The Small Business Tax Help Blog

Posts Tagged ‘tax’

Question: Have you ever ran a business at a paper loss as a personal tax shelter?

Tell me what benefits you derived.

Answer: You would be a dumb@$$ not to do it.

Profit Loss Reports, Printing Income Tax and Sales Tax Reports

Question: Quarterly tax payments for an independent contractor?

I just got done paying my 2010 taxes as an independent contractor (self employed). I have never done quarterly payments….this year I owed almost $4,000 in self employment taxes for federal and my state combined. I want to make quarterly payments for 2011, but I have already missed the first deadline….is it better to just pick up with the 2nd payment and make that, the 3rd and 4th payment on time, or not pay quarterly taxes at all? Usually I just pay in a lump sum at the end of the year…I was charged a slight penalty for 2010 but it wasn’t much at all. What should I do, continue with the quarterly payments or just skip it and get on track with them properly next year?

Answer: Neither. Make the first payment now. The penalty for being two weeks late is much less than the penalty for missing the payment completely.

Save Money on Tax with MrTax CD

Question: Small Business Tax Audit?

My business that was closed in 2009 is currently under audit. My partner is non-collectible I am considered collectible. We owe 25,000, will the IRS just come after me? I currently own no property besides a old car, my partner owns a house and newer car. Any advice or tips on how I should handle this would help?
We were an L.L.P. and it is payroll tax….
He was determined non-collectible due to his amount of income. His parents are helping him out with money and that’s why he is able to survive

Answer: Mr Reliable claimed that IRS audits cannot be handled on your own and require professional representation. Not completely true. I’ve met with a number of people who successfully defended themselves against an IRS audit. This is certainly possible, however I have to agree that more often than not self-representation backfires, and these people come to hire me after they already messed up. And I have to undo the damage.

That said, what you’re dealing with is a special case, and this type of cases is NOT a do-it-yourself project. I’m not talking about your audit – the audit you may or may not be able to handle yourself. I’m talking specifically about owing payroll tax. This is where the IRS is the most aggressive, and you really do need professional help, in my opinion. I will mention just couple points, but please do yourself a favor and hire a pro.

The issue at stake is called Trust Fund Penalty – see my link below. It is when you were supposed to take out payroll taxes from your employees’ paychecks and turn these taxes over to the IRS. When it’s not done, the IRS gets real mad, because this is not even your taxes, but your employees’ taxes. As punishment, the IRS automatically adds 100% penalty which instantly doubles what you owe, before you add interest which makes it even worse.

And while the tax itself is assessed against the company, the penalty is assessed against so-called responsible persons, and this is personally you and your partner. Unfortunately, no matter what your partner’s situation is, you’re responsible for 100% of the Trust Fund penalty. This is why you really are in a tough spot, and the IRS is very serious when dealing with this type of debt. It is possible to settle these cases, but I would not attempt it on your own.

Now, you mentioned audit, and I assume you’re talking about a standard audit where you’re asked to prove your business expenses. This is a very different game and normally is not related to payroll tax problem. Payroll tax and trust fund penalty is not an audit issue, it is collection issue.

Michael Plaks, EA, Houston TX
www.MichaelPlaks.com

Penalty for Late Filing

Getting to Know Your Taxes: Credits for Children

Question: Tax filing and business questions?

If you sell something and you make only $10 for a whole year, do you have to report that?
Self-employed tax starts when you make $400, right? What happens if you only make (1) $5 sale and (1) $10 sale for the WHOLE year? (especially if it’s your mother or friend)
Does that still have to be reported to the IRS?

I don’t really understand when you have to start paying taxes. Is it $400 for a month or for the whole year?
~ Does it count as a “business” if you make less then $20 a year?
~ Is it a business if you sell handmade items on Artfire?
~ Is it a business if you are only selling items you make and not working at any other job? Or is that considered a hobby?
so….I don’t have to file taxes for the $15 I got from my mom, right?

Answer: If you make less than $400 for the YEAR, no you don’t have to file a return or pay tax.

IRS Tax Questions Answered LIVE – Metro Detroit – Part 5