IRS delays start of tax filing season to January 30


On January 8th, the IRS announced that it was delaying tax filing your 2012 tax return until January 30th.  However, certain forms won’t be available until late February or early March.  This means that most taxpayers can begin to file their 2012 tax returns on January 30th.  However, if you own a business or rental property, you probably won’t be able to file either business or personal returns until March.

How to determine when you can file:

  1. Did you start a business or buy rental property in 2012?  If yes, you can’t file until March;
  2. Did you own a business or rental property in 2012?  If yes, you can’t file until March;
  3. Are you a partner or S Corp shareholder in 2012?  If yes, you can’t file until March.
  4. If you answered no to all three questions, you can probably start filing on January 30th.

Forms 4562 Depreciation and 8582 Passive Activity Losses won’t be ready until late February or early March.  Just about every business and rental property owner uses Form 4562.  If your rental property generates losses, you also use Form 8582.  There are some other delayed forms like Residential Energy Credits ans Qualified Adoption Credits that might keep you from filing until late February.

Leave a comment or email me with any questions if you are unsure as to when you can file.  My clients will also receive a letter with their estimated filing date.

Email from the IRS


I say this slowly for the Jets fans out there:

THE IRS NEVER USES EMAIL!!!!!!!!!!!!!!!!!!!!!!!!!!

Any email that you receive from the IRS is a scam.  Don’t open it or read it.  Delete it immediately.  See this announcement from the IRS.

If it makes you feel better, you can forward the email to the IRS at phishing@irs.gov.

Why does my accountant take so long


Or cost so much.

Because:

  1. You never bring the information that I request.  Yes I need your W-2, 1099 and every other damned form you get;
  2. You want me to save to save you the most money.  Sometimes it takes meditation or a stroke of genius or a bottle of Jim Beam to find the deductions or planning that ordinary accountants miss;
  3. The price is already set and I’m a craftsman.  Do you think the Pope bugged Michelangelo while he painted?
  4. There’s a lot at stake.  Mess with the IRS?  Are you insane?
  5. I am really @#$?&! busy.  Working 16 hour days can wear a guy out.

My advice to any client, even if you are not enlightened enough to have me prepare your books and tax returns, is be prepared.  If you’ve been working with your accountant for more than one season, you should know what information is needed.  Ask questions in August not February.  Bring cookies or booze or Rolos when you come to see me.  And, realize that I’ve saved people and companies millions of dollars (seriously) in my career.  Sometimes it just takes a little longer to get it right.

 

Starting a small business – Income Tax


I hate paying taxes.  I hate when my clients have to pay taxes.  I hate when my clients say, “I’m happy that I make enough money to have to pay taxes.”  You really shouldn’t be.  Imagine what you could do with the money if you didn’t have to pay it – give to charity, invest in your business, invest in anything, save for your kids, pass it on to your kids, etc.

If you own a business and it’s profitable, you will have to pay Federal, State and maybe local income taxes on the profit.  There is no way around it.  If you don’t, the government will find out and they will come after you.  There are basically three ways to report and pay income taxes on business income:

  1. as a corporation;
  2. as a pass-thru entity, and;
  3. as an individual.

The method depends on the legal and tax structure of your business.  The rates may be higher or lower for a corporation than the other two methods.  A pass-thru entity is a business that does pay the income tax.  Instead, it passes the income thru to your individual tax return and you pay taxes at the individual rates.

Pass-thru entities include partnerships and S corporations.  Your business is automatically a partnership if there is more than one owner.  S Corporation status is an election that your business makes.  It can be made for qualifying regular corporations, partnerships and single person LLCs.  A Limited Liability Company is a legal entity designed to give corporate legal protections to non-corporate entities.  My business is organized as a single person LLC.  LLC really has nothing to do with taxes unless you elect to be taxed as a C Corporation or S Corporation.

If your business is a C Corporation, the profits are taxes at the corporate level.  The corporation files a tax return and pays any tax due.  The owners do not include the corporate profits on their Form 1040.  They would only need to report dividend income if the corporation paid dividends.

If you are the sole owner of your business, you will report your revenue and expenses on Schedule C of your Form 1040.  The earnings are taxed at individual rates.  You are required to pay estimated taxes on a quarterly basis towards your income taxes from your business.

Selection of a tax entity usually makes sense once your business is profitable with annual net income over $40,000 or you have employees.  Otherwise, for the sake of simplicity, it is probably best to use the default tax entity based on your legal structure.

 

Strategy for innovation – Society and Culture – AEI


Strategy for innovation – Society and Culture – AEI.

I think this is all crap.  Innovation shouldn’t be affected by government.  While I agree that government should get out of the way, I believe that innovation needs more private capital.

Let’s go outside the box.  Let’s introduce a 3% annual wealth tax on all accumulated wealth over $10 million.  At the same time introduce a new R&D wealth tax credit that offsets the new wealth tax dollar for dollar with each dollar invested in R&D, software development excluded.

Private capital has been misallocated for decades now.  Job growth and real GDP growth will depend on actual, tangible production.

 

Starting a small business – Taxes Part 1


I should be finishing a third response to the IRS for a client under audit.  The response has me so angry and frustrated that I decided to start a new thread.  By the way, I’ve had 3 clients get audited in 10 years of having my own firm.  That’s 3 out of about 3500 tax returns.  The IRS audits about 1% of returns each year some I’m either lucky or good – most likely a combination.  The first audit was due to being way to aggressive on deductions.  The second audit was because the IRS agent couldn’t figure out the Form 1040.  No lies – his supervisor admitted that I was right over the phone but decided to let her agent audit the return anyway.  The US Treasury got nothing from the audit but I had to bill my client more than $500 for my work.  Insipid.  This last audit was a no brainer.  I warned the client when I filed it.  The IRS originally wanted about $14,000.  I should have it down to less than $200 when I finally finished.  It will probably cost him about $1000 in heavily discounted fees from me.

Besides the relief of ranting, I’m telling you these stories because taxes are a large part of a business.  All three of the audits above were on small businesses or self-employed individuals.  Taxes suck.  They are complicated.  The average person (non-HGH or steroid using) probably couldn’t carry the paper version of all the forms, codes and regulations for just the IRS.  When I started studying taxes, they could fit in a duffle bag with room left over for a notebook, textbook, Mountain Dew and M&Ms.

Here’s a list of taxes that the average business must confront:

  • Federal Income tax – business or personal
  • State Income tax – business or personal
  • Social Security tax
  • Medicare tax
  • Self Employment tax if self employed
  • Federal Unemployment tax
  • State Unemployment tax
  • State and local Sales tax
  • Property tax
  • Real estate tax
  • Myriads of excise taxes (usually paid when you buy something)

I’ll address the taxes in separate posts.  Please leave any questions in the comment section.  I’ve have to get back to my audit response.