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Tax Tips for Businesses​


Domestic Production Deduction
 If your business is engaged in a qualifying production activity you may be able to take a tax deduction for your U.S. based business activities. The deduction is limited to income arising from qualified production activities in whole or in part based in the United States. The following are qualified production activities.

  • Manufacturing based in the United States,
  • Selling, leasing, or licensing items that have been manufactured in the United States,
  • Selling, Leasing, or licensing motion pictures that have been produced in the United States,
  • Construction services in the United States, including building and renovation of residential and commercial properties,
  • Engineering and architectural services relating to a US-based construction project,
  • Software development in the United States, including the development of video games.
If you have a business that falls into any of these categories and you are not looking at this deduction, you could be missing out on a valuable tax break. Contact us to see if this deduction is for you.       

Organizational and Start Up Costs
Have you just started a new business? Did you know expenses incurred before a business begins operations are not allowed as current deductions? Generally, these start up costs must be amortized over a period of 180 months beginning in the month in which the business begins. Luckily congress passed a bill letting businesses deduct up to $10,000, for 2010 only. If you want to deduct a larger portion of your start up cost in the first year, a new business will want to begin operations as early as possible and hold off incurring some of those expenses until after business begins.       

Business or Hobby?
 It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make    a profit. If you do not carry on your business or investment activity    to make a profit, there is a limit on the deductions you can take.

  You must include on your return income from an activity from which you do not  expect to make a profit. An example of this type of activity is a hobby  or a farm you operate mostly for recreation and pleasure. You cannot  use a loss from the activity to offset other income. Activities you do  as a hobby, or mainly for sport or recreation, come under this limit. So  does an investment activity intended only to produce tax losses for the investors.

  The limit on not-for-profit losses applies to individuals, partnerships,  estates trusts, and S corporations. For additional information on these entities, refer to business structures. It does not apply to corporations other than  S corporations.

  In determining whether you are carrying on an activity for profit, all the  facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether:
  1. You carry on the activity in a business-like manner,
  2. The time and effort you put into the activity indicate you intend to make    it profitable,
  3. You depend on income from the activity for your livelihood,
  4. Your losses are due to circumstances beyond your control (or are normal    in the start-up phase of your type of business),
  5. You change your methods of operation in an attempt to improve profitability,
  6. You, or your advisors, have the knowledge needed to carry on the activity    as a successful business,
  7. You were successful in making a profit in similar activities in the past,
  8. The activity makes a profit in some years and the amount of profit it makes,    and
  9. You can expect to make a future profit from the appreciation of the assets    used in the activity.


Business Eligibility for Schedule C-EZ
Your business may be eligible to use the abbreviated Schedule C-EZ    instead of the longer Schedule C when reporting business profit and loss    on your federal income tax return, according to the IRS.    That’s because the deductible business expense threshold for filing    Schedule C-EZ of the Form 1040 is $5,000. This change    allows an additional 500,000 small businesses to file the C-EZ rather than    Schedule C.

  Schedule C-EZ, Net Profit from Business (Sole Proprietorship), is the simplified  version of Schedule C, Profit or Loss from Business (Sole Proprietorship).

  Schedule C-EZ consists of an instruction page and a one-page form with three  short parts — General Information, Figure Your Net Profit, and Information  on Your Vehicle. The instruction page includes a worksheet for figuring the  amount of deductible expenses. If that amount does not exceed $5,000, you should  be able to use the C-EZ instead of Schedule C.   Contact us to learn more!       

Deductible Home Offices
Whether you are self-employed or an employee, if you use a portion of your    home exclusively and regularly for business purposes, you may be able to    take a home office deduction.

  You can deduct certain expenses if your home office is the principal place  where your trade or business is conducted or where you meet and deal with clients  or patients in the course of your business. If you use a separate structure  not attached to your home for an exclusive and regular part of your business,  you can deduct expenses related to it.

  Your home office will qualify as your principal place of business if you use  it exclusively and regularly for the administrative or management activities  associated with your trade or business. There must be no other fixed place  where you conduct substantial administrative or management activities. If you  use both your home and other locations regularly in your business, you must  determine which location is your principle place of business, based on the  relative importance of the activities performed at each location. If the relative  importance factor doesn't determine your principle place of business, you can  also consider the time spent at each location.

  If you are an employee, you have additional requirements to meet. You cannot  take the home office deduction unless the business use of your home is for  the convenience of your employer. Also, you cannot take deductions for space  you are renting to your employer.

  Generally, the amount you can deduct depends on the percentage of your home  used for business. Your deduction will be limited if your gross income from  your business is less than your total business expenses.  Please contact  us for more!       


Filing Deadline and Payment Options
If you’re trying to beat the tax deadline, there are several options  for last-minute help. If you need a form or publication, you can download copies  from the Forms page on our website. If you find you need more time to finish your return, you can get  a five or six month extension of time to file using Form 7004, Application for Automatic  Extension of Time to File Certain Business Income Tax, Information, Other Returns. And if you have  trouble paying your tax bill, the IRS has several payment options available.

  The extension will give you extra time to get the paperwork to the IRS, but  it does not extend the time you have to pay any tax due. You have to make an  accurate estimate of any tax due when you request an extension. You can  also send a payment for the expected balance due, but this is not required  to get the extension. However, you will owe interest on any amounts not paid  by the March 15 deadline, plus a late payment penalty if you have paid less  than 90 percent of your total tax by that date.       

