taxes Tax Information: พฤศจิกายน 2008

วันอาทิตย์ที่ 30 พฤศจิกายน พ.ศ. 2551

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable deductions for donated vehicles. The American Jobs Creation Act (AJCA) radically changed the amount of the deduction taxpayers can claim for their donated car.

Fair Market Value v. Actual Sales Price

When donating a car to charity, a taxpayer traditionally was allowed to deduct the fair market value. The new law changes this valuation to the actual sales price of the vehicle when sold by the charity. The taxpayer is also required to get written and timely acknowledgment from the charity in order to claim the deduction

The AJCA does provide some limited exceptions under which a donor may claim a fair market value deduction. If the charity makes a significant intervening use of a vehicle--such as regular use to deliver meals on wheels-- the donor may deduct the full fair market value. For example, driving a vehicle a total of 10,000 miles over a one-year period to deliver meals is a significant intervening use.

The AJCA also allows a donor to claim a fair market value deduction if the charity makes a material improvement to the vehicle. Under the guidance, a material improvement means major repairs that significantly increase the value of a vehicle, and not mere painting or cleaning.

Interestingly, the IRS has also added an exemption not included in the AJCA. On its own, the IRS has determined that taxpayers can claim a deduction for the fair market value of a donated vehicle if the charity gives or sells the vehicle at a significantly below-market price to a needy individual, as long as the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.

If you intend to assert one of these exemptions, how do you determine the fair market value? Generally, vehicle pricing guidelines and publications differentiate between trade-in, private-party, and dealer retail prices. The IRS consider the fair market value for vehicle donation purposes to be no higher than the private-party price.

The new provisions of the Americans Job Creation Act certainly make it less attractive to donate a car to charity. Using the exemptions, however, you can still create a sizeable deduction while helping others who are less fortunate.

Richard Chapo is CEO of <a target="_new" href="http://www.businesstaxrecovery.com">http://www.businesstaxrecovery.com</a> - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

วันเสาร์ที่ 29 พฤศจิกายน พ.ศ. 2551

Tax Deduction for Alimony Payments? - Yes!

Over 50% of marriages end in divorce in the United States. Many divorce decrees include provisions for the payment of alimony. The IRS takes the position that such payments constitute a form of income and create an alimony tax deduction for the person making payments.

According to the IRS, alimony payments are taxable to the recipient in the year received. In turn, the person paying the alimony can claim a deduction for the payments if the following tests are met:

1. You and your spouse or former spouse do not file a joint return with each other,

2. You pay in cash (including checks or money orders),

3. The divorce or separation instrument does not say that the payment is not alimony,

4. If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment,

5. You have no liability to make any payment (in cash or property) after the death of your spouse or former spouse; and

6. Your payment is not treated as child support.

If you are receiving or paying alimony, you must use Form 1040 for your personal taxes. Regardless of income levels, deductions or miscellaneous tax issues, you cannot use Form 104A or Form 1040EZ.

In preparing your tax return, the person receiving alimony will report the information on line 11 of Form 1040. That person must also provide their social security number to their former spouse or face a fine of $50. The person paying the alimony can claim the deduction on line 34a of Form 1040.

Amending Procedural Laws for Collection of E-taxation

The electronic transaction ordinance defines the certificated copies in which are to be presented for adjudication. Where any law requires or permits the production of certified copies of any records, such requirement or permission shall extend to print outs or other forms of display of electronic documents where, in addition to fulfillment of the requirements as may be specified in such law relating to certification, it is verified in the manner laid down by the appropriate authority.

The code of civil procedure should be amended to oblige the court to accept the endorsement rule as enunciated in the rule 4 and 5 Order XI of the Code of Civil Procedure Act 1908 as defined in section 12 of Electronic Transaction Ordinance 2002.

The power to summon as defined in subsection (1) of section 94 of Cr.P.C (Act V of 1898) should be extended so as to add the power of police to summon all persons who has committed offence under electronic transaction ordinance 2002.

My recommendations are that amendments should be made in section 95 of the Cr.P.C.( Act V of 1898) in manner as to add wordings of 'electronic document' and power of certification services provider defined in electronic transaction ordinance 2002, parallel with the power of possession of documents held by postal and telegraphic authorities and the similar types of amendments are recommended in subsection (1) of section 96 and in clause (a) to (e) of subsection (1) of section 99.

The section 510 of Cr.P.C. (Act V of 1898) should be amended for acceptance of the report of Certification council issued under section 21 of electronic transaction ordinance 2002.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.Author can be contacted by adil.waseem@lawyer.com

Deducting Points On Home Refinances

Deduction of Refinance Points

Any points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence. To the extent that money is taken out to pay off credit cards and non-residence costs, the points may not be used as a tax deduction.

Big Deductions By Refinancing Twice

If you refinanced your primary residence twice during 2004, you may be in for a very nice surprise. A significant tax deduction can be created when you refinance twice in one year. If you refinance a mortgage, you accelerate the deductible amount of points from the first mortgage and may claim the points from the first mortgage all at once.

As an example, assume that I refinanced my home in January 2004 and paid $3,000 in points. Interest rates continued to drop through 2004 and I then decided to refinance again in August. Because I paid off the original loan with the refinance, I am able to accelerate the value of the points of the January loan.

So, what tax deductions have I created for my 2004 filing period? Initially, I am going to deduct a percentage of the points off of my latest refinance. The deduction will amount to the total amount of points paid divided by the total months of the loan. This will not be a big deduction, but every little bit helps.

In addition to this amount, however, I will also deduct the full $3,000 in points that I paid on my January 2004 refinance! I am able to claim this deduction because I "accelerated" the deductibility of the points by paying of January mortgage with the August refinance.

By refinancing twice, I get a lower interest rate and a healthy tax deduction. Ah, the value of owning a home.

The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is looming large. If youre like most people, you havent gathered all of your tax records, let alone filled your return.

Before you dig in and get started, take this opportunity to first review a list of a few tax deductions to which you may be entitled if you itemize deductions but most people overlook. Many of these deductions are subject to various limitations, so consider getting professional help from your tax advisor and accountant to determine which deductions you qualify for and which items apply to your specific circumstances. Remember, there are hundreds of deductions throughout the tax laws; many of them can be quite obscure but also quite lucrative. Here are seven commonly missed deductions to keep top of mind:

<ul>

<li>Points on Refinancing: With interest rates so low in 2003, there was a great deal of refinancing activity. Any points you pay to refinance your home can be deducted ratably over the life of the new loan. Furthermore, all unamortized points on old refinancing are deducted in the year of the new refinancing.

<li>Health Insurance Premiums: Any health insurance premiums you pay, including some long-term care premiums based on your age, are potentially deductible. Medical expenses have to reach 7.5% of your adjusted gross income before they give you any tax benefit. Self-employed people can deduct 100% of health insurance premiums paid for themselves, their spouses and their dependents.

<li>Non-Cash Charitable Contributions: If you have used your charge card for contributions to charity, remember that the deduction is allowed in the year that you made the charge, not when you actually pay the bill. Also, you may write off certain out-of-pocket expenses related to charitable activities. Appraisal fees paid to value property donated to charities may be taken as a miscellaneous deduction subject to the 2% floor on miscellaneous deductions.

<li>Higher-Education Expenses: If your adjusted gross income wasnt more than $65,000 ($130,000 for married, filing jointly) in 2003, you can get an above-the-line deduction for as much as $3,000 for any higher-education tuition and fee expense you paid. For 2004, the deduction can be as much as $4,000. For those at higher adjusted gross incomes limits ($80,000 single, $160,000 married filing jointly) the deduction is limited to $2,000 for 2004. This deduction must be coordinated with other education credits and savings vehicles.

<li>Work-Related Expenses: You can write off many work-related and work-search expenses, such as education that maintains or improves your skills, certain business tools, dues to labor unions, cell phone depreciation, certain expenses to search for job in your present occupation, including employment agency fees, resum preparation, and travel expenses (local and out of town) and cleaning and laundry bills when on a business trip. Work-related expenses are subject to the 2% floor on miscellaneous deductions. Furthermore, if you buy a new SUV for business use that weighs more 6,000 pounds, and file Schedule C or other business tax return you may be allowed to write off the full amount (up to $102,000 in 2004) in one year as a business expense subject to limitations.

<li>Clean-Fuel Deduction: If you are not in the market for a large SUV for business, you still can get a deduction for your personal car, another above-the-line deduction of up to $2,000 for 2003 ($1,500 for 2004) of the cost of buying a clean-fuel vehicle or a car that uses a significant source of energy other than gasoline. That includes hybrid cars, such as the Toyota Prius, the Honda Insight and the Honda Civic Hybrid. You get the deduction in the year you start using the car, and you must be the original owner.

