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Showing posts from March, 2012

Government Forcing Small Business to convert independent contractors to employees

Government Forcing Small Business to convert independent contractors to employees The federal government is doing everything possible to convert true independent contractors and independent business owners into employees. Because there are significant tax and business advantages to both the small business and independent contractors to avoiding employee status, it makes good business sense. Nevertheless, the IRS and federal government wants mandatory withholding and all of the limitations that come with W–2 employee status. the government wants to collect more tax! In the disguise as a Bill to help small business, o n March 28, the House Ways and Means Committee by a vote of 21 to 14 approved the Chairman's Mark in the Nature of a Substitute to H.R.9, the “Small Business Tax Cut Act.” There were no amendments adopted during the committee process. H.R. 9, which was introduced by House Majority Leader Eric Cantor (R-VA), would allow qualified small businesses (those

IRS Audits Increasing

General Results: Business Owners face a 4.5% chance of audit More audits are detailed audits with Revenue Agents rather than correspondence Audits Almost 1/3 of Individual Returns Audited were for the Earned Income Tax Credit IRS has issued its annual data book, which provides statistical data on its fiscal year (FY) 2011 activities. As this article explains, the data book provides valuable information about how many tax returns IRS examines (audits) and what categories of returns IRS is focusing resources on, as well as data on other enforcement activities such as collections. The figures and percentages in this article compare returns filed in calendar year 2010 and audited in FY 2011 to returns filed in calendar year 2009 and audited in FY 2010. What are the chances of being audited? Of the 140,837,499 total individual income tax returns with a filing requirement, 1,564,690 were audited. This works out to roughly 1.1%, the same as the rate for the previous

Reporting Uncertain Tax Positions Hurts Small Companies

The Financial Accounting Standards Board  is continuing to enforce FIN 48. The rule requires    uncertain tax positions to be reported on financial statements. Under FIN 48, companies must disclose how much they have in reserve in case the Internal Revenue Service or state tax officials disagree with their use of tax treatments. This makes it easy for the IRS or State taxing agencies to look right at those sections to begin their audits!  For more information see: CFO Article

Small Business 20% income tax deduction proposed

Cantor bill would give “small businesses” 20% domestic business income deduction On March 21, House Majority Leader Eric Cantor (R-VA) introduced the “Small Business Tax Cut Act,” which would allow qualified small businesses (those with fewer than 500 employees) to claim a new 20% deduction. In general, the deduction, which would be similar to the Code Sec. 199 domestic production activities deduction (and would be coordinated with that deduction), would be equal 20% of the lesser of: qualified domestic business income (generally, domestic business gross receipts less cost of goods sold allocable to such receipts, less other expenses, losses or deductions allocable to such receipts); or taxable income (without regard to the new deduction) for the tax year. The new small business deduction couldn't exceed 50% of the greater of: (a) W-2 wages paid to non-owners of the business; or (2) W-2 wages paid to non-owner family members of direct owners, plus W-2 wages

Republicans Propose New Tax Code with Lower Rates

GOP budget proposal would reduce top tax rate for businesses and individuals to 25% On March 20, Representative Paul Ryan (R-WI), chairman of the House Budget Committee, introduced his Chairman's Mark proposing a new budget for fiscal year (FY) 2013 and setting forth appropriate budgetary levels for fiscal years 2014 through 2022. Among other things, Ryan's budget would: a.consolidate the existing six individual income tax brackets to two (10% and 25%), b.reduce the corporate tax rate to 25%, c.repeal the alternative minimum tax, d.shift from a worldwide tax system to a territorial regime, e.drastically reform Medicare and Medicaid, and repeal the 2010 health care reform legislation. According to Ways and Means Committee Chairman Dave Camp (D-MI), Ryan's new budget “reforms our outdated and burdensome tax code to unleash innovation and investment.” However, Ways and Means Committee Ranking Member Sander Levin (D-MI) countered that the budget “would end up showering benefits