Robert (Lee) Riley, CPA, MBA-tax Certified QuickBooks Pro Advisor

Transcription

1 SCORE SEMINAR TAXES - ACCOUNTING CORPORATIONS Robert (Lee) Riley, CPA, MBA-tax Lee@RileyAccounting.net Certified QuickBooks Pro Advisor SEMINAR OUTLINE taxes, accounting, corporations and LLC s ACCOUNTING use plastic when spending money, avoid cash. if possible, use on-line bill pay (where the bank mails out the check). use McAfee Internet Security Suite. enter transactions into QuickBooks directly from the credit card, and bank statements. if possible, enter everything into QuickBooks, tax deductible or not. if possible, scan all receipts. Consider using the scanner. consider using Adobe Acrobat Pro to put security codes on files. Print to pdf; or set up a good contact management system, or daily diary. use a bound notebook, avoid loose pieces of paper. diligently post to your appointment book, back up Outlook to Acrobat PDF, or to paper. backup frequently to a new CD-R each time. build systems, use technology as much as possible. For example; On-line banking, PayPal, PayTrust, Stamps.com, Yahoo Business, Outlook, cell phone air-card for internet access. Use WinZip 9 to put security codes on files. Wells Fargo has a good on-line interface between QuickBooks and the bank, use Direct Connect, not Web Connect. get the tax religion; you live to work. Your business, and your life, are the same thing. consider an S corp. to save money on the Social Security tax. beware of the gross receipts tax on LLC s. go to and down load the Tax Data Organizer. use my pre-configured QuickBooks file. come see me for a QuickBooks set up and explanation of the program. It is not necessary to bring your own computer.

2 The Tax Data Organizer, the Excel file above, is found on my web page, it is 12 pages long. This is all the information you need to compile for the IRS. Expense accounts on the Tax Data Organizer, and the pre-configured QuickBooks file (above) are the same. This system will save you time and effort, and insure you do not over look important information, and tax deductions. How people get in trouble with Quickbooks. It is not possible to simply buy QuickBooks and go home and start using it. It is not possible to simply take a QuickBooks class and go home and start using the program. People will hire a book keeper, but the book keeper often quits after 6 months, and everything needs to be redone at great expense. The proper way to learn QuickBooks is to have someone sit down with you, one-on-one and show you how to use it with a pre-configured, simplified QuickBooks Company file, a preformatted QBW file. Similarly, people get in trouble trying to use do-it-yourself Turbo Tax the tax code is too complex for that. Lee Riley Lee@RileyAccounting.net Key business records Accounts payable Accounts receivable Audit reports Chart of accounts Depreciation schedules Expense records Financial statements (annual) Fixed asset purchases General ledger Inventory records Loan payment schedules Purchase orders (1 copy) Sales records Tax returns (permanent if LIFO system) Bank records Bank reconciliations Bank statements Cancelled checks 2 years (permanent for real estate purchases)

3 Electronic payment records Employee records Benefit plans Employee files (ex-employees) Employment applications Employment taxes Payroll records Pension/profit sharing plans (or statute of limitations) 3 years Personal records Tax returns (uncomplicated) Tax returns (all others) W-2s 1099s Cancelled checks supporting tax deductions Bank deposit slips Bank statements Charitable contribution documentation Credit card statements Receipts, diaries, logs pertaining to tax return Investment purchase and sales slips Dividend reinvestment records Year-end brokerage statements Mutual fund annual statements Investment property purchase documents Home purchase documents Home improvement receipts and cancelled checks Home repair receipts and cancelled checks Retirement plan annual reports IRA annual reports IRA nondeductible contributions (Form 8606) Insurance policies Divorce documents Loans Estate planning documents Ownership period + Ownership period + Ownership period + Ownership period + Ownership period + Ownership period + Ownership period + Warranty period for item Life of policy + 3 years (check w/agent) Term of loan + Why is this seminar important if you make $25,000 net income, after expenses, you will owe $5,000 in tax, or $50,000/$15,000, or $100,000/$40,000. if you make a mistake with; payroll taxes, or, employees, verses