| |
| |
|
Taxes |
|
|
|
Articles and Information about TaxesNetFinancial | Institutions | LoansColleges and Universities | Search Engines Tax Trap #2 -- Double Taxation: Isnt Once Enough?
Have you been thinking about incorporating your smallbusiness or self-employment activity? The advantagesare many! For starters, you'll be protecting yourself and your familyfrom the possible of a business ending lawsuit. Forming acorporation is Step One on the path known as "AssetProtection" -- you are moving from the world of unlimitedliability to the world of limited liability. (NOTE: For further insight into the legal advantages ofincorporating, check out the article: "It Can Happen To You:Why Any Sole Proprietorship Is A Risky Business" athttp://www.YouSaveOnTaxes.com/happen-to-you.html) From a tax standpoint, there are both advantages anddisadvantages to incorporating. Yes, forming a corporationcan either reduce your taxes or increase your taxes,depending on what type of corporation you create. There are two main types of corporations: "C" Corporationsand "S" Corporations -- and which type you choose can makeall the difference in the world of taxes. NOTE: The question of "C" Corp vs. "S" Corp has no effecton the asset protection provided by your corporation.This is a tax issue, not a legal issue. A "C" Corporation can lead you into a Tax Trap known as "double taxation". Yes, income from a "C" Corporation canactually be taxed twice -- once when it's earned on thecorporate level and again when it's paid to you, the shareholder, in dividends. There are several ways to avoid double taxation. Oftenthe easiest way is to tell the IRS that you choose tobe an "S" Corp instead of a "C" Corp. The profits ofan "S" Corp are not taxable to the corporation; instead,those profits are reported directly on the shareholder'spersonal income tax return and are therefore onlytaxed once. And once is enough, don't you think! Of course, any article on Choice of Entity must containthe old disclaimer, "Consult your tax professional" -- I am not prescribing a one-size-fits-all approach tothis issue. But for many small biz owners and self-employedfolks, the "S" Corporation is a good fit becauseit provides protection from personal liability andavoids the nasty tax trap of double taxation -- twogreat benefits worth checking into. Should you incoporate your sole proprietorship and thendecide that the "S" Corporation is the right fit,you must inform the IRS that your corporation is choosing"S" Corporation status by filing Form 2553, which is,in effect, an application to become an "S" Corporation. IMPORTANT:If you incorporate and do not file Form 2553, you areautomatically considered to be a "C" Corporation by the IRS.In other words, to be a "C" Corporation, you just incorporate; there is nothing you have to do to inform theIRS you want to be a "C" Corporation. There are critical rules regarding how and when to fileForm 2553, so be sure to read the instructions carefully,or check with your tax pro. Failure to file Form 2553 on time or filing Form 2553incorrectly results in a rejection of your corporation's"S" Corp application, and the corporation is then by defaulttreated as a "C" Corp, subject to double taxation, thevery trap you were trying to avoid. To download a copy of Form 2553, go to:http://www.irs.gov/pub/irs-pdf/f2553.pdf The instructions for filing Form 2553 are found here:http://www.irs.gov/pub/irs-pdf/i2553.pdf Wayne M. Davies is author of 3 tax-slashing eBooks forthe self-employed, available separately or as a 3-volumeset, "The Ultimate Small Business Tax Reduction Guide".http://www.YouSaveOnTaxes.com/ultimate-guide To get your free copy of Wayne's 25-page report,"How To Instantly Double Your Deductions" visit:http://www.YouSaveOnTaxes.com
MORE RESOURCES:
Taxes - Google News |
|
|
|
RELATED ARTICLES
Employment Taxes - What Are They? If you have employees, you are responsible for paying a variety of taxes at the federal, state, and local levels. You must also withhold certain taxes from the paychecks of your employees. Highlights of IRS List of 2005 Tax Scams Each year, the IRS lists various scams taxpayers get caught up in. The top 2005 scams include several that manipulate laws governing charitable groups, abuse credit counseling services or rely on refuted arguments to claim tax exemptions. Save Money on Taxes - Is the Only Way to Get Your Tax Savings is to Sleep With an IRS Agent? Tilting the Tax Laws in Your Favor.In order to accelerate your movement along the wealth building curve, you absolutely MUST have your own business. Uncle Sam is Ready...Are You? Organizing Tips for Tax Time Anyone who is closely related to an accountant knows that there are not four, but five seasons in a year: Spring, Summer, Fall, Winter, and 'Tax Season.' During the other seasons, we accumulate leaves, snow, and mosquito bites. Hurricane Katrina - How To Use Your Business Loss To Get A Refund on 2004 Taxes With the massive losses caused by Katrina, the economy of the Gulf Coast region