August 29, 2007

Tax Calendar For Small California Businesses

Are you running a small business anywhere in the U.S and in particular Los Angeles County, Santa Barbara County, Orange County or Ventura County, California? Would you like a calendar packed with valuable business tax information?

The IRS is offering a free calendar to help you keep track of tax deadlines and important dates throughout the year.

This widely-used special business tax calendar provides the small business owner with a ready resource for meeting his or her tax obligations.

Topics include information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, common tax filing dates, federal holidays and much more.

The Tax Calendar for Small Businesses and Self-Employed Individuals from the Internal Revenue Service is a 12-month calendar is filled with deadline reminders, important information such as changes in deductible mileage rates and business tips such as how to organize business and travel expenses.

Each page of the calendar highlights different tax issues and tips such as business planning, accounting methods, tracking your records, and protecting your information that are especially relevant to small-business owners. The calendar has room each month to add notes, state tax dates or business appointments.

The 2007 Tax Calendar for Small Businesses, IRS Publication 1518, is now available in both English and Spanish versions. You may also want to look at IRS Publication 509 entitled “Tax Calendars for 2007”.

Want to discuss with a Los Angeles tax attorney topics covering business tax, choice of business entity, business contracts or business liquidation? Call Mitchell A. Port at (310) 559-5259.

August 27, 2007

What Has The IRS' Taxpayer Advocate Done Lately?

The Taxpayer Advocacy Panel (TAP) has released its 2006 Annual Report. TAP is a Federal Advisory Committee made up of citizen volunteers, representing all 50 states, the District of Columbia, and Puerto Rico, dedicated to helping the IRS identify ways to improve customer service and responsiveness to taxpayers needs.

By analyzing a large number of issues, setting priorities and conducting research, TAP has made important recommendations to improve the IRS and reduce taxpayer burden. The panel is a Federal Advisory committee established under the authority of the Department of the Treasury.

The 2006 TAP Annual Report illustrates the partnership between TAP and the IRS. Through this partnership TAP has been able to make positive changes to improve the tax administration system.

This annual report highlights important actions of the Panel and summarizes 58 new recommendations for improvement that TAP generated for IRS consideration in 2006. The Report also provides an update on the status of the 250 recommendations submitted to the IRS since TAP was established in 2002, many of which have been partially or fully implemented.

Take a look at the full report.

For more information about the IRS and tax problems you may have, please contact Mitchell A. Port at (310) 559-5259.

August 20, 2007

I'll See You In Court

How does the IRS determine which cases it will pursue? Why do some tax cases end up in court? In an address to the Tax Court Judicial Conference, former Chief Counsel B. John Williams of the Internal Revenue Service spoke on his approach to designating cases for litigation. You can read his comments to get insight into this aspect of tax administration by clicking here: "Designating Cases for Litigation".

August 17, 2007

Executive Compensation - IRS Audits Fringe Benefits And Perks

California business owners take heed: the Internal Revenue Service published the “Executive Compensation - Fringe Benefits Audit Techniques Guide” giving you a road-map to what it will examine when auditing your executive perks.

Corporate executives in Los Angeles County, Santa Barbara County, Ventura County and Orange County and throughout California often receive extraordinary fringe benefits that are not provided to other employees. New income tax problems arose because of changes in the law.

In 1984, the Internal Revenue Code (“Code”) was changed to include the term “fringe benefits” in the definition of gross income found in Code §61. A fringe benefit provided in connection with the performance of services, regardless of its form, is treated as compensation includible in income under Code §61. Any property or service that an executive receives in lieu of or in addition to regular taxable wages is a fringe benefit that may be subject to taxation.

Whether a fringe benefit is taxable depends on whether there is an exclusion under the law that applies to the benefit. For example, when Code §61 was amended to include the term “fringe benefits”, §132 was added to provide exclusions for certain commonly provided fringe benefits.

Section 132 provides exclusions for working condition fringes, qualified moving expenses, de minimis fringes, no additional cost services, qualified transportation fringes, qualified employee discounts and qualified retirement planning services.

