From the blog - Tennessee Tax Law - a very succinct review of the new business tax law which will start changing business taxes in the year 2014.
The most important piece of information was that small businesses grossing less that $10,000 no longer need to worry about this tax. These businesses grossing more than $3,000 and less than $10,000 will still have to pay a minimal business tax fee, but no more reporting and paying the tax. If you want to read the full blog click on the link from my blog to get all the scoop.
Tuesday, June 18, 2013
Keep your guard up!
Small business owners get told a lot of things. They get told things by their customers. They get told things by their suppliers. They get told things by their families. They get told things by their friends. They get told things by their competitors. They get told lots of things.
It's difficult during the course of the day to figure out what it true and what is false and what to act upon and what to ignore. The best advise I can give is to think a little bit before acting or reacting.
Here are some examples. I had a client who called all bothered because she'd received a letter from an organization stating that she was required by law to post in her shop certain information for her employees and this company would, for a fee, provide her with the proper information to post that would make her compliant with the law. The letter made it sound like this was a new law and that inspectors would be coming around soon to verify that she had this information posted for her employees to read. If the information wasn't posted, she would be fined.
There's always some truth in a good lie. There is information required to be posted for employees to read and be aware of their rights. This information can be printed for free from the tax authority's web site. The State of Tennessee has this information. Laminated pages can be purchased but it's not necessary. If something is required to be posted, it is usually provided for free. Not all the time, but I'd check into that before I paid any money for a display.
Recently I was told by a small businessman that foreigners, he didn't specify which group of foreigners, but I got the impression he wasn't talking about people from the North which used to be the main type of foreigner here in the South, but people from and born in another country. These "foreigners" don't have to pay sales taxes because the state wants them to open businesses here. I told him I'd never heard of this and was certain it wasn't true.
It's not true. First I looked on Snopes.com and found it was an urban legend that had been making the rounds for years. Next I called the state to make sure. But maybe as a small business owner you don't have that kind of time. Let's apply some logic to then.
Would the state legislature pass a law to help out people who can't vote them back into office and hurt people who can? I can't see that happening at all. If such a law was passed, wouldn't the press let us all know? I never heard anything about it. Believe me, if the Republicans advanced this, the Democrats would let everyone know and the reverse if the Democrats brought this to the floor. It pays to keep an ear open for current events.
I've also been told that one Tennessee county paid a different liquor tax than another. Bring logic into it again. A state tax is a state tax. Counties don't have the ability to change it. State taxes are the same throughout the state.
Another individual was upset that health insurance premiums were going to be added to gross pay on the W-2 and taxed. Gross pay is gross pay. Nothing can be added to gross pay.
As a small business owner, you need the best information you can obtain to make a decision. Sometimes the information you need is right there in your head. Does it make sense? Even if you don't have the time to check everything out, logic and knowledge of the way things work will take you far. People don't mean to pass on false information, but sometimes they don't think before they speak. The old adage is still true: Don't believe anything you hear and only half of what you read. Except my blog, of course, you can believe 75% of it, maybe even 80%.
It's difficult during the course of the day to figure out what it true and what is false and what to act upon and what to ignore. The best advise I can give is to think a little bit before acting or reacting.
Here are some examples. I had a client who called all bothered because she'd received a letter from an organization stating that she was required by law to post in her shop certain information for her employees and this company would, for a fee, provide her with the proper information to post that would make her compliant with the law. The letter made it sound like this was a new law and that inspectors would be coming around soon to verify that she had this information posted for her employees to read. If the information wasn't posted, she would be fined.
There's always some truth in a good lie. There is information required to be posted for employees to read and be aware of their rights. This information can be printed for free from the tax authority's web site. The State of Tennessee has this information. Laminated pages can be purchased but it's not necessary. If something is required to be posted, it is usually provided for free. Not all the time, but I'd check into that before I paid any money for a display.
Recently I was told by a small businessman that foreigners, he didn't specify which group of foreigners, but I got the impression he wasn't talking about people from the North which used to be the main type of foreigner here in the South, but people from and born in another country. These "foreigners" don't have to pay sales taxes because the state wants them to open businesses here. I told him I'd never heard of this and was certain it wasn't true.
It's not true. First I looked on Snopes.com and found it was an urban legend that had been making the rounds for years. Next I called the state to make sure. But maybe as a small business owner you don't have that kind of time. Let's apply some logic to then.
Would the state legislature pass a law to help out people who can't vote them back into office and hurt people who can? I can't see that happening at all. If such a law was passed, wouldn't the press let us all know? I never heard anything about it. Believe me, if the Republicans advanced this, the Democrats would let everyone know and the reverse if the Democrats brought this to the floor. It pays to keep an ear open for current events.
I've also been told that one Tennessee county paid a different liquor tax than another. Bring logic into it again. A state tax is a state tax. Counties don't have the ability to change it. State taxes are the same throughout the state.
Another individual was upset that health insurance premiums were going to be added to gross pay on the W-2 and taxed. Gross pay is gross pay. Nothing can be added to gross pay.
