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Showing posts from February, 2005

S Corp Deadline Coming Up

"Beware the ides of March." That’s the March 15 date from Shakespeare’s Julius Caesar. It's also the tax return due date for corporations and a lesser-known tax deadline for business owners — the cutoff for electing S corporation status for 2005.

Background: An S corporation operates as a pass-through entity in much the same manner as a partnership. Items of income and deduction are passed through to the individual shareholders for tax purposes. Thus, the owners receive the protection from personal liability afforded to corporations, but avoid the “double taxation” pitfall of regular C corporations. This has made S corporations a popular entity for many business operations.

The election to be treated as an S corporation requires the irrevocable consent of every shareholder. Keep in mind:
If a husband and wife have a community interest in the stock, both spouses must consent to the election.
Consent of a minor may be given by a legal representative or a nat…

IRS Increases Audits

The IRS announced today that it is increasing audits. Even though a taxpayer reporting an income of $100,000 or more only has a 2% chance of a full audit, the IRS is agressively using computer record matching to do "mini-audit" type tax adjustment letters.

Some of the most common problems that generate letters can be avoided by filing electronically and letting the computer check for valid Social Security numbers and math errors. If you fill out the forms by hand, make sure to double- and triple-check your work.

The IRS has no single formula that determines which tax returns will be audited. The agency audits some taxpayers by mail and others in face-to-face meetings, depending on the complexity of the return.

Audits can be defended. Please click here for further information.