<li>Investment and Tax Expenses: In addition to forgetting to deduct tax-preparation fees and the portion of your legal, accounting or financial planner fees that relate to tax planning, many people miss deducting investment expenses. Those include certain fees paid to your financial advisor and/or broker and certain IRA fees you may pay directly. It also may include mileage for meetings and long-distance phone calls to your advisor or broker. Dont forget to include deductions for the cost of your investment publications or subscriptions, safe deposit boxes used for investment-related documents, these deductions are subject to the 2% floor on miscellaneous deductions.

</ul>

About The Author

Sandra N. Salter, Personal Finance Expert, is an American Express Financial Advisor and owner of American Express Financial Advisors Branch Office in Newark, NJ. She focuses on providing comprehensive financial planning services paying close attention to the long-term financial health of their clients, building customized financial plans that help clients achieve both short-term and long-term goals. The types of services she offers clients include: Income Tax Planning, Saving and Investing for Retirement, Working with Retirees, Financial Strategies for Small Business, Domestic Partner Planning, Risk Protection Planning, Estate Planning, Charitable Giving , Investment Strategies for Education , Asset Allocation and Comprehensive Financial Planning, among other areas. They can be reached at <a href="mailto:sandra.n.salter@aexp.com">sandra.n.salter@aexp.com</a>.

วันศุกร์ที่ 28 พฤศจิกายน พ.ศ. 2551

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made up can affect what you pay in tax. The plan is to make as much of the price tax deductible for you and not the other party.

Once a final price has been agreed upon, try to allocate that price in the sale and purchase agreement in such a way that you get maximum benefit.

Here are some ways to do this:

<ul> <li>If you are buying allocate as high a value as possible to the assets in the purchase price (plant, equipment, computers, vehicles, fittings, machinery) so you can claim a higher deduction for depreciation of those assets. If you are selling, keep asset values down so you are not taxed for any depreciation recovered (that is, the excess of the amount you have sold the assets for over their book value).</li>

<li>If buying value goodwill at the lowest figure possible because it is not tax deductible to you but it does increase the assets allocation. If selling then the higher the goodwill figure the better for you as this lowers the assets figures in the price.</li>

<li>If buying, the higher the valuation for stock the better, because you pay tax on the stock profit, which is the difference between stock at the beginning and stock at the end of the period so keep this profit down. If selling, keep stock value as low as possible as they have the opposite effect.</li>

<li>If buying and part of the deal includes you taking over the lease, put in a value for "premium on lease" as this premium is tax deductible. If selling, don't include any premiums.</li>

<li>If buying and the old owner is staying on, lower the purchase price and increase wages the you'll pay to the former owner because those wages would be fully tax deductible. If selling and you're staying on, increase the purchase price and work for nothing for a period.</li>

<li>If buying, leave your repairs and maintenance for a year or two, so you'll have no problems getting a deduction. If you carry out the work immediately on moving in, there is a possibility that the expenses may be "capitalized" and only depreciation can be claimed. If selling, get the repairs done before the sale and increase your price.</li>

<li>If buying and you're paying off the balance of the purchase price, reduce the price and raise the interest rate, because interest is fully deductible to you. If you're selling increase the selling price and instead, give the buyer a loan at nil interest. </li> </ul>

StartRunGrow (<a target="_new" href="http://www.startrungrow.com">http://www.startrungrow.com</a>) is a global online information organization that specializes in creating, developing and marketing business help information specifically with the aim of "making business easier" for entrepreneurs around the world. The StartRunGrow objective is to become a dominant player in the business help arena providing end to end solutions for the millions of small and medium businesses worldwide who continue to struggle daily with the difficulties of starting, running and growing a successful business.

วันพฤหัสบดีที่ 27 พฤศจิกายน พ.ศ. 2551

State Tax Information

All states also have their own tax system. Typically there is a tax on real estate, and there may be additional income taxes, sales taxes, and excise taxes. Oil and mineral producing states often have a severance tax, which is similar to an excise tax in that tax is paid on products produced, rather than on sales. Taxes on hotel rooms are common, and politically popular because the taxpayers usually do not vote in the jurisdiction levying the tax.

These states do not levy an individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee only tax interest and dividend income. Delaware, Oregon, Montana and New Hampshire have no state or local sales tax. Alaska has no state sales tax, but allows localities to collect their own sales taxes up to a state-specified maximum. California has all the mentioned taxes, with the result that tax liability often exceeds 51% of income for many California residents.

Many states also levy personal property taxes, which are annual taxes on the privilege of owning or possessing items of personal property within the boundaries of the state. Automobile and boat registration fees are a subset of this tax; however, most people are unaware that practically all personal property is also subject to personal property tax. Usually, household goods are exempt; but virtually all objects of value (including art) are covered, especially when regularly used or stored outside of the taxpayer's household.

States permit the creation of special assessment districts (typically for provision of water or removal of sewage, or for parks, public transit or schools) whose boundaries may be independent of other boundaries and whose income may be from one or more of service assessments, property taxes, parcel taxes, a portion of road or bridge tolls, or an additional increment upon sales taxes in addition to the non-tax fees for services provided (such as metered water). State government is financed mainly by a mix of sales and/or income taxes and to a lesser extent by corporate registration fees, certain excise taxes, and automobile license fees.

For more free legal information on <a target="_new" href="http://www.bankdynamic.com/laws/tax-law.html">Tax Law</a>, please visit <a target="_new" href="http://www.bankdynamic.com/">Free Legal Information</a>.

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist, and to know strategies to minimize them. When it comes down to it, you need to plan how you and your family will eventually pay them.

The Estate Tax Dilemma

Estate taxes are generally due nine months after the date of death. And they are due in cash. In addition to estate taxes, there may be final expenses, probate costs, administrative fees, and a variety of other costs. How can you be sure the money will be there when it's needed?

Estate Tax Options

There are four main sources of funds to pay estate taxes. First, your current savings and investments. You or your survivors can use savings and investments to cover the costs of estate taxes, probate fees, and other expenses. This is often a sound alternative. However, sometimes savings and investments may not be sufficient. And if those savings were earmarked for other financial goals, you may need to rethink how you will achieve those goals.

Another option would be to borrow the money. Unfortunately, with this option you not only have to pay the estate taxes, but you or your survivors will be forced to pay interest on the amount borrowed to pay estate taxes. Remember to consider how your family's credit standing will be affected by a death in the family.

The third option involves liquidation. If estate taxes are larger than the cash available to pay them, you may have to sell valuable assets such as the family home, the family business, or other assets. Hopefully, they will sell for what they're worth. In many cases, however, they don't. The fourth option - one that is often a prudent way to pay estate taxes - is life insurance.

What Can Life Insurance Provide?

Life insurance can provide a timely death benefit, in cash, that can be used to pay estate taxes and other costs. And it will be paid directly to the beneficiary of the policy, without being subject to the time and expense of probate.

Granted, life insurance does require premium payments. However, if appropriate to your situation, life insurance premiums can be looked at as a systematic way of funding future estate taxes. You get guaranteed liquidity and a death benefit that is generally free from federal income taxes. Indeed, the financial protection provided by life insurance can be invaluable to those who have the burden of paying estate taxes - your loved ones.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance. Keep in mind, however, that there are special tax rules that apply and you should seek professional advice before implementing this strategy.

Coping with estate taxes may be a difficult proposition for you or your survivors. When it comes to paying them, consider life insurance. It may be a strategy worth considering, and overlooking it could be costly.

Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information: <a target="_new" href="http://neda.dabestani.pcragent.com/">http://neda.dabestani.pcragent.com/</a> Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

Understanding Basic Tax Terms

If your like many, you don't always understand what people are talking about when it comes to Taxes. It's important to know the main tax terminology, especially when tax season comes around. Knowing the basics will make tax season less of a hassle for you, and maybe even save you some money. There are hundreds of terms; Below are some of the most important:

Tax Form
A Tax Form is the form that is filled out and submitted to your government to report all of your tax information for the past year.

Audit
An audit refers to an unbiased examination and evaluation of the financial statements of an individual or organization such as a business. Audit's are performed for the purpose of ensuring that accounting records are fair and consistent, and are following the guidelines laid out for the individual or organization.

Capital Gain
Capital Gain refers to the amount of money made on Capital during a given tax period. For example if you own a house, and over the past year the value of your house increased by twenty thousand dollars, you would have to claim this twenty thousand dollars as a capital gain in your income taxes.

