Sykes Accounting

CLASSIFICATION WARFARE

2012-01-09T16:11:00.000-08:00

      In the past some companies have misclassified an employee as an independent contractor and although there is no bright-line test as to whether a worker is an employee or an independent contractor. The IRS is in the works to change that.

    Many companies in the past have found that treating a worker as an independent contractor was more beneficial because they avoided paying taxes and did not have to offer benefits such as medical, sick pay, vacation pay and workers compensation. In some cases a lot of employers also paid these independent contractors cash to avoid withholding of taxes, or avoid immigration status.

   Now in the upcoming year the IRS is wanting to put a stop to companies that treat a worker as an independent contractor rather then an employee. The IRS plans to go directly to source (the employer) and suggest they treat those contractors as employees. In essence this is to help keep track of those who are avoiding taxes and hopefully it will produce more revenue.

DO YOU KNOW WHAT THE NEW AND EXTENDED ENERGY EFFICIENCY PROVISIONS ARE?

2011-12-12T09:00:00.000-08:00

These credits are a great way to make improvements on residential homes while reducing your income tax. These credits include, the Nonbusiness energy property credit and the Residential Energy Efficient Property Credit. The actual credit is set to expire however there is talk of extending it. The IRS suggest that taxpayers should act fast and take advantage of this credit.

Insulation materials, exterior windows and doors, central air conditioners, natural gas, non solar heaters are just a few energy efficient items that will allow you to use 10% credit of cost. However, new construction and rentals do not qualify. This dollar for dollar tax credit is a long term benefit of reduced energy consumption.

A credit that will expire December 31, 2016 is a part of the Residential Energy Efficient credit. This has to do with Solar energy systems. Which includes Solar heaters, solar water heaters, solar heat pumps, etc. This credit is used for new and existing homes, however it will not qualify for rental properties. Also apart of the Residential Energy Efficient credit is a fuel cell credit. This credit is provided for the acquisition of microturbine systems installed in new and existing homes.

If you have any questions regarding Energy Efficiency taxes please call us for an appointment or go to our website at www.sykesaccounting.com

DO YOU KNOW WHAT TAX PROVISIONS ARE EXPIRING?

2011-12-09T09:00:00.000-08:00

As 2011 is almost at an end there are several income tax provisions that are schedule to expire with the close of the year. Some of the more significant ones affect the tax treatment of fixed assets. Here are just a few:

- Depreciation deduction for qualifying property placed in service after September 8, 2010 and through 2011 which was increased to 100% will revert to 50% bonus depreciation deduction.

- Fifteen year straight-line cost recovery for qualified leasehold improvements, qualified restaurants buildings and improvements, and qualified improvements will expire also.

- Special expensing rules certain film and television productions allowing a deduction for qualified costs, rather then capitalizing and amortizing the costs under the income forecast method will also expire.

There will also be changes impacting Businesses which may include:

- The tax credit for research and experimentation expenses only applies to amount paid before January 1, 2012.

- The credit for construction of new energy-efficient homes available to eligible contractors will not apply to homes acquired after December 31, 2011.

- The new market tax credit for employers who hold a qualified equity investment in a qualified community development entity will no longer be in place after 2011.

If you don't understand what this means for you go to our website which s full of information and call us for an appointment. www.sykesaccounting.com

SELF-EMPLOYMENT DEDUCTIONS

2011-12-08T09:00:00.000-08:00

This self-employment deduction can't be taken by everyone, the taxpayers who do qualify are:

- A self-employed individual with a net profit for the tax year (code Secs. 162(I)(1), 40(C)

- A partner with the net earning from self-employment (Code Secs. 162(I)(1), 401(C)).

- An S corporation shareholder who owns more then 2 percent of the outstanding stock of the S corporation and has wages from the S corporation (Code Secs. 162(I)(5) , 1372 (a)).

This deduction was developed to place self-employed individuals on a level playing field with the employees, who are allowed to exclude the cost of employer-provided health care cost from gross income on your 1040 tax return.

How do you know if you qualify?

To qualify for the deduction, a shareholder must have wages reported to him by the corporation on Form W-2, Wage and Tax Statement. However, sometimes the deduction will not be available during which such a taxpayer was eligible participate in any employer-subsidized health plan maintained by the employer of the taxpayer, the taxpayers spouse, or the dependent.

We offer a one on one sit down to help you understand your tax situation and any questions you have. Make an appointment and call 1-800-921-0829

WHAT TO DO IF YOU DON'T RECEIVE YOUR REFUND

2011-12-07T09:00:00.000-08:00

Do you know what to do if you don't receive your IRS refund?....

The IRS has 153.3 million dollars in undelivered tax refund checks. Which averages out to 1,547 for the taxpayers that didn't receive their refund. All of these errors occurred because of a mailing address error.

If you are a taxpayer who believes their refund check may have been returned to the IRS, then you should use the "Where's My Refund" tool located on the IRS website. The tool will give you the status of your refund and, in some cases, instructions on how to resolve delivery problems.

Although only a small percentage of checks mailed out come back undelivered, taxpayers can simply avoid that issue by switching to direct deposit when they file paper or electronic returns. However, the IRS suggest that filing your return electronically will reduce the amount of lost paper returns, reduces errors on tax returns and it will speed up refunds.

Please go to our website at www.sykesaccounting.com where you will find more information regarding taxes, starting a business and other topics.

Changes in 2012

2011-11-21T08:53:00.000-08:00

For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation. By law, the dollar amounts for a variety of tax provisions, will affect every taxpayer, must be revised each year to keep pace with inflation. A new dollar amount will effect returns in 2012, filed by most taxpayers in early 2013, include the following:

-The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
-Standard deductions for married couples filing joint returns will go up $300 from the 11,900 it is. It will also go up $150 for those who file single or married filing separately and nearly $200 for those who file head of Household. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- The tax-bracket thresholds will increase in each filing status.

