News you can use
IRS is targeting businesses earning below $200K
Accordioning to Joint Committee on Taxation a key provision in the Inflation Reduction Act which throws an extra $80 billion to the IRS will end up targeting small business owners. They are estimating between 78% and 90% of the estimated additional $200 billion the IRS will collect will come from small businesses making less than $200,000 annually. For the IRS small businesses can be more lucrative because the wealthier individuals and higher revenue businesses will have more resources to fight back. For a full article click on the link below.
Former IRS agent's input about upcoming audits
Here is the quick paraphrased summary of what one of the former IRS auditors shared: most of the new auditors that will be unleashed will be young and without experience. They will not be able to recognize their boundaries of settlement. They will be aiming to impose a full letter of law just to impress their supervisors. This means that some of the audits could be dragging on for a long time. Negotiations may not be that easy. A lot of frustration could come out of some of those audits. Whenever you get the feel that there is no way out, ask the auditor to issue a final letter and then go to appeals. In appeals there will be experienced agents who will most likely make adjustments and settle the case. The appeal agents want to settle as they know that they cannot clog up the tax court and a lot of cases will be too small to keep them open and dragging.
My advice is always consult with your CPA before answering any letters or communicating with an auditor. Always keep a good record (receipts and other proofs of income and expenses). The IRS can go back three years for audit but if they find something that they identify as a substantial error they may add additional years. Per the IRS website they do not go back more than last six years.
Business Tax Mistakes
The most common small business tax mistakes are overreporting or underreporting income as a result of poor recordkeeping and miscalculation. Most of these mistakes happened as business owners tend to commingle their personal funds with the business and then at the end of the year, they may look at only one records and forget about other. My advice is to stay out of commingling funds as this will help you not only have a cleaner record for preparation of the tax return but also if audit arises. If you treat your personal as business account or business account as personal, then the IRS agent will start going not only though your business bank accounts but also your personal and they will have a lot more questions on which you will spend tremendous amount of time trying to explain and find the support. For a full article click on the link below.
“You can’t hide. We are going to find you”
Earlier this month president Biden has signed two bills that give the federal government more time to catch and prosecute fraud related to Payroll Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). The both of those programs started in first quarter of 2020 as COVD-19 small business relief programs. With this bill the statue of limitation is extended to 10 years for fraud charges to be brought in connection with PPP and EIDL program including EIDL advances and Targeted EIDL advances. President Biden’s message was “You can’t hide. We are going to find you”. For a full article click on the link below.
Will student loan pause into 2023?
Following the passage of the CARES Act in Marh 2020, payments and interest on government held federal student loans were suspended initially for six months, but the extension continued into 2022 with the most recent extension pause to end on August 31, 2022. The administration is signaling that another extension of the student loans is in the works and this one may continue not just through the end of the year but nearly a full additional year through July 1, 2023. For a full article click on the link below.
IRS and State Win Lottery without buying a ticket.
The last months winner of Mega Millions won $1.28 billion prize which is the second largest jackpot in Mega Millions lottery history. The winner gets $1.28 billion if they decide to take it over period of time, or if they decide to take it all at once (as most winners do) they would receive a winning of $747.2 million. $179,328,000 or 24% in Federal withholdings is taken off the top leaving the winner with the $567,872,000. The winner will still have to set aside an additional money since the winner will be in the highest tax bracket of 37%. The spread between the 24% withholding tax rate and the 37% tax rate on these numbers is another $97,136,000 for which the winner will have to write a check to the IRS by April 15th. Let’s not forget about state taxes as well. If the winner would have been in the state of Louisiana most of those winnings would be taxed at the highest tax bracket of 4.25% which would be additional $31,756,000 in state taxes leaving the winner with net earnings of $438,980,000. Congratulations Government you just won $308,220,000. For a full article click on the link below.
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E-mail: dragana@dcmtax.com
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