Capital Loss
Capital Gain refers to the amount of money Lost on Capital during a given tax period. For example if you own a house, and over the past year the value of your house decreased by twenty thousand dollars, you would have to claim this twenty thousand dollars as a capital loss in your income taxes.

Child Tax Credit
Child tax credits are tax credits that are given to the caregivers for each dependent child, that at the end of the tax year is under 17.

Flat Tax
Flat tax refers to a system where everyone is taxed at the same rate, regardless of how much they earn.

Gross Income
Gross income is an individuals or corporations total income before any taxes or deductions have been applied to the sum.

Net Income
Net Income is the total amount of income after all deductions and expenses.

Property Tax
Property tax is a tax that is assessed on real estate value by a local government.

Feel free to reprint this article as long as you keep the following caption and author biography in tact with all hyperlinks.

Ryan Fyfe is the owner and operator of <a href="http://www.taxes-area.com" target="_blank">Taxes Area</a>. Which is a great web directory and information center on Taxes and related issues like Income tax and property tax.

Tax Help Secret: Avoiding the Entreprenuers Curse

Your days as an entrepreneur and businessperson are consumed with one primary activity; making money. Whether you think in terms of growing your business, getting the word out there, or some fancy new marketing technique, your days and weeks and months in business are focused on that one group of activities. In fact, some of you are marketing machines.

<a target="_new" href="http://m123.infusionsoft.com/go/MikeDrew/MikeDrew/EntCurse">Tax Secrets of the Rich Found Here</a>

Maybe you've developed a new product line. Or, set up a joint venture with a new partner. If you're a real estate investor, you're looking for another deal or strategy for locating under-valued properties.

No matter how you break it down, entrepreneurs are single-focused. MAKE MORE MONEY. You live it, you breath it and you sleep it.

<a target="_new" href="http://m123.infusionsoft.com/go/dm/MikeDrew/EntCurse">Asset Protection</a>

I call it the entrepreneur's curse.

Don't get me wrong. It's not completely bad. In fact, the most singly focused people I know are the most successful. But building your business up can't be your only focus.

There are two BIG reasons why.

Taxes and Lawsuits.

Left unmanaged taxes and lawsuits will eat you alive. Taxes do it slowly but surely. They chip away at your net worth a little at a time. It can be so subtle, that you've stopped noticing. Let's face it, when was the last time you looked at your pay stub (yes, even if you're self-employed). There's one line of income and three lines of taxes (Fed, State and FICA) they're alone. But when was the last time you really noticed it?

You've been conditioned not to care. But every dollar that you overpay in taxes is a lost opportunity to build wealth. Think about it; if someone handed you $10,000 or $20,000 to invest in your business, couldn't you leverage the heck out of it?

Maybe you'd buy a piece of (almost) no money down real estate and flip it for $20,000 profit.

Or launch an ad campaign - radio or print.

Or start a web marketing campaign.

Whatever your strategy of choice, you would parlay that money into something bigger and compound the returns on top of it. But if you throw that money away by unnecessarily overpaying your taxes, it's gone. (Remember, a penny saved is a penny earned) And so is the opportunity. Forever. What a shame!

Then there's lawsuits. They mess you up differently. If taxes steal away your money in the night, lawsuits are like a tiger. Waiting. Stalking. Circling. And then, at the opportune moment - BAM! It's over. They pounce on you and you don't even know what hit you.

It might be an angry tenant, or the passenger in a car that you ran into. It could be your spouse or a disgruntled employee. It could be any one of a thousand reasons that people can sue you (there are millions of lawsuits each year).

Whatever the reason, before you can fully regain the use of your senses, you're upside down and inside out. And it can take years before you can pull yourself up by the bootstraps and start over again.

Then, you find you're digging yourself out of a big hole. It doesn't have to be that way. There is a better way. A way for you to build consistent protected wealth that lasts for generations.

<a target="_new" href="http://m123.infusionsoft.com/go/pfbsaff/MikeDrew/EntCurse">Tax Strategies</a>

That's what my new Wealth Accumulation program is all about. The last thing I want to see is you work for years building a great asset base - only to have someone bring it toppling down. It's not necessary and you deserve better than that. I am trained as an attorney and practiced in the State of New York for 12 years as the senior partner of my own firm, where I was admitted to both the State and Federal Bars and specialized in the areas of business and real estate.

I have benefited from the strategies he teaches and I've saved thousands and thousands of dollars in the process.

Ladies and Gentleman, I give you
The Tax Saving Attorney,
Drew Miles.

P.S. It's the little things in life that make all the difference. Missing the details here could be devastating to you and your family.

P.P.S. Be a hero to those you love. Do it right the first time.

Drew has combined what he learned during formal education, informal education and twenty five years of business experience in the development of programs designed to teach people how to build and preserve lasting wealth. He is an author, teacher and international speaker in the areas of asset protection, and tax saving and wealth building strategies.

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a glorious summer, it's time to remind teachers to organize 2004 school expenses. Under a temporary tax code change, teachers can deduct certain school-related expenses from adjusted gross income.

Educator Expense Deduction

If you work in the education field, you may be able to deduct up to $250 from your adjusted gross income for 2004 taxes. Unfortunately, the deduction is only applicable to 2004, but there is a reasonable possibility it will be extended to the 2005 tax year and beyond. As a result, you should continue to keep records so you can claim the deduction if it is extended. So, who can claim it and what can be claimed?

"Educators"

Under the tax code provision, "educators" are defined as a fairly broad group of professionals. You are an education if you comply with the following guidelines:

1. You teach kids in kindergarten or through grade 12;

2. You are a teacher

3. You are an instructor

4. You are a counselor

5. You are an aide, or

6. You are a principal

If you fit within one of the above positions, there is an additional time requirement that must be met. You must work at least 900 hours in an elementary or high school during the year in question. This equates to roughly half a year.

Expenses

As an educator, you are allowed to deduct unreimbursed expenses you paid for school room items. Examples include books, computer programs, writing supplies and those little stars I used to love getting on my book reports. Just make sure the school is not covering the costs.

The educator expense deduction is a rather disappointing $250, but every deduction counts when it comes to taxes. Make sure you claim the deduction and keep your receipts for the write off.

Richard Chapo is with <a target="_new" href="http://www.businesstaxrecovery.com">http://www.businesstaxrecovery.com</a> - recovering overpaid taxes for small businesses. Visit our article page - <a target="_new" href="http://www.businesstaxrecovery.com/articles">http://www.businesstaxrecovery.com/articles</a> - to read more tax articles.

วันพุธที่ 26 พฤศจิกายน พ.ศ. 2551

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What do you do if you can't pay the amounts you owe? You should still file your return by the due date and pay as much as you can. There are, however, additional steps that might help.

Credit Cards

You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. If you go in this direction, you can use either of the following two sources:

Official Payments Corporation
1-800-2PAY-TAX (1-800-272-9829)
www.officialpayments.com

Link2Gov Corporation
1-888-PAY-1040 (1-888-729-1040)
www.pay1040.com

If a credit card is out of the question, you may be able to pay any remaining balance over time in monthly installments through an installment agreement. If you are completely wiped out and the future looks grim, you may also want to consider getting the tax amount reduced through the Offer in Compromise program.

To apply for an installment payment plan, fill out and attach Form 9465 to the front of your tax return. The IRS has streamlined the approval process if your total taxes (not counting interest, penalties or other additions) do not exceed $25,000 and can be paid off in five years or less. Be sure to show the amount of your proposed monthly payment and the date you wish to make your payment each month. Make absolutely sure you can make the payments.

The IRS charges a $43 fee for setting up an installment agreement. You will also be charged interest plus a late payment penalty on the unpaid taxes. The late payment penalty is usually one-half of one percent per month or part of a month of your unpaid tax. The penalty rate is reduced to one-quarter of one percent for any month an Installment Agreement is in effect if you filed your return by the due date (including extensions). The maximum failure to pay penalty is 25 percent of the tax paid late.

If you do not file your return by the due date (including extensions), you may have to pay a penalty for filing late. The penalty for failing to file and pay timely is usually five percent of the unpaid tax for each month or part of a month that your return is late. The maximum penalty for failure to file and pay on time is 25 percent of your unpaid tax.

In Closing

The IRS wants you in the system, even if you're broke. Whatever you do, file your tax return in a timely manner. Once filed, the IRS will work with you on payment issues. Don't get stressed. Keep in mind that millions of Americans have the same problem.

Richard Chapo is CEO of <a target="_new" href="http://www.businesstaxrecovery.com">Business Tax Recovery</a> - Obtaining tax refunds for small businesses for overpaid taxes. Discovery tax strategies and deductions in our <a target="_new" href="http://www.businesstaxrecovery.com/articles">tax articles section</a>.

