5 Reasons You Are Likely to Face an Audit Trial in 2017!

Audit trials by IRS turn out to be the biggest nightmare for professionals and business owners. After successfully paying the tax, one tends to relax but one should be careful while paying their taxes because if IRS senses something fishy, one has to face an audit trial likely.

Even If you pay your taxes on time and honestly, there is a possibility of facing a trial since we are humans and we commit some mistakes for sure. These unwanted mistakes are best handled by a tax preparation services company. So, it is always advisable to take professional help for the same. Let’s see what all tax filing return mistakes have the chance of leading you to an audit trial in 2017.

5 Likely to be Audit Trial Candidates

  1. Making Huge Money

We all aim to earn more and more and there is nothing wrong in that. If you have been lucky enough to make huge amounts of money, you should be proud of yourself. However, you should be mentally prepared to face the audit trial and the reason is simple. When you make lots of money, you are always under the radar of IRS. Having said that, you need not fear for the same if you are filing your return explaining each and everything in detail!

  1. Committing Mistakes

Anyone can commit a mistake while filing his/her tax return. You may forget to include something important or include something which may put you in trouble. No matter, how big or small mistake you commit while filing the return, any mistake may end up in making you face the audit trial. If there is even a single element of the tax return which you can’t understand, you have the option of taking help from a tax preparation services company for the same.

  1. Not Mentioning Your Entire Income

It is not advisable at all to hide any of your income from the tax department as one can always get penalized for the same. The copy of W-2 AND 1099 forms is received by taxpayer detailing all his/her income for the previous year and even IRS receives the same information. If you fail to list any of the income which is listed on these two forms, the IRS computer will flag your return for sure, eventually leading you to a trial.

  1. Too Much Charitable Donation Claim

It is always good to donate money to charity and it is well appreciated by society and even the government. It is very normal to do so and one should not worry at all if everything is done in a limit. However, when your charitable donation exceeds 3% of your total income, chances of getting your return flagged are high for sure. The key here is to donate to those nonprofit organizations which can give you a receipt for the same. Also, include ‘form 8283’ for all the items having a value of more than $500.

  1. Small Cash Business Enterprises

If you run a small business and deal in only cash or mostly cash transactions, you are likely to face the audit trial. It is very difficult to maintain records for each and every cash transaction and this is the reason, such types of business face a lot of trails every year. One should hire a tax preparation services company if one is finding difficult to deal with the record keeping.

Decoding 5 Possible Business Entity Types In the United States

To get the most out of your business, it is important to choose the right business structure. Many business owners are confused between whether they should incorporate business online or not. They aren’t sure what their possible business entity types are, what incorporation is best for their business, or even what are the basic requirements to start a small company.

The business structure you choose for your business helps maximize your chances of financial and operational success. It is significant to find a business entity type best suited for your business. There are five possible business structures that a company may choose in the United States. These include a sole proprietorship, limited liability companies LLC, S corporation, partnerships, and a corporation; let’s describe all of your options one by one:

5 possible business structures in the United States

Sole Proprietorship

This is by far the simplest structure of business in the United States. This form of business is simple and straightforward, and usually involves only one individual who owns and manage the business. If you have it in mind to work alone, this business entity type may be the way to go.

The tax aspects of a sole proprietorship are interesting because owner remains personally liable for the income and expenses, and lawsuit filed against the business. This business structure is especially fantastic for businesses those have a low risk of liability. It is easy to form and operate, startup costs are very low, no state filing required, and the owner has complete control over the business. In addition, owner reports business profit and loss on their personal tax return, and personally liable for everything company does.

Limited Liability Companies (LLC)

An LLC is a hybrid business structure designed to provide the limited liability protection, tax efficiencies and operational flexibility of a partnership. Profits and losses move across to the owners and incorporated on their personal tax returns. It is basically an independent legal structure separate from its owners and helps separate your personal assets from your business debts.  It is comparatively difficult to start a limited liability company than a corporation and requires a lot of hard work. If you want to incorporate business online, an LLC defiantly needs a lawyer or a certified public account for the better understanding of the process. Not required to hold an annual meeting, no limit to the number of owners and governed by operating agreements, these are some of the many benefits of limited liability companies.

