Category: SMALL BUSINESSES

June 20th, 2019 by Oscar

Taxpayers who receive certain types of income may need to have backup withholding taken from these payments. Backup withholding can apply to most payments reported on Forms 1099 and W-2G.

Here are some facts to help taxpayers understand backup withholding and determine if they should have it withheld from their income payments.

First, here’s what backup withholding is
The person or business paying the taxpayer doesn’t generally withhold taxes from certain payments. They don’t do this because it’s assumed the taxpayer will report and pay taxes on this income when they file their federal tax return. There are, however, situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income. This is what’s known as backup withholding.

Backup withholding is set at a specific percentage
The current percentage is 24 percent for US residents and 30 percent for non residents.

Here are some payments subject to backup withholding

  • Interest payments
  • Dividends
  • Payment card and third-party network transactions
  • Patronage dividends, but only if at least half the payment is in money
  • Rents, profits, or other gains
  • Commissions, fees, or other payments for work done as an independent contractor
  • Payments by brokers
  • Barter exchanges
  • Payments by fishing boat operators, but only the part that is paid in actual money and that represents a share of the proceeds of the catch
  • Royalty payments
  • Gambling winnings

Here are some situations when the payer must take out backup withholding

  • If a taxpayer identification number is missing. A taxpayer identification number specifically identifies the taxpayer. This includes number like a Social Security number and an individual taxpayer identification number.
  • If the name provided does not match the name registered with the IRS for a specific TIN, taxpayers should make sure that the payer has their correct TIN.

Posted in INDIVIDUALS, SMALL BUSINESSES

June 7th, 2019 by Oscar

Although the IRS often finds and corrects errors during processing, there are certain situations in which a taxpayer may need to file an amended return to make a correction. Here are some quick tips for anyone who discovered they made a mistake or forgot to include something on their tax return.

Don’t amend for math errors or missing forms. Taxpayers generally don’t need to file an amended return to correct math errors on their original return. The IRS may correct math or clerical errors on a return and may accept it even if the taxpayer forgot to attach certain tax forms or schedules. The IRS will mail a letter to the taxpayer, if necessary, requesting additional information.

Wait until receiving refund for tax year 2018 before filing. Taxpayers who are due refunds from their original tax year 2018 tax return should wait for the IRS to process the return and they receive the refund before filing Form 1040-X to claim an additional refund. It may take the IRS up to 16 weeks to process amended returns.

File Form 1040-X to amend. Taxpayers must file on paper using Form 1040-X, Amended U.S. Individual Income Tax Return, to correct their tax return. While taxpayers can use software to prepare Form 1040-X, they can’t file Form 1040-X electronically. Taxpayers should indicate the year of the original return and explain all changes made by attaching any forms or schedules. Taxpayers then sign and mail the Form 1040-X to the address listed in the instructions. Taxpayers filing Form 1040-X in response to an IRS letter should mail it to the address shown on the letter.

Amend to correct errors. Taxpayers should correct their return if they find that they should have claimed a different filing status or didn’t report some income. Taxpayers who claimed deductions or credits they shouldn’t have claimed or didn’t claim deductions or credits they could have claimed may need to file an amended return.   Changes made on a federal return may also affect state taxes. The taxpayer should contact the state tax agency to see if this is so.

Pay additional tax. Taxpayers who will owe more tax should file Form 1040-X and pay the tax as soon as possible to avoid penalties and interest. They should consider using IRS Direct Pay to pay any tax directly from a checking or savings account for free.

File within three-year time limit. Taxpayers generally have three years from the date they filed their original tax return to file Form 1040-X to claim a refund. They can file it within two years of the date they paid the tax, if that date is later.

Use separate forms if amending more than one tax year. Taxpayers must file a Form 1040-X for each tax year and mail each year’s form in a separate envelope to avoid confusion. They should check the box for the calendar year or enter the other calendar year or fiscal year they are amending. The form’s instructions have the mailing address for the amended return.