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the widow who stated:

"I didn't realize what an A-B Revocable Living Trust meant and that it had to be divided between the survivor and the deceased spouse and that I am limited as to what I can use from his share."

She told me that she only learned of this after her husband passed away. This is too late for many (there is a way to collapse an A-B Revocable Living Trust, which we'll talk about in another article).

First, what is an A-B Revocable Living Trust? I spend a great deal of time going over this in my free Multi-Media Course, available at http://www.livingtrustsecrets.com. Basically it is the splitting of a husband and wife's estate into two shares, his share and her share. The reason is to capture, or use, the estate tax unified credit amount that each spouse receives on death.

Let's explain. Since we know Uncle Sam likes to receive his inheritance too, whenever there is a death, we always need to ask "is there a tax?"

When we talk about taxes on death, we are talking about the federal estate tax (your state may also have a tax, sometimes called an estate tax or an inheritance tax. The difference is who is liable for payment of the tax? the estate or the inheritor? But let's not get side-tracked on the state tax. Let's stick with talking about the federal estate tax).

So let's say you have a "simple will." In a simple will, you will usually say "when I die, leave everything to my spouse." Very Simple.

Now, is there a federal estate tax? First, realize that the passing of property on death is a privilege and not a right. Therefore, it is taxable event. Even though it is a taxable event, however, the tax code tells us that everything that is left to our spouse is tax-free under what is called the "marital deduction." So, in our simple will example, there would be no estate tax since everything you leave to your spouse is tax free.

Uncle Sam is patient. He is willing to wait until the second spouse to die passes away. Now, he gets to collect his tax on the total of both shares: the husband's share and the wife's share.

What happened with the "simple will" is that you have wasted the federal estate tax unified credit amount (currently $1.5 million) that can be left tax free to anyone.

So, what the A-B Revocable Living Trust is designed to do is to capture and preserve the federal estate tax unified credit amount available when the first spouse dies. It does this by creating what is often called the "credit shelter" trust.

The "credit shelter" trust (the "B" trust in an "A-B" Trust) is an irrevocable trust that springs into being out of your Revocable Living Trust when the first spouse dies. This trust is designed to be managed by the surviving spouse for the benefit of the surviving spouse, without giving the survivor any "taxable incidents of ownership."

What this accomplishes is that upon the death of the second spouse to die, the assets that had been placed into the "credit shelter" trust are not considered to be owned by the second spouse to die. Therefore, they are not included in or taxed as part of the second spouse to die's estate.

This can often save hundreds of thousands of dollars, since the federal estate tax rate kicks in at 37% and goes up from there.

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entreprenuer. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=========><a target="_new" href="http://www.LivingTrustSecrets.com">http://www.LivingTrustSecrets.com</a>

** Attn Ezine editors / Site owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed above.

If you do use the material please send us a note so we can take a look. Thanks.

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Bad Debt Tax Deduction

A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:

A. The existence of a legal relationship between the small business and debtor;

B. The receivables are worthless; and

C. The small business suffered an actual loss.

Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest requirement to meet, the issue is a bit more complicated. The Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic example of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can show a real loss if the retailer files bankruptcy. Unfortunately, there is almost no way to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not consider the expenditure of time and effort to be a sustained economic loss.

Small businesses suffer all to often from uncollected receivables. If you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.

Tax Trap #2 -- Double Taxation: Isnt Once Enough?

Have you been thinking about incorporating your small business or self-employment activity? The advantages are many!

For starters, you'll be protecting yourself and your family from the possible of a business ending lawsuit. Forming a corporation is Step One on the path known as "Asset Protection" -- you are moving from the world of unlimited liability to the world of limited liability.

(NOTE: For further insight into the legal advantages of incorporating, check out the article: "It Can Happen To You: Why Any Sole Proprietorship Is A Risky Business" at http://www.YouSaveOnTaxes.com/happen-to-you.html)

From a tax standpoint, there are both advantages and disadvantages to incorporating. Yes, forming a corporation can either reduce your taxes or increase your taxes, depending on what type of corporation you create.

There are two main types of corporations: "C" Corporations and "S" Corporations -- and which type you choose can make all the difference in the world of taxes.

NOTE: The question of "C" Corp vs. "S" Corp has no effect on the asset protection provided by your corporation. This is a tax issue, not a legal issue.

A "C" Corporation can lead you into a Tax Trap known as "double taxation". Yes, income from a "C" Corporation can actually be taxed twice -- once when it's earned on the corporate level and again when it's paid to you, the shareholder, in dividends.

There are several ways to avoid double taxation. Often the easiest way is to tell the IRS that you choose to be an "S" Corp instead of a "C" Corp. The profits of an "S" Corp are not taxable to the corporation; instead, those profits are reported directly on the shareholder's personal income tax return and are therefore only taxed once.

And once is enough, don't you think!

Of course, any article on Choice of Entity must contain the old disclaimer, "Consult your tax professional" -- I am not prescribing a one-size-fits-all approach to this issue. But for many small biz owners and self-employed folks, the "S" Corporation is a good fit because it provides protection from personal liability and avoids the nasty tax trap of double taxation -- two great benefits worth checking into.

Should you incoporate your sole proprietorship and then decide that the "S" Corporation is the right fit, you must inform the IRS that your corporation is choosing "S" Corporation status by filing Form 2553, which is, in effect, an application to become an "S" Corporation.

IMPORTANT: If you incorporate and do not file Form 2553, you are automatically considered to be a "C" Corporation by the IRS. In other words, to be a "C" Corporation, you just incorporate; there is nothing you have to do to inform the IRS you want to be a "C" Corporation.

There are critical rules regarding how and when to file Form 2553, so be sure to read the instructions carefully, or check with your tax pro.

Failure to file Form 2553 on time or filing Form 2553 incorrectly results in a rejection of your corporation's "S" Corp application, and the corporation is then by default treated as a "C" Corp, subject to double taxation, the very trap you were trying to avoid.

To download a copy of Form 2553, go to: http://www.irs.gov/pub/irs-pdf/f2553.pdf

The instructions for filing Form 2553 are found here: http://www.irs.gov/pub/irs-pdf/i2553.pdf

Wayne M. Davies is author of 3 tax-slashing eBooks for the self-employed, available separately or as a 3-volume set, "The Ultimate Small Business Tax Reduction Guide". <a target="_new" href="http://www.YouSaveOnTaxes.com/ultimate-guide">http://www.YouSaveOnTaxes.com/ultimate-guide</a>

To get your free copy of Wayne's 25-page report, "How To Instantly Double Your Deductions" visit: <a target="_new" href="http://www.YouSaveOnTaxes.com">http://www.YouSaveOnTaxes.com</a>

วันจันทร์ที่ 24 พฤศจิกายน พ.ศ. 2551

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is a necessary evil and that without it our government would not be able to afford our roads, health services, education, welfare system etc. However you are not obliged to pay more tax than that for which you are legally liable.

Here are some tips to keep your tax down:

<li> Reduce all stock to levels and cut costs.
Never carry excess stock because that is money that is sitting on the shelves and not in your bank.</li>

<li> Clear out stock that is slow.
Clear stocks and turn them into cash. If necessary reduce your prices and turn stock into cash rather than have it sitting on the shelves or in the warehouse. Best to cut your losses and use the cash to buy in stock that does sell.</li>

<li> Reduce rental costs.
Cut your rental cost by letting out or letting go space that are excess to your requirements. Talk to your landlord about what you can do. It may be that you can obtain approval to rent out areas that you don't need. </li>

<li> Pay your bills on time but not before the due date.
Do not pay your bills too early because having the money sitting in your bank will reduce your bank fees and interest costs. Make use of any early payment discounts offered and, where necessary, if the funds are short talk to your suppliers and see if they would allow you extra time to pay.</li>

<li> Make sure you are making a profit on your sales.
The correct profit margin you put on to your products is critical and will determine whether you will be profitable or not.</li>

<li> Use your credit card.
Credit cards often have an interest-free period so make use of it. Advantage can be taken of this fact by using your card to pay some expenses and then paying the credit card on the due date. The result is that you effectively obtain an interest-free period through the use of this facility.</li>

<li> Dump and no longer stock products that are not profitable.
Check your product range and discontinue all slow moving stock that is not generating profit. It is far wiser turning poor products into ready cash and using that cash for those products which provide a profit contribution.</li>

<li> Look after your customers.
No customers mean no business. Your customers are critical to your success, so look after them. Satisfied customers will keep coming back to buy. Unhappy ones will never be seen again. When they stop coming back, sales will be lost and your business will suffer.</li>

<li> Reduce credit to customers.
Don't sell on credit unless you have to. Provide credit to customers who are regulars and who support the business all the time. Give credit to those who pay their bills on time. Late payers should be dropped as the costs of servicing them will drain your profits.</li>

<li> Keep all papers.
Remember papers are "worth more than money". Keep a record of all claims you make and all receipts to justify those claims. It is very important for you to write/record in your working papers the basis or reasoning or viewpoint relating to every claim you make. If your basis is sound but wrong then you will have a better chance to resist any claim for tax avoidance or evasion directed at you. If you have no basis at all and no thought given to how you arrived at the claim made, and your claim is rejected, you could be up for the "high jump" and be charged with the intention to evade tax.</li>

Small Business Tax Credit - Americans with Disabilities Act

Many small businesses complain when confronted with the expense of complying with the Americans with Disabilities Act. Most do not realize that there are a number of tax incentives available to offset the costs. Importantly, one tax incentive comes in the form of a tax credit, which is far more valuable than a tax deduction when it comes to creating tax savings.

