Last year, the IRS purchased between 1,500 and 2,000 licenses for QuickBooks and spent time training agents on the software.
According to IRS Revenue Procedure 98-25, the IRS has the authority to request electronic records, including the popular business software program QuickBooks, as well as Peachtree, Great Plains or any other software program businesses use to maintain their books.
Since Intuit launched its QuickBooks software, more and more Charlotte, NC small business owners have taken to managing and keeping their own set of books. Our experience, when working with business owners, is that more often then not, their QuickBooks are inaccurate, This is hardly surprising since most small business owners are not accountants and have little to no formal training or experience in bookkeeping.
It is more important than ever to make sure you have a clean set of books. It appears, the IRS is stepping up its efforts for compliance and has small business owners as its target. A couple indicators of this are:
1. A significant number of QuickBooks licenses were purchased within the past year and the IRS has been conducting training for its revenue agents for this software. QuickBooks is far and away the best selling bookkeeping software for small business owners. As companies get larger, they move away from QuickBooks. The only reason to purchase all these licenses and train revenue agents is to audit and insure compliance for small business owners who use QuickBooks.
2. In a study conducted by Syracuse University's Transactional Records Access Clearinhouse (TRAC), they found the IRS has increased the audits on small businesses (<10 million in assets) by 30% while simultaneously decreasing the number of audits on large companies (>250million in assets). Additionally, the number of IRS agents has increased by 6%.
Source: Transactional Records Access Clearinghouse-Syrcause University
3. Included in President Obama's budget proposal, released in mid-February, 2011, was an additional 5,100 revenue agents.
All of these factors are strong indicators that the IRS is placing an extra emphasis on small business owners to make sure there is compliance to tax law. As a business owner, it is your responsibility to know and understand your bookkeeping records and to be able to defend them to the IRS.
Has your business been the subject of an audit, where they requested a copy of your Quickbooks files? If so, please share your thoughts regarding this experience in the comments section below.
As of Monday, February 14, the IRS began accepting e-files for taxpayers that itemize on their tax returns. In a previuous blog post about filing your 2012 taxes, we highlighted how the IRS could not accept tax returns until mid-February.
The delay in processing returns, was a result of a last minute bill passed by Congress and signed into law. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 became law on December 17, 2011 and had a number of tax law changes. As a result of these changes the IRS had to change and update some of its processes and systems before it could accept certain returns, mostly 1040 returns with an attached schedule A (itemized deductions, such as mortgage interest)
The IRS commissioner, Doug Shulman, issued the following statement regarding the delay in processing tax returns. "We worked hard to update our systems to get the changes in place as quickly as possible. We appreciate the patience of those impacted by the delay. We urge taxpayers to use e-file with direct deposit, and they can get their refunds within days."
Most tax preparers, as we did with our Charlotte, NC tax filers, prepared returns but did not submit them to the IRS until the IRS gave the green light. They did that this week.
However, the IRS did caution taxpayers, that due to the increased volume of tax returns being submitted, tax filers and tax preparers may experience a brief delay in receiving their e-file acknowledgment, which is normally provided in 24-48 hours.
The IRS is now set to receive all tax returns, and will typically turn the refunds around within 1-2 weeks. The state returns are a different story. Many states are facing budget crunches and delaying the processing of refunds. Last year in North Carolina, tax payers had to wait until May and June before receiving NC sate refunds. The sooner you have your tax return prepared and sent in the more quickly you will receive a refund. For NC state filers and other states, where there continues to be a budget crunch, taxpayers expecting a refund should submit their return as soon as possible.
All employees should have received a copy of their W2s by the beginning of February. If you have not received yours yet, then you should call your employer and request a copy immediately. By law, employers have until the end of January to mail out copies of W2s to employees. Failure to comply with the W2 filing requirements and deadline can lead to hefty fines and penalties for employers.
Follow the steps below if you have not received your W2 or if you have received an incorrect W2.
- Contact the employer to find out, if and when, it was mailed. If you changed your address, or an incorrect address was listed on the W2, then the W2 may have been returned to the employer as undeliverable. Make arrangements to have it picked up or mailed to the correct address.
- If after a few days, you still have not received it, contact the IRS at 800-829-1040. The IRS will ask for your name, SS number, address and phone number. You will also need to provide them with your employer's name, phone number address, dates of employment and an estimate of your wages for the year. Usually, you can find this information on the last pay stub you received.
- You are still required to file a tax return and report this income before the tax filing deadline (April 18, this year) regardless of whether you received a W2 or have an incorrect W2. The IRS has form 4852, than can be used as a substitute for the W2, but only after you have contacted your employer and the IRS. Fill out form 4852, estimating your income and withholding taxes. You can use your last pay stub for the basis for your wage and income tax withholding estimates.
- After your tax returns has been filed, it is possible you will receive the missing W2 or a corrected W2. If this information is different than the amount listed on form 4852, that was filed with your taxes, you will have to do an amended return to reflect the correct amount listed on the W2.
As a taxpayer, you are responsible for reporting all income to the IRS. Not receiving a W2 is not an valid reason to not report the income. Employers are forced to pay hefty fines and penalties for not sending out W2 information and reporting its employees' wages to the IRS. Eventually, they will report your income. If the IRS cannot match the income you reported on your tax return to what your employer reported to the IRS, you will receive a an IRS notice detailing the additional taxes you owe plus penalties and interest.
Visit our services page to see how we can asssit you with your tax preparation this year.
The Healthcare Tax Credit was part of the The Patient Protection and Affordable Care Act that was passed and signed into law in March, 2010. The purpose of the Healthcare tax credit for small business is to promote and encourage small business owners to provide health care coverage to their employees. In return, the employer may receive up to a 35% tax credit for the premiums paid. The IRS video below, highlights The Healthcare Tax Credit available to small business owner.
Download our Healthcare Tax Credit Guide for Small Businesses to learn about this credit and help you determine if you qualify for this credit.
Businesses scored a big win yesterday as the Senate voted to repeal the 1099 reporting requirements that was part of the Healthcare bill. This requirement had been the topic of several blog articles that can be found here, here, here and here. In these blog articles, we highlighted the devastating impact and high costs that this requirement would have had on businesses. Fortunately, both parties realized this was a burdensome reporting requirements.
This provision was slipped into the Healthcare bill and required that businesses would have had to report all business transactions with any single person or business that totaled more than $600 in a calendar year. According to Kenneth Schortgen, JR in his article that appeared on examiner.com today, he highlights the cost to businesses: "The sheer cost of doing this, coupled with the cost many people would have incurred by hiring accounting help just to deal with this provision, could have burdened small businesses to the point that up to 40% would have had to close their doors, or layoff workers."
The bill must still pass the House and be signed into law. Few problems are anticpated with it passing the House and President Obama during the State of the Union address indicted hew was willing to compromise on the 1099 reporting requirement.
All North Carolina LLC's must file their annual report before April 15'th. If the annual report is not filed before the deadline and the annual renewal fee of $200 is not paid, the LLC will be dissolved by the NC Secretary of State. The web site address for the NC Secretary of state is http://www.secretary.state.nc.us. If you need assistance, do not hesitate to contact us.