S Corporation

S corporation provides with some attractive tax benefits and liability protection of a corporation. With this form of business, income and expenditures are passed through the shareholders and included on their individual tax returns. It is also an independent legal and tax business entity separate from their owners. S corporations can have up to 100 shareholders but all must be U.S citizen. More shareholders mean the company can attract more investors and thus attract more capital through the sale of shares of stock.

Partnerships

Depending on the partner responsibility and nature of the arrangement for the business, there can be several types of partnerships. It is the single business that has two or more owners. All these partners or owners contribute to the business either with labor, money, skill, property, or similar.

Generally, there are two types of partnerships: general partnerships and limited partnerships. In a general partnership, partners equally manage the company and responsible for company’s debts and other obligations. Whereas, a limited partnership is the combination of both general and limited partners.  The general partners manage and operate the business, while the limited partners work as investors only.

Partnerships will require registration but it’s very easy to set up. Each state of the USA has different rules and regulations for forming a partnership, but in most of the state, it is a matter of paying a small fee and filling out a form.

Corporation

 

The corporation business entity type is more expensive and complex than most other business types. It is suggested for larger recognized companies with a large number of employees. A corporation is separate from its owners and is an independent legal identity. There are several benefits of corporation structure but the biggest benefit is the liability protection owner receives. Since the owner is not responsible for corporation’s debts, you are not putting your personal assets at risk.

2017 Top Tax Preparation Tips for Small Businesses

It is tax season, and small business taxpayers are looking for ways to save money, and maximize deductions and credits. It is the right time for small businesses to decide what they want to achieve next year and how they can minimize tax liabilities. Tax time comes with an urgency and pressure, and small businesses are vulnerable to mistakes.  Paper traits can go awry, tax deductions can go unclaimed and costly surprises can result etc. It is always better for a small business to hire some small business tax preparation service. To get you started, here are few important tips you can take in order to maximize your tax benefits:

Maintain separate accounts for business and personal expenses

Many small businesses merge their business and personal accounts. It can cause a big confusion around tax time, making it difficult to track expenses and incomes. Luckily, you can avoid this problem with a little care up front. If you operate a small business, make sure to maintain separate bank accounts in your business’s name and prepare regular accounting statements for evidence including balance sheet, income statement, cash flow statement etc.

Keep a proper record of business expenses

A good and careful documentation is critical for justifying many deductions from income. Small business common deductions are entertainment, travel, meals, charitable donations, health insurance, start-up expenses etc. It is significant to get all these records in a good shape. Keep a diary to record all the entertainment expenses, including the amount, purpose, date and place. For travel expenses, you should keep a trip log separating personal and business use.

 Avoid tax preparation mistakes

Small businesses do a lot of tax mistakes and it is important to mitigate those mistakes. A big mistake that business owners make is to limit their deduction to mileage. If you can prove that these all are business expenses, you can deduct the cost of oil, insurance, tires, lease payments and parking fees In addition, don’t forget the small expenses. Whether it is magazine subscriptions or education classes, make sure to track all your expenses and consult your tax advisor about what you can or can’t deduct. Moreover, don’t forget about your other tax obligation such as local taxes, payroll, property, self-employment taxes etc. These all can hurt you if you are not compliant in a timely manner.

Avoid becoming a victim to scams

Tax season is the time when small business taxpayers are vulnerable to scams. One of the most common tax scams involves a call, text message or email from an unknown who claims to represent the IRS. But in reality, IRS doesn’t contact taxpayer about such matters. The motive of this scam is to collect money. In addition, it always better to keep all communication secure between tax preparers and their clients. Some scammers may attempt to intercept this communication to steal sensitive information. So if you are sharing some information related to your taxes with any person, make sure that the communications are kept secure from scammers.

2017 Top Tax Preparation Tips for Small Businesses

It is tax season, and small business taxpayers are looking for ways to save money, and maximize deductions and credits. It is the right time for small businesses to decide what they want to achieve next year and how they can minimize tax liabilities. Tax time comes with an urgency and pressure, and small businesses are vulnerable to mistakes.  Paper traits can go awry, tax deductions can go unclaimed and costly surprises can result etc. It is always better for a small business to hire some small business tax preparation service. To get you started, here are few important tips you can take in order to maximize your tax benefits:

Maintain separate accounts for business and personal expenses

Many small businesses merge their business and personal accounts. It can cause a big confusion around tax time, making it difficult to track expenses and incomes. Luckily, you can avoid this problem with a little care up front. If you operate a small business, make sure to maintain separate bank accounts in your business’s name and prepare regular accounting statements for evidence including balance sheet, income statement, cash flow statement etc.

