Tax Savvy for Small Business

by Daily, Frederick W.

• ISBN13: 9781413305296
• ISBN10: 1413305296
• Edition: 10th
• Format: Paperback
• Copyright: 2006-11-30
• Publisher: Nolo

Summary

It is possible to run a profitable, honest business while minimizing taxes and staying out of legal trouble. How? This bestseller points the way, detailing year-round tax-saving strategies to help business owners:claim all legitimate deductions-maximize fringe benefits keep accurate records-document expenses-survive an audit.

Author Biography

Frederick W. Daily is a tax attorney with over 20 years experience helping individuals and small business owners make smart tax decisions and stay out of trouble with the IRS. He has been featured as a tax expert on Good Morning America, and in publications across the country including Money Magazine, U.S. News & World Report, the Miami Herald and the Chicago Tribune. He is also the author of Stand Up to the IRS. Mr. Daily lives in Sagle, ID

Table of Contents

Introduction
Taxes for Small Businesses and the Self-Employed	2	(2)
How Tax Law Is Made and Administered: The Short Course	4	(1)
Where to Find Tax Rules	5	(1)
Marginal Tax Rate and Tax Brackets	5	(1)
The Alternative Minimum Tax (AMT)	6	(5)
Part 1: The Basics
Deductible Business Expenses and Income
What Is a Deductible Business Expense?	11	(2)
Is It a Current or Future Year Expense?	13	(1)
Top 25 Deductions for Businesses	13	(9)
The General Business Credit	22	(1)
Vehicle Expenses	23	(5)
How and Where to Claim Expense Deductions	28	(1)
What Is---And Isn't---Income?	28	(7)
Writing Off Business Assets
When Various Expenses May Be Deducted	35	(1)
Section 179: Expensing Business Assets	36	(4)
Depreciating Business Assets	40	(5)
Tax Basis of Business Assets	45	(4)
Leasing Instead of Buying Assets	49	(2)
When You Dispose of Business Assets: Depreciation Recapture Tax	51	(1)
Tax Errors in Depreciation	52	(4)
Bookkeeping and Accounting
Why You Need a Bookkeeping System	56	(1)
Should You Hire a Bookkeeper?	57	(1)
Manual or Computer System?	57	(4)
What Kinds of Records to Keep	61	(3)
How Long Records Should Be Kept	64	(1)
Bookkeeping Methods of Tracking Income and Expenses	64	(1)
Timing Methods of Accounting: Cash and Accrual	65	(2)
Accounting Periods: Calendar Year or Fiscal Year	67	(5)
Business Losses and Failures
Unincorporated Business Losses	72	(2)
Incorporated Business Losses	74	(4)
Tax Concerns of Employers
Employer Identification Numbers	78	(1)
What Are Payroll Taxes?	78	(1)
Reporting and Depositing Payroll Taxes	79	(8)
Classifying Workers: Employee or Independent Contractor?	87	(2)
Misclassifying Employees as Independent Contractors	89	(3)
IRS Filing and Payment Requirements for Employers	92	(1)
Record Keeping for Your Workers	93	(3)
Part 2: The Structure of Your Business
Sole Proprietorships
What It Means to Be a Solo---From a Tax Perspective	96	(1)
To Be or Not to Be---A Solo	96	(1)
Solo Income and Expenses	96	(2)
Solos' Tax Forms: Schedule C Is Your Friend	98	(4)
What If My Solo Biz Loses Money?	102	(1)
How Solos Are Taxed	103	(3)
Record Keeping for Solos	106	(1)
When a Solo Closes Up Shop	106	(1)
Death of a Solo	107	(1)
Outgrowing the Solo	107	(4)
C Corporations
Types of Corporations	111	(1)
How C Corporations Are Taxed	111	(4)
Tax Benefits of C Corporations	115	(4)
Incorporating Your Business	119	(3)
The Importance of Issuing Section 1244 Stock	122	(2)
Taking Money out of a C Corporation	124	(3)
Tax Pitfalls of C Corporations	127	(1)
Dissolving a C Corporation	128	(4)
S Corporations
An Overview of S Corporations	132	(1)
Should You Choose S Corporation Status?	132	(3)
Tax Reporting for S Corporations	135	(1)
How S Corporation Shareholders Are Taxed	135	(3)
Social Security and Medicare Taxes	138	(1)
Electing S Corporation Status	139	(1)
Revoking S Corporation Status	139	(2)
Dissolving an S Corporation	141	(4)
Partnerships
