Oh, the poor Woodsum's. They took their return to their preparer who left one measly 1099-Misc off their return and this poor couple gets stuck with a $104,295 penalty...not to mention the $521,473 tax bill that goes with it. But don't feel too bad for them. The missing 1099 was for a $3.4 million dollar transaction.
One of the main advantage for forming an S corporation is about to go away.
Right now, S corporation shareholders only pay employment taxes on the wages paid. But thanks to Section 413 of HR 4213-American Jobs and Closing Tax Loopholes Act of 2010, that's about to be a thing of the past.
As another year comes to a close (oh my, make that a decade!) it's time to clear out that closet & make room for another year of Christmas toys... or tax records as the case may be.
But don't get too shred happy or throw that shredding party just yet as a recent tax court case points out. In Menzies v. Commissioner, Mr. Menzies lost over $12,000 of business mileage deduction because he lacked documentation. Or rather he had documentation, in the form of an mileage log recorded in his "daily planner", but tossed it after he received his refund for the year after the deduction was claimed.
Unfortunately, the audit notice came much later.
Is 'Friending' in Your Future? Better Pay Your Taxes First
(WSJ) - State revenue agents have begun nabbing scofflaws by mining information posted on social-networking Web sites, from relocation announcements to professional profiles to financial boasts.In Minnesota, authorities were able to levy back taxes on the wages of a long-sought tax evader after he announced on MySpace that he would be returning to his home town to work as a real-estate broker and gave his employer's name.
I usually like to stay away from the political side of taxes, but this being an election year it's definitely a hot topic!
All the recent hubbub about the tax rebates has me completely flummoxed and recent reports by the Tax Foundation make me wonder how all this hand waving by Congress & the Executive is actually going help the economy. It's clear people who are making policy don't have to do any of the hard work to implement it.
What they've managed to cobble together in a matter of weeks will be a logistical nightmare and wont get into the economy for months.
It may be too late now, but if we're going to have a stimulus package I would be interested in hearing comments on alternatives to an income tax rebate. There are plenty of other taxes we pay besides income taxes.
Wouldn't a payroll tax holiday would be an easier solution?
By now most S-Corps shareholders have heard about IRS Headliner 163. This said S-Corp shareholders with >2% ownership in the corporation could not take the same deduction to gross income for self-employed health insurance premiums as sole-proprietors or partners unless there was a policy written in the company's name.
This created a proverbial Catch-22 if you and/or your spouse are the only employees of the corporation. Insurance regulations in many states specifically prevented insurers from writing business policies with just one member. Instead these people were required to get individual health insurance plans.
The real question of any tax reform should be what is taxable, not what's the tax rate.
Would every purchase really be taxable under this "fair tax"? Would a single mother on welfare have to pay 23% sales tax on baby formula? Would you have to pay sales tax on the purchase of your primary residence? The Fair Tax people say yes, but you can see how easy it would be to start saying this or that should be exempt from sales tax. And even in the current form, the tax would exempt purchases for resale and the sale of used items.
C-NET's recent article on internet taxes got my ire up! We already have enough taxes! And, at least in California, we're already required to pay sales tax on tangible items purchased over the internet. (The article incorrectly states paying the taxes is voluntary. The CA Franchise Tax Board and Board of Equalization don't consider it voluntary).
It seems to me the obvious and relatively simple solution is reporting. Business already do a lot of it & you can expect more soon.
Internet sellers of tangible products, like books, would send the equivalent of a 1099 of annual customer purchases over say $100. The only tricky part is businesses would have to report each customer's sales by state. Centralized reporting to the IRS would help make that a lot easier.
The states could then setup matching programs to make sure customers are reporting their sales tax due. You could easily add a provision to exempt reporting by small businesses with sales under a certain amount, say $1 million.
In an increasingly electronic age, it seems a lot better to add reporting than impose a new tax when we already have taxes in place that could be enforced with minimal effort.