In small business, it’s not about how many units of goods or services are sold. It’s about how much is left in your pocket, making every tax break matter. With small businesses still struggling to stay afloat, new laws to reduce federal taxes have come at an ideal time.

Among the provisions from the American Recovery and Reinvestment Act (ARRA) scheduled to expire for 2010 returns are decreased estimated tax payments for certain small businesses and additional Section 179 expenses. The expanded Net Operating Loss carrybacks will also expire. However, if you filed your 2009 tax return on time without electing the carryback, you have until Oct. 15. 2010, to make the election for either 2008 or 2009 losses.

One ARRA change carrying over to 2010 returns is the capital gains tax break for individual investors selling or exchanging small business stock. Stock must be acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. Up to a 75 percent gain can be excluded on individual returns, but is limited to the greater of 10 times the taxpayer’s basis in the stock, or a $10 million gain from stock in the small business corporation.

The health care reform legislation, the Patient Protection and Affordable Care Act, enacted a tax credit for small businesses and tax-exempt organizations paying at least half the cost of single coverage for employees. To qualify, businesses must have less than 25 full-time equivalent (FTE) employees earning wages averaging less than $50,000 per employee per year. Because the credit is FTE-based, the business may have more than 25 employees. The maximum credit is 35 percent of premiums paid in 2010 and 25 percent of premiums paid by eligible employers.

The 2010 standard mileage rates are lower than 2009 rates to reflect lower transportation costs. Beginning Jan. 1, 2010, the standard mileage rates for use of an automobile for business, charitable, medical or moving purposes became:

• 50 cents per mile for business miles driven
• 16.5 cents per mile for medical or moving purposes
• 14 cents per mile in service of charitable organizations.

Consider using do-it-yourself tax preparation software like TaxACT Home & Business Bundles that cost under $55. Each Bundle includes TaxACT Deluxe and State, and your choice of 1065, 1120S or 1120C software. TaxACT releases preview versions of its federal programs each October, which allows small business owners to get a head start on their returns and create a year-end tax plan. Visit http://www.taxact.com for details.

- Courtesy NUSA

As a small business owner you may hire people as independent contractors or as employees.

There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.

Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.

The IRS uses three characteristics to determine the relationship between businesses and workers:

Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.

Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.

Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.

Employers who inaccurately classify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

Workers can avoid higher tax bills and lost benefits if they know their proper status.

Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.

You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also http://www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also http://www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also http://www.payUSAtax.com).

You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at http://www.eftps.gov.

An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.

You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account.  For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options visit http://IRS.gov.

The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list every taxpayer should be aware of this summer.

Phishing
Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov.

Return Preparer
Fraud Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.

Hiding Income Offshore
Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.

Abuse of Charitable Organizations and Deductions
The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.

Frivolous Arguments
Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.

For the full list of 2010 Dirty Dozen tax scams or to find out how to report suspected tax fraud, visit http://IRS.gov.

The type of legal formation you select for your business can have a most important influence on the success or failure of your undertaking.

This is because your ability to take decisions speedily, to compete in the market-place and raise extra money if necessary is directly related to the legal structure of that business.

There are fundamentally three legal structures to choose from: sole proprietorship, partnership and corporation or limited company. No one form is better than another per se, because each has its own peculiar advantages and disadvantages. Therefore, what is imperative is to select the legal structure that is best for you.

There are a number of questions that you should ask yourself to help you decide which kind of business to select. What do I already know about this sort of business? In which areas of the business will I need assistance? How much money will I need to get started? Where will I be able to get money from, if I want to expand later? What types of risks will I be exposed to later? How can I limit my liability? What kinds of taxes will I be required to pay?

Sole Proprietorship
More than 75% of all businesses in the United States are sole proprietorships. The fundamental nature of this sort of business is that they are owned by just one person and usually, that person is directly concerned in the day-to-day running of that business. As a sole proprietor, you have complete responsibility for that business and all the profits from that business will be yours as well, as will all the debts and liabilities.

