| Preparing for an Audit |
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| Substantiation is the key to a successful audit of your small business tax return. The Internal Revenue Service has the right to look at any records used to prepare the return, so get ready to bring them in. But do not bring in a crate of receipts for the auditor to wade through. This is one situation where neatness really does count. The more receipts and paperwork the auditor has to search through, the more errors he or she can find. When the examiner asks about automobile deductions, your ability to produce a file labeled "car" not only builds the appearance of credibility but also prevents the auditor from finding potentially problematic items in your crate. In addition, going through all that paperwork to organize it refreshes your memory concerning the year in question. More... |
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| Taxability of Military Pay |
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| In general, if you are a member of the U.S. Armed Forces, your pay is included in gross income for federal income tax purposes. Basic pay includes amounts paid as back wages and amounts paid for services performed during active duty, attendance at designated service schools, drills, reserve training, and training duty. Special pay, including amounts received by medical and dental officers, nuclear-qualified officers, and amounts paid for services performed during diving duty, foreign duty, hostile fire, imminent danger, and special duty assignment must also be included in gross income. In addition, if you receive bonuses for enlistment and reenlistment, payments for accrued leave, muster out payments, personal money allowances paid to high-ranking officers, and certain scholarship and student loan repayments, you must include them in gross income. More... |
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| Partnership Income or Loss |
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| Even though a partnership is not a taxable entity for federal income tax purposes, it is treated as a separate entity from its partners for the purpose of computing and characterizing partnership income. The partnership has an obligation to file an information-only tax return, which gives a complete tax accounting of partnership operations for the tax year. More... |
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| Credit Card Annual Fees |
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| If you are a taxpayer who uses a credit card for business purposes, you might be tempted to deduct as interest the annual fee charged to your account under the terms of the credit card agreement. However, the Internal Revenue Service would disallow that deduction. More... |
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| SIMPLE 401k Retirement Plans |
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| A section 401(k) plan is a type of deferred compensation plan that permits an employee to have his employer set aside a portion of his or her wages in the plan on a pre-tax basis. Upon making an election to participate in a 401(k) plan, the contributed wages are not subject to income tax withholding at the time of the deferral. Thus, they are not taxable wages at that time. However, they are subject to Social Security, Medicare, and federal unemployment taxes. More... |
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