Disable Access Tax Credit

If you make your small business accessible to persons with disabilities, you can take an annual tax credit. Your business is eligible if you earned one million or less the previous year or had 30 or fewer employees. If you meet this test, you can claim a tax credit of 50 percent of your expenditures to a maximum of $5,000. Since this is a tax credit, it is deducted from your total tax liability.

To claim this tax credit your expenditures must be paid or incurred to enable your business to comply with the Americans with Disabilities Act. Expenditures might include:

1. Purchase of adaptive equipment or modification of equipment;

2. Production of print materials in alternate formats such as Braille or audio; and

3. Sign language interpreters for employees or customers.

Modifications to buildings or offices also qualify as long as two criteria are met. First, the modifications cannot be construction of something new. Second, the building must have been in service prior to November 5, 1990.

Barrier Removal Tax Deduction

All businesses can take a tax deduction for expenditures incurred to remove physical, structural or transportation barriers for disabled individuals in the work place. This tax deduction carries no restrictions in regard to revenues earned or number of employees. Businesses may claim up to $15,000 a year as a tax deduction. Expenditure amounts exceeding this amount may also be claimed, but are subject to depreciation calculations.

To claim the barrier removal tax deduction, your expenditures must be related to making a facility or vehicle accessible to disabled persons. Examples include:

1. Providing ramps and curb cuts;

2. Making restrooms accessible to persons in wheelchairs; and

3. Expanding the width of sidewalks to at least 48 inches.

Significant Tax Break

Small business owners can double their tax saving pleasure by claiming both of these tax incentives in the same tax year. If a small business spent $20,000 creating wheelchair access to an office, it could take a $5,000 tax credit and a $15,000 tax deduction.

These tax incentives are in place to significantly reduce the burden of complying with the Americans with Disabilities Act. If you failed to claim the credit or deduction during the last three tax filing years, you should file amended tax returns to get a refund.

วันอาทิตย์ที่ 23 พฤศจิกายน พ.ศ. 2551

10 Tax Tips to Reduce Costs and Increase Income

Here are some tips to keep your tax down:

<li> Reduce all stock to levels and cut costs.
Never carry excess stock because that is money that is sitting on the shelves and not in your bank.</li>

<li> Make sure you are making a profit on your sales.
The correct profit margin you put on to your products is critical and will determine whether you will be profitable or not.</li>

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

The Internal Revenue Service has certified the 2006 Toyota Highlander Hybrid as being eligible for the clean-burning fuel deduction. This certification means that taxpayers who purchase one of these hybrid vehicles new during calendar year 2005 may claim a tax deduction of up to $2000 on Form 1040.

Under Working Families Relief Act of 2004, which was signed into law in October of 2004, the clean-burning fuel deduction is limited to up to $2,000 for certified vehicles first put into service in 2005 and $500 for vehicles placed in service in 2006. No deduction will be allowed after 2006.

Federal Law allows individuals to claim a deduction for the incremental cost of buying a motor vehicle that is propelled by a clean-burning fuel. By combining an electric motor with a gasoline-powered engine, these hybrid vehicles obtain greater fuel efficiency and produce fewer emissions than similar vehicles powered solely by conventional gasoline-powered engines.

This one-time deduction must be taken in the year the vehicle is originally used. The taxpayer must be the original owner. Individuals do not have to itemize deductions on their tax return to claim this deduction. This benefit can be taken as an adjustment to income on the Form 1040.

The amount of the deduction for the Toyota Highlander Hybrid was set after the manufacturer, Toyota Motor Sales, U.S.A., Inc. documented for the IRS the incremental cost related to the vehicle's electric motor and related equipment.

A $2,000 tax deduction? I'm off to my local Toyota dealer!

วันเสาร์ที่ 22 พฤศจิกายน พ.ศ. 2551

Failure To Pay Employment Taxes ? Penalties

As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade.

Penalties

If you have employees, you absolutely must deduct and withhold various taxes from the paychecks of your employees. Since you are deducting money from the employee's paycheck, you are handling their funds. This fact is very important to the IRS and it places great emphasis on any failure to deposit employment taxes.

If you fail to pay employment taxes, you will be subject to a 100 percent penalty. Yes, 100 percent. Known as the "trust fund recovery penalty", the penalty is assessed against the person responsible for paying the taxes, not the entity. The person can be the owner, corporate officer or other "responsible person." In short, a business entity is not going to protect you from the wrath of the IRS.

Late Payments

Cash flow crunches are an inevitable event for practically every business. So, what happens if you make a late payment for employment taxes. Unless you can show a reasonable reason for the delay, the IRS is going to penalize you.

Late payment penalties range in amount depending on the delay. If the delay is less than six days, the penalty is two percent. Delay for six to 15 days and you are looking at five percent. More than 15 days in delay is going to push the penalty to 15 percent. If you delay this long, the IRS will be peppering you with penalty notices telling you where you stand.

In Closing

Whatever you do, make sure you deposit employment taxes with the IRS in a timely fashion. Take a moment to think about the worst thing you have ever heard done by the IRS. If you fail to pay employment taxes, the actions taken by the IRS will be ten times worse and you will be the one telling horror stories.

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate."
--Strother Martin in Cool Hand Luke

Statutory Law

Governments pass laws, it's what they do. It is the job of others to interpret the laws that Parliament has made.

Statutory Construction

It is "presume[d] that the legislature avoids superfluous or meaningless words, that it does not pointlessly repeat itself or speak in vain. Every word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose": Tower v. M.N.R., [2004] 1 F.C. 183 (F.C.A.) per MALONE J.A. per curium at para. 15.

Also Communities Economic Development Fund v. Canadian Pickles Corp., [1991] 3 S.C.R. 388, per IACOBUCCI, J. at page 408 Interpretation of the Canadian Income Tax Act ("ITA") in practice is primarily done by the Canada Revenue Agency ("CRA"); followed closely by tax accountants and lawyers with the tying vote going to the Courts.

The Legislative Purpose

To raise money and implement federal policies.

The Accounting/Legal Purpose

To assist taxpayers to legally structure their affairs so as to minimize the taxes they must pay: IRC v. Westminster, [1936] A.C. 1 (H.L.), at p. 19 and Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536 (S.C.C.), at p. 540.

It is not difficult to foresee that the legislative objective and private sector tax adviser will frequently disagree. While CRA wins many such arguments by default (e.g., the taxpayer can't, or won't, fight) for those that do contest a restrictive or erroneous interpretation of the ITA, there is a heartening rate of success.

A caveat should be interjected here, this presumes challenges where have been made thoughtfully; that is, were CRA "got it wrong" and the taxpayer has called them on it. Frivolous challenged or specious arguments (i.e., R. v. Klundert) are not going to succeed.

Legislative Tools

In order to expedite the collection of taxes Parliament has given CRA broad powers to enforce the ITA, some require taxpayers to cooperate under a compulsion of law.

While such compulsion may be permissible in the civil context (R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627), the same is not true if the information sought or seized by CRA will be used to prosecute the taxpayer for an offence under the ITA (R. v. Jarvis [2002] 3 S.C.R. 757; s. 7 of the Canadian Charter of Rights and Freedoms).

Thus the following material assumes a CRA civil audit, but if you believe that in your situation CRA abused these provisions while you were under a criminal prosecution (e.g., s. 239(1)(d) ITA for evasion) then obtain immediately legal advice.

S. 230(1) ITA: Books & Records

Every "person" carrying on business or required to pay, or collect, taxes under the ITA is required to keep records and books of account at their place of business or residence. What books? Enough to enable you to calculate the taxes and for CRA to see that you did it correctly. "Person" includes corporations (s. 248(1) ITA).

