10 Big Tax and Accounting Issues

10 Big Tax and Accounting Issues

Entrepreneurs usually aren’t surprised by the amount of work it takes to get a business up and running and become successful. But these same small business owners are often blindsided by the time and effort required for tax and accounting issues. It’s an important aspect that is often overlooked. Specifically, the following ten issues are critical to small business owners and might even “make or break” the operation. 1. Form of business: The business may be formed as a C corporation, a pass-through entity like an S Corporation, limited liability company (LLC) or partnership, or a sole proprietorship. Generally, C corps provide greater protection from creditors, but result in “double taxation” on earnings. 2. Estimated taxes: As with individual taxpayers, businesses must take a “pay-as-you-go” approach with tax liability, reporting and paying taxes on a quarterly basis. This applies regardless of the form of business ownership. 3. Ordinary and necessary expenses: The tax law provides current deductions for numerous “orderinary and necessary” business expenses ranging from paper clips to office furniture. But the law is also ridled with numerous special rules and requirements. 4. Independent contractors: Employers must pay payroll taxes on employee wages, but not on amounts paid to independent contractors, such as most outside workers hired for specified projects. The IRS often contests the employment status of workers. 5. Inventory valuation: The company must value the items included in its inventory. Initially, the value is the cost, but these figures are being constantly updated as items gets sold and restocked, with accompanying tax results. 6. Section 179/ depreciation: Under Section 179 of the tax code, a company...
ACA: IRS Releases 2017 Reporting Forms

ACA: IRS Releases 2017 Reporting Forms

Are you up to date with your knowledge on your company’s reporting requirements? An article shared by CalChamber informs employers about the 2017 Affordable Care Act (ACA) tax reporting forms and instructions. With no changes to the Affordable Care Act (ACA) on the horizon, employers must remember their reporting requirements. The Internal Revenue Service (IRS) recently released final forms and instructions for 2017 ACA tax reporting, as detailed below. It is federally mandated that employers with 50 or more full-time or full-time equivalent employees must report information about the health care coverage, if any, they offer. The updated forms and instructions to do so are: File 2017 Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns with the IRS; Furnish 2017 Form 1095-C Employer-Provided Health Insurance Offer and Coverage to each full-time employee and file with the IRS; and Review the IRS’s Instructions for Forms 1094C and 1095-C for guidance. For employers that sponsor self-funded minimum essential coverage plans, the required forms and their instructions are: File 2017 Form 1094-B Transmittal of Health Coverage Information with the IRS; Furnish 2017 Form 1095-B Health Coverage to the enrollee and file with the IRS; and Review the IRS’s Instructions for Forms 1094-B and 1095-B for guidance. Deadlines For 2018, the deadline to furnish the 2017 Form 1095-B or Form 1095-C to the employees or individuals is January 31, 2018. The deadlines to file ACA forms with the IRS depend on whether you are filing a paper form or filing electronically. The deadline to paper file all 2017 Forms 1095-C or 1095-B, as well as the appropriate transmittal Form...
How to Account for Loss when Disaster Strikes: Part 3

How to Account for Loss when Disaster Strikes: Part 3

In the first post in the series, we discussed accounting for losses and in part 2 we shared information on calculating payroll in the event of a disaster. To review the information, you can click here to visit part one (http://bit.ly/2g7DZxQ) and part two: (http://bit.ly/2x3T9et). Today’s post will go over filing taxes and reporting insurance proceeds. Extending Tax Deadlines After a major disaster, the IRS will automatically extend tax deadlines for individuals and businesses in the affected areas. Typical extensions vary based on the severity of the disaster and the type of tax. For income tax returns, the extension may be several weeks or months. For payroll tax deposits and information statements, the extension is generally only a few business days. Note that an extension of time to file may not include an extension of time to pay. You should continue to make estimated tax payments as close to your usual schedule as possible to avoid additional interest charges. If a major disaster disrupts your business and you are outside of the federally declared disaster area, or some other event, such as a fire, affects only your business, you may also be eligible for relief. Visit the IRS website or speak with your accountant to learn how to apply for an extension or to have penalties abated. Reporting Insurance Proceeds The exact accounting treatment of insurance proceeds depends on the nature of the policy and when payments are made. However, there are a few common themes. Insurance proceeds should be reflected on your financial statements. Even though insurance isn’t a typical revenue or expense, it’s still important information. Insurance...
How to Account for Loss when Disaster Strikes: Part 2

