Posts Tagged ‘IRS tax forms’


How to Barter Responsibly…

In Accounting & Finances,Business,Culture,Taxes on March 8, 2012 by Sufen Wang Tagged: , , , , , , ,

“I will gladly pay you Tuesday for a hamburger today!”
That classic Wimpy phrase was not just about hamburgers, it’s about bartering – one of the oldest business transactions in human history. Well, in Wimpy’s case, it was probably more like an “I.O.U.” than an actual bartering exchanging hands.  Yes, before coins and dollars were invented, folks survived by trading stuff. Bartering is back in full swing now that the country is going through some hard times, so it’s time to dust off your haggling skills.
The official definition of bartering is “the trading of one product or service for another.” If you offer your friend three cookies in exchange for a sandwich, you have just bartered. Of course, it gets more complicated than this in the business world, and small business owners can save a lot of money by bartering for the products and services they need.
In general, bartering involves no exchange of cash, but that doesn’t mean you’re off the hook with the IRS. The fair market value of property or services received through barter is taxable income. Since it takes two to barter, both parties must report this income for the year in which the transaction is performed. How you report your transactions depends on which form of bartering takes place. In most cases, you’ll use Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.
You might still imagine bartering to be like a crowded swap meet, with people yelling and pushing you. Actually, the internet has allowed bartering to get a lot fancier than that and now there are even things like organized barter exchanges. A barter exchange organizes a marketplace where members buy and sell products and services among themselves. If you choose to use such a marketplace, every year you’ll have to fill out Form 1099-B, Proceeds from Broker and Barter Exchange Transactions.
You, yourself, might find that you really like bartering – if you start to do it a lot, congratulations, you may have started what the IRS calls a “barter business.” Once you’re established enough, you can even deduct business expenses. Or you might have a regular business and are simply using barter transactions to help your sales; then you’ll have to include those sales in your business income.
If you really want to be a savvy barterer, here’s a tip: never barter outside of your industry.  When you mix two different types of businesses, one party of the bartering partners will always feel short-changed. That’s why a uniform currency was invented in the first place. So, stick with the same business if you want to barter – otherwise, just pay for each other’s services and be done with it!
The IRS provides a Bartering Tax Center for all of your bartering needs. And no, you don’t need to trade anything to read it!
On the Money,
Sufen Wang
Wang Solutions


The Return of the Dirty Dozen…

In Accounting & Finances,Business,Taxes on March 2, 2012 by Sufen Wang Tagged: , , , , , , ,

