supplies. Cost: $228 million.

A credit that helps businesses finance research and development. Cost: $7 billion.

Accelerated depreciation for improvements made to leased restaurant and retail property. Cost: $5.4 billion.

Additional depreciation allowance for businesses that suffer damage from a federally-declared disaster. Cost: $1.4 billion.

CA Tax Panel to Recommend New Business Tax

As my home state’s economic woes continue, the California tax commission has been working on ways to increase revenue. Reports suggest the commission is about to recommend a new business tax that has “never been tried on a wide scale in the U.S.” They will reportedly recommend repealing state sales and corporate taxes then try the all-new business tax instead. Check out the following clip of an Associated Press article discussing the announcement.

A commission charged with reforming California's tax structure will recommend repealing the state sales and corporate taxes, flattening the income tax rate and taxing businesses in a way that has never been tried on a wide scale in the U.S.

The Commission on the 21st Century Economy is expected to submit a sweeping report to the governor and Legislature Tuesday after spending a year looking for ways to stabilize California's volatile tax system.

A draft copy of the report obtained by The Associated Press said the commission will recommend California change its personal income tax structure to reduce the burden on the wealthy.

It also recommends replacing the state sales and corporate taxes with a new business levy that taxes net receipts, in an attempt to tax the value of all goods and services produced by businesses in the state.

Continue Reading at Google.com…

Small Business Tax Mistakes to Avoid

Yesterday the Roni Deutch Tax Center – Tax Help Blog posted an entry with the top 10 small business tax mistakes to avoid. I’ve included a few items from the list below, or click here to see all 10 items on the list.

Independent Contractors

Since payroll taxes can add up quickly, some business owners will do everything they can to avoid them. However, this is a big mistake, and can lead to fines and penalties. One tactic that is commonly used is to hire all staff as independent contractors, even when they should be classified as wage earning employees. However, too many independent contractors is a huge red flag to the IRS, and in order to avoid penalties you will need to prove to the IRS that they all meet the rules for the classification. Even if the employees agree to the situation, the IRS may still call your bluff and audit you.

Payroll Taxes

Speaking of payroll taxes, as a business owner you need to understand how payroll taxes work, and how to stay compliant with the IRS in how you withhold and pay them. Since you take taxes out of your employees’ paychecks, it is then your duty to pay them to both the IRS and your states tax department.

Calculations, Calculations

Even if you avoid the rest of these mistakes, making a simple miscalculation can cause a lot of problems. It is of the utmost importance to be correct when calculating your tax payments and yearly tax return. Even if you do calculate the correct amount, the numbers all need to be typed or neatly written on all forms. If you do make a miscalculation on a quarterly payment, then you are going to have to pay the difference to the IRS when you file your full return in April.

Throwing Out Receipts

One of the biggest mistakes a small business owner can make is to throw away receipts for business expenses. Although regular wage earning taxpayers can throw out any receipts they wish, business owners need to be able to verify any purchases you deduct from your taxable income.

Improper Budgeting and Banking

You need to remember to keep your business and personal finances separate. One of the biggest tax mistakes you can make as a business owner is to intermingle your business and personal bank accounts, expenses, or finances. The IRS can monitor your bank accounts, and if they see you are not keeping your business and personal purchases then they are going to want to examine each one during an audit.

Missed the Quarterly Payment Due Date?

Although the estimated quarterly tax system was made to make taxes simpler for business owners and self employed taxpayers, sometimes it seems like they do just the opposite. The economy is making life more difficult on millions of Americans, and it can be very easy to miss an estimated quarterly due date. For those of you who may have missed last week’s June 15 deadline, I’ve put together the following article explaining what you can do.

Do Not Worry

First of all, do not worry. If you miss the quarterly payment by a few days then the IRS probably will not assess any penalties or fees, but you should still get your payment in the mail as soon as possible. The IRS’s main concern is that they get their money, and as long as you get yours to them within a couple of days then you should be fine.

Do Not Wait

Although some people will tell you it’s fine to just include more money in your next quarterly payment, this option can have serious consequences. The IRS wants self-employed taxpayers to make regular quarterly payments, and can enforce heavy fines if you wait. Unless you did not have any profit this quarter then you want to get your payment mailed out ASAP.

Get Professional Help

Calculating your own estimated payments is actually pretty simple—see The Truth About Estimated Quarterly Tax Payments on the RDTC Tax Help Blog—but if you are confused then you might want to seek out professional help. Not all tax preparation offices are open year round, so you might need to find an accountant. Additionally, most Roni Deutch Tax Center franchises are open year round and can help with estimated payments. To find a store close to you, check out the Locations Page on RDTC.com.

