If you own a company filing an S Corporation tax return, you should be reporting reasonable compensation. Think of "reasonable compensation" as being what you would have to pay somebody else to do the same job you are doing. Many company owners want to pay themselves less, to reduce their payroll tax bill. However, the IRS has successfully argued that business owners should pay themselves more, and assessed tax to business owners many, many times. The following article discusses one of the times the IRS has gone to court over this issue.
In the past few months, many businesses and employers nationwide have received “no-match” letters from the Social Security Administration (SSA). The purpose of these letters is to alert employers if there’s a discrepancy between the agency’s files and data reported on W-2 forms, which are given to employees and filed with the IRS. Specifically, they point out that an employee’s name and Social Security number (SSN) don’t match the government’s records.
Bitcoin and other forms of virtual currency are gaining popularity. But many businesses, consumers, employees and investors are still confused about how they work and how to report transactions on their federal tax returns. And the IRS just announced that it is targeting virtual currency users in a new “educational letter” campaign.
The chances of IRS audit are down, but you should still be prepared.
The IRS just released its audit statistics for the 2018 fiscal year, and fewer taxpayers had their returns examined as compared with prior years. However, even though a small percentage of tax returns are being chosen for audit these days, that will be little consolation if yours is one of them.
Many employers prefer to classify workers as independent contractors to lower costs, even if it means having less control over a worker’s day-to-day activities. But the government is on the lookout for businesses that classify workers as independent contractors simply to reduce taxes or avoid their employee benefit obligations.
As you prepare for the start of 2019, you may be thinking about shredding some of your business' old financial records.
I recently attended an education conference hosted by the Internal Revenue Service. I suffered through hours of classes each day, but was rewarded with San Diego evenings and a sunset on an ocean beach.
Tax return preparers are required to have a PTIN, or preparer tax identification number. Other than that, there aren't really any requirements to be a paid tax return preparer. That's kind of scary!
It is with mixed emotions that Next Step Advisors announces the departure of Josh Emett. He has accepted a position with a firm in North Carolina, and will be moving his young family across the country. Josh has been an important piece of our team, and replacing him will not be easy. We will miss him, but we are excited for his new adventure. We wish him the best of luck in this move, and with his new firm on the East coast!
We've all heard the quote, "Love what you do, and you'll never work a day in your life." Can you really take something you enjoy and turn it into a business?
We all have hobbies. Sometimes we might be able to make money with our hobby. You must report any income you make from a hobby, and any related expenses are deductible. However, so called "hobby losses" are not deductible. Expenses up to your total income are fine, but no more. What's worse, those deductible expenses are reported on Schedule A as miscellaneous itemized expenses, meaning they are deductible only to the extent they exceed 2% of your adjusted gross income. To be able to deduct expenses beyond your income, you have to be able to demonstrate you are not just reporting a hobby, but that you are actually running a business.
One of the questions we get asked most frequently is about how long documents should be kept. Here are some general guidelines based on our experience and federal statutes of limitations for income tax purposes. Your state may have longer statutes, so use this list as the guide, not the rule.
Next Step Blog
Our blog is intended as a tool to keep people informed about relevant tax and accounting issues. If you have a question or an idea for a post, let us know!