Sunday, April 29, 2007

Tax Relief is on the way for Small Business…Hopefully

The Senate Finance Committee and the House Ways and Means Committee have come to an agreement on the tax package that would give relief to the many small businesses in the country. This bill will provide nearly 5 billion in tax relief for small businesses if passed. The major portion of the bill is a 3 ½ year extension of the Work Opportunity Tax Credit which accounts for more than 2.5 billion of the tax relief. The bill also proposes:

Tax preparer penalties for understating liabilities on income tax returns would also be raised

a new penalty on claims for refunds that are filed without any reasonable basis would raise an estimated $100 million

increase the expensing limits of Section 179 of the tax code -- which allows businesses to deduct the cost of certain types of property on their taxes as an expense -- by $17,000, to a total of $125,000, through 2008

Extending the enhanced credit for low-income housing and treating certain qualified Gulf Opportunity Zone repairs or reconstruction as “qualified rehabilitation” for purposes of bond rules;

Allowing an unincorporated business owned jointly by a married couple to file as a sole proprietorship, instead of a partnership;

Modifying the “kiddie tax” -- the point at which a child's unearned income is taxed at the parent's rate -- to increase the age from under-18 to under-19, or under-24 for students (intended to prevent parents from shifting income to children to take advantage of lower tax rates); and,

Doubling the period before which the Internal Revenue Service must stop imposing fees and penalties on taxpayers who have not been notified of a deficiency, from 18 months, to 36 months.

These changes can make a big difference in your tax planning strategy for 2007 and beyond if signed into law. Be sure to speak with your trusted advisor to ensure that your tax strategy is in line with these potential changes.

Keeping your Business N Synergy as always :-)

Brian N. Stovall

Sunday, April 22, 2007

Tax Season is over, but Tax Planning Isn’t

The 2007 tax filing season is over and I’m sure many accountants and tax professionals are looking forward to some vacation time. There are however, the people that filed extensions (as always), and the IRS has extended the deadline for the following groups:

Northeast storm victims have until April 26 2007 to file their returns
Virginia Tech Shooting victims have until October 15 2007 to file
Intuit customers had until April 20, 2007 to file due to a “database” problem

There is still a little work out there for everyone to focus on before these deadlines past which makes it a great time to continue tax planning for the current year. Many individuals and small business owners think that tax time is the only time for planning. When this attitude is taken, the filer along with the accountant take on a reactive role instead of a proactive role in planning for the future. It is more beneficial for the filer to work proactively with their tax advisor before making major purchase decisions and/or any changes in the strategic vision of the company. This way the accountant along with the tax filer can work out the best scenario to minimize their tax liability for the year. Typically your tax planning should be done on a quarterly basis unless there are major changes during the quarter. In the coming weeks we will address some of the tax law changes and how they will affect your 2007 tax return filing in 2008. Be sure to check in for these tips may assist you and your accountant in keeping your Business N Synergy in 2007.

We are already in the 2nd quarter of 2007 so tax planning should be an integral role in your overall strategy.

Brian N. Stovall

Sunday, April 15, 2007

Senate’s Reaction to the Recent Tax Problems

Congress is now putting together a plan to close the tax gap and clamp down on the many fraudulent returns being filed by taxpayers. The Senate Finance Committee meeting hearing “Filing Your Taxes: An Ounce of Prevention is Worth a Pound of Cure” is focusing on the filing of fraudulent returns similar to the ones filed by many Jackson Hewitt franchises in the past years. Oddly enough the IRS and the Senate are at war with who to blame. Committee Chairman Max Baucus (D-MT) feels that the IRS is not doing their job and the IRS Commissioner Mark Everson feels that there needs to be more funds allocated to the IRS for enforcement.

The ultimate goal of the Senate is to introduce another bill similar to S. 832 filed last year which would make tax preparers required to take an exam to prove they are competent in preparing tax returns and that they are also registered with an independent administrative entity. It appears that changes to the tax and accounting industry are coming soon. This will benefit everyone as a whole in the long run. Be sure that your tax returns are prepared by a professional and you can lower your risk of a fraudulent return being filed on your behalf.

Brian N. Stovall

Sunday, April 08, 2007

Hewitt’s Rotten Egg/Small Business Lay More Eggs

With the Easter season upon us, I was somewhat surprised (but not really) by the news of Jackson Hewitt’s run in with the Justice Department. If you haven’t heard the news yet, Hewitt is accused of defrauding the government out of more than 70 million dollars by filing fraudulent tax returns using phony W-2’s and claiming bogus deductions and tax credits. The franchises affected are in Chicago, Atlanta, Detroit, and Raleigh and it even alleges that managers and employees were in on the scam. For many individuals, it may be a better idea to go to a trusted advisor or purchase software and file your taxes yourself. You will definitely come out better, and you will also stay away from those refund anticipation loans that typically take a majority of your hard earned dollars. I wonder how business is doing at Hewitt offices these days. Hewitt officials have launched an internal probe into the allegations. We’ll see what happens.

There was however good news this week from the small business/self employed front. According to an article in USA Today, the Labor Department saw the number of self employed individuals rise by 132,000 from February to March of this year. The self employment rate also edged up to 8.6% of all private sector employment. This is great news for the small business sector (see last weeks post). Small businesses are the backbone of our economy and with the sector growing, everyone will benefit.

Just may want to seek tax assistance from someone other than Hewitt. Happy Easter everyone and continue to keep your Business N Synergy.

Brian N. Stovall

Sunday, April 01, 2007

Mixed Small Business News

With tax season almost over, many small business owners scramble to finalize the all their records to ensure a smooth tax filing process. In actuality, many small business owners are not aware that for corporations, the tax deadline is March 15th not April 15th. Hopefully small business owners filed extensions 6months using Form 7004. A recent survey conducted by Rasmussen Reports LLC for Discover Small Business Watch states that a quarter of small business owners feel that tax season is a distraction from growing their business. With the proposed changes to the tax code (see previous blog post) for small business in the next few years, this burden could increase substantially.

Not all the news from the survey was bad however; almost 50% of small business owners feel that the economy was getting better. This is up from 44% of respondents in February. The small business owner feels better about the economy than their larger Wall Street counterparts. This in turn means that the small business owner feels better about their cash flow situation in the coming quarters of the year. It will be interesting to see how things pan out as the year progresses.

The survey also stated that almost 75% of small business owners used a tax pro to prepare their taxes and handle all the paperwork that comes with filing. Hiring a tax pro may be a good idea for a small business owner. By passing their tax information to a professional, the small business owner can focus on bringing in more business, thus keeping their Business N Synergy.

Brian N. Stovall