S-Corporations Must Pay Owners A Resasonable Wage for Services Provided

This isn’t really new its just a reminder. You can not provide services within your S-Corporation and avoid paying payroll taxes on amounts that are easily identifiable as wages. The proper way to avoid this trap is to take a reasonable amount for the services you provide for your S-Corporation then if you have excess profit you can occasionally pull some money without charging it through payroll. Failure to follow this advice could end up costing you a bundle.

Stimulus Check 1 and 2 created an Opportunity for Parents With 17 and Older Dependents

Stimulus check for 2020 were issued by the IRS during 2020 based on 2019 income tax returns. They are reconciling the stimulus checks on the 2020 tax return which is currently being filed. I am finding that many people with children between 17 and 24 that have earned income actually benefit from allowing their children to claim themselves as dependents. Everyone may not benefit from this strategy and the best way to know is to look at it both ways. I can do this for you if you’ll come see me.

IRS Debt

You can hear the commercials on most any syndicated talk radio show in America. The pitch goes something like “Settle Your Debt With The IRS For Pennies on The Dollar”. Is it possible? Yes it is. It happens all the time.  But there are many factors that determine when an IRS debt can be settled.

The method used to settle debt for pennies on the dollar with the IRS is called The Offers in Compromise Program. It is a program offered by the IRS so that honest taxpayers can settle debts that they can not afford to pay. Let me reiterate. The program that can be use to settle debt with the IRS for “Pennies on the Dollar” is called the Offers in Compromise Program. It is designed for honest taxpayers to settle debt that they can not afford to pay.You have to be able to prove that you lack the ability to pay in order to qualify for this program.

Don’t let someone tell you they can settle your debt that is unaware of your ability to pay according to the IRS formula. The IRS has it’s own formula in arriving at whether a person can qualify for an offer and their definition of ability to pay is rarely the same as the taxpayer’s.

Many of the companies that are in the business of soliciting people to settle their IRS debts will make unrealistic statements and guarantees that they can not deliver. The name of the game is to prey on the taxpayers fear of the IRS and to get the taxpayer to pay for services now.  They will even go as far and tell the taxpayer that “You have already proven that your a procrastinator and you don’t need to let this go any further. Your problems are only going to get worse if you don’t make this decision right now”.

This is a pressure tactic to get you to commit your money to them before they have any idea whether they can provide you with any substantial help or not. Don’t get me wrong. If you have past due taxes you do need to get started solving your problems. But if the people you are talking with have not taken the time to learn about your income, your assets, and liabilities they have no idea if you will qualify for the Offers In Compromise program. Be wary of making any monetary commitment to a person that is promising to help but asking you very few questions about your financial status. Chances are they are not going to help you in the end they just want to get your money while you are scared.

When we take on an IRS Problem Resolution Client we usually ask for $500-$1000 to get started in the determination process of whether a taxpayer can qualify for the Offers In Compromise Program. We advise the client that we are making a determination if an Offer is appropriate or if a payment plan is the proper course of action. As well as an estimate of total fees depending on our determination. We require the deposit to pay for our time in assisting the client in gathering and organizing the financial data needed to make a determination on the clients ability to pay according to the IRS. Then we advise the client on our findings and the proper way to proceed with the IRS debt.

Any other methodology has a high chance of being a scam and the people that pressure the taxpayers to get them to commit money are potentially crooks. You should do your homework to determine the reputation of anyone that requires prepayment.  However, those of us who do IRS resolution work would be foolish to perform the work without some payment up front.  We are typically working for clients that are only dealing with their problem because they are being forced to act by the IRS.

Finally, I would never suggest that anyone pursue an offer without professional assistance. Taxpayers have rights and you need someone that knows your rights to protect you. Look for someone that you can trust by getting recommendations from people you personally know or ask for references and check them out before handing over you hard earned dollars.

