Tag: Corporate Tax


California Corporation Franchise Tax Due April 17th 2012

Sanjiv Gupta CPA - 8 years ago
Attention California Corporation OwnersDo you have a California corporation with no sales or no income?  Did you set up your corporation in the last quarter of 2011 and planning to start your business in 2012?  You operated business in 2011?If you have set up a corporation at any time during the year 2011  than you are required to file the California Tax Return for the year 2011.  In case you had no income or have not started your business until now,  you are still required to file the tax return and pay a minimum of $800 California Corporation Franchise Tax. This is the minimum tax and all California corporations are required to pay even if they had incurred a loss or had no income for the taxable year.What if you had LLC, C-Corp or S-Corp?Make no mistake – California Corporation Franchise Tax applies to all kinds of corporations.  As long as you were registered in the state of California as corporation during the tax year, you are required to fine the California Corporation Franchise Tax Return and pay the tax.   Failure to file the tax return can ensure penalties and interest.I didn’t do any business last year, how can I avoid paying a minimum $800 tax?In most cases, you will have to pay the minimum tax but it certain cases you can get relieved from this minimum tax.   There are certain rules that need to follow.   We recommend you contact your certified public accountant or give our office a call to discuss your options.$800 Minimum Tax is only required in 2nd Year of Business:A good way to look at this is that in California, you are not required to pay the California Corporation Franchise Tax when you incorporate your business or your first year of business.  You pay the tax for next year but you pay in advance when you file the tax return for the previous year.Office of Sanjiv Gupta CPA can help you file California Corporate Franchise Tax Return and work with you to reduce your tax liability and improve your bottom line.  If you live or work around Fremont, Palo Alto, Cupertino, Sunnyvale, San Jose or San Francisco Bay Area than we recommend you make an appointment to come into our office for a consultation.   We also offer appointments by phone for those who can’t come to the office.  You can reach us at 510-825-7563 to get your California Corporation Franchise Tax questions answered.You only got a couple more days left to file the 2011 Franchise Tax Return.  Our office is open during the weekend to accommodate the last-minute filing by San Francisco California Corporations.  You can still make it in time and avoid any late penalties.

Taxes Due Today | Did you file ?

Sanjiv Gupta CPA - 8 years ago
Did you file your taxes?Tax returns are due today.  You must get your tax return and tax payment postmarked by today. Unlike previous years post offices are not open late today.  So, get to the post office on time.  Most post offices will close at standard 5:00 closing time.Need to file extension?If you are not ready to file then make sure to file an extension for your tax return.  Filing extension will buy you additional time to file the tax return but it won’t buy you time to pay your taxes.  It is a good idea to make an estimated tax payment if you feel you will end up owing taxing.   If you end up owing taxes when you file tax returns, you will have to pay penalty and interest.You can file for the extension by visiting the IRS site here.  You can file form 4868 to get an automated 6 months extension.Here is some important pointer you should consider if you are thinking about filing late:1. File on time even if you can’t pay:   Some customers don’t file tax returns because they don’t have enough money to pay for taxes. This is not good. You should go ahead and file the taxes. There is no reason to request an extension. Pay as much as you. IRS will send you the bill or notice of balance due. You can also apply for a payment agreement by calling the IRS at 1-800-829-1040. You can also apply for a payment agreement online from the IRS website.2. Extra time to file An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April 18 deadline, plus you may owe penalties.3. Form to file   As stated earlier, if you do not an extension than make to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to the IRS by April 18, 2011. You can also make an extension-related electronic credit card payment.4. E-file extension  You can also get an e-file for an extension.  You can go to your CPA or using one of the tax software. Don’t worry IRS will acknowledge receipt of the extension request if you file by computer.5. Traditional Free File and Free File Fillable Forms   Filing for an extension is Free.6. Electronic funds withdrawal While you are filing for an extension, you can also request for electronic funds withdrawal. Have a question about filing your taxes ? Give us a call at 510-825-7563 or leave us a comment below.

How To Deduct Commuting Cost ?

Sanjiv Gupta CPA - 8 years ago
Have you thought about deducting your commuting expenses?  Most of us living in the Bay Area drive a long distance to get to work and would love to deduct our growing commuting expenses. So, here is what you need to know about deducting commuting expensesSelf-employed or contractors (aka 1099 employees) can take advantage of deducting commuting costs.  You can establish a home office and deduct the cost of traveling between your home office and any other location where you conduct the work-related activity.  Activates such as meeting with clients for interviews or business presentation can be considered as work-related.To take advantage of this kind of deduction, you must have a home office aka the principal place of your business.   You can only deduct the commuting cost from the “principal place of your business”.  The good news is that you get to decide where you want to set up the “principal place of your business”. Consultants and self-employed will find it very convenient to set up their residence as their principal place of business.  Please note that in order for your home to qualify as “principal place of your business” it must be used regularly and exclusively for management and administrative functions of your business.Now that you have your base office established, you can deduct your commuter cost between your home office and work locations by car.  You can write off the standard business mileage allowance or you can write off the actual expenses including depreciation of your vehicle.You take the deduction by filing Schedule C if you are a single-member LLC or sole proprietor or on Schedule E if you are a partner or member of multimember LLC.Still have a question about deducting your commuter deduction – simply leave us a comment here.

Red Flags | Invite For An Audit

Sanjiv Gupta CPA - 8 years ago
One of the common questions asked by Tax Payers is “Can I get audited?” or “What can flag my tax return for an audit?”. These questions bug so many taxpayers that we are often bombarded with the same question via email and phone calls.Good News | Less than two percent of taxpayers get audited a year. Your chances of getting audited increase with your income. How IRS selects tax returns for audit is “Top Secret” and I would assume that even the IRS employees don’t know the answer to that question. However, experts presume that it is a combination of multiple factors that may prompt your tax return for audit. You will need to have multiple flags in order to get audited – but you never know.1. Making Calculation/Math Error(s): “This is simplest but one of the common flags for an audit,” says Sanjiv Gupta, CPA. Most taxpayers use computers these days and this reduces the risk of a math error. However, the software depends upon the data you enter. So if a moved a couple of zero’s here and there – you may be called for an audit. Sanjiv pointed out that common math errors typically time pressure. Folks trying to do their tax return at the minute are more prone to making a mistake.2. Taking Abnormal deductions. How about $100,000 charitable donations from someone making $50,000 year – possible but outrageous. If something is out of ordinary, attach proof with your tax return.3. Submitting inconsistent information. What happens if you report income of $25K but your employers report $45K? Audit, of course. Make sure information going to IRS from all places matches with numbers you put on your tax return. This is especially true if you were paid in cash or have any kind of reported income.4. Making More Money. Yes – you have a better chance of getting audited if you make $200,000 or more. How much more you may ask? Recent IRS data shows that audit of taxpayers making $200,000 increased by 34& during 2010 tax year. Just imagine, how is it like if you are making over 1 Million dollars.5. Filing a business return. Most businesses run into losses every now and then. However, if you show loss three out of five years than you are at higher risk of getting audited.6. Taking home office deductions. This sounds like an easy deduction but big guys at IRS are looking out for home deductions.7. Handwriting your return. Still, filing paper tax return? It is a well-known fact that handwritten tax returns have more errors than the ones generated by the computer. Guess what, IRS knows this too.

Discounted Kaiser Insurance for Small Business Owners

Sanjiv Gupta CPA - 8 years ago
Our public accounting firm is focused on Small Business Owners and Individuals and many times new business owners ask us about health insurance.   Most of us live in the Bay Area and prefer  “Kaiser” as a  health care provider and therefore I gathered some basic information about Kaiser health care plans for small business owners.Kaiser offers many health care plans but one that suits the need of small business owners is called “GROUP POLICY”.  You can buy this group policy in two flavors.  One with the annual deductible and one with no annual deductible.Plan with annual deductibles cost about $250-$300 less than the non-deductible plans. Both policies cover doctor's visits and other services offered by Kaiser.  Both plans have minimum out of pocket doctor’s visit cost but the key difference is that with an annual deductible plan you have to pay the minimum deductible ($1500) before your major benefits kick in.   For example, a daily rate for the hospital room maybe $500/night and you will have to pay for 3 nights before your insurance pays.  However, with non-deductible plans you won’t be required to pay for these three days.So, if you and your employees are fairly healthy and won’t be needing any major services than you can opt for deductible plan and save a significant amount on a monthly basis.How about Spouse and kids?Yes, of course, your employees along with officers/owners of the company can also enroll their dependents including kids and spouses.  Most policies don’t allow you to include your parents.What are the requirements for this kind of policy?You must have a business in good standing.You must have two or more people enrolling in the policy.More than 50% of all eligible persons should have insurance.Can I get a tax deduction for the health policy?You can read my post about health care policy deduction for more details.How much does the policy cost?I found the group policy of very good value. Rate varies by age but here is a simple example. Females less than 30 years old can get this kind of policy for about $300.  Not Bad?How can I enroll in group policy?Simply call Kaiser and ask for enrolling in group policy.

Legal Zoom Alternative In San Francisco Bay Area

Sanjiv Gupta CPA - 8 years ago
Sanjiv Gupta CPA firm is a great alternative to legal zoom business and corporation set up offerings.  We serve clients from Fremont, San Jose, Cupertino, Palo Alto, and the entire San Francisco Bay Area. Our firm set up Corporations, LLC, S-Corporation, Partnerships, and Sole-Proprietorships. If you are thinking about starting a new business than Sanjiv Gupta CPA firm can be a great choice over the Legal Zoom online website.Why Should You Do Business With Sanjiv Gupta Instead of Legal Zoom?Starting a new business requires proper planning both from a tax perspective and long term survival of the company.   What kind of corporate structure you set up should depend upon how your business will operate and how you plan to exit your business.  This kind of advice is hard to get from Legal Zoom or other online corporation set up practices.  When you sit down with Sanjiv, you will understand why you should choose one kind of business structure over the other.  You will learn how one structure can save you thousands of dollars in taxes.  You will learn how you can exit out of the business when you are ready to sell or retire.Online practices like legal zoom do not focus on customized and individual service but firms like Sanjiv Gupta can deliver exceptional value to new business owners in this arena.   In addition to setting up your company, you can also learn about tax saving strategies and how you should handle payroll and other taxes.Is Legal Zoom Cheep?Legal Zoom is only doing paper processing.  You decide how much paper processing should be worth.  You should still consider consulting with your CPA or attorney even if you started your business using Legal Zoom.Can you do this yourself?Of course, you can do the paperwork yourself.   But the key is to identify what makes a long term success.  Saving money on important tasks as setting your company may not be a wise move. You may end up paying extra taxes just because you picked a wrong structure or timing of setting up your company was wrong.Is it as easy to set up a company with Sanjiv Gupta CPA firm as with Legal Zoom?This one is a tricky question.  Sanjiv Gupta CPA firm specializes in a customized solution that can be a good fit for the long term.  Therefore, you must set up an appointment with Sanjiv Gupta before we can set up your corporation or LLC.  You may consider it an extra step but this can very useful and save thousands of dollars in taxes.Ready to set up your business. Give us a call at 510-825-7563 or visit us online at sanjivcpa.com

Non Profit Tax Filing | Due Date is May 15th 2012

Sanjiv Gupta CPA - 8 years ago
Tax time is over? Not for everyone.Exempt Organization needs to file their tax return by May 15th, 2012.  Non-Profit tax returns are complicated and very tedious.   We strongly recommend that you consult with CPA for the filing for tax return.   Our office can also help with your non-profit tax return.Not-Ready to file your non-profit tax return?No problem. Simply file for an extension. You may incur penalties if you file a tax return late without filing for an extension.What do I need to file:  There are many requirements for filing the tax return but the key is Form 990 and its related schedules. This form and schedules include a significant amount of financial reporting. Here are just some of the things you will need.Revenue and Income Statement:  This should include categories (e.g. salaries, postage, rental revenue),Balance Sheet:  Once again, this sheet should include categories (e.g. cash, accounts receivable),Statement of Functional Expenses:  Tell how all expenses are allocated to either program services, fundraising, or operations.Expenses Report: This report should have all expenses divided into individual program services (e.g. mailings, a seminar program).Revenue Report:  This report should include the details of sources of revenue, with categories.  Basically, the IRS wants to know how money was raised.As you can see IRS wants the detail of your operation including income and expenses.  This can be quite tedious especially if this is your first time filing the return.  Also, note that the IRS provides specific categories and classes for revenue and expenses.  Your tax return can be quite complicated if are not using these categories.Our firm can help you set up a proper bookkeeping practice for the non-profit and help you file your tax return.

