This year, the filing deadline for most corporate entities is March 15. For sole proprietorships and partnerships, the deadline is April 18. Limited liability companies must choose to file as a corporation or as either a sole proprietorship or partnership.

Business tax returns are undoubtedly complex. They include a vast number of rules and options that frequently change. For example, the recently enacted federal health-care law includes a new, temporary tax credit for small businesses that cover at least 50% of the cost of health insurance for some employees, among other qualifications.

"Most people can do the tax return themselves, but it is a hassle," says Mr. Hall. "It's about how much you want to spend on Advil for the headaches you're going to get."

Lana Goldenberg says she lost out on roughly $1,000 last year by inadvertently misclassifying certain deductions when preparing her start-up's first tax return. "It's not a huge amount of money," she says, "but for a small business it matters."

Ms. Goldenberg launched her marketing consultancy out of her home in Marina del Rey, Calif., after getting laid off from a job in the same field in 2008. For her 2010 tax return, she says she's hired an accountant for about $300.

There are a number of deduction options that entrepreneurs may not be aware of. For example, if you've been running your business out of your home, you can deduct a percentage of your rent or mortgage interest, utility bills and repairs, says Cathy B. Goldsticker, a tax partner at accounting firm Brown Smith Wallace in St. Louis, Mo.

If you've been using your personal vehicle for your business, you can deduct however much you spent on gas, maintenance and tolls for this purpose. "Just make sure you have the records to show they're truly business-related deductions," Ms. Goldsticker says.

One tax break in particular that entrepreneurs won't want to miss: the ability to deduct up to $10,000 in start-up expenses when filing a business's first tax return. These include items or services purchased "prior to actually opening your doors," such as software for writing up a business plan, says Scott Berger, a principal at accounting firm Kaufman Rossin & Co. in Boca Raton, Fla.

But entrepreneurs may not realize that not every resource purchased to get a business up and running qualifies as a start-up expense. For example, the Internal Revenue Service doesn't consider computers, office furniture, machinery and other assets that last more than one year as such, says Mr. Berger. (However, many of these items can still be fully deducted either over the course of their lifetime in small amounts or, for 2010 returns, in one fell swoop if they meet certain qualifications.)

Oren Salomon says he regrets preparing his start-up's first tax return on his own this year to save money because he grossly underestimated how much time and energy the job would take. "The process has been very arduous and confusing," he says. "So far I've spent at least 25 hours and I'm maybe halfway done."

Mr. Salomon co-owns Mozign, a Dallas designer and developer of smartphone applications. He started the business with a friend last year after graduating from the University of California, Berkeley, because he wasn't able to land a job.

Next year, Mr. Salomon says he plans to hire an accountant. "It will be totally worth the money," he says. "I'd rather be working on product and spending my weekends with my girlfriend."

 

Cash earnings are non-taxable? Enrolled agents discuss most common taxpayer misconceptions

reprinted from accounting web

A recent informal poll of Enrolled Agents (federally-licensed tax practitioners like Michael Marshall, The Tax Rabbi ), revealed many common misconceptions among taxpayers. Included on the list were:

"I had a really big loss in the stock market this year, so I won't owe any income taxes." Deduction of capital losses against ordinary income is limited to $3,000. Also incorrect: "I traded some stocks and have a loss/didn't make any money, so there's no need to report those sales."

"They paid me in cash and I don't have to report that, right?" If it's income, you must report it.
 
"I'm too young/too old to have to pay taxes." Even your dependent high schooler has to file a return after earning income over $5,700. And, Uncle Sam may still be interested in your return after you're dead. A personal representative of the decedent is required to file a tax return and the estate tax when due.
 
"If I didn't receive a document about it, it's not taxable." A good preparer will provide you with a checklist that reveals missing documents, but too often taxpayers who are preparing their own returns or dealing with an unlicensed preparer will fail to include important information simply because they missed something in the mail, or because the document was never mailed.
 
"Income earned in a foreign country is not taxable." Taxpayers are required to report all earned income to IRS, no matter where it was earned.

"You don't have to report gambling income, and besides, I lost." Gambling losses do not net out against income. For the non-professional gambler, income goes on page one of Form 1040; the losses go on Schedule A and are not subject to the 2 percent floor, but cannot be greater than the winnings. Therefore, the "net" sheets many casinos provide individual taxpayers are worthless.
"Income from my hobby can't be taxable." The operative word here is "income." It's taxable.

One of this year's widest-spread misconceptions came in the wake of the IRS announcement that employers must now report medical insurance paid for employees. Duped by a viral e-mail, taxpayers across the country mistakenly believe that medical insurance must now be reported as income and taxed. Not true. The expense will be reported on the W-2, and not added to income.