Credit, deductions and other discontinuations;
- In 2012, the maximum earned income credit for low and moderate income workers and working families will rise to 5,891 up from 5,751 in 2011. The maximum income limit for EITC rises up to 1,192. This credit will vary by the size of your family, filing status and other factors. The maximum credit will go to married couples who file jointly with three or more qualifying children.
-Foreign earned income deduction will increase by 2,200 from 2011 maximum credit deduction.
-In 2012 the annual deductible amount for Medical Savings Account will increase from the 2011 tax year.
-The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

INFLATION ADJUSTMENTS INCREASED TAX BENEFITS IN 2012

2011-11-18T09:00:00.000-08:00

The IRS announced that there are 738,000 tax return preparers who must renew their Preparer Tax Identification Numbers (PTINs) before January 1, 2012. They must do it before the year begins. Preparers who used paper applications to receive their PTINs will receive an activation code in the mail from the IRS which they can use to create an online account to convert to an electronic renewal for 2012. Individuals can also renew by using a paper Form W-12 PTIN application. Yet renewing electronically avoids a four to six week wait for processing the renewal request. There have been changes made for the upcoming 2012 tax season that will include:

- Return preparers must self-identify that they are supervised preparers or Non-1040 preparers.

- Supervised preparers will need to provide a supervisor PTIN when applying or renewing their PTINs.

- Credentialed preparers (certified public Accountants, attorneys, unrolled agents) must provide the expiration date for their license when they apply for their new PTINs.

Taxpayers who use a paid preparer are urged to choose a return preparer with a Valid PTIN. Preparers should also sign the returns they prepare for taxpayers and enter their PTINs.

YOUR RIGHTS AS A TAXPAYER

2011-11-17T09:00:00.000-08:00

The IRS employees will explain and protect your rights as a taxpayer throughout your contact with them. They will not disclose to anyone the information you give them, except as authorized by law. You have the right to know why the IRS is asking you for information, how they will use it, and what happens if you do not provide requested information. If you believe an IRS employee has not treated you in a professional manner, you should ask for a supervisor or write the IRS director.

Should you ever get audited, you have the right to represent yourself or with proper written authorization, have someone else represent you. Your representative must be a person such as an attorney, enrolled agent or certified public accountant, or someone allowed to practice before the IRS.

IRS expects you to be responsible for and to pay only the correct amount tax that owe. If you can not pay the amount in full you may qualify for monthly installment payments. If you disagree with IRS about you tax liability or certain collection actions you have the right to appeal the decision within IRS or as a court to review your case. However you may have to pay the tax first if you go to court.If you owe penalties and interest IRS may waive them if you can show you acted reasonably or on good faith, or if an error or delay was caused by an IRS employee. It’s always great to have an understanding of your rights because this will help you in resolving any problem with IRS.

IRS WORKING WITH BUSINESSES

2011-11-14T09:00:00.000-08:00

The IRS has created a new outreach that will remind employers about upcoming extensions and deadlines. They will also provide details on other important information about credits, including:

- Businesses who have already filed and later determine they are eligible for the credit, they can always file an amended return such as form 1120X or 1040X

- Businesses without tax liability can still benefit. The small business job act of 2010 provided that for 2010 and after eligible small businesses may carry back unused general business credits (including the employer health care tax credit) from about 5 years. Small businesses who did not have tax liability should evaluate their eligibility for the small business tax credit.

-Businesses that couldn't use the credit in 2010 can claim it in the future years. “Many Businesses” Businesses that are locked into a health insurance plan for 2010 may not have the opportunity to make any needed adjustments to qualify for the credit for 2010. These businesses may a be eligible to carryover the credit to 2011 or later tax returns.

US TAXPAYERS HOLDING FOREIGN FINANCIAL ASSETS

2011-11-11T09:00:00.000-08:00

The Foreign Account Tax Compliance Act has required that certain U.S. taxpayers that have foreign financial assets with an aggregate value exceeding 50,000 is to report information about those assets. A new form has been created (Form 8938) and it must be attached to the taxpayers tax return. You must report the assets for the taxable year starting March 18, 2010 and after.The failure to report foreign financial assets can result in a penalty of $10,000 or more. As well as underpayment of tax attributable to non-disclosed foreign financial assets will be subject to an additional 40% penalty.

HAVING A BUSINESS PLAN

2011-11-10T09:00:00.000-08:00

Many people every year consider opening up a business, yet have no business plan or don't know where to start. When considering opening up a business you must realize the effort and strategy that goes into it. There are questions that one needs to ask himself.

1. What does success look like? People naturally think that success in business is measured by growth and profit. But in contrast it's also measured by consistency and having some money in the bank. Also, keeping up to date on taxes is a big ordeal when owning a business. The IRS is not hesitant to put a levy on your business bank account until your taxes are paid and depending on how you maintain your corporation it may also affect your personal bank account. Success is keeping up with the tax laws and being consistent in your profits.

2. What approach do you want to use in managing your business? Do you want to use the team approach in which your team has input in your decisions or a star approach you make all important decisions without any counsel. Are you prepared to pay the fees for a corporation, an LLC, Etc? If not then you should consider staying a sole proprietorship.

3. Where do you want your business to go? Sometimes when a business is successful owners want to branch out and open another business(could be the same kind of business) somewhere else. Due to the internet and social media it has made it easier to do business anywhere around the world. Just remember tax laws in every state are different and there may be restrictions that also apply in other states as well.

CLAIMING INCOME

2011-11-09T09:00:00.000-08:00

Whether you file your taxes yourself or have a preparer file them it is necessary that the proper information be given before e-filing your return. If not it can come with alarming consequences in form of penalties and interest. In order to e-file an accurate tax return, preparers are relying on the client to give them every detail of income, expenses, interest, stocks...etc. Giving the proper information can help you avoid an audit and any other complications with the IRS. This upcoming tax season the IRS will be looking for unclaimed income. IRS is slowly closing in on those who sell and produce income from Ebay, Craigslist, Etsy and other sites that can help an individual generate revenue. It is necessary to keep all receipts for income or expenses made, it will be to your benefit if there is ever an audit. Once again, anything that will generate revenue is considered income so keep track of it.

