Reads from Last Week

Posted by on Jul 25, 2010 in Information, Opinions, Week in review | 0 comments

Five Critical Facts About Business Growth is a video blog post from Chad over at Bordeaux and Bordeaux in Charlotte North Carolina. I haven’t posted much from his blog but that’s because I am to lazy to watch so I can’t really say if they are worth watching or not. However I did watch this one and every business owner needs to watch this one. He discusses the following five facts about business growth:

  1. There is no such thing as a mature business or market.
  2. Not all growth is good growth.  Some growth can be disastrous for your Company.
  3. Growth is a mentality – created by the leaders within a Company
  4. Balance growth is the key to long-term prosperity.
  5. Growing your business is much less risky than NOT growing your business.

If the rest of his video posts are like this I have been missing some things. Keep up the great work my friend.

Unfortunately, most young adults find themselves on their own when entering the “real world” without guidance about money and how to manage it. 7 Things About Money I Wish I Knew in My 20s is a great post.

IRS Presents: Five Facts about the Making Work Pay Tax Credit

Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know. IRS Presents: Six Tax Tips for New Business Owners.

Have you ever wondered how banks can offer higher than average interest rates on savings or checking accounts? Banks are in the business of making money, even if that means taking a loss sometimes. While that might sound counter-intuitive, it often works out well in the long run. So, How Do Banks Make Money by Offering High Interest Rates?

During the NATP annual conference my friend RDF ran some really great reruns. If you missed them please visit The Wondering Tax Pro

Your 2011 tax burden

Are you ready for a Roth?

Don’t fall for health care tax rumors

How To Prepare for Tax Increases Next Year In this Sluggish Economy

Am I Saving Enough Money For Retirement and How Much You Should Be Putting Away in 401K or IRA Accounts

LLC vs S Corp

Tax Relief FAQ: You Received a CP-504 Notice From the IRS for Back Taxes You Owe – What Does This Mean?

Back Taxes Aren’t Your Only Problem When Concealing Income from the IRS

This Month’s Runner Up for the Strangest Tax Form

Is extreme remodeling a charitable contribution?

Recording Fixed Assets

“Tax Cuts Will Expire” – Geithner

Me, me, me. It’s all about me.

What the Heck is Basis, Anyway?

Don’t Get Too Anxious to Stuff Just Anything into Your IRA

How Would the Expiration of the 2001 and 2003 Tax Cuts Affect Individual Taxpayers? With just a week left before Congress leaves town for the August recess, the fate of the 2001 and 2003 tax cuts is up in the air.

Last week I wrote About The Three Most Common Payroll Tax Mistakes and I shared one of my reasons and thought process as to why I have started writing about non-tax stuff. Truth is as the non-tax stuff goes, the bookkeeping is very important for your taxes. The IRS even tells you in Publication 583 (1/2007), Starting a Business and Keeping Records “Except in a few cases, the law does not require any specific kind of records. You can choose any recordkeeping system suited to your business that clearly shows your income and expenses.” As I read the second sentence or even interrupt it, the IRS is saying to you (business owners), it doesn’t matter if you use QuickBooks, Peachtree, or even Microsoft Office Accounting (before it was discontinued), but you need something “that clearly shows your income and expenses.”  I promote QuickBooks because it is in my opinion, with over 12 years as a self-employed tax accountant, that QuickBooks is the best suited for those who keep their own books.

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How do I know if I have to worry about the AMT?

Posted by on Nov 19, 2009 in AMT, Information, Opinions | 0 comments

          One of the big problems with the AMT, there’s no good answer to this common question. You can owe AMT liability due to any number of reason/s. Could be just one thing, could be a lot of little things. Some things that can contribute to an AMT liability are mundane items that appear on many tax returns. (See this list Top 10 Things that Cause AMT Liability.)

          If you use computer software to prepare your tax return, the program should (I would hope) be able to do the AMT calculations for you. If you’re preparing your return by hand, the only way to know for sure is to fill out IRS Form 6251 – a very laborious process, on that I charge almost $80.00 for, and that price is adjusted (usually up) almost every time.

         The best way to understand the alternative minimum tax liability is to see how it’s calculated. So, here’s what you do.

         First, you figure the amount of tax you would owe under the different rules. What’s different about these rules? Roughly speaking, there are three things:

  1. Various tax benefits that are available under the regular tax are reduced or eliminated.
  2. You get a special deduction called the AMT exemption, which is designed to prevent the AMT from applying to taxpayers with modest income. This deduction phases out when your income reaches higher levels, a fact that causes significant problems with the alternative minimum tax.
  3. You calculate the tax using AMT rates, which start at 26% and move to 28% at higher income levels. By comparison, the regular tax rates start at 10% and then move through a series of steps to a high of 35%.

          The result of this calculation is the amount of income tax you would owe under this “alternative” system of tax.

          Okay, got that number? Now then, compare this “tax” with your regular tax. If the regular tax is higher, you don’t owe any AMT. However, if the regular tax is lower, the difference between the two taxes is the amount of AMT you have to pay.

         You should definitely run the numbers if your gross income is above $75,000 and you have write-offs for personal exemptions, taxes and home-equity loan interest. if your income is over $150,000, run the numbers just because.

        Running the numbers means filling out Form 6251. In effect, you are simply adding back some tax deductions and income exclusions to your regular taxable income to arrive at your new alternative minimum taxable income (AMTI).

“Here is where the middle class gets screwed by the goat. If you are planning on doing all this on your own please call a tax pro for some guidance and a better understanding.”

         The AMT form has quite a few other pluses and minuses, but you can probably ignore them unless you own a business, rental properties or interests in partnerships or S corporations. If you do, you may need a tax pro to prepare at least the Form 6251 part of your return for you.

         Finally, you get to deduct the AMT exemption however, this exemption is reduced by 25 cents for each dollar of AMT taxable income above $150,000 for couples ($112,500 for singles and $75,000 for married filing separate status), and it’s not adjusted for inflation, which is one of the reasons why more people owe the AMT every year.

         After the exemption (if any) has been deducted, the result is subject to AMT rates. Again, the AMT brackets are not adjusted for inflation, which causes much greater exposure to the tax as the years go by. If the AMT exceeds your regular tax, you have to pay the greater amount. Basically, the AMT is just more tax, above and beyond your regular tax. Technically, the AMT is just the liability over and above the regular tax, and this figure is entered on page 2 of Form 1040.

Other notes:

         To calculate and report your AMT liability you need to fill out Form 6251, Alternative Minimum Tax – Individuals. If you use this form by all means please read the instructions.

         You’re required to take your AMT liability into account in determining how much estimated tax you pay. For information about estimated tax payments, see this Guide to Estimated Tax.

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