We deal with agreements on a daily basis — from the terms and conditions on a website to municipal regulations that guide public actions. These agreements are often forgotten, if not entirely ignored, which may only become apparent when an issue arises. Similarly, partnership agreements may be drafted and then ignored. Partnership agreements guide many aspects of the partnership, including important tax consequences. Unless you have a legal background, you may have retained an attorney’s help when your partnership drafted its partnership agreement. What you may not have considered at the time was having a CPA review the agreement.
This blog post covers 2016 year-end update for businesses. With the start of 2017 quickly approaching, a slew of changes is upon us. The new year often brings tax changes, and with a new president in 2017 there is already talk of overhaul of the tax code. While we will briefly discuss some speculative changes for 2017, most of the changes discussed below have already been approved by Congress and will be in effect for 2017.
As a reminder during this tax season as well as throughout the year, it is important to keep in mind that the IRS will not contact you by phone or e-mail regarding tax liens or outstanding tax liabilities. The IRS has strict protocols when contacting taxpayers regarding tax deficiencies, with letters of correspondence being their official method of first contact.
How to identify a tax scam:
We understand that there are others in our industry that charge by the form. At Freyman CPA, P.C., we go beyond the preparation of tax forms to find ways to reduce your tax burden and help plan for your financial future. We take a holistic approach utilizing technology, experience, and knowledge to provide the best service for our clients.
When utilizing the services of a professional CPA firm, it is important to appreciate the values that are provided:
With tax season upon us, we have compiled a list of hot topics the IRS has been known to closely examine with the filing of a Schedule C – Profit or Loss from Business.
The IRS’s primary concerns revolves around the reliability/duplication of information provided on the Schedule C as well as the methods used for recordkeeping and presentation in the following areas:
An increase in income within the business should be considered taxable.
If the payment of income would not have been received without the existence of the business, the income should be considered business income. This includes IOUs, cash, etc. So remember, if the payment crosses the door of your business, that payment of income should be considered part of your business income.
Itemizing deductions in itself does not increase the chances of being audited. If we reference the latest IRS statistics, the taxpayer’s income is more of a factor than whether or not they itemized. Specifically:
That being said, if the taxpayer has significant itemized miscellaneous expenses in relation to their income, then that can certainly raise a red flag.
Technically, it does not hurt to save every single receipt and there are tools available to easily convert hard copies to digital. However, that doesn’t mean you need to save receipts for taxes in every instance.
The answer is yes if you need to justify an expense on your tax return. However, those that file a simple tax return and elect the standard deduction usually do not need to save their receipts for everyday purchases. Typically, you will not need a receipt for groceries as that’s not an item you can itemize on your tax return, unless sales tax is involved. It’s a different story for receipts related to charitable donations and mortgage interest payments as that can generally be claimed on your tax return.