INCOME CHANGES FOR 2012

2011-11-02T09:30:00.000-07:00

The IRS has announced many new changes for the upcoming tax season. A lot of changes have been made due to inflation and will have an impact on every taxpayer.
Changes Include:

1. Personal and dependent exemptions will increase from $100 to 3,800.

2. Standard deductions have increased in all categories including a $300 increase for married couples filing jointly.

3. There will be an increase in Tax-Bracket thresholds.

4. The maximum earned income tax credit will increase to 5,891 from 5,751.

5. An increase in the income phase out level for married couples that pay student loan interest.

The IRS will also increase the contribution limit for certain retirement accounts. In 2012, the new limit applies to 401(K)s, 403(b)s, the government's Thrift Savings Plan and some 457 plans. There will also be changes to Roth IRAs and pension plans, such as increasing the amount contributed.

TIPS FOR EMPLOYERS WHO OUTSOURCE PAYROLL

2011-10-29T13:59:00.001-07:00

Although outsourcing to third parties can streamline business opportunities, the IRS reminds employers that they are liable for paying tax liabilities. Recent accusations have inquired individuals & companies who-act under the guise of a payroll service provider, have stolen funds intended for payment of employment taxes make it important that employers who outsource payroll understand the following information.

A. It is the responsibility of the employer for the deposits and payment of federal and tax liabilities. If the third party fails to make the federal tax payments the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. However, the IRS can also hold the individual liable for certain unpaid federal taxes.

B. If the employer has an issue with an account, the IRS will send a correspondence letter to the address they have on record. And they strongly suggest you do not change the address of the payroll service provider , reason being is to keep you informed of legal tax matters regarding your business.

C. IRS suggest that using a Payroll service provider that uses the Electronic Federal Tax Payment System is the best way to go.

HEALTH BENEFIT MANDATES

2011-10-26T11:35:00.000-07:00

At the beginning of next year insured group health plans will have to provide coverage for behavioral health treatments such as pervasive developmental disorders or Autism. And California included that health plans must provide coverage to same sex spouses or domestic partners regardless of where employers principal place is located. Also, employers who have group plans cannot discriminate against participants on the basis of gender identity or gender expression. California is adding new changes to health care, taxes etc. Again, at the beginning of 2012 the are going to start a New-Hire Procedure, which in details ask employers to provide each employee at the time of hiring written notices that detail certain information related to wages, the employer's contact information and employer's workers' compensation insurance carrier.

TAXPAYER ADVOCATE SERVICE

2011-10-20T09:42:00.000-07:00

The IRS Taxpayer Advocate Service is temporarily changing the criteria used for accepting cases and said it would no longer deal with cases that involves the IRS delay of processing certain tax documents. TAS said they will focus on taxpayers who need the most assistance and will temporarily limit the acceptance of cases involving delayed processed tax documents.

The TAS will determine who will meet the criteria and who they consider is experiencing an economic burden.

HELP IS ON THE WAY

2011-10-17T09:16:00.000-07:00

IRS has announced that there will be help from the IRS for individuals and small businesses struggling to meet their tax obligations. To help people get a fresh start they plan to change adjustments to IRS Lien policies in a few ways.

1. By increasing the dollar threshold when liens are issued, resulting in fewer tax liens.

2. They want to make it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

3. Withdrawing liens in most cases where taxpayers agree to a Debit Installment Agreement.

As for small businesses, IRS would create easier access to Installment Agreements for struggling businesses.
Last, the IRS wants to expand the streamlined Offer in Compromise to cover more taxpayers.

PREPARERS REQUIRED TO USE FORM 8867

2011-10-11T10:58:00.000-07:00

This week the IRS has announced that it would be required for paid tax return preparers to file a due diligence checklist Form 8867 with any federal returns claiming the Earned Income Tax Credit. In essence it was designed to reduce errors on returns claiming the EITC. This checklist will help preparers be accountable for what they enter in when filing the EITC for their clients.The EITC benefits low-and moderate-income workers and working families. However, the credit varies by income, size and filing status. Taxpayers can get it even if they owe no tax but they must be eligible.

7 Tax Saving Tips Part3

2011-08-31T11:09:00.000-07:00

This is Part 3 of my series on the topic 7 Tax Saving Tips. We've been filming many segments that are aired on Literary Speak a Pasadena cable show.

GOOD RECORD KEEPING CAN REDUCE TAX TIME STRESS

2011-08-29T11:28:00.000-07:00

     Getting organized in the summer is a great way to get ready for next years tax season. Here are a few tips that may help you prepare.

      1. Keep documents and receipts that you think are going to have an impact on your tax return.

     2. Bills, mileage logs, invoices, and other receipts are some things you should keep track of. Most importantly keep track of money spent on home improvements, stock and other investments, rental properties etc...

    3. If you're a small business owner you should keep track of Gross Receipts, Invoices, Bank Deposit Slips, Proof of purchases, Expense Documents, Documents to Verify your assets, etc.

All this information here will help you keep track of your tax information. Not only will it make it easier on yourself but it will also make it easier on your tax preparer. The best part about keeping track of everything is it will help you if you ever get audited.

Sykes Accounting: TEN TIPS FOR TAXPAYERS WHO OWE MONEY TO THE IRS

2011-08-10T09:48:00.000-07:00

Sykes Accounting: TEN TIPS FOR TAXPAYERS WHO OWE MONEY TO THE IRS: "No one likes to pay taxes and it seems to be more painful when you cannot pay the amount you owe to IRS in one payment. The IRS has announ..."

TEN TIPS FOR TAXPAYERS WHO OWE MONEY TO THE IRS

2011-08-10T09:46:00.000-07:00

No one likes to pay taxes and it seems to be more painful when you cannot pay the amount you owe to IRS in one payment.

The IRS has announced an effort to help struggling individuals and businesses meet their tax obligations without adding unnecessary burdens.

    1. Get a loan if possible to pay your tax bill, it is cheaper than paying installments.

    2. Ask for additional time to pay. If you can pay the amount in one payment but do not have the money
        readily available you can call 800-829-1040 or go to www.irs.gov.

    3. You can pay by credit card if you get reward credits this may take some of the pain away knowing you can use those reward credits for something you want. However, there are fees involved and the interest may not be deductable.