Keep a proper record of business expenses

A good and careful documentation is critical for justifying many deductions from income. Small business common deductions are entertainment, travel, meals, charitable donations, health insurance, start-up expenses etc. It is significant to get all these records in a good shape. Keep a diary to record all the entertainment expenses, including the amount, purpose, date and place. For travel expenses, you should keep a trip log separating personal and business use.

Avoid tax preparation mistakes

Small businesses do a lot of tax mistakes and it is important to mitigate those mistakes. A big mistake that business owners make is to limit their deduction to mileage. If you can prove that these all are business expenses, you can deduct the cost of oil, insurance, tires, lease payments and parking fees In addition, don’t forget the small expenses. Whether it is magazine subscriptions or education classes, make sure to track all your expenses and consult your tax advisor about what you can or can’t deduct. Moreover, don’t forget about your other tax obligation such as local taxes, payroll, property, self-employment taxes etc. These all can hurt you if you are not compliant in a timely manner.

Avoid becoming a victim to scams

Tax season is the time when small business taxpayers are vulnerable to scams. One of the most common tax scams involves a call, text message or email from an unknown who claims to represent the IRS. But in reality, IRS doesn’t contact taxpayer about such matters. The motive of this scam is to collect money. In addition, it always better to keep all communication secure between tax preparers and their clients. Some scammers may attempt to intercept this communication to steal sensitive information. So if you are sharing some information related to your taxes with any person, make sure that the communications are kept secure from scammers.

5 Interesting Tax Facts You Probably Had No Idea About

April 18 is just 2 weeks away and your unfiled taxes have you in a fear. Whether you file on your own or use tax return preparation services in Concord, you need to know certain important things about tax, such as what is your filing obligation? What is the rate of taxation? Do you have all the important documents needed to file tax? Orhow your choices can affect your bottom line?

You know, this is the time when IRS requires employees to report their salary information on Form W-2.  You want to minimize your tax liability and maximize your tax benefits; you get timely and accurate advice and all deduction possible for your situation when you file with TaxCare.

You may or may not like having to pay taxes, but if your gross income is more than the applicable magic number, you have to pay federal income tax. The following surprising facts highlight what many of us don’t know about tax?

The IRS code is too long and changes a lot

No, it is not 5,000, not even 10,000; the IRS tax code is more than 70,000 pages long. Yes, you read it right. If you are going to file tax for the first time and have a complicated return, you need enough time, energy and patience to get the proper knowledge of tax return. If you find it difficult or have stuck in between, find a professional tax preparer, like TaxCare A professional and experienced tax expert definitely saves you a lot of money.

Second thing is that IRS code changes more than once a day. According to a report, there have been more than 4,500 changes to the tax code since 2001.

The first income tax occurred in 1815

The first income tax occurred in 1815 when an income tax was proposed to pay for the war of 1812 by Secretary of Treasury Alexander Dallas. However, it did not become a law till President Abraham Lincoln hasn’t passed the revenue act of 1861 to fund the costs of civil war. Earlier, the act imposed a flat tax of 3% on those people who had gross income over $8,000. But later in 1862, the act was amended and a new interest rate of 5% was imposed for all incomes over $10,000.

The Average Tax Refund is About The Same For Each State

From income to cost of living, many things vary to a great extent from state to state. But average tax refund doesn’t change much. No matter from which state are you, the national average tax refund i.e. $2,860 stays almost exactly the same across the board.

California has the most millionaires

According to Forbes, United States has 540 billionaires with a combined net worth of $2.399 trillion. Out of these California has the most millionaires. In 2013, more than 40,000 Californians reported over $1 million in income. Even in 2016, California has the highest density of millionaires, with 772,555 millionaire households. Vermont has the least –less than 300 millionaires.

IRS never ask for electronic personal information

You may have seen many scams related to tax. Scammers might call, email or text claiming to be the IRS and you can easily be scammed.  It’s important to know that IRS never requests electronic personal information nor demands immediate payment of taxes owed. If IRS needs some information about you, they will mail you first. If you get a call asking your electronic personal information, call the IRS. With some awareness, you can protect yourself from tax-related identity thefts and scams.