As a small business owner, you need the best information you can obtain to make a decision. Sometimes the information you need is right there in your head. Does it make sense? Even if you don't have the time to check everything out, logic and knowledge of the way things work will take you far. People don't mean to pass on false information, but sometimes they don't think before they speak. The old adage is still true: Don't believe anything you hear and only half of what you read. Except my blog, of course, you can believe 75% of it, maybe even 80%.
Friday, February 15, 2013
When can you file certain forms?
The IRS can only act a quickly as Congress. Since Congress worked literally until the 12th hour making changes to the tax structure, the IRS is still working on updating forms and instructions. If you want to know which forms will be ready and at which dates, click on the link to the right on this blog page that says IRS General Information Home Page. That link will take you directly to the IRS. Then click on the orange/red section that says Forms and Pubs. At the top of the next page is a link to all the forms still under programming. Most will be ready by the first of March and most people don't use them. So it's very possible you can file right now, if you haven't already done so.
As always, if there is something specific you want to know, leave a comment and let me know.
As always, if there is something specific you want to know, leave a comment and let me know.
Monday, January 28, 2013
W-2s, 1099s and Year End Payroll Reports
It's about time to get those tax statements out to employees and sub-contractors. These need to be mailed by the end of January but don't have to be filed with the IRS (for 1099s) or the Social Security Administration (for W-2s) until the end of February. The reason for this? If there are errors in name, address or ID number, in either the 1099 or W-2, the recipient of the form will let the sender know. A corrected form can be generated and the documents needed to be sent to to the taxing authority can be corrected before the forms are sent in. That's the easiest way to do it.
The other reports that need to be sent in by January 31, no extension on these forms, are the 941, the 940 and the state unemployment. These have to be sent in by the end of the month. The main thing to remember about these reports is that they all need to balance to each other. The four quarterly 941 reports need to match the the W-2s in gross payroll. The gross payroll total of the 941s need to equal both the quarterly state unemployment reports and the total payroll for the annual 940 or federal unemployment. If these reports don't match, you will find out about it years later and have to dig through your old files to figure out what the error is and how to correct it. Best to get it right the first time.
Now let's take a look at the W-2. New this year on the W-2 is the requirement to include the value of health insurance. Small employers are exempted from this requirement. Only large employers need to worry about this. In any event, this amount is not taxable to the employee but is included for information purposes only, to let the employee know the value of health insurance paid on his behalf. If the employer can't afford health insurance for the employee, then there is nothing to include.
That's a brief overview, except to let you know that there are a multitude of 1099s - miscellaneous, interest, dividends, mortgage interest (actually a 1098), and a host of others. So don't forget any of them. You still have time to get them out. Have fun.
The other reports that need to be sent in by January 31, no extension on these forms, are the 941, the 940 and the state unemployment. These have to be sent in by the end of the month. The main thing to remember about these reports is that they all need to balance to each other. The four quarterly 941 reports need to match the the W-2s in gross payroll. The gross payroll total of the 941s need to equal both the quarterly state unemployment reports and the total payroll for the annual 940 or federal unemployment. If these reports don't match, you will find out about it years later and have to dig through your old files to figure out what the error is and how to correct it. Best to get it right the first time.
Now let's take a look at the W-2. New this year on the W-2 is the requirement to include the value of health insurance. Small employers are exempted from this requirement. Only large employers need to worry about this. In any event, this amount is not taxable to the employee but is included for information purposes only, to let the employee know the value of health insurance paid on his behalf. If the employer can't afford health insurance for the employee, then there is nothing to include.
That's a brief overview, except to let you know that there are a multitude of 1099s - miscellaneous, interest, dividends, mortgage interest (actually a 1098), and a host of others. So don't forget any of them. You still have time to get them out. Have fun.
Wednesday, January 23, 2013
Link on blog to TN Corporation Annual Reports
I have just added a link to filing the Tennessee Corporation Annual Report on line. You can pay online with a credit card - I believe there is an extra charge for that - or you can fill out the form, print it and mail it in with payment. Unless there are changes made, the fee is $20.00 annually. Once your corporation is registered with the state, you will receive a notice each year with your control number on it. With the control number, you can gain access to your annual report. If you lose the notice, you can call the Secretary of State's office. The number for the Business Services Division is 615-741-2286.
Wednesday, January 16, 2013
New Link to TN Business Taxes
I have added a new link to my list of tax pages. This one is for the Tennessee Business Tax. With this link you can pay your Tennessee business tax on line. You can find out what category you business falls under so you'll know when to file your taxes and what the tax rate is. The only thing you can't do is apply for the business license. The business license is what you renew each year when you pay the business tax. To start the business tax process you need to get in touch with your county or city clerk and pick up a form. The clerk can help you figure out your business classification as well, if you don't want to go on line. On the business tax page you can also find out if your business is exempt from the license and the tax, in which case you won't have to bother seeing the clerk and picking up a form. Accounting is a business exempt from business tax, for example, along with lawyers, doctors and a host of others. Many of those exempt from the business tax, such as accountants, have to pay a professional privilege tax, which is business tax by another name.
Any questions? If so, leave a comment and I'll get back to you.
Any questions? If so, leave a comment and I'll get back to you.