Posted in INDIVIDUALS, NONPROFIT ORGANIZATIONS, SMALL BUSINESSES

May 16th, 2019 by Oscar

Businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes. Businesses generally can use one of the two methods to figure their deductible vehicle expenses:

  • Standard mileage rate
  • Actual car expenses

For 2019, here are the standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical or moving purposes:

  • 58 cents per mile driven for business use
  • 20 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Of course, business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Here are some facts to help business owners understand the differences between the two methods of figuring their deductible vehicle expenses:

  • Businesses that want to use the standard mileage rate for a car they own must choose to use the standard mileage rate in the first year they use the vehicle. Then, in later years, they can choose to use either the standard mileage rate or actual expenses.
  • If a business wants to use the standard mileage rate for a car they lease, they must use this rate for the entire lease period.
  • The business must make the choice to use the standard mileage rate by the due date of their return, including extensions. They can’t revoke the choice.
  • A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.
  • Here are some examples of actual car expenses that a business can deduct: licenses; gas; oil; tolls; insurance; repairs and depreciation – (limitations and adjustments may apply)

Posted in SMALL BUSINESSES

May 9th, 2019 by Oscar

Small business owners should keep good records. This applies to all businesses, whether they have a couple dozen employees or just a few. Whether they install software or make soft-serve. Whether they cut hair or cut lawns. Keeping good records is an important part of running a successful business.

Here are some questions and answers to help business owners understand the ins and outs of good recordkeeping.

Why should business owners keep records?
Good records will help them:

  1. Monitor the progress of their business
  2. Prepare financial statements
  3. Identify income sources
  4. Keep track of expenses
  5. Prepare tax returns and support items reported on tax returns

What kinds of records should owners keep?
Small business owners may choose any recordkeeping system that fits their business. They should choose one that clearly shows income and expenses. Except in a few cases, the law does not require special kinds of records. .

How long should businesses keep records?
How long a document should be kept depends on several factors. These factors include the action, expense and event recorded in the document. The IRS generally suggests taxpayers keep records for three years.

How should businesses record transactions?
A good recordkeeping system includes a summary of all business transactions. These are usually kept in books called journals and ledgers, which business owners can buy at an office supply store. All requirements that apply to hard copy books and records also apply to electronic business records.

What is the burden of proof?
The responsibility to validate information on tax returns is known as the burden of proof. Small business owners must be able to prove expenses to deduct them.

How long should businesses keep employment tax records?
Business owners should keep all records of employment taxes for at least four years.

Posted in SMALL BUSINESSES

May 2nd, 2019 by Oscar

La ley federal requiere que una persona informe las transacciones en efectivo en exceso de $10,000 al IRS.  Aquí hay algunos datos importantes acerca de cómo reportar estos pagos.

A quién aplica

Para propósitos de pagos en efectivo, una “persona” se define como un individuo, compañía, corporación, sociedad, asociación, fideicomiso o patrimonio.  Por ejemplo:

Distribuidores de joyas, muebles, barcos, aviones, automóviles, arte, alfombras, y antigüedades

  • Casas de empeño
  • Abogados
  • Corredores de bienes raíces
  • Compañías de seguro
  • Agencias de viaje

Cómo informar

Las personas reportan el pago a través del  Formulario 8300, Informe de pagos en efectivo en exceso de $10,000 (PDF) recibidos en una ocupación o negocio. 

Una persona puede presentar el Formulario 8300SP electrónicamente. La presentación electrónica es gratis, rápida y segura. Los contribuyentes recibirán un acuse de recibo electrónico por cada formulario que presenten. Aquellos que prefieren enviar el Formulario 8300 por correo, pueden enviarlo al IRS a la dirección que aparece en el formulario.

Qué es efectivo

Efectivo incluye la moneda de los Estados Unidos o de cualquier país extranjero. Para algunas transacciones, también incluye cheque de caja, giros bancarios, cheques de viajeros o giros postales con un valor nominal de $10,000 o menos.

Una persona debe reportar efectivo si recibe más de $10,000 en efectivo:

  • En una suma global
  • En dos o más pagos relacionados dentro de 24 horas
  • Como parte de una sola transacción dentro de 12 meses
  • Como parte de una sola transacción o dos o más transacciones relacionadas dentro de 12 meses

Cuándo presentar

Una persona debe presentar el Formulario 8300 dentro de los 15 días posteriores a la fecha en que recibió el efectivo. Si recibe pagos para una sola transacción o dos o más transacciones relacionadas, debe presentar cuando la cantidad total pagada supere los $10,000.