independent contractors, you might end up paying a 100% penalty. if you miss a filing deadline, you may end up with a 50% penalty. failure to deal with tax liabilities will limit your ability to grow the business, buy a house, save, and create a retirement plan. if you cannot pay your taxes, the IRS can shut down your business. if you overpay your quarterly estimated taxes, you are not optimizing the use of your capital. if you ignore the accounting, and tax issues, you will just end up giving all of your money to the IRS, and FTB. Entity formation LLC, beware of the gross receipts tax, there is less paperwork, it is more flexible, it is good for real estate, and if you have silent partners; also, there no SSI tax savings, no need to deal with an expense reimbursement form. S-corp., save money on SSI, you will need a W-2 payroll check, there is more paperwork, it is not good if you have silent investors, or real estate, you will need to have an expense reimbursement form. LLC taxable as S-corp., less paperwork (directors meetings, etc.) partnership, no limited liability protection, no SSI tax savings. Good for real estate, allows special allocations, flow-through of depreciation losses in excess of capital contributed. Single member LLC, file as a sole proprietor, no tax LLC tax return required, limited liability, no SSI tax savings, elect later to be taxed as an S-corp. C-corp., good for issuing stock, but double taxation is a problem, therefore, try to zero-out earnings, but lose the California Net Operating Loss carryover. Delaware verses California corp., if plan to leave California, form Delaware corp. instead. Nevada corp., expensive, difficult to obtain tax savings (no state tax in Nevada), better judicial business climate but expensive to litigate in Nevada. if your LLC is electing to be taxed as a corporation, do not forget the IRC Section 1244 election, which applies to capital gains, and losses on the sale of your stock. The Tax Data Organizer at the Tax Data Organizer is found on my web site, I update it each year. It is free. this is the information that you need to compile, to do your taxes; therefore, I have my clients download it each year, fill it out, and E- mail it to me. I also have my clients fax me everything else of importance, which I receive digitally. the IRS computers pre-audit tax returns, using a DIF score, based upon your Zip code, industry classification code, and, each expense item as a percentage of your gross income. Excess deductions might trigger an audit. the Tax Data Organizer also uses language that the IRS computers understand, thus reducing the likelihood of triggering an audit.

4 the Tax Data Organizer also reduces the possibility of over-looked tax deductions. all of the income, and expense line-items, in the tax data organizer, are included in my pre-configured QuickBooks file; which is a QuickBooks template which simplifies QuickBooks, for non-accountants. Borrowing money for the business...home mortgage interest deduction issues; 1) deduct up to 1 million for acquisition/improvement debt, up to $100,000 on HELOC debt (used for any purpose), 2) if you refinance acquisition debt, it retains its character, 3) HELOC debt is not deductible for AMT purposes, 4) purchase points are deductible, refi points are amortized, 5) these rules apply to primary home and a vacation home, 6) if loan proceeds are used for a business (eg. Rental property) interest may be deductible as business interest, 7) if AGI exceeds $156,400 itemized deductions are phased out. Equipment costs, verses supplies costs in QuickBooks, segregate any expense item that has a useful life of more than a year. first year bonus depreciation of $133,000 for use general asset account system. What is wrong with Turbo Tax, H&R Block, Enrolled Agents, etc? Turbo Tax; you answer all the questions, but the end result is all wrong. trigger DIF scores, and red flags, increases audit profile. there are penalties for being wrong; 50% penalties for missing a deadline; 100% penalties for being wrong with independent contractors, W-9, and 1099 forms. over-looked planning opportunities cost you money. it takes 10 years, at least, to understand tax laws, a $50 software program is no substitute. a CPA can save you money, not cost you money. H&R Block, no advice, no planning. Enrolled agents, limited education, often do not understand corporations, LLC s, etc. The tax payment, and filing, timeline self employed; you owe taxes quarterly; 4/15, 6/15, 