Finally, a lot of taxpayers hold misconceptions regarding paid preparers. The notion that all tax preparers do is fill out forms neglects the real value of a paid preparer: They keep up with myriad tax laws and regulations and have the expertise to know how to apply these rules for the benefit of the taxpayer. And, no matter who prepares the tax return, the taxpayer is the one who is legally responsible for whatever appears on his or her return, making it a doubly good idea to hire a licensed preparer.

 

Kevin Jenkins, EA joins Rapid Tax!!! 

We are pleased to introduce the newest member of the Rapid Tax Team, Kevin Jenkins. Kevin brings over 20 years of extensive experience in analyzing and preparing Federal and State tax filings to Rapid Tax

Kevin is not only an Enrolled Agent, licensed to represent our clients before the IRS but he is also a Certified Quickbooks Pro Advisor. Kevin has degrees from Arizona State University and The Graziadio School of Business & Management at Pepperdine University.

Kevin brings a new vision and his ability to quickly grasp the big picture to help our clients achieve their tax goals. We look forward to introducing you to him.  

January 13, 2011

Seven Early Tax-Filing Tips That Will Save You Time and Money

by Ken and Daria Dolan

reprinted from AOL

The National Taxpayer Advocate recently announced that Americans spend 6.1 billion hours a year on tax prep. That's almost as many hours that 3 million full-time employees work in a year.

You can easily cut down the number of hours you spend preparing your 2011 taxes by taking a few simple steps now. Trust us, tackling tax season in bite-size chunks will make the whole process less daunting.

Here are seven simple, painless tips to save time, money, a headache and hassle down the road:

1. Create a system for organizing tax documents as they arrive.

There is nothing worse than sitting down to finally do your taxes and realizing that you can't find an important document. So tip #1 is to have a record-keeping system in place before the first tax document ever shows up at your house. Your system can be as simple as a large envelope or an accordion file. Just designate a specific spot and make sure that everyone in the house knows about it.

If you want to be even more organized, you can use our checklist of critical tax documents to track documents as they come in so that you know what you have and what you are still missing.

2. Review all your tax documents as they come in.

As tax documents show up, don't just stuff them into that great new tax record keeper. Take a moment to review each document as it arrives so that you can correct any discrepancies well before you start preparing your return. If there is a mistake, getting a corrected W-2 or 1099 form can take time, so don't wait until you are down to the wire on your filing deadline.

3. Make sure that you know all the 2010 tax changes that could impact your taxes.

Every year sees some new tax changes, but 2010 was a real doozy. The last-minute compromise between the White House and Republicans to extend the Bush tax cuts included a host of other tax changes. Plus, many 2009 tax credits expired. Be sure that you know the new 2010 tax rules so that you can take advantage of every tax credit and deduction possible.

4. Decide whether you are going to go it alone or hire a pro.

Thanks to our ridiculously complicated tax code (more than 18,000 pages!), even the IRS Commissioner hires tax prep help! About 60% of us have to pay a professional to help us prepare our taxes. If you are going to use a professional, make your appointment early.

If you are going to do your taxes yourself, decide whether you are going to use tax software (30% of us do). If so, you can get ahead of the game by purchasing your tax software now.

Tax software can help you find every deduction to which you are entitled and helps you avoid common mistakes that can trip you up, such as simple math mistakes (electronic returns have 13% fewer mistakes).

5. Get your tax forms now.

70% of all returns were e-filed last year, so in a move that will save $10,000,000 a year, Uncle Sam is no longer automatically mailing paper tax forms to individual taxpayers.

If you are still filing by mail, get the tax forms you will need now. You can find commonly-used tax forms at your local library or post office. You can also download all tax forms through the IRS's web site, www.irs.gov. You can even still have a copy mailed to you by calling the IRS at 1-800-829-3676.

6. Start gathering your tax information now.

There's no reason to wait until the heat of the battle to start organizing the tax information that you already have. Even before you receive a single tax document here's how you can get a head start:

• Make a list of all your 2010 tax payments and tax refunds
• Gather all those receipts that have piled up throughout the year
• Comb through your credit card bills and checkbook to look for possible deductions
• Tally up charitable donations

7. Start early!

There's no sense in putting off the inevitable. Use these tips to get a big of a head start on the tax season now and save yourself headache and heartache as the tax deadline looms.

As you dive into your 2010 taxes, make sure you don't overlook these important 2010 tax changes and be sure to make your tax deductions air-tight.