How To Start A Start Up ?

Sanjiv Gupta CPA - 8 years ago
We are almost at the end of May and weather is starting to get hotter by the day. This weekend, in particular, felt hotter than previous weekends.   Temperature is almost the same as last weekend but I am feeling it a bit hotter.   Maybe  its because of Facebook.   The company has created hundreds of millionaires in the bay area and things are really starting to get hot around here.When we hear stories like Facebook, an entrepreneurial sitting in us may ask “how to start a start-up like Facebook ?”A startup like Facebook means a very successful start-up.  How do you do it?Ingredients for a good start-up and well known.  You need good people with great skill sets, make something that customers actually want and do it with the least amount of money possible.   You don’t need to invent something new or come up with a super cool idea.  You just need something that is much better than what’s currently available.If the formula is well known than how come we do see IPO’s like Facebook every day?I recently met with the CEO of one of the leading franchises in the United States who invited me to consult on their marketing strategies.  After carefully listening to my ideas he commented that ‘I also have lots of ideas but we often fail to implement those.”  This reminded me of a phone call a couple days with the CEO of a leading restaurant owner in Fremont.   He made a similar comment.   I meet with many business owners and CEOs of small and medium-sized companies and all of them have great ideas but they either fail to implement their ideas or invest in wrong ideas.The truth is the failure is usually due to a lack of implementation.  Some fail to put the right people in right place, some spend time, money and energy on the wrong product and some spend so much money doing it that they go brook long before they can become profitable.Recently example of such failure in  Silicon Valley was Solyndra.  They picked the wrong product and spent millions of dollars in taxpayer money only to lose it all within months of initial government back funding.How do you get the right people in the right place?This one is probably the most tricky part.    People involved within your company can be your relatives, friends and they may or may not be the right fit for the job.   Do you keep running the show with them or do you find the right person for the job?A common solution is to keep a friend or relative until the company becomes profitable.   This strategy may work if you only have a couple people in the wrong place and they are not providing a substantial amount of support.   However, most companies will fail if they continue on this path.You need to find the right place for the right people.Building something people will like?This is what we call market research.  Find the answer before you spend thousands of dollars.   We are living in a computer age and you can research almost anything.   You can hire professionals like Fixtro to do market research for you.Gather all the information you need before you start.  Some people even call this a feasibility study.Doing it for as little as possible?Should you open office in Stockton CA or San Jose CA? Should you travel or do video conferencing? Should you hire employees or consultants?  There are probably hundreds of decisions you need to take to cut the cost on a daily basis.   Good CPA or in house financial consultant can help you cut costs.Some new business owners cut corners instead of cutting costs.  Having a good CPA can help you avoid such mistakes.   Good CPA can also help you keep most of your earnings in your pocket instead of paying it in taxes.Ready to start a startup?You can contact the office of Sanjiv Gupta CPA for tax and company advice and you can talk me to for business research and marketing.

Know How To Distinguish Independent Contractors

Sanjiv Gupta CPA - 8 years ago
Independent contractors are those people or businesses who provide freelance services to other companies. As they are not qualified as employees of a company, the independent contractors are not liable to enjoy any employment taxes or benefits. As employers can save a lot of employee’s taxes and other benefits with independent contractors, they classify many employees as independent contractors to save money on payroll taxes. To stop this practice there are certain factors that can distinguish an independent contractor from an employee.Understanding The Concept Of Independent Contractors Having a clear understanding of the concept of independent contractors is the first element to distinguish between them and an employee. An independent contractor can be a person or a company that offers its services to another company. What makes them different is that these contractors follow their own schedule and work as per their own free will. So the employer company has a limited hold on these independent contractors. The employer companies cannot regulate which jobs the contractors accept or how much pay they will demand and when they will work on a certain project. Another point of difference between independent contractors and employees is that the independent contractors will usually bring in their own supplies, or have some kind of investment in equipment. The employer company also is not liable to provide any insurance or any compensation to them. Determining Ways To Identify Independent ContractorAs hiring independent contractors relieve the employer of giving payroll taxes and other liabilities, many companies list a portion of their employees as independent contractors to save taxes. Some companies also outsource their work to independent contractors to achieve the same goal.  Therefore, the IRS has the knowledge of a few factors with which they can identify a contractor from an employee. The first thing that IRS notices is the way the employers exert their authority on the worker. If it is an independent contractor the employer will only give details about the work but if it is an employee, the employer can exercise more control over the way he works, how it is ultimately carried out and his performance. So if the employer is giving out a more defined and whole set of instructions the worker is considered as an employee. Whereas if the instructions are limited and the worker has the freedom to execute a project on his own terms then he is considered an independent contractor. IRS will consider any worker to be an employee if the employer can regulate the way the worker gets paid or if it is the employer who provides all the tools and supplies. Whereas if the worker is paid in accordance with the job done, can offer his services to other companies at the same time or has a considerable amount of investment in the supplies used for the job then the worker is considered as an independent contractor. In addition, if the worker faces profits or losses in a certain work then he is an independent contractor.If the worker and the employer have a written contract and if the employer is liable to pay insurance, casual leave and sick leave then the worker is considered to be an employee. Another way to identify an independent worker is to check if the worker expects to work for the employer only for a specific period of time then the worker can be classified as an independent contractor. These are the factors through which the IRS distinguishes an employee from an independent contractor. It is crucial for the employer to classify his workforce properly as a miscalculation can make one liable for penalty and payment of all possible dues. 

Obama's Health Care Plan and Tax Deductions

Sanjiv Gupta CPA - 8 years ago
As many of you may know that starting 2014 Obama’s healthcare plan will kick in that may allow low-income families to enroll in a qualified health care plan and claim the insurance premium as a tax credit.  However, some of us are still wondering what if a qualified health plan offered by Obama's health care plan is cheaper than the one offered by our employer.    Can we switch to a different plan?  If we make the switch, can we still deduct premium?Answers to these questions are equally important to the employers.   Employers would like to predict their exposure to the employer responsibility excise imposed should if they offer the healthcare that does not provide minimum value (What is the minimum value?), or is unaffordable.   After all, employers want to know if they should continue with their health plans or not?“Have IRS not finalized the rules?” you may ask.  You can read T.D. 9590 published by the IRS and Treasury Department.  You will find many rules to determine eligibility for and calculation of the tax Code section 36B refundable health insurance premium tax credit added by the Patient Protection and Affordable Care Act, as amended.   These rules address many matter e.g treatment of required waiting periods or relief from erroneous automatic enrollment in an employer-sponsored plan.  But at the same time, they leave many issues for future guidance and public interpretation.For example, Employers can find out when employer plan coverage is affordable for the employee by using a simple formula (i.e., the employee’s contribution is no more than 9.5% of household income) but do not address whether coverage is affordable for related individuals who can enroll in the employer plan.Many groups are working closely with IRS and Obama’s administration to finalize the rules and calculation methods to determine how much premium should be deductible.  Taxpayers are also being invited by the IRS to comment on these matters.Would you like to share your thoughts on this matter?

Turning Over Your Business? 5 Steps To Know

- 1 year ago
Whenever we start a business we hope to make it big, earn profits and expand a lot. But doing these is not easy. While we all expect the maximum return from our businesses turning over your business requires the implementation of some essential steps. So if you, like many are trying to know and understand the steps that will help you to turn over your business, this article will surely be of much help.Increasing your turn overIncreasing your turn over is what all businessmen try to do but to actually be successful in doing this requires some steps. Here are a few of them:Lowering costs: Lowering costs of the company will inevitably result in a higher turnover. You can lower the expenditure of the company by getting your products at a lower cost from the supplier and by evaluating the business processes and systems to reduce any wastage. Reducing these costs will ensure an increased turn over. You can also try to reduce overheads and introduce a functional method that will help your employees to properly utilize time. The less time they spend on unnecessary activities the more time they will spend on productive works thereby increasing your turnover. Asses your employees: Assessing your employees’ performance can also help you increase your turn over.  Motivate your employees to work better to increase profitability, appoint the seniors to hand over easy tasks to the juniors so that they can have more time to work on important projects and reward employees when they have done something good. Creating a proper work schedule and keeping yourself updated with how the work is being carried out, who is responsible for a certain project and the end result will bring out better quality work and increase your turn over.Plan well: Proper planning and execution help a lot with increasing your turn over. Having a proper plan will ensure that the work will get done quickly and you will also be able to adapt to changes. You should set a short time, well-thought plans and see if you can implement them properly. You can also modify your plans as they are implemented to suit your needs. Developing a customer base: Increased customer base will automatically mean an increased turn over. You can increase your customer base by developing your service and product quality. You should have a market survey to understand the recent trends and offer your products or services according to those trends. Pricing your commodities perfectly so they give good value for money is a great way to expand your client base. Providing after-sale services such as training and installations creates a good feeling about your company to the customer and this can help attract more customers. You should also develop your customer care services so that they can solve their problems quickly. The number of satisfied customers the more turnover you will have.Check your profit margins: Periodical checking of the profit margins of the company will help you identify the pattern of sales and profit from which you can take proper steps to either maintain or to bring the necessary changes to increase turnover. If you find high sales with high profits you should definitely continue implementing the action plan and reward those employees who have made your product successful. However, if you find that your profit margins are low but sales are high you can increase your pricing of the product. Many times there is a considerable profit but the sales are low. In such a scenario you can think of plans that will help you increase sales and bring more profit to the company. But if you are faced with low sales and low profits you then need to stop the present action plan and incorporate something new that will help you to hike up the sales and in turn more profits. Hopefully, these steps have helped you understand how you can increase your business turn over. It is very important that you remain updated about the strategies being used to generate more sales for a product or service. Since a large customer base can expedite your company turnover you must design your products and services to suit their demand. Since employees are also a big part of the company you should motivate them and have a reward program to encourage them to increases the profit margin of the company.

Will Mitt Romney (Republican) File for OVDI 2012?

Sanjiv Gupta CPA - 8 years ago
The easiest way to evade tax and pile personal savings is to tuck away money in offshore/overseas accounts. Mitt Romney, the Republican presidential candidate is currently enjoying attention for having put away his ‘vast wealth’ into overseas establishments. However it is not Romney alone, who stocks money in Swiss bank accounts, provides funds to third world countries (money laundering) and clever as he is he has allocated all asset listings to a certain omnipresent ‘Uncle Sam’.But can Romney rest in peace? Can the ‘Uncle Sam alibi’ silence his political foes and also the common mass?  This is, in fact, a warning for the others to take due notice of summons for the Tax Justice Network. TJN conceptualized by British Houses of Parliament is a research center that analyzes and reports on ‘how tax evasion on part of high net worth investors affects national economy’. In its latest report ‘The Price of Offshore revisited’ it presents a detailed study on financial assets invested in foreign fiscal centers and secrecy structures. It traced $21 trillion (a total of US and Japanese economy combined) as reserved with overseas banks.  This amount is exclusive of non-financial assets like real estate holdings, yachts & bonds, and equities, etc. if these non-cash assets are added to $21 trillion, the amount increases to $32 Trillion, TJN reports.The IRS is trying hard to convince high net worth investors to reveal detailed property holdings in order to clear tax with the US government. In fact, the IRS has designed two amnesties to encourage the investors to bring back national currency from their foreign bank accounts.  Offshore voluntary disclosure programs this year have brought in more than $5 million as taxes, interests, and penalties. Almost 33,000 taxpayers revealed their financial holdings in order to dodge criminal charges for evading taxes.The offshore voluntary disclosure endeavor is an ongoing process. Penalty charges for those that have avoided paying taxes for overseas assets have gone up by 27.5 % from 25% in last year’s program. However, the amnesty is far better for high net worth investors for it charges only a penalty fee. On the other hand, if the IRS discovers foreign assets after the amnesty period is over then they might as well confiscate all fiscal assets or might even send the investor to federal jail.