9/15, 1/15 of the following year, but pay the Q4 state payment by 12/31 for a current year tax deduction. I put all my clients on extension automatically, for free, so the filing deadline converts to 10/15 for individuals, and 9/15 for corps. by 4/15, 90% of the tax due is required to be paid, so enough information needs to be compiled to make a projection of taxes due. if the taxes due on 4/15 are under-paid, the penalty is ½% per month; it is, generally cheaper to borrow on a credit card, than to borrow from the IRS. your tax return is now due 10/15, and the final 10% payment is due. unless you have made prior arrangements, most CPA s need for you to send in your tax information about 30 days prior to any deadline. Health insurance, and medical reimbursement plans an HSA works like an IRA, except that it is used for paying your qualified medical expenses. if you have an S-corp., you need to set up a medical reimbursement plan. I do this for my clients. the medical reimbursement plan can cover just insurance, or, it can cover insurance, plus medical costs that were unreimbursed by the insurance company. medical insurance is paid for by your S-corp., it is tax deductible on your personal tax returns if you are a >2% owner. Unit K, Solo Owners, and their spouses, only paired 401k/Profit Sharing Plans a SEP-IRA, or profit sharing plan, allows you to put up to 20% of your self-employment income, or, up to 25% of your S-corp. W-2 income, into the plan. You must include employees, or independent contractors reclassified as employees. if you are a sole proprietor, or, a partner, you put 20% of your net income, after expenses, into the profit sharing plan. if you have an S-corp., and are paying yourself a salary, then you put 25% of your W-2 income into the profit sharing plan. Unit K plans are paired 401k and profit sharing plans. the 401k contribution is up to $15,500, with catch-up contributions for those 50 or older. due dates; the 401k contribution is to be paid by 12/31 of the tax year that you are in, and, the profit sharing contribution is paid by the due date of the tax return, including extensions, which is usually either 9/15, or 10/15 of the following year. the Unit K is only available to owners, and their spouses; otherwise use a SEP-IRA. you may set up a regular 401k, and include all employees, although, it is expensive to set up, and to maintain. Tax dangers, and annoyances you miss the 10/15 deadline, the penalty is about 50% of the tax due; in such cases, I prepare an estimated tax return, file it prior to 10/15, and then, prepare an amended tax return after 10/15. miss-categorizing employees, and independent contractors; you have to pay the Social Security tax, and the withholding tax, plus penalties, can be about a 100% penalty. failure to obtain a W-9 for a service contractor; the penalty can be about 100%. failure to pay the W-2 employee taxes due with the employment tax returns; the debt is not dischargeable in bankruptcy, and, follows you for life, penalties can be very large, there is no Offer in Compromise. you forget about the LLC gross receipts tax; $900/$250,000, or, $2,500/$500,000, or, $6,000/$1 million, or, $11,790/$5 million. relying upon a general attorney for tax advice is often a mistake. you miss your S-corp. election due date, then file as an unqualified S corp., so the dividends are taxed as income, but are not deductible at the corporate level, eg. double taxation. you try to zero out your C-corp. earnings, but create a loss instead, and lose the California Net Operating Loss deduction. you have an S-corp., but do not pay yourself a salary, or, pay a salary that is too small; therefore, all earnings are subject to Social Security tax. you sell an asset, such as shares of stock, or, a building, before the one year holding period is met for Long Term Capital Gain reduced tax rates., then you are taxed at ordinary income rates. you do not set up your S-corp. in time, and lose the tax savings. you use a SEP-IRA instead of a Unit K, or Solo K, for owners and their spouses, thus, you lose the 401k deduction. you forgot to set up a written medical reimbursement plan for your S-corp. you did not save all your tax records, the IRS lost your file, and considers the statute of limitations to still be open for a year that is more than three years in the past. you did not use a debit, or credit, card, and on-line bill pay, and lost all your tax records. Sometimes, you can use bank, or credit card statements, in lieu of receipts.