Refund, Where’s My Refund?
Are you expecting a tax refund from the Internal Revenue Service this year?    If you file a complete and accurate paper tax return, your refund should    be issued in about six to eight weeks from the date IRS receives your return.    If you file your return electronically, your refund should be issued in about    half the time it would take if you filed a paper return — even faster    when you choose direct deposit.

  You can have a refund check mailed to you, or you may be able to have your  refund electronically deposited directly into your bank account. Direct deposit  into a bank account is more secure because there is no check to get lost. And  it takes the U.S. Treasury less time than issuing a paper check. If you prepare  a paper return, fill in the direct deposit information in the “Refund” section  of the tax form, making sure that the routing and account numbers are accurate.  Incorrect numbers can cause your refund to be misdirected or delayed. Direct  deposit is also available if you electronically file your return.

  A few words of caution — some financial institutions do not allow a joint  refund to be deposited into an individual account. Check with your bank or  other financial institution to make sure your direct deposit will be accepted.

  You may not receive your refund as quickly as you expected. A refund can be  delayed for a variety of reasons. For example, a name and Social Security number  listed on the tax return may not match the IRS records. You may have failed  to sign the return or to include a necessary attachment, such as Form W-2,  Wage and Tax Statement. Or you may have made math errors that require extra  time for the IRS to correct.

  To check the status of an expected refund, use "Track My Refund" an interactive  tool available on our links page. Simple online instructions  guide you through a process that checks the status of your refund after you  provide identifying information from your tax return. Once the information  is processed, results could be one of several responses.       

Your Appeal Rights
Are you in the middle of a disagreement with the IRS? One of the guaranteed    rights for all taxpayers is the right to appeal. If you disagree with the    IRS about the amount of your tax liability or about proposed collection actions,    you have the right to ask the IRS Appeals Office to review your case.

  IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important  taxpayer rights. During their contact with taxpayers, IRS employees are required  to explain and protect these taxpayer rights, including the right to appeal.

  The IRS appeals system is for people who do not agree with the results of an  examination of their tax returns or other adjustments to their tax liability.  In addition to examinations, you can appeal many other things, including:
  • Collection actions such as liens, levies, seizures, installment agreement    terminations and rejected offers-in-compromise
  • Penalties and interest
  • Employment tax adjustments and the trust fund recovery penalty
Appeals conferences are informal meetings. The local Appeals Office, which  is independent of the IRS office that proposed the disputed action, can sometimes  resolve an appeal by telephone or through correspondence.

  The IRS also offers an option called Fast Track Mediation, during which an  appeals or settlement officer attempts to help you and the IRS reach a mutually  satisfactory solution. Most cases not docketed in court qualify for Fast Track  Mediation. You may request Fast Track Mediation at the conclusion of an audit  or collection determination, but prior to your request for a normal appeals  hearing. Fast Track Mediation is meant to promote the early resolution of a  dispute. It doesn’t eliminate or replace existing dispute resolution  options, including your opportunity to request a conference with a manager  or a hearing before Appeals. You may withdraw from the mediation process at  any time.

  When attending an informal meeting or pursuing mediation, you may represent  yourself or you can be represented by an attorney, certified public accountant  or individual enrolled to practice before the IRS.

  If you and the IRS appeals officer cannot reach agreement, or if you prefer  not to appeal within the IRS, in most cases you may take your disagreement  to federal court. But taxpayers can settle most differences without expensive  and time-consuming court trials.
For more information on the appeals process, please contact us!       

Information about IRS notices
It’s a moment any taxpayer dreads. An envelope arrives from the IRS — and  it’s not a refund check. But don’t panic. Many IRS letters can  be dealt with simply and painlessly.

  Each year, the IRS sends millions of letters and notices to taxpayers to request  payment of taxes, notify them of a change to their account or request additional  information. The notice you receive normally covers a very specific issue about  your account or tax return. Each letter and notice provides specific instructions  explaining what you should do if action is necessary to satisfy the  inquiry. Most notices also give a phone number to call if you need further  information.

  Most correspondence can be handled without calling or visiting an IRS office,  if you follow the instructions in the letter or notice. However, if you have  questions, call the telephone number in the upper right-hand corner of the  notice, or call the IRS at 1-800-829-1040. Have a copy of your tax return  and the correspondence available when you call so your account can be readily  accessed.

  Before contacting the IRS, review the correspondence and compare it with the  information on your return. If you agree with the correction to your account,  no reply is necessary unless a payment is due. If you do not agree with  the correction the IRS made, it is important that you respond as requested.  Write an explanation why you disagree, and include any documents  and information you wish the IRS to consider. Mail your information along  with the bottom tear-off portion of the notice to the address shown in the  upper left-hand corner of the IRS correspondence. Allow at least 30 days for  a response.

  Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you. Be sure to keep copies of any correspondence with your records. If you’ve received a notice and are confused about what to do next, please contact us and we can help!

Charitable Contributions
When preparing to file your federal tax return, don’t forget your contributions  to charitable organizations. Your donations can add up to a nice tax deduction  for your corporation or your personal taxes if you are a member of a flow-through business entity and itemize deductions on IRS Form 1040, Schedule A.

Here are a few tips to help make sure your contributions pay off on your tax return:
You cannot deduct contributions made to specific individuals, political organizations  and candidates, the value of your time or services and the cost of raffles,  bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.
Organizations can tell you if they are qualified and if donations to them are deductible. has an exempt organization search feature to help you see if an organization is qualified. IRS Publication 78, Cumulative List of Organizations, lists all charitable organizations except those most recently granted tax exempt status. Pub. 78 is available online and in many public libraries.   Alternatively, contact us for more!


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