Failure to Oversee a 55 Million Dollar Investor Education Fund

Sanjiv Gupta CPA - 8 years ago
Failure to oversee a 55 million dollar investor education fund by U.S. securities regulator got them strong criticism by the federal judge William Pauley. This fund is a part of about 1.5 billion regulatory accords with Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and with other banks. Pauley has stated that the SEC has proved to be indifferent in overseeing how the nonprofit organization is handling the distribution of money.The settlement of this fund which took place in 2003 was governed by Eliot Spitzer who was the attorney general of New York of the time. The settlement was geared to put an end to the scandal dealing with the publication of biased analyst research. Being responsible for overseeing the implementation of the settlement, judge Pauley has time and again raised his concern about whether the goals of the settlement are being met.In Wednesday’s hearing he expressed that while some parts of the fund are being channelized properly, he enquired the regulators for putting up vague expenditure and auditing by the nonprofit organization and the FINRA Investor Education Foundation. He pointed out a number of instances where the expenditure is not transparent enough. One such instance is a 91, 500 dollar grant to Genesee District Library in Flint, Michigan which resulted into two events one of which included an investor education for children aging 2 to 5 years. Pauley pointed out that while an early start to investor education is surely beneficial but giving toddlers this education seems pointless. He also gave another example of irresponsible expenditure, citing the instance of a full-day seminar of 130 attendees in West Virginia that cost $ 57,000. He also said that it was also not sensible to host a financial fraud conference in 2011 where the SEC chairman gave an address of a five-star hotel instead of the SEC’s headquarters or FINRA’s office.In Wednesday’s order, Pauley demanded that the SEC, as well as the foundation, should put an end to their noncompliance with his 2005 directive which included the submission of annual audits along with a detailed report of the receipts and expenses. In relation to this order, the spokesperson of FINRA objected to many of the claims of the judge but both FINRA, as well as SEC, has agreed to provide the court with all the necessary information. The Genesse library system refrained from commenting on this issue.

Things to Consider Before Closing Down Business

Sanjiv Gupta CPA - 8 years ago
Well if you are closing your business it’s not bad news. You are sensible enough and you know that lately, your business has not been bringing you the money you thought it would and so you took the right decision or maybe that you have got a plush offer, etc. Once the decision has been made now the only thing to focus upon is how to close that small business most effectively.Well, the above words might have sounded crazy but nevertheless, they are facts. If you are quitting from your small business venture then do it properly. And to help you in that here are the few checklists that you should keep in mind while retiring.Things of importance while clearing that office Of course, as per the IRS norms for closing your business, you need to ensure that important forms regarding the company’s annual tax returns and deductions are filled out and kept in proper order for future requirements. Again documents related to business property disposal, reporting of exchange of similar type property and documents relevant to changing the form of the business. Also if you can check on internet sites and browse relevant pages that may guide you towards closing that business most successfully, then you can try “ Close your business: What you need to do “ FindLaw page. Here you will find in detail the necessary things you ought to do before closing down that business. Besides other important suggestions, it gives detail about the concepts of licensing, tax considerations, dissolution and many more. If you want personal opinions too then also you can go to the Hub pages site learn about how to close a small business.  “A Road Map to Closing Down Your Business (FindLaw)” this has step by step remedies of suggesting proper methods of closing down your business.So whatever may be the reason for your closing down of business do it properly and I wish you all the luck for your next venture. For more information visit the site 

Surviving Small Business Ordeals With A Friend!

Sanjiv Gupta CPA - 8 years ago
Wow never had you imagined that there will come a time when surviving that business venture with your friend has become so difficult. It has strangely put your friendship in jeopardy too. This was indeed uncalled for.While starting that business together there were high hopes running on both ends but then tightening of funds, lack of trust and other minor quarrels started to get the better of the two of you ad finally the business. It may be vice versa also. But whatever the case outcome is for the detriment of both. So why not take care of it and nip it right at the bud?Don’t know how? Well here’s what you should do.Important Ways To Keep That Venture Rocking!Talking is rocking for all business – it is extremely important that both the friendly partners engage in honest conversations. It’s absolutely crucial that they talk out their differences and share the solutions to the problems bothering them.• Have written proof/ agreements – the agreement of your business should be in writing. These come in handy at times of disputes and can effectively put things in order. So this is another aspect to keep the business partnership going.•Separate attorneys must be made to review the documents separately – in order to gain full knowledge about how the agreement affects you, you must get a separate attorney for yourself ad so does your partner. Whatever may be the case, there should be an attorney’s involvement in the understanding of the signed document.•Draw the line between friendly and business communication-Be vocal about any important issues at the workplace. Any issue, major or minor must be approached immediately to stop them from going out of proportion. No matter what leaves the business in the office.•Bond outside the office – discuss issues other than business when not in the office – This goes a long way towards saving both the business and the friendship. Mutual respect is enhanced, and tensions avoided.Whatever may be the case it is important to note that the two important aspects of life, that is, work and friendship must not be let go of easily.

How Tax Shelters Help To Reduce Tax Burden?

Sanjiv Gupta CPA - 8 years ago
A tax shelter is a great way of reducing tax. It can effectively reduce your tax burden to the IRS (Internal Revenue Service). But tax shelters can turn to be a problematic issue if the law is violated. So make sure that the tax shelters are legitimate.A tax shelter is actually a financial arrangement that helps to reduce a taxpayer’s tax burden. Tax shelters accomplish such difficult jobs by decreasing and sometimes eliminating your taxable income. This is also a great tool to create tax-deferred or tax-exempt income.You have to be very cautious while setting up the tax shelter. It should be legitimate. If it’s proven abusive then it can create a big problem. When the purpose of a tax shelter is avoiding tax, then that is considered as an abusive tax shelter. There are many other purposes involved with legal tax shelters.A legal tax shelter can effectively reduce taxable income. The main purpose of setting up a legal tax shelter is to report the IRS very little of your income. Tax shelters are extremely beneficial for high-income professionals. Especially big companies are to take the help of tax shelters for avoiding tax payments.The most common examples of tax shelters are charitable donations, pension plans, retirement accounts, municipal bonds and so on. Investments like life insurance and health insurance plans can also be considered as tax shelters. Investing in real estate is also a perfect example of a legal tax shelter. So it can be said that tax shelters work great as an incentive for investment.A tax shelter is actually a great strategy. The more intelligent reason you can show to the IRS the easier will be to reduce the amount of payable tax. Larger firms have no way but to use this subtle way of cutting the taxable amount.Without much stretching the laws, you can really set up a beneficial tax shelter. A charitable donation is a legitimate way to avoid taxation. The authorities of the IRS monitor tax shelters efficiently. So going with laws is the best way to reduce your taxable amount. To know the laws better you must visit

Defending the “hobby loss” Rule with a Business Plan

Sanjiv Gupta CPA - 8 years ago
A business plan is very important where a business is concerned. As long as you have a business idea, you need to draft a business plan so that you can know how to set up the business. When a business is recurring losses, the IRS audits them. Also, the IRS reduces the inference or deductions claimed when a business is not set up to gain profit. The Internal Revenue Service has for many years defended ‘hobby loss” rule with a business plan. Listed below are some of the factors to consider like;Does the taxpayer rely on making an income from the current business?Has the taxpayer made some income from this business in previous years? If the answer is yes, how often has the business made this income and also how huge was the income?Has the taxpayer out aside reasonable time and also dedication to the business to show that he or she has plans of making some income from it?Has it been proven that the taxpayer has a tax plan of losing cash in the business to lessen its taxes from their main source of profit?Is this business used to employ family relations who are in lower tax groups?If the business in itself does not bring any income, does the taxpayer logically foresee generating income from the appreciation of equipment used in the business?Does the income reason for the business overshadow the fun parts of the business?If the business is generating losses, are these losses as a result of conditions out of the taxpayer’s power? Or, are those losses going at the start-up stage of the activity or business?Has the taxpayer made income from a comparable business in years gone?Does the taxpayer have the needed trade or activity understanding to go on with business success and also make the needed income? Or has the taxpayer seen or talked with other people who can provide the right routes and education to run the business very well?If the business is making any losses, has the taxpayer tried to modify its process to make better and enhance income?The secure harbor where the taxpayer is considered is if the business has generated some income in at least 3 years out of the last 5 years of its operation. When a business is not making profits like it should, there is a need for the IRS to come in and check if the reasons are beyond the control of the business. This helps to ensure that, the taxpayer is relieved of paying taxes.For every business, the survey will differ. This is because; every business will have a different issue from the other. So, not all the investigations come with the same results. Due to the fact that there are different companies and also businesses, there is a strategy for every trade or business type to get the best results. If you need a business plan, you may contact me at 510-709-4030.

President Obama and Taxes Next Year

Sanjiv Gupta CPA - 8 years ago
The re-election of President Obama to the white house may have come as a relief for him; however, it just is that part of the deal. He comes back to deal with the headache of an economy that is just coming out of the ditch. He has to handle the expiry of the tax breaks that have for a long time now buffered the American population. In fact, the imminent increase in the capital-gains tax rate in this coming year is fueling an increase in the sales of some privately-held businesses in America.The fact of the matter is that most of the business owners in America have lots to gain from making a sale on their assets as they seek to dispose of off the underperforming assets, especially those deals that can be closed before the start of the next year. At the turn of the year, it is expected that the maximum tax on investment income will rise from its current threshold of 15% to a minimum of 23.8% on most of the capital gains. This situation is especially true for higher-income earning homes. In the same vein, it is expected that many sellers will convert their equity in homes into retirement funds.While some people took advantage of the increase in taxes to make smart sales, there are other people who have chosen to wait until the last minute to see if there are chances of a better deal. However, the legislatures have to first come to a decision with regard to the direction the tax increases and spending cuts will take. While a number of austerity measures are being put in place, individuals and companies alike are being asked to take some austerity measures of their own.As it stands, the top tax rate is set to go up at the end of the year by a minimum of 3.8 percentage points due to a provision introduced by President Barack Obama through the overhaul of the health care system. Even then, now that the election is a done deal, the negotiations that will take place are expected to bring the numerous tax and spending measures to the economy.Sometime in the year 2012, the president and Congress had come into an agreement to extend the current 15% capital-gains tax rate all the way to this election year. However, that deal is on its death bed, and another deal must be hammered out. The absence of such a deal by the close of business this year could only mean one thing; that the rates revert to the higher ones that stood at almost 25%. Add this to the extra charge from the health-care law, which is to be charged for higher-income households as well as the maximum tax on investment income, and then you have a rate of up to 28.8% or even more. In essence, for the high earners who do not handle their estates in time, the next year is going to be a tough one.The re-election of President Obama to the white house may have come as a relief for him; however, it just is that part of the deal. He comes back to deal with the headache of an economy that is just coming out of the ditch. He has to handle the expiry of the tax breaks that have for a long time now buffered the American population. In fact, the imminent increase in the capital-gains tax rate in this coming year is fueling an increase in the sales of some privately-held businesses in America.The fact of the matter is that most of the business owners in America have lots to gain from making a sale on their assets as they seek to dispose of off the underperforming assets, especially those deals that can be closed before the start of the next year. At the turn of the year, it is expected that the maximum tax on investment income will rise from its current threshold of 15% to a minimum of 23.8% on most of the capital gains. This situation is especially true for higher-income earning homes. In the same vein, it is expected that many sellers will convert their equity in homes into retirement funds.While some people took advantage of the increase in taxes to make smart sales, there are other people who have chosen to wait until the last minute to see if there are chances of a better deal. However, the legislatures have to first come to a decision with regard to the direction the tax increases and spending cuts will take. While a number of austerity measures are being put in place, individuals and companies alike are being asked to take some austerity measures of their own.As it stands, the top tax rate is set to go up at the end of the year by a minimum of 3.8 percentage points due to a provision introduced by President Barack Obama through the overhaul of the health care system. Even then, now that the election is a done deal, the negotiations that will take place are expected to bring the numerous tax and spending measures to the economy.Sometime in the year 2012, the president and Congress had come into an agreement to extend the current 15% capital-gains tax rate all the way to this election year. However, that deal is on its death bed, and another deal must be hammered out. The absence of such a deal by the close of business this year could only mean one thing; that the rates revert to the higher ones that stood at almost 25%. Add this to the extra charge from the health-care law, which is to be charged for higher-income households as well as the maximum tax on investment income, and then you have a rate of up to 28.8% or even more. In essence, for the high earners who do not handle their estates in time, the next year is going to be a tough one.