5 you threw away your appointment book and all meeting notes. Your appointment book is good for establishing your auto use-age. Your meeting notes are good for establishing the business relationships with your colleagues. you did not keep a good record of income, and, are not able to reconcile bank deposits, to taxable income; so, the IRS calls all bank deposits taxable income. you did not scan your receipts, they faded, and now you are in an IRS audit. you did not back up your computer properly and have lost everything; use a small hard drive for daily/weekly backups; use a readonly CD-R, or DVD-R for monthly backups, and, put them in a safe deposit box. you incorporated on-line very cheaply, now you are being sued, and the judge ignores your corporation, and allows the plaintiff to sue you personally. you forgot to hold Board of Director meetings for your corp., you failed to have written contracts, and, you commingled business, and personal money; so now your corp. is invalid for the purposes of civil liabilities. you hired an attorney to set up your S-corp., first they missed the S-corp. election deadline, and second, they forgot to include your spouse s signature on the S-corp. election form, so now your S-corp. is a C-corp., and, you have a double taxation problem. you did not make the 83b election for your stock options at work, or, you made the election, paid the tax, and now the stocks are underwater financially. you waited until the last minute, just before the deadline, to send in your information, you did not give your CPA the necessary information, at least 30 days prior to the deadline, and now your CPA is telling you to find another accountant; you will pay penalties, and it is your fault, not the fault of the CPA. QuickBooks please attend my other seminar on Maintaining Tax Records, sign up here use QuickBooks to account for every penny spent, both business, and personal, link via Direct Connect, not Web connect. use a document management system to meet burden of proof to make business-development expenses tax deductible; use an appointment book, address book, to-do lists, memos, meeting notes, receipts, and neat receipts scanner Sole Proprietor, use one QuickBooks file. LLC, or Corp., use two QuickBooks files, toggle between them, for limited liability protection. QuickBooks for the Mac does not work well, and, does not work with on-line QuickBooks either. at the end of the year, or periodically throughout the year, send your CPA the QuickBooks backup file (the.qbb file); as, this file is easier to attach to an than the regular.qbw company file. I have a pre-configured QuickBooks file, which simplifies the use of QuickBooks, will get you up and running quickly, and, it has all of the income, and expense items included in my Tax Data Organizer. Entity formation LLC, beware of the gross receipts tax, there is less paperwork, it is more flexible, it is good for real estate, and if you have silent partners; also, there no SSI tax savings, no need to deal with an expense reimbursement form. S-corp., save money on SSI, you will need a W-2 payroll check, there is more paperwork, it is not good if you have silent investors, or real estate, you will need to have an expense reimbursement form. LLC taxable as S-corp., less paperwork (directors meetings, etc.) partnership, no limited liability protection, no SSI tax savings. Good for real estate, allows special allocations, flow-through of depreciation losses in excess of capital contributed. Single member LLC, file as a sole proprietor, no tax LLC tax return required, limited liability, no SSI tax savings, elect later to be taxed as an S-corp. C-corporations pay tax, whereas S-corps. and LLC s are flow-through entities, and the income flows through to your personal tax return even if you leave the money in the corporate checking account. some people use a C corp. to split income into lower tax brackets, but this works only for a limited time, as you can accumulate too high retained earnings, and, you may have a double taxation issue later on when you take the money out as dividends. C-corp., good for issuing stock, but double taxation is a problem, therefore, try to zero-out earnings, but lose the California Net Operating Loss carryover. Delaware verses California corp., if you plan to leave California, form Delaware corp. instead. Nevada corp., expensive, difficult to obtain tax savings (no state tax in Nevada), better judicial business climate but expensive to litigate in Nevada. if your LLC is electing to be taxed as a corporation, do not forget the IRC Section 1244 election, which applies to capital gains, and losses on the sale of your stock. partnerships, are good for real estate, as the depreciation deductions flow through to your personal tax returns. partnerships offer no liability protection. use a C corporation if you have large medical expenses, as they can be