Business Auto Mileage Rate Increase

The IRS has announced the following increases in the stanadard mileage rates beginning July 1, 2011:

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/11	Rates 7/1 through 12/31/11
Business	51	55.5
Medical/Moving	19	23.5
Charitable	14	14

The information is from IRS Announcement 2011-40.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

Business Paid Education

If you need to take a course (or courses) or class (or classes) in or to maintain or imporve your skills to maintain your status or pay level or if you need to takes these courses or classes for the purpose of meeting legal or employer requirements your employer may be able to deduct the expenses.





The business is not able to deduct expenses that enable you to be qualified for the job or that would qualify you for a new trade or business (a new job). 





As with all business expenses, they must be considered "ordinary and necessary" in order to be deductible and as far as educational expenses are concerned they must also be "required".  The key, as with all deductions is that you document your reasoning.  The expenses must be directly related to your current employment.  Just because taking the course or having this knowledge is "appropriate or helpful" does not make it "required, necessary or ordinary".  Just because the employer adds a line to your employment contract stating it's a requirement does not make it "ordinary or necessary".





It is even more to your advantage to carefully document the FACTS, proving that the education is required, ordinary and necessary for your current job and not a new job, trade or business.  It does not matter if you do not intend on getting a new job, or starting a new trade or business.  It does not intend on your reasons for taking the new courses.  





For example the tax courts have allowed taxpayers with finance degrees, management and marketing degrees to deduct the expenses related to getting an MBA, if and when the taxpayer is involved in the same aspect of the business that they were involved in prior to obtaining the MBA on the basis that the taxpayer showed that these courses "enhanced and maintained their skills".  





On the other side of the coin, the tax court disallowed an aeronautical engineer the ability to deduct the cost of obtaining his commercial pilot's license even though the engineer was easily able to show that the education did improve his knowledge of aeronautical engineering.  The expenses were disallowed because he was now able to get a job as a commercial pilot - it didn't matter that he didn't want to.





As with all contested expenses they are often "won or lost" based on the taxpayer's substantiation of the deduction.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

5 things you should know about tax collector bonds

As taxpayers, we all want to know that our taxpayer dollars are allocated appropriately rather than being mishandled by corrupt officials. Tax collector bonds help protect against potentially unruly tax officials in five key ways.

1. Tax collector bonds are legally binding contracts.

Tax collector bonds function as do other surety bonds. Each bond that's executed provides a financial guarantee that a specific job will be done according to applicable regulations. Tax collector bonds bind three separate entities together in a legally binding contract.

• The principal is the tax collector that purchases the bond as a promise that work will be completed appropriately.


• The obligee is the entity that requires the principal to purchase a bond as a way to deter fraud and potential financial loss.


• The surety is the insurance company or specialty surety agency that issues the bond as a financial guarantee of the tax collector's ability to do the job.

2. Tax collector bonds protect consumer interests.

As a specific type of surety bond, tax collector bonds provide protection to consumers. They're primarily used to guarantee the general public that hired or elected tax collecting officials will perform their duties appropriately. Government agencies establish surety bond regulations to deter fraudulent or otherwise unethical individuals from getting the position.

3. Tax collector bonds deter unqualified individuals from getting control of taxpayer money.

Before surety providers issue tax collector bonds, they always conduct thorough background checks of all applicants. To determine a tax collector's credibility, surety providers investigate the applicant's credit scores, financial records and work histories. Negative feedback will deter sureties from issuing a bond, as they tend to avoid bonding potentially risky principals.

4. Tax collector bonds guarantee that collectors will do their job appropriately.

Because tax collectors have access to a significant amount of taxpayer money, they need to be held accountable for their actions. If a tax collector fails to complete the duties of that position according to law, tax collector bonds provide a safety net for the governing agency. This prevents tax collectors from taking advantage of their position's power.

5. Tax collector bonds provide compensation if a tax collector should break the law.

If a tax collector breaks the law or otherwise fails to perform duties, tax collector bonds allow obligees or other harmed parties to collect on the bond. This enables government agencies and the general public to recover funds that were lost as a result of a tax collector's negligence.



This article was provided by Kristen Bradley of SuretyBonds.com, a nationwide surety bond producer. Because the surety industry is often misunderstood, SuretyBonds.com provides educational resources to the general public to help them understand the benefits provided by surety bonds.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

Happy April 15th!

For those of you who have finished your annual duty of filing your taxes I hope it was as painless as possible.  I enjoyed a successful tax season and while the busiest time of the year for me is just about over, I would like to take a moment to remind you to drop me an email any time throughout the year with any tax concerns.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

Should You Switch from a C-Corporation to a S-Corporation?

Changing from a C corporation to a S corporation can be beneficial, but there are numerous factors to consider. With the March 15, 2011 deadline for making this election effective January 1,  2011 fast approaching, you should seek guidance for your situation.

Basic benefits of a switch: If a C Corporation owner elects S corp status, the corporation’s income and deduction items are passed through to the owner, reported on his or her 1040 and taxed at personal rates. Significantly, switching to S status would avoid any threat of double taxation on: (1) future corporate operating profits and (2) future appreciation in corporate assets that occurs after the switch.

As you may know, double taxation occurs when a C corporation pays corporate-level tax on its income and gains. Then the owner pays tax again at the shareholder level when those income and gains are distributed as taxable dividends.

In contrast, a business owner is only taxed once under the S corp form of doing business, while retaining other benefits such as corporate protection from personal liability. 