    4. You can pay by Electronic Funds Transfer. The amount would be deducted from your bank account using the Electronic Federal Tax Payments System. You can access this by calling 800-555-4477 or online at www.eftps.gov.

    5. Installment Agreement. You can request an installment agreement to pay a certain amount each month but you must have all tax returns filed and be current with any estimated tax payments

   6. If you owe 25,000 or less you can request an installment online at www.irs.gov.

   7. You can use form 9465 to request an installment. After filling out the form you mail it to IRS and in    about 30 days IRS will let you know if it is accepted or not.

   8. If you owe more than 25,000 you will need to complete form 433F Collection Information Statement before IRS considers your request for an installment agreement.

   9. If the installment agreement is approved there will be a user fee depending on your income and which option you choose it can be $43, $52 or $105.

  10. Taxpayers can also have the amount they owe taken from their paychecks by adjusting their W-4, Employee Withholding Allowance Certificate to have more tax withheld.

EQUITABLE RELIEF

2011-08-05T13:10:00.000-07:00

The Internal Revenue Service announced that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests. What this means is that a married couple who filed a joint tax return both are liable for 50% of the tax due unless one does not pay then the other is liable for 100%. This usually happens in a year involving a divorce.

Equitable Relief Under Section 6015(f ) allows for equitable relief of taxes owed when a spouse files a joint tax return and relief is not available under Section 6015(b) or (c). However there was a two year deadline to request equitable relief of taxes under subsection (f).

Even though the courts have upheld the validity of the two-year deadline to request equitable tax relief the IRS launched a thorough review of the equitable relief provisions and issued Notice 2011-70 which eliminates the two-year deadline.

"In recent months, it's became clear to me that we need to make significant changes involving innocent spouse relief" said IRS Commissioner Doug Shulman.

Start A Business Part 2

2011-07-29T13:11:00.000-07:00

In Part 2 of "Start A Business" we talk about such topics as Strategy, who's targeting small businesses, What sets my company apart from H&R Block and Turbo Tax, How long do you have to Finance your company, and much more. With the right information given to you, you may be able to start a business. I'm here to answer your questions and help you get started. Go to our website www.sykesaccounting.com or you can reach me directly at 562-864-2341

FEDERAL/STATE BASIC PAYROLL TAX SEMINAR

2011-07-15T12:22:00.000-07:00

You are invited to attend, at no charge, a Federal/State Basic Payroll Tax Seminar
Wednesday, August 3, 2011 from 9:00a.m to 3:00p.m.
            At: WorkSource/Career Partners
                  3505 N. Hart Ave.
                  Rosemead, Ca 91770

You will learn:
      . California payroll reporting requirements: forms, employer obligations, reporting,
          and payment requirements
       . Independent Contractor reporting requirments
       . Electronic filing and payment requirements and options
       . Federal payroll reporting requirements: Forms 940, 941, 1099, W-2, W-4, W-9, and
           alternative filing

There is no charge for this seminar. Reservations are recommended. Use the Internet: www.edd.ca.gov/payroll_tax_seminars/, or telephone (888) 873-6086

For additional seminar dates, times, locations and subjects, please check EDD's Internet site as shown above

Starting A Business Part 1

2011-07-14T11:15:00.000-07:00

I have a reoccuring spot on Literary Speaks and we discuss issues such as Starting Businesses, Taxes, Audit and much more. If you're interested in starting a business or have a tax question feel free to go to my website at www.sykesaccounting.com or email me. There are also many other Videos on Youtube, please check them out.

FUTA SURTAX IS NO LONGER IN EFFECT

2011-07-09T12:00:00.000-07:00

Beginning July 1, 2011 the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. Thus, the FUTA tax rate, before consideration of state unemployment tax credits,is now 6.0%

Under code Sec. 3301(1), the .02% FUTA surtax expired on June 30, 2011. The surtax was part of the 6.2% gross unemployment tax rate that employers paid on the first $7,000 of wages paid annually to each employee (6% permanent tax rate, 0.2% temporary surtax). The surtax has been in effect in every year since 1976, when it was enacted by Congress on a temporary basis. Since legislation hasn't been enacted to extend the surtax, the FUTA tax rate, before consideration of state unemployment tax credits, now drops to 6.0%, effective July1, 2011.

Changes in California's Sales Tax Collection

2011-07-06T15:55:00.000-07:00

Governor Brown has signed a bill that expands the definition of "retailer engaged in business in the state" to include retailers having agreements with persons in California to refer potential purchasers to the retailer through an internet-based link or an internet website, or other means. In addition, the legislation requires retailers to collect sales tax when they have an agreement with another member of the retailer's commonly controlled group to perform services in California in connection with tangible personal property to be sold by the retailer. (L. 2011,A28(c.7) effective 6-28-11.)

"Click-through nexus," The legislation requires retailers to collect sales tax when there exists what is commonly know as "click-through nexus." A retailer is considered to be engaging in business in California, and thus required to collect tax on sales to purchasers in the state, when the retailer enters into an agreement under which a person in California, for a commission or other consideration, refers potential purchasers of tangible personal property to the retailer, whether by an internet-based link or an internet website, or other means. For nexus purposes, a "retailer" includes an entity affilated with a retailer for federal income tax purposes under IRC sec 1504. The retailer's activities must meet the following thresholds before "click-through nexus" will apply (both conditions must be met):

(1) the total cumulative sales price from all of the retailer's sales, within the preceding 12 months, of tangible personal property to purchasers in California that are referred pursuant to all such agreements with a person or persons in California, is in exess of $10,000 and

(2) the retailer, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in California in excess of $500,000.

IRS CHANGES TAX FILING EXTENSION FROM 6 TO 5 MONTHS FOR PARTNERSHIP, ESTATE AND TRUST RETURNS.

2011-06-30T14:04:00.000-07:00

The Internal Revenue Service has issued final regulations shortening the automatic extension time period for partnership, trust, and estate tax returns from six to five months, meaning the returns are due Sept. 15.