Your Tax Credits and Deductions Are Expiring Soon

Sanjiv Gupta CPA - 8 years ago
The US congress and senate have a way of waiting until the last moment before making the many needed changes in legislation. In the year 2012, the country was just coming out of a deep international recession that affected the economy deeply. At that time, the congress and senate fell over themselves as they scrambled to try and save the normal Americans from feeling the effects of expiry on the tax breaks that they had gotten used to. This was then; however, the same situation seems to be in the offing at the end of this year. Most of the extensions that had been given earlier in 2012 are nearing their end with the collapse of this year, and as yet, few safety nets have been put in place to protect the common folk for when that time comes. Pundits point out that the delay in enacting changes in these laws or determining the direction that any fiscal interference from the government will take largely depends on the result of the presidential election. Well, the elections have come and passed, and the democrats had their way with regard to the presidency. As such, it is expected that such bills such as the Family and Business Tax Cut Certainty Act of 2012, which was approved by the Senate are going to sail through to the implementation stage.This is only half the solution; while the bill covers most of the extensions, there are some and albeit crucial parts of the bill that have not been looked at. This to some extent indicates the direction that congress may be leaning in relation to the tax breaks that have been the norm for a while now. The result will be a reaction that is part in full to what the market is used to. If this is the result, then it is expected that people are bound to tighten their belts, so to speak in the recent future.Initially, the bill took care of the tax provisions that affected individuals including restoring the alternative minimum tax (AMT) patch. The bill also took care of the deduction for state and local sales tax as well as the parity for employer-provided mass transit and parking benefits. Such provisions for these businesses include the extension of research and development credit in addition to the work opportunity credit. On the other hand, some of the things that this bill overlooked include the impending changes that are expected to happen on income, estate and capital gains tax rates.Recently, estimations by the Joint Committee on Taxation held that the renewal of this smaller list of provisions would have a net effect of costing more than $192 billion in loss of revenue from the fiscal year 2013 all the way to the fiscal year 2017. This is by no means a small number; however, the main question is “can the US economy handle such a loss at the moment?” If so, just what is the net return if such a move is undertaken?

Important Year-End Tax Implications For Ranchers

Sanjiv Gupta CPA - 8 years ago
The thing about taxes is that you always have to pay them at one point in your life. In fact, at some point, it is said that the only thing human beings are sure about is death and taxes. Ranchers make up a fairly large percentage of the human population in the USA. So what are the implications of end of year tax implications to the ranchers in the USA?The answer to this particular question is somewhat complicated in itself owing to the multifaceted way in which it can be tackled. This is because the implications can be economical, social and fiscal in nature. The magnitude of these implications is also something that needs to be looked at, especially considering that a larger part of the population is just picking itself up from the throes of financial recession. However, in this article, we are going to look at the major financial implications of the end of year tax changes to the average rancher.The baseline of this article is simple; if congress does not act this year to shield the local folk by enacting safety nets with regard to ranching, then the result is that the New Year will not be too good to the ranchers. This is because such a move will have the net effect of raising the rates on virtually all the taxes that taxpayers pay, and in this case, ranchers. Such taxes include, but are not limited to income taxes, capital gains, dividends, wages, gifts, and estates. Looking at the wholesome situation, most of the tax provisions that expire at the end of the year actually have a direct bearing on the tax amount that is paid by the ranchers and farmers in much of the USA. Most of the farmers and ranchers in the USA are owners of a large estate through which they carry out their businesses. Estate taxes are some of those taxes that are bound to increase if changes are not made. As such, a person paying a 35% tax on his estate may be slapped with a top rate tax of up to 55%. Such increases are bound to increase the cost of business and of the products sourced from these ranches. This is one of the reasons that experts advise businessmen to take care of their estates before the year-end. If not, then the net result may be something that is not entirely good.It is for this particular reason that the end of year tax implications should be put into account not only by the accountants as they crunch the numbers but also by the government and the legislators as they continue to debate the taxation issue. Initially, there were exemptions to the extent of 10 million dollars; however, with the expiry of the tax breaks, the situation is bound to get a little tighter. This is because only exemptions of up to 1 million will be entertained by the taxman. 

New Year Tax Cut Updates

Sanjiv Gupta CPA - 8 years ago
It is now common knowledge that the New Year will signal an increase in taxes. This is not very good news, especially at the start of a new year. However, with the expiration of the term of most of the tax breaks that had been legislated, there is not much choice for the common folk. The chances of another extension being provided are all the same minimal, especially considering that the estimated loss of these breaks is about $192 billion. The effects of such a loss are expected to be felt way into the year 2017.  The resultant net effect of these changes in the tax threshold is meant to cover at least 90% of the citizenry. These changes are expected to cut through the social fabric, from the very rich people to the very poor people. Even then, this does not mean that the population in general and the government are ready for the result of such tax changes. While the government may be happy that more and more people will be covered with the tax threshold, the result may not be smooth sailing for everyone who is affected. As such, the total effect is an increase of about $2000 in the tax bill of individuals.Now that the elections are complete, it is expected that the congress will finally get down to business and deliberate on the tax bills. The problem with this kind of deliberations is that the congress will be forced to balance delicately between the spending cuts that they seek and the tax increases that they want to effect. As such, while the legislators will be busy trying to reverse or change the scheduled tax increases, various accounting professionals are expecting to get busy with the process of re-arranging the tax benefits of their clients so as to minimize the effect of tax on the bottom line. It is therefore expected that a lot of lobbying will happen before a blueprint for tax in the New Year is let out to the public. On the other hand, the public can only hope that the result of this intense lobbying is a relief nonetheless.It is the expectation of many people that some particular types of taxes are bound to make a come back in the process. Some of these include payroll tax, which was cut at the time to help inspire growth. This kind of tax is set to affect virtually everyone who falls within the tax bracket. The president has been on record as pushing for some of the tax cuts as well as some of the scheduled tax increases. With a government in debt even more than it was before, his reasoning cannot be faulted one bit. At the end of the expiry period, the average rise in taxes that individuals and businesses pay is bound to affect the bottom line of most institutions. Businesses, individuals and the government have to work together so as to fend off any negative impact that such a situation may bring.

Single Member LLC’s gets Charitable Contribution Deduction

Sanjiv Gupta CPA - 8 years ago
Before getting into the details of Single and dual member LLC, one must be sure about the facts that constitute LLC. The Limited Liability Companies or enterprise has the unique capability of blending corporate elements and partnership structures whereby one can reap rich profits. In this form, the company is legal where both the partners enjoy limited liability. The prior motive of LLC’s may not be entirely profit-oriented, it may be a partnership for other social causes as well.Based on this there was a recent announcement from the IRS that any contribution to a national LLC which is totally owned and managed by an IRC organization shall be treated like any other that has been made in the name of charity. There is a condition though, that the LLC is not liable for taxation as any other corporation.The IRS although had been earlier provided with guidance to conduct both public charities and private foundations in case of tax treatment for operating through single-member LLC. The release of a Notice 2012 – 52 which came to the fore only after 31st July 2012 acted as the initial guide for both the corporate and individual contributors which stood tantamount to the deductibility of various contributions. If left unaddressed or not the treatment of tax to an individual member, or “disregarded entity” these limited liability companies are organized in a place of the foreign jurisdiction. Limited Liability Company AdvantagesThe advantages of a limited liability company are  as followsThey have the flexibility to choose and get elected to be taxed as a single owner, partnership firm, hence a great deal of flexibility is enjoyed by an LLC Member of an LLC are liable to enjoy the distributive share of profit and loss, income or expenditure and so there is a sense of moderation in the practices of an LLC.Members are greatly protected compared to other firms as per the state corporate laws.There is hardly much paperwork or recordkeeping one has to get involved in LLC.Only one person can also set up an LLC.The advantages are aplenty and one only needs to arm oneself with full knowledge to deal with such matters intelligently and successfully.

Want Funding For Your Business ? Look at Crowdfunding

Sanjiv Gupta CPA - 8 years ago
For a beginner, the term crowdfunding may be new. However, it is quite easy to understand. It simply means the collective drawing of resources or investing the collective money drawn from various resources to some activities as investments etc.Crowdfunding implies collective drawing of money from disparate resources, usually through the internet in order to support the earning initiatives by other people and organizations. Crowdfunding can be used in the wide spectrum of activities like disaster management, political propaganda, movie promotion, research, and development, etc, the term crowdfunding is more in use now than it was ever.Legality – How legal is crowdfunding?Once you understand the meaning of crowdfunding, the natural question that follows is how legal is crowdfunding? Is it safe for any business house to go about crowdfunding? If so then how shall one go about it? Questions likewise follow and to get full knowledge about all of the above, here’s a bit of discussion about it all.Though Jobs Act regulations favor crowdfunding, there are of course more significant ways companies should deal with them. For starters, owners of small businesses should state the requirements to investors and only move forward once all the rules defined.Again the rules are not without their risks and the biggest and most grievous of them is getting involved in a scam. Often the brokers, introducing themselves as know – all of the crowdfunding are treacherous and so the warning, that unless with proper documentation such people cannot and should not be trusted. Offers that promise smart deals in a short time can never be good offers.Crowdfunding will be available next year for small business owners. However, businesses should watch out for companies looking to make a quick buck. As per NASAA reports, such owners are already after investors.

2012 Year End Tax Implications

Sanjiv Gupta CPA - 8 years ago
The fat lady is almost singing to signal the end of the current gift and estate tax exemptions and rates. To start with, the so-called “fiscal cliff”, which is the estate tax exemption, is on course to fall precipitously in 2013 while at the same time the maximum estate tax rate is expected to rise. The net result of all these changes in tax thresholds is that many high net worth clients are being requested to consider giving away part of their wealth in order to take advantage of the current exemption just before this period lapses. The thing is with most of the exemption strategies in gift-giving often the least effective means is to give the gifts as cash. On the other hand, one can also use some of the other strategies such as the use of Family Limited Partnership (FLP) to acquire a valuation discount for the assets being gifted may be used. Some of the other ways to give away gifts include using the Intentionally Defective Grantor Trust (IDGT) and then use the trust as seed money to purchase different assets from the estate.However, this is not usually the situation in most cases as there are different things that come into play when gifting away part of your estate. For instance, there are many important caveats that include the risk of an estate tax clawback as well as the affordability of the gift itself. You must also take care of the state estate tax laws that may be due on the estate. As such, it is very important for the high-end members of the population to determine whether they would rather give away part of their wealth or simply sit back and endure the tax burden that will be coming at the turn of the year.Taking Advantage of the Current Gift Exemption: To start with, for a person to take advantage of the gifting it is important to know a few things. In essence, the basic principle that is behind gifting is to start by making a gift while the exemption is currently at $5.12 million. At the end of the year, the exemption will drop from $5.12 million to only $1 million. While, the exemptions that are set to expire at the end of the year, it is quite possible that the tax burden that an individual will have at the start of the next year will be very huge. Gifting is a way through which individual spread their wealth, not only to the people around them but also help themselves take care of the financial aspect of their estates. Gifting can also be done to a member of the family as well as to charities and other less fortunate members of the community.While on the case of gifting away wealth, it is usually advisable to gift away pieces of property instead of cash. This is because it is a better way of spreading the wealth to future generations who may not be old enough to handle huge sums of money.

Buy Sell Agreements

Sanjiv Gupta CPA - 8 years ago
Understanding the Buy-Sell AgreementBusiness owners with partners can protect themself by having a buyout agreement (aka buy-sell agreement) in place. This agreement allows stockholders to purchase partners' interest in the company under certain triggering events such as retirement, or death. The agreement can also be structured so that company partners have the first right to purchase the interest in the company.The common type of buy-sell agreement are:1.) Stock-repurchase agreement2.) Cross-purchase agreementThe first one is commonly used in small businesses. It allows the company to buy out the departing owner's interest. For example, if one of the partners decides to leave the company, his or her stocks can be purchased by the company thereby increasing the share of other partners in the company.A cross-purchase agreement is a bit different. Instead of the company purchasing the stock of the departing partner, remaining owners are allowed to purchase the departing owner’s stock.Who needs a buy-sell agreement?Any business with partners should have a buy-sell agreement in place. This agreement should be drafted and signed as soon as the company is formed. The agreement will protect the owner leaving the company along with partners remaining in the business. A buy-sell agreement can help businesses avoid costly conflicts when the buyout time comes.What methods are used to set the price?Pricing should be based on the evaluation of your business. This is where your CPA will come in. IRS section 2703 prevents a business owner from picking a random low value for the evaluation purpose due to estate planning laws. However, your CPA or lawyer should be able to help you come up with a fixed price agreement.The better way to evaluate your business is to use the valuation process agreement. It is a good idea to engage an independent valuation analyst to determine the fair market value of the business. There is a good chance that a fixed value agreement may undervalue or overvalue your business. However, an independent valuation will get you much closer to the correct number.You can engage an independent valuation analyst on a yearly basis to determine the correct value of your business and update your buy-sell agreement accordingly.Do you have a buy-sell agreement for your business?