Although fringe benefits are taxable, employers may not treat them as wages for income and employment tax purposes. Employers may classify a taxable fringe benefit under expense accounts other than compensation and thereby not subject the fringe benefit to income and employment taxes.

Continue reading "Executive Compensation - IRS Audits Fringe Benefits And Perks" »

August 13, 2007

CPA In Bakersfield, California, Prohibited From Advising Customers Not To File Tax Returns

After a two-day hearing in Fresno, California, the U.S. District Court for the Eastern District of California recently issued a preliminary injunction against Lowell Baisden, a Certified Public Accountant. The injunction prevents him from promoting his tax scheme.

The California court found that Baisden’s tax scheme involved a plan which encouraged and assisted customers to create corporations into which they had their incomes deposited for the purpose of decreasing their tax liability. The court also found that Baisden prepared tax returns in California which characterized wages as rent, which is not subject to self-employment or employment taxes.

Several of Baisden’s customers are physicians and nurse anesthetists, many of whom have not filed past-due tax returns. According to Baisden’s plan, the customers created real estate and forestry corporations, but almost all of the income reported by the corporations was derived from their income from their jobs in the medical profession. Baisden reported deductions for the corporations for customers’ car expenses, lawn care expenses and expenses related to their personal residences.

The California court also found that Baisden prepared tax returns that identified customers as investors when they were actually physicians or nurses. The tax returns claimed business deductions for non-deductible personal expenses of customers or for which he and his customers did not have supporting documentation. The tax returns he prepared also failed to report compensation to owners of those corporations.

Finally, the court found that Baisden engaged in misconduct by falsely advising his clients not to comply with IRS document and meeting requests, filing meritless requests to delay civil audits, advising clients to make insufficient estimated tax payments, and advising customers not to file lawfully due returns.

Since 2001, the Justice Department has obtained injunctions against more than 230 tax preparers and tax-fraud promoters. More information about these cases is available on the Justice Department Web site. More information is available about the Justice Department’s Tax Division.

If you have a tax controversy you wish to discuss with a California tax attorney, call Mitchell A. Port at 310.559.5259.

August 10, 2007

Recordkeeping

Why Should I Keep Records?

Everyone in business - California businesses as well - must keep records. Keeping good records is very important to your business. This discussion involves advice I give to my clients in Los Angeles County, Ventura County, Orange County and Santa Barbara County, California. Good records will help you do the following:

Monitor the progress of your business

Keep track of deductible expenses

Identify source of receipts

Prepare your financial statements

Support items reported on tax returns

Prepare your tax returns

Continue reading "Recordkeeping" »

August 8, 2007

Why Pay Taxes? - The Truth about Frivolous Tax Arguments

Here’s an interesting read. Published by the IRS and read by tax attorneys like me as well as by others, The Truth About Frivolous Tax Arguments addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the federal tax laws.

These arguments are grouped under several general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention. The second section deals with frivolous arguments encountered in collection due process cases. The final section illustrates penalties imposed on those pursuing frivolous cases.

Continue reading "Why Pay Taxes? - The Truth about Frivolous Tax Arguments" »

August 7, 2007

How Long Should You Keep Your Tax Records?

That question comes up often with my clients in Los Angeles County, Orange County, Santa Barbara County and Ventura County. It isn’t exactly a big tax problem for which a Los Angeles tax attorney like myself needs to offer tax help. But the length of time a document must be retained depends on the action, expense, or event the document records. Generally, records that support an item of income or deductions on a tax return must be retained until the period of limitations for that return runs out.

PERIOD OF LIMITATIONS DEFINED:

The period of limitations is the period of time in which a tax return can be amended to claim a credit or refund, or that the IRS can assess additional tax.

I've listed below the periods of limitations that apply to income tax returns. (Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.)

KEEP RETURNS FOR 3 YEARS IF:

If you file a claim for credit or refund after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.

