Friday January 27, 2012
Alyssa Gregory at Small Business Information has a new article about why your small business needs an accountant. Every business, no matter how small, needs a financial and tax advisor for all the reasons Alyssa mentioned. But I would go further and specify that your business needs a Certified Public Accountant (CPA), not just an accountant.
A personal story from GenerationXFinance shows how a CPA can save you money at tax time; a CPA found an additional $1500 in savings for the blogger. From my own experience, I find my CPA a big help in making business decisions. I have an LLC for my own business, and we discussed tax benefits of LLC vs. sole proprietorship as they relate to taxes.
Advantages of a CPA for Your Business
1. Licensing. A CPA is A CPA is licensed by a state, and must keep current with tax laws in order to maintain a license in that state. Accountants aren't licensed. I have several CPA's in my family and I can attest to the strictness of the exams and study and continuing education requirements for CPA's.
2.Taxes. While not all CPA's specialize in small business taxes, almost all CPA's are more familiar with tax laws than are accountants. Knowledge of the tax code is a big part of a CPA's licensing exam.
3. Audit support. Probably the biggest reason to use a CPA for your business taxes is that a CPA is eligible to represent you before the IRS, while an accountant is not.
In other words, all CPA's are accountants, but not all accountants are CPA's. Accountants do the routine work, while CPA's can analyze the work and help you make more high-level business and tax decisions. Sure, CPA's charge more, but you get what you pay for.
My suggestion: Find a CPA firm that includes a bookkeeper and accountant. Then you can separate the more routine financial jobs from the tax and financial analysis done by the CPA. Or hire a bookkeeper for those monthly, quarterly and yearly financial reports, then periodically consult with your CPA and have your CPA do your business taxes.
Image: Getty Images
For 2012, resolve to stay up to date with the latest on legal and tax issues affecting your business - subscribe to my newsletter or RSS feed or check out my new Twitter page.
Wednesday January 25, 2012
Tuesday, January 31 is the last day to provide W-2 Wage and Tax Reports for 2011 to employees.
What If I Can't Get the Forms to Employees and Contractors by January 31?
First, let employees know that you will not be able to get their W2 forms to them on time. They won't be happy not to receive the forms, so you had better have a great reason for not getting the forms to them by this date. They need them to complete their tax returns.
Second, request an extension of time to furnish these forms to employees and contractors. If you submit the request before the due date, you may get up to 30 days to give these forms to employees. Submit a letter before January 31 to the Internal Revenue Service at:
Information Returns Branch, Mail Stop 4360
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville WV 25430
Include your name and address, your employer ID number, a statement requesting an extension, the reason for the delay, and your signature or the signature of your company's authorized agent.
The IRS doesn't have to grant you an extension, so again you need a great reason for not getting these forms to employees.
In any case, GET THESE FORMS TO EMPLOYEES AS SOON AS POSSIBLE, even if you have applied for an extension.
If you have more than 10 payers (employees receiving forms), you must submit this request electronically. The requirements for electronic submission are complex; check with your tax preparer to see if he or she can submit the request for you.
More on Form W-2 for 2011 including changes to the form and a step-by-step explanation of how to complete Form W-2.
Image: Getty Images
Sunday January 22, 2012
Diva from 1099online.com sent a comment on my recent article about giving a 1099-MISC to your attorney.Her comment got me thinking about benefits of filing 1099 forms (and other tax forms) electronically. (The 1099-MISC form is the one you must give to independent contractors and businesses you have paid.)
1. More time to file. Diva reminded me that 1099s filed online have a later filing deadline. The filing deadline for 1099-MISC forms (along with transmittal 1096 forms) is February 28. But you have until April 2 to file these forms if you file online.
2. Easier to file. Of course, it's almost always easier to file tax forms online, but the IRS's online filing is something of a chore. To file electronically with the IRS, you must sign up for their FIRE (Filing Information Returns Electronically) system and submit documents in a specific format. And there is no online form completion option with FIRE. Sounds almost as painful as paper forms. Another way online filing is easier is that state and federal is filed in one filing and the user sends the recipients copies from the filing.
3. Required for larger companies. If you have 250 or more information returns (like 1099s) to file, you must do the filing electronically. The requirement is met separately for each form.
4. No need to send Form 1096. Online filing eliminates the need to complete Form 1096, which includes totals from all 1099s of each type. If you don't file online, you must complete a Form 1096 for each type of 1099 (1099-MISC, 1099-B, 1099-DIV, etc.)
5. Less expensive than some other options. My bookkeeper said he used to pay $10 to $12 for a package of 25 forms from an office supply store to prepare just 2-3 1099-MISC forms and a 1096. With the online service he checked, one to ten forms per filing is priced at $3.49. (Prices may vary.)
Online filing sounds good to me; my bookkeeper is going to use it and let me know what he thinks. Of course, with any tax submission, if you have anything complicated, you should check with your tax advisor before you send in any forms.
Reminder: 1099-MISC forms must be send to independent contractors and business you pay by check/cash, by January 31.
Image: Getty Images
Friday January 20, 2012
Getting ready to file Schedule C for 2011 taxes? Check out these changes before you begin:
- Merchant card reporting. Lines 1a and 1b have been added for reporting of gross receipts received by credit or debit card. The requirement for reporting these payments has been deferred for 2011, so just put a zero in line 1a and enter the total gross receipts on line 1b.
- Mileage rate. On line 9, use the standard IRS mileage rate for 2011 to calculate business mileage deductions. There are two different rates for 2011: January 1 through June 30, the business rate is 51 cents for business miles, and July 1 through December 31 the business rate is 55.5 cents. The rate for medical/moving expenses changed from 19 cents per mile to 23.5 cents per mile; the driving for charity rate stayed at 14 cents per mile throughout 2011.
- Information reporting. Lines I and J have been added to include information about your reporting of payments using Form 1099. These forms are required if you pay $600 or more to independent contractors or certain other businesses. See the information on Form 1099-MISC for 2011, and note that the 1099-MISC is one of several types of 1099 forms.
- Qualified joint ventures reporting rental real estate income must now report that income on Schedule E (rental real estate and royalty income) rather than Schedule C.
- Other changes to Schedule C for 2011 include changes for heavy highway use tax, reporting rental real estate income and reporting of musical composition expenses.
As usual with this kind of tax preparation issue, I would strongly urge you to check with your CPA or tax preparer before you complete Schedule C.
For 2012, resolve to stay up to date with the latest on legal and tax issues affecting your business - subscribe to my newsletter or RSS feed or check out my new Twitter page.
