IRS Small Biz Webinar

For me, Small Business Week sort of came and went this year with little notice.  In fact, I just now got around to watching the IRS webinar that came out on May 15th called “Avoiding the Biggest Tax Mistakes.”  The video is now archived and available through the IRS video portal here.

This video may be useful for young entrepreneurs and teenagers who are interested in one day having their own business.  I say this because it just scratches the surface of business tax knowledge, and anyone who has already begun operating a business absolutely must understand these basic principles.  The entire video runs about 42 minutes in length; the first 15 minutes cover the bullet-point topics below, and the balance of the video is a live Q & A session:

  • Keep good records (three years is the general rule)
  • Report all taxable income (all income is generally reportable unless specifically excluded by law)
  • Keep business and personal expenses separate
  • Choose your tax preparer carefully (be skeptical of promises of outcomes that seem too good to be true)
  • Always review your tax return for accuracy
  • Consider e-file options
  • Do your homework
  • Don’t fall prey to tax scams

When asked what he thought should be the main “take-away” points from the webinar, the presenter emphasized the importance of the first three (keeping good records, reporting all income, and claiming only business expenses on Schedule C).

Another point that was mentioned is that too many small business owners rely on word of mouth when it comes to business “write-offs.”  Just because a buddy writes off a certain expense every year doesn’t mean it is legitimate.  One real-life example of this is the rumor that you can put your file cabinet in one room of your house, your desk in another, your printer in another, etc. and basically claim the entire square footage of your home as “business use.”  It doesn’t even make sense that the IRS would agree to this, and that should be the first indication that it is bogus.

Not everybody has a very good feel for what “seems” right or wrong, so that’s why it is critical to seek sound advice from a respected tax professional.  When it comes to running a small business and avoiding IRS scrutiny, it is never a good idea to “shoot from the hip.”

National Small Business Week 2013

There are so many elements involved in operating a successful business, only some of which are controllable by the owner.  You need a good business plan, adequate capital investment, not to mention an excellent product or service.  You also need to figure out how you’re going to market that product or service.  Of course, it helps if you have a head for business; some people just seem to “get it.”  But even these measures do not ensure success because so much depends on timing and luck.

One element that people tend to overlook when they start a business is the tax consequences and requirements.  No luck involved here.  And, thankfully, you don’t really need to have a knack for numbers or a specialized knowledge of tax laws to make sure the tax aspects of your business are in order.  What you do need is a basic understanding of what tax requirements apply to your business and where to go for answers.

Some small business owners consult with a tax accountant or a tax attorney in the opening and operating of their business.  But if you’re not in a position to hire a tax professional, there are still excellent resources at the IRS, especially this week.

It is National Small Business Week 2013 and the IRS is offering two free webinars, one on June 18th and one on June 20th.  The June 18th webinar is entitled “Small Business Owners: Get All the Tax Benefits You Deserve” and the June 20th webinar will cover the topic of “common mistakes.”  If you don’t have a chance to register and watch live, the IRS will be archiving both webinars on the IRS Video Portal.

Interested in hearing President Obama’s self-congratulatory introduction to National Small Business Week?  In a minute and a half he lists everything his administration is doing to help small businesses succeed.  Me neither.  But here’s the link anyways:

Small Business Health Care Tax Credit

The IRS recently released a special edition tax tip of interest to small business owners who may be struggling to continue health care coverage for their employees. A special tax credit is available to employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement. To qualify for the credit, the employer must have 25 or fewer workers with average income of $50,000 or less. The maximum credit for eligible small business employers is 35 percent of premiums paid. The credit may be claimed using Form 8941.

Even though many standard filing deadlines have passed for 2010 taxes, the IRS points out that the Small Business Health Care Tax Credit may still be available subject to the following deadlines:

  • businesses affected by certain natural disasters (deadline is October 31)
  • business entities such as sole props, partnerships, and S-corp shareholders who report their income on Form 1040 and who requested an extension (deadline is October 17)
  • tax-exempt organizations that file on a calendar year basis and requested an extension (deadline is November 15)
  • business that have already filed can still go back and claim the credit by filing an amended return

Heightened Enforcement of 1099 Compliance

Politicians are desperately trying to increase revenue without raising taxes.  One way to do this is to beef up enforcement of the tax laws already on the books.  According to the IRS, the best place to focus these efforts is on small businesses and their tax obligations, specifically their 1099 reporting requirements.  The IRS has always had a more difficult time getting money out of the self-employed.

IRS Commissioner, Doug Shulman, recently told a Congressional committee: “the thing you have to remember about the [tax] gap is it’s like a deep shale oil reserve, it’s not money sitting there that’s easily tapped, in many ways we have tapped the easy money… the real answer, the place where we have leverage, is information reporting.”

What this means for the regular taxpayer is that the IRS is going to be furiously ramping up its collection efforts in the coming months.  The government seems eager to pour more money into the IRS.  According to Commissioner Shulman, each 1 percent improvement in compliance will produce an added $20 billion in revenues.  For more details, click here.