The White House's deficit-reduction commission has issued its report. To read a copy of the published report, click one of the links below.
http://online.wsj.com/public/resources/documents/WSJ-20111201-DeficitCommissionReport.pdf
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
Here are two summaries of the report.
The Tax Foundation: http://www.taxfoundation.org/publications/show/26882.html
Texas Society of CPAs Federal Tax Policy Blog: http://tscpafederal.typepad.com/blog/2010/12/deficit-panel-issues-final-report-w-major-tax-changes.html
Friday, December 3, 2010
Sunday, November 21, 2010
Have you prepared your 2010 taxes yet?
Even though there is more than a month left in 2010 and tax deadlines are well in the future, it is not too soon to get started cleaning up your books and preparing to file your taxes. Getting started now can help you by reducing the amount that you spend on bookkeeping, accounting, and tax services, and it could reduce the size of your tax bill. If you begin reviewing your tax situation now, you will also have some time for last minute tax planning for 2010.
Getting started
The first thing you need to do is to get your books in order. Whether you have a full-time bookkeeper or simply save everything in a shoebox for your CPA, a little organizing can go a long way. If you need more guidance than this brief article provides, contact your bookkeeper or CPA. They will be happy to tell you how to improve the way you organize your records. What you pay for an hour or two of consulting will be more than offset by the money that you can save by being organized. Your CPA or bookkeeper might even provide the consultation for free. You may even decide that working more closely with your professional accountant will give you more time to spend on the rest of your business.
Separate business and personal
Make sure that your personal and business lives are separate. This seems obvious, but every year small business owners or employees with unreimbursed expenses turn over business records comingled with personal records. It may be too late for 2010, however you should make sure that you have different bank accounts and credit cards for your business and personal lives. You may not need special business accounts, but you should make certain that they are separate.
Get your books in order
There are a couple of important parts to this step. The first step is to organize your records the way that CPAs and bookkeepers do. Figure out all of your sources of income and group them into logical categories. Then organize all of your expense. Business owners tend to focus on expenses because they worry about cash flow. However most people used to working with money are accustomed to seeing revenue, then expense, then net income. It is not a bad idea for you to think in that order also. If you think about it, the success of your business depends on money coming in the door, not just your ability to control expenses. Income and expense groupings are not just for business. If you organize your personal records this way, you will find your personal record keeping easier. An added bonus to organizing your records this way is that bankers also expect to see your financial statements in this order. If you ever need to complete a credit application, it will be easier for you to find the information that you need.
Once you have grouped your records into the two large categories of income and expense, further categorize the records by type. How you do this will depend on the type of business you own. If you have W-2 income then keep that apart from business income. You will want to group business income by whether it was for services or goods. A quick note about employee business expenses is in order at this point. If you are organizing your records because you have employee business expenses, you will want to sort out any payments that you received for expenses by whether they were taxable or nontaxable. Your employer should be able to tell you this.
After you have categorized your income, do the same with your expenses. If you already have a bookkeeping system with a set of accounts, then simply use those accounts. This is a good time to review your chart of accounts for completeness and accuracy. If you do not already have a way to categorize your expenses, take a look at your previous tax returns and see how your CPA divided up your expenses. Your CPA may even have a tax organizer that you can use. Depending on the arrangement that you have with your bookkeeper of CPA, this process could be as simple as organizing your receipts and statements, or it could include entering the expenses into your bookkeeping system. If all of this is getting unwieldy for you, then this is a good time to talk to your CPA or bookkeeper about how they can help you manage your books.
What about records that you do not yet have?
You will not receive some statements or reports until the end of the year or even until January or February. No problem. Set up folders for the statements or reports that you expect to receive later. Then when you receive them, simply add them to the appropriate folder.
How this helps
This may seem like a lot of work that could just as easily wait until later. However, by beginning now, you will be more likely to have everything you need later when you take your files to your CPA. In addition, having complete and well organized records makes your CPA’s task easier so that he or she can work faster. That will save you money. In addition, complete and well organized records will make it less likely that your CPA will miss something, and in the event that your return is selected to be audited, good documentation will make the audit much easier for you.
