Focus CPA Group, Inc. (562)281-1040

Copyright (c) 2009 William Piner
A greeting to you all my friends, it is time to write another year end tax planning article. What shall we discuss? What can I tell you all that will offer some sort of financial revelation helping with both your income tax and strategic financial management?
Well, times are difficult but some of you might still be in need of some practical tax planning. How about a C corporation taxpayer (a corporation that is not a subchapter S and pays tax as though operating as an individual) that has a sizeable profit, a father-son ownership team, and reports for tax purposes on the cash basis method of accounting. Suppose that Daddy has aspirations of retiring in the not too distant future. Try this one on for size. For the current year, why not allow the Company to pay tax on $75,000 of income. By leaving this amount of taxable income inside of the C Corporation, the 15% and 25% tax brackets will be exploited. The father ‘son owners have a much higher marginal tax rate facing them-35%. By doing it this way, we save money within the corporate structure allowing it to stockpile additional capital to manage operations going forward. The earnings exceeding the $75,000 of desired taxable income will be paid out to father-son in the form of bonus or other compensation. In addition, the Company will make a profit sharing plan contribution on their behalves. This is a great tactic for this Company’s year end tax planning as the lower corporate rates are used for maximum benefit and the owners (father and son) get tax sheltered income in the form of retirement plan contributions. The business now has working capital as we approach another year of operations.
As for a strategic financial consideration, if Father is considering retirement in the not too distant future, why not consider gifting the stock to qualified small business trust, where sonny is the beneficiary, in January (the next year of operations). The Company would then make a corresponding S corporation election (due by March 15th for calendar year corporations-use form 2553). A gift tax return will have to be filed by father and a valuation will need to be performed on the gifted shares. The valuation of these shares will consider the time frame of the gift to the trust and its earnings potential. If father will strip most or all of the earnings and the gift term is say ten years (the recognition period for the S corporation, when it is converted from a C corporation, in order to avoid liquidation tax), the value of the gift will be significantly reduced thus preserving the estate tax exemption for other assets in his estate. The gift tax return is filed on form 709 and is due by the filing of Father’s personal income tax return.
For those of you more advanced, when converting a C corporation to an S corporation, income is recognized at the corporate level to the extent of unreported receivables and payables, the 481(a) adjustment, because of using the cash basis method of accounting for tax reporting purposes. Remember, a major trait of the S corporation involves the flow-through of profits to the shareholders, thus avoiding corporate level tax. Regarding cash basis C corporations converted to S corporations, the would-be taxable income of the entity would have to be eliminated to avoid a corporate level tax. This would be true for the entire ten year recognition period. Because it would be the goal of the corporation to eliminate taxable income, in order to reduce the exposure to gift tax consequences, we have effectively killed two birds with one stone. There will be no corporate level tax; the corporation can continue to use the cash basis method of accounting, and Father will have a limited exposure to estate and gift taxes. Wait a minute, that’s three birds with one stone. Nice.

Product Description
Taking the same practical approach as Principles of Accounting I, this book teaches the second part of introductory accounting courses, including FASB requirements for the statement of cash flow. Covering specialized areas and aspects of business such as manufacturing costs, budgets, standard costs and financial ratios, the contents match those of the leading acocunting textbooks. Students in regular and special accounting prgrams and nonmajors will also appreciate … More >>

Schaum’s Outline of Principles of Accounting II

I know Peachtree/Quickbooks or something
but what does it really do?
Is accounting only to help out the owner? or is there legal stuff included?
Also, what’s the difference between what the cash register monitors and what i use the accounting program for?

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Product Description
Now the best-selling book of its kind has gotten even better.This revised and expanded second edition of Ittelson’s master work will give you that firm grasp of “the numbers” necessary for business success.

With more than 100,000 copies in print, Financial Statements is a perfect introduction to financial accounting for non-financial managers, stock-market investors, undergraduate business and MBA students, lawyers, lenders, entrepreneurs, and more. Most … More >>

Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

A business is an entrepreneur’s creation and his way of achieving success for the vision, which he has in mind. More and more small businesses are making an appearance in every sector and industry as more people are becoming independent and want to establish their own identity. However, a start up needs to be handled with extreme care and caution and requires much more effort in its day to day working than an already established big business. One of the crucial aspects to be handled in any business, whether a start up or established, is its accounting processes. Now, for a small business, the finance and accounting helps the entrepreneur keep a close track of the way the business is functioning and the costs associated with running a business. Hence, if you own a business or are planning on starting your own firm, ensure that small business accounting receives its due importance and is handled professionally from the very beginning.

Small business accounting forms one of the pillars of a successful business and it helps you to understand the strategies and measures that should be adopted to earn profits for the business. It helps the entrepreneur to keep a track of each and every financial transaction that takes place in the form of income or expenditure. Small business accounting will enable you to have a ready record of every details of the account for your referral at any time you want. This keeps you always prepared whenever you want to take some decisions regarding the working of the business or perhaps analyze your next move for expansion and growth in the market.

