| The IRS is tightening up on it's Offer in Compromise program (settling tax debt for pennies on the dollar-still possible but tougher to get), hiring tax private debt collectors to close the Tax Gap and increasing the number of audits. |
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| The IRS is tightening up on it's Offer in Compromise program (settling tax debt for pennies on the dollar-still possible but tougher to get), hiring tax private debt collectors to close the Tax Gap and increasing the number of audits. |
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IRS Closes in on the Tax Gap-Cash Businesses Put in SpotlightAs summer grew to a close, Liz attended the IRS Nationwide Tax Forum where she learned about the latest from the horses mouth-IRS. I went up to the Bronx to check out the Tigresses. Cushy life those girls have. I heard all about this on the train back. Seems the IRS is looking to close what it calls the “Tax Gap”. This is the difference between what the IRS actually collects and what it could collect if taxpayers payed all they owe . The IRS intitated a study and found this gap to be a greater $300 Billion with a B dollars per year. They are serious about collecting it. The tax gap finding came from a study named the National Research Project . This study of 46,000 individual income tax returns in 2001 was completed over three years. Individual income tax returns include the “Schedule C” that unincorporated businesses file. An unincorporated business is also known as a “DBA” or sole proprietor. Although the people whose returns were studied were not necessarily called in for an audit, filing a “Schedule C” generally increases your chances of an audit. In a future column I will discuss the pro's and con's of Incorporating or forming an Limited Liability Company vs being a sole proprietor This Gap is made up of people 1) Who don't file returns 2) Undereport thier Income 3) Underpay their Taxes. Underreporting makes up of 80 % of the total tax gap. The rest is made up of made up of underpayment and non-filing at 10% each. Businesses-DBA's/ Sole proprietors contributed most to underreporting income. The smallest contributors were people who got W-2's or otherwise had the tax taken out at the source. The IRS is particularly looking at businesses that deal mostly in cash like Pizza Parlors and Contractors (Mastic and Shirley look out). The IRS is tightening up on it's Offer in Compromise program (settling tax debt for pennies on the dollar-still possible but tougher to get), hiring tax private debt collectors to close the Tax Gap and increasing the number of audits. It's key tool for closing the Gap is the Automated Underreporter Program or “AUR”. This program matches income reported to the IRS on forms like the 1099 given to subcontractors to what has been reported on the individuals income tax. This summer we saw a flurry of “CP200” notices which ask the taxpayer to pony up the tax on the unreported income. The IRS reports that overall 4.4 million “AUR “ (CP200) notices were issued in 2006. Taxes assessed were more than 4 billion. This is an important tax collection tool that the IRS plans to expand. What should you do if you get a “CP200” or any notice from the IRS or the State? First, don't panic. Just remember all they want is their money and unless you have willfully and intentionally committed fraud, coughing the funds up is all you have to worry about. Second, deal with it immediately. Third, if you communicate with them, make sure it's in writing. Fourth, make sure all communications are sent Certified Return Receipt. Fifth, if dealing with the government gives you the willies, hire a Tax Professional to do it. Hiring a Tax Professional will be cheaper than paying the additional taxes, penalties and interest the government will eventually collect from you and help avoid the aggravation that goes along with having your bank account raided and comic book collection seized to pay the taxes. A Tax Professional can minimize the taxes you have to pay or see if the claim is valid at all. Your best defense against being asked to pay additional taxes is keeping good records. The burden of proof is on the government. Receipts, bank statements, canceled checks , records of where the income came from. Businesses should have formal books based on these prepared by an accounting professional. A tax return that matches your books and records is your best defense. Thank you for your interest, and please remember we offer a free Outsourcing Report to business owners in Long Island and New York.
