Tax Savvy for Small Business

Table of Contents......Page 9
Your Tax Savvy Companion......Page 17
1. Tax Basics......Page 19
How Tax Law Is Made and Administered: The Short Course......Page 20
Where to Find Tax Rules......Page 21
Marginal Tax Rate and Tax Brackets......Page 23
The Alternative Minimum Tax (AMT)......Page 24
2. Deductible Business Expenses and Income......Page 25
What Is a Deductible Business Expense?......Page 27
Is It a Current or Future Year Expense?......Page 29
Top 25 Deductions for Businesses......Page 30
The General Business Credit......Page 40
Vehicle Expenses......Page 41
How and Where to Claim Expense Deductions......Page 46
What Is—And Isn’t—Income?......Page 47
3. Writing Off Business Assets......Page 51
When Various Expenses May Be Deducted......Page 53
Section 179: Expensing Business Assets......Page 55
Depreciating Business Assets......Page 58
Tax Basis of Business Assets......Page 65
Leasing Instead of Buying Assets......Page 69
When You Dispose of Business Assets: Depreciation Recapture Tax......Page 71
Tax Errors in Depreciation......Page 72
4. Bookkeeping and Accounting......Page 75
Why You Need a Bookkeeping System......Page 76
Manual or Computer System?......Page 77
What Kinds of Records to Keep......Page 81
How Long Records Should Be Kept......Page 85
Bookkeeping Methods of Tracking Income and Expenses......Page 86
Timing Methods of Accounting: Cash and Accrual......Page 87
Accounting Periods: Calendar Year or Fiscal Year......Page 89
5. Business Losses and Failures......Page 91
Unincorporated Business Losses......Page 92
Incorporated Business Losses......Page 94
6. Tax Concerns of Employers......Page 97
Employer Identification Numbers......Page 98
What Are Payroll Taxes?......Page 99
Reporting and Depositing Payroll Taxes......Page 101
Classifying Workers: Employee or Independent Contractor?......Page 109
Misclassifying Employees as Independent Contractors......Page 112
IRS Filing and Payment Requirements for Employers......Page 115
Record Keeping for Your Workers......Page 116
7. Sole Proprietorships......Page 119
Solo Income and Expenses......Page 120
Solos’ Tax Forms: Schedule C Is Your Friend......Page 122
What If My Solo Biz Loses Money?......Page 126
How Solos Are Taxed......Page 127
Record Keeping for Solos......Page 130
Outgrowing the Solo......Page 131
8. C Corporations......Page 133
Types of Corporations......Page 135
How C Corporations Are Taxed......Page 137
Tax Benefits of C Corporations......Page 142
Incorporating Your Business......Page 144
The Importance of Issuing Section 1244 Stock......Page 147
Taking Money Out of a C Corporation......Page 149
Dissolving a C Corporation......Page 153
9. S Corporations......Page 157
Should You Choose S Corporation Status?......Page 158
Tax Reporting for S Corporations......Page 161
How S Corporation Shareholders Are Taxed......Page 164
Electing S Corporation Status......Page 165
Revoking S Corporation Status......Page 167
Dissolving an S Corporation......Page 168
10. Partnerships......Page 171
Tax Reporting by Partnerships......Page 173
Tax Obligations of Partners......Page 174
Partnership Losses......Page 179
Partnership Contributions......Page 180
Selling or Transferring a Partnership Interest......Page 183
Ending a Partnership......Page 185
11. Limited Liability Companies......Page 187
Taxes......Page 188
Comparing LLCs With Other Entities......Page 189
The Limited Liability Company (LLC)......Page 190
Terminating a Limited Liability Company......Page 192
12. Qualified Personal Service Corporations......Page 195
Qualified Personal Service Corporations (QPSCs)......Page 196
QPSCs & Taxes......Page 197
Potential Tax Problems......Page 198
Dissolving a Qualified Personal Service Corporation......Page 199
13. Family Businesses......Page 201
Income Splitting Lowers Taxes......Page 202
A Spouse in the Business......Page 205
Preserving a Family Business After Death......Page 206
14. Microbusinesses and Home-Based Businesses......Page 213
Deducting Part of the Cost of Your Home......Page 214
Calculating Your Home Office Deduction......Page 218
Tax When Selling the Home Office......Page 221
A Microbusiness as a Tax Shelter......Page 222
15. Fringe Benefits......Page 227
How Fringe Benefits Save Taxes......Page 229
Meals......Page 230
Travel and Lodging......Page 231
Clubs and Athletic Facilities......Page 233
Health Benefits......Page 234
Education Benefits......Page 236
Gifts, Rewards, Discounts, and Free Services for Employees......Page 237
Special Benefits for C Corporation Employees Only......Page 238
16. Retirement Plans......Page 243
Advantages of Retirement Plans......Page 244
Overview of Retirement Plan Types......Page 245
Details About Each Type of Retirement Plan......Page 246
Where to Go for a Retirement Plan......Page 255
Potential Tax Problems With Retirement Plans......Page 256
Withdrawing Money From Retirement Plans......Page 257
Closing Your Business and Your Plans......Page 258
17. Buying a Business......Page 261
Buying the Assets of a Business......Page 262
Buying Shares of Stock......Page 263
Assigning a Price to Business Assets......Page 266
State and Local Transfer Taxes......Page 269
18. Selling a Business......Page 271
Reporting the Sale of a Sole Proprietorship......Page 272
The Importance of an Arms-Length Deal......Page 273
How to Protect Yourself From IRS Challenges......Page 274
19. When You Can’t Pay Your Taxes......Page 277
Getting More Time to Pay......Page 278
Paying in Installments......Page 279
What to Expect When the IRS Gets Serious......Page 280
Dealing With a Monster Tax Bill......Page 284
When the IRS Can Take Your Assets......Page 286
20. Audits......Page 291
Who Gets Audited?......Page 293
How the IRS Audits Small Businesses......Page 295
The Auditor’s Powers......Page 296
Should You Get Audit Help?......Page 298
What to Bring to an Audit......Page 299
What Auditors Look for When Examining a Business......Page 301
How to Behave at an Audit......Page 306
How to Negotiate With an Auditor......Page 307
Your Options After Getting an Audit Report......Page 309
When Your Audit Is Final......Page 311
21. Appealing IRS Audits......Page 313
IRS Appeals......Page 314
Contesting an Audit in Court......Page 316
22. Penalties and Interest......Page 321
Common Reasons for Penalties......Page 322
Understanding Penalty and Interest Notices......Page 323
How to Get Penalties Reduced or Eliminated......Page 324
Designating Payments on Delinquent Tax Bills......Page 326
23. Help Beyond the Book......Page 329
Finding Answers to Tax Questions......Page 330
Finding and Using a Tax Pro......Page 336
24. Answers to 25 Frequently Asked Tax Questions......Page 341
Glossary......Page 349
Appendix......Page 359
IRS Publications List......Page 360
Forms Checklist and Due Dates......Page 361
Quick and Easy Access to IRS Tax Help and Tax Products......Page 362
Index......Page 363