Friday, August 29, 2008

Business Taxes - Am I Liable?

Business Taxes – Am I Liable?

Are you a business owner? Does the business owe taxes? If so, you may be liable for the taxes and need to speak with a tax professional. There are two types of taxes associated with a business (excluding sales taxes) and they are income and payroll taxes. Most small business owners get into trouble in the area of payroll taxes. It is the responsibility of the business owner to withhold the appropriate amount of payroll taxes and then pay the federal government and the state government (if applicable).

Payroll taxes are due on the 15th of the month immediately following the month for which the taxes were withheld. If the taxes are not paid the IRS will notify the business owner of the amount owed. If not paid within the timeframe requested then the IRS will take actions to collect. If the business is unable to pay the taxes the IRS can force the business to close and then go directly to the business owner to pay the taxes at which point the business owner becomes personally liable for the payroll tax(es).

The good news in this is that often times dealing with the IRS can be somewhat easier as an individual taxpayer than as a business. Payroll taxes rank as one of the top IRS collection priorities. Taking a proactive approach to this problem is always the best option. If you think you have an issue with payroll taxes consult a tax professional today.

Thursday, August 28, 2008

Surviving an IRS Audit

Surviving An IRS Audit

Have you been audited and now owe the IRS money? If so you may need to talk to a tax resolution specialist. The key to surviving an audit is to effectively plan for an audit. A large percentage of taxpayers are sole proprietors who work out of their homes, use their personal vehicle for both personal and business purposes and have a variety of expenses to write off.

Many things can trigger an audit. The IRS will flag returns that have either excessive write offs or under reported income. One way to effectively prepare for an audit is to get your records in order! Everyone, not just small business owners, needs to set up a good system of record keeping to maintain all documents that will be required during the course of an audit. A good system of record keeping would adequately maintain all records relating to income, expenses, home and investments. A basic record keeping system would keep track of the following:

Form(s) W-2
Form (s) 1099
Bank statements
Brokerage statements
Form (s) K-1

Sales slips
Cancelled checks or other proof of payment

Closing statements
Purchases and sales invoices
Proof of payment
Insurance records

Brokerage statements
Mutual fund statements
Form (s) 1099
Form (s) 2439

Rules to recordkeeping
Many people wonder how long they must keep their income tax returns after the due date of the return. If you did not report income that was more than 25% of the gross income shown on your return you must keep the return 6 years. If you filed a fraudulent return or did not file a return then there is no limitation. If you owed additional tax on a return and your did not file a fraudulent return and you did not report income that was more than 25% of the gross income shown on the return then the limit would be 3 years. Any time a claim is filed for a credit or a refund after filing the return then you must keep the return must be kept the later of 3 years or 2 years after the tax is paid. If a claim was filed for a loss from worthless securities then the return must be kept for 7 years.

Remember, when you are accused by the IRS of owing taxes the burden of proof is on you the taxpayer. You must be able to prove what you claim. If you haven’t already, set up a system of recording keeping today to help you survive an audit. If you are in trouble then get help now!

Wednesday, August 27, 2008

The Truth About Liens & Levies

The Truth About Tax Liens & Levies

When you owe money to the IRS the IRS has two very effective ways to collect the taxes they are owed, the federal tax lien and the levy.

The Federal Tax Lien – An Encumbrance
When the IRS assesses a tax liability against a taxpayer they are required to give notice to the taxpayer and demand for payment within 60 days of the assessment. If the full payment is not made then a tax lien is thereby created and subsequently encumbers all property and property rights of the taxpayer. This encumbrance applies to all current property and current property rights as well as any and all property and property rights acquired in the future by the taxpayer until the tax is paid in full.

The Levy – A Seizure
A levy is a seizure of your property, In order for the IRS to gain possession of your property thru a levy the following must take place:
1) The IRS must make a notice and demand for payment.
2) The taxpayer must neglect or refuse to pay the tax within 10 days of the notice and demand.
3) The IRS give the person a notice in writing of his or her right to a hearing 30 days before the levy is made on the taxpayer’s property.

Unless the taxpayer asks for a hearing, the IRS may levy upon all property and rights to property belonging to the taxpayer with the exception of certain exemptions. Do you have a federal tax lien or levy? Make sure you user a professional tax resolution company in order to learn what your best options are in dealing with this problem.