Basic drawbacks to a switch: The decision to switch isn’t always a slam-dunk. If the owner has substantial income from other sources or if the company is quite profitable, he or she may be forced to pay the 35% maximum rate on most or all of the incremental income passed through. Rule of thumb: With the current tax brackets in effect, the owner often fares better if the company generates annual profits of less than $100,000.

In addition, beware of the onerous "built-in gains" (BIG) tax. It comes into play if the corporation owns appreciated assets when it switches from C to S status. When this corporate-level tax applies, the rate is 35%.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

Form W-2 and Form 1099s

This is a quick reminder that the IRS requires that you furnish your employees their W-2 and your contractors their Form 1099 by Monday January 31, 2011.





If you need assistance in meeting this deadline please contact me and I'll see if I can help you.





Best wishes, 

Gina

http://GLGcpa.com

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

Use Tax in QuickBooks

Typically when you go into a store a buy a taxable product the store collects the sales tax from you and remits that tax to the appropriate taxing authority.  However, when you buy items via the internet or out of state the company you buy it from may not be required to collect the sales tax from you.  If they do not collect the sales tax from you then you become responsible for remitting "use tax" to the proper tax authorities based on that purchase.

Many small businesses purchase items over the internet for their business from vendors who do not collect sales tax.  When this happens it's best to immediately record it in your accounting records so you don't forget to pay it.  You can usually remit this right along with the sales tax that you collect from your customers.

If you're using QuickBooks for your business, this is one approach that MAY work for your company.  This approach is NOT a good approach for every company.  It's best to talk to your QuickBooks ProAdvisor and/or accountant to determine if this method of tracking use tax will work for your business.

By doing the following the use tax that your company owes will show up in the "Pay Sales Tax Window":

1. Create a "Sales Tax Item" called "Use Tax" and use your use tax rate and your sales tax agency.


2. Create a "Other Charge Item" called "Reversing Items Sold" and indicate that this is a nontaxable charge and code it to an Income account.  You can create a new account for this or you could code it to the one you use for your inventory parts items.


3. Create a "Other Charge Item" called "Use Tax Expense" which should also be nontaxable and coded to an expense account such as "Use Tax Expense".


4. If you don't already have an item to subtotal the invoice add that as well.


5. Create a customer for your business in the Customer List and for the default tax code (in the Additional Info tab) use the "Use Tax" item you created.


6. Write invoices to yourself for the inventory part item you purchased.  Use the items cost as the selling price.  This will assure that you're calculating use tax on the cost of the items.  Once you are done entering the items you purchased without paying sales tax subtotal the invoice (use the subtotal item).  On the next line, use the "Reversing Items Sold" item and enter the subtotal of your purchase as a NEGATIVE amount.  This will zero out the cost of the pre-tax products on the invoice.  On the next line use the "Use Tax Expense" item and enter the amount of the use tax that is calculated at the bottom of this invoice as a NEGATIVE amount.  This will bring the total invoice to zero.

I've created this video, Record Use Tax in QuickBooks to demonstrate how to set this up, how to record an invoice and show you how it will look on your sales tax report.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.

A New Degree Can Make You a Better Entrepreneur

Earning a new degree can make you a better entrepreneur Being an entrepreneur is more than just having a great idea. Instead, it is about being able to execute and manage this idea. Having a small

business or bringing a great idea to life means understanding how to finance, sell, market, and then keep the accounting on this group.

This is where new degrees from online schools come into play. Having a degree in marketing, finance, accounting, and economics will give an individual a great number of skills that will help an individual become a successful entrepreneur or small business owner. The following includes some basic information about how a new degree will develop a person’s skills and make him or her a better entrepreneur.



Marketing is key to any business. After all, one has to sell an idea to people of all ages and backgrounds. Understanding how to create a marketing plan takes time. One has to understand the different marketing tools around – everything from advertising in local publications and holding promotional events to using social networking items – and understanding how to target specific groups of people. A degree in marketing will teach a person how to perfect the art of customer service, how to word advertisements, and how to really make items look attractive to specific types of people (businessmen, stay at home mothers, college students, etc.).



Economics is more than just counting money. Instead, it’s about understanding supply and demand. You need to be able to judge the market both in one’s community and around the world to understand how to lure people into a business or make an idea economically smart. After all, if there are tons of breakfast places in a community, one may want to rethink starting another one. Instead, a new idea should satisfy a need people have. This means understanding how to entice people into coming into your new business and investing in goods and services. An economics degree will help people read the news and read economic-focused statistics to understand how the market is changing and how changing interest rates and trends could affect the price of one’s goods as well as any small business loans one may have.



A business degree is another important investment. Such a degree will help a person manage the day to day operations of a group. Running a business is more than having a store and selling goods. Instead, it is also about understanding the basics of accounting – so that every expense is accounted for – as well as basic payroll information. Treating employees right means taking care of taxes, making sure checks are on time, and ensuring all laws are followed. Update one’s administrative skills and learn how to organize a store or price goods and services so that this idea or business is successful.



Starting a business means making a plan and understanding the ins and outs of how to make the most of an idea. Thus, one should know how to make a budget, develop a marketing plan, how to gauge the every-changing market, and how to keep track of how funds are spent or used. With enough planning, one can make the most of an idea. Entrepreneurs will arm themselves with important skills and information if they earn new degrees.

This is a guest post from C. H., a freelance writer.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.