The Small Business Tax Help Blog

Archive for December, 2010

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Question: I dont believe it but what if … An email saying I got a tax refund?

It says:
Dear Tax Refunder
After the last calculations of your fiscal activity we have determined that you are eligible to recieve a tax refund of $990.55
Please submit the tax refund request and allow 3-6 days in order to process it.

If you don’t recieve your refund within 9 business days from the original IRS
mailing date shown, you can start a refund trace online.

A refund can be delayed for a variety of reasons.
for example submitting invalid records or applying after the deadline.
Be sure to access your form for your tax refund securely by clicking the link
below:

http://www.irs.gov/govt/index.html

Whats up with this?

Answer: The IRS does not initiate taxpayer communications through e-mail.
Also, please remember that all IRS.gov Web page addresses begin with http://www.irs.gov/.

For further information regarding suspicious email and phishing scams, please visit:

How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.

How to report phishing, e-mail scams and bogus IRS Web sites
If you receive an e-mail or find a Web site you think is pretending to be the IRS,

Forward the e-mail or Web site URL to the IRS at phishing@irs.gov.
You can forward the message as received or provide the Internet header of the e-mail. The Internet header has additional information to help us locate the sender.
After you forward the e-mail or header information to us, delete the message.

Obama signs tax deal into law

President Barack Obama signed an $858 billion tax bill into law Friday, saying, “this is progress, and that’s what (the American people) sent us here to achieve.”

Filing an Income Tax Extension is EASY with FileLater

Question: section 179 – SUV write off?

Someone please correct me if im wrong anywhere in this example:

i earn 60,000 at work per year. My online business earns 0 this year, and 10,000 next year. Therefore 2008 total income = 60k, and 2009 = 70,000.
Half way through 2008, i decide to buy a yukon/tahoe Hybrid for $60,000, but decide to finance, so the payments from june thru december add up to $10,000. However, i can still use the section 179 deduction of 25,000 and the depreciation, therefore, a dedcution of about $32,000? (thats 25 + 7k) (60-25 = 35/5 yrs = 7k). And i am in the 25% tax bracket, thus i would recieve (.25*32k) $8k back?

in june 2009 i decide to sell car, but i only get 45k for it, do i have to show that as an income?
Or scenerio 2, i trade it in for 45, and get another 60k car. Can i use section 179 and depreciaion again on whole value of the car, or just on the 15k differance?

and final question, does all this work, if it was a lease instead?

Answer: The scenerio in your first paragraph seems correct.

For every dollar of depreciation you take (including 179), you have to reduce your basis in the car for when you sell it. So if you sell the car for $45K, you have a gain of $17K. ($45K less $28K, which is $60K less $32K) All $17K would be taxed at ordinary income rates, because you have to “recapture” any depreciation you take – since you got to take an ordinary deduction with your depreciation, you have to claim ordinary income for any gain you get as a result of depreciating the asset.

Using scenerio 2, you can opt to do a 1031 exchange (a “like-kind exchange”) for the car. This is usually tax advantageous, but gets a little more complicated. The amount of credit you get for the old car doesn’t matter. All that matters is the net “boot” you pay for the new car, which is basically the out-of-pocket expense you have to give up in addition to the car. So if give up the car and the dealer takes over a $5,000 loan balance you had in exchange for a new car and $20,000 cash, then your “boot” is $15,000. You must continue depreciating the original car as if you never traded it, and then depreciate the boot as a separate asset, that was purchased in the year of the trade. You cannot take 179 a second time.

As for the lease, this depends on what type of lease it is. If it is an operating lease, then you don’t depreciate the car at all. You simply write off your rent payments as an expense. If it’s a capital lease, then you would treat the asset as if you purchased it. Generally it’s an operating lease if it’s a short-term lease and you don’t have the option to buy the car at a discount at the end of the lease. It’s a capital lease if it’s a longer-term lease (most of the useful life of the car) and/or you have the option to buy it at a discount at the end of the lease. Of course, these are very general scenerios, and there are all kinds of weird rules that could change the answer.

I hope this helps. It may be worth sitting down with a CPA to go over which option would be best for you.

Hancock leaves unusual mayoral legacy

A s the new council begins regular business, it’s worth pausing to reflect on former mayor Mike Hancock’s record as he enters political retirement, and as Mayor Chris Friel -a very different Brantford phenomenon who brackets Hancock’s time in the chair -resumes his career in the city’s top [...]

Franklin County, Virginia – Business at Smith Mountain Lake

Question: Change of ownership for an LLC based in Georgia?

I am wondering what if anything do I need to do to change ownership of a company from one person to another. I know I will need to submit a New EIN number thru the IRS, is there any additional items I will need to do, such as state filling ect.

Answer: You need to research Georgia state law (not hard to do–just go to the state web site).

You also need to consider federal law. The IRS has no clue what an LLC is and doesn’t care. To the IRS:

single member LLC = sole proprietorship (it’s called a “disregarded entity, files form 1040, schedule C)
multi member LLC = partnership (files form 1065)

Technically, if there’s been a change in ownership, there has been a sale of assets and a purchase of assets, whether the transactions took place or not. There is a value that has to be assigned to them, and that value has to be transferred to the new owner.