The final regulations in TD 9531 put in place a temporary change that was originally created in July 2008. Those temporary and proposed regulations reduced the automatic six month extension of time to file to five months for certain pass-through entities, including most partnerships, estates, and certain trust.

As these pass-through entities were previously allowed to obtain an automatic six-month extension of time to file certain returns under 2005 regulations, the Treasury Department and the IRS requested comments on whether, and how, a five-month extension of time to file for these pass-through entities might increase or reduce overall taxpayer burden. Approximately 10 comments were received in response to the notice of proposed rule making. A public hearing was held on Jan 13, 2009. Three speaker appeared at the public hearing and commented on the notice of proposed rule making.

Pass-through entities used to be entitled to an automatic three month extension of the time to file certain returns by filing one form, and could also request a discretionary additional three-month extension of time to file by filing s second for. TD 9229 provided temporary regulations that simplified the extension process by allowing most taxpayers, including pass-through entities, to obtain a six-month.

IF YOU FILE YOUR TAXES TOO LATE YOU MAY LOSE YOUR REFUND

2011-06-27T16:13:00.000-07:00

The Court of Appeals for the Fifth Circuit has denied an employer's refund claim, even through the employer had overpayments in certain quarters that were not applied to its withholding tax liability [Nicholas Acoustics & Specialty Company, Inc. v., CAS, 107 AFTR 2d ||2011-950,6/15/11].

Between 1999 and 2003, Nicholas Acostics & Specialty Company, Inc. (Nicholas) remitted payroll taxes to the IRS, but failed to file any tax returns. The funds remitted were not for the exact amount owed, but were instead an estimate of the amount due. The company occasionally paid taxes in excess of its liability. Nicholas erroneously assumed that the IRS could apply all of its overpayments to other quarters in which it had underpaid its tax liability.

In 2003, the IRS audited Nicholas due to its failure to file its tax returns. After the audit, Nicholas filed returns for the missing quarters, which allowed the IRS to refund overpayments or credit the overpayments to certain quarters in which a deficit had occurred. The IRS said that it could only refund or credit Nicholas's overpayments for returns due within the past three years because of the statute of limitations. Nicholas still owed taxes for the period in question, even after the IRS made the adjustments. The IRS filed a lien against Nicholas, which Nicholas paid before seeking a refund. Nicholas contended that the shortfall wouldn't have occurred if the IRS had applied all of the company's overpayments to future or past quarters.

The IRS classifies a remittance of taxes as either a payment or a deposit. If a tax remittance is determined to be a deposit, it is treated like a cash bond, which the IRS simply holds, an a taxpayer may seek a refund of the deposit at any time. But if a remittance is deemed a payment, the taxpayer may only recover the money by filing a timely claim for refund.

WORK OPPORTUNITY CREDIT

2011-06-24T11:55:00.000-07:00

IRS has released a draft of form 5884, Work Opportunity credit taxpayer to claim this tax credit, which is scheduled to expire for employees who begin work after 2011. For many taxpayers, information previously reported on the form would now be reported directy on Form 3800 General Business Credit.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation At of 2010 extended Code Sec. 51 work opportunity tax credit four months to include individuals who began work before Jan 1, 2012. Under pre-Act law, wages for purposes of the credit didn't include any amount paid or incurred for an individual who began work after Aug. 31, 2011.

The credit allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of the first-year wages up to $6,000 per employee($12,000 for qualified veterans; and $3,000 for qualified summer youth employees). Where the employee is a long-term family assistance (LTFA) recipient the credit is a percentage of the first and second year wages, up to $10,000 per employee. Generally, the percentage of qualifying wages is 40% of the first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. For LTFA recipients, it includes an additional 50% of qualified second-year wages.

The targeted groups are:

Qualified IV-A recipients Cqualified recipients of aid to families with dependent children or successor program)
qualified veterans;
qualified ex-felons
designated community residents (i.e. the former "high-risk youths" targeted group but with the maximum age requirement raised and the residency requirement expanded to include rural renewal residents)
vocational rehabilitation referrals
qualified summer youth employees
qualified food stamp recipients
qualified SSI (supplemental security income) recipients
long-term family assistance recipients, i.e. members of a family that receives or received assistance under a IV-A program for a minimum period of time
unemployed veterans and disconnected youths who began work for an employer after 2008 and before 2011.

Taxpayers use form 5884 to claim the work opportunity tax credit for qualified first- or second-year wages paid to or incurred for targeted group employees during the tax year. A taxpayer's business doesn't have to be located in an empowerment zone, renewal community, or rural renewal county to qualify for this credit. Taxpayers can claim or elect not to claim the work opportunity tax credit any time within three years from the due date of their return on either an orginal return or an amended return.

As noted above, the work opportnuity tax credit is scheduled to expire for employees who begin work after 2011. In addition, the renewal community designations expired at the end of 2009. Wages paid or incurred for services performed after 2009 by a designated community resident or summer youth employee who lived in a renewal community may no longer qualitfy for the work opportunity tax credit unless the designation is extended.

IF YOU MAKE A PRODUCT IN THE U.S. YOU MAY BE ABLE TO SAVE ON YOUR TAXES.

2011-06-22T14:25:00.000-07:00

Form 8903 Domestic Produciton Activities Deduction (DPAD) is for those businessess that make a product in the United States and Puerto Rico. It is available to individuals, corporations, cooperatives, estates, and trusts. For those businesses that are pass through entities such as partnerships and S corporations the partners or shareholders take the deduction on their personal tax returns.

The DPAD is not just for oil and gas companies any individual or entity can qualify as long as it has Qualified Produciton Activities Income (QPAI).

Domestic Produciton Gross Recipts (DPGR) is

Construction of real property you build in the united States in your construction trade or business.
Engineering or Architectural services trade or business for the construction of real property in the United States. Any lease, rental, license, sale, exchange, or other disposition of the following.

a. Qualifying produciton property you manufacture, produce, grow or extract in whole or in significant part in the Unitd States. Qualifying Production Property is Tangible personal perperty, Computer software, Sound recordings (there are limitations and exclusions please see the instructions for form 8903 at IRS.GOV).
    3.   Any qualified film you produce.
    4.   Electricity, natural gas, or potable water you produce in the United States.

