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Consumer spending to hit a pothole with tax refunds still in the mail

Posted on 10 February, 2017 at 12:49 Comments comments (1)
(Bloomberg) Legislation aimed at preventing fraud is delaying U.S. tax refunds and is likely to crimp consumer spending by as much as $21 billion this month, according to Goldman Sachs Group Inc.

The provision in the Protecting Americans from Tax Hikes Act passed by Congress near the end of 2015 will postpone funds remitted to between 25 and 30 million U.S. households (the majority of which are lower- and middle-income) via two federal tax credits until the week of Feb. 27, economist Spencer Hill wrote.

These groups tend to have a higher marginal propensity to consume—that is, they're more likely to spend additional income than wealthy households—so this delay is likely to have an immediate and meaningful impact on purchasing activity.

"Just two weeks into the tax filing season, tax return statistics from the IRS and U.S. Treasury are already showing a meaningful slowdown," writes Hill in a Feb. 8 note to clients. "Because a significant portion of households spend their income almost immediately—due to credit constraints or other factors—the refund delay could result in a pothole in consumer spending in February."

Hill estimates that February's tax refunds could be cut in half relative to 2016. The hit to personal-consumption expenditure this month could reach nearly 2 percent, says the economist, while cautioning that any weakness would be short-lived and reversed after households eventually receive the refunds associated with the Earned Income Tax Credit and Additional Child Tax Credit.

Evidence of the lag is likely to be visible in February and March consumer-spending data as well as potentially in some companies' first-quarter earnings reports, he added, though not in the monthly personal-income figures compiled by the Bureau of Economic Analysis.
- Luke Kawa
Bloomberg News

Some new dates...but all important...

Posted on 21 December, 2016 at 10:31 Comments comments (0)
Important Dates...some due dates are new...
  • Form W-2: Furnish copies B, C, and 2 to each person who was your employee during 2016. See General Instructions for Forms W-2 and W-3.
  • Form W-2 and Form W-3: Send Copy A of Form(s) W-2 and W-3 to the SSA
  • File Form 941 (for Q4 2016), Form 943, and Form 944 to IRS
  • Deposit 940 payments if undeposited FUTA tax is more than $500 on February 1, 2016
  • NEW! Deadline to file when reporting non-employee compensation payments in Box 7
  • Deadline for providing contractors/ vendors with 1099-MISC copies
February 15, 2017
  • Due date for providing 1099-MISC statements to recipients if amounts are reported in Box 8 or 14
February 28, 2017
  • Filing deadline to IRS via paper if filing outside of Box 7 (Form 1096 must accompany all paper submissions)
March 31, 2017
  • E-filing deadline to IRS if filing outside of Box 7

Don't be scammed....

Posted on 18 August, 2016 at 11:28 Comments comments (1)
IRS Warns Taxpayers of Summer Surge in Automated Phone Scam Calls; Requests for Fake Tax Payments Using iTunes Gift Cards
IR-2016-99, August 2, 2016           
                                                                            
WASHINGTON — The Internal Revenue Service today warned taxpayers to stay vigilant against an increase of IRS impersonation scams in the form of automated calls and new tactics from scammers demanding tax payments on iTunes and other gift cards.

The IRS has seen an increase in “robo-calls” where scammers leave urgent callback requests through the phone telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Once the victim calls back, the scammers may threaten to arrest, deport or revoke the driver’s license of the victim if they don’t agree to pay.

“It used to be that most of these bogus calls would come from a live-person. Scammers are evolving and using more and more automated calls in an effort to reach the largest number of victims possible,” said IRS Commissioner John Koskinen. “Taxpayers should remain alert for this summer surge of phone scams, and watch for clear warning signs as these scammers change tactics.” 

In the latest trend, IRS impersonators are demanding payments on iTunes and other gift cards. The IRS reminds taxpayers that any request to settle a tax bill by putting money on  any form of gift card is a clear indication of a scam.

Some examples of the varied tactics seen this year are:
  • Demanding payment for a “Federal Student Tax.” See IR-2016-81.
  • Demanding immediate tax payment for taxes owed on an iTunes or other type of gift card
  • Soliciting W-2 information from payroll and human resources professionals. See IR-2016-34.
  • “Verifying” tax return information over the phone. See IR-2016-40.
  • Pretending to be from the tax preparation industry. See IR-2016-28

Since these bogus calls can take many forms and scammers are constantly changing their strategies, knowing the telltale signs is the best way to avoid becoming a victim.  
The IRS will never:
  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
  • Ask for credit or debit card numbers over the phone.