Who Should Pick C Corporation?

Sanjiv Gupta CPA - 8 years ago
This is a very common question asked by our readers.Who should use a C Corporation as a business entity?You should pick a C Corporation if you:Have noncitizen or green card shareholders.We might look for additional funding from venture capital firms.Want a flexible way of splitting profit among business owners.Want to reduce medicare and social security taxes by setting up salaries for employees and/or owners.Want to provide fringe benefits to owners. E.g. life insurance, education, and transportation costs.Want to provide health benefits (through your corporation) to your employees and owners.Want to reduce your taxes by splitting your earnings between your shareholders and the corporation.Want your business earning to stay within your business so that it can grow.Want to transfer your share among other business partners/shareholders.Want to provide stock options to employees as a benefit.Want to make it easier for someone else to purchase your business.Want to provide a travel and entertainment benefit to your employees.These are some of the key reasons why you should pick a C Corporation as your business entity. However, you should consult with a professional before setting up your business structure.A good consultant can advise you to ensure your business structures provides good asset protection and reduce your tax liabilities.Make sure to understand the requirements of the business structure.  For example, C Corporation requires a business owner to hold the annual meeting and keep the meeting minutes.  You can lose your protected corporation status if you fail to follow the requirements.

Dealing With Tax Liens

Sanjiv Gupta CPA - 8 years ago
Federal tax liens are documents that are filed in the county in which a business or a person is conducting his or her activities informing the public that the person or business n question has outstanding tax bills. This lien attaches to the property of the said individual or business allowing the IRS to recover the full value of the tax bill through the sale of the personal and business property of a person or business. In essence, it is a warrant that the IRS places on your pieces of the property allowing them to dispose of them off in the pursuit of tax arrears. Once a lien is filed, then during the period that the lien is effective the IRS can sell off any property and recover the amounts owed in tax before the balance of such a transaction is given to the individual. So what happens when you pay off your tax debt?Well, the major thing is that the lien is lifted. The statute requires that the lien is lifted within 30 days of the settlement of the bill that was due. That is the law that comes into operation once the balance is cleared. However, in reality, this does not always take place. In most cases, the IRS is normally reluctant to release the lien that it has placed on a piece of property. To make up for this oversight, the lien is often issued with the writing that if it is not refilled on the date of the expiry, then the owner of the piece of property should consider the lien released. This option means that at the end of the liens period, the ownership of the pieces of property that had been attached reverts back to the owner.Does the IRS inform your credit agencies of the release of any lien once it expires? The law requires that a Certificate of Release is filed at the courthouse where the original lien had been filed. Once it is filed, the owner of the piece of property can then use it. However, most people have made the proposal for the creation of at least three copies of the release certificate. These copies would then be sent to the credit bureau once they are filed therefore releasing the individual from doing the job himself or herself.Is it possible to have a tax lien on your credit file without your knowledge? The simple answer is yes. In this day and age when identity theft is at an all-time high, the probability of finding a lien in your credit reports when you have no idea of it is very likely. The next step that you should take is to notify the IRS and the court in which such a lien was filed to seek clarification. Often, the services of a lawyer will be required to make the follow up as the process may be tedious and time-consuming. In addition, it is important to keep legal counsel by your side during this process to mitigate the legal impact such a discovery may have on your affairs.

Difference between C Corp and S Corp

Sanjiv Gupta CPA - 8 years ago
Difference between S Corporation and C Corporation.Both types of corporations are quite common in the United States and names very similar. However, there are major differences between these two types of corporations.Since you are reading a Tax Blog, we can start with Taxation.Taxation:  Tax is one of the key differences between these two types of corporations.  C Corporations are separate taxable entities.  C Corporation must file a corporate tax return and report its profit and losses to the IRS and to the state.  All profits are taxed at the corporate level.  Income distribution to the shareholder is taxed as individual income.  However, business losses do not pass through to the shareholders.  In Other Words, a corporation pays the tax on income and then pays the dividend to the shareholder.  Shareholder pays the tax on the dividend received.S Corporations are better entities in this regard.  S Corporations are pass-through tax entities.  There is no tax at the corporate level.  All profits and losses are passed through the corporation and reported on each shareholder's personal tax return. Taxes are paid based upon each shareholder's personal income and deductions.Ownership of Corporation:  S Corporations can not have non-US citizens/residents as shareholders.  S Corporations can be the owner by another C corporation or another S Corporations, LLCs, trusts or other partnerships. Moreover, S Corporations can have no more than 100 shareholders.C Corporation does not have such limitations. C corporations can have an unlimited number of shareholders and can be owned by other business entities.  C corporations can also have multiple classes of stocks whiles corporations are limited to one class of stock.I would like to point out that s corporations and c corporation are similar in the way they are set up with the franchise tax board.  However, a corporation must elect to become an S corporation by making a timely filing of form 2553 with the IRS.  Moreover, all the shareholders of the corporation must agree in writing to the S corporation election.Reduced Taxes:  S Corporation owners can get paid in the form of dividends and reduce their medicare and social security taxes.Can you convert from C Corporation to S Corporation?Of course, you can.  However, don’t do it just yet. Consult with your tax professional to ensure this is the right choice for you.  Converting from C to S corporation may not be ideal for you if your corporation is operating at a loss. You may end up owing a big tax bill if the following condition is met:The company was C corp prior to the S corp election.The company has recognized built-in gain within the 10-year recognition period.The net recognized built-in gain for the tax year doesn’t exceed the net unrealized built-in gain minus the net recognized built-in gain for prior years in the recognition period.I know it sounds complicated.  That is why I was suggesting that you talk to a tax professional before converting your company from C Corporation to S Corporation.

Solo 401k Plan Explained for Self Employed

Sanjiv Gupta CPA - 8 years ago
Last week I talked about the 401K plan and how shared an example explaining how your 401k plan contribution can earn you a 25% return on investment.Today, I want to continue with that conversation and how to explain how an independent contractor or self-employed person can save even more taxes by investing in their solo 401k plan.In today’s video, I am going to explain the following.A.) How much money can you contribute to your solo 401k plan?B.) What are some of the limitations with a solo 401k plan?C.) Where to open a solo 401k plan?D.) How much does it cost to open a 401k plan?E.) What kind of tax benefit you can get by investing in your 401k plan?We have about 2 months before the end of this tax year.  Self-employed personals can contribute up to $50,000 to their solo 401k plan and reduce their tax liability accordingly.There are fees associated with the solo 401k plan, but you can borrow funds from your 401k to help you with cash flow and you can pay the money back within 5 years.  You can also move the 401k plan to another company in the future.  In the video, I will tell you how you can open a solo 401k plan for free.A self-employed person with income of $75,000 will have to pay about $7500 in federal income tax.  However, this person can contribute up to  $30,941 to the solo 401k plan and reduce the federal income tax to only $2,304. Savings of over $5000.Moreover, a contribution to a 401k plan can be made as profit sharing.  In this case,  Up to $13,941 can be contributed as profit share further reducing the tax to about $600.In other words, you can earn up to $75,000 and pay almost no federal income tax if you contribute fully to your 401k plan and take advantage of a few other deductions. Have you checked your retirement plan this year?This is a good time to review your retirement account for the year 2012.  Single tax filers can contribute up to $17,000  to their 401k retirement plan.  Contributing to your 401k can significantly reduce your tax liability for the year 2012.1099 Contractors and Small Business Owners can also reduce their tax liability by taking advantage of various retirement plans.  You still have time to set up a proper retirement plan for this year and save thousands of dollars in taxes.Want to come in for a consultation to discuss your retirement plan?  Please make sure to bring your retirement statement and current year income statement.Free Solo 401k plan for self-employedWatch this video to learn how you can deduct up to $50,000 this year.

Watch Out For Ghost Tax Preparers

Sanjiv Gupta CPA - 8 years ago
The Director of Internal Revenue Service Return Preparer Office – David Williams, presented the meeting at the Dallas IRS Tax Debate this summer subtitled “Rumor Control” due to the propaganda neighboring Registered Tax Return Preparers (RTRPs). Given the antagonism and obvious fret, a lot of tax experts were feeling concerning the listing procedure, David Williams began the meeting by explaining that it is an entry-level test.“(It is) not a test to put people out of the business of preparing tax returns,” David Williams said. “We think there are a lot of people still not registered or have or even know what a PTIN (Preparer Tax Identification Number) is.”David Williams also spoke about the fact that a lot of groups are giving out practice tests allegedly based on the authorized test. David Williams exposed that the aptitude test is still being drafted, and a transitory threshold has not up till now been elected but documented vendor’s hard work to rise above the blockade of time.“Most people have anxiety about testing. The tests available today are from vendors that are clairvoyant,” Williams joked.The minimum aptitude is based on the Internal Revenue Service’s publication 17. Continuing education (CE) is intended for 2012 subsequent to finding out how to record the sellers’ contribution to the CE. Necessary, will be yearly 10 hours of tax law, three hours of updates and two hours of ethics.Current figures make the public that present is in excess of 720,000 registered preparers. Of these preparers, 62% are not attorneys, CPAs or EAs. There possibly will be as many as 900,000 RTRPs as soon as authorized listing has started.  Of preparers, as countless as 100,000 have had fulfillment troubles and 50,000 may have been criminals in the previous 10 years, which might leave them out from the program.Not capable to be counted, phantom preparers are tax preparers that are not operational for CPAs or have any type of qualifications, listing or most prominently a PTIN. According to David Williams, PTINs was tenable in 15 minutes online.The inquiry of why to pay a cost of $64.25 while I before now had a PTIN is frequently asked.“For the reason that the course is financed totally by these bills, which comprises community consciousness,” David Williams said. “You have rights as a circular 230 responsible practitioner. The fee could come down in subsequent years. Due process rights are now available, so if your rights [to practice] are removed, you can appeal and eventually take the case to court. You have the right to be heard, to tell the rest of the story; this is also part of the fee.” All labors to revitalize the Central Estate Tax for the year of 2010 just did not get completed to the surprise of many. A good number of witnesses anticipated Congress to do something in some way to stop the jam-packed revoke of the Federal Estate Tax for the year of 2010 only to allow it to return on January 1, 2011, with revenge.

Tax Implications On Trade

Sanjiv Gupta CPA - 8 years ago
The general feeling around the USA and Europe for that matter are that the year 2013 is going to be a tough one, at least economically. Already countries like Spain have changed their tax policies and the effects of these changes have started showing various contract negotiations being halted. In Spain for instance, football players like Ronaldo are in contract negotiations with their clubs. In a bid to keep the player, clubs such as Real Madrid are forced to offer to pay the taxes on behalf of the player if only to retain his services. Such options are normally available to the rich clubs such as Real Madrid; however, much poorer clubs may not be able to follow the same pattern, in essence losing some of their best players or assets. In the USA, the trade of R.A. Dickey the N.L. Cy Young winner is being held up by the tax implications of his move to the Blue Jays. We can see the trend spreading across Europe and North America affecting various organizations and individuals. The changes in the tax policies of the different countries seem to be having a biting impact on the way in which business is being conducted. Various governments have resorted to increasing their tax bases as they try to make ends meet in the face of a harsh economic period. The effects of the recession may have passed, but the impact that the recession had cannot be ignored whatsoever. As such, in a bid to do away with the budget deficits that they acquired during that period, different governments have resorted to various ingenious ways of cutting off their bills. Considering that the government is a representation of the people, then the people can be expected to bear the brunt.The tax implications of the different tax changes have gone as far as the capital gains and the dividend taxes. In most countries like Greece, the tax on capital gains has been increased by almost 200% with the tax on distributed dividends being reduced by a smaller margin. The result is that it gets more expensive to make money on the stock market, with the margin of profits reduced considerably. However, some people hold the opinion that this increase in taxes may in effect actually increase the amounts of money that investors get from the stock market. This thinking seems to rely on the psyche of the stock market investor. In most cases, the stock investor is a long term investor who waits for real money. As such, this investor looks at the long term trend instead of the short term implications of laws. The historic relationship between the taxes shows that an increase in taxes often has the net impact of an immediate decrease in the earnings of individuals coupled with a resurgence of the prices and an eventual increase in returns. It is this line of thought that seems to have some people very optimistic. The long term seems to be the solution for the current mess.

