...filing due to many reasons and then they get into trouble. There are many reasons why this happens are some are we forget about it, or we were confused about what to do. We took advice from the wrong person or the IRS did not reply to our email. You might have to pay a lot of money and you thought you cannot pay them all together so waited to file. Do not worry if you have done that. Unluckily, this is an issue which will not disappear on its own unless you file. Before it is too late, you need to understand what you can do and get rid of the problem. Here is what you can do. File as Rapidly as You Can The first thing you have to do is not waste any time but gather papers as soon as possible. You should keep in mind that there is big chance for your file to get...
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...amendment was to provide a tax relief to wage earners (Hart 2002). Now that all wages are taxed, whether apportioned or not, taxing the rich was supposed to assist the lower classes while generating revenue for the government. Hart, Phil. "Phil Hart -- Constitutional Income: The Purpose of the 16th Amendment. Part1."Phil Hart -- Constitutional Income: The Purpose of the 16th Amendment. Part1. NewsWithViews.Com, 28 July 2002. Web. 01 Nov. 2014. . Smith, Ephraim P., Philip J. Harmelink, James R. Hasselback, and Ted D. Englebrecht. CCH Federal Taxation: Comprehensive Topics, 2015. Chicago, IL: Wolters Kluwer, 2014. VitalSource Shelf. Chapter 2 (5 pts) 2. Explain the two "safe harbors" available to an Individual taxpayer to avoid a penalty for...
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...2 Abstract This paper illustrates how an Internal Revenue Service (IRS) audit strikes fears in individuals, small businesses and large corporations. By understanding the process of a tax audit and reporting information that is understandable, people can lesson some of the risk. According to Sidney Weisman, an attorney and senior editor with the Research Institute of America, publisher of tax materials for professionals, “the easiest way to survive a tax examination is to prepare for one at the time you fill out the tax return” (Rankin, 1981, p. 2.29). THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 3 The Process of Lessoning the Risk of a Tax Audit The tax audit have been feared by many and embraced by the few. Even though there are ways to reduce the likelihood of an audit, one must understand how the audit process works. If selected, a tax audit usually means corresponding with the IRS, searching through files, and producing records. It can also mean paying additional taxes, interest, or a penalty. Reducing the likelihood of an audit, all income and deductions must be reported truthfully even if it means a higher chance of being audited. One good strategy for avoiding an audit is to give the IRS the answer before it asks the question for unusual transactions on the tax return. “Thanks to the IRS Restructuring and Reform Act of 1998, individuals and small businesses...
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...Ethical Issues – Bill Services There are many ethical issues going on with Bill that will affect his business and our firm legally and financially. Here are some of the issues: 1) He is planning on filing for divorce. His wife, Rotunda is a large and violent woman who has spent every penny Bill has made over the years. She has a moustache, missing a few front teeth and generally not a nice person. Ethical issues: Bill and Rotunda’s marriage seemed to change after the birth of their last child. Rotunda’s personality changed and she even put on extra weight. Rotunda continued to spend every penny of her husband’s hard earned money. Ethically, he has every right to want to file for divorce. Bill using the fact that she has a moustache and missing teeth are not a factor here. The mention of Rotunda being violent could be an issue as the divorce proceedings are under way. Choosing to divorce a person should be based on something that isn’t going quite right. You do not need to have a specific reason at all to request a divorce, but most states do have the option of using one of the grounds for divorce as your reason. Having one of these reasons can help your case, but if the two of you are not happy, then a no fault divorce would be the way to go. You are both on level ground and can go your separate ways without your record being tarnished. Choosing to get a divorce is not always an easy decision for...
