To say, "helpful IRS" sounds like an oxymoron, but it really is true.  Particularly for small businesses, the IRS provides many helpful tips, reports, and forms, as well as other helpful information.

Today, my focus is on the IRS tax calendar for 2010.  I just received mine by mail and I was very pleasantly surprised.  The calendar was colorful and on good heavy stock, with illustrations throughout.  Each month even has a "quote of the month."

The theme for the 2010 calendar is "Helping to Grow Your Small Business, " and every month they focus on a different topic.  January, for example, is starting up a business, choosing a business structure and a tax professional.  Each section is very short, but it gives you a starting place for your information search.

Of course, the calendar itself includes tax due dates, including income taxes, employment taxes,excise taxes, and other taxes.  Following these due dates will help you stay on top of your taxes.  You can also sign up for my Newsletter and receive timely updates on taxes and reports due each month.

You can order the IRS 2010 Business Tax Calendar online at no cost.  I received mine in about 3 weeks, so now is a good time to order.

For more information:

How the IRS Can Help Your Business

Back in the good old days, (pre-recession, that is), many business people figured they should get all the good things in life from owning a business.  Many owners and board members would plan luxurious vacations and call them "board meetings" and deduct the costs as a business expense.  No more.  In addition to cracking down on entertainment expenses, the IRS also looks unfavorably on conferences, seminars, and board meetings on cruise ships.  You can still take these trips, but there are limits.

Cruise Ship Expense Limit
You can deduct up to $2,000 a year for expenses of meetings, conventions, or trade shows held on cruise ships (the IRS considered any ship to be a cruise ship), but only if all the following conditions are met:

1. The event must be directly related to your trade or business
2. The cruise ship is registered in the U.S. (I found this requirement strange, since most of these cruise ships have non-U.S. registrations)
3. All ports of call are in the U.S. or U.S. possessions

In addition,  you must provide:

1. A written statement detailing the total days of the trip (not including days of transportation to and from the cruise ship port), the number of hours each day devoted to business activities, and the program of scheduled business activities
2. A statement by an officer of the organization or group sponsoring the meeting that includes a schedule of each day's business activities, and the number of hours you attended the scheduled business activities.

Conventions Held Outside the North American Area

You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:

Image: Angelo Cavalli/Getty Images

After reading yesterday's blog post about car expenses, a reader asked, "How do I know what car expenses I can deduct from my home business? What travel from home to other locations is deductible?"

Can I Deduct Car Expenses Going Back and Forth from my Home Office?
You can deduct business-related car expenses for travel back and forth under these circumstances:

• You work at home or from home and your home is your principal place of business (the place where you earn most of your income or where you do your administrative or management tasks)
• You don't commute back and forth from your home to an office.
• You can prove that the car expenses were business related, not personal.

Two Examples
Sunny works from home as a freelance writer. She has online clients, but she also has local clients. She can deduct any car travel to drop off or pick up work from local clients, and to travel to the office supply store for supplies.  She should be careful not to combine business trips with personal ones, like personal banking or a stop at the grocery store.

Karl works out of his home as a manufacturer's representative, and he travels around the state to meet clients and discuss purchases.  He does his administrative work at home, so it is his primary place of business. He keeps a log in his car and records mileage for all car travel, from his home to client locations, hotels, and back.

In both of these cases, the small business owners can deduct all business travel to and from their home.

How Do I Prove Car Expenses are Business Related?
The IRS looks very carefully at car expenses for small businesses.  They want to see detailed records that:

• Were prepared at the time of the expense (not weeks later) and
• That detail the date, reason for the trip, and include any other information to show that the trip was business-related

What Car Expenses Can I Deduct?
You can deduct all ordinary and necessary expenses related to business travel, but no personal travel. You can deduct these expenses for car travel to and from business locations.  For example:

1. the home of a client
2. the office store where you buy office supplies
3. temporary job sites where you work for clients
4. places where you meet with clients, customers, or business advisers
5. your warehouse or the place where you keep your business inventory
6. a convention center where you participated in a business seminar

How do I determine these car expenses?

• You can use the standard mileage deduction rate set by the IRS (55 cents a mile for 2009), or
• You can keep track of actual costs for all car-related expenses.

Using the standard mileage rate is less trouble, because all you have to do is set out the miles traveled for business purposes, but the actual cost method sometimes results in higher deduction amounts.