Getting started
The first thing you need to do is to get your books in order. Whether you have a full-time bookkeeper or simply save everything in a shoebox for your CPA, a little organizing can go a long way. If you need more guidance than this brief article provides, contact your bookkeeper or CPA. They will be happy to tell you how to improve the way you organize your records. What you pay for an hour or two of consulting will be more than offset by the money that you can save by being organized. Your CPA or bookkeeper might even provide the consultation for free. You may even decide that working more closely with your professional accountant will give you more time to spend on the rest of your business.
Separate business and personal
Make sure that your personal and business lives are separate. This seems obvious, but every year small business owners or employees with unreimbursed expenses turn over business records comingled with personal records. It may be too late for 2010, however you should make sure that you have different bank accounts and credit cards for your business and personal lives. You may not need special business accounts, but you should make certain that they are separate.
Get your books in order
There are a couple of important parts to this step. The first step is to organize your records the way that CPAs and bookkeepers do. Figure out all of your sources of income and group them into logical categories. Then organize all of your expense. Business owners tend to focus on expenses because they worry about cash flow. However most people used to working with money are accustomed to seeing revenue, then expense, then net income. It is not a bad idea for you to think in that order also. If you think about it, the success of your business depends on money coming in the door, not just your ability to control expenses. Income and expense groupings are not just for business. If you organize your personal records this way, you will find your personal record keeping easier. An added bonus to organizing your records this way is that bankers also expect to see your financial statements in this order. If you ever need to complete a credit application, it will be easier for you to find the information that you need.
Once you have grouped your records into the two large categories of income and expense, further categorize the records by type. How you do this will depend on the type of business you own. If you have W-2 income then keep that apart from business income. You will want to group business income by whether it was for services or goods. A quick note about employee business expenses is in order at this point. If you are organizing your records because you have employee business expenses, you will want to sort out any payments that you received for expenses by whether they were taxable or nontaxable. Your employer should be able to tell you this.
After you have categorized your income, do the same with your expenses. If you already have a bookkeeping system with a set of accounts, then simply use those accounts. This is a good time to review your chart of accounts for completeness and accuracy. If you do not already have a way to categorize your expenses, take a look at your previous tax returns and see how your CPA divided up your expenses. Your CPA may even have a tax organizer that you can use. Depending on the arrangement that you have with your bookkeeper of CPA, this process could be as simple as organizing your receipts and statements, or it could include entering the expenses into your bookkeeping system. If all of this is getting unwieldy for you, then this is a good time to talk to your CPA or bookkeeper about how they can help you manage your books.
What about records that you do not yet have?
You will not receive some statements or reports until the end of the year or even until January or February. No problem. Set up folders for the statements or reports that you expect to receive later. Then when you receive them, simply add them to the appropriate folder.
How this helps
This may seem like a lot of work that could just as easily wait until later. However, by beginning now, you will be more likely to have everything you need later when you take your files to your CPA. In addition, having complete and well organized records makes your CPA’s task easier so that he or she can work faster. That will save you money. In addition, complete and well organized records will make it less likely that your CPA will miss something, and in the event that your return is selected to be audited, good documentation will make the audit much easier for you.
Friday, October 29, 2010
BusinessWeek Publishes Misleading Article on Federal Withholding Changes in 2011
BusinessWeek Publishes Misleading Article on Federal Withholding Changes in 2011
All taxpayers should be concerned about the impending expiration of tax cuts (from both the Bush and Obama years) but no one should have a heart attack reading BusinessWeek’s latest estimates of how much higher the taxes will be. They’re way too high.
In an article yesterday, BusinessWeek purports to show how much more will be withheld from each two-week paycheck this coming January, assuming all the tax cuts expire. They make several errors, though, so taxpayers should either wait for the official tables from the IRS or check out the Tax Foundation’s calculator at MyTaxBurden.org.
Since Congress has yet to act to extend any of the cuts, it is increasingly likely the IRS will release initial 2011 withholding tables to employers assuming that the cuts expire. This would result in smaller paychecks beginning next year.
BusinessWeek crunches the numbers and claims, for example, that a married couple making $80,000 per year would pay an additional $224.48 twice every month, for a total of $5,315.52 per year, and links to a calculator showing withholding changes for a number of different taxpayers. This claim is being repeated across the blogosphere.
