Tax Deductible Expenses for Small Businesses

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Small business expenses are those expenses that you incur every other day as you run your business. These expenses are usually allowed as deductibles when filing your tax returns. The IRS has defined business expenses as those expenses that must exist and are therefore necessary and ordinary in the business.

In a business that produces goods, any costs that are incurred in the production of a good are considered to be deductibles. A business that deals in the production of quilts is expected to incur expenses in fabric, thread or even batting. Other expenses that it may encounter include freight charges as it receives the materials, storage costs, costs to the factory and even labor costs.

There are rules that are used to determine the expenses that need to be deducted as direct in a business as tax returns are being filed. In order to effectively identify the deductible expenses you should consider hiring a tax accountant who can guide you and determine the IRS laws and regulations that apply to your business. In the midst of all the costs you incur in your business, there are those that can not be included as expenses. The best example of such costs includes the capital expenditures which fall under different classes: Assets Start up costs and Improvements.

A common practice found in small business owners is the fact that they use their own personal income to operate their business. They also incur personal expenses as they run the business, such expenses are not deductible. Your tax accountant can guide you on how to differentiate these expenses and deduct them appropriately. You should follow the advice given as you also keep all the records of your business so that you have an easy time when filing your tax returns.

Strategies for Settling Tax Debt

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Every taxpayer has several options for resolving his federal tax debts. There are many tax professionals who are willing to help individuals to evaluate their options for dealing with tax debts. They will prepare financial statement for their clients based on their financial situation to determine which tax settlement strategies are most applicable for them.

Below are the five strategies to settle your tax debts.

1. Installment agreement –  This is a monthly payment plan for paying off your Internal Revenue Service. With this IRS tax debt settlement strategy, either you or your tax professional can set up an instalment agreement by filling out some paper works, over the phone or by using online payment agreement.

2. Not currently collectible –  It means that the taxpayer has no ability to pay his tax debts. After the Internal Revenue Service received the evidence that you have no ability to pay, it will declare that you are “currently not collectible”. After declaration, the IRS shall stop all collection activities including levies and garnishment.

3. Partial payment installment agreement –  This is an IRS tax debt settlement strategy that contains a fairly new debt management program. Through this, you will have a long term payment plan to pay off the Internal Revenue Service at a reduced dollar amount.

4. Filing a bankruptcy – As a tax payer, you can be eligible for discharge under Chapter 7 (which provides full discharge of your allowable debts and which is most likely applicable when you have no real state or when you have modest income) or under Chapter 13 (where you will be provided with a payment plan to repay some of your debts, with the remainder of debts discharged) of the Bankruptcy Code. However, not all tax debts are capable of being discharged in bankruptcy.

5. Filing an offer-in-compromise –  It is one of the best ways to settle your tax debts for even less than the amount you owe. There are 3 options for this IRS tax debt settlement strategy: lump sum payment, monthly payment for over 24months or less, or monthly payments over the remaining statute of limitations. If you choose the lump sum payment plan, you must submit at least 20% down payment or must start making monthly payments if you choose any of the two monthly payment options.

There are several tax settlement strategies you can choose from. However, there are certain requirements for each option that you have to comply first before you become eligible.

Ready for Tax Season? Learn the 3 Key Steps to Avoiding the Ire of the IRS

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Just about everyone fears a tax audit from the IRS, but why? If you haven’t done anything wrong, there may really be no reason to fear such an inspection of your financial matters. Maybe this fear comes from the knowledge that we aren’t always sure we’re doing our taxes correctly in the first place. Maybe it comes from the fact that the tax code is so bloated with exceptions, exemptions, and deductions, that it leaves most us wondering if we indeed have a clue as to what we are doing when we fill in those simple looking tax forms that sit beside the huge instruction booklet. Maybe it’s just that as Americans, we don’t like having our privacy invaded by “the man” and don’t appreciate the fact that he’s checking up on us and our private financial affairs.

Whatever the reason, an audit is something the majority of us would prefer not to have to deal with. But mistakes, voluntary or not, can sometimes lead us in that direction. Here are three common tax mistakes that people often make and ways to avoid them.

Being and Staying Organized

Keeping all your pertinent financial and tax information together throughout the year isn’t necessarily easy. However, it can make a huge difference when it comes time to file. For many, one of the major mistakes when it comes to taxes is not having all the documentation they need at the end of the year easily at hand to make their filing process more efficient. Not having the proper documents can lead to mistakes and errors that could raise a red flag when your return gets to the state or federal level.

But being organized is only half the battle to avoiding this tax mistake. Staying organized after the fact can be important as well. Keeping your tax information together and in a location that is easy for you to find can help you if you need to reference information from a previous year or have to deal with an audit and need to provide documentation for your tax claims.

Deduction Fear

What if you happen to misplace certain documentation relating to your taxes such as a charitable donation receipt or similar item but have a legitimate claim to taking the item as a deduction or credit upon your taxes? This might lead to another common mistake — failure to take the deduction that you are eligible for anyway.

If you have legitimately made certain purchases or are eligible for certain credits or deductions, but may not have or can’t find the necessary documentation to prove it, this doesn’t necessarily mean you shouldn’t attempt to take the deduction. While it might be like playing a form of roulette — taking your chances of not being able to prove the item if you are audited — it’s not as if you are illegally claiming something you didn’t actually deserve, and your conscience should be clear even if the tax man gives you a slap on the wrist.