Another Dirty Dozen: The Top 12 Tax Scams of 2012
As long as there are taxes, there are going to be scams. A lot of money gets moved around in April and a lot of people want to get their hands on it – illegally. If you’re one of those people, you’ll probably be in jail sometime soon. Luckily, the IRS’ “Dirty Dozen” – the list ranking scams taxpayers are most likely to get sucked into – is back. Let’s see how things have changed since we brought you the “Dirty Dozen” last year.
The new leader of the IRS’ “Dirty Dozen” is Identity Theft. This is a growing problem in which somebody uses a real taxpayer’s personal information to file a return and then receives the refund. If that sounds like a good idea to you, just know that the IRS is cracking down on this particular scam with law-enforcement. There’s even a special web page to help taxpayers spot when somebody is pretending to be them. So how do you know if your name is being used elsewhere? If you get an IRS notice telling you that you filed more than one return, you could be a victim of identity theft.
Close behind is Phishing. This does not have to do with going out on a boat and catching things in the water. This is actually when a scammer uses a fake website or email to steal your personal information – which they can then use for the big bad identity theft. Always check that you’re on the real IRS site (the address should contain and since the IRS doesn’t send out any e-mails, don’t open anything that is supposedly from the agency or the Electronic Federal Tax Payment System (EFTPS). Oh, and don’t post your social security number on the “IRS” Facebook page.
Remember that post a few weeks ago about finding the right preparer? It was supposed to help you avoid becoming a victim of scam number three, Return Preparer Fraud. These corrupt preparers will do anything, from stealing part of your return, to charging you outrageous fees. Make sure your preparer includes his/her signature and PTIN on your return, and walk away if they tell you to include false information.
You really can’t get away from Hiding Income Offshore. The number one scam on last year’s “Dirty Dozen” list, evading taxes by storing your assets out of the United States, continues to be a huge problem. That’s not to say that you can’t keep stuff overseas – you just have to tell the IRS about it. If you’ve had a change of heart and want to stop being a scammer, the Offshore Voluntary Disclosure Program is still going on.
The above are the most prevalent issues, but there’s still a lot of scamming going on at the bottom of the list. Don’t pay attention to people offering advice – for a fee – about how to get Free Money” from the IRS & Tax Scams Involving Social Security. You’ll be paying money for a claim that is eventually going to get rejected by the IRS. And don’t think you can get away with penning in False/Inflated Income and Expenses on your tax return. Although it might seem easy to claim income or expenses you didn’t really pay, so that you can receive refunds like the EITC, you’ll face interest and penalties when you do get caught.
The same goes for False Form 1099 Refund Claims. Filing a fake information return to verify a fake refund claim will result in real problems for you. And don’t listen to Frivolous Arguments about why you don’t need to pay taxes. Pay first, and then if you have a problem, bring it up in court later. You also need to pay the correct amount that you owe, so don’t Falsely Claim Zero Wages. 
Perhaps the dirtiest scam on the Dirty Dozen is Abuse of Charitable Organizations and Deductions. Yes, people will do things like “improperly shield income or assets from taxation” and “maintain control over donated assets.” Charities are for you to help other people – not yourself. The penultimate scam, Disguised Corporate Ownership, is when the true ownership of a business is obscured. Last but not least is Misuse of Trusts. Promoters will convince taxpayers to transfer their assets into trusts, promising less income subject to taxation or reduced estate taxes. In reality, this is just a fancy way of avoiding tax liability.
The IRS is watching you.
On the Money,
Sufen Wang
Wang Solutions


Hello E-File!

In Accounting & Finances,Business,Taxes on January 9, 2012 by Sufen Wang Tagged: , , , , , ,

Good-Bye Paper Returns, The IRS Makes Its Digital Move


The IRS is doing everything it can to ensure e-filing remains alive and well.  In 2011, paid preparers who expected to file 100 or more individual income tax returns during the calendar year were required to file electronically. However, the new year means new requirements. As of January 1, 2012, paid preparers who expect to file just 11 or more individual, estate, or trust returns must file electronically.
Members of a firm will also have to play by these revamped rules. The e-file requirement applies if the firm’s members in the aggregate expect to file 11 or more covered returns in 2012. Basically, if your firm is doing any business at all, you’re probably going to be e-filing.
Indeed, almost every tax return counts when you’re checking for that magic number 11. The regulation covers income tax returns in the Form 1040 and Form 1041 series, and Form 990-T, the Exempt Organization Business Income Tax Return. However, forms such as 1040-NR and 1040X are considered automatic administrative exemptions because they still have to be mailed to the IRS the old-fashioned way, and so you shouldn’t include them in your estimate.
Remember that it’s ultimately up to the taxpayer to decide how he wants to submit his tax return.  Psssst, heads-up, keep in mind that most of your client(s) usually do not know what they want; specifically how they want their tax returns to be filed…  So, make sure you give sound advice to your clients in this regards.  However, for those clients who really do not want to go digital, because of the new regulations, you’ll need to acquire a written statement from the taxpayers on or before the date the return is filed. It must be signed and dated (a joint return need only be signed by one spouse) and should state that the taxpayer chooses to file the return in paper format and will be submitting it to the IRS –rather than the preparer. This way, the individual income tax return will not be treated as filed by you, the tax return preparer, and thus will not be included in your return tally.
It’s important that you don’t send this statement to the IRS or attach it to your client’s tax return – that’s the taxpayer’s responsibility; well, good luck with that… hoping that your client will do what he is supposed to do…  So, instead, make sure you do your part by attaching Form 8948, Preparer Explanation for Not Filing Electronically, to your client’s paper return and check box 1. You also need to include your PTIN on each tax return where requested. If your client does choose not to e-file, it’s important that he personally mails his return. The IRS is making it clear this year that once a taxpayer chooses not to e-file, it’s hands-off the paperwork for the tax preparer.
Hopefully you’re already an authorized e-file provider because that’s the only way you’re allowed to e-file with the IRS. If not, you might want to click on the following link and start applying for your
Electronic Filing Identification Number – it takes at least 45 days for the authorization process. Otherwise you’re going to have a lot of clients filing complaints against their unprepared tax preparer.