What is not considered DPGR is:
    1.   Activities not attributable to the actual conduct of a trade or business.
    2.   The sale of food and beverages you prepare at a retail establishment.
    3.   The lease, rental, or license of property between certain persons treated as a single employer.
    4.   The lease, rental, license, sale, exchange, or other disposition of land.
    5.   The transmission or distribution of electricity, natural gas, or potable water.
    6.   Advertising and product-placement; however, see Regulations section 1.199-3(i)(5)(ii) for exceptions.
Customer and technical support, telephone and othertelecommunications services, online services (including internet access services, online banking services, providing access to online electronic books, newspapers, and journals). See Regulations section 1.199-3(i)(6)(iii) for exceptions.

TAX RELIEF: FORM 982 MAY REDUCE YOUR TAXES.

2011-06-21T11:33:00.000-07:00

If you received a form 1099-C (Cancellation of Debt) for a loan modification, foreclosure, or short sale of your primary residence, you maybe able to reduce the amount of income to be included in your income tax return from form 1099-C. Form 982 is used to show reduction of the amount of debt included as income from several sources but I am only going to discuss the part that pertains to a primary residence.

In order to use form 982 for your primary residence you must have Qualified Principal Residence Indebtedness. This is a mortage that you took out ot buy, build, or substantially improve your main home. Also the debt is secured by your main home. If the amount of the orginal mortgage is more than the cost of your main home plus improvements, only the debt that is not more the cost of your main home plus improvements is qualified principal residence indebtedness.

The amount of exclusion applies only to debt discharged after 2006 and before 2013. The maximum amount you can treat as qualified principal residence indebtedness is $2million ($1million for married filing separately).

If only part of the loan is qualified principal residence indebtedness, the exclusion applies only to the extent the amount discharged exceeds the amount on the loan (immediately before the discharge) that is not qualified principal residence indebtedness. For example, your main home cost $1million, of which $800,000 is qualified principal residence indebtedness. If your home is sold for $700,000 and $300,000 of the debt is discharged, only $100,000 of the debt discharged can be excluded. The other $200,000 is nonqualified debt, it may however qualify under one of the other exclusions.

Mortgage Loan Modification Tax Relief

2011-06-15T09:40:00.000-07:00

If you have had a mortgage loan modification and you receive a form 1099-C (cancellation of debt) there may be some tax relief. Publication 4681 Canceled Debts, Foreclosures, Repossessions and Abandonments goes into detail about cancelled debt and defines exclusions and deductions. I am only going to discuss how this affects your primary residence.

A mortgage loan modification occurs when you and the bank agree to a reduction of the principle balance. You may receive a form 1099-C showing cancelled debt; this amount is to be included in income. However if it qualified debt (the mortgage was used to buy, build, or to substantially improve your main home) then the amount on the 1099-C line 2 or a portion of it may be entered on form 982 to be excluded from income. If you have refinanced your primary home and received money then your qualified debt may be limited to your original mortgage depending on what the money was spent on. Also the amount of debt that was not used to improve the primary residence may have to be deducted from the 1099-C amount, thus reducing what you can deduct from income. The amount entered on form 982 to be excluded from income will also be used to reduce your basis in your home.

If all of this seems complicated it is, especially if you have refinanced your home more than once.

If You Owe Taxes There Is Some Relief

2011-06-13T10:47:00.000-07:00

In February of this year IRS made major changes to its practice of filing tax liens. These changes include:

Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
Creating easier access to Installment Agreements for more struggling small businesses.
Expanding a streamlined Offer in Compromise to cover more taxpayers.

When IRS files a tax lien it notifies the public that the taxpayer's property can be used to satisfy a tax debt. This adversely affects a person's credit making it harder to get a loan to pay off the debt. To help taxpayers IRS has raised the lien threshold to 25,000. Also, IRS will allow Installment Agreements on amounts owed under 25,000 without submitting a financial statement but a lien may be filed. In order to not have a lien filed or to have it withdrawn the taxpayer must have a Direct Debit Installment Agreement.

Installment Agreements and Small Businesses

IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate. If the tax debt is 25,000 or less the small business can use the streamline Installment Agreement and can have up to 24 months to pay.

Offer in compromise

An Offer in Compromise is an agreement between a taxpayer and IRS that settles the taxpayer's tax liabilities for less than the full amount owed.

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to 100,000 to participate. In addition, participants must have a tax liability of less than 50,000.

Tax Form 1099K

2011-06-10T12:33:00.000-07:00

The 1099K Merchant Card and Third Party Network Payments form is now available. This form was created to account for monies that merchants who accept credit and debit cards received. Some businesses have a separate bank account for their merchant services or may be using a foreign merchant service company and may not report all the income received when preparing their taxes. On the form 1099K each month is shown separately so that the total on line 1 equals the total of the all the months. This form should be mailed by January 31 just as all other 1099s. It will be mailed from the merchant service company to all its customers. If the total number of transactions are less than 200 or the total amount of transaction dollars is less than $20,000 for the year a 1099K may not need to be issued.

California-Taxes: New Home Credit

2011-06-09T10:57:00.000-07:00

The Franchise Tax Board (FTB) has issued an update on the estimated application and reservation requests received for the New Home Credit. As of May 24, 2011 the FTB has received 21,390 ( up from 21,250 as of May 17) resevation requests and 31,280 (up from 31,110) applications. This is different from the federal because there was no seperate application. The FTB will stop accepting applications when it has received sufficient applications to allocate the full $100 million. This is different from the federal because there was no limit. New homes closing escrow in 2011 are only eligible for the New Home Credit if the is purchased pursuant to an enforceable contract executed on or before December 31, 2010. This is different from the federal which ended April of 2010. Claimants should continue using the 2010 forms for homes purchased pursuant to an enforceable contract in 2010, but closing in 2011. Taxpayers who applied or the New Home Credit for a purchase that closed escrow in 2010 and have not yet received a determination from the FTB, may either: get an extension to file their tax returns(to avoid penalties and interest, compute and pay any balance due as if their application will not be approved) or file now, but do not claim the credit (if their application is approved they may then file an amended return). This process is different from the federal New Home Credit because you apply for the credit when you file your taxes. If you do not have the correct documentation or if there is an audit your credit may be denied,

Tax Preparer Exams

2011-06-08T15:12:00.000-07:00

IRS is asking for public comment on Tax Preparer Exams.
This means that you can make suggestions on what topics tax preparers should be tested on or if you feel they should have to take a test at all. In developing the exam IRS would like to know if you think the examination should concentrate in a certain area of tax law or cover all areas in general. Do you feel the exam should be multiple choice, true or false, writtern problems or short answers or a combination of all. Also how often should the exam be given once a year or several times a year and when can a person apply and how often they can apply if they need to retake the test.