If you get a phone call from someone claiming to be from the IRS and asking for money and you don’t owe taxes, here’s what you should do:
  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, call the IRS directly at 800-829-1040.

Tax Professionals Beware....

Posted on 18 August, 2016 at 11:25 Comments comments (0)

New Phishing Scheme Mimics Software Providers; Targets Tax Professionals
IR-2016-103, Aug. 11, 2016

WASHINGTON — The Internal Revenue Service today alerted tax professionals to an emerging phishing email scam that pretends to be from tax software providers and tries to trick recipients into clicking on a bogus link.
The email scheme is the latest in a series of attempts by fraudsters to use the IRS or other tax issues as a cover to trick people into giving up sensitive information such as passwords, Social Security numbers or credit card numbers or to make unnecessary payments.
In the new scheme identified as part of the IRS Security Summit process, tax professionals are receiving emails pretending to be from tax software companies. The email scheme requests the recipient to download and install an important software update via a link included in the e-mail. 
Once recipients click on the embedded link, they are directed to a website prompting them to download a file appearing to be an update of their software package.  The file has a naming convention that uses the actual name of their software followed by an “.exe extension.”
Upon completion, tax professionals believe they have downloaded a software update when in fact they have loaded a program designed to track the tax professional’s key strokes, which is a common tactic used by cyber thieves to steal login information, passwords and other sensitive data. 
Although the IRS knows of only a handful of cases to date, tax professionals are encouraged to be on the lookout for these scams and never to click on unexpected links in emails. Similar email schemes using tax software names have targeted individual taxpayers.
The IRS recently launched a new campaign to raise awareness among tax professionals about security threats posed by identity theft issues targeting their industry. The Protect Your Clients; Protect Yourself campaign features an ongoing effort to urge tax professionals to step up their security protections and be aware they increasingly are targets of cybercriminals.

The IRS urges all tax preparers to take the following steps:
  • Be alert for phishing scams: do not click on links or open attachments contained in e-mails and always utilize a software provider’s main webpage for connecting to them.
  • Run a security “deep scan” to search for viruses and malware;
  • Strengthen passwords for both computer access and software access; make sure your password is a minimum of 8 digits long (more is better) with a mix of numbers, letters and special characters;
  • Educate all staff members about the dangers of phishing scams in the form of emails, texts and calls;
  • Review any software that your employees use to remotely access your network and/or your IT support vendor uses to remotely troubleshoot technical problems and support your systems. Remote access software is a potential target for bad actors to gain entry and take control of a machine.

Tax professionals should review Publication 4557, Safeguarding Taxpayer Data, A Guide for Your Business, which provides a checklist to help safeguard taxpayer information and enhance office security.

9 Crucial Things to Know About Sales Tax

Posted on 16 August, 2016 at 18:06 Comments comments (0)
9 Crucial Things to Know About Sales Tax

We get it. Sales tax isn’t fun or exciting to think about. In fact, we're willing to bet you consider it a huge pain. And one of the reasons sales tax is such a huge pain is because the rules and best practices can vary so much from state to state and business to business.

While it’s true that sales tax can get hairy, there are some general rules that will help you conquer this cumbersome administrative chore. (Remember, this post is for educational purposes only. For sales tax advice related to your business, be sure to consult with a professional.)

Here are the crucial things to know:

Sales tax is governed at the state level.
Forty-five states and Washington, D.C., have a sales tax. This means that each state creates its own sales tax laws and regulations, and they can vary widely from state to state. Be sure to check with your state to get a clear idea of its sales tax requirements.
You only need to collect sales tax from buyers in states where you have nexus.
Fortunately, you probably don’t need to learn sales tax rules in all 45 states (plus D.C.). You only need to collect sales tax in states where you have nexus. Nexus means a “significant connection” with the state, and common factors that establish nexus include:
  • A location
  • Personnel
  • Inventory
  • A drop shipping relationship
  • An affiliate
  • Making sales at a tradeshow or craft fair
You can find a list of what creates nexus in every state here or read this crash course on sales tax nexus for more information.

Some items aren’t taxable or are taxed at a different rate.
In New York, clothing that costs under $110 is tax exempt. In Arkansas, grocery items are taxable at a reduced rate of 1.5%. In many states, textbooks are not taxable but regular books are (though sometimes digital books are not). That just goes to show that states treat some products differently when it comes to sales tax. Always check with your state if you believe you’re selling an item that may be taxed differently (or not taxed at all).