On the Money,
Sufen Wang
Wang Solutions





Are You Ready For Year-End?

In Accounting & Finances,Business,Taxes on December 14, 2011 by Sufen Wang Tagged: , , , , , , ,

The end of the year is almost here and it’s the perfect time for business owners and individual tax payers to dust off their financial documents and confirm that everything is in order. You’ve got a lot to do, so let’s get started before those April tax showers come storming in! 
Business Owners:
You’ll need to review all of your vendor payouts for the year: any vendor who has provided you labor services for more than $600 must be reported to the IRS via Form 1099. As a rule of thumb, always ask your vendors, regardless of the amount of their services, to complete a new W9 at the beginning of each calendar year; so that you do not have to chase them at year end for information. The W9 provides their legal name, address, and tax payer ID – whether it’s an EIN number or a regular social security number – and also requires the vendor to claim responsibility for any taxes due from payments issued to him.
Check your payroll to ensure payments to your employees have been recorded correctly throughout the year, any corrections may be still processed onto their year-end W2’s.  Also, make sure that your payroll taxes have been submitted to the proper governmental agencies on a timely basis, and better take care any late payment before you close your books for the year.  Any year-end bonuses and/or profit sharing to officers and employees must also be processed and to be included in their individual W2’s, and recorded as business expense accordingly.

Review your retirement plan, i.e, 401k Plan, if you have one.  Make sure that all of the employees’ deferral have been deposited into their accounts; and any and all profit sharing or employer matching funds have been accurately distributed accordingly.The good news is that those profit sharing and/or employer matching distributions within a retirement plan are actually business write-offs and can help ease your year-end tax liability!
 Take the time to reconcile your business checking and money market accounts with their corresponding bank statements – that means making sure the interest income has been recorded. Then move on to your credit card accounts and verify any and all business related charges and finance fees are in the record books. You should do the same with your cash expenses (i.e. count the petty cash drawer one last time) and dig out those receipts you knew would come in handy to support any expenditures.

Moreover, any capital expenditures?  Section 179 will allow you to deduct a large amount of assets (expenditures) that you purchased throughout the year for business use.  Again, make sure you have the proper receipts and purpose of the equipment clearly stated for your tax preparer. 

Last but not least, the company cars are going to require a little inspection. Always reexamine the mileage log and odometer of what are supposed to be strictly business-used vehicles; your tax preparer will need this information to complete your business tax returns.
Individual Tax Payers:
Now where did you put those year-end W2’s? Your tax preparer will ask you for them, along with childcare-related expenses, and interest income received and mortgage payment 1098’s from your financial institutions. Keep an eye out because these documents must arrive on your doorstep by January 31.  Next is the numbered forms category, check for 1099’s received from your investment accounts, such as mutual funds dividends and/or interest received for the year, and any stocks sold with their proper gain or loss data. 
You can deduct any charitable donations you made during the year. Unfortunately, this does not include the time you spent doing laundry and taking the kids to school. Most charity organizations will issue a year-end summary of funds received from you by January 31. Any other small donations to Goodwill, Salvation Army, etc. must have a receipt with a description of the donated items and their estimated value.
To all the homeowners out there, do yourself a favor and confirm that you recorded your property tax payments. If you own rental properties, be sure that the collected rent has been properly documented as income, and related expenditures noted as rental expenses – this should include the property taxes you paid in the calendar year. While you’re searching through your “Property” file, if you refinanced, purchased, or sold any real estate this year, set aside your final closing document issued from the escrow company for your tax preparer. Please note that this must be the final closing statement and NOT the estimated statements.

Finally, gather up all of your medical expenses, doctors and medicine expenses alike.  They are tax deductible if you are filing itemized personal income tax returns.  Make sure you have the proper receipts to support your claims.  Dont’ forget those glasses and dental appointments you had throughout the year!

Now you’re ready to welcome in the new year with a (temporarily) clean filing cabinet!


On the Year End,
Sufen Wang
Wang Solutions