The benefits of a sole proprietorship are that you are the only boss, it is very easy to get started, you keep all the profits, revenue from the business is taxed as your personal income and you can stop whenever you like. The disadvantages are that you take on unlimited liability, your ability to raise investment capital is limited, you have to be able to do everything yourself from book-keeping to advertising, retaining high-quality employees can be difficult and the life of the business is limited to your own life time.

Partnership
A partnership is when two or more people share in the ownership of the business. The partners are accountable for every decision collectively, although decision-making might be divided up unevenly by agreement of all partners equally. All agreements ought to be written down, preferably in the company of a solicitor.

The advantages of a partnership are that you get the benefit of other opinions, it is simple to get started, more investment capital is available, partners pay only personal income tax, high-quality employees can be made partners to encourage them to stay. The disadvantages are that partners have limitless responsibility, profits must be shared,partners, may quarrel and the lifetime of the partnership is limited by death.

Corporation
A corporation differs from the other models of company, because a corporation is though of as a ‘person’ by the law. It has a completely separate life from its owners. As such it can sue and be sued..

The benefits of a corporation are that stockholders have limited liability, corporations can raise the most investment capital, they have an unlimited lifespan, ownership is easily transferable and they make use of experts. The disadvantages are that they are taxed twice, starting up is costly and they are more closely regulated.

About the Author:
Owen Jones writes on many subjects, but is currently involved with researching the best virus protection software. If you have an interest in such software, please go over to our website now at Computer Antivirus Software.

If you don’t have the money to pay your income taxes by the due date, you have three choices:

• You can pay late for a monthly fee of 1 percent of the balance due per month, $10 on a $1,000 tax. (Be sure to file on time even if you can’t pay.)

• You can set up a payment plan with the IRS for a one-time fee of up to $105.

• Or, you can pay by credit card. If you think you can soon pay off the charged taxes, there may be advantages.

The Advantages:

• It’s convenient – taxpayers can e-file or paper- file early and make a payment by credit or debit card later, to delay out-of-pocket expenses. Payments can be made by phone, Internet or when e-filing.
• It’s safe and secure – standard, commercial card networks are used. The IRS does not receive or store card numbers.
• These electronic tax payment options are available through service providers.
• There is a fee charged by service providers. Fees are based on the amount of the payment and may vary by service provider (see table below).
• Payment information will not be disclosed for any reason other than processing the transaction authorized by the taxpayer.
• A confirmation number is provided at the end of the phone or Internet transaction.
• The “United States Treasury Tax Payment” is included on the card statement as further proof of payment. The convenience fee will be included on the statement as a “Tax Payment Convenience Fee” (or similar transaction).
• If enrolled in such a program, taxpayers may earn miles, points, rewards or money back from the credit card issuer.

The Disadvantages:
Unless you have a low-interest deal, you could pay a lot of interest before the credit card charge is paid. There are costs. The IRS charges a convenience fee of 2.49 percent of your bill. If you owe $1,000, the fee will be about $25. A new, large charge on your credit card could affect your credit score, especially if the tax charge puts you over 50 percent on your card limit.

For more information on ePay service providers and applicable fees, visit the IRS website.

by: Bernard B. Kamoroff, C.P.A., author of 422 Tax Deductions for Businesses

Tax Filing Season is here, and there are still several things you can do to reduce your taxes for 2009. Here are Seven Tax Tips that can possibly save you a lot of money on your 2009 taxes. Remember, “It’s not how much money you make, it’s how much money you keep!”

Tip #1. For businesses on the cash accounting system (most small businesses), expenses are usually deducted the year paid. However, if you charge any business expenses to your bank credit card (VISA, MasterCard, American Express, or Discover) you can deduct those expenses the year incurred even though you pay them in the next year. Go through your December charges and add them to your December expenses.

