Category Archives: Business Taxes

Articles and tips related to business taxes by James E. George, CPA

Santa’s Tax Situation Doesn’t Look Good!

Santa’s Tax Situation Doesn’t Look Good!

It is Christmas! While the happiness that comes with the holiday is enjoyed by most of us, the IRS continues to do their job undeterred by the season and its traditions. We will now take a look at the situation involving the income tax audit of one Kris Kringle, also known as Santa Claus.

Santa employs many elves at the North Pole place of business where the toys are made for all the good girls and boys. With all those elves, Santa must make sure the proper employment forms are on file. Significant penalties could be assessed against Santa if his files don’t include the I-9 immigration form for the foreign elves. The New Hire form must be filed with the applicable states so they may track down any elves that are behind on their school loans or little elf support. Don’t forget the W-4 form must be completed for each elf on the payroll to assure the proper amount of withholding is taken from their toy making pay.

To deliver the toys to all the good girls and boys, Santa and his reindeer travel thousands of miles over the Christmas holidays. If he fails to adequately document his mileage, rooftop parking and tolls, he could lose valuable deductions and result in a significantly higher tax bill this year.

Santa is paid for the toys he delivers to stores. The toys he leaves at the houses for all the girls and boys are free! This calls into question the profit motive for the entire operation. How could Santa possibly expect to make a profit when he gives away such a high percentage of the products the elves make? Santa needs to document his business model in order for his toy making and delivery business not to be deemed a hobby and therefore any losses are not deductible.

What about all those elves? Do they qualify as Santa’s dependents? Each elf must complete a form outlining their sources of income and support outside of their North Pole toy making income. Santa must also track where each elf sleeps every night in order to establish custody. Without this key piece of information, he loses the right to claim many of the elves as dependents. This could result in a significant assessment to Santa and cause old Saint Nick to not be so jolly.

If Santa needs a good CPA, he can find one in Jefferson, Maryland.

New Tax Laws for 2019!

New Tax Laws for 2019!

This week I attended a two-day seminar on the new tax laws taking effect for 2019. The sheer number of changes is a little overwhelming. There are new reporting requirements for anyone who files Head of Household status. There is also an expanded due diligence checklist for any taxpayer that claims college expenses, the child… Continue Reading

Employing your child could be a win-win strategy

Employing your child could be a win-win strategy

I met with one of my higher income clients this morning to discuss tax saving ideas. She operates a business out of her home to keep the overhead low. This year her income has increased about 20 percent and it looks like the growth will continue for the foreseeable future. We discussed a number of… Continue Reading

Tax-Related Telephone Scams

Tax-Related Telephone Scams

This week our area has been hit with an increased number of tax-related scam telephone calls. They are starting to sound much more realistic than similar scams in prior years. Usually the caller will identify themselves as a member of an enforcement division of either the IRS or Maryland State Police. They will inform you… Continue Reading

IRS to Audit More Small Businesses!

IRS to Audit More Small Businesses!

The 2018 IRS Forum was a valuable source of information regarding the upcoming tax filing season. Among the many tidbits I gleaned were issues of IRS concern relating to small businesses. The IRS has announced they are going to scrutinize such things as: personal use of the business assets such as cell phones and laptops,… Continue Reading

Many New Tax Law Changes are Just Around the Corner!

Many New Tax Law Changes are Just Around the Corner!

Last week I spent three fantastic days at the IRS Nationwide Tax Forum! Many new tax laws and changes to the tax forms are slated for the next filing season. The amount of new information, procedural changes and tax form modifications discussed was at times, overwhelming. The increasing number and types of new tax scams… Continue Reading

Employees’ Business Expenses Must be Documented

Employees’ Business Expenses Must be Documented

A deduction is available for money an employee spends to perform their duties in the course of their employment if they are unreimbursed by their employer. This includes mileage, licenses, union dues, education and out of pocket expenses. The expenses must be incurred as a condition of employment or utilized in the performance of the… Continue Reading

Beware of Tax-Related Identity Theft Scams

Beware of Tax-Related Identity Theft Scams

Deceitful communications come via phone, email, postal mail, and sometimes even a knock on your door. It’s important to know that the IRS does occasionally contact taxpayers, but when they do, it’s most often by mail. Sometimes the IRS needs to verify a taxpayer’s identity and will do so by sending a Letter 5071C. This… Continue Reading

Do You Need to File a Form 1099 Misc?

Do You Need to File a Form 1099 Misc?

A Form 1099 Misc should be filed for every unincorporated vendor or contractor who you paid $600 or more during the calendar year 2017. The amounts to be reported are for services only. If you paid someone for products and services, only the labor charges are to be reported in box 7 of Form 1099… Continue Reading

Due Date for Payroll Reporting

Due Date for Payroll Reporting

The due date for filing your form W2’s with the Social Security Administration is January 31, 2018.  Extensions to file these forms are much more difficult to get this year.  The IRS is only granting extensions in cases of extreme hardship or uncontrollable circumstances.  The penalties for failure to file the forms on time have… Continue Reading

Biggest Audit Risks for Business Owners

Biggest Audit Risks for Business Owners

The Schedule C for an unincorporated business and the Schedule F for farming activities are the forms MOST AUDITED by the IRS! The IRS has published the following list of issues they scrutinize when auditing the Schedule C and the Schedule F: Lack of record keeping for automobile use – no mileage logs. Personal phone… Continue Reading

Should You Use Technology for Record Keeping?

Should You Use Technology for Record Keeping?

Technology can be helpful when it comes to bookkeeping! There are many new gadgets and applications on the market that assist with tracking business expenses. While these “apps” eliminate paper, they do not eliminate the need to provide your tax preparer with the records they deem necessary to prepare your income tax returns. For example,… Continue Reading

Would Your CPA Approve of How You Organize Your Files & Receipts?

I recently met with a contractor who had very organized files. You could tell he spent a lot of time assembling his receipts. The problem: they were organized in a manner that was not efficient for preparing a tax return. Instead, the gentleman had organized his records by vendor. The solution: The income tax return… Continue Reading

Do I File A Return If My Business Had More Expenses Than Income?

QUESTION: Dear Taxman – This summer I started a lawn mowing business and made about $3,000 mowing grass. However, my expenses were more than my income. Do I need to report it on my tax return? ANSWER: Dear Reader: The IRS requires all business income to be reported when you file your tax return. You… Continue Reading

What Is The Due Date for Filing W-2’s?

QUESTION:  Dear Taxman – What is the due date for filing my W-2’s with the Social Security Administration? ANSWER: Dear Reader – You’re probably aware that W-2 forms must be provided to your employees by January 31st. The IRS has set the due date for filing your W-2’s with the Social Security Administration to January… Continue Reading

Do I Give my Employees 1099’s or W-2’s?

QUESTION: Dear Taxman – I have a small business and I am not sure if I should give my workers 1099’s or W-2’s. Can you tell me how to determine which way to go? ANSWER: Dear Reader – It’s not uncommon for small business owners to be confused about the right way to handle their… Continue Reading

Deducting Vehicle Mileage

QUESTION: Dear Taxman –  I use my car in my business occasionally. I have paid for all my gas with my debit card so I have a record of how much gas I purchase.  Is there anything else I need to do to deduct my auto through my business? ANSWER: Dear Reader – The record… Continue Reading