Sales tax rates vary.
A small handful of states only have one, statewide sales tax rate. Most states aren’t so simple. In most states with a state sales tax, counties, cities, and other “special” district taxes may also exist. That’s why you may pay 6% sales tax in one town and then 8% sales tax in the next town. Be sure to check the sales tax requirements in your county and city as well as state.

How much you collect depends on a few factors.
If you have a brick-and-mortar business, your sales tax collection is pretty simple: Collect sales tax at the rate where your store is located. But if you sell online, your life gets a little trickier. Some states are origin based and some are destination based. In origin-based states, if you make a sale to someone in your state, then you simply charge the sales tax rate at your location. But in destination-based states, the point of sale is considered to be the buyer’s location. In those cases, you need to figure out the sales tax rate at each buyer’s address and charge sales tax based on that rate. Complicated, right? We have a whole lot more aboutorigin and destination-based sales tax to help you figure out which sales tax rate to charge.

Your filing deadlines are usually tied to sales volume.
Sales tax deadlines generally fall either monthly, quarterly, or annually. If you have sales tax nexus in more than one state, you may notice that you’re required to file at different intervals. Your sales tax filing frequency is usually tied to your volume. The higher your sales in a state, the more frequently you may be required to file sales tax in that state.

The complexity of sales tax filing varies by state.
A small handful of states have relatively few taxing jurisdictions or a nice, flat, one-size-fits-all sales tax rate. While filing a sales tax return is always a bit of a hassle, it can be fairly simple to file in these states. But most states have dozens or hundreds of taxing jurisdictions, all of them with slightly different sales tax rates. When you file, these states want to see how much you collected from buyers in each of these many jurisdictions. The vast majority of states have complex filing requirements, especially for online sellers, and require serious time and effort.

File a sales tax return even when you didn’t collect any sales tax.
Maybe you have a seasonal business or just didn’t do any sales in a state over a taxable period. Don’t think you’re off the hook. If you have an active sales tax permit in a state, that state generally requires that you file a “zero return” even if you didn’t collect a penny of sales tax. In fact, many states fine you or even revoke your sales tax permit just for failing to file a zero return.

You can get a sales tax discount.
Many states get that asking you to file a sales tax return is cumbersome. Some of them actually let you keep a small percentage of the sales tax that you collect as a sort of reward for doing all the hard work of collecting, reporting, and filing. If your state gives out a sales tax discount, be sure to take it. Don’t leave that money on the table.

We hope these general rules of sales tax have helped you wrap your mind around this ubiquitous retail concept. And to make sales tax a breeze.

—Mark Faggiano
Mark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for e-commerce sellers. Try a 30-day free trial of TaxJar today and eliminate sales tax compliance headaches from your life.

Management Skills

Posted on 16 August, 2016 at 18:00 Comments comments (0)
The first time you take on a leadership role at work, you’re probably just as excited as you are intimidated. Finally, it’s your chance to make the changes you've always wanted. But once you take on your new role, you quickly realize that being in charge isn’t as easy as you thought it would be, and you empathize with the managers who came before you. Not only do you have the challenge of leading a team, but you also have to adapt to a new way of working now that you have a different set of responsibilities and goals.

You can't expect yourself to be a stellar manager from the day one. However, it’s important that you approach your new role with an open mind and a willingness to learn. Check out some of the errors commonly made by first-time managers so that you can avoid these pitfalls.

They don’t focus on the big picture.
Once people get into a leadership position, they can no longer focus on a daily to-do list of tasks and personal short-term goals. Now they have to focus on the larger goals of their department or organization. Instead of focusing on details and individual projects, it’s crucial that they turn their attention to the progress of their direct reports. Effective managers know that they are responsible for motivating their team and keeping everyone on track.

They don’t get to know their employees.
It’s tough to lead your team if you don’t really know them. "How you begin is so important to how you’re perceived by your team," Lindsey Pollak, author of the management book Becoming the Boss, tells Fast Company. She cautions against relying primarily on electronic communication. So, while you don’t need a face-to-face meeting for every question and discussion, it’s important to have a personal relationship with your employees. Having in-person conversations can also bring up other issues that need to be addressed and lead to productive brainstorming sessions. In short, there’s no drawback to talking to your team and getting to know them better.

They only focus on keeping things running smoothly.
A big part of a manager’s job is making sure that everyone else is doing their work. “New managers also need to realize they are responsible for recommending and initiating changes that will enhance their group’s performance,” Harvard Business School professor Linda Hill writes. According to Hill, that means evaluating and challenging structures and processes outside their area of authority.

