February 23, 2011
From the Flashpoints blog
One of the more common ways small business owners get into trouble with the IRS is by getting behind on their payroll taxes. Normally you would pay your employees, withhold the appropriate taxes (income and employment taxes), and remit those funds along with your (as the employer) share of your federal tax deposit to the IRS on a monthly or quarterly schedule (depending on the size of your payroll). When you pay your employees, withhold the appropriate taxes, and then don’t send the funds to the IRS, you can find yourself in serious trouble.
To read more, click here.
February 21, 2011
by Gina Anton, Director – Corporate Communications
JK Harris leaves South Carolina today to begin his job creation speaking tour in Boston. He plans to meet with business leaders in Boston (and in future cities) to discuss how entrepreneurs and business owners can grow their companies, create jobs and jump start economic recovery at the local level, in their own communities.
Visit The Flashpoints blog to find out more information on Mr. Harris’ tour or to sign up for the free Flashpoints newsletter. The Flashpoints newsletter was created for the small business owner and is published once a month. As a bonus, when you sign up to receive the newsletter, you will also receive the free e-book, “The Mindset of High Achievers.”
February 17, 2011
At JK Harris, we have a lot of small business clients who come to us for either back tax help through our tax resolution services or for bookkeeping services through JK Harris Small Business Services. And, since our company is technically considered a small business, we always keep an eye out for small business owners and their needs.
CNN Money ran an article a few weeks ago which talks about six new breaks for small business owners.
Own a business? 6 new tax breaks by Catherine Clifford
Doing your taxes stinks, right? No fun at all. But take note as you brace for your 2010 return: A handful of changes in the tax code could translate into a fatter refund check.
The Small Business Jobs Act, passed last September, and the historic health care reform law, passed in March, enacted hefty credits and deductions for capital investments and employee health insurance costs.
Here is a rundown of six new credits and deductions likely to affect the most small business owners. Read the rest of the article here.
February 15, 2011
From The New York Daily News
Marcos Esparza Bofill was shocked to find out he owed over $172 million in back tax debt. Esparza Bofill moved to New York i from Spain in 2006 when he decided he wanted to try his hand at day-trading. After one year – and barely surviving on a “beer budget” and no profit – he decided to go back home to Spain.
Esparza did not know he was required to file a tax return during the year he was swapping stocks. But, the IRS was tracking his every move – and they assumed that Esparza made pure profit on his day trading transactions. This would have given Esparza Bofill a whopping $500 million in income.
“Who is the IRS?” Esparza was said to have asked of his American friends. One friend commented that Esparza thought he was kidding when he told him the IRS had hit him with a $172 million dollar tax bill.
Marc Albaum, a Manhattan CPA points out that the tax lien will probably be completely resolved when Esparza Bofill files his tax return for the year in question.
“When you do not file a return, the IRS assumes you made pure profit,” said Albaum. “Now the remedy here is simply to file (a tax return). He could wipe out anything he owes.”
February 14, 2011
In a recent edition of Lawson Condell’s Tax, Accounting and Auditing update, the federal case of U.S. v. Quinn, DC KS, 107 AFTR 2d ¶2011-412 was discussed. Rosie Quinn owed IRS trust fund taxes (i.e. payroll taxes such as income taxes and FICA that are withheld from employees’ pay) that should have been paid on various dates between 2003 and 2005. Ms. Quinn decided to pay them on December 4, 2010 – which was coincidentally, just before she was set to go to court over her back payroll taxes.
The federal court ruled Ms. Quinn could still be prosecuted even though she paid the tax debt right before her trial date. According to the law, any person “required to collect, account for and pay over” trust fund taxes and who “willfully fails to collect or truthfully account for and pay over such tax shall in addition to other penalties provided by law, be guilty of felony and upon conviction thereof, be fined up to $10,000 or imprisoned not more than 5 years, or both…”
Ms. Quinn argued that she should not face such prosecution because she had paid the trust fund taxes. The court did not see things Ms. Quinn’s way – and ruled she could still be prosecuted for willfully avoiding paying the payroll taxes. While the court was probably thankful that Ms. Quinn came into compliance and repaid her tax debt, she could not avoid prosecution by paying at the last minute.
Moral of the story: Make sure to set aside and pay all trust fund taxes on time. If you cannot – seek professional assistance immediately!
February 10, 2011
From IRS Tax Tip 2011-28
The IRS has reminded taxpayers about the steps they should take if they have not received their Form W-2, Wage and Tax Statement. Employers had until Jan. 31 to send employees a 2010 Form W-2 earnings statement.
The agency suggested four specific actions for taxpayers to take.
First, contact the employer to inquire if and when the W-2 was mailed. After making contact, allow a reasonable amount of time for the employer to resend or to issue the W-2.
Second, if the W-2 is not received by Feb. 14, contact IRS for assistance at (800) 829-1040.
Third, even if the taxpayer still has not received the Form W-2, a tax return or request for an extension to file must be filed by April 18. If the Form W-2 is not received by the due date, and the taxpayer has completed the previous steps, the taxpayer may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Form 4852 should be attached to the return, with an estimate of income and withholding taxes.
Finally, a taxpayer may have to file Form 1040X, Amended U.S. Individual Income Tax Return. If a missing W-2 is received after the return was filed using Form 4852 and the information is different from what was reported on the return, the return must be amended. Complete details can be found here.
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February 9, 2011
Recently a client from Tennessee came to us with a burden she could no longer bear. She and her former spouse had taken out a distribution from their life insurance policy to help pay their living expenses. What they didn’t realize was that one move bumped them up into a higher tax bracket. This in turn triggered a tax liability for the year that they were unable to pay.
Our client tried making arrangements with the IRS and set up an installment payment plan. She tried to repay her debt in full, but she just didn’t make enough money. Now a single mom, she didn’t have the means to repay the tax debt she had incurred. Then, she came to JK Harris.
Our tax team analyzed her financial situation and determined she was a candidate for an Offer in Compromise. We prepared the Offer package and after several months of waiting to hear back from the IRS, when we did – the news was good. Ms. Capps had her offer in compromise accepted at a fraction of what she owed.
“I am very thankful to you,” Ms. Capps said in the letter she wrote to her case specialist.
We were glad to help – and wish you all the best in the future!
February 1, 2011
by Teresa Rotell, Tax Consultant, JK Harris
This story actually happened about ten years ago, but I share it due to the uniqueness of the client’s situation.
John, 67 years old, came into my office in Ohio. He had come in with his daughter, Sherri, who was in her 40’s. He looked very heartbroken (and so did she) and I could not figure this out since he had just won the lottery the year before…for $300k. It was on a scratch-off ticket of all things. I had never seen this big of a winner…ever! At least not in person. He was upset because he had spent all of his winnings. He had given most of his money away… burying his wife of 44 years, helping his 3 daughters out of debt, and paying off some debt that he and his late wife had incurred.
After doing what most people would (paying oneself out of debt) he found himself in a bad situation with the IRS. His initial taxes were taken out when he received the proceeds from the winning ticket, but he never counted the 300k as ordinary income on his tax return for that year – leaving him with a large tax liability…I don’t recall exactly what his tax debt was, was but it was hefty. Like most, he thought all of the tax was taken out when he received his winnings.
JK Harris was able to settle the debt…for much less than I ever anticipated. I just think this is a great story because this can happen to anyone…not necessarily to win the lottery…but I think any of us can not realize that somethings must be counted as ordinary income. It was an honest mistake on John’s part. I was just glad I was able to help!