Partnership Tax Status	145	(1)
Tax Reporting by Partnerships	145	(1)
Tax Obligations of Partners	146	(5)
Partnership Losses	151	(1)
Partnership Contributions	152	(2)
Getting Money out of a Partnership	154	(1)
Partnership Expenses	155	(1)
Selling or Transferring a Partnership Interest	155	(1)
Ending a Partnership	156	(4)
Limited Liability Companies
Taxes	160	(1)
Comparing HCs With Other Entities	161	(1)
The Limited Liability Company (LLC)	162	(2)
Terminating a Limited Liability Company	164	(4)
Qualified Personal Service Corporations
Qualified Personal Service Corporations (QSPCs)	168	(1)
QPSCs & Taxes	169	(1)
Fringe Benefits	170	(1)
Potential Tax Problems	170	(1)
Transferring Shares	171	(1)
Dissolving a Qualified Personal Service Corporation	171	(3)
Part 3: Thinking Small
Family Businesses
The Legal Structure of a Family Business	174	(1)
Income Splitting Lowers Taxes	174	(3)
A Spouse in the Business	177	(1)
Preserving a Family Business After Death	178	(8)
Microbusinesses and Home-Based Businesses
Business Expenses Incurred at Home	186	(1)
Deducting Part of the Cost of Your Home	186	(4)
Calculating Your Home Office Deduction	190	(2)
Tax When Selling the Home Office	192	(1)
A Microbusiness as a Tax Shelter	192	(7)
Part 4: Fringe Benefits
Fringe Benefits
How Fringe Benefits Save Taxes	199	(1)
Retirement Benefits	200	(1)
Motor Vehicles	200	(1)
Meals	200	(1)
Travel and Lodging	201	(2)
Clubs and Athletic Facilities	203	(1)
Association Dues and Subscriptions	203	(1)
Health Benefits	203	(2)
Day Care Benefits	205	(1)
Education Benefits	205	(1)
Gifts, Rewards, Discounts, and Free Services for Employees	205	(2)
Adoption Assistance	207	(1)
Special Benefits for C Corporation Employees Only	207	(5)
Retirement Plans
Advantages of Retirement Plans	212	(1)
Overview of Retirement Plan Types	213	(1)
Details About Each Type of Retirement Plan	214	(8)
Where to Go for a Retirement Plan	222	(1)
Potential Tax Problems With Retirement Plans	222	(1)
Withdrawing Money From Retirement Plans	223	(2)
Closing Your Business and Your Plans	225	(3)
Part 5: Buying or Selling a Business
Buying a Business
Buying the Assets of a Business	228	(1)
Buying Shares of Stock	229	(2)
Assigning a Price to Business Assets	231	(4)
State and Local Transfer Taxes	235	(3)
Selling a Business
Reporting the Sale of a Sole Proprietorship	238	(1)
The Importance of an Arms-Length Deal	239	(1)
How to Protect Yourself From IRS Challenges	240	(4)
Part 6: Dealing With the IRS
When You Can't Pay Your Taxes
If You Owe Less Than $25,000	244	(1)
Getting More Time to Pay	244	(1)
Paying in Installments	245	(1)
What to Expect When the IRS Gets Serious	246	(3)
Dealing With a Monster Tax Bill	249	(2)
When the IRS Can Take Your Assets	251	(6)
Audits
Who Gets Audited?	257	(2)
How Long Do You Have to Worry About an Audit?	259	(1)
How the IRS Audits Small Businesses	259	(1)
The Auditor's Powers	260	(2)
Should You Get Audit Help?	262	(1)
Preparing for Your Audit	262	(1)
What to Bring to an Audit	263	(1)
Don't Rush a Field Audit	264	(1)
What Auditors Look for When Examining a Business	265	(4)
How to Behave at an Audit	269	(2)
How to Negotiate With an Auditor	271	(2)
Your Options After Getting an Audit Report	273	(1)
When Your Audit Is Final	274	(4)
Appealing IRS Audits
IRS Appeals	278	(2)
Contesting an Audit in Court	280	(6)
Penalties and Interest
Common Reasons for Penalties	286	(1)
Interest on Tax Bills	287	(1)
Understanding Penalty and Interest Notices	287	(1)
How to Get Penalties Reduced or Eliminated	288	(2)
How to Get Interest Charges Removed	290	(1)
Designating Payments on Delinquent Tax Bills	290	(4)
Help Beyond the Book
Finding Answers to Tax Questions	294	(5)
Finding and Using a Tax Pro	299
Answers to 25 Frequently Asked Tax Questions
Glossary
Appendix
IRS Publications List
Forms Checklist and Due Dates
Quick and Easy Access to IRS Tax Help and Tax Products (Publication 2053-A)
Index	1