They make promises they can’t keep.
Before you were in a leadership position, you probably had a long list of things you would change if you could. So, once you’re a manager, it’s tempting to start making grand proclamations about processes you’re going to change or technology you’re going to adopt. It’s a bad idea to make promises before you understand how things work from the other side. Especially as a new manager, it’s important not to make promises you can’t keep. Once you lose the trust of your team, it’s hard to get it back.

They don’t take action where they can.
Sure, it’s not advisable for first-time managers to promise sweeping changes before they know what is realistically possible. But that doesn't mean they can't first tackle the little things that will make a big difference. For example, instead of promising a new software system for employee scheduling, how about starting with a more streamlined process for requesting time off? Listen to employees and do what you can, even if it’s not a permanent solution. Making an effort goes a long way toward earning your team’s trust and respect.

IRS Marks Small Business Week 2016 with Four Webinars

Posted on 2 May, 2016 at 10:46 Comments comments (0)
IRS Marks Small Business Week 2016 with Four Webinars

As the nation celebrates Small Business Week May 1-7, the IRS will host four free webinars. The webinars will help small business owners with their taxes. The IRS also highlights popular products and services available on IRS.gov.
Here are some details about the free webinars:

1. Tax Tips for Your New Business, May 2. Small business owners and tax professionals with small business clients who may be starting new endeavors are the focus of this webinar.
Topics include:
  • Deciding if it’s a business or hobby
  • Selecting a business structure.
  • Understanding business taxes.
  • Record keeping requirements.
  • Choosing a tax preparer.
  • Finding out where to go for IRS help.
2. Staying Afloat: Planning for Emergencies Before they Happen, May 3.Small business owners, tax professionals and payroll organizations learn about emergency preparedness in this broadcast.
Topics include:
  • Business continuity planning.
  • How to create an emergency plan.
  • Employee preparedness.
  • Payroll continuity and supply chain protection.
  • Protecting your records and data.
  • What happens after a disaster is declared.
  • IRS resources to help you plan.
3. Worker Classification: Employee or Independent Contractor? May 4. This webinar is in Spanish. It teaches Spanish-speaking small business owners, tax professionals and payroll organizations how to classifying workers.
Topics include:
  • Differences between employees and independent contractors.
  • Common law rules.
  • Form SS-8.
  • Employment tax obligations.
  • Voluntary classification settlement program.
4. Tip Reporting and Tips vs. Service Charges, May 5. This webinar provides small business owners, employers, tax professionals and payroll organizations with details on tips and reporting.
 Topics include:
  • Record keeping and reporting responsibilities.
  • Understanding the difference between tips and service charges.
  • Filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips.
All four webinars are an hour long and start at 2 p.m. (ET). Live Q&A sessions with IRS experts will be available. To register and to find out more visit the Webinars for Small Businesses page on IRS.gov.
Many other IRS products and services provide small business owners with the help they need. Here are three pages that you can check out anytime:
  • The Small Business and Self-Employed Tax Center is your complete tax resource. For example, you can link to a list of free workshops and events offered in your area. Or visit the IRS Video Portal to watch videos on a wide range of topics, including prior live webinars.
  • The Self-Employed Individuals Tax Center is for sole proprietors and others who are in business for themselves. This site has many useful tips and references to the tax rules that a self-employed person may need to know.
  • The Online Learning and Educational Products page has tools that can help you learn about taxes on your own time, and at your own pace. For example, the IRS Tax Calendar for Businesses and Self-Employed has important tax dates for your business.

Visit IRS.gov to get small business forms and publications. You can also call 800-TAX-FORM (800-829-3676) to get them by mail.
Follow the IRS on Twitter. The IRS has three key accounts: @IRSnews,@IRStaxpros and @IRSenEspanol. For all the IRS Small Business Week information, keep an eye on these IRS Twitter accounts and the key hashtags: #IRSsbw16 and #DreamSmallBiz.

Great quick info for LLC Owners or Prospective

Posted on 24 February, 2016 at 10:14 Comments comments (0)
How to Choose a Tax 
Structure for Your LLC

In the vast business landscape, a limited liability company (LLC) offers lots of options and flexibility. An important decision LLC owners can make involves choosing how they want the IRS to treat their business entities from a tax standpoint.  In IRS lingo, this critical decision is known as the entity classification election. Due to the many tax rules and regulations put on small businesses by the IRS, it’s essential to weigh your ECE options and learn how the specific tax structure of an LLC can significantly impact its financial standing from an accounting perspective.