is in extremely bad shape. Fortunately, there is a quirk in the tax code that can help you generate a large refund from your 2004 taxes. Electronic Commerce Taxation and Pakistan Assume a buyer in Pakistan downloads software from the Internet for a 30-day trial. If he likes the software, he submits his credit card information and receives an authorization code that allows him unrestricted use of the software. Know A Tax Cheat? Get Paid To Tell The IRS According to the IRS, taxpayers underpay their taxes by some $300 billion. If you know someone that is contributing to that deficit, the IRS may be willing to pay you up to $10 million for the information you provide. Tax Audits: What Signs Make You More Likely to be Audited by the IRS? It's a major fear for most Americans: A notice from the Internal Revenue Service (IRS) summoning you for an audit.What is it about these three letters that strikes a cord of fear in Americans' hearts? Learning the signs that could put your tax return at the top of the list for an audit, and avoiding them if possible, may put your mind at ease. Small Business Tax Credit - Americans with Disabilities Act Many small businesses complain when confronted with the expense of complying with the Americans with Disabilities Act. Most do not realize that there are a number of tax incentives available to offset the costs. How to Donate Your Car to Charity and Get Tax Deduction Donating your used car to charity is a win-win situation; the charity gets your gift and you get tax deduction. Below are some simple steps to make a car donation. Small Business Tax Deductions for Year End 2004 As a small business owner, it's wise to familiarize yourself with some key deductions that may reduce your tax bill for 2004.Employee Benefit Plans - You may deduct contributions to employee benefit plans (such as health insurance plans and retirement plans). What the Tax Software Companies Dont Want You to Know Haven't done your taxes yet? No problem. Now there is a new way you can use top tax software programs, like TurboTax and H&R Block, to get your taxes done quickly and easily. Knock-Knock-Knock Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax forthe self-employed is not far off. Network marketers whoreceive a form 1099 at the end of the year, and/or whoare expected to owe $1,000 or more in taxes, must filea form 1040-ES Payment Voucher quarterly to avoidpaying a penalty. Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000 Does your incorporated business pay alternative minimum tax ["AMT]? If so, there is a 93% chance you have been overpaying your taxes by an average of $11,000 a year according to the Treasury Inspector General.The Office of the Treasury Inspector General for Tax Administration was created in 1999 to oversee the IRS. 2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction If you are environmentally conscious and purchase a 2005 Ford Escape Hybrid vehicle that combines a gasoline-powered engine with alternative power methods, you are in line for a nice tax deduction.Ostensibly, the government uses clean power tax deductions as a method to promote the use of vehicles that are less harmful to the environment. Failure To Pay Employment Taxes - Penalties As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade. SFR Substitute for Returns: IRS Action on Non-Filers In the latest Star Wars episode, the evil empire executes a brutal revenge on the Jedi. While the IRS is not an evil empire (and due to the Revenue Reform Act of 1998 not very brutal anymore); it too is executing revenge on those who do not comply with filing their tax returns. What to Do If You Can't Pay Your Taxes The end of tax filing extensions is quickly approaching. What do you do if you can't pay the amounts you owe? You should still file your return by the due date and pay as much as you can. Insider Guides to IRS Audits! Ever wish that, as a business owner, you knew exactly what would raise "red flags" at the IRS? Or how to make an IRS audit go as smoothly and painlessly as possible?If you're in the right type of business, you can get that information, directly from the IRS!Traditionally, IRS examiners have been responsible for auditing many types of businesses. An examiner might audit a grocery store one week and a construction company the next. Tax Trap #2 -- Double Taxation: Isnt Once Enough? Have you been thinking about incorporating your smallbusiness or self-employment activity? The advantagesare many!For starters, you'll be protecting yourself and your familyfrom the possible of a business ending lawsuit. Forming acorporation is Step One on the path known as "AssetProtection" -- you are moving from the world of unlimitedliability to the world of limited liability.
|
|
Currency Trading | Investing | Leadership | Negoatiation | Real Estate | Stocks and Mutual Funds | Taxes home | NetFinancial | Institutions | Loans | Colleges and Universities | site map Search Engines | EZmatic | 0pops | GetSonic | TrafficFish | Health |
| © 2006 |