How to Account for Loss when Disaster Strikes: Part 2

In today’s post we will be discussing how your company’s payroll should be handled if you should find yourself in the midst of disaster. To refresh your memory on our discussion last week on accounting for loss and property damage, click here to visit last week’s blog post: http://bit.ly/2g7DZxQ. Calculating Payroll If your business closes or brings in additional employees during a disaster, carefully review federal law, your local laws and your employment agreements to determine whether you’re legally obligated to pay your employees. Who Must Be Paid Under the Fair Labor Standards Act (FLSA), you may be required to pay exempt, salaried employees during a temporary closing. In that circumstance, you may require your employees to use their paid leave time but may not refuse to pay them if they have no available leave time. Under federal law, nonexempt employees are generally only paid according to the time they worked and are therefore not legally entitled to pay during a closing. However, your local laws or your employment agreement may require you to pay employees who were originally scheduled to work during your closing. If you require employees to remain on-site during a disaster, you must pay them for all time during which they are not permitted to leave. This includes overtime pay if it otherwise applies. Late Payments If a disaster delays processing paychecks, you should make issuing them one of your first priorities. Willfully failing to pay your employees in a timely manner is a violation of the FLSA and may also violate state laws. While you might be excused from penalties during a power outage or...
How to Account for Loss when Disaster Strikes: Part 1

How to Account for Loss when Disaster Strikes: Part 1

With the most recent natural disasters happening around the world, worrying about how you can prepare and protect your business may be weighing heavily on your mind. You can find out what accounting steps to take in the event a disaster with information shared from CPAPracticeAdvisor.com. When a flood, fire, hurricane or other disaster strikes your business, you may suffer heavy property damage along with lost sales during the time you’re forced to close. Having a good understanding of the accounting rules related to natural disasters can help you fully account for your losses, reduce the economic harm to your business, and obtain financial relief through insurance, tax deductions and other sources. Accounting for Inventory Losses Conduct a manual count of your inventory as soon it is practical to do so. Even if items are obviously a total loss, it’s a good practice to document the specific losses due to the disaster versus what you might have lost due to shrinkage or some other means before the disaster. This may also help with the insurance claims process. You will need to update your balance sheet to reflect the current value of your remaining inventory. You can generally include inventory losses as an expense when you prepare your financial statements and file your tax return. However, you will need to adjust for any insurance reimbursements — you cannot both claim a loss expense and exclude the insurance claim from your income. Accounting for Property Damage Damage to other assets, such as buildings or machinery, is handled in a similar manner to inventory. If the damage is so substantial that it...
New E-Verify Poster Published

New E-Verify Poster Published

Do you use the E-Verity program in your workplace? If you do, then you need to update the mandatory poster in your workplace. Recently, the federal E-Verify Participation poster has been changed by the U.S. Citizenship and Immigration Services agency (USCIS). The following information has been shared by ePlace Solutions, Inc. Who must post the E-Verify Participation poster? The following employers are required to post the E-Verify Participation poster: All federal contractors All employers in states that require the use of the federal E-Verify program All employers that voluntarily participate in the federal E-Verify program. Where should it be posted? In a conspicuous location in the workplace. What changed? There were several changes made to the E-Verify Participation poster: The poster layout was redesigned The language was revised to make information more clear and understandable. The English and Spanish versions are combined on one post How do I get the poster? The USCIS has only a sample poster available on its website. Employers can only download the official E-Verify Participation poster by logging into the E-Verify program. Recommendations? All affected employers should update the E-Verify Participation poster immediately. As sample poster is available here. This article was written by Laurian Rutterbush on the ePlace Solutions, Inc....
IRS Offers Help to Hurricane Victims