Tax Structures of an LLC:

LLCs can be categorized under several different structures in terms of taxes. These structures include S corporation status, C corporation status, sole proprietorship status and partnership status. Choosing the appropriate tax structure for your business is based on several factors, such as the number of business owners involved and where the business is registered. The election can be made when a business owner files Form 8832: Entity Classification Election with the IRS.

S Corporation Election: If you opt to have your LLC taxed using S corporation status, your business will not be taxed at the corporate level. Instead, all shareholders invested in the company split all business-related taxes on their personal income tax returns. But there is a corporate tax return (Form 1120S) that must be filed to report business activities, even though taxes are not levied at the corporate level.

C Corporation Election: Unlike LLCs arranged as S corps, those that are structured as a C corp are taxed at the corporate level as a separate business entity. This means there is a separate business income tax return (Form 1120) to be filed with the IRS. Business activities do not pass through to an owner’s personal tax obligations.

Default Structures; The default tax structure of an LLC is a sole proprietorship for one owner (single-member LLC) and a partnership for multiple owners (multi-member LLC). In such cases, LLC taxes are passed directly through to their owners’ personal income tax returns. This is similar to the S corporation structure of an LLC.  Keep in mind that the default LLC tax structure often results in higher tax rates and fewer deductions, so opting for a corporate tax structure is highly recommended.

When to make your entity classification election …There is a time frame on when the entity classification election must be made after officially opening the doors to an LLC. If you do not elect a tax structure within the first 75 days of launching an LLC, your company’s tax structure will default to either sole proprietorship or partnership status. However, don’t forget that you can make this election starting Jan. 1 of each year, through March 15.Overall, the entity classification election for an LLC is imperative to putting such a business on the right tax track — and for the best chance at future prosperity and sustainability.

Do an End-of-Year Planning Refresh

Posted on 3 November, 2013 at 10:31 Comments comments (2)
Do an End-of-Year Planning Refresh
by Tim Berry, Guest Blogger
  • Created: October 29, 2013, 1:13 pm
  • Updated: October 29, 2013, 1:31 pm
It’s that time of year: changing colors, chill air, thoughts of holidays coming, the shock of another year ending. Does your business slow down during December, like my business planning software business always does, and so many other do? If so, then this becomes a good time for a planning refresh.
My business has always had slowdowns in the end of November and December. We recognized the pattern years ago and started to work with it. December became our time for pulling away from the business, looking out at the horizon, talking to customers and potential customers, evaluating potential new products, checking in with major clients, and so forth. We called it a planning refresh.Here are some important elements of a good planning refresh:
.  First, your long-term goals: Review your definition of success. That could be fame and fortune, or maybe just independence and peace of mind, or time for other things. Has it changed? Are you making progress? Have you forgotten where you’re trying to go?
2.  Second, your SWOT: Review strengths, weaknesses, opportunities and threats. Have they changed in the last year? Does your strategy reflect your SWOT? Is it time to revise strategy, or stick to the same thing?
3.  Third, your target market: Are you still focused well and on the right potential buyers? Have market developments changed the strategic value of one segment over another? Does your market focus match the opportunities and your business offering?This is an especially good time to refresh your sense of the customers. How often do you talk to them? Are you in touch with what customers are thinking and saying about your business? Has it changed? One of the best things you can do is talk to a few random customers, in depth, provided of course that you can find customers to talk to you. Market knowledge is critical to business success, and it’s too easy to get lost in the routine and not realize that the situation has changed. 
4.  Fourth, review your competition. Think broadly about competition, looking not just for the competition you know, but also for new competition that you don’t realize is out there. Maybe customers are discovering new ways to solve the problems and fill the need that your business offering is supposed to – and you haven’t realized it. 
Just as an example, competition for business plan software includes courses, classes, books, magazine articles, television shows and consultants – not just other business plan software.When it’s about autumn leaves, snow, spring blossoms, or summer heat, we call it the change of seasons. When it’s business, we call it seasonality. The two are not too different from each other. Both can be used as automatic reminders of change and cycles.

About the AuthorFounder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, doing social media business planning atsmbplans.com, and blogging at timberry.bplans.com. Stanford MBA. Married 42 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.

Term of the Day...economics

Posted on 10 August, 2013 at 13:02 Comments comments (2)
Term of the Day                                                                               economics Definition
The study of how the forces of supply and demand allocate scarce resources. Subdivided into microeconomics, which examines the behavior of firms,consumers and the role of government; and macroeconomics, which looks at inflationunemployment,industrial production, and the role of government.

Usage Example
"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."