tax deductible by the corporation. limited liability; in California, everyone in the chain of production is jointly and severely liable, you are liable for what your employees do, you are liable for the products you sell, so limiting your liabilities is important, especially if you own a home. you cannot always rely upon insurance to protect you in full, so a corp. is useful in limiting your liabilities. if you have an S corp. and someone sues you, you might be able to assign your income to the person suing you, via form K-1 if they take over the corporation, this may reduce the likelihood that they sue you. increased marketability; if you have an LLC, or corp., it is easier to get employers to hire you as a part time, or independent contractor, as, they do not need to worry about you being reclassified as an employee (included in the pension, or be liable for payroll taxes, workman s comp., stock options, etc.) Managing the corporation when you form the corporation, transfer your assets, and startup costs into the corporation either by selling your assets to the corp. or by issuing stock in exchange for the assets you are transferring into the corp. you may want a medical expense reimbursement plan so you medical insurance is tax deductible; if you have very high medical expenses, you may want a C corp. instead of an S corp. The medical reimbursement plan must be in writing, and is in addition to any corporate plan that you buy from an insurance company. the corporation pays for the medical insurance with corporate money. the Board of Directors must approve the medical plan, in writing. medical insurance payments for those who own more than two percent of the company stock, must include the medical insurance payments on their W-2 forms, in box 1 only. with an S corp. you must pay yourself a salary; failure to do so could result in penalties for failure to file payroll tax returns. Your salary should be more than 51% of net corporate income. If you do not pay yourself a salary then you cannot make a profit sharing contribution which is 25% of your W-2 salary. you must observe the corporate formalities; one way is the but the Corporate Records Handbook from nolo.com. it is important to use a business credit card for all corporate purchases, and use the expense reimbursement form for corporate expenses paid for with personal money. use the expense reimbursement form for auto mileage, and office in home rent, there is a sample expense reimbursement form on my website. be aware of independent contractor issues. Contractors need to be on the payroll, as W-2 employees unless; 1) they are incorporated, or have an LLC, 2) have their own web site, 3) have their own business name and City business license, 4) have their own business insurance, and, you have a copy in your files, 5) you need to pay the person by the job, not by the hour. If the IRS

6 reclassifies the independent contractor as an employee; 1) the penalties will be about 100% of what you have paid the employee, 2) your pension plan will probably be declared invalid for failure to include employees, and, 3) your medical reimbursement plan could be declared invalid. If you hire an independent contractor, and pay them more than $600 per year, you need to have them fill out a W-9, or face a 30% penalty, and you need to give them a You also need to have a written contract with each independent contractor, and, have them fill out IRS form SS-8. there is an annual $800 per year minimum tax due 4/15/xx, except that S corporations get the first year free. when you form a new corporation, take care to notify your customers, that, you need the 1099 to be issued to the corporation tax ID number, not, to your personal Social Security number. when you form the corp. you need a City Business License, DBA, doing business as name, and corporate tax ID number. generally, it is a good idea to have the legal corporate name be different than the doing business as name; as, it makes it more difficult for someone to sue the corp., if they cannot figure out the legal corporate name, so, have the legal corporate name be different than your name, or the DBA name, as, it makes it hard to look up. when you have employees, you must include them in your pension plan, whether you are a sole proprietor, or a corporation. if you have a C corp. do not just take money out, as, you will be double taxed, instead, pay yourself a salary. in QuickBooks, set up an account called Loans To/From Owner, to account for miscellaneous transactions between yourself and the corporation. properly capitalize the corporation, if you can, in order to maintain the limited liability protection; you cannot just have a few dollars in the corp. and expect it to protect you from liabilities; as, you must have enough assets in the corp., and insurance, to meet foreseeable legal liabilities. The Tax Data Organizer at the Tax Data Organizer