Tip #2. Normally, the cost of your inventory (goods for sale, parts) cannot be written off until sold. But if you have any damaged inventory, inventory that is out of date or out of fashion, goods unsalable for any reason, you can write off this inventory for 2009.

Tip #3. Your business expenses are deductible even if you paid them from your non-business bank account, personal credit card or debit card, or cash. Take a few minutes and go through all of your expenses for the year. If the expenses were for your business, deduct them. (Does not apply to corporations).

Tip #4. Manufacturers, and some construction, engineering and architecture firms, software developers, and video producers, are eligible for a 9% “manufacturer’s deduction” for income earned from domestic production. This “bonus” deduction is in addition to the deductions already allowed for manufacturing expenses.

Tip #5. In addition to your deductible business expenses, you may qualify for special “Tax Credits” available to businesses. Tax credits are very specific and limited, but if you qualify, the credits reduce your taxes dollar for dollar. Tax credits can be a real tax pot-of-gold.

Tip #6. You can put some of your business profit into an IRA or a SEP-IRA, and not pay income taxes on the profit until you withdraw the money. You have until April 15, 20010 to set up and contribute to an IRA or a SEP-IRA for the 2009 tax year.

Tip #7. Finally, and one almost sure way to reduce your taxes, is to re-examine every purchase, every expense you made in 2009. Make sure you’ve taken all the business tax deductions you are entitled to: expenses you didn’t record in your ledgers, expenses you didn’t think were deductible, “personal” expenses that qualify as business expenses. Neither the IRS nor your accountant is going to know about a deduction you forgot to take. It’s entirely up to you.

Seven Tax Tips for Business are excerpted from 422 Tax Deductions for Businesses and Self-Employed Individuals by Bernard B. Kamoroff, C.P.A., 9th Edition, 2010. http://www.bellsprings.com.

It’s time to gather your receipts and income statements. Tax time is approaching, and you might as well get a handle now on how much work you will have to do.

When you have made a list of your possible deductions, you can determine whether to use the Standard Deduction form or to itemize. Put the amount of Standard Deductions next to your list total to determine which is greater.

Don’t forget to calculate above-the line deductions. They are important because they decrease your Adjusted Gross Income before deductions. They are allowed even if you take the Standard Deduction.

Health Savings Accounts are one example. You can claim a deduction for money you paid into the HSA and money paid into it for you by someone other than your employer.

Another above-the-line deduction is a tax break that is part of the American Recovery and Reinvestment Act of 2009. The above-the-line deduction is the amount of state and local sales taxes paid on up to $49,500 for the purchase of a new car, light truck, motor home or motorcycle, if it was bought between February 16 and December 31, 2009

The IRS offers these tax tips:

1. If you file electronically instead of using a paper tax form, you will receive your refund in as few as 10 days.

2. Check the identification and Social Security numbers for each person listed. Missing or incorrect numbers will delay your tax refund.

3. Double-check your figures if you are filing a paper return. Check to see that you have used the right figure from the right tax table.

4. Sign the form. Both spouses and the tax preparer must sign it or it will be sent back to you for a signature.

5. When mailing a return, use the coded envelope included with your tax package or check the section called “Where Do You File?”

6. Electronic payment options are convenient and safe for paying taxes. Authorize an electronic funds withdrawal or use a credit or debit card.

7. An extension of time to file a return should be filed by the April due date. It is not an extension of time to pay so if you have an idea of how much you owe, include a check.

8. If you are sending a check with your paper return, make it out to “United States Treasury” and enclose it with, but not attach it to, the tax return or the Form 1040V Payment Voucher. The check should include the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.

Does an extra $5650 in your pocket sound good to you?

I thought that it might. When it comes to tax refunds, it literally PAYS to know the facts.

If you qualify for the Earned Income Tax Credit (EITC), that just may be the case this year. The credit is available to many low-to-moderate-income individuals and families that earn less than $49,000 annually.