IRS Offers Help to Hurricane Victims

The Internal Revenue Service has recently released information on tax relief that is available to victims of Hurricanes Harvey, Irma, and Maria. In general, the IRS is now providing relief to individuals and businesses anywhere in Florida, Georgia, Puerto Rico and the Virgin Islands, as well as parts of Texas. Because this relief postpones various tax deadlines, individuals and businesses will have until Jan. 31, 2018 to file any returns and pay any taxes due. Those eligible for the extra time include: Individual filers whose tax-filing extension runs out on Oct. 16, 2017. Because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief. Business filers, such as calendar-year partnerships, whose extensions ran out on Sept. 15, 2017. Quarterly estimated tax payments due on Sept. 15, 2017 and Jan. 16, 2018. Quarterly payroll and excise tax returns due on Oct. 31, 2017. Calendar-year tax-exempt organizations whose 2016 extensions run out on Nov. 15, 2017. A variety of other returns, payments and tax-related actions also qualify for additional time. See the disaster relief page on IRS.gov for details on these and other relief the IRS has offered since these hurricanes began hitting in August. The IRS also continues to closely monitor the aftermath of these storms, and additional updates for taxpayers and tax professionals will be posted to be IRS.gov. Besides extra time to file and pay, the IRS offers other special assistance to disaster-area taxpayers. This includes the following: Special relief helps employer-sponsored leave-based donation programs aid hurricane victims. Under these programs, employees may forgo their vacation,...
Hurricane Charity Scams on the Rise

Hurricane Charity Scams on the Rise

With many victims of the most recent natural disasters still dealing with the devastating effects on their homes and businesses, good hearted people are looking to donate and help in any way possible. The IRS has recently issued information to help protect taxpayers from criminals who want to take advantage of charitable people. If you’re currently searching for a way to donate, unfortunately, there are things you should be aware in order to avoid fake charity scams. While there has been an enormous wave of support across the country for the victims of the hurricanes people should be aware of criminals who look to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations. Criminals often send emails that steer recipients to bogus websites that appear to be affiliated with legitimate charitable causes. These sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade people to send money or provide personal financial information that can be used to steal identities or financial resources. IRS.gov has the tools people need to quickly and easily check the status of charitable organizations. The IRS cautions people wishing to make disaster-related charitable donations to avoid scam artists by following these tips: Be sure to donate to recognized charities. Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of...
A Radical Proposal for Fighting Tax-Related ID Theft

A Radical Proposal for Fighting Tax-Related ID Theft

Are you concerned about your tax information being stolen? A recent article from TaxProToday.com, written by Roger Russell, brought to our attention how a new idea could help cut down on tax-related ID theft and protect taxpayers in the long run. Tax experts Roger Harris and Jeff Trinca have an idea to drastically cut down tax refund fraud — by making stolen taxpayer information worthless to thieves. The two talked to staffers on the Senate Finance Committee and the House Ways and Means Committee about the idea last week, and intend to speak with committee members when they return from the August recess next month. The IRS is making progress in fighting identity theft tax refund fraud, according to Harris, president of Padgett Business Services, and Trinca, vice president of Van Scoyoc Associates. They cite the decline in taxpayers reporting ID theft from 698,700 in 2015 to 376,500 in 2016, a 46 percent drop. And indications are that the number will decline further in 2017. Yet the lower number still reflects approximately a billion dollars a year in lost revenue. Fraudsters are relentless, and will likely adjust in future filing seasons. “Rapid refunds and refundable credits are part of the problem,” said Harris. They increase the incentive for ID theft by putting all taxpayers at risk with a system that only benefits a portion of the taxpayer population. Thieves don’t care if a taxpayer is due a refund or owes money; they just want the taxpayer’s information.” The solution, according to Harris, is a “Refund Lock.” “There is a large pool of returns that, due to the taxpayer’s expected...

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