This is an excerpt of an article posted on the Tax Foundation's Tax Policy Blog. To read the rest of the article, please click the link at the top of the post.
All taxpayers should be concerned about the impending expiration of tax cuts (from both the Bush and Obama years) but no one should have a heart attack reading BusinessWeek’s latest estimates of how much higher the taxes will be. They’re way too high.
In an article yesterday, BusinessWeek purports to show how much more will be withheld from each two-week paycheck this coming January, assuming all the tax cuts expire. They make several errors, though, so taxpayers should either wait for the official tables from the IRS or check out the Tax Foundation’s calculator at MyTaxBurden.org.
Since Congress has yet to act to extend any of the cuts, it is increasingly likely the IRS will release initial 2011 withholding tables to employers assuming that the cuts expire. This would result in smaller paychecks beginning next year.
BusinessWeek crunches the numbers and claims, for example, that a married couple making $80,000 per year would pay an additional $224.48 twice every month, for a total of $5,315.52 per year, and links to a calculator showing withholding changes for a number of different taxpayers. This claim is being repeated across the blogosphere.
This is an excerpt of an article posted on the Tax Foundation's Tax Policy Blog. To read the rest of the article, please click the link at the top of the post.
IRS Consumer Alert
The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it's a scam. IRS impersonation schemes flourish during filing season. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail.
Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site.
Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.
For more information on scams and what to do if you're subject to one, see our Problem Alerts page, Online Scams that Impersonate the IRS, Suspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.
Reposted from http://www.irs.gov/newsroom/article/0,,id=97322,00.html
Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site.
Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.
For more information on scams and what to do if you're subject to one, see our Problem Alerts page, Online Scams that Impersonate the IRS, Suspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.
Reposted from http://www.irs.gov/newsroom/article/0,,id=97322,00.html
IRS Begins Notifying Tax Return Preparers on PTIN Renewals
WASHINGTON — The Internal Revenue Service has begun notifying about 1 million tax return preparers to remind them that they must renew their Preparer Tax Identification Numbers (PTIN) if they are still paid preparers. Use of the PTIN will be required on all federal returns prepared by paid tax return preparers starting Jan. 1.
Tax return preparers can register immediately using a new PTIN sign-up system available through www.IRS.gov/taxpros. Preparers will need to create an account, complete the PTIN application and pay a $64.25 fee before getting their PTINs.
The IRS will be sending approximately 125,000 notification letters each week for eight weeks. The notifications are based on those tax return preparers who currently have PTINs. Tax return preparers who received their PTINs prior to the new system launch on Sept. 28, 2010, must register using the new sign-up system. Existing PTIN holders who register through the new system will generally be reassigned their same numbers.
The PTIN was created several years ago as a nine-digit number that tax return preparers could obtain from the IRS to use on tax returns instead of their Social Security numbers.
The PTIN requirement is one of the main provisions in a new oversight program to help regulate the tax preparation industry. Anyone paid to prepare all or substantially all of any federal tax return or claim for refund must have a PTIN. The requirement applies to all tax return preparers, including those who are enrolled agents, certified public accountants and attorneys.
Reposted from http://www.irs.gov/newsroom/article/0,,id=229602,00.html
Tax return preparers can register immediately using a new PTIN sign-up system available through www.IRS.gov/taxpros. Preparers will need to create an account, complete the PTIN application and pay a $64.25 fee before getting their PTINs.
The IRS will be sending approximately 125,000 notification letters each week for eight weeks. The notifications are based on those tax return preparers who currently have PTINs. Tax return preparers who received their PTINs prior to the new system launch on Sept. 28, 2010, must register using the new sign-up system. Existing PTIN holders who register through the new system will generally be reassigned their same numbers.
The PTIN was created several years ago as a nine-digit number that tax return preparers could obtain from the IRS to use on tax returns instead of their Social Security numbers.
The PTIN requirement is one of the main provisions in a new oversight program to help regulate the tax preparation industry. Anyone paid to prepare all or substantially all of any federal tax return or claim for refund must have a PTIN. The requirement applies to all tax return preparers, including those who are enrolled agents, certified public accountants and attorneys.
Reposted from http://www.irs.gov/newsroom/article/0,,id=229602,00.html
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