In light of TIGTA’s report and recommendations, the IRS is updating the Discriminate Index Function (DIF), used to score corporate tax returns for their audit potential. The DIF assigns a higher score to corporate returns containing red flags such as larger-than-usual deductions, losses, and expenses, blank sections, and too many round numbers. The higher the [...]
Read More Discriminate Index Function (DIF), Income Tax Planning, Income Tax Preparation, IRS Audit, IRS Small Business, National Research Program Study, Small Business, Tallahassee Tax Service, TallyTaxManThe latest TIGTA (Treasury Inspector General for Tax Administration)report targets IRS audits of small, closely-held corporations. The opening lines of the report state that close corporation transactions are often structured to avoid tax compliance. The report states: “Shareholders typically have a significant amount of control over managing and directing the day-to-day operations of the corporation. [...]
Read More Income Tax Planning, Income Tax Preparation, IRS Audit, IRS audits small corporations, IRS Help, IRS Small Business, S Corporation, Small Business, Small Business Tax, Tallahassee Tax Service, TallyTaxManSB/SE (Small Business and Self-Employed) audits consist of several preliminary tests for unreported income, or “minimum income probes,” which begin with the Financial Status Analysis, or Cash-T analysis. Using the Cash-T probe, IRS examiners compare the balance sheet and income statements from the year under audit with prior/subsequent year data. TIGTA reported in September 2010 [...]
Read More Income Tax Planning, Income Tax Preparation, IRS Audit, IRS Small Business, personal living expenses, self-employed audits, Small Business, small business audits, unpaid self-employed tax, unreported income earnedThe IRS has persuaded U.S. taxpayers to disclose hidden offshore bank accounts but then sometimes failed to cap the penalties, as promised, an agency watchdog has said, accusing the government of “bait and switch.” The Taxpayer Advocate Service, an oversight arm of the IRS, wrote in its annual report to Congress that a series of [...]
Read More bait and switch, hidden accounts, Income Tax Planning, Income Tax Preparation, IRS Penalty, IRS requirements, IRS voluntary disclosure programs, offshore bank account, reduced penalties, Swiss Bank, Tallahassee Tax Service, Tally Tax Man, TallyTaxMan, Tax EvasionThe IRS issued guidance on the treatment of employer-provided cell phones as an excludible fringe benefit. Generally, when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is nontaxable to the employee. The IRS also announced in a memorandum to examiners [...]
Read More Employer Provided Cell Phones, Income Tax Planning, Income Tax Preparation, Personal Cell Phones used for Business, Small Business, Tallahassee Tax Service, TallyTaxManThe IRS reminded small employers about the Code Sec. 45R small employer health insurance tax credit. Small employers may be eligible to claim the credit to offset the costs of providing health insurance to employees. Through 2013, the Code Sec. 45R credit reaches 35 percent (25 percent for tax-exempt employers). For 2014-2015, the Code Sec. [...]
Read More Health Care Bill, Income Tax Planning, Income Tax Preparation, Small Business, Tallahassee Tax Service, TallyTaxMan, Tax Credit for Providing Health InsuranceThe IRS expanded interim relief from reporting the cost of employer-provided health insurance coverage on Forms W-2 as required by the Patient Protection and Affordable Care Act (PPACA) for small employers (Notice 2011-28). Small employers are excused from reporting until further guidance is issued. A small employer for purposes of Notice 2011-28 is an employer [...]
Read More Employer Provided Health Insurance, Health Care Bill, Income Tax Planning, Income Tax Preparation, Tallahassee Tax Service, TallyTaxMan