What is AICPA ?

Sanjiv Gupta CPA - 8 years ago
AICPA is an acronym that stands for the American Institute of CPAs. This is a mother organization that combines all the CPAs in the country. This organization has some pretty good ideas on the tax policies and their implications for the normal citizen in the year 2013. The skill required to analyze and completely take advantage of the tax issues in today’s world are complex in many ways. This means that today’s tax CPA faces a mountain of a task in trying to decipher the challenges that the new tax laws portend. The AICPA provides an avenue through which CPAs across the country are able to communicate, interact and come up with a system of practices that can be used across the country. The AICPA offers a number of avenues through which individuals can be helped. It is split into three major departments: advocacy, practice support and professional standards and ethics. In essence, the institution provides support to the CPAs across the country in the performance of their duties.What is the AICPAs opinion on the new tax bill that is before the congress? Officially, the AICPA has no stand on the tax bill. As a unit, it is their work to implement policies that are being put in place by the government and the politicians. However, they also play a very important part in ensuring that the policies actually make sense. This means that they consult actively and engage the relevant bodies in the process of policy making as they try to create a tax policy that makes sense and maintains the rule of equity and equality.Through their advocacy plan, the AICPA petitions various federal regulators and members of Congress on behalf of its members, touching on a wide range of issues that affect CPAs in general and taxpayers. In fact, the institution has in the past successfully sought guidance as well as a raft of changes to the regulations and tax administration. All these were done in a bid to ease the return preparation as well as repeal a number of burdensome reporting requirements that the law had put in place.The AICPA has a tax division that provides a number of tools and aids that may include, journals on current tax laws, checklists, engagement letters, and webinars. All these resources are designed to help its members provide the best services possible in the regions in which they practice. The AICPA has over the years acted to the benefit of its members and the public in general. The changes in the tax bill are expected to have far-reaching impacts in the coming year. The AICPA is expected to play a large part in not only designing the eventual policy that will be placed in the public domain but also in its implementation. Through their different arms, the AICPA is expected to be key during the next financial year; on a larger scale, the AICPA will play an important role all through the next four years.

State Budgets and Taxes: What Will Happen in 2013?

Sanjiv Gupta CPA - 8 years ago
2013 is a year of many expectations. In the USA, the new government (the Obama government) has been given another lease of life to implement its policies and affect the lives of the common Americans for the next 4 years.There is a school of thinking that the federal fiscal cliff has the potential on unloading a massive state tax fiscal cliff or disaster if left unchecked. The main reason for this expected increase in the tax bill arises from the fact that some of the states, and in essence most of the states, rely on the federal government to sort their programs. If this trend spills over to the next year, then the federal government will have to find new ways of sustaining the state's programs. The most common way that governments use to raise money for their needs is through taxation. An increased program bill can only result in an increased tax bill. According to various sources, the federal government provides support of up to 20% to the different states. In addition to this problem, the states will have to balance their budgets in a way that they can cut spending and increase the revenue that they receive. The result of these actions may include spending cuts and an increase in the tax bill to the ordinary citizens.Putting this in perspective, at least>48 states in the USA have budget deficits accumulating a total of $581 billionin the last four years only. How will different states seek to cover their deficits? Well, the rumor around town and in government is that there are going to be quite a number of changes that will tax place especially in relation to the taxation threshold. There have been suggestions to increase the number of taxes such as sales tax. However, not all states will follow the same path when trying to cut their deficits. In fact, it is expected that the most successful states are those that will come up with innovative ways of ensuring that the deficits are dealt with without increasing the taxes. Already, there is much public outcry about the increase in the federal debt, an issue that caused a lot of problems for the Obama administration during the campaign.2013 is a year that promises to be one with many solutions. However, it is also a year in which individuals will have to undergo some “baptism of fire” so to speak if the states in the USA are to achieve their long term goals.

Hiring a Tax Expert to Face an IRS Audit

Sanjiv Gupta CPA - 7 years ago
“I am nervous and unsure about the impending audit from the IRS for my 2010, tax returns. I believe that they are pointing towards the irregularities in my deductions and income. I need to know whether I would be required to represent myself to them or can it be taken care of in case I pay the arrears involved?” asked Mr. Ravi. SIn this scenario, we strongly recommend him on hiring an expert who can represent him on this tax audit. This is crucial to him as the IRS can refer his case to criminal investigation for prosecution. He not hiring a representation would tantamount to approaching the court with no lawyer.Below are mentioned some facts about IRS audits in order to help you understand the gravity of the situation being discussed.The IRS has the option of auditing you by mail, face to face in there or in your office. Amongst all the three, the face to face audits is more serious as the examiner would closely scrutinize the documents related to your income & deductions.Initially, you are interrogated on some 54 seemingly innocuous questions. What will come next would depend on the way you had handled these questions initially. Talking more than required and speaking the truth is recommended here; facing this unprepared, can fail you on both these crucial aspects.Hire a professional tax expert in order to avoid this sticky situation. The below-mentioned points are advisable to be kept in mind while hiring a professional tax expert.Choose an experienced hand over a greenhorn in this field. Hiring someone aptly qualified with hands-on experience in handling IRS audits would save you unnecessary costs over time. An experienced professional would productively channelize your fundamental rights – fairness, due process & representation – as a taxpayer, keeping your best interests in mind.Following are some of the strategies we have used at our firm ( Tax Resolution Services) for handling IRS audits earlier: If possible, obtain a “ no change” letter; making sure that any additional taxes assessed remained lowest as per the law; helping clients in reducing any accruing interest, penalties or back taxes, along with pushing away the possibility of a criminal prosecution by the IRS; Systematic steering of the client through the entire process.Other than checking the credentials at a meet-up, the candidates, as well as the company’s credentials, can additionally be verified through Google and by fishing out the ratings of the Better Business Bureau of the same. Seminar on Audit By Sanjiv Gupta CPABoE, IRS and FTB Tax Audit On The Rise | Protect YourselfWe have seen an increase in the Franchise Tax Board, Board of Equalization (Sales Tax) and IRS Tax Audits in recent months.  In the last few months, California Sales Tax Officers have also visited the businesses in various counties including Alameda, Contra Costa, Santa Clara and requested to see their sales receipts and record of their sales transactions.  In many cases, BOE has asked these businesses to bring their detailed sales record to the BoE office in Oakland CA.  Certain types of businesses like Gas Stations, Grocery Stores, Retail Stores and businesses with the majority of cash transactions are of particular interest to FTB and IRS.We feel it is important for our fellow business owners to prepare for such a visit or an audit by IRS, BoE, EDD or FTB.We will be holding a free conference call in February to discuss important steps you can take to prepare yourself for such a visit.  We will discuss many scenarios that may catch you off guard.For example:What kind of documents IRS, FTB, BoE or EDD may ask to see?How to prepare your employees for BoE, EDD< IRS and FTB visits?What should your employees know about BoE, EDD, IRS and FTB Audits?How to deal with customers when BoE,  IRS or FTB agents are at your site?What should you tell or not tell to Tax Auditors?When to get professional help with your Audit?When can you join the conference?Feb 16th, 2013 From 10:00 AM to 12:00 PMRegister and Join the Conference Call | Learn and earn a chance to win iPad Mini.

Planning To Pay Tax Bill With Credit Card ?

Sanjiv Gupta CPA - 7 years ago
It is the time of the year to pay taxes, again. Have you planned for your tax payment? If you are thinking about the various options available to pay your taxes, you should certainly consider paying taxes using your credit card.Don’t panic!! After all, paying your tax using your credit card is not a bad idea at all.Let me explain how you can benefit by paying tax using your credit card.Credit cards are extremely dangerous if they are not used with due care. Caution should be exercised about the payment date and the amount. Nevertheless, if they are used wisely there is no better option than a credit card to manage your payments. By paying your tax through a credit card, you can buy time to repay the money. Though making payments through a credit card will lead to paying interest, the rate of interest charged by the credit card company is way lower than what the IRS would charge for defaulting on tax payment.Let us consider this classic example. Assuming that the last date for payment of tax is April 20th, IRS would start charging interest on any outstanding tax from the due date to the date the tax is paid in full. The current rate of interest is 3%, which is revised quarterly, and the additional interest rate for late payments is another 0.5% a month. If a taxpayer is late by one year, the total interest rate would work out to approximately 9%. On the other hand, for a credit card with an interest rate of 4% annually and another 2.4% interest rates as a one-time convenience fee, that a third-party service provider charges for using a credit card, the total interest rate still works out to around 6.5%. So, on a $20,000 bill, the savings would be approximately $500. For someone using a 0% credit card, the savings could still increase. But the point of concern here is the due date for the credit card bill payment. If the credit card dues are not cleared in time, all the savings accumulated here will go down the drain.For people, who are unable to avail of a credit line, this option may make no sense. Such people may approach the IRS and set up payment options with the department. Of late, IRS has unveiled schemes for taxpayers who need less than 4months to settle their tax amounts. Under this arrangement, tax filers can avail of a certain grace period where they can still pay their taxes, penalty-free. But the details of this arrangement need to be checked with the department as these rules and programs are not fixed and may vary from each tax year to the next.All said and done, it is very important to pay taxes on time. Considering that the penalty rate may go up to as high as 9%, it is very important for tax filers to figure out ways and means that are cheaper and affordable to them. For all those who hold a credit card, the above-mentioned option could prove beneficial and worthwhile to give it a try and pay taxes on time.

Employers (Dental Practices) Engaging Independent Contractors are Prone to Scrutiny

Sanjiv Gupta CPA - 7 years ago
The government acts strictly with employers who make attempts at evading taxes by resorting to unscrupulous means.  Many employers project their permanent employees as being independent contractors in order to avoid employment tax.Hiring independent contractors are legal in certain businesses and professions, provided the conditions allowing for the same are adequately satisfied.  Dentistry also falls under the same purview. The government is liable to identify and arrest any practice by an employer wherein he manipulates or misuses this provision of law with the intention of avoiding employment tax.To be considered as an independent contractor, one needs to fulfill certain conditions, so that status as an independent contractor can be defended in the court of law if the need arises.  The conditions which validate a person as a contractor require to include the ability of the person to work freely in the premises of the owner is liable to be paid by the owner for the project based on any frequency other than on an hourly basis, the person uses his own appurtenances, recruits and pays for his own employees, and has a control on the final product of the service he is giving.The person who doesn’t fulfill the stated criteria cannot be validated as an independent contractor.  Let’s consider the case of a dental specialist. He doesn’t practice on his own as an individual practitioner but works in the facility owned by some other practitioner. He is compensated for his services separately from the regular employees of the facility owner, He comes with his own team – which does not fall under the owner’s supervision – and is totally responsible for the quality of the services he provides.The owner cannot supervise his work and operates as a business entity; thus his company has signed a contract with the owner’s entity for delivering a certain service for a particular period.  The way the workers connect to the owner’s facility in terms of financial and business relations is what decides the exact status of the worker.The owner who wrongly classifies an employee as an independent contractor can be assessed for social security and medicare tax attributed to the employer. The owner can also be held responsible for the employee portion of Medicare and social security taxes.The owner can also be additionally penalized for not covering the wrongly classified employee under any benefit plans like health and retirement. An independent contractor is a self-employed individual and has certain tax obligations to be met, which are listed on the IRS website’s Self Employed Tax Centre page.Any worker that does not fulfill the criteria required of an independent contractor will be deemed as being wrongly classified by the employer. Even an associate uses the employer’s resources and his work is dirigible by the employer, keeping him out of the purview of being an independent contractor.In case of any discrepancies are proved related to the same, the onus of taking the beating would fall on the owner. There have been cases where larger firms have been penalized for classifying an employee as an independent contractor due to the inconsistencies being discovered in their terms of employment by the IRS. Such owners had been forced to pay the payroll taxes and related penalties.