To make suggestions and comments about the Tax Preparer Exams email IRS at Notice.Comments@irs.counsel.treas.gov before July 7, 2011.

Are You Ready For The Audit Part 2

2011-05-20T11:16:00.000-07:00

http://www.youtube.com/watch?v=h239HhRVVSA

Asykes Audits Part 1

2011-03-14T16:07:00.000-07:00

My series on Audits and Taxes

SMALL BUSINESS JOBS ACT OF 2010

2010-12-13T12:01:00.000-08:00

As we approach the end of the year I would like to talk about some tax law changes that may be of benefit to your business.

On September 27, 2010 The Small Business Jobs Act of 2010 (SBJA) was enacted. It's purpose is to spur growth and help small businesses in particular.

One provision that may help self employed business owners is the Sect 2042: Deduction for health insurance costs in computing self-employment taxes in 2010. Generally small business owners may not deduct the cost of health insurance when computing self-employment tax. Under (SBJA) with specific limitations the business owner may deduct the cost of health insurance for themselves and their families when computing self-employment taxes.

Sect.2031: Increase in amount allowed as deduction for start-up expenditures in 2010 for anyone starting a new business they may be able to deduct up to 10,000 in startup expenses. However if the startup cost exceed 60,000 the deduction may be reduced dollar for dollar by the amount over 60,000. The remaining amount is amortized of 180 months.

Sect.2022: Additional first-year depreciation for 50% of the basis of certain qualified property. Generally, businesses allowed to depreciate capital assets over time, this will allow a business to take an additonal first year depreciation of 50%

Sect.2021: Increased expensing limitations for 2010 and 2011; certain real property treated as code section 179 property. This not only increases the amount of Sec 179 expense depreciation a business may take but also allows for certain real property to be expensed as well.

In my next blog I will cover some of the other provisions of the tax act.

FORM 8941: CREDIT FOR SMALL EMPLOYER HEALTH INSURANCE PREMIUMS

2010-12-06T11:35:00.000-08:00

Th Internal Revenue Service has released for the 2010 tax season form 8941 Credit for Small Employer Health Insurance Premiums along with the instructions. In general, the credit is for small employers that pay at least half of the premiums for single health insurance coverage for their employees. It will specifically help employers that employ moderate and lower income workers.

A business can claim the credit for 2010 through 2013 and for any two years after that. Those employers with 10 or fewer full time equivalent (FTE) employees paying an average wage of $25,000 or less can receive the maximum credit. The credit is phased out at 25 or more employees or average wages of more than $50,000 per year. Remember the eligibility rules in part consider the number of FTE employees the company has, so if a business uses part-time employees it may still qualify for the credit.

In reading the instructions and filling out the form 8941 I believe that unless the business is already creating reports that contain the needed information, the business owner will at least, in the beginning spend more the suggested 12 hours on record keeping that the instructions suggest.

You can download the form and instructions at http://www.irs.gov/newsroom/article/0,,id-231928

The 4 Things Every Small Business Should Consider

2010-07-21T16:12:00.000-07:00

Whether you have been in business for less than a year or over 20 years like our company you have to consider 1. Your Competition, 2. How the industry is changing. 3. How your company is changing. Now you should consider the following:

1. The Credit Crunch will be around for a long time. With the passage of financial reform, lenders will have stricter requirements which makes getting loans harder. You should consider keeping higher cash reserves, look at receivables as an option. You should look for banks that truly do want small business customers. Just as banks are becoming stricter on who they lend to, you should become picky with whom you deposit your money with.

   2. You Should Continue to Watch Expenses. Even though the economy is starting to look better it can and may have a relapse. You should consider outsourcing some functions to keep payroll down. You should review and analyze your income expenses every month or at least every quarter.

   3. Review Your Marketing Strategy. A lot of business owners stopped attending chamber networking functions because they either did not have the time to go or did not have someone to send. This is a mistake. You should attend those functions often enough to appear as a regular attendee. Then people begin to trust you and work with you. As an example attend a networking breakfast one time and a networking lunch the next time and you will begin to be recognized by those who attend both functions as a regular.

   4. There will be More Tax Audits. Whether it is federal, state or local all governments are looking for more revenue. Under the new health care law IRS is given the responsibility making sure all businesses comply with the law which means there will be more audits of small businesses. Also, the new rules to segregate income on tax returns and issuance of more 1099's will increase the chances of an audit.

Small Business Credit

2010-06-29T18:25:00.000-07:00

It is still difficult for a small business to get a line of credit or loan these days but it can be done. If you go to http://www.sba.gov/ you will see the Small Business Administration website, click on the Recovery Act button and it will take you to the overview of the American Recovery and Reinvestment Act of 2009. There are several programs for small businesses I advise you to take a look to see if you can qualify for one.

One of the requirements for any of the loan programs is that you have good credit. While the definition of "good" varies it is generally said that a score of 690 or better is needed. However a change has been occurring in the credit scoring system, you should visit http://www.vantagescore.com/ for more details. The three main credit rating agencies have created a new scoring system using their combined data information. However they will market it separately. The new scores range from 501-990. They will predict the likelihood of future serious delinquencies (90 days late or greater) on any type of account. The score is based on a 24 month review of the consumer's credit file. All three credit agencies can access this score. What is not known is if everyone's credit score will be adjusted to this new range, and if it is adjusted by how much? Please send me your views.

