Thursday, May 26, 2011

9 Factors to Legitimize Your Biz

Recently I was privileged to speak at the Atlanta Professional Business Network (APBN) event celebrating National Small Business Week and the topic was how entrepreneurs can legitimize their businesses and minimize the chances of an IRS audit. We went over quite a bit of material that evening, but here are the major points:

According to the IRS, whether or not an activity is presumed to be operated for profit requires an analysis of the facts and circumstances of each case. Deciding whether a taxpayer operates an activity with an actual and honest profit motive typically involves applying nine non-exclusive factors contained in Treas. Reg. § 1.183-2(b). Those factors are:

1. the manner in which the taxpayer carried on the activity,

2. the expertise of the taxpayer or his or her advisers,

3. the time and effort expended by the taxpayer in carrying on the activity,

4. the expectation that the assets used in the activity may appreciate in value,

5. the success of the taxpayer in carrying on other similar or dissimilar activities,

6. the taxpayer's history of income or loss with respect to the activity,

7. the amount of occasional profits, if any, which are earned,

8. the financial status of the taxpayer, and

9. elements of personal pleasure or recreation.

No one factor controls, other factors may be considered, and the mere fact that the number of factors indicating the lack of a profit objective exceeds the number indicating the presence of a profit objective (or vice versa) is not conclusive. A profit objective in an earlier year does not automatically provide a taxpayer a blank check with regard to losses incurred in later years.

The bottom line for small business owners is to keep good records, operate in a businesslike manner and have a profit motive as your goal.

The Tech Accountant

Saturday, May 07, 2011

3 Ways to Fight Identity Theft & Tax Fraud

As many taxpayers continue to get over the tax filing season, there are quite a few still waiting to hear from the IRS regarding their tax refunds. Most of the time the refund claim can be tracked by using the IRS’s “Where’s My Refund” system on their site but for those taxpayers that have been the victim of identity theft; locating their refund may be a bit more challenging.

Recently in the Tampa Bay area, there were numerous cases of identity theft where someone had used the taxpayers’ names and social security numbers to file fraudulent tax returns claiming refunds. Typical cases of identity theft and tax return information include complex schemes that either intercept taxpayer information via the mail or online email phishing communication that tries to get the taxpayer to enter their personal information on what appears to be an IRS site. Currently the IRS and the Postal Service investigate any cases of identity theft and tax information.

So what’s a taxpayer to do if they think they are a victim of identity theft and tax return information? Here are 3 Steps one should take:

1. If the IRS contacts you that your identity has been used for tax fraud, respond to the correspondence ASAP. Identity theft and tax issue notices will outline if more than one return has been filed with your information or that you have wages from an employer that you do not know.

2. If you have not been contacted by the IRS, and you think that you have been a victim of identity theft and tax fraud, submit a copy of your identification, a police report detailing the incident, and Form 14039 to the IRS.

3. Contact the IRS Identity Protection Specialized Unit at 1-800-908-4490

Identity theft and tax fraud are on the rise currently and taxpayers must do everything they can to protect their personal information from getting in the hand of unscrupulous persons. By taking a proactive approach, the risk of losing one’s identity can be minimized.

The Tech Accountant

Wednesday, May 04, 2011

3 Steps to a Smoother Tax Season

Now that tax season is over, many small biz owners are getting back into the groove of running their operations and focusing on the rest of the year. As tax season was winding down, I had a great deal of small biz owners approach me and ask what they can do to make tax season move a bit more smoothly next year. The majority of the problems that small biz owners are facing are closing their books on time, organizing their important documents for tax season, and getting those documents to their tax professional for tax preparation.

Usually the answer is better organization and proactive tax planning throughout the year, but after I make that comment, most small biz owners look at me with a blank stare. Now I would like to provide a bit more detail regarding how to streamline their business operations and stay on top of everything before tax season comes back around. Here are three steps to getting your small biz ready for next tax season:

1. Use a computerized accounting system
2. Scan important documents
3. Use a file storing system

Listen here for more details on getting your biz ready for next filing season.


These are just a few of the things that a small business owner can use to streamline their business operations and get them ready for a smooth tax season next year. With a little assistance, a small biz owner can have a less taxing season next year.

The Tech Accountant