I originally posted this article on February 2, 2008. I did so because I was dealing with my third client that had been duped by one of these organizations. I did not know that many state Attorney General’s were upset with their marketing message, subsequent failure to perform, and in pursuit of a remedy. I have attached a pdf file of an article produced by Web CPA on June 18, 2008. The group in this article is not the only offender but they are probably the most well known which is probablly why they started with them. It basically supports my article.  You should read it for yourself.

Ant and Grasshopper

THE ANT AND THE GRASSHOPPER
This one is a little different…. Two Different Versions…………….. Two Different Morals

OLD VERSION

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away..

Come winter, the ant is warm and well fed.

The grasshopper has no food or shelter, so he dies out in the cold.

MORAL OF THE STORY: Be responsible for yourself!

MODERN VERSION

The ant works hard in the withering heat and the rain all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while he is cold and starving.

CBS, NBC , PBS, CNN, and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.

America is stunned by the sharp contrast.

How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?

Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, ‘It’s Not Easy Being Green.’

Acorn stages a demonstration in front of the ant’shouse where the news stations film the group singing,’We shall overcome.’ Rev. Jeremiah Wright then has the group kneel down to pray to God for the grasshopper’s sake.

President Obama condemns the ant and blames President Bush, President Reagan, Christopher Columbus, and the Pope for the grasshopper’s plight.

Nancy Pelosi & Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.

Finally, the EEOC drafts the Economic Equity & Anti-Grasshopper Act retroactive to the beginning of the summer.

The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar and given to the grasshopper.

The story ends as we see the grasshopper and his free-loading friends finishing up the last bits of the ant’s food while the government house he is in, which, as you recall, just happens to be the ant’s old house, crumbles around them because the grasshopper doesn’t maintain it.

The ant has disappeared in the snow, never to be seen again.

The grasshopper is found dead in a drug related incident, and the house, now abandoned, is taken over by a gang of spiders who terrorize the ramshackle, once prosperous and once peaceful, neighborhood.

The entire Nation collapses bringing the rest of the free world with it.
MORAL OF THE STORY: Be careful how you VOTE.

Disaster Planning

On April 27th, 2011 a tornado hit Cullman, AL and destroyed many things. It swept through the downtown area and destroyed businesses, homes, infrastructure such as power lines and telephone lines and more. My office was spared a direct hit but the effects were substantial none the less. We were without power for 6 days and phone and internet services for 8 days. I had a disaster recovery plan. I thought that we were ready to quickly reestablish a computer network complete with backed up data. I learned that I was not nearly as ready as I thought and I hope that this message will help someone avoid my mistakes.

I had been advised by our IT management company to develop a disaster recovery plan that included having to start completely from scratch and rebuild my computers, servers and workstations. This plan was a plan that would need to work even if my building were completely destroyed and all my paper files essentially lost for ever. You see, while my experience is thus far limited to the ripple effect of a tornado, it could just have easily been a direct hit by the tornado or a fire that destroyed my building and everything in it. That is a scary thought for any of us. But I want you to think about how much better it would be if you planned ahead and had a recovery plan in place to get your computers and communications back up quickly and without losing any of your data.

It is not an impossible goal and it is not a goal that one can afford to fall short on if one is dependent on computers to operate a business. It is called a disaster recovery plan and if it is done properly 24 hours is within reason for a 5 or so user network.

Found Money

Many taxpayers leave money on the table, due to missed deductions even qualified tax preparers miss. Bring your tax returns and related documents into our office, and we’ll help you find lost money! If you don’t have more money coming back, we charge nothing! No Risk.

Come by our offices and drop off your last three year’s tax forms and income/deduction documents. Or, just call us today at (256)739-3195 to set an appointment for this year’s prep and bring what you can. If you have any questions, FEEL FREE TO CALL . We may be able to help you find money that is already due you but is yet unclaimed. Please contact us now and we will look for your money at absolutely no risk to you.

Incorporate

There are many different reasons for choosing to Incorporate your business. The best reason is typically liability protection for personal assets. I see and hear stories of all kinds of poorly formed and or operated corporate entities which do little to protect the owners when they need it.

The bottom line is don’t do it if you do not intend to maintain the correct form which means following processes that will limit the way you conduct business.