Businesses Receiving Erroneous IRS Payroll Tax Notices

box full of junk mailA recent IRS error has resulted in the distribution of incorrect notices to taxpayers. These notices reflect a late payment for the second quarter 2016 Form 941 – Employer’s Quarterly Federal Tax Return.

The IRS failed to extend payment due dates to account for the Memorial Day holiday. Any business with a semi-weekly liability paid on June 2, 2016, for the tax period ending May 27, 2016, may receive a notice. In addition, any client with a $100K liability paid on May 31, 2016, for the tax period ending May 27, 2016, may receive a notice.

Notices are dated August 8, so affected businesses may receive them in the mail in the next few days.  According to the IRS, impacted taxpayer accounts will be corrected without the taxpayers taking any action. If you have further questions about this situation, please give us a call.

photo credit: box o junk mail via photopin (license)

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Combine business travel and a family vacation without losing tax benefits
Personal Finance


Are you thinking about turning a business trip into a family vacation this summer? This can be a great way to fund a portion of your vacation costs. But if you’re not careful, you could lose the tax benefits of business travel.

Reasonable and necessary

Generally, if the primary purpose of your trip is business, then expenses directly attributable to business will be deductible (or excludable from your taxable income if your employer is paying the expenses or reimbursing you through an accountable plan). Reasonable and necessary travel expenses generally include:

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Will your business have a net operating loss? Make the most of it
Business Ownership


When the deductible expenses of a business exceed its income, a net operating loss (NOL) generally occurs. If you’re planning ahead or filing your income tax return after an extension request and you find that your business has a qualifying NOL, there’s some good news: The loss may generate some tax benefits.

Carrying back or forward

The specific rules and exact computations to figure an NOL can be complex. But when a business incurs a qualifying NOL, the loss can be carried back up to two years, and any remaining amount can be carried forward up to 20 years. The carryback can generate an immediate tax refund, boosting cash flow during a time when you need it.

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Accounting 101: Cash- vs. accrual-basis reporting
Business Ownership


Qualifying small businesses and service firms often use the cash-basis method of accounting. But as a business grows, it usually needs to convert to accrual-basis reporting for federal tax purposes and to conform with U.S. Generally Accepted Accounting Principles (GAAP). For federal tax purposes, the simpler cash method is generally available to small businesses with annual gross receipts of less than $5 million and to professional services firms of all sizes.

In recent years, Congress has threatened to require more businesses to make the cash-to-accrual conversion, so the IRS can collect taxes sooner. Here’s how these accounting methods differ and why it’s important to pick the reporting option that’s right for your business.

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Business owners: Put your successor to work before you set sail
Business Ownership


A hastily chosen or ill-prepared successor can lead a company astray or, in worst cases, mismanage it into bankruptcy. Before you set sail into retirement or perhaps on to your next great professional adventure, make absolutely sure that your chosen replacement is ready to, well, succeed.

Build stakeholder confidence

Perhaps the simplest, most important thing you can do is to put your successor to work. Co-owners, board members and employees are more apt to follow a replacement’s lead if they feel confident in his or her knowledge and skills. And the only way to truly build that confidence is to allow these stakeholders to experience your successor’s leadership style and capabilities first-hand.

For instance, let your successor gain experience examining and discussing financial information for tax and financial reporting compliance and profitability analysis. In addition, allow him or her to spend time among your HR staff to learn about your hiring methods and benefits issues.

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How many employees does your business have for ACA purposes?
Business Ownership


It seems like a simple question: How many full-time workers does your business employ? But, when it comes to the Affordable Care Act (ACA), the answer can be complicated.

The number of workers you employ determines whether your organization is an applicable large employer (ALE). Just because your business isn’t an ALE one year doesn’t mean it won’t be the next year.

50 is the magic number

Your business is an ALE if you had an average of 50 or more full time employees — including full-time equivalent employees — during the prior calendar year. Therefore, you’ll count the number of full time employees you have during 2016 to determine if you’re an ALE for 2017.
Under the law, an ALE:

Is subject to the employer shared responsibility provisions with their potential penalties, and
Must comply with certain information reporting requirements, including calculating full-timers, part time and seasonal employee status.
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Make Your 2017 Tax Return Audit-Proof
Business Ownership

27098556433_85b0561903Audits are one of the great mysteries for many taxpayers: How do they happen? Why do they happen? How often do they happen? And who, exactly, gets audited?

I joined Hancock & Dana in 2014 after a 26-year career with the IRS as a Revenue Agent and manager. Today, I specialize in representing individual and business clients with IRS issues including audits, notices, collection, employment tax, appeals, and offer-in-compromise. My background gives me a unique understanding of how to resolve and avoid IRS issues. The IRS uses a variety of techniques to select returns to audit.  These techniques range from simple comparisons of the W-2s and 1099s you received to what is reported on your return.  If there is a discrepancy, you receive a notice.  Other techniques are more sophisticated where returns are reviewed for unusual items.  The IRS also focuses on specific types of returns where it thinks there might be compliance problems.  In recent year, the IRS has focused on partnerships, S corporations, and high-income people.  The most recent push is on businesses with a lot of Cash sales.  The assumption is all of the Cash might not be reported.

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The “kiddie tax”: A trap for the unwary
Personal Finance


It’s common for parents, grandparents and others to make gifts to minors and college students. Perhaps you want to help fund education expenses or simply remove assets from your taxable estate. Or maybe you’re hoping to shift income into a lower tax bracket. Whatever the reason, beware of the “kiddie tax.”

What is the kiddie tax?

For children subject to the kiddie tax, any unearned income beyond $2,100 (for 2016) is taxed at their parents’ marginal rate (assuming it’s higher), rather than their own likely low rate.

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Hancock & Dana Announces Janet Osborn, CPA, as New Managing Partner

Ervin_11121382-Edit_2Hancock & Dana is very excited to announce that Janet Osborn, CPA has been named Managing Partner effective July 1, 2016.

“Janet has done an excellent job taking over my client responsibilities as I transition to retirement”, said John Hancock, co-founder of Hancock & Dana.  “She has a unique ability to connect with people. I am confident that her intelligence, compassion and common sense approach will make her an outstanding Managing Partner.”

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6 FAQs for Understanding Household Help and Taxes

babysitter working with a toddlerDo you spend $50 per week ($2,600 annually) on a babysitter to watch your kids in the afternoons? What about that cleaning lady you pay $25/hour for three hours of work three times a month ($2,025 over nine months?) Although you might not consider yourself as having “household employees,” routine service people like babysitters, cleaners, gardeners, nannies, nurses, and drivers might be classified as employees, and taxes should be paid accordingly, if you spend over $1,900 per year on them.

Here are six tips for first, determining whether or not you have employees, and second, navigating what can be a complicated tax landscape if you do.

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