2010-06-15T10:41:00.000-07:00

It is the middle of June and this very deep and tough recession has taken a toll on many small businesses and we are seeing many businesses refocusing and adjusting to become stronger and more flexible. However one thing we need to pay more attention to is that governmental entities whether Federal, State or Local are refocusing and gearing up to bring in more revenue. In the Health Care Act there is a provision to hire more Internal Revenue Service Personnel, the State of California Board of Equalization is sending notices to all business that gross over 100,000 inquiring about if they should be paying us tax, and local governments are beginning to step up enforcement of business taxes. In the area where you are located, What is the government climate like?

What people should expect this tax season?

2010-03-16T15:21:00.000-07:00

This Tax season has been like none before. I have a few suggestions on how to make thing go a little smoother for you when filing your 2009 Tax Return. First of all, be very careful of what you put on you returns this year because every State and Federal Goverment needs money therefore audit are up. Refunds may be smaller and you may possibly owe because withholdings have been reduced. However, on a lighter note there are new credits this year that may help you out. There is a work opportunity credit. A credit for buying a New vehicle. The new credit for first time homebuyers. Also, if your going Green there are several credits you can take advantage of such as energy and Solar credit and credits for purchasing any Hybrid vehicle, just to name a few. There has also been an increase in Earned Income Credit. I understand that 2009 was a struggling year for many Americans I hope my information can help some of you out.

I will be speaking at several Seminars at the Los Angeles Fairplex in Pomona regarding Online Taxes and Audits.For further information go to my website at www.sykesaccounting.com

SEMINAR

2010-02-03T16:08:00.001-08:00

We will be holding a seminar entitled "Are You Ready For The Audit". It will be held on February 10,2010 from 5:30-7:00 at Los Angeles Trade Tech College. Price will be $25 must R.S.V.P by February 8, 2010. Should you have any questions you may contact me at (800)921-0829 or go to my webite www.sykesaccounting.com

Retirement Savings Planner

2009-09-18T11:07:00.001-07:00

Retirement Savings Planner- Will I have enough to meet my retirement income goals? This financial calculator estimates how much your retirement savings may be worth at your retirement age and the potential retirement income you might expect from it (based on current planning).

-Anthony Sykes
800-921-0829

Handle Curves for New-Vehicle Deductions

2009-08-26T11:28:00.001-07:00

How to qualify for a tax bargain if you are in the market for a new car or other vehicle, Uncle Sam might have a deal that interests you: Under the new economic stimulus law enacted earlier this year, you may be able to write off a sizable portion of the sales and excise taxes you pay as part of the purchase. However, there are several "twists and turns" to this new deduction, so make sure that you understand all the rules.
http://ping.fm/OGUBL

2009-08-13T13:46:00.001-07:00

To meet the needs of all our clients throughout the Los Angeles area, we also have individualized services for small businesses.

2009-08-12T13:01:00.001-07:00

At Anthony Sykes and Co. Accounting, a Los Angeles firm, we provide a wide variety of accounting, tax, and financial management services.

IRS Tax Forum

2009-07-24T13:09:00.001-07:00

It has been a busy week. At the Tax Forum I learned that IRS will be hiring 4000 to 6000 new Revenue Agents, Office Auditors and Revenue Officers this year and another 2000 next year. They probably will look at small corporations, partnerships and Limited Liability Corporations.

In the past, these entities did not get audited very often. I think the IRS will look at the tax basis the partners have in these entities. A simple definition of basis is how much money you have at risk. Also, I attended a session on Examination Audit Tools. In this session they covered what IRS maybe looking for in an audit. I attended a session on ethics. They covered different situations where a tax preparer can have their license suspended or revoked. I attended a session on S-corporations and learned more about how to do more tax planning with them. I spent some in the IRS e-services room an learned about the online newsletters and tax updates and creating a power of attorney online. Also I learned more about the IRS Oversight Board their function is to report to congress about changes for IRS.

This Saturday I will be giving a seminar for another company I am involved in called California Association of Licensed Professional Contractors Inc. (Calpro). It is aimed at contractors looking to take part in rebuilding the country’s infrastructure.

The following Saturday I will be in San Diego giving this seminar again.

2009-07-05T10:47:00.001-07:00

Payroll seminar on the 22nd... Wonder what's the lastest?

2009-04-15T12:53:00.000-07:00

Phone Number: 800.921.0829
Fax: 562.864.8787
E-Mail: sykesaccounting@gmail.com
Website: http://www.sykesaccounting.com/

I have been practicing various accounting and financial management functions for over thirty years. At the heart of what I do is a desire to help small business owners and individuals achieve more of the things they value in life - sooner - by effectively integrating tax management and accounting into what they do.

My diverse background features general management, operational management and extensive tax management responsibilities. This enables me to provide my clients an extensive experience base to tap into, overcome barriers, and confidently achieve more of what they're looking for in life, sooner than it may have come to them otherwise.

Looking at my business experience, I was the CFO for a non-profit medical clinic in Los Angeles. In terms of corporate experience, I have held accounting management positions with Johnson & Johnson and Wickes Companies. In terms of tax management, I started with the Internal Revenue Service after college, and held various positions for CCH as a Senior Tax Analyst developing tax software.

It was in 1988 that I established Anthony Sykes and Company Accounting. I did this because I recognized that each client has unique goals and from those we tailor our services to meet your specific needs. To better do this, we have individualized services for clients in industries like real estate accounting, hospitality accounting, professional services and various consumer services. These individualized services have enabled us to address industry specific challenges, compliance needs and standard tax practices.

We approach each client relationship as if we were business partners in their company. At Anthony Sykes and Company Accounting we take the time to know and understand the business and individual financial needs so that we may deliver personalized service that is deserved and expected. With our hands on-approach to client service and our creativity and experience, we are able to advise clients on the current changes and the concerns that might arise, before they become problems. That is why we stay involved with our clients and their businesses throughout the year.

For any more information you can go to http://www.sykesaccounting.com/ or give us a call at 800.921.0829

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