Should you amend a tax return?
In my last blog I ended by stating the I didn't always recommend that a client amend a tax return to apply for the full refund to which he or she might be entitled. Why would I do that? Why wouldn't I want my client to have every penny of their hard earned money refunded by the government? What kind of CPA am I?
I'm a cautious CPA. First let me say that I always do what the client wants, as long as it's legal. But here are some reasons why it might not be the best idea to amend a prior year's tax return.
Every tax return carries a statute of limitations based upon when it was filed. That time period for personal taxes or 1040s is three years. If you file, that is submit your tax return to the IRS, on April 15, 2013, for tax year 2012, the IRS has until April 15, 2016, to question the return. After that date, no more questions. Unless fraud, that is out right lying on the return, is suspected, then these rules don't apply. But for this discussion we're going to assume no fraud.
How do you know for certain when the statute begins? The IRS will have a record of when the tax return was received and you'll know that as well based upon the date on your copy of the return. You can go to the lengths of sending your tax return via return receipt if you wish but I've never had a client do that unless they were really worried or under the gun by the IRS for some reason. Of course, if you file electronically, which is becoming more and more popular, then you know exactly when the return was received and accepted by the IRS.
So what does all this have to with amending a tax return to get back more money? When a tax return is amended, the statute of limitations is extended. That's not usually a problem but it is a consideration. If the amount to be refunded with an amended return is $50, the tax payer might not want to extend the time the IRS could examine the return for that small amount.
Another consideration is cost to prepare the amended return. As far as I'm concerned, if I made the mistake, then I correct it for free. For example, if the client brought in the information and I failed to get it onto the tax return, then after I explain everything to the client - that is my mistake and the statute of limitations - if he or she wants to proceed, then I prepare the amended return for free. On the other hand, if the reason for the amended return is that the client forgot to bring me some information, then they have to pay for the preparation of the amended return. And that brings us to the second reason for not requesting the refund.
It takes a lot of time to prepare an amended return. It might cost $200 to prepare the amended return to receive a $50 refund. Not very cost effective, however, I did have a client with this situation and he insisted that I prepare the amended return even though he would be paying me more than he would be getting back from the IRS. His reasoning was that the government wasn't going to keep a penny of his money that it didn't deserve and he didn't care how much he had to pay me to get it all back. I didn't agree with this reasoning but if that's what he wanted to do, I was happy to collect the fee.
There you have it. My two main reasons why I don't always suggest preparing an amended return to get back a refund. Next blog: How much should I be paying to have my taxes prepared or do CPAs really read 900 pages of tax law or maybe I'll talk about year end payroll taxes and W-2s? If any of my readers want one topic more than the other, let me know in the comments sections. Until next time Happy Taxes!
I'm a cautious CPA. First let me say that I always do what the client wants, as long as it's legal. But here are some reasons why it might not be the best idea to amend a prior year's tax return.
Every tax return carries a statute of limitations based upon when it was filed. That time period for personal taxes or 1040s is three years. If you file, that is submit your tax return to the IRS, on April 15, 2013, for tax year 2012, the IRS has until April 15, 2016, to question the return. After that date, no more questions. Unless fraud, that is out right lying on the return, is suspected, then these rules don't apply. But for this discussion we're going to assume no fraud.
How do you know for certain when the statute begins? The IRS will have a record of when the tax return was received and you'll know that as well based upon the date on your copy of the return. You can go to the lengths of sending your tax return via return receipt if you wish but I've never had a client do that unless they were really worried or under the gun by the IRS for some reason. Of course, if you file electronically, which is becoming more and more popular, then you know exactly when the return was received and accepted by the IRS.
So what does all this have to with amending a tax return to get back more money? When a tax return is amended, the statute of limitations is extended. That's not usually a problem but it is a consideration. If the amount to be refunded with an amended return is $50, the tax payer might not want to extend the time the IRS could examine the return for that small amount.
Another consideration is cost to prepare the amended return. As far as I'm concerned, if I made the mistake, then I correct it for free. For example, if the client brought in the information and I failed to get it onto the tax return, then after I explain everything to the client - that is my mistake and the statute of limitations - if he or she wants to proceed, then I prepare the amended return for free. On the other hand, if the reason for the amended return is that the client forgot to bring me some information, then they have to pay for the preparation of the amended return. And that brings us to the second reason for not requesting the refund.
It takes a lot of time to prepare an amended return. It might cost $200 to prepare the amended return to receive a $50 refund. Not very cost effective, however, I did have a client with this situation and he insisted that I prepare the amended return even though he would be paying me more than he would be getting back from the IRS. His reasoning was that the government wasn't going to keep a penny of his money that it didn't deserve and he didn't care how much he had to pay me to get it all back. I didn't agree with this reasoning but if that's what he wanted to do, I was happy to collect the fee.
There you have it. My two main reasons why I don't always suggest preparing an amended return to get back a refund. Next blog: How much should I be paying to have my taxes prepared or do CPAs really read 900 pages of tax law or maybe I'll talk about year end payroll taxes and W-2s? If any of my readers want one topic more than the other, let me know in the comments sections. Until next time Happy Taxes!
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