The Small Business Tax Help Blog

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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

Question: New Years Resolution: Save money rather than spend and get into debt: any free spreadsheets out there?

im not talkin about loans on a house or condo, just loans on stuff other than land/houses/condos. (My partner and I own a condo and are making more than the required minimum payments on our mortgage) Are there any good websites or spreadsheet templates on the net that itemise your goal for you on an annual basis? I want to get rid of my credit card debt of $12k and save enough money to start a small business (my partner doesn’t know about either of these otherwise he would explose). I would still work in my crappy job so my expenses are covered and to have an income stream…just that I want to pay off my credit card debt without my partner knowing and then start a small business and tell him when the business is off the ground. So I need the spreadsheet for both these things.

Answer: www.msn.com used to have many spreadsheets for use for free. Or try www.money.com

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Question: I need help choosing the best accounting software.?

Hello! I am a small business owner, married, and have a full-time job out of the home. I want to get accounting and invoicing software for my businesses. I have a freelance writing and editing business and a jewelry and accessories business. I would like the software to allow me to create customized invoices and quotes, track payments, show where money is going and coming from, organize charges for tax purposes, allow me to print and email the invoices and quotes, organize my clients and customers’ information, easy to use, and not too expensive. I would prefer one software package rather than two to do both the accounting and invoicing. It can be any brand as long as I can download it. I would like only software(s) with a free trial to see if it is for me.

Any input, suggestions, etc. would be greatly appreciated.

THANKS!

Answer: It’s not exactly what you are asking for, but Quickbooks is the way to go. Yes, it’s a little expensive and takes some time to learn. But it’s full-featured. It can handle anything you are doing now or wish to do in the future. It has all the features you want.

You basically can’t get full-featured software that is ‘easy to use’ and inexpensive.
I know – I’ve tried many different accounting programs. Eventually, you will want to enter a transaction and the cheap software won’t have the required feature. As an aside, tax laws and tax tables change every year, so whatever you buy if you are planning to use it for tax purposes will need to be upgraded to the new tables each year. And yes, you have to pay for such updates.

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Question: Can I write off business expenses incurred before the business was established?

I plan to file the paperwork to start either an LLC or INC later this month for a web-based business. (I’m still researching which will work best for our situation.) But, I’d like to get started on the web development immediately. If I buy web hosting, domain names, web software, etc. today, can I still write it off as a business expense after I’ve officially created the business?

Answer: Yes. You can pay for it personally, then “reimburse” yourself from the company. Keep all the associated receipts with your business records.

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Question: In Nevada, is seller’s permit number the same as tax ID number?

I’m getting confused by all the different numbers and the auto-response machines at the department of taxation.

So my question is:

1. Is a seller’s permit number the same as the tax ID number in NV?
Then there are a bunch of other numbers: NV business ID, Entity number, etc.

2. If I did the initial filing (which was somehow put together with the business license appliation),
am I allowed to write the Resale certificate (http://www.tax.state.nv.us/documents/Resale_Cert_22509.pdf) that was here?: http://www.tax.state.nv.us/forms.htm

So for the “seller’s permit number” would I write my tax ID?

Answer: Reseller’s number and sales tax id, likely yes – not the other numbers you mention.

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