Archive for 'small business'

Tax Umbrella Companies : Is It Worth You Using One?

Tuesday, March 22nd, 2011 at 7:35 pm  
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Making sure that you meet your tax liabilities is something that you need to seriously consider and plan for before you start working as a freelancer or contractor. Failure to have a proper system in place could see you being hit with a big, unexpected, tax bill, and possibly even a fine too. As well as paying the right amount of taxes, you need to make sure that the system that you opt for does not make it difficult for your clients to pay you.

So, what are your options? You basically have two – set-up a limited company or utilize the services of a tax umbrella company. Setting up a limited company is the most tax efficient way to operate, and you can claim back all kinds of expenses (equipment, software, etc.). If you are only concerned with paying the least amount of taxes possible, then it is probably the best option for you.

As you would expect though, there are lots of legalities and paperwork involved with setting up a limited company. There is the cost to factor in too; it is not a cheap thing to do. As well as paying to register the company, you will also have to pay for a solicitor and an accountant. If you would prefer to avoid the hassles involved, and to focus on simply making money, then a tax umbrella company is what you need.

If you use the services of a tax umbrella company, you enter into a contract with them and effectively become a PAYE employee again. However, you get the benefits of being an employee, without the hassles. Of course, the umbrella company cannot tell you what to do, but for you they will look after your invoicing, payments and tax contributions.

The tax umbrella company system is fairly simple to use, and you can have everything set-up within a few days. Once you are in their system, you will get paid from them every couple of weeks or every month, with the amount being whatever your clients have paid for your services, minus your taxes and the fee that you have to pay the umbrella company. You should only have to pay the umbrella company a set monthly fee, and not a percentage of your earnings.

Deciding which tax umbrella company to use can be a bit of tricky process, as some of the less reputable ones try to charge you a percentage of your earnings, or make claims that are false. One false claim, which is unfortunately not that uncommon, is that if you sign up with a particular company they will give you ‘special dispensations’, implying that you can claim more expenses by using their services; however, as any accountant will tell you, these claims are untrue, and expenses are either allowed or disallowed according to taxation laws, and not at the discretion of the company that you use to calculate your payroll.

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The Reality Of Small Business Taxes

Wednesday, December 29th, 2010 at 2:51 am  
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The small business tax – a misnomer if ever there was one, what with all of the deductions that could be claimed, all of the expenses and losses that amount to thousands, or even tens of thousands of dollars a year.

Yes, let’s face it, businessmen (and women) are always crying poverty. But faraway from some tyrannical small business tax, rates are still within the range of historic lows, at thirty-some-odd percent that, adjusted by those aforementioned “expenses” and “losses” (yeah, right), can make the effective tax rate about twenty or less! Compare that to that of a single person whose net earnings are generally some twenty-five percent less his / her gross income.

To put things in perspective, consider that Republican President Dwight D. Eisenhower, who ran one of the most business-friendly administrations ever, presided over corporate taxes of more than ninety percent! And still no one ever complained to Eisenhowever about how economic growth had been affected. Yet present day entrepreneur routinely complains about being hamstrung by usurious taxes, despite the fact that there is no “small business tax.” Indeed, aside from the expenses and losses that may be claimed against what one owes Uncle Sam, the government in fact has many special subsidies in place to help small business owners!

Is it just greed, pure and simple, which makes the typical entrepreneur such a complainer with regards to sharing in the burden of funding the common good? Just what is with the Tea Party ideologues who assume that an every-man-for-himself attitude is best for society in the long run ? A strange mood has long taken hold of the country ever since Reagan, where people wave the flag while passing the buck. And yet the current financial crisis, a result of the Wild West ethos of economic libertarianism, has many demanding even less oversight and regulation!

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Tax Shelter Incorporating – Finding A Good Tax Attorner

Tuesday, February 17th, 2009 at 1:27 pm  
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Small Business Tax Attorney – What You Need To Know

No one plans to rack up tens of thousands of dollars of debt with the IRS when they open their business. Most of these problems start small. Little things, like maybe forgetting taxes for one or two payroll periods. Eventually things spiraled out of control. Now you’re up to your eyeballs in debt to the IRS with no idea where to turn for help. For serious tax problems, including large IRS debts, payroll and other employment tax problems, you need a tax attorney.

Here are some tips for finding an attorney who can successfully go to bat for you against the IRS. Why you can’t go with a typical lawyerTax law is one of the most complicated fields of law. Taking one or two tax law classes in law school doesn’t give an attorney the training or experience necessary to represent you tax helpeffectively against the IRS. It would be like going to an obstetrician for brain surgery. They’re both doctors, yes, but with very different specialties. Good tax lawyers know the IRS’s rules, and they can use those against them. They have specialized data bases/libraries they subscribe to and know how to utilize to have access to the very complicated, and constantly changing, laws and rules governing tax laws and procedures.

The stakes are too high to gamble on a lawyer without these specialized tools, training and experience in tax law. If things go wrong, the business you’ve worked so hard to build could be shut down. You personally could even go to jail. Your CPA can’t help you, either CPAs know the day-to-day accounting stuff needed to run a business and to file its tax returns. But when it comes to actually going head-to-head in controversies with the IRS, you need someone with both real litigation training and experience and a broad knowledge of how tax shelters protect incorporated businesses.

Also, be advised: you have no confidentiality privilege covering potential criminal liability with your CPA. In fact, your accountant is required by law to disclose certain accounting errors, which may land you in even bigger trouble. Consider the ramifications of having your CPA called in as the star witness against you if your case goes to trial. Look for specialized education Diplomas don’t lie. Look for specific tax experience and training. Look for a lawyer that specializes in tax law, and preferably one who graduated from a highly-rated law school, such as NYU School of Law. Try to find a lawyer with a Master’s law degree specializing in tax law (LL.M. in Taxation). Make sure they are staying current in their field as well. Laws constantly change, and you want to make sure your business doesn’t suffer with a tax attorney who’s behind the times.

