Posted By Administrator
Taxpayers who do not file their return and pay their tax by the due date may have to pay a penalty. Here are seven things you should know about failure-to-file and failure-to-pay penalties.
1. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
2. The penalty for filing late is usually 5 percent of the unpaid taxes for each month of part of a month that a return is late. This penalty will not exceed 25 percent of the taxpayer’s unpaid taxes.
3. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
4. You will not have to pay a failure-to-file penalty if you can show that you failed to file on time because of reasonable cause and not because of willful neglect.
5. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.
6. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty.
7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
Posted By Administrator
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Bartering is the most ancient form of commerce. While our ancestors may have exchanged eggs for corn, today you can barter computer services for auto repair.
Another example of a one-on-one, non-barter exchange transaction is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of the goods and services exchanged must be reported as income by both parties.
Here are a few things you should know about bartering:
* Barter Exchange A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.
* Barter Income Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another’s products or services - you will have to report the fair market value of the products or services you received on your tax return.
* Taxes Income from bartering is taxable in the year it is performed. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
* Reporting The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.
For more information type “Barter” in the search box on the IRS.gov homepage.
Issue Number: TT-2009-58
Provided by the IRS e-mail service
Posted By Administrator
Well one thing is likely for certain, small business or businesses for that matter are likely looking at higher taxes in the not so distant future. It is to early to know there final form but they will likely occur in one of the following areas: increased taxes on dividends, increased capital gain rates, increased income tax rates for individuals, or tax rate limitation on deductions.
My advice…..get your money out of your corporation now while you can. No this doesn’t mean bankrupt your company for the fear of future tax hikes and I’m not one for running a business with the fear of taxes, but it it does mean that you should not put off tax reduction strategies now simply because you don’t need the money. Between SEP 401ks, draws for S-Corp owners, dividends for C-Corp owners, section 179 deductions, etc you should be using these and other strategies to your best advantage now while they still exist in there current form.
Undoubtedly the need for accurate tax planning now and especially in the future is going to be at a premium especially for higher income individuals and corporations. Another bit of advice to clients is do not put off tax planning simply because it costs money. Its similar to the analogy of paying a mortgage simply for an interest deduction on your tax return…..“I never want to payoff my mortgage because I receive a deduction for it”. Well what sense does it make in paying $15,000 in mortgage interest for $3,000 in tax savings. On the other hand tax planning does cost money but if the benefits (tax savings) exceeds the cost isn’t it a no brainer? This is one point that I make to all potential clients that have a provider or are provider shopping…….are you sure your getting the most out of your business or are you just paying excessive fees for tax preparation? Regardless of “maximum refund guarantees” maximum refunds are not achieved at tax preparation, but are achieved before the year is over and when you CAN maximize your tax savings!
On an aside one thing I found interesting is many states voting strongly in Obama’s favor will be the same states most impacted by these types of future tax increases.
http://finance.yahoo.com/taxes/article/106659/Where-the-200K-Crowd-Lives
For a free in person consultation fell free to give me a call at 443-927-9161.
Thanks,
Travis Raml, CPA