This ties into with the obligation on each Canadian taxpayer to estimate the amount of the taxes payable in any taxation year under s. 151 ITA.

S. 231.1(1) ITA: Inspect, Audit & Examine Books

Someone from CRA may, enter your place of business to inspect, audit or examine your books and records, or those of another taxpayer, to see you fulfilled your obligation under s. 151, above. They may not enter your home without a search warrant, unless you invite them in.

Although the wording of this provision is broad, it is not unlimited: the person has to be authorized, their approach has to be at a reasonable time(s), the request has to be related to enforcement of the ITA and it is restricted to "inspect[ing], audit[ing] or examination[s]."

If you are subject to such a "compliance audit" you will want to have your accountant involved as soon as possible in the process.

If, however, you are audited and shortly thereafter charged with an offence under the ITA speak with your lawyer as this "audit," it may have violated s. 7 of the Charter and the Jarvis principles.

S. 231.2(1) ITA: Requirements To Provide Information and Documents ("RPIDs")

If CRA wants you (or a third party) to produce (a) information or (b) any document the Minister of National Revenue ("MNR") may, for any purpose related the ITA, give notice served to you, or that third person, personally requiring production, within a reasonable time, of stipulated materials listed in the notice: Tower, above, s. 17.

Like you, CRA must follow the wording of s. 231.1(1) ITA (Ludmer v. Canada, [1995] 2 F.C. 3 (F.C.A.), CHEVALIER D.J. at p. 17).

CRA does get this wrong from time to time. Just how serious their error is you can discuss with your lawyer. An irregular RPID doesn't necessarily mean the evidence will be excluded, but the mere possibility is sufficient to justify your lawyer thoroughly reviewing the memoranda, RPIDs and related materials for errors.

Only the MNR (or his delegate) can issue RPIDs. RPIDs must be subject to prior approval and the delegate must act in a quasi-judicial manner; or in other words, if they don't act unreasonably.

The Supreme Court of Canada has held that a taxpayer may have substantive defences to successfully attack RPIDs and any resulting prosecution (McKinlay Transport), defence which include:

1) unauthorized fishing expeditions by CRA (James Richardson & Sons, Ltd. v. M.N.R. [1884]1 S.C.R. 614 at p. 623), and

2) there is no a genuine and serious inquiry into a taxpayer's liability (relying on Canadian Bank of Commerce v. A.G. Canada (1962), 35 D.L.R. (2d) 49).

The court ruled that the test is objective, which means that what's important is statutory compliance not CRA's good faith.

If the Requirement power was used improperly and all of the resulting information was obtained in violation of the Charter then your lawyer may ask the Court to exclude the evidence: Charter s. 24(2).

If search warrants were obtained "based solely on information gleaned in violation of the Charter [those warrants] are invalid": R. v. Evans, [1996] 1 S.C.R. 8 at para. 26.

S. 231.2(2) ITA: Unnamed Persons

The MNR shall not impose on any third party a RPID to provide information or any document relating to any one, or more, unnamed persons without prior judicial authority.

The Supreme Court of Canada has held that warrantless searches are prima facie a violation of s. 8 of the Charter: R. v. Collins, [1987] 1 S.C.R. 265 per LAMER, J. at para. 22 and it then becomes a question of fact whether that violation was "reasonable."

To rebut this presumption the onus will be on the Crown/CRA; but normally a "search will be reasonable if it is authorized by law, if the law itself is reasonable and if the manner in which the search was carried out is reasonable" (Collins, at para. 23).

In other words, an RPID will be legal if:

* the ITA was followed, exactly (Tower);

* if it was done in the civil context (McKinlay Transport);

* if there was a genuine and serious inquiry into a taxpayer??s liability (Canadian Bank of Commerce); and

* the taxpayer was named (s. 231.2(2) ITA; Artistic Ideas Inc. v. Canada (CRA), 2004 FC 573 (F.C.T.D.) per SNIDER, J.);

And, an RPID will not be valid and enforceable if:

* the ITA was not followed;

* if the MNR??s delegate didn??t act quasi-judicially;

* if the RPID was used as part of an investigation (Jarvis);

* if CRA was "fishing" (Richardson & Sons); and

* if CRA didn't obtain prior authorization for the RPID (Hunter v. Southam Inc., [1984] 2 S.C.R. 145 DICKSON J.)

This is a simplified version of the law, only your lawyer can give you advice about your particular situation.

S. 231.3(1) ITA: Search Warrants

CRA can apply to a judge for a search warrant ("SW") without notice to you.

A CRA officer must swear an Information to Obtain (s. 231.3(2) ITA) and under s. 231.3(3) ITA a judge may issue the search warrant if they are is satisfied that there are reasonable grounds to believe:

(a) an offence under the ITA was committed;

(b) a document or thing that may afford evidence of the offence; and

S. 231.3(3) ITA now reads "may issue" rather than "shall" because the Baron v. Canada, [1993] 1 S.C.R. 416 declared the former invalid as a violation of s. 8 Charter because it unduly restricted judicial discretion in refusing to issue search warrants. So you can see judicious challenges can change not only the results, but the law as well.

S. 487 Criminal Code

Provides an alternative procedure for applying for SWs, similar to the foregoing; which in practice, CRA uses regularly; as you might imagine s. 487 has been extensively litigated and it is generally well understood by the criminal bar.

S. 231.5(1) ITA

Where any document is seized, inspected, examined or provided under ss. 231.1 to 231.4 ITA the CRA officer my make copies. Such copies, when certified, have the same probative force as the original.

S. 231.5(2) ITA

No person shall hinder, molest or interfere with any person doing anything he is authorized to do under ss. 231.1 to 231.4. If you think that CRA has violated your rights or otherwise failed to comply with the ITA ?V then call your lawyer. Don't try to stop them yourself.

S. 238(1) ITA

Provides that every "person" who has failed to file a return as and to comply with the sections of the ITA listed therein is guilty of an offence and in addition to any other penalty (e.g., s. 162(1) ITA). If convicted a taxpayer is subject to a fine and imprisonment

The Bottom Line

Although the CRA uses these provisions frequently, they don't always do so correctly.

Some CRA officers have testified that they followed CRA "practices" rather than the ITA per se (e.g., s. 231.2(2) ITA), but as only the statutory provisions that are binding this may give your lawyer grounds to challenge CRA use or reliance on any materials found.

Parliament has spoken, but sometimes CRA hasn't listened; that "failure to communicate" may, if your lawyer decides circumstances warrant it, may justify challenging CRA on their use of their requirement powers.

Staff Writer For - Tax Evasion Resources - <a target="_new" href="http://www.taxevasionresources.com">http://www.taxevasionresources.com</a>

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

As a small business owner or self-employed person, one of the easiest ways to keep Uncle Sam off your back and out of your life is to file your forms, payments and other paperwork on time.

Over the next four months there are several key dates that you dare not forget! Here they are -- all in one place, along with links to the IRS website PDF file for that particular form, where appropriate.

NOTE: This article only addresses federal tax deadlines. Be sure to contact your state's tax department for their due dates.

Also, the calendar is adjusted for Saturdays, Sundays and federal holidays, because if a due date falls on a Saturday, Sunday, or federal holiday, then the due date is moved to the next business day.

JANUARY:

Tuesday, Jan. 18

Personal

If you pay quarterly estimated income tax payments, it's time to make the fourth-quarter payment for 2004 via Form 1040-ES. http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Business

If you have employees, you must make the federal payroll tax payment for December 2004 by today (assuming you are on the monthly deposit schedule).

You use Form 8109 (found in the little yellow coupon book) or the IRS Electronic Federal Tax Payment System (EFTPS).

Monday, January 31

Business

4th quarter and year-end payroll tax returns are due by January 31 of the following year.

Here's an overview of the 4 most common federal payroll-related forms due today:

1. Form W-2 (for your employees) http://www.irs.gov/pub/irs-pdf/fw2.pdf

If you mail the W-2's, the postmark must be on or before January 31, 2005.

You may also be a recipient of a W-2 (if you work as an employee for someone else), so don't give your employer a hard time unless the W-2 is postmarked, or delivered in person, later than January 31.

2. Form 941 (for payroll tax) http://www.irs.gov/pub/irs-pdf/f941.pdf

3. Form 940 (for unemployment tax) http://www.irs.gov/pub/irs-pdf/f940.pdf

4. Form 1099-MISC If you paid any independent contractors at least $600 in 2004, you must send each one a 1099 by January 31. http://www.irs.gov/pub/irs-pdf/f1099msc.pdf

Tip: if the independent contractor is a corporation, you usually don't have to issue a 1099. The main purpose of the 1099 is to track payments to Sole Proprietors, i.e. unincorporated self-employed people.