Knowing When to Call it Quits

Pride can be a dangerous thing, and when it comes to doing your own taxes, it can sometimes get in the way of a properly completed tax return. Frugality can also play into the mix of tax preparation mistakes, preferring cost savings by completing a tax return on your own as opposed to paying a professional to do it for you.

Saving a buck can be a great aspect of doing your taxes yourself, and the pride that comes with sealing that envelope and mailing a tax return you’ve completed yourself off to the IRS can a be a wonderful feeling, but these factors can also be common and dangerous mistakes in the realm of taxes. Knowing when to pack it in, swallow your pride and spend a buck to get a professional’s touch upon your tax return can save you time and even money by avoiding costly mistakes. Doing so might also provide you with peace of mind knowing that you haven’t missed any deductions and that you have a professional on your side should you indeed be audited.

Anastacio Mindiola is an accomplished attorney and business owner. His company helps home and business owners protest property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit https://www.republicpropertytax.com/.

Income Tax Repayment Agreements

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When you get into debt with the IRS it’s not a happy time. There’s stress and more stress as you worry about how you’re going to pay the income tax debt. There’s a lot of uncertainty too about what your options are and what kind of penalties you might incur. As I said, it’s not a happy time.

Fortunately, all is not bleak. The IRS is surprisingly reasonable when it comes to paying back your tax debt. They in fact allow you to enter into a repayment agreement to do just that.

Now there’s not a lot of negotiation room with one of these agreements. The IRS pretty much dictates the terms. But these agreements can be life-savers when you find you don’t have the cash to pay off the debt or the ability to borrow it either. There are a couple things to keep in mind however.

The first thing to keep in mind is that these tax settlement agreements are not open-ended. They’re usually set up so that you pay off your balance within a five year period. That means the monthly payments can be a bit on the high side.

Another important point is that once you begin one of these agreements, you must be very careful not to miss a payment as it will void the agreement and make you immediately liable for the complete balance amount.

And then there’s the special requirement that calls for you to pay off all of your future tax liabilities in full and on time. That means you need to get your taxes in order for the new tax year. You can’t let your tax liability go unpaid during the next year or your repayment agreement will be voided.

IRS repayment agreements come with a cost. Interest and penalties continue to accrue while you have an outstanding balance. But together they’re on par with normal loan rates so you won’t get skinned alive. And if you want to make extra payments, you can do so to further reduce the balance.

Settling a debt with the IRS can be a difficult time in anyone’s life. The IRS has more power than simple debt collection agencies and they use it. Thankfully when other options aren’t available there’s still a repayment alternative you can turn to.

How to Effectively Settle Your Tax Debt

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Life can be a lot easier if you do not have to worry of everything such as settling tax debt. Tax debt has been the problem of many people since they have received some notice form the IRS. Whatever the reasons in not settling the tax debt, the fact still remains that this is a debt that needs to be paid. In order to settle IRS tax debt, you have to do some necessary actions in order for your salary paycheck and house to be auctioned. This can be possible if they see that are not willing or you are showing negligence. Therefore, you got do something in order for the IRS to see that you are willing to do your part.

If you have received letters from the IRS, it is necessary that you call them and not vice versa. Do not wait for the moment where the IRS agents will call you. This only means that you are not showing interest in settling your tax debt. You can negotiate with them to know the terms and conditions which you think you can be able to meet. Do not sign any legal documents if you are not sure that you can be able to meet them. If you think that the agreement is in your favor, then you can sign it but be sure to follow religiously what is agreed upon. Because if not, the penalties and interest will increase tremendously. For people who have lost their job or have physical disabilities, the penalties and interest are removed. This case does not apply to everybody.

It is highly recommended that you have to educate yourself with the laws and regulations governing tax debt. If you have zero knowledge then you can search online and be familiar with the terms and conditions as well as the favors which you can avail of. Another thing that you can do in order to gain more information is to visit the local attorney in your place. Lawyers are the perfect source of information so you can visit one of them to know learn the laws and regulations of IRS regarding tax debt.

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The Government Retiree Tax Credit

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The Government Retiree Tax Credit

If you are a government retiree and received a pension during 2009, you could be eligible to the Government Retiree Tax Credit. An extra $250 in tax credits is available to federal, state and local government retirees. This credit was created with the ARRA bill passed early in the current presidential administration’s tenure.

If you have a pension or annuity outside of the social security system, this credit is available to you. This credit and the Making Work Pay credit cannot both be claimed. Therefore your Making Work Pay credit is reduced if you … Read the rest

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The Government Retiree Tax Credit

If you are a government retiree and received a pension during 2009, you could be eligible to the Government Retiree Tax Credit. An extra $250 in tax credits is available to federal, state and local government retirees. This credit was created with the ARRA bill passed early in the current presidential administration’s tenure.

If you have a pension or annuity outside of the social security system, this credit is available to you. This credit and the Making Work Pay credit cannot both be claimed. Therefore your Making Work Pay credit is reduced if you worked while receiving the Government Retiree Credit. Couples can get a full $500 if both spouses qualify.

The really good news is, this is a refundable credit which means you can get the refund even if you have not paid taxes into the system. Complete the Schedule M to claim the tax credit when you file your taxes this year.