If You Need Time

If you cannot afford your entire tax payment right away right away then you can take another route. One common option is to simply pay by credit card. That way you take care of your tax liability with the IRS, and pay off your credit card balance whenever it is most convenient for you. You could also just pay what you can now, and pay the rest over time as you can. If the IRS sees you are making steady payments on the total, they are probably not going to penalize you much, if at all.

Confusing Dates

The name "quarterly payments" has misled more than one taxpayer. Since they are quarterly, it would be correct to assume you need to pay every three months right? Wrong. There is actually only a two month space between the April 15^th, and June 15^th due date. Later in the year you also have a four month quarter to make up for the reduced spring time quarter.

Avoiding Missed Payments

There are several ways you can make sure you do not make this mistake again. Put the due dates (April 15th, June 15th, September 15th, and January 15th) in as many places as you need to in order to remember. This can include your calendar, planner, iCal, a date book, or even a sticky note on your desk. You may even be able to set an alert on your cell telephone months ahead of time.

Can You Believe...? Tax Information for Business

A new article from Reuters.com broke down some of the most interesting tax facts for business owners. You can find a portion of the text below, but the full article can be read here.

The IRS may recognize your business as one entity for tax purposes but your home state or a state that you are doing business in may not. As a result the protections that you think you have (e.g., personal liability protection) may not be in place in the event you are sued.

Some states require partnership registration fees that may go as high as $120,000.

Owners, members, officers, and partners who are protected against "personal liability" for the entity obligations may still be held personally liable for obligations that result from their failure to conform to tax rules and regulations.

Failure to comply with the tax laws in the states where you do business may subject your business to paying full taxes in your home state and additional taxes in the states where you do business.

There is a way for a business in economic trouble to avoid paying IRS penalties for delinquent taxes if the business can prove that it made the IRS its top priority by expending only absolutely necessary funds to complete work that would generate the income to make federal tax payments.

You may have to pay the entire tax debt or obligation of your business even though you have partners, fellow members, or other associates who were incompetent or dishonest and created the situation that caused the obligation.

Tax Tips for Truckers

Truck-driving is an imperative industry to our economy. Consequently, Congress has designed numerous tax benefits designed specifically for truck drivers. Unfortunately, I noticed there is not nearly enough information available to truck drivers concerning taxes, so I decided to shed some light on the issue here on my blog. To help truckers across the country, I have compiled the following list of tax tips for truckers to give you a better idea of what your taxes should look like.

Keep Immaculate Records
With the tax-filing complications of the trucking industry, dozens of truckers get audits in the mail every year. While an audit is never a "good" thing, as long as you have your financial information organized then you should not have anything to worry about. Throughout the year, keep your receipts and financial records together and safe in a box. When its time to get your taxes done, take the whole box in so that you have all the info you need.

Self-Employed Benefits
If you are a self-employed truck driver (i.e. you own your own truck and work for whatever jobs come along), you will be able to deduct regular business deductions. This can be a great benefit, because on top of all the other tax benefits you receive as a truck driver, you will be able to take advantage of the many benefits and deductions available to self employed individuals.

Business Deductions
If you are self-employed, there are many truck-driving expenses you can look into deducting. The basic rule of thumb with these deductions is that about anything that goes on or in your truck can be deducted as a business expense. This can include decorations for the inside of your cab, the materials you use to clean your truck, and even repair expenses.

Itemizing Tips
While it is not true that itemizing deductions will automatically give you an audit, it does make sense that itemizing can make it more "likely". This is only due to the fact that itemizing uses more paper; therefore the IRS spends more time looking over your return. This is not a bad thing however, just be sure to keep good records and keep all receipts. If you do not receive a receipt for a truck wash or other expense, write down the amount, description and date in a “receipt book”, which the IRS should accept.

Meal Allowances
According to the IRS, you are allowed to deduct up to $52 worth of meal allowances, as long as you are on the road that full day. Keep a logbook with dates and amounts that you eat while on the road or it will be very difficult to come up with an accurate number.

Multiple State Taxes
Perhaps the biggest tax headaches truck drivers face is the taxes they have to pay in every state they are registered to drive their truck in. For some truckers, this is can be as little as 1 or 2 states. However, for truckers driving across the country, this number can quickly add up. Each state will collect vehicle registration fees, and some states will charge other tax fees as well. Make sure your tax preparer is up to date on each state’s tax codes regarding out-of-state truck drivers.

Truck Weight
If you drive a truck with a large gross weight (over 55,000 pounds) you will need to pay the federal highway use tax by August 31st every year. If you have not already purchased a truck with this weight, be aware that if you do, this tax will be due for the first time at the end of the month in which you make your truck purchase. After you have paid it for the first time, you can decide to pay it every year in August, or in quarterly payments to reduce the burden.