Posted in INDIVIDUALS, SMALL BUSINESSES

April 11th, 2019 by Oscar

Tax-related identity theft occurs when a thief uses someone’s stolen Social Security number to file a tax return and claim a fraudulent refund. The victim may be unaware that this has happened until they e-file their return. Even before the victim files their return, the IRS may send the taxpayer a letter saying the agency identified a suspicious return using the stolen SSN.

Here are some things people should know about identity theft, including warning signs and steps to take after identity theft occurs.

Warning signs that a theft occurs
Taxpayers should be alert to possible tax-related identity theft if they are contacted by the IRS or their tax preparer about:

  • More than one tax return being filed using the taxpayer’s SSN.
  • Additional tax owed.
  • A refund offset.
  • Collection actions taken against the taxpayer for a year when they did not file a tax return.
  • IRS records indicating they received wages or other income from an employer for whom the taxpayer did not work.

Taxpayers who suspect they are a victim of ID theft should continue to pay their taxes and file their tax return, even if they must do so on paper.

Steps to take if someone becomes a victim
The taxpayer should:

  • File a complaint with the FTC at identitytheft.gov.
  • Contact one of the three major credit bureaus to place a fraud alert on their credit records.
  • Contact their financial institutions to close any financial or credit accounts opened without permission or that were tampered with by identity thieves.
  • Respond immediately to any IRS notice and call the number provided in the letter.
  • Complete IRS Form 14039, Identity Theft Affidavit. They can use a fillable form on IRS.gov, print it, then attach the form to their tax return and mail according to instructions.

Taxpayers who previously contacted the IRS and did not have a resolution can contact the agency for specialized assistance at 1-800-908-4490.

Taxpayers should remember that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and through social media channels.

Posted in INDIVIDUALS, SMALL BUSINESSES

March 15th, 2019 by Oscar

Los contribuyentes y profesionales de impuestos que llamen al IRS deberán verificar sus identidades. El estar preparado antes de una llamada o visita al IRS puede ahorrarles tiempo a los contribuyentes y evitar tener que hacer varias llamadas.

Si un contribuyente decide llamar, debe saber que los asistentes telefónicos del IRS tienen mucho cuidado de sólo discutir información personal con el contribuyente o alguien a quien el contribuyente autoriza a hablar en su nombre. Para asegurarse de que los contribuyentes no tengan que volver a llamar, el IRS les recuerda que tengan a la mano la siguiente información:

  • Números de seguro social y fechas de nacimiento de quienes aparecen en la declaración de impuestos.
  • La carta del Número de identificación del contribuyente individual (ITIN) si el contribuyente tiene una en lugar de un número de seguro social.
  • El estado civil tributario: soltero, cabeza de familia, casado que presenta una declaración conjunta o casado que presenta una declaración por separado.
  • La copia de la declaración de impuestos del año anterior. Los asistentes telefónicos pueden necesitar verificar la identidad del contribuyente con la información de la declaración antes de responder ciertas preguntas.
  • Una copia de la declaración de impuestos en cuestión.
  • Cualquier carta o notificación del IRS recibida por el contribuyente.

Por ley, los asistentes telefónicos del IRS sólo hablarán con el contribuyente o con el representante legalmente designado del contribuyente. Si los contribuyentes o los profesionales de impuestos llaman sobre la cuenta de otra persona, deben estar preparados para verificar sus identidades y proporcionar información de la persona que representan.  Antes de llamar a nombre de una tercera persona, deben tener disponible la siguiente información:

  • Autorización verbal o escrita del tercero para discutir la cuenta.
  • Debe estar preparado para verificar el nombre del contribuyente, el SSN o el ITIN, el período tributario y los formularios de impuestos presentados.
  • Número de identificación del preparador de impuestos o PTIN si es un tercero designado.
  • Uno de estos formularios, que este vigente, completo y firmado:
    • Formulario 8821, Autorización de Información Tributaria
    • Formulario 2848, Poder legal y declaración de representante

Las preguntas con respecto a un contribuyente fallecido requieren diferentes gestiones. La persona que llama debe estar preparada para enviar por fax:

  • El acta de defunción del contribuyente fallecido.
  • Copias de Cartas Testamentarias aprobadas por el tribunal, o Formulario 56 del IRS, Aviso de la relación fiduciaria.