Best wishes, Elizabeth Marasco,
MBA |
| — Outsourcing articles & services — | |
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Outsourcing Report Subscribe to this free report on the benefits of outsourcing back office functions and you'll learn how to lower risks while concentrating more on those activities that produce profit! |
Comparing outsourcing with in-house solutions
Read which activities benefit from outsourcing and what to look out for in outsourced solutions. |
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Outsourced bookkeeping
If so, read this article about outsourcing your bookkeeping and what that can bring you in terms of benefits... |
Give Bookkeepers Plus a challenge! An easy way for business owners to get first-hand experience on our services. Give us a challenge and we'll tell you how we would solve it... free! Give us a challenge involving outsourcing of accounting services... |
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Learn how easily one can make mistake in the setup of QuickBooks — and how simple it is to fix these in your accounting software! Use an expert's help in training & support for your QuickBooks accounting software and procedures. |
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| Different functions of bookkeeping — read to see what you can benefit: | ||
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Billing & Accounts Receivable Explained in understandable form what is included in accounts receivable and what you need to look out for in this area. |
Accounts Payable & Cashflow / credit What functions are included and how do these influence your finances and credit rating — and how do you speed up the cashflow? Learn the importance of accuracy in accounts payable for your activity! |
Purchasing & Inventory -controlling cost Keeping accurate record on purchasing and inventory allows for optimizing of your stock and investment while minimizing downtime. Read what outsourcing the purchasing & inventory functions can benefit you! |
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Banking routines This area of bookkeeping frees up a lot of your time while ensuring your funds arrive promptly and securely. Read what benefits you receive by outsourcing the banking duties to an accounting professional. |
Cash Management How would you like to be free from constant worry and checking of your cashflow and receive some control and prediction to finances? How cash management can increase your financial control and prediction. |
Payroll outsourcing Calculating salaries is the most time-consuming of all activities. Outsourcing your payroll you gain accuracy at lower cost than handling it in-house. |
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Financial Management Reporting The absolute jewel of services, ensuring that you gradually gain full control over financial planning in your company. Management Reporting teaches you to plan finances hands-on with accuracy and profits! |
Project Accounting An essential service if you have larger jobs or projects coming up which you want to keep under tight financial control. Quality service giving greater financial control. Project Accounting - how to keep the budget and finances of any larger job or project under control! |
Taxes and preparing books for your CPA Why not save some 50% off this part of your accounting by letting our bookkeepers prepare taxes and books for your accountant / CPA? Save money and headaches by... ...outsourcing tax work and preparation of books for accountant's review. |
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Useful articles for LI business owners This page contains articles by Elizabeth Marasco on various subjects relating to taxation, finance, accounting, bookkeeping and other important issues. Read Elizabeth Marasco's articles on taxation and accounting in Long Island and New York |
Bookkeepers Plus Virtual Assistant Don't need a full-time secretary or can't afford one? Then the solution is the Bookkeepers Plus Virtual Assistant - you pay only for the work we performed at the quality requested! Bookkeepers Plus Virtual Assistant - secretarial work without the cost. |
Human Resources Outsource the tasks involved in Human Resources: Workers Comp, insurance, retirement plans, leave maintenance, recruitment, personnel policies, resolving disputes, etc. and save money and time! Human Resources support services: Workers Comp, Retirement Plans, Recruitment, disputes... |
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Other Credits and Collections actions These tasks are not very spectacular if done accurately and correct. But if you forget then many unnecessary problems can arise from... ...Petty Cash , Employee Reimbursements, Business Expenses, and Vehicle Mileage tracking |
Bookkeepers Plus Office Software Application Training Read how businesses throw away thousands of dollars monthly... and how you can make sure you don't... and secure it for free! Bookkeepers Plus Office Software Application Training & Consulting |
Sales Tax Keeping accurate record on your sales tax and filing in time is not exciting and thus it suits outsourcing well. Save money while avoiding all problems due to delays or mistakes... See the savings and benefits available from outsourcing your sales tax routines! |
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Getting the most out of your QuickBooks? Participate in this survey to find out! Want to see if you are receiving the true benefits from your QuickBooks software... or check if it could help you more than currently? Take this online survey on QuickBooks to find out... and receive a free initial phone consultation! |
About Bookkeepers Plus Inc. Introducing Bookeepers Plus Inc. — the outsourcing expert for businesses in Long Island NY. |
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What
do you stand to GAIN by outsourcing select back office activities...
and how do you know which ones to outsource and which not? This
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outsourcing brings the biggest profits and benefits.
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more accurate bookkeeping with timely delivery and without any
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