First-year Rule for Standard Mileage
If you don't use the standard mileage rate the first year of your business, you can never use it again.  If you do use standard mileage the first year, you can then select the rate which will give you the highest possible tax deduction.

Remember, although business travel to and from your home based business is deductible, it must be documented and recorded at the time of the trip.  Don't get caught shorthanded without these documents in the event of an IRS audit of your business.

For More Information:
More about Taxes for Home Based Businesses

Standard Mileage vs. Actual Expenses - Which is Better?

"I have my company logo on my car.  Someone told me I can deduct the car as a business advertising expense."

"Can I deduct expenses for going back and forth from my home to my office?"

"If I can make business phone calls when I'm commuting, can I deduct the car expenses?"

"If I use my car to take business materials, tools and equipment back and forth from home to work, can I deduct these car expenses?"

Small business owners have lots of questions about tax deductions for business use of cars and there is a lot of misinformation out there. These are some of the most common questions.  If you have other questions, comment on this post or in the Forum.

Business Vehicles as Advertising
You can certainly deduct the cost of putting the logo on the car as an advertising expense, but you can't deduct the miles you drive around as "advertising." The IRS says, "Putting display material that advertises your business on your car does not change the use of your car from personal use to business use.  If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses."

Commuting Expenses are Not Deductible
The time you spend driving back and forth from your home to your business is considered "commuting," and it is not deductible as a business expense.  Consider it this way - everyone needs to get to work, employees and business owners alike, so this expense is not part of your business.

Use of Car While Commuting
If you use your personal car to transport materials, supplies, or equipment back and forth from home to office, the IRS says this doesn't make the car expenses deductible. Even if you use commuting time to talk on your cell phone about business matters, the car costs are still not deductible.  Of course, you can deduct the cost of the cell phone and any additional charges.

Even If the Business Owns the Car
If your business has purchased the car, you still must separate out personal use of that car for tax deduction purposes.  Only the business use of the car can be deducted.

For More Information:
Records to Keep for Car/Truck Expenses
Standard Mileage Deduction vs. Actual Mileage Expenses

Disclaimer: I am not a tax professional or Enrolled Agent, and my purpose in presenting this discussion is to provide general information and give you some background so you can talk about this subject with your tax professional.

Many small businesses have petty cash.  You know what I mean - that drawer at the front desk that you use to make change for customers and that you take small amounts from for those donut runs or soft drinks. This drawer contains "petty cash," so-named because it is small (petite) amounts of cash available to a business for making change and for small purchases, needs to be managed in the same way as other assets of your business.

Petty Cash is Not Small Change. If you think petty cash is small, consider this:  Let's say you have a weekly staff meeting in your company, and you always buy donuts and coffee.  If you spend $15 a week, in a year you have spent $780 for this business expense.  If you don't keep track of petty cash and record all petty cash transactions, you can't claim them as business deductions on your tax return.  If you don't have a process for petty cash, now is the time.

Answer these questions to get your business set up for petty cash management.

The Small Business Administration has announced proposed changes to strengthen its 8(a) business development program to benefit disadvantaged small businesses. The 8(a) program allows these disadvantaged businesses to compete more easily for business, particularly with the federal government.

How Does This Program Help My Small Business?
If you can qualify as a disadvantaged business, you can become eligible for SBA assistance in obtaining government contracts, which can provide long-term growth for your company.

How Do I Qualify as a Disadvantaged Business?
Your business must first qualify as a "small" business, according to its size relative to other businesses in your industry.  Then you must be either:

Socially disadvantaged: a member of a disadvantaged group (subject to racial or ethnic prejudice or cultural bias because of your membership in the group) , or

Economically disadvantaged: socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities. You must have a personal net worth less than $250,000 (excluding your primary residence and the equity in your business), and a product or service regularly purchased by the federal government.

The qualification process also includes a review of the composition of your board of directors to be sure the board is controlled by individuals who are socially or economically disadvantaged.

If you think you may be able to qualify as a disadvantaged business, contact your local SBA office.

