Tag Archives: IRS

Business Deductions Not Allowed Due To Lack of Substantiation

Posted on
by

In a recent tax court case, the taxpayer who is a self-employed nutritional supplement salesperson, deducted expenses for travel, vehicle, meals and entertainment allegedly related to his sales business.  Even though the taxpayer kept a mileage record on his calendar, the record lacked specific and necessary information on how and why the mileage was related to business.  The taxpayer supplied a spreadsheet to the court in support of his deducted meals.  However, he admitted that many of his meals were eaten alone.  The tax court concluded that the records and substantiation supplied were not reliable and could not be considered “adequate records” as required by the tax code.

The morale of the story…Document, document, document!  Each claimed meal and mile must be directly related to or associated with an active trade or business or for the production of income.  And specific documentation must be kept to substantiate the deduction.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

A Few Tax Mistakes To Avoid

Posted on
by

While taxes are complicated, there are some mistakes that are pretty easy to avoid. Keeping the following items in mind will help to keep you out of trouble with the IRS.

  1. Not filing a tax return because you can’t afford the tax.  Paying taxes on time and filing a tax return on time are two separate issues, and have separate penalties.  Even if you can’t afford to pay the tax due, you should still file a tax return.  On the flip side, you should still pay the tax due even if you can’t get your tax return done on time.
  2. Never ignore notices from the IRS or state agencies.  Some people think the first couple notices are just warnings.  Don’t take the wait and see approach.  They won’t forget about you or just move on to your neighbor if you ignore them.
  3. Don’t pay taxes with high interest credit cards.  This is better than not paying taxes at all, but always look for other financing options first.  You can even work out payment plans with the IRS and most states for relatively small fees and low interest.
  4. Avoid refund loans.  Wait just a couple weeks and that refund check will arrive.  With an electronically filed tax return and direct deposit, you could see your refund in as little as a week.  In general it takes a couple weeks, but it’s better to be patient than to pay the fees associated with these refund loans.
  5. Don’t assume your tax software is smarter than you.  It’s easy to go to the office supply store, buy that tax software and answer all the questions and input some numbers.  But always look through the tax return before pressing the “send” button.  The tax programs out there can be good, but they can’t anticipate everyone’s unique situation.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Summer Is Passing Quickly

Posted on
by

Winter this year seemed to hold on extra hard, then we had a month of torrential rain, and just as the weather is getting nice, it’s already time for the State Fair.

This also means that corporate, partnership, trust and estate tax returns that are on extension are due in a mere three weeks. If you’ve not gotten started putting that information together, now is the time to start.

As fall approaches, this is also a good time to consider tax planning for the year. With more than half the year passed, projections now can provide great insight both into how your taxes will look come next April, as well as reveal tax saving possibilities with time to get them implemented.

Lastly, if you have kids going off to college this fall, know that there can be some great tax breaks to dull the pain of college expenses. Keep your receipts for required books and fees, and those, along with a 1098-T that the college will send in January, will allow your CPA to get the most out of education tax savings.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Minnesota Property Tax Refund

Posted on
by

During the last few weeks of the legislative session, the legislature passed, and Governor Dayton signed, a bill that will provide additional property tax refunds for those that qualify.

For renters, the amount of the refund they will receive will increase by 6%, while homeowners will see a 3% increase.  There is no change in who is eligible for the refunds, just more money for those that already do.

For those who have already completed their property tax returns, nothing more needs to be done.  The Department of Revenue will recalculate the additional refund and send the correct amount along with a letter explaining the calculation. Property tax returns filed going forward will be correct from the outset.

The Department will also be sending letters to those taxpayers that appear to qualify for the refund but haven’t filed a 2011 or 2012 property tax return. We make a habit of checking to see which of our clients will qualify, but if you do get a notice from them, please let us know.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Who Needs a 1099-MISC?

Posted on
by

With the end of January approaching, we’re busy preparing forms 1099 for our clients.  One of the questions we get most often is: “Who needs a 1099, and why?”

Form 1099-MISC is used to report a number of different payments, but for this posting, we’ll discuss the most common one, nonemployee compensation.

Nonemployee compensation is a technical term for payments to subcontractors.  If you pay $600 or more to a subcontractor for services to your business in a year, you may be required to issue them a Form 1099-MISC.  Only subcontractors that are incorporated are exempt from the reporting rules.  This means they need to be a legal corporation – an LLC is still required to receive a 1099.  Family members who provide $600 or more in services are also required to get a Form 1099.

Remember, these are for services provided to your business – you don’t need to worry about issuing a 1099 to people like your personal cleaning lady or your occasional babysitter, nor do you need to issue a 1099 for payments for products like office supplies or computer purchases.

You should always make sure you have a completed Form W9, Request for Taxpayer Identification Number and Certification, from your subcontractors before you make the first payment to them.  This form will give you all the information you need to determine if you are required to issue them a Form 1099, and the name, address, and tax ID number to use when doing so.

The forms are due in the mail by January 31st of each year.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.