FEBRUARY:

Tuesday, Feb. 15

If you have employees, you must make the federal payroll tax payment for January 2005 by today (assuming you are on the monthly deposit schedule).

Monday, February 28

If you prepared any W-2's or 1099's (mentioned above), today is the deadline for sending a copy of those forms to the IRS.

Form W-3 is sent to the Social Security Administration, along with Copy A of any Forms W-2 you issued. http://www.irs.gov/pub/irs-pdf/fw3.pdf

Form 1096 is sent to the IRS, along with Copy A of any Forms 1099-MISC you issued. http://www.irs.gov/pub/irs-pdf/f1096_04.pdf

MARCH:

Business

Tuesday, March 15

Today is a big day if your business is a corporation.

Form 1120 -- the annual corporate income tax return for regular "C" corporations. http://www.irs.gov/pub/irs-pdf/f1120.pdf

Form 1120S -- the annual corporate income tax return for "S" corporations. http://www.irs.gov/pub/irs-pdf/f1120s.pdf

Form 7004 -- if you can't file Form 1120 or 1120S by today, here's a tip: just file Form 7004 by March 15 and you are granted an automatic, no-questions-asked 6-month extension of time to file the return (i.e. until Sept. 15, 2005) http://www.irs.gov/pub/irs-pdf/f7004.pdf

Form 2553 -- if you want your corporation to be treated like an "S" corporation for the first time, today is the deadline for telling the IRS that you want to be an "S" corp beginning with calendar year 2005. http://www.irs.gov/pub/irs-pdf/f2553.pdf

Also, If you have employees, you must make the federal payroll tax payment for February 2005 by today (assuming you are on the monthly deposit schedule).

APRIL:

Friday, April 15

Ah, yes, the most famous tax deadline of all.

Form 1040

http://www.irs.gov/pub/irs-pdf/f1040.pdf

And if you are a Sole Proprietor, don't forget that you must file several business-related tax forms with your Form 1040.

The most commonly used tax forms for the self-employed person include:

Schedule C (to report your business income and expenses) http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Schedule SE (for self-employment tax) http://www.irs.gov/pub/irs-pdf/f1040sse.pdf

Form 4562 (to deduct equipment and other depreciable property) http://www.irs.gov/pub/irs-pdf/f4562.pdf

Form 8829 (to deduct a home office) http://www.irs.gov/pub/irs-pdf/f8829.pdf

Need more time to prepare your personal tax return? Go no further than Form 4868, which grants an automatic no-questions-asked 4-month extension to file the return. http://www.irs.gov/pub/irs-pdf/f4868.pdf

NOTE: this is only an extension of time to file the return, not an extension to pay any tax due. So if you think you might owe, it may be wise to estimate what you owe and send in a payment with Form 4868; otherwise you may have to pay extra in late payment penalties and interest.

Form 1065

If your business is a Partnership or Limited Liability Company (LLC), today is also your lucky day to file the annual business income tax return -- via Form 1065. http://www.irs.gov/pub/irs-pdf/f1065.pdf

Form 8736

To get an automatic 3-month extension of time to file Form 1065, file Form 8736 on or before April 15. http://www.irs.gov/pub/irs-pdf/f8736.pdf

As if April 15 wasn't already painful enough, it's also the deadline for the first quarter estimated tax payment for Year 2005:

Personal -- Form 1040-ES.

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Corporate -- Form 1120-W

http://www.irs.gov/pub/irs-pdf/f1120w.pdf

And if you're an employer, yup, it's time for yet another monthly federal payroll tax deposit -- for March 2005.

MAY:

Monday, May 2

Form 941 is due for the 1st quarter 2005. http://www.irs.gov/pub/irs-pdf/f941.pdf

Form 940 federal unemployment tax deposit is due today, if your first quarter liability exceeds $100.

Had enough? OK, OK. I'll stop here.

That should get you through the first four months of the year.

For more tax resources, here's a few more links:

Looking for a federal tax form? http://www.irs.gov/formspubs/index.html

Looking for a state tax form? http://taxes.yahoo.com/stateforms.html http://www.taxadmin.org/fta/link/forms.html

IRS Website for Small Business & the Self-Employed http://www.irs.gov/smallbiz

To get your free copy of Wayne's 25-page report, "How To Instantly Double Your Deductions" visit: <a target="_new" href="http://www.YouSaveOnTaxes.com">http://www.YouSaveOnTaxes.com</a>

วันศุกร์ที่ 21 พฤศจิกายน พ.ศ. 2551

Small Business Tax Deductions for Year End 2004

As a small business owner, it's wise to familiarize yourself with some key deductions that may reduce your tax bill for 2004.

Employee Benefit Plans - You may deduct contributions to employee benefit plans (such as health insurance plans and retirement plans). Depending on your circumstances the maximum contribution that you may deduct per employee in a qualified retirement plan can go up to:

$100,000 or more With a Defined Benefit Plan

$ 44,000 With a 401(k) plan

$ 41,000 With a SEP-IRA or Keogh

Automobile Expenses- You can elect to deduct the actual expenses incurred (including gas, oil, tires, repairs, insurance, depreciation, and rent or lease payments) for the business-related portion of your car or truck expenses, or simply take the 2004 standard mileage rate of 37.5 cents per business mile.

Social Security Taxes - You may deduct Social Security and Medicaid taxes paid to match required withholdings on employee wages, federal unemployment taxes, as well as real estate or personal property taxes paid on business assets.

Home Office - Depending on whether you use your home or other real estate for business purposes, you may deduct some or all of any mortgage interest paid, as well as some or all of the maintenance and repair expenses associated with the property. The cost of utilities and business supplies associated with business use are also deductible.

Depreciation - Depreciation may be taken on passenger cars, equipment used for entertainment or recreational purposes (i.e., photographic equipment, cell phones and computers), as long as these items are used solely for the business.

Bonus Depreciation - The 'bonus' depreciation deduction of up to 50 percent of the cost of new business equipment in the year of purchase applies only to property placed in service on or before December 31, 2004. You may want to consider making any significant equipment purchases before year-end to take advantage of this expiring provision.

Professional Fees - You may deduct professional fees, such as those paid to a lawyer or accountant.

Meals and Entertainment - You may deduct 50 percent of meal and entertainment expenses associated with the conduct of your business.

State and Local General Sales Tax - Beginning in 2004, you will have the option of electing to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction provided for state and local income taxes.

Charitable Donations of Vehicles ? Through 2004, a deduction equal to the fair market value of a donated vehicle is allowed. Starting next year, however, the deduction allowed will generally be limited to the gross proceeds from the sale of the vehicle by the charitable organization.

Remember to keep on file the records and documentation necessary to substantiate all of your deductions. You should consult a tax preparer or professional tax advisor to determine how specific tax rules may impact your individual situation.

About The Author

Daniel Lamaute specializes in setting up retirement plans for the self-employed. Visit <a href="http://www.investsafe.com" target="_new">http://www.investsafe.com</a> to learn about methods to maximize retirement contributions and to reduce taxes and penalties on early withdrawals.

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those powers, are set forth in Article I of the United States Constitution. Section 8 specifies both the power to collect, "Taxes, Duties, Imposts and Excises," and the requirement that, "Duties, Imposts and Excises shall be uniform throughout the United States."

One of the major concerns of the Constitutional Convention was to limit the powers of the Federal Government. Among the powers to be limited was the power of taxation. It was thought that head taxes and property taxes (slaves could be taxed as either or both) were likely to be abused, and that they bore no relation to the activities in which the Federal Government had a legitimate interest. The fourth clause of section 9 therefore specifies that, "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken."

The courts have generally held that direct taxes are limited to taxes on people (variously called capitation, poll tax or head tax) and property. (Penn Mutual Indemnity Co. v. C.I.R., 227 F.2d 16, 19-20 (3rd Cir. 1960).) All other taxes are commonly referred to as "indirect taxes," because they tax an event, rather than a person or property per se. (Steward Machine Co. v. Davis, 301 U.S. 548, 581-582 (1937).) What seemed to be a straightforward limitation on the power of the legislature based on the subject of the tax proved inexact and unclear when applied to an income tax, which can be arguably viewed either as a direct or an indirect tax.

In order to help pay for its war effort in the American Civil War, the United States government issued its first personal income tax, on August 5, 1861 as part of the Revenue Act of 1861 (3% of all incomes over US $800; rescinded in 1872). Other income taxes followed, although a 1895 Supreme Court ruling, Pollock v. Farmers' Loan & Trust Co., held that taxes on capital gains, dividends, interest, rents and the like were unapportioned direct taxes on property, and therefore unconstitutional.