References count Ask around. If you know a good lawyer or judge you trust, ask if he or she knows someone who specializes in tax cases who he or she feels comfortable recommending to you. Peer-reviewed ratings, like Martindale-Hubbell, can also give you an idea of what other lawyers are saying about the one you’re considering hiring. Ask what the Better Business Bureau has to say about the lawyer. Field experience is absolutely necessary Any time you have a controversy or a fight, you want a litigator. If you have a dangerous or complicated controversy with the IRS, your tax lawyer should also have extensive litigation experience, though very few do. You need someone who has real training and experience in dealing with conflicts and proceedings with someone who’s after you.

A significant reason why the IRS settles is because they have to consider the hazard of litigation. They are going to want to get things settled and avoid a lengthy court battle — but only if your case poses a risk to them. You need a credible threat of being able to go to court and really stand up to the IRS to get leverage to make them settle.

By: Clifford N. Ribner

Article Directory: http://www.articledashboard.com

Clifford N. Ribner serves as a tax attorney in Tulsa, Oklahoma. For more than 28 years, he has helped people with serious tax problems fight the government and win. If you’re in danger of losing your business because of tax problems, visit him online at www.cnribneratty.com.

The Stimulus’ Key Small Business Tax Provisions

17, formally known as the American Recovery & Reinvestment Act, provides $288 billion in tax relief to individuals and companies. But how much of that will benefit small business owners—and how? 

IRS Vows to Intensify Enforcement of Employment Tax Evasion

by Elizabeth Milito, senior executive counsel, NFIB Small Business Legal Center. Tools to include criminal prosecutions. The head of the U.S. Justice Department’s Tax Division has warned a group of tax attorneys that the IRS and DOJ …  

I don’t need an Attorney; I’m not in trouble

Oh yeah, and access to GoSmallBiz, the top business resource for small business owners, with answers to tax questions and much more. 

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Small Business Deductions

Monday, January 26th, 2009 at 4:37 pm  
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In an earlier article, I talked about how you, as a small business owner, can rightfully claim many small business deductions as a way to reduce your taxes. In this article, I’ll present several more. Check to see if you have included these in your tax planning.

1. Travel Expense Deductions

When flying on business, keep a detailed record of all your expenses. You can claim a deduction on your plane ticket, for example, if your business has not reimbursed you for it. Also, you can write off things like cab fare and mass transit tokens. You can even expense dry-cleaning. But for meals, you are only allowed claim a deduction for half the cost your incur for eating out.

You can even write off expenses you incur for employees and/or business associates that you are traveling with (friends and family members are out). Consult your tax professional for more details.

2. Deductions for Software

If your business uses customized computer software you can claim the expense of that software as long as you spread out the deduction over three years.

But…Section 179 of the IRS rules allow you take the write-off on computer software all in the first year, IF that software is "off-the-shelf," in other words, something like Microsoft Office.

3. Deductions for Charitable Contributions

When discussing this kind of deduction, the rules are a bit complicated. For starters, if your small business is a partnership, or if it is classified as an S corporation, or if you’re organized as a limited liability company, your members will be filing the company’s taxes on your personal forms including donations to charity that you have made. In other words, charitable donations are a "pass-through," as is the case with the company’s income. C corporations are entitled to corporate deductions.

[Note: if you don't know what kind of classification you fall under, consult your tax professional or your attorney.]

OK, then, now that is out of the way, here are the rules:

You, as an individual, can write off 30-50% of your adjusted gross income as long as the organization you are donating to qualifies as a 501(c)(3)charity or foundation.

A corporation can write off up to 10% of their taxable income.

tax prep bowling green ky If you donate more than $250 you’ll need to have a letter from that organization that confirms your contribution. Make sure you read IRS Publication 551 as well as the rules set forth in Section 179. Consult your tax professional for more details.

4. Deductions for Advertising

It’s true: you’ll either advertise your company now, or when you have your going out of business sale. Either way, advertising and marketing expenses are deductible if they are directly related to your business. They fall under the "Miscellaneous" category of write-offs. Check out IRS Publication 535 and consult your tax professional for more details.

5. Deductions for Legal and Professional Fees

OK, I saved this one for last because it relates directly to the thing I’ve said many times already: "Consult your tax professional for more details."

Fact is, fees you pay to your attorney and/or accountant are deductible under certain conditions. For example, you can’t write off professional fees you expend when you buy a business asset (e.g., equipment). In that case, you include the charges in the cost of the purchase.

If your business is organized with you as the sole proprietor, you can take a deduction for the costs you incur on tax preparation. You would claim the expense on your Schedule C or C-EZ. Not only that: you would use your Schedule A from your Form 1040. Call your CPA or tax professionals for all the details.

Last but not least:

Uncle Sam wants you to be a success at business. It’s good for the economy when you are. That said, they are more than willing to give you plenty of ways to reduce your tax liability through the use of write-offs and deductions. You have a great opportunity — if you choose to use it.

For More Small Business Tax Help, visit Ara Rubyan’s Your Tax Help Online.

By Ara Rubyan
Published: 11/28/2007

 
Top IRS Tax Questions For Small Business Owners
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Small Business Tax Tips
Looking for more small business tax tips? For a free copy of the Special Report "How To Instantly Double Your Deductions", visit www.YouSaveOnTaxes.com.
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