Nationally, the IRS estimates that 25 percent of eligible taxpayers are unaware they qualify for the credit. And as income changes qualify even more people for the EITC, that percentage is expected to rise. In addition, working families with three or more children may qualify to get more money due to recent tax law changes.

Getting Help With Taxes
How can you tell if you or your family qualifies for the EITC? There are a number of free services to help:

Free Tax Preparation
Hundreds of local United Ways work with community partners to provide free tax preparation and other services at Volunteer Income Tax Assistance sites nationwide. Since 2006, Bank of America has invested $4.5 million to support the United Way Earned Income Tax program and launch the United Way Financial Stability Partnership. The bank has expanded support for free tax preparation services to 61 cities, contributing to the completion of more than 1.1 million free tax returns and more than $1.2 billion in total tax refunds to lower-income families. In addition, bank associates volunteer their time to help working individuals and families claim valuable tax refunds.

United Way also partners with the Walmart Foundation, One Economy and National Disability Institute to make free tax preparation more accessible to lower-income working families. By providing a free self-preparation option for federal and state taxes for families that earn less than $58,000, United Way is increasing the number of working families that access the EITC and avoid costly filing fees. As part of this partnership, Walmart sponsored the creation of the MyFreeTaxes.com tour that will visit 30 cities nationwide to promote the service and train people to complete and file their taxes online. The Walmart Foundation is also supporting 91 volunteer-assisted tax preparation campaigns across the country. Combined, this effort will help return $1 billion in total tax refunds to qualifying, low-income families throughout the U.S. Last year, this partnership contributed to the completion of more than 650,000 tax returns, for a total of $950 million in tax refunds and a savings of $45 million in tax preparation fees.

Where to Find Free Tax Preparation
You can dial 2-1-1 to find out where to get free tax prep help or to learn more about tax preparation programs. You can also visit http://www.myfreetaxes.com.

ezW2 users can now upload employee, contractor and tax data from outside programs and spreadsheets.

Halfpricesoft.com added the new feature to its popular software in response to requests from customers. The data upload feature significantly reduces time spent entering data.

Now it’s easier than ever for small business owners and tax preparers to print and file W2′s and 1099′s this tax season. Newly released updates to the 2009 edition of ezW2 software now allow users to import employee and contractor data from other programs and spreadsheets.

Louisville, Kentucky-based Halfpricesoft.com created and distributes ezW2, including the recently-added data upload feature at the request of customers who enjoyed many of the other features in the 2009 release.

“It’s important to us that ezW2 be exactly what our customers need it to be,” said Halfpricesoft.com founder Dr. Ge. “Many of our users keep employee data in other software programs and wanted an easy way to import that data to ezW2.”

The new feature added to ezW2 allows users to import employee lists, contractors lists and certain tax information from .csv files—a common format used by spreadsheet software. Users can export their data from other programs and spreadsheets into the .csv format and then import it into ezW2 2009. This saves customers time, because they don’t have to enter all the information for each employee and contractor by hand. The data import function is straight forward and easy to use, says Dr. Ge.

Released in December, ezW2 2009 is the latest release of this popular tax-related software designed with non-accountants in mind. The 2009 edition includes all state and federal updates needed for filing W2, W3, 1096 and 1099 forms in the 2010 tax season.

Also new to the 2009 release of ezW2 is the ability to print two sets of W2 or 1099 data on one red form sheet. Print one employee’s or contractor’s data on the top half of the sheet and another on the bottom. Business owners can now cut costs for red form sheets in half.

The software is available for free download on the HalfPriceSoft.com website. This is not a demo or trial version. All features are available and there are no time limitations. It is the complete software. However, documents will print with a “DEMO” or “SAMPLE” watermark across each page until a license key is purchased. The license key is just $39.

For more information about ezW2 2009 and Halfpricesoft.com, please check this 1099 w2 software at http://www.halfpricesoft.com/w2_software.asp.