Posted in INDIVIDUALS, SMALL BUSINESSES

March 5th, 2019 by Oscar

The Internal Revenue Service today urged businesses required to file reports of large cash transactions to take advantage of the speed and convenience of filing these reports electronically.

Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, many have already found that e-filing is a faster, more convenient and cost-effective way to meet the reporting deadline. The form is due 15 days after a transaction and there’s no charge for the e-file option.

Electronically filing Form 8300 is a secure way for businesses to send sensitive information to the IRS. Although many cash transactions are legitimate, information reported on this form can help stop those who evade taxes, profit from the drug trade and engage in terrorist financing and other criminal activities. The government can often trace money from these illegal activities through the payments reported on this and other cash reporting forms.

Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file. In addition, electronic filing is more accurate, reducing the need for follow-up correspondence with the IRS.

Posted in SMALL BUSINESSES

January 31st, 2019 by Oscar

The Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).
 
The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income. 
 
The QBI deduction is available in tax years beginning after Dec. 31, 2017, meaning eligible taxpayers will be able to claim it for the first time on their 2018 Form 1040.

The guidance, released today includes:

  • A set of regulations, finalizing proposed regulations issued last summer, A new set of proposed regulations providing guidance on several aspects of the QBI deduction, including qualified REIT dividends received by regulated investment companies
  • A revenue procedure providing guidance on determining W-2 wages for QBI deduction purposes,
  • A notice on a proposed revenue procedure providing a safe harbor for certain real estate enterprises that may be treated as a trade or business for purposes of the QBI deduction

The proposed revenue procedure, included in Notice 2019-07, allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met.  Taxpayers can rely on this safe harbor until a final revenue procedure is issued.

The QBI deduction is generally available to eligible taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with incomes above these levels, are still eligible for the deduction but are subject to limitations, such as the type of trade or business, the amount of W-2 wages paid in the trade or business and the unadjusted basis immediately after acquisition of qualified property. These limitations are fully described in the final regulations.

The QBI deduction is not available for wage income or for business income earned by a C corporation.

Posted in INDIVIDUALS, SMALL BUSINESSES

January 28th, 2019 by Oscar

El Servicio de Impuestos Internos inició exitosamente hoy la temporada de presentación de impuestos de 2019, mientras la agencia comenzó a aceptar y procesar las declaraciones de impuestos federales para el año tributario 2018. A pesar de los cambios importantes en la ley de impuestos realizados por la Ley de Empleos y Reducción de Impuestos, el IRS pudo abrir esta temporada de presentación de impuestos un día más temprano que la temporada de impuestos del año anterior. Se espera que se presenten más de 150 millones de declaraciones de impuestos individuales para el año tributario 2018, y la gran mayoría de éstas se presentarán antes de la fecha límite de abril. Hasta el mediodía del lunes, el IRS ya había recibido varios millones de declaraciones de impuestos durante las horas de apertura.

La fecha límite para presentar las declaraciones de impuestos de 2018 es el lunes, 15 de abril de 2019 para la mayoría de los contribuyentes. Debido a la celebración del Día de los Patriotas el 15 de abril en Maine y Massachusetts y al Día de la Emancipación en el Distrito de Columbia, los contribuyentes que viven en Maine y en Massachusetts tienen hasta el 17 de abril de 2019 para presentar sus declaraciones.

El IRS también señala que los reembolsos, por ley, no pueden emitirse antes del 15 de febrero para las declaraciones de impuestos que reclaman el Crédito Tributario por Ingreso del Trabajo o el Crédito Tributario Adicional por Hijos. Esto se aplica a todo el reembolso, incluso la parte no asociada con el EITC y ACTC. Si bien el IRS procesará las declaraciones de EITC y ACTC cuando se reciban, estos reembolsos no pueden emitirse el 15 de febrero. Al igual que el año pasado, el IRS espera que los primeros reembolsos relacionados con EITC/ACTC estén disponibles en las cuentas bancarias o en las tarjetas de débito de los contribuyentes desde el 27 de febrero de 2019, si eligieron el depósito directo y no hay otros problemas con la declaración de impuestos.

Posted in INDIVIDUALS, NEWS, SMALL BUSINESSES