What Changes are Proposed in the 8(a) Program?
The SBA proposed changes are the result of the first comprehensive review of the 8(a) program in a number of years.  Among the proposed changes:

•   Joint Ventures - qualifying that 8(a) firms are required to perform a significant portion of the work to ensure that these companies are able to build capacity;   
•   Economic Disadvantage - providing more clarification on economic disadvantage as it relates to total assets, gross income, retirement accounts and a spouse of an 8(a) company owner in determining the owner's access to capital and credit;
•    Mentor-Protégé Program - requiring that assistance provided through the Mentor-Protégé relationship is directly tied to the protégé firm's business plan;
•    Ownership and Control Requirements - providing flexibility in admitting individuals of immediate family members of current and former 8(a) participants;
•    Tribally-Owned Firms - seeking public comments on the best way to determine whether a tribe meets the criteria of being economically disadvantaged for the 8(a) program;
•    Excessive Withdrawals - amending regulations on what is considered excessive as a basis for termination or early graduation from the 8(a) program;
and
•    Business Size for Primary Industry - requiring that a firm's size status remain small for its primary industry code during its participation in the 8(a) program.

For More Information:

More Details on Qualifying as a Disadvantaged Business

Details on Business Development/Disadvantaged Status Determination (from the SBA)

Many businesses have found that bartering goods and services can be an effective way to increase income and make the best use of employees and capital resources.  Barter statistics show that:

• There are in excess of 500,000 corporate trade exchange members globally.
• Almost 1/3 of all small businesses in the US use some form of bartering.
• 65% of corporations listed on the NYSE are involved in bartering.

(from the Universal Barter Group).

But the IRS wants you to know that barter income is taxable and this income can affect other business taxes, including self-employment taxes.  Barter income can also result in capital gains, as well as ordinary income.  Consider the following:

Reporting Barter Income
Barter is considered as income to a business, just like other income. Barter transactions must be reported to the IRS on Form 1099B. If you have received barter income from another business or individual during 2009, they are required to submit Form 1099B showing the amount paid to your business through barter transactions. This form must be submitted to you by mid-February 2010. Then, you must include the barter income from all sources on your business income tax return, along with all other income. So, barter income is just like other income, from a tax standpoint.

Effect of Barter Income on Taxes
When the IRS says that barter transactions may increase your tax liability, it is telling you that, like other income, it may increase items like self-employment taxes for you as the business owner, and it may result in various kinds of business income (primarily ordinary business income and capital gains income).

But barter works like other forms of income in another way: expenses related to this income are deductible, reducing your tax liability.

Effect of Barter-related Expenses on Taxes
The expenses related to your barter transactions may be deductible as legitimate business expenses. For example, if you barter consulting services, and you must travel to meet the client, your business travel expense for this work is probably deductible. Or, if you paid to register on a barter exchange, the registration may be a business expense. These deductible expenses can reduce your income from the barter transaction.

So, in conclusion, barter transactions, both income and expenses, are considered in the same way as other income and expenses for your business in terms of their affect on your tax liabilities and the amount and types of taxes you must pay. The IRS reminds you:

Treat barter income as you would any other business activity. Keep good records, work with a reputable barter exchange and consult the IRS or a tax professional if you have questions.

For More Information:
All About Barter and Taxes
Barter Income (IRS Publication)

I don't mean to scare you (pun intended);   I just wanted to remind you of several taxes that are due at the end of October.  The good news is that October 31 is a Saturday, so you have until Monday, November 2, to pay these taxes.

Federal excise taxes
If your business buys the following items, you must pay an excise tax:

• Environmental products, such as domestic petroleum oil spills and ozone-depleting chemicals.
• Communications and air transportation taxes
• Fuels used in business
• Purchase of trucks, trailers, semi-trailers (at a percentage of the sales price)
• Ship passenger tax (per passenger)
• Manufacturers Taxes on coal, taxable tires, gas guzzlers, etc.
• Foreign insurance taxes
• Sport fishing equipment, fishing rods, poles, outboard motors, etc.
• Floor stocks tax on ozone-depleting chemicals

The tax is due quarterly, and the 3rd quarter payment is due October 31.

Federal Payroll Tax Return- Form 941
Your federal payroll tax return for the 3rd quarter (July, August, September) is due October 31, on Form 941.  If you have made your deposits on time and in full, you have until November 10 to file this report with the IRS; otherwise, it is due now.

Federal Unemployment Taxes
If you owe more than $500 in federal unemployment taxes for last quarter, you must pay by October 31.