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...Revenue Code (“IRC”), applicable Treasury Regulations under IRC, and a relative court case. The facts as we understand them are as follows: The IRS disallowed several business deductions from 2010 and 2011. Upon this disallowance you were assessed interest owed on back-taxes. You were assessed $18,000 in interest on the taxes owed. Under the IRC Sec. 163 interest expense is deductible if “interest paid or accrued on indebtedness is properly allocable to trade or business”. Clearly, the interest expense is derived from trade or business. The trade s Mr. Hancock’s law practice and the deficiencies and interest assessed were a direct result of business activity. We suggest that you deduct the interest expense of $18,000 on your 2012 return and consult with us for future tax preparation to assure you do not experience any similar situations in the future. Please call us at 555-555-555 if you have any further questions. May I suggest you visit our office to prepare your 2012 return when you are ready. To comply with requirements imposed by the Department of the Treasury, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed...
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...Week 1 1. Question : (TCO 2) Penguin Corporation, a C corporation, has two equal shareholders, Bob and Leo. Penguin earned $100,000 net profit during its first year of operations and paid a dividend of $50,000 to each shareholder. Before considering the dividend, Bob is in the 10% marginal tax bracket and Leo is in the 28% marginal tax bracket. Which statement is incorrect? Student Answer: $100,000 will be subject to double taxation. Penguin could have avoided paying corporate tax if, instead of paying a dividend, it had paid Bob and Leo a salary of $50,000 each (assuming a $50,000 salary for each is reasonable). A preferential tax rate will apply to the dividend income of both Bob and Leo. If Penguin had paid Bob and Leo a salary of $50,000 each, Bob would have paid less federal income tax on his salary than Leo would have paid on his salary. None of the above Instructor Explanation: See Chapter 2. To the extent Bob's dividend income would otherwise be taxed at 105 and 15%, the preferential rate on his dividend is 0%. Thus, Bob will not pay tax on some of his dividend income, and to that extent not all $100,000 is subject to double taxation. Points Received: 2 of 2 Comments: Question 2. Question : (TCO 2) Sage Inc., a closely held corporation that is not a PSC, has a $110,000 passive loss, $90,000 of active income, and $25,000 of portfolio income during the year. How much of the passive loss can Sage deduct in the...
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...Identification Number and Certification Give Form to the requester. Do not send to the IRS. Name (as shown on your income tax return) Business name/disregarded entity name, if different from above Print or type See Specific Instructions on page 2. Check appropriate box for federal tax classification: Individual/sole proprietor C Corporation S Corporation Partnership Trust/estate Exempt payee Limited liability company. Enter the tax classification (C=C corporation, S=S corporation, P=partnership) ▶ Other (see instructions) ▶ Address (number, street, and apt. or suite no.) City, state, and ZIP code List account number(s) here (optional) Requester’s name and address (optional) Part I Taxpayer Identification Number (TIN) Social security number Enter your TIN in the appropriate box. The TIN provided must match the name given on the “Name” line to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3. Note. If the account is in more than one name, see the chart on page 4 for guidelines on whose number to enter. – – Employer identification number – Part II Certification Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification...
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...officer-stockholders, this Subchapter S election is a safe means of avoiding the double tax, the problem of reasonable compensation, and any accumulated earnings penalty. It is also a good way of allowing the stockholders to take advantage personally of a corporate loss, particularly in a start-up situation. On the other hand, the stockholders must understand that they can be taxed on income which they do not actually receive (“phantom income”). If corporate earnings are required for working capital, the year’s earnings should be distributed, and the needed funds contributed back to the corporation as loans evidenced by interest-bearing notes. Because of the favorable tax results, many businesses have converted to S corporations, thereby eliminating the corporate tax while keeping limited liability for the owners. However, any “built-in” gains will be taxed to the corporation (even as an S corporation) if it sells any of its pre-conversion assets within ten years. 1-2 FEDERAL TAX GUIDEBOOK § 2.04 (2017) Subchapter S is applicable only to a “small business corporation,” defined by §1361(b)(1) as a domestic corporation that does not have more than seventy-five shareholders (all of who must be individuals, estates, or certain types of trusts) or more than one class of stock. The corporation may not have any nonresident alien shareholders; and it cannot be an “ineligible corporation’ described in §1361(b)(2). IRS Form 2553 Election by a Small Business Corporation must be completed...