Also, an old business was closed, and a new business was opened. The IRS will ever recognize the new owner, nor will they allow any release of information attached to the federal ID number, until they have word that written permission or release has been tendered. The old owner is still the owner of the federal ID number (forever and ever amen) in their eyes.

(Hint: you might be able to make it easy on yourself by just forming a new LLC. In my state, you can do it on line, and there’s a fee of $200. The new LLC will own the assets, and you’re free to make whatever arrangements you want with the old owner, as long as you have your own federal ID, which you can also get on line, and I think it’s free.)

Wikileaks: Raketenschild erkennt iranische Raketen nicht?

(4.2.2011) Ein Briefing im Herbst 2007, das in einer US-Depesche beschrieben wird, enthüllt die mangelhafte Planung beim vieldiskutierten Raketenschild. Denn Radaranlage, die Tschechien betrieben werden soll, würde nur sehr limitierte Kapazitäten haben.

7amoody’s wedding Georgia EIN yabrud (4)

Question: Income Tax Rates for an American citizen working in Switzerland?

Greetings. I have been offered a position at an American company in Zurich and I am an American citizen. Since I would be working for an American co, but living in Switzerland, does anyone know what tax bracket I would likely be paying into, i.e. – would I be taxed under the US system or the Swiss system?

It seems to me that based on my expected salary, paying taxes to the Swiss gov in lieu of the IRS would be beneficial to me, but I am not sure what factors are considered when determining which nation will tax me. Also, I am not totally certain yet, but I may potentially be able to work as an independent contractor instead of an employee for this co, which I suspect may also affect the taxation status.

Any help would be appreciated. Thanks in advance.

Answer: If you work and live in Switzerland you will be taxed in Switzerland for sure.
How much you pay depends on your income and family status. Here a webpage to callculate your income tax:

http://www.comparis.ch/steuern/default.aspx

You might realize that the income tax depends highly on your canton of residence. So choose your canton of residence wisely. For example the canton of Zug is close to Zurich and has very low tax rates. In return the rents for housing are higher there. So it depends on your income if it makes sense to move to this canton.

In addition to income tax you will have to pay 5.05% of your income for social insurance and you must have a compulsory health insurance (at least 150. – CHF month) . The premium for health insurance depends on your age and the place of residence. Check this webpage for detailed calculations: http://www.comparis.ch/krankenkassen/default.aspx

If you are 25 or older you will also have to pay about 8% of your income for your pension plan. Your employer will pay the same amount. As you will get most of the money when you leave Switzerland this could be attractive for you. Pension plans vary from employer to employer. The HR department of your potential employer are experts on this and should be happy to explain you the details.

If you work as an “independent contractor” this will not have a big effect on your tax status. (It would have some impacts on your pension plan but explaining this goes beyond yahoo answers.)

As far as I know the U.S. government sometimes taxes its citizens when they work abroad although there must be an agreement between Switzerland and the U.S. to prevent double taxation. I am not very familiar with the U.S. tax system so others might answer on this aspect.

Hobbs to consolidate with Colorado City

By Belinda Serrano editor@sweetwaterreporter.com c-school board2.jpg Several topics affecting many facets of the Sweetwater Independent School District were discussed in a regular session at the monthly board meeting held on Monday evening, Dec. 13. Among those were the location of the Hobbs alternative school. At last month’s meeting, two options were presented yet no …

Rob Wood Employee Status- Independent Contractor

Question: low in come family’s – on benefits- tax credits-and child tax credits is it an un fair change or not?

Changes to Child Tax Credit and Working Tax Credit
Budget 2010 announced several changes to Child and Working Tax Credits, including:

•raising the second withdrawal rate (the amount taken off your tax credit entitlements depending on your income) to 41 per cent from 6.67 per cent
•lowering the amount of your income not taken into account from £25,000 to £10,000, and then £5,000
•increasing the rate at which tax credit awards are reduced
•removing the one-off payment for new workers over 50 from April 2012
•no Child Tax Credit from April 2011 for families earning more than £40,000 per year
•aligning the income levels (thresholds) for the child and family elements
•removing the baby element from April 2011
•increasing the child element by £150 above inflation in April 2011 and £60 above inflation in April 2012
Tax credits (Money, tax and benefits section

Answer: It’s very fair. There is no point us paying benefits to people on 50k a year!

Few families DON’T qualify for this benefit! I’m the only one among my friends that can’t claim – cos our income is 100k. But my friend who is a solicitor and his wife is a nurse can claim it! Crazy!

I’m glad I get my child allowance though – it’s all people like us ever get in return for our taxes!

New law means big savings for millions of taxpayers

Times staff and wires Friday, December 17, 2010 It’s the most significant new tax law in a decade, but what does it mean for you? Big savings for millions of taxpayers, more if you have young children or attend college, a lot more if you’re wealthy. The package, approved early Friday morning by the U.S. House and signed later in the day by President Barack Obama, will save taxpayers, on average …

TIAA-CREF Raise The Rate Contest inspired Savings on Saving (SOS) System “The Saver-Friendly System”