Heavy Vehicle Purchase Tax
If your business purchased a heavy truck (taxable vehicle weight of 55,000 pounds or more) in September, you must file Form 2290 and pay an annual vehicle tax by the end of October.

For More Information:
All about federal unemployment taxes

More about Form 941

IRS Publication 510: Excise Taxes

Image: Stockbyte/Getty Images

I occasionally hear from individuals who want to know why their Articles of Organization or Articles of Incorporation or other business registration documents were rejected by their state.

Change in the Legal Requirements
In one case I know of, the new business owner didn't realize that the state (Iowa, in this case) had changed the form for filing a limited liability company entity from Articles of Organization to a Certificate of Organization.  This mistake is understandable, considering that the change had just been made a month or so before the filing date.  It does, however, point out the importance of reading carefully; the change was on the first web page of the secretary of state's website.  (Most states still require Articles of Organization; only Iowa and Idaho require a Certificate of Organization at this time.)

Following Directions
In most cases, the rejection is simply a matter of not following directions.  The specific directions may vary from state to state, but most are just common sense. For example, here is a list of reasons why an application might be rejected in Iowa (from the Secretary of State website):

• Legal title does not contain required suffix. For example, a corporate name must contain the word "corporation", "incorporated", "company", or "limited, or the abbreviation "corp.", "inc.", "co.", or "ltd.", or words or abbreviations of like import in another language. Refer to the Code of Iowa to determine requirements for each business organization.
• Legal title conflicts with an entity already on record. To determine availability you may search our corporate database or contact our office.
• Document not accompanied by the required fee, or if document submitted by an account holder, not accompanied by a completed charge transaction form.
• Check not signed.
• Document not signed.
• Document contains only a post office box for the registered office address. A post office box may be used in connection with a street address.

To Avoid Having Your Documents Rejected:

• Read carefully. All of the items above were included in the directions.
• Double check before sending. Or have someone else check, to make sure you signed the check and completed everything.
• Use an attorney. Using an attorney is expensive and having an attorney file the documents doesn't guarantee that everything will be done perfectly (attorneys make mistakes too), but it does increase your chances of success, since they are supposed to be keeping up with changes in the law and they do these routine filings all the time.

If your document is still rejected...
Read the rejection letter.  The state will always detail the reasons for the rejection.  Just read the reasons, make the change, and get back in the game.

Image: Thomas Northcut/Getty Images

Good question.  This standard is always confusing for small employers, so I will try to clear up some of the confusion.

What is the minimum wage rate?
The minimum wage rate is the amount, set by the federal government (the Fair Labor Standards Act) and the states, that is required to be paid to employees in larger businesses (more on this in a minute) . Some specific types of workers are excluded from minimum wage rules (more on this too). The current federal minimum wage rate, is $7.25 an hour. The federal minimum wage regulation is administered by the Wage and Hour Division (WHD) of the Department of Labor (DOL).

Which minimum wage rate applies - state or federal?
Each state has set its own standards for minimum wages; some states are lower than the federal government, some are higher, and some follow the minimum wage rate set by the federal government.  When there is a difference between your state's minimum wage rate and that of the federal government, the higher standard applies.  The Wage and Hour Division has a map and listing showing the current minimum wage rates for each state.

Does the minimum wage law apply to my employees?
The minimum wage law (the FLSA) applies to employees of larger businesses, those with annual gross sales or business done of at least $500,000.  The Department of Labor says it "also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mails or telephones for interstate communications. Other persons, such as guards, janitors, and maintenance employees who perform duties which are closely related and directly essential to such interstate activities are also covered by the FLSA. It also applies to employees of federal, state or local government agencies, hospitals and schools, and it generally applies to domestic workers."  Basically, it sounds like almost all employees are covered, since most workers use the mails or phones for interstate communications.

What employees are not covered by minimum wage laws?
Some types of employees are considered to be exempt from minimum wage laws.  The list includes farm workers; workers at seasonal and recreational establishments; and salaried executive, administrative, professional, and outside sales employees.  For a complete list see the "Exemptions" page on the Wage and Hour Division website.

The minimum wage laws are complex, so if you have questions about whether you must pay minimum wage to your employees, contact the district office of the Wage and Hour Division of the Department of Labor and your state employment department.

For More Information:

• Alison Doyle, over at JobSearching, has a good article on minimum wage laws as they relate to restaurant employees who receive tips and younger workers. .