A business that has its small business accounting in place also earns a good reputation and name with its employees, creditors, vendors, shareholders and the public in general. If you have ready access to detailed accounts, it stands you in good stead during the process of paying taxes and filing returns. The auditor forms a favorable impression about any small or large business that has its accounts accurately maintained and updated. Hence, most businesses have allocated a separate division to the maintaining of accounts which is manned by professionals who are very good with numbers and can maintain records accurately. However, if you feel that you cannot afford to devote an entire division to accounts then perhaps outsourcing your business accounting work is a good idea.

Any individual starts a business with the intention of earning profits and if your business is not doing well, then you need to review your actions and analyze where you are going wrong. The small business accounting plays a crucial role in helping you make the right decisions and realize where your business actually stands in the market. Once the accounting has given you an accurate picture of your business dealings, you can accordingly plan and revise your growth plans and take the business forward successfully. So ensure that your accounts and records are in order and your business is taking flight in the direction that you had dreamed of.

The quickbooks I am using now is just very cluttered with invoices which are paid but not marked paid and bla bla bla… I want to keep that one current because I still have recievables for it. How can I “start a new company” but import all my service lists, customer info and custom invoice templates?
Thanks!

hi,
I got a letter from IRS that i owe them $25,000 from 2007..I had $27,000 worth of shares wich i still own them.now they are saying my income is $87k,and i need to pay #25,000 tax including pently,and interest..
how much attorney charge roughly?and how long does it take to settle my case? and do i need to go with attorny all the time or just one time i have to go?

I am starting a small bookkeeping business and want to know should I charge a upfront fee for service. It will come with written/signed invoice of satisfaction or money back guaranteed.
*Bookkeeping services will be monthly, meaning they pay once a month for services.
The reason why I want to do this is because I don’t want to deal with the hassles of “running people down” to pay for services.

One of the biggest mistakes made by business owners and real estate investors is waiting until it is too late to assess the tax impact of your business income and real estate transactions. There are several reasons for this:

1. The tax laws are complicated and change constantly.

2. Taxpayers often fear an IRS audit if they aggressively pursue tax savings.

3. Taxpayers often do not think about their taxes until the filing deadline is imminent.

However, taxpayers only need remember that the Internal Revenue Service only requires you to pay the amount of tax you owe under the current regulations and NOT A PENNY MORE! There are numerous tax court cases where judges have noted that it is the taxpayer?s right and obligation to reduce their taxes to the minimum amount due as long as they are in compliance with the tax code.

There are several factors to consider when developing a tax strategy for each business owner or real estate investor?s unique situation. Tax strategies that provide the most benefit should take into account the following:

1. How does the timing of a transaction impact the situation?

2. What options are available to minimize your taxable income?

3. Can you defer taxable income or tax payments without incurring a penalty?

4. What is your marginal tax rate and how does a given transaction affect that rate?

5. Do we have the ability to match high income with high expense?

6. What is the effect of long term versus short term holding periods?While each taxpayers situation is unique, tax planning basically consists of the following steps:

1. Analyzing and obtaining an understanding of the taxpayer?s situation and goals.

2. Development of a strategic tax plan to minimize the current and future tax liabilities.

3. Preparation of a tax projection which incorporates the strategic tax plan.

4. Implementation of the strategic tax plan.

5. Ensuring that the taxpayer has made sufficient tax payments to avoid a tax penalty.There are numerous tax planning strategies available which can be used depending on your unique situation. The following is a brief description of some of the most common:

1. Deductibility of qualified business expenses paid at year-end in advance for the following year. A business check is considered payment in the year in which you mail or deliver it as long as no restrictions on it apply. In addition, a bank credit card can be used to pay such expenses even if the card balance is not paid off until the following year.

2. Purchases of needed business fixed assets such as furniture, machinery and equipment and business-use vehicles can lead to either a complete write-off of the cost of such equipment in the current year using Section 179 of the IRS code assuming the business has sufficient income or at a minimum, bonus depreciation on fixed asset purchases no matter what the business income is. The 2007 Section 179 deduction is $108,000 for qualified asset purchases.

3. Funding of tax deferred IRAs, SEPs and 401(k) programs to defer the amount of taxable income and help fund your retirement.

4. Use of Section 1031 to defer gains on real estate held for investment purposes.

And there are many more depending on your unique tax situation and goals!

In order to take advantage of the benefits and savings that await you, you must have a plan that takes into account your unique situation. DON?T PROCRASTINATE. CONTACT A TAX ADVISOR TODAY!!

I know that Florida Atlantic offers a masters degree in Forensic Accounting, but I would like to know, what other schools offer this or a similar masters program? A list would be great, because so far all I’ve found are regular Accounting masters programs, with no specific concentration. Thanks!