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...WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 1. (LO 1) When enacting tax legislation, Congress often is guided by the concept of revenue neutrality so that any changes neither increase nor decrease the net revenues raised under the prior rules. Revenue neutrality does not mean that any one taxpayer’s tax liability remains the same. Since this liability depends upon the circumstances involved, one taxpayer’s increased tax liability could be another’s tax saving. Revenue-neutral tax reform does not reduce deficits, but at least it does not aggravate the problem. 2. (LO 2) Economic, social, equity, and political factors play a significant role in the formulation of tax laws. Furthermore, the IRS and the courts have had impacts on the evolution of tax laws. For example, control of the economy has been an important economic consideration in passing a number of laws (e.g., rapid depreciation, changes in tax rates). 3. (LO 2) The tax law encourages technological progress by allowing immediate (or accelerated) deductions and tax credits for research and development expenditures. 4. (LO 2) Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion. For example, the tax laws provide incentives to encourage savings by giving private retirement plans preferential treatment. 5. (LO 2) a. Section 1244 allows ordinary loss treatment on the worthlessness of small...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Learning Objective LO 1 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 3 Topic Revenue neutrality Controlling the economy Encouraging industries Research and development expenditures Social considerations Earned income credit Charitable contributions Fines and penalties Home ownership Higher education incentives Tax credit versus deduction Alleviating the effect of multiple taxation Double taxation and effect of a credit versus a deduction Wherewithal to pay concept: transfer to controlled corporation Avoiding the corporate income tax Wherewithal to pay: example Recognized gain versus realized gain: amount Like-kind exchange versus involuntary conversion: losses Settlement time period Installment method Keogh Plan: grace period Bracket creep: indexation Community property states Community property states Deterrence provisions $13,000 annual gift tax exclusion: audit Status: Present Edition New New New New New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Modified Modified New New New New New New New New New New New Q/P in Prior Edition 6 7 8 9 10 11 12 13 14 15 Instructor: For difficulty, timing, and assessment information about each item, see p. 1-3. 1-1 © 2012 Cengage...
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...an honor to support this event for our community. In our meeting of February 16, you asked for guidance on the best possible approach in financing capital for your new corporation. There are two alternatives in financing, debt financing, which is borrowing from a lender and equity financing, which is selling of stocks to investors. It would be our recommendation as a start-up corporation to utilize both forms of financing to raise your capital while keeping debt financing to the minimum. In reaching this conclusion we considered the advantages and disadvantages, listed below, of debt financing versus equity financing. We reviewed the Internal Revenue Service’s (IRS) approach on this matter and in consideration of code section 385 which is used to determine if the financing is debt or equity. The IRS may re-characterize debt financing to equity financing under this code section based on the circumstances of the financing (Antebi & Krauthamer, 2014). Advantages of Debt Financing | Disadvantages of Debt Financing | Interest paid is a deductible expense | Reduced cash flow due to monthly payment | Shareholders do not recognize income | Shareholders may recognizes gain | Corporation maintains control of Company | Personal Guarantees | (Pope, Rupert, & Anderson, 2015) Advantages of Equity Financing | Disadvantages of Equity Financing | A 70%, 80%, or 100% dividends received deductions are available to shareholders. | Dividends are not deductible...
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...W-9 Form (Rev. December 2014) Department of the Treasury Internal Revenue Service Request for Taxpayer Identification Number and Certification Give Form to the requester. Do not send to the IRS. Print or type See Specific Instructions on page 2. 1 Name (as shown on your income tax return). Name is required on this line; do not leave this line blank. 2 Business name/disregarded entity name, if different from above 3 Check appropriate box for federal tax classification; check only one of the following seven boxes: C Corporation S Corporation Partnership Trust/estate Individual/sole proprietor or single-member LLC Limited liability company. Enter the tax classification (C=C corporation, S=S corporation, P=partnership) ▶ Note. For a single-member LLC that is disregarded, do not check LLC; check the appropriate box in the line above for the tax classification of the single-member owner. 4 Exemptions (codes apply only to certain entities, not individuals; see instructions on page 3): Exempt payee code (if any) Exemption from FATCA reporting code (if any) (Applies to accounts maintained outside the U.S.) Other (see instructions) ▶ 5 Address (number, street, and apt. or suite no.) Requester’s name and address (optional) 6 City, state, and ZIP code 7 List account number(s) here (optional) Part I Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. The TIN provided must match the name given on line 1...