The Sixteenth Amendment to the United States Constitution removed the limitations on Congress, paving the way for the income tax to become the government's main source of revenue; it states: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

A growing number of citizens seeks to challenge the power of the state to collect taxes by finding a way to discount the sixteenth amendment. The italicized paragraphs below are represenative of these attempts:

Lower federal courts sometimes refer to "unapportioned direct taxes" and similar catch phrases to describe the power of Congress to tax income. (See U.S. v. Turano, 802 F.2d 10, 12 (1st Cir. 1986). ("The 16th Amendment eliminated the indirect/direct distinction as applied to taxes on income.")) This, however, does not seem to be the stated position of the Supreme Court.

Yet, despite popular opinion, the 16th Amendment did not give Congress any new taxing powers. In Treasury Decision 2303, the Secretary of the Treasury directly quoted the Supreme Court (Stanton v. Baltic Mining Co. (240 U.S. 103)) in saying that "The provisions of the 16th amendment conferred no new power of taxation," but instead simply prohibited Congress original power to tax incomes "from being taken out of the category of indirect taxation, to which it inherently belonged, and being placed in the category of direct taxation subject to apportionment."

The closest the Supreme Court has come to saying that "from whatever source derived" in the amendment expanded the taxing power of Congress was in Justice Holmes' dissent in Evans v Gore (253 U.S. 245, 267 (1920). (Holmes dissent) (Partially overruled by U.S. v Hatter. 532 U.S. 557 (2001), with respect to the prior reasoning about the compensation clause.)). In that case, the Court was considering the effect the 16th Amendment had on the compensation clause, and specifically whether the compensation of judges was unlawfully reduced by the imposition of the income tax. Justice Holmes opined that under the 16th Amendment, "Congress is given power to collect taxes on incomes from whatever source derived ?[so] it seems to me that the Amendment was intended to put an end to the cause and not merely obviate" the result in Pollock. (Id.) Even in this case, though, the majority affirmed the more restrictive interpretation of the Amendment. (Id. at 262-263. (Majority opinion))

The federal income tax statutes echos the language of the 16th amendment in stating that it reaches "all income from whatever source derived," (26 USC s. 61) including criminal enterprises; criminals who fail to report their income accurately have been successfully prosecuted for tax evasion. Since the language of the amendment is clearly meant to restrict the jurisdiction of the courts, it is not immediately clear why the courts emphasize the words "all income" and ignore the derivation of the entire phrase to interpret this section - except to reach a desired political result.

Arguments about the meaning of the current income tax has continued for nearly 100 years. Courts are reluctant to support a literal reading of the tax laws in favor of potential taxpayers, since it can lead to tax avoidance. Professor Soled points out why judicial doctrines are used against tax avoidance strategies in general,

"The use of judicial doctrines to curtail tax avoidance is pervasive in the area of income taxation. There are several reasons for this phenomenon: central among them is that courts believe that if the Internal Revenue Code ("Code") were read literally, impermissible tax avoidance would become the norm rather than the exception. No matter how perceptive the legislature, it cannot anticipate all events and circumstances that may unfold, and, due to linguistic limitations, statutes do not always capture the essence of what is intended. Judicial doctrines fill the void left either by the legislature or by the words of the Code. Another reason for the popularity of these doctrines is that courts do not want to appear duped by taxpayers..." (Jay A. Soled, Use of Judicial Doctrines in Resolving Transfer Tax Controversies, 42 B.C. L. Rev 587, 588-589 (2001).)

Of course, if the intent of Congress was to actually reach all income then the simplest way to state s. 61 would be "all income ***however realized.***" Instead, s. 61 mentions sources and other sections of the federal tax code actually lists about 20 sources of income that are specifically taxed. (26 USC ss. 861-864.) A common rule of statutory interpretation is the doctrine inclusio unius est exclusio alterius. This doctrine means "[t]he inclusion of one is the exclusion of another?This doctrine decrees that where law expressly describes [a] particular situation to which it shall apply, an irrefutable inference must be drawn that what is omitted or excluded was intended to be omitted or excluded." (Black's Law Dictionary 763 (6th Ed. 1990).) Since particular sources are listed as taxable in the tax law, then it is reasonable to infer that other sources of income are excluded from taxation. This argument is called the "861 source argument" and the courts refuse to analyze the argument despite consistently holding against it, even going so far as to issue restraining orders against people who publish websites about it. (U.S. v. Bell, 238 F.Supp.2d 696, 698 (M.D. Pa. 2003).''

In 1913 the tax rate was 1 percent on taxable net income above $3,000 ($4,000 for married couples), less deductions and exemptions. It rose to a rate of 7 percent on incomes above $500,000.

During World War I the top rate rose to 77 percent; following the war, the top rate was scaled down (to a low of 25 percent).

During the Great Depression and World War II, the top income tax rate rose again, reaching 91% during the war; this top rate remained in effect until 1964.

In 1964 the top rate was decreased to 70% (1964 Revenue Act), and then to 50% in 1981 (Economic Recovery Tax Act or ERTA).

The Tax Reform Act of 1986 reduced the top rate to 28%, at the same time raising the bottom rate from 11% to 15% (in fact 15% and 28% became the only two tax brackets).

During the 1990s the top rate rose again, standing at 39.6% by the end of the decade.

In 2001 the top rate was cut to 35% and the bottom rate was cut to 10% by the EGTRRA, or Economic Growth and Tax Relief Reconciliation Act.

In 2003 the JGTRRA, or Jobs and Growth Tax Relief Reconciliation Act, was passed, expanding the 10% tax bracket and accelerating some of the changes passed in the 2001 EGTRRA.

วันพฤหัสบดีที่ 20 พฤศจิกายน พ.ศ. 2551

Small Business Tax Credit - Americans with Disabilities Act

Disable Access Tax Credit

To claim this tax credit your expenditures must be paid or incurred to enable your business to comply with the Americans with Disabilities Act. Expenditures might include:

1. Purchase of adaptive equipment or modification of equipment;

2. Production of print materials in alternate formats such as Braille or audio; and

3. Sign language interpreters for employees or customers.

Barrier Removal Tax Deduction

To claim the barrier removal tax deduction, your expenditures must be related to making a facility or vehicle accessible to disabled persons. Examples include:

1. Providing ramps and curb cuts;

2. Making restrooms accessible to persons in wheelchairs; and

3. Expanding the width of sidewalks to at least 48 inches.

Significant Tax Break

taxes Tax Information

วันอาทิตย์ที่ 30 พฤศจิกายน พ.ศ. 2551

Donating Cars To Charity - New Tax Rules

วันเสาร์ที่ 29 พฤศจิกายน พ.ศ. 2551

Tax Deduction for Alimony Payments? - Yes!

Amending Procedural Laws for Collection of E-taxation

Deducting Points On Home Refinances

The Seven Deadly Tax Sins: Commonly Missed Deductions

วันศุกร์ที่ 28 พฤศจิกายน พ.ศ. 2551

Slash Tax when Buying a Business

วันพฤหัสบดีที่ 27 พฤศจิกายน พ.ศ. 2551

State Tax Information

Estate Taxes - It Pays to Plan Ahead

Understanding Basic Tax Terms

Tax Help Secret: Avoiding the Entreprenuers Curse

Back To School ? Educators Deduct School Expenses

วันพุธที่ 26 พฤศจิกายน พ.ศ. 2551

What to Do If You Can?t Pay Your Taxes

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

Small Business Tax Deduction - Write-Off Bad Debts

Tax Trap #2 -- Double Taxation: Isnt Once Enough?

วันจันทร์ที่ 24 พฤศจิกายน พ.ศ. 2551

10 Tax Tips to Reduce Costs and Increase Income

Small Business Tax Credit - Americans with Disabilities Act

วันอาทิตย์ที่ 23 พฤศจิกายน พ.ศ. 2551

10 Tax Tips to Reduce Costs and Increase Income

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

วันเสาร์ที่ 22 พฤศจิกายน พ.ศ. 2551

Failure To Pay Employment Taxes ? Penalties

Requirements To Produce Tax Information (Whats Up With That?)

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

วันศุกร์ที่ 21 พฤศจิกายน พ.ศ. 2551

Small Business Tax Deductions for Year End 2004

History Of The Federal Income Tax

วันพฤหัสบดีที่ 20 พฤศจิกายน พ.ศ. 2551

Small Business Tax Credit - Americans with Disabilities Act

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