Have you prepared your 2010 taxes yet?

Even though there is more than a month left in 2010 and tax deadlines are well in the future, it is not too soon to get started cleaning up your books and preparing to file your taxes. Getting started now can help you by reducing the amount that you spend on bookkeeping, accounting, and tax services, and it could reduce the size of your tax bill. If you begin reviewing your tax situation now, you will also have some time for last minute tax planning for 2010.

Getting started
The first thing you need to do is to get your books in order. Whether you have a full-time bookkeeper or simply save everything in a shoebox for your CPA, a little organizing can go a long way. If you need more guidance than this brief article provides, contact your bookkeeper or CPA. They will be happy to tell you how to improve the way you organize your records. What you pay for an hour or two of consulting will be more than offset by the money that you can save by being organized. Your CPA or bookkeeper might even provide the consultation for free. You may even decide that working more closely with your professional accountant will give you more time to spend on the rest of your business.

Separate business and personal
Make sure that your personal and business lives are separate. This seems obvious, but every year small business owners or employees with unreimbursed expenses turn over business records comingled with personal records. It may be too late for 2010, however you should make sure that you have different bank accounts and credit cards for your business and personal lives. You may not need special business accounts, but you should make certain that they are separate.

Get your books in order
There are a couple of important parts to this step. The first step is to organize your records the way that CPAs and bookkeepers do. Figure out all of your sources of income and group them into logical categories. Then organize all of your expense. Business owners tend to focus on expenses because they worry about cash flow. However most people used to working with money are accustomed to seeing revenue, then expense, then net income. It is not a bad idea for you to think in that order also. If you think about it, the success of your business depends on money coming in the door, not just your ability to control expenses. Income and expense groupings are not just for business. If you organize your personal records this way, you will find your personal record keeping easier. An added bonus to organizing your records this way is that bankers also expect to see your financial statements in this order. If you ever need to complete a credit application, it will be easier for you to find the information that you need.

Once you have grouped your records into the two large categories of income and expense, further categorize the records by type. How you do this will depend on the type of business you own. If you have W-2 income then keep that apart from business income. You will want to group business income by whether it was for services or goods. A quick note about employee business expenses is in order at this point. If you are organizing your records because you have employee business expenses, you will want to sort out any payments that you received for expenses by whether they were taxable or nontaxable. Your employer should be able to tell you this.

After you have categorized your income, do the same with your expenses. If you already have a bookkeeping system with a set of accounts, then simply use those accounts. This is a good time to review your chart of accounts for completeness and accuracy. If you do not already have a way to categorize your expenses, take a look at your previous tax returns and see how your CPA divided up your expenses. Your CPA may even have a tax organizer that you can use. Depending on the arrangement that you have with your bookkeeper of CPA, this process could be as simple as organizing your receipts and statements, or it could include entering the expenses into your bookkeeping system. If all of this is getting unwieldy for you, then this is a good time to talk to your CPA or bookkeeper about how they can help you manage your books.

What about records that you do not yet have?
You will not receive some statements or reports until the end of the year or even until January or February. No problem. Set up folders for the statements or reports that you expect to receive later. Then when you receive them, simply add them to the appropriate folder.

How this helps
This may seem like a lot of work that could just as easily wait until later. However, by beginning now, you will be more likely to have everything you need later when you take your files to your CPA. In addition, having complete and well organized records makes your CPA’s task easier so that he or she can work faster. That will save you money. In addition, complete and well organized records will make it less likely that your CPA will miss something, and in the event that your return is selected to be audited, good documentation will make the audit much easier for you.

IRS Consumer ALert

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it's a scam. IRS impersonation schemes flourish during filing season. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail.

Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site.

Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

For more information on scams and what to do if you're subject to one, see our Problem Alerts page, Online Scams that Impersonate the IRS, Suspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.


Reposted from http://www.irs.gov/newsroom/article/0,,id=97322,00.html

AICPA Supports Repeal of Burdensome Tax Information Reporting Measure

AICPA Supports Repeal of Burdensome Tax Information Reporting Measure
The American Institute of Certified Public Accountants told members of Congress recently they should repeal the section of the new health care law that requires businesses to report to the Internal Revenue Service any purchase from a vendor of goods or services worth $600 or more during the calendar year.