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...system with a payroll outsourcing service. Include direct and indirect revenue enhancements and direct and indirect cost reductions. For an organization which is considering replacing its internal payroll system with a payroll outsourcing service, the direct revenue enhancements and cost reductions for a company which is into internal payroll system may include increase in productivity of the company’s employees since they can now focus on doing more productive things, and improve the profitability. For instance, this holds true for small businesses with employee strength of 10-20. Moreover, the other direct cost reduction could be avoiding IRS Penalties. According to the IRS, 40.00% of small businesses pay an average penalty of US$845.00 per year for late or incorrect filings and payments. Outsourcing of payroll may help the company to avoid the penalty notices. The other direct revenue enhancements could be reduction on transaction costs. The outsourcing company may enable the employees to claim Reimbursement statements and other things online. The indirect revenue enhancements could be building brand in the other countries. For instance, the outsourced company features its partner’s Logo Branding which enables the company to display the company name, and logo in all employee and client access pages. The other indirect cost reduction could be the use of best technology. This holds very true for small businesses which don’t have technology strengths such as latest version of payroll...
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...Analysis of regulation fairness and administrative costs for the IRS Innocent Spouse Relief. ACCT 525 Current Issues in Accounting. Instructor: Professor Blaise Bender 04.12.2015 * Introduction When couples get married and they have to file a tax return every year, in the majority of cases they would have to file a joint return. This joint signed return makes the couple equally responsible for the tax liability and any charges that could arise from a mistake made in the return, and it does not matter if the couple is already divorced at the time that the IRS asks for the tax due. I believe it is highly unfair for a married person or even a recently divorced one to be exposed to tax liabilities and fines in certain cases where the spouse or former spouse engaged in activities with negative financial impacts or makes unilateral decisions in lying on the tax returns or simply makes blatant mistakes in the return without the consent or the previous knowledge of the other person in the marriage. It is very common for one of the spouses to entirely trust the other one with the home finances and even give that other person the necessary signature to file a married joint tax return without really even paying attention to the contents of the return. This trust is given as an act of love in the relationship without thinking of the consequences or impacts this could bring later. This joint signed return makes the couple equally responsible for the tax liability and any charges...
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...Amazon.com Tax Avoidance Business Strategy, How they did it, And how it affects me. Introduction: Amazon and Tax Avoidance Part I: Amazon Part II: Taxes in the U.S. Part III: The IRS/Penalty for Tax Avoidance Part IV: Amazon and Tax Avoidance Part V: Amazon in Europe Part VI: Amazon in 2014 Part VII: How does it affect me? Part VIII: Conclusion Introduction: The topic I choose to write about is how Amazon.com website avoided collecting sales taxes in the U.S. for nearly it whole existences. I’m going to introduce amazon and what the company is about and the role they played as more then successful online retailer. Then introduce the topic of taxes and state taxes, sales tax, and the importance collecting and paying taxes, and the benefits the country and its residents get for paying such taxes. The amazon company will then be analyze and in operating structure and design and learn how they avoided paying taxes in their home country and how they brought their operation over seas and did the same. And why this topic and subject matter is and should be severely important for future business owners and managers on business structuring operations. Part I: Amazon Amazon is the largest online retailer as of 2014. And how did they accomplish this? Jeff Bezo is the founder and amazon.com and it all started in his garage in the state Washington. Amazon first started off as an online bookstore and soon began to venture off to selling CD’s, DVD’s, and computer...
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