IRS Using Tracking To Understand More About The Tax Payers Than Just Their Tax Returns

Sanjiv Gupta CPA - 7 years ago
The Internal Revenue System (IRS) is an organization that is responsible for collecting the taxes of the general public. It holds a highly reputed position and is constantly improving on its techniques to ensure that the taxpayers are loyally paying their taxes every year. However, even if they take immense precautions, cases of tax fraud cannot be avoided. Every year, there always remains a section of people who evade tax and cheat the government in millions.Hence the IRS has come up with the technologically sophisticated tracking tools that help them understand more about the taxpayers than just their tax returns. These tracking tools, keep a check on the digital transactions of the defaulting taxpayer like his eBay transactions, Facebook settings and one of the most recently developed techniques to track the tax payer’s online payment details, his credit card number, and other personal data. This data is essential for the IRS personnel to track down the defaulting customer and make him pay the dues that he is rightfully liable to pay.Big cities like Washington are reeling under losses to the extent of $300 billion dollars caused to the state’s exchequer because of fraudulent people. Hence the IRS has brought in new models like the robot audit and third-party audit to bring these faulty people to justice and make them cough up their shares.  There has been a little apprehension among the people, for these techniques, because the personal details like the bank, card details, etc of the loyal taxpayers are also scrutinized while analyzing the details of the tax evaders. This has not gone down well with the general public, however other than implementing this method; tax evasion cannot be controlled properly.The IRS big data tracking system is an efficient tool for tracking the digital background of the tax evaders. Here the social networking transactions are tracked, electronic payments are monitored and auditing is conducted for those individuals who are regular defaulters. The internet browsing pattern is also tracked here. This tool is used to study the digital and the economic behavior of the individual and around 1 million unique attributes are attached to these individuals. Relationship analysis, statistical and agent-based modeling are employed in this method to know about the defaulter better.The computing power of the IRS is increased in huge proportions. Of the entire storage capacity of the IRS, only 1.5% is used to store tax returns of an entire year. This gives huge amounts of empty storage space which can be used for more productive purposes like tracking the individual and forming a pattern around his transactions.During last year, the behavior and the profiling test study conducted by the tracking mechanism of the IRS helped to identify around 1500 people with past records of tax evasion. These people were tracked down to where they live, were constantly chased upon and around $200 million was recovered from them. This is enough proof to explain the efficiency of the auditing and tracking tools of the IRS.

Why You Won’t Be Audited?

Sanjiv Gupta CPA - 7 years ago
Last year, the US saw a huge fall in the tax audit rates by 5.3%. This reduces the probability of individuals being audited.  This research was conducted by the Transactional Records Access Clearing system.  This trend is due to the cuts in federal spending.  This process is called sequestration and this is a process that cuts down the employees who are eligible for tax audits so that the fraudulent individuals can be tracked down easily. Kevin Brown, leader of Pricewaterhouse Coopers ‘tax controversy and dispute resolution practice, rightly said that if the number of individuals decreases then it correspondingly decreases the number of audits.The National Treasury Employees Union conducted a survey and it was found out that these cutbacks could impact enforcement actions. The audits usually conduct its audits on days when the works have five to seven unpaid furlough days in the summer. The cuts are also timed in that part of the season, where there is a recruitment freeze which prevents the agency to fill up jobs.  In 2011, the IRS had 7000 full-time employees lesser than what it had during the year 2010. The staffing and other enforcement actions were lesser by 6% last year.The lesser number of individuals to be covered for auditing does not mean that the defaulters can make merry. On the contrary, it is tougher to escape this way because being one among 10,000 people definitely has more visibility than being one among 100,000 people.  The way the audits are being conducted has also changed. Earlier, face to face audits was the fashion. However, this has now been reduced and audits through email correspondence are the order of the day recently.  Audits through emails have increased to almost triple the amount of quantity around 20 years ago.The IRS has effective software systems to track if the income is not reported rightly. Most of the cases of under-reporting of income are tracked through this software by matching the income filed in the form 1099 and other related paperwork, while tax filing. Fewer audits are not necessarily a reason for the defaulters to enjoy. The fewer audits take a longer time to get completed than the frequent speedier audits that were the process some time back.If a defaulter is found to have misreported income or done fraudulent tax filing in the new long audit process, then the interest and the penalty charges that he needs to pay is exorbitant than what the frequent audits charged. This puts the cheaters in a great fix, as in the current scenario, they not only have to pay taxes due for years together but also have pay very high penalty charges of each year’s missed payments.Though the audits on individuals have been reduced drastically in the year 2012, the frequency of the audits on the corporate organizations has not changed according to the recent IRS survey. More than 17% of the organizations were qualified for audit in 2012.

Interest Is Taxable But Often Overlooked

Sanjiv Gupta CPA - 7 years ago
Any interest that the taxpayer receives directly, or through credit in his account and is of the nature that it can be withdrawn at a future date without attracting any penalty or interest, is termed as taxable income. Bank interest rates, money market accounts, certificates of deposit, deposited insurance dividends, etc, are few examples of taxable interest income.The interest on Series EEE and the series IUS bonds saving bonds are usually classified as tax-deferred bonds as tax need not be paid on these unless it matures and starts generating income. Interest from such bonds, which have been issued after the year 1989, is not taxable if it is generated to fund higher education expenses for that particular year. Form 815 explains the interest that needs to be excluded from redeemed US Savings bond whereas form 1040A, 1040 or Schedule B talks about excludable interest from the Series EEE bonds issued after 1989.Dividends are actually interests on deposits or accounts with banks, credit unions, stocks held in the capital market, domestic building and loan associations, mutual savings banks, etc. The interest payer sends the Copy B of Form 1099- NT to the receiver, who in turn all the necessary paperwork to claim deductions for interest received. The Publication 550 or Publication 1212 gives more details about bonds or debt instruments that were originally offered at a discount. This explains that a part of the original discount must be included every year as interest charges.Some interest incomes qualify for the federal income tax but are exempted from the state and local income taxes. These incomes include interest from Treasury Bills, notes and bonds. Interest income on some bonds that are used for financing government operations, or that are issued by the state government or by the District of Columbia or a US possession does not qualify even for the federal income tax. It is the duty of the taxpayer to duly submit all the interest details that are exempted from tax while filing tax returns. This is because the details submitted to the IRS should be complete and accurate. This is only for the records of the IRS and they would not charge any tax on this amount.A nominee who receives the interest on behalf of the actual recipient should inform the IRS of the same and also furnish all these details to the actual recipient or recipients. The interest amount received by the nominee should be shown as a subtotal of all interest revenues listed under Schedule B of Form 1040 or Form 1040A. The nominee must fill-up the Form 1099-INT for the interest portion and hand over the copy B to the actual recipient.If one receives interest income that qualifies for tax payment, then the same should be done by the receiver on time so that no interest charges or penalties are charged on them. The receiver of the interest should furnish accurate details about his social security number to the interest payer.

2014 Tax Brackets

Sanjiv Gupta CPA - 7 years ago
Are you ready to plan your 2014 Tax? In that case, you might want to start with the 2014 tax brackets. 2014 Tax Brackets(for taxes due April 15, 2015)Tax rateSingle filersMarried filing jointly or qualifying widow/widowerMarried filing separatelyHead of household10%Up to $9,075Up to $18,150Up to $9,075Up to $12,95015%$9,076 to $36,900$18,151 to $73,800$9,076 to $36,900$12,951 to $49,40025%$36,901 to $89,350$73,801 to $148,850$36,901 to $74,425$49,401 to $127,55028%$89,351 to $186,350$148,851 to $226,850$74,426 to $113,425$127,551 to $206,60033%$186,351 to $405,100$226,851 to $405,100$113,426 to $202,550$206,601 to $405,10035%$405,101 to $406,750$405,101 to $457,600$202,551 to $228,800$405,101 to $432,20039.6%$406,751 or more$457,601 or more$228,801 or more$432,201 or moreYou may also like to compare these numbers with 2013 tax brackets:2013 Tax Brackets (For taxes due April 15, 2014)Tax rateSingle filersMarried filing jointly or qualifying widow/widowerMarried filing separatelyHead of household10%Up to $8,925Up to $17,850Up to $8,925Up to $12,75015%$8,926 – $36,250$17,851 – $72,500$8,926- $36,250$12,751 – $48,60025%$36,251 – $87,850$72,501 – $146,400$36,251 – $73,200$48,601 – $125,45028%$87,851 – $183,250$146,401 – $223,050$73,201 – $111,525$125,451 – $203,15033%$183,251 – $398,350$223,051 – $398,350$111,526 – $199,175$203,151 – $398,35035%$398,351 – $400,000$398,351 – $450,000$199,176 – $225,000$398,351 – $425,00039.6%$400,001 or more$450,001 or more$225,001 or more$425,001 or more And lastly – you may also like to compare these numbers with 2012 tax brackets.2012 Tax Brackets (For taxes due this year)Tax rateSingle filersMarried filing jointly or qualifying widow/widowerMarried filing separatelyHead of household10%Up to $8,700Up to $17,400Up to $8,700Up to $12,40015%$8,701 – $35,350$17,401 – $70,700$8,701- $35,350$12,401 – $47,35025%$35,351 – $85,650$70,701 – $142,700$35,351 – $71,350$47,351 – $122,30028%$85,651 – $178,650$142,701 – $217,450$71,351 – $108,725$122,301 – $198,05033%$178,651 – $388,350$217,451 – $388,350$108,726 – $194,175$198,051 – $388,35035%$388,351 or more$388,351 or more$194,176 or more$388,351 or more 

Tax Provisions That Expire In 2013

Sanjiv Gupta CPA - 7 years ago
There are many tax provisions that are scheduled to expire at the end of 2013. You should consider taking advantage of these provisions while they exist.Tax Breaks For IndividualsExclusion for Mortgage Debt Cancellation on Primary ResidencesIn general, debts that have been canceled or forgiven are considered to be taxable income. There has been an exception for mortgage debt canceled between 2007 and 2013 if the debt was canceled because of a short sale, mortgage restructuring or foreclosure.Distributions From Retirement Plans Are Tax-Free If It Is For Charitable PurposesIndividuals that are at least 70.5 years old can distribute funds from a retirement account directly to the charity of their choosing up to $100,000 per year as a qualified charitable distribution. These qualified charitable distributions are tax-free and may satisfy the minimum plan distribution rules.Qualified Small Business Stock ExclusionInvestors are able to sell a qualified small business stock. 100% of the gains from the sale of the stock will be excluded from income. After 2013, only 50% of the small business stock gains will be able to be excluded. Tax Breaks For Employee Benefits Mass Transit Benefit During 2013, the tax-free exclusion for the mass transit fringe benefits was $245 each month. The amount is reduced to $130 per month beginning in 2014. Above The Line DeductionsDeduction For Classroom ExpensesK through 12 educators, principals and teachers are able to deduct job-related expenses up to $250 as an above the line deduction. In 2014, they will only be able to deduct these expenses as part of the itemized deduction for employee business expenses.Deduction for Tuition and FeesThis above the line deduction expires in 2013. In 2014, the American Opportunity Credit and Lifetime Learning Credit will be available.Itemized DeductionsMortgage Insurance Premium DeductionHomeowners are able to deduct mortgage insurance premiums, only through 2013, as part of the mortgage interest deduction.Local and State Sales Tax DeductionState sales tax can be deducted in place of state income taxes. This is very valuable for taxpayers that live in any state that does not have a state income tax. Real Property Charitable Contributions Made For The Purpose of ConservationTaxpayers that donate conversation easements to a charity can deduct the value of the easement limited to 50% of AGI minus deductions for all additional charitable contributions. The 50% special limitation expires in 2013. Tax CreditsNon-Business Energy Property CreditThe tax credit is for 10% of the cost of the qualified energy-efficient products that are installed at the main residence of the taxpayer.2 Or 3 Wheeled Plug-In Electric VehiclesThis tax credit is for $2,500 for a vehicle that draws energy from a battery that has a minimum of five kilowatt capacity hours. There is an additional $417 credit for each additional kilowatt capacity hours in excess of the minimum five. The total of this credit has a limit of $7,500. Credit For Health Coverage The health coverage credit is equal to 72.5% qualified health insurance premiums and the taxpayer’s family.Credit For Work Opportunity Tax CreditThis tax credit is an incentive for businesses to hire specific employees including public assistance recipients or veterans. For example, employers can receive a tax credit of $4,800 for each disabled veteran that is hired. DepreciationBonus Businesses are able to deduct up to 50% of new equipment costs through a bonus depreciation deduction in 2013. All of the rest of the cost of the equipment will be depreciated over the equipment’s useful life. This bonus will not be available in 2014. The only exception in 2014 will be in the case of noncommercial aircraft and long production period property.Section 179Under section 179, businesses are able to expense the total cost of equipment in the year it is purchased instead of using depreciation and spreading the cost over many years. In 2013, businesses are able to expense up to $500,000. In 2014, they will only be able to expense up to $25,000.