KEEP RETURNS FOR 4 YEARS IF:

It is an employment tax record. Keep all such records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

KEEP RETURNS FOR 6 YEARS IF:

You do not report income that you should report, and it is more than 25% of the gross income shown on your return.

KEEP RECORDS FOR 7 YEARS IF:

You file a claim for a loss from worthless securities or bad debt deduction;

KEEP RECORDS INDEFINITELY IF:

You have filed a fraudulent return, or

You do not file a return;

BUT WAIT, THERE'S MORE:

The following questions should be applied to each record as you decide whether to keep a document or throw it away.

PAY SPECIAL ATTENTION TO RECORDS CONNECTED WITH PROPERTY:

Records relating to property must be retained until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.

Those records are needed to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

Generally, if property is received in a nontaxable exchange, your basis in that property is the same as the bases of the property you gave up, increased by any money you paid. Records must be retained on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

THE TIME IS UP. NOW WHAT?

Even when records are no longer needed for tax purposes, they should be retained until it is certain they will not be needed for other purposes. For example, an insurance company or creditors may require the records to be held for a period of time beyond what the IRS requires.

If you have concerns about this issue and other tax controversies and tax problems, please call Mitchell A. Port at (310) 559-5259 to discuss the tax help you need.

August 3, 2007

What You Can Do If You Owe Tax Of $25,000 Or Less

The Online Payment Agreement (OPA) allows eligible individuals to apply for an installment agreement to pay off their tax liability. To qualify, you must have your bill from the IRS and have filed all required tax returns. You must owe less than $25,000 and be able to pay the entire liability within 60 months.

Paying your taxes in full and on time avoids unnecessary penalties and interest. However, if you cannot pay your taxes in full, you may request a payment agreement.

This application will allow you or your authorized representative (Power of Attorney) to self qualify, apply for an installment agreement, and receive immediate notification of approval.

There may be times when you will need to mail in paperwork or speak with us before we can determine your eligibility for an installment agreement. If that is the case, the OPA application will give you an address or a toll-free phone number to reach the IRS.

Continue reading "What You Can Do If You Owe Tax Of $25,000 Or Less" »

August 1, 2007

Attention All Tax Non-Filers

My clients in Los Angeles County, Ventura County, Santa Barbara County and Orange County who are “taxpayers” present tax problems in two flavors: those who don’t pay their tax and those who don’t file their tax returns. Some tax problems involve both non-filers and non-payment.

As a California tax attorney involved with tax controversies, I have a checklist when helping the client who is a non-filer:

Create a workable plan to deal with all aspects of the client’s non-filing.

Instruct the client to obtain all tax-filing information.

Determine if Automated Substitute for Return (ASFR) assessments have been made or attempted by IRS.

Retain the services of a competent accountant to prepare necessary returns.

Obtain copies of last-filed tax returns.

Advise the client to consider filing status decisions in the preparation of tax returns.

Have the client prepare drafts of 433-A/B Financial Disclosure Forms.

Review with client collection alternatives: installment agreements, currently uncollectable status.

Consult with the Revenue Officer if the taxpayer’s delinquent account has been assigned to one.

Contact the IRS, if necessary, to obtain unreported income documents or request tax transcript.

Respond appropriately to all IRS correspondence requesting delinquent filed tax returns.

Prepare Form 843 for filing incident to Penalty Appeal Procedure, if necessary.

Review with client approximate likely penalty assessments.

Prepare factual grounds for reasonable cause waiver.

Review new procedures for filing of offers in compromise.

Refer client to bankruptcy attorney, if appropriate and taxes appear dischargeable.

Insure that the client remains current in order to qualify for collection alternatives. This includes making estimated tax payments and tax deposits as required by law and filing all extension requests and current returns. (Note: Under current offer in compromise procedures, a client who is not current will not have his offer returned as “non-processable” but will be contacted and given the opportunity to correct the situation, if possible.)

If you face the tax problem of having unfiled returns or unpaid federal or California State taxes, call Mitchell A. Port at (310) 559-5259 for tax help.