The AICPA said it will be burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC information return. Furthermore, the AICPA said the information collected on the 1099 forms will not be very helpful to the IRS in collecting any unpaid taxes that should have been paid by the vendor because it will be difficult to reconcile payments reported on the forms and income reported by the vendor.

The reporting requirement is included in the Patient Protection and Affordable Care Act and is effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013.

A copy of the AICPA’s letter to members of the U.S. Senate is pasted below. An identical letter was sent to members of the U.S. House of Representatives.

If you would like to speak to someone about the AICPA’s letter, please contact Shirley Twillman, AICPA senior manager for media relations, at 202-434-9220 or stwillman@aicpa.org.

To read the entire article and a copy of the letter, please click the link above.

IRS help with Gulf oil spill issues

The IRS has created a Gulf Oil Spill Information Center, and set up a Dedicated Phone Line for Gulf Oil Spill Victims, 866-562-5227.

 

The IRS is also planning a Special Assistance Day, July 17th in four states:

1. Alabama: Mobile.
2. Florida: Panama City and Pensacola.
3. Louisiana: New Orleans, Houma and Baton Rouge.
4. Mississippi: Gulfport.

 According to the IRS,

The IRS continues to have a number of ways to help taxpayers dealing with oil spill issues or other economic hardship issues, including:

• Assistance of the Taxpayer Advocate Service for those taxpayers experiencing economic harm, who are seeking help resolving tax problems that have not been resolved through normal channels.
• Postponement of collection actions in certain hardship cases.
• Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
• IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise.
• Accelerated levy releases for taxpayers facing economic hardship.

Repost from CNN/Money.com: IRS starts mopping up Congress's tax-reporting mess

IRS starts mopping up Congress's tax-reporting mess
By Neil deMause, contributing writerJuly 9, 2010: 11:18 AM ET

NEW YORK (CNNMoney.com) -- With a new mandate looming that will require business owners to file millions more tax forms, the Internal Revenue Service has begun the daunting process of figuring out how to turn the law's sweeping demands into actual rules for taxpayers.

To read the rest of the article click here. IRS starts mopping up Congress's tax-reporting mess

IRS provides a web page with help for homebuyer tax credit extension

The IRS has created a web page with information about the extension of the homebuyer tax credit. http://www.irs.gov/irs/article/0,,id=225078,00.html The deadline for the credit was extended from June 30, 2010 to September 30, 2010.

Here are some important exceprts from the page.

The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit. To avoid refund delays, those who entered into a purchase contract on or before April 30, but closed after that date, should attach to their return a copy of the pages from the signed contract showing all parties' names and signatures if required by local law, the property address, the purchase price, and the date of the contract.
Besides filling out Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, all eligible homebuyers must also include with their return one of the following documents:

• A copy of the settlement statement showing all parties' names and signatures if required by local law, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
• For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

Besides providing a tax benefit to first-time homebuyers and purchasers who haven’t owned homes in recent years, the law allows a long-time resident of the same main home to claim the credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. Homebuyers claiming this credit can avoid refund delays by attaching documentation covering the five-consecutive-year period:

• Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
• Property tax records or
• Homeowner’s insurance records.

There are three options for claiming the credit on a qualifying 2010 purchase:

• If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. Though these returns cannot be filed electronically, taxpayerscan still use IRS Free File to prepare their return. The returns must be printed out and sent to the IRS, along with all required documentation. The IRS urges taxpayers claiming refunds to choose direct deposit.
• If a 2009 return has already been filed, claim it on an amended return using Form 1040X.
• Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.

For details, check out the complete page. http://www.irs.gov/irs/article/0,,id=225078,00.html

Re-post from AccountingWEB.com: Collecting unpaid taxes four pennies at a time

The article below is reposted from AccountingWEB. It describes a collection effort by the IRS.

Aaron Zeff is the owner of Harv’s Metro Car Wash in Sacramento, California. Imagine his surprise when, one day last March, federal agents showed up at his business demanding payment of an amount owed from tax year 2006.

Just how much did Zeff need to cough up? Four pennies.

Check out the article for the entire story.
Collecting unpaid taxes four pennies at a time AccountingWEB.com