Top 10 Mistakes You Can Get Sued For

Sanjiv Gupta CPA - 7 years ago
Employers with good intentions might be breaking employment laws without realizing it. The California Chamber of Commerce cataloged the top mistakes that a company can get sued for. Some of the mistakes are federal and other mistakes apply to some states. The report finds that many employers don’t realize the mistakes they are making when they are trying to be nice, save a little money or trying to be flexible for employees. Top Ten Mistakes #1  – Allowing employees to work during lunch in order for them to leave early. Non-exempt employees have required a thirty-minute break for a meal in addition to a ten-minute break for every 4 hours worked. Denying either requires an extra hour of pay. If you deny both breaks during the same day, you will be required to pay two hours' pay. An employee does not have the right to waive breaks. The extra pay hours are required to be paid during the same period that the breaks were denied. #2  – Classifying all of the employees as exempt regardless of whether they are exempt or notEmployers could be subject to lawsuits or huge penalties if they pay everyone's salary instead of calculating meal breaks and overtime. #3 – Categorizing all employees as independent contractors because it is easier.Employers need to determine who is an employee and who is an independent contractor to avoid many legal spider webs. #4 – Not training supervisors and managers about discrimination and harassment. Do not assume that your employees know all of the information or that they will not need it. Providing basic training will help you avoid lawsuits. #5 – Allowing employees to decide when they are going to work and the number of hours. The majority of employees are restricted under the law about the number of hours each day that can be worked before overtime needs to be paid. Letting employees work fewer days per week for more hours each day, might require you to pay overtime for the week. Specific rules must be followed. Make sure to check your state laws. # 6 – Withholding final paycheck because the employee never returned the property of the company.Some state laws require you give a fired employee their check the moment you say “you are fired”. You can not withhold the final paycheck because they have not returned property belonging to the company like a cell phone or computer. There are penalties that start accruing for the time the check should have been paid. Often times, the penalty is 1 day’s pay for each day the paycheck is delayed. # 7 –Terminating an employee that took a leave of absence.There is a legal protection that is provided to employees that have to take a leave of absences for a variety of reasons including disability, worker’s compensation, family leave, medical leave, pregnancy, jury duty, military leave as well as many other reasons.# 8 – Making employees sign non-compete agreements in order to protect the company’s confidential informationYou can not force an employee to stay under your employment or prevent a previous employee from making a living with another company. #9 – Giving employee loans and deducting money each pay period from their paycheck Most states have labor codes that only allow paycheck deductions that are authorized by the law or for benefits. If you give an employee a loan, you need to have the employee sign a promissory note that was reviewed by a lawyer. #10 – Vacation policies that force employees to “use it or lose it” so money does not have to be paid out at termination. The vacation that has accrued is a form of wages and is not allowed to be denied. The only thing you can do is stop the amount of vacation that can be accrued over a reasonable amount. Generally, the reasonable amount is 1.5 to 2 times the annual vacation that is accrued.

The IRS Is Getting Ready to Audit More Partnerships

Sanjiv Gupta CPA - 6 years ago
If you have a partnership including an LLC or S corporation, your chances of being selected for auditing are increasing. The Internal Revenue Service is getting ready to audit more LLCs and S corps than they have ever done before.In the upcoming years, the IRS is planning on shifting the focus on business auditing from corporations and start concentrating on “pass-through” entities. This shift information comes from the head of the Internal Revenue Services’ Self-Employed and Small Business division, Faris Fink, at a recent American Institute of CPAs’ National Tax Conference. The reason for the shift is because partnerships have become more complex. The Internal Revenue Service sees partnerships as a business type that has many opportunities for potential tax fraud.For a long time, the IRS has focused all of its energy on looking into corporations. According to Mr. Fink, the IRS is behind the curve when it comes to developing a strategy for looking into partnerships.Approximately 95% of all the businesses have a pass-through structure including sole proprietors, S corps and LLCs according to official Internal Revenue Service data. With pass-through entities, the income earned flows directly down to the taxpayer. Bloomberg reported between the years 2007 and 2011, the number of pass-through entities grew 15.3%.Over the years, partnerships have gotten increasingly complex. There are some partnerships that have various tiers and even thousands of partners. These issues make the chances of fraud much more likely according to Mr. Fink. The Internal Revenue Service has started training its auditors on the best way to evaluate pass-through entities so they will be able to identify any red flags.In 2012, the Internal Revenue Service audited only a small amount of partnerships tax returns, approximately .5%. That is compared with the 1.6% of corporate tax returns and 1% of individual tax returns.In small business tax and audit news, the Internal Revenue Service announced recently that it would start allowing small businesses that had less than $10 million dollars in revenue the ability to request a fast track settlement. This fast track settlement is similar to what midsize and large businesses have had the ability to do. The rule would let small businesses appeal audits early and they can get resolution in 60 days or less instead of having to wait for the audit to be complete. CNN money sources state that it can take many years for an audit to be officially complete. This is a huge benefit for small businesses.  Sanjiv’s Thoughts on Setting Up Business:

4 Ways That The US Budget Deal Might Affect You

Sanjiv Gupta CPA - 6 years ago
There is a new budget deal working in Congress that will have large effects on taxes and government spending if it is passed. Congressional leaders Representative Paul Ryan (Republican – Wisconsin) and Senator Patty Murray (Democrat – Washington) came to an agreement on a long term budget deal. If it is passed, this deal would give clarity to owners of businesses on their own economic future and the country’s financial future in the coming years.According to sources at the Washington Post, this deal will not reduce the national debt but it will affect many small businesses in 4 ways:Increased Government Spending. The new budget would increase spending by the government and it would repeal some of the 2013 spending cuts. This means that government agencies would have more available money to spend. This is good news for many contractors for small government that lost business in recent months during the spending freeze.It will reduce the chance of the government shutting down again in the future. One of the top reasons that this budget was important to agree on was so that the government could avoid any future shutdowns. The 2013 government shutdown has cost the national economy approximately $24 billion dollars. It hurt many businesses that rely on government activity and spending for a majority of their business. Consumer confidence was decreased as Americans entered the 2013 holiday season. This budget plan would significantly reduce the chance of having another government shutdown.Corporate and individual tax rates will not increase. The new budget deal ignored the proposal by President Obama to decrease the corporate tax rate in addition to eliminating all corporate loopholes. Individual and corporate federal tax rates would stay the same. Additionally, the deal would not eliminate corporate loopholes. Corporations will still be able to get tax deductions if they buy corporate jets in addition to many other deductions they were able to take in 2012.Airfare might increase. If this budget is approved, many business airline travelers will see moderately increased airline tickets. Under the deal, payments for increased federal revenues will be funded by increased aviation and security fees. These fees are paid by the fliers and are used to finance TSA (Transportation Security Administration).Now the question is whether the budget deal will have enough support for it to pass through Congress. It was praised by President Obama because it was reached under great compromise by the parties. However, many are predicting that the hard-line Republicans are going to try to kill the deal because there are not enough cuts in government spending.

5 Important Tips For 2014 Tax Planning

Sanjiv Gupta CPA - 6 years ago
Your new goal for 2014 should be to gain a higher level of understanding about your income taxes, plan for your tax liability and get organized. This will make tax season much easier and could save you some of your hard-earned money.Below are some simple tips to help you achieve your new goal.Create a 2014 tax file. You can use a folder, bin or electronic file on your computer.  Include all transactions and documents that might affect your 2014 tax return.If you use the electronic file, all you have to do is scan all your tax documents and move them into the folder on your computer.  The great thing about using an electronic file is you can easily e-mail the folder to your tax preparer when it is time to file. An electronic file also takes up much less room and will not clutter your desk. It is important that you back up your electronic file so you will not lose your tax file if anything happens to your computer.Add important notes on your documents to help your tax preparer understand each transaction. You should include documents such as W2’s, K-1s, 1099s, property sale documents, escrow papers, property tax receipts, vehicle registration receipts, receipts for any tax-deductible purchases, and donation receipts.If your financial position will change this year, schedule a tax planning appointment halfway through the year. Financially altering events that occur in 2014 include marriage, divorce, having a baby, buying a home, selling a home or any other event that will affect your taxes. Do not try to set up an appointment in the middle of tax season. Waiting until the middle of 2014 will assure your tax professional will have enough time to spend with you help you adequately plan for your taxes.Fund your retirement plan. Check with your employer to see if you can contribute more to your retirement plan and confirm you are fully taking advantage of the employer match if you have a retirement plan with your employer.If you do not have a retirement plan, you need to open a ROTH IRA, IRA or other types of retirement plan. An investment house or bank can help you decide the best plan for your specific financial situation. This will help you plan for your future and will reduce your tax liability this year.Prepay your income tax liabilities. If you do not prepay your income tax liabilities timely, the IRS will penalize you. You should write down your estimated tax payments and the due dates on your calendar. For 2014, the installment due dates for individuals are April 15th, June 16th, September 15th, and January 15th, 2015.Keep up with current news relating to tax legislation. The tax laws are constantly changing. You might think you know the valuable credits and deductions but Congress might have obliterated them.  Keeping up with the new tax law changes will help you take advantage of all the tax credits and deductions that are available to you.

Business Travellers Tax Deductions

Sanjiv Gupta CPA - 6 years ago
You might be surprised at some of the business expenses that are tax-deductible for business travelers. It is important that you keep proper records and receipts. Handwritten notes are also important to keep track of the reason for the expense, name of the person who met with you, the date and location.There are many people who do not take advantage of all the deductions they are eligible for. Most of the time it is because they are lazy or do not keep proper records. All little extra time and organization can save you a lot of extra money.If you travel for business and your employer does not reimburse all of your expenses, you are able to deduct any expenses you pay out-of-pocket that exceed 2% of your AGI. If you are the business owner or are self-employed, you do not even have to reach the 2% threshold.Anything relating to your business is fair game including gasoline, airfare, fees for baggage, lodging, taxis, supplies, meals, and phone calls. You are even allowed to deduct your dry cleaning, laundry service or bar tab while you are traveling.  The expenses have to be both necessary and ordinary. That means that they are typical business traveling expenses in your industry and necessary for your business. In other words, you need to prove you are trying to make money on the business trip.What Happens When You Mix A Business Trip With Pleasure?Business travelers need to be aware that the IRS is big on watching business travel-related expenses because they know there is plenty of room for manipulation. They come across many taxpayers that try to group personal expenses with business travel expenses. If you want to make the whole trip tax-deductible, you need to make the primary purpose of the trip for business. You are able to take some personal time.There is not anything wrong with mixing business with pleasure as long as you make the distinction very clear. Do not try to pass any personal expenses off as business expenses.Also, make sure that any conferences or conventions you attend are related directly to your profession or trade. The IRS wants to make sure they are really not disguised vacations. Make sure you keep any materials you receive at the convention.What Is Deductible As A Business Related Travel Expense?There are many things that you can deduct as a business-related travel expense. If you attend a seminar or conference that lists an optional excursion for meet and greet purposes, you can deduct the expense even if is a balloon ride or trip to a winery. You need to keep the paperwork from the seminar listing the excursion. The trick is to keep meticulous records of all the expenses you incur when you are traveling for business.If you cannot substantiate your tax deduction you will face serious penalties. In addition to losing the deduction and being required to pay the tax, you will have to pay interest and penalties. When your taxes are recalculated, you could get a 20% penalty for understatement if your taxes were understated by $5,000 or 10%.It does not stop there. If the IRS finds a discrepancy, they will question what other deductions are personal or bogus. It is hard to get them to stop once they start digging.
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