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Tax Tips Newsletter
Serving you since 1993
August 2012 - Vol 7, Issue 8
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Greetings!
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I hope you are staying cool through this heat wave. Even though we are in the middle of summer, tax extension deadlines are soon approaching. If you have not gotten your information in, please send it to me as soon as possible.

I just read about two Tax Court cases in which the taxpayers were denied a charitable contribuiton deduction IN FULL because they did not have the proper documentation or did not follow the correct procedures. Even though it was obvious that it was a chartiable donation One case was the donation of a $18.5 million piece of real estate. Yes, that's correct. The ENTIRE deduction was disallowed because the donor did not follow the rules for a non-cash contribution. The other case ws for a cash contribution of $25,000 to a church. The ENTIRE deduction was disallowed because the donee did not get a qualified acknowledgement of the donation from the church. To make sure you have the proper documentation for your donation, check my website. There is a tab at the top of the home page that says "Information Station". From their you can click on "Your Taxes" and then on one of the "Charitable Giving" topics.

The office will be closed on Monday, September 3rd for Labor Day.

Be sure to "friend" me on Facebook. I'm at Linda L. Heineman, CPA. I send out great tax tips once a week!

Checklist
The IRS wants new business owners to be aware of their tax obligations.

Among the common tax issues that can trip up new business owners:

* CLASSIFICATION OF WORKERS. Determining whether workers are employees or independent contractors is a matter of law, not the choice of the worker or the employer.

* FEDERAL EMPLOYMENT TAX DEPOSITS. Called trust fund taxes, these deposits must be made according to the appropriate schedule, depending on deposit amounts.

* QUARTERLY ESTIMATED TAX PAYMENTS. Business earnings are not subject to tax withholding; therefore, the owner's income and social security tax obligations are met through quarterly estimated tax payments.

* RECORDKEEPING. New businesses need a good recordkeeping system to make tax filing easier and accurate.

* DISASTER PROTECTION. Financial and tax records need to be protected to ensure business continuity in the event of a disaster.

* TAX SCAMS. New business owners should be alert to the prevalence of abusive tax avoidance schemes. Falling victim to one of these schemes could result in serious tax problems.

For guidance in getting a new business off on the right tax foot, give my office a call.
Tax Evasion
Suppose you discover a mistake or omission of an item on the 2011 federal tax return you recently filed. Should you ignore the error? Although it can depend on the nature and significance of the item, the answer is generally "no." But the matter may be resolved by filing an amended 2011 return.

Clearly, you should file an amended return right away if you've paid less tax than the amount you actually owe for 2011. If the IRS eventually detects the mistake, it can require you to pay the difference in tax liability plus substantial interest and penalties. As a general rule, the IRS has three years in which to audit a return, but the statute of limitations is extended to six years if you underreport income by more than 25%. And there's no time limit if fraud is involved.

When a change works in your favor, consider all the ramifications. If you stand to receive only a few extra dollars back, it's probably not worth the effort. This also gives the IRS another chance to scrutinize your return. On the other hand, if you expect a sizable refund in return, it usually makes sense to pursue this action.

One of the common reasons for amending a return is to change your tax filing status or dependency exemptions. For instance, there could be some confusion over claiming exemptions for children following a divorce. Similarly, you may have overlooked special deductions or credits available on 2011 returns.

If you discover an error or missing information on a return you already filed, give us a call. I can review the situation with you and help you file an amended return if necessary.
Seaside bliss
Tax Tip of the Week: The Tax Tip this week has to do with S corporation deduction limits. If you are a shareholder of a S corporation you need to meet certain criteria in order to take a loss on your personal tax return. See the tip on my web site for an explanation of how this works if you are a shareholder.

Business Tip of the Month: Keeping a clear and supportable record of your firm's business transactions makes good business sense. Read the article to see why it's so important for your business to create clean audit trails.

Financial Tip of the Month: Owning a car is one of our major expenses. Regular maintenance and shopping around for better insurance are just 2 ways to save a few dollars. Check out the article for more money saving tips.

Fraud Alert: Health insurance scams are big money, so in a shaky economy it's the perfect setting for the crooks to be out in full force. There are some informative tips in this article to keep you aware of how not to be sucked in to an insurance scam.

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Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979