Fuel Taxes
Luckily for truckers, most states appreciate your purchase of their fuel and will give you specific tax breaks. Therefore it is imperative that you keep good track of your mileage and fuel purchases.

Hire a Professional
With so many IRS rules and regulations as well as deductions and credits available to truck drivers, you should definitely consider hiring a tax professional to help you sort it all out. You may even find that your tax preparation fees pay for themselves, as a professional will be able to tell you any and all deductions you are eligible for, even the new ones you may or may not know about yet.

Problems With Recent Tax Foundation Study

From A Taxing Matter:

“The Tax Foundation is busy again pushing its latest propaganda idea--that the US has such high corporate taxes that it stifles competition and hurts our economy--with a new "competeusa.com" organization.

Wrong. Fact is, though our tax laws include statutory rates that are fairly high (35% for corporations earning about $18 million or more annually) but generally in the same ballpark as those of other developed western nations, the actual tax rates paid by US corporations are extraordinarily low, around 6%. Remember the latest GAO report (reported elsewhere on ataxingmatter) that shows that two-thirds of US corporations pay no federal income tax. That's not just the ones that are losing money, but also many corporations that have record high profits (including some Big Oil companies) that end up paying next to nothing in taxes.

That's because the statutory rate of 35% is only on paper. Corporations engage in aggressive tax planning that cheats the system, and they take advantage of a bountiful number of lucrative loopholes built into the system under the four decades of Reagan-style corporate favoritism and deregulation, including items such as accelerated depreciation, various expensing provisions that let corporations deduct before they really have an economic cost, and the lucrative research & development credit that lowers taxes dollar-for-dollar for R&D expenditures that corporations have to do anyway (so they do not serve as an incentive to greater development) and that corporations have often already done prior to the enactment of the one-year "extensions" of the credit that have been taking place as transitions to no-credit for years.

As a result, the US is actually a corporate tax haven, with the lowest effective corporate tax rates of almost all the countries that participate in the OECD. That's a little fact that the Tax Foundation apparently doesn't want the American public to understand, since all its hype is in terms of statutory rates and not in terms of effective tax rates.

Now, the Tax Foundation does put out a figure for the amount of corporate taxes collected--a little more than $300 billion. But it doesn't provide the historical context--the share of federal revenues paid by corporate taxes has decreased substantially, while the share of overall revenues provided by everybody else (including the little guys through payroll taxes, among other means) has increased.

The Tax Foundation does something else it often tends to do in setting out its propaganda: quote one source as a definitive authority, without mentioning conflicting conclusions from other respectable sources. The Tax Foundation wants employees to believe that they are the ones who "really" pay corporate taxes come. But we don't know the incidence of the corporate tax, and there are a number of conflicting studies. Even the studies that exist make a number of assumptions that may bring their conclusions into doubt. Many experts think it is primarily the shareholders (of course, that's also the claim of many of the right-leaning organizations like the Tax Foundation when they are arguing for eliminating corporate taxation because, they claim, it amounts to "double taxation" of the same earnings when shareholders are taxed on their investments). But it may be predominantly consumers, or workers, or creditors, or so diffuse that it isn't borne by any one segment of the economy. What we do know is that many corporations have been making very high profits and paying low taxes, and that the corporate contribution to the fisc is considerably less as a percentage of GDP than it used to be, at the same time that wealthy US taxpayers are paying astoundingly low overall effective tax rates on their income, including very low rates on their income from capital, while they are garnering an ever larger share of the income pie.

Instead of talking about a need to reduce corporate tax rates, the Tax Foundation should be answering the following question: if low corporate taxes are the key to success, how does the Tax Foundation explain that very favorably taxed US corporations--like Big Pharma, Big Oil, and of course Big Banks--that pay among the lowest tax rates in the developed world, still claim they need more government subsidies in order to successfully compete against their international counterparts (or each other, in many cases). Isn't this just another one of those straw-man arguments claiming a "need" to reduce US taxes for the "public" good, when the real goal is to eliminate taxes on corporations and on income from capital, so that wealthy corporate owners and managers can continue to garner a larger and larger share of the nation's income?

What US corporations need is more long-term thinking and less of the mentality that has reigned for decades, that leads to restructuring to build profits into hedge funds and equity joint ventures and managers and shareholders, but not leaving much on the table to build long-term commercial success. It's not a tax cut these corporations need, but cuts to the drivel at the top (executives earning in half a day what their average employees earn in an entire year) and more committed participation in the community and nation that has made their incredible success possible.

I hope Americans are too smart to buy more of this propaganda that is part and parcel of the deceptive marketing of the corporatist state. It's time to recognize the power that corporatism gives to wealthy owners and managers of corporations and set the rules to benefit the public good, rather than the wealthy few.”