is found on my web site, I update it each year. It is free. this is the information that you need to compile, to do your taxes; therefore, I have my clients download it each year, fill it out, and E- mail it to me. I also have my clients fax me everything else of importance, which I receive digitally. the IRS computers pre-audit tax returns, using a DIF score, based upon your Zip code, industry classification code, and, each expense item as a percentage of your gross income. Excess deductions might trigger an audit. the Tax Data Organizer also uses language that the IRS computers understand, thus reducing the likelihood of triggering an audit. the Tax Data Organizer also reduces the possibility of over-looked tax deductions. all of the income, and expense line-items, in the tax data organizer, are included in my pre-configured QuickBooks file; which is a QuickBooks template which simplifies QuickBooks, for non-accountants. Borrowing money for the business...home mortgage interest deduction issues; 1) deduct up to 1 million for acquisition/improvement debt, up to $100,000 on HELOC debt (used for any purpose), 2) if you refinance acquisition debt, it retains its character, 3) HELOC debt is not deductible for AMT purposes, 4) purchase points are deductible, refi points are amortized, 5) these rules apply to primary home and a vacation home, 6) if loan proceeds are used for a business (eg. Rental property) interest may be deductible as business interest, 7) if AGI exceeds $156,400 itemized deductions are phased out. Equipment costs, verses supplies costs in QuickBooks, segregate any expense item that has a useful life of more than a year. first year bonus depreciation of $133,000 for use general asset account system. What is wrong with Turbo Tax, H&R Block, Enrolled Agents, etc? Turbo Tax; you answer all the questions, but the end result is all wrong. trigger DIF scores, and red flags, increases audit profile. there are penalties for being wrong; 50% penalties for missing a deadline; 100% penalties for being wrong with independent contractors, W-9, and 1099 forms. over-looked planning opportunities cost you money. it takes 10 years, at least, to understand tax laws, a $50 software program is no substitute. a CPA can save you money, not cost you money. H&R Block, no advice, no planning. Enrolled agents, limited education, often do not understand corporations, LLC s, etc. The tax payment, and filing, timeline self employed; you owe taxes quarterly; 4/15, 6/15, 9/15, 1/15 of the following year, but pay the Q4 state payment by 12/31 for a current year tax deduction. I put all my clients on extension automatically, for free, so the filing deadline converts to 10/15 for individuals, and 9/15 for corps. by 4/15, 90% of the tax due is required to be paid, so enough information needs to be compiled to make a projection of taxes due. if the taxes due on 4/15 are under-paid, the penalty is ½% per month; it is, generally cheaper to borrow on a credit card, than to borrow from the IRS. your tax return is now due 10/15, and the final 10% payment is due. unless you have made prior arrangements, most CPA s need for you to send in your tax information about 30 days prior to any deadline. Health insurance, and medical reimbursement plans an HSA works like an IRA, except that it is used for paying your qualified medical expenses. if you have an S-corp., you need to set up a medical reimbursement plan. I do this for my clients. the medical reimbursement plan can cover just insurance, or, it can cover insurance, plus medical costs that were unreimbursed by the insurance company. medical insurance is paid for by your S-corp., it is tax deductible on your personal tax returns if you are a >2% owner. Unit K, Solo Owners, and their spouses, only paired 401k/Profit Sharing Plans a SEP-IRA, or profit sharing plan, allows you to put up to 20% of your self-employment income, or, up to 25% of your S-corp. W-2 income, into the plan. You must include employees, or independent contractors reclassified as employees. if you are a sole proprietor, or, a partner, you put 20% of your net income, after expenses, into the profit sharing plan. if you have an S-corp., and are paying yourself a salary, then you put 25% of your W-2 income into the profit sharing plan. Unit K plans are paired 401k and profit sharing plans. the 401k contribution is up to $16,500, with catch-up contributions for those 50 or older. due dates; the 401k contribution is to be paid by 12/31 of the tax year that you are in, and, the profit sharing contribution is paid by the due date of the tax return, including extensions, which is usually either 9/15, or 10/15 of the following year.

7 the Unit K is only available to owners, and their spouses; otherwise use a SEP-IRA. you may set up a regular 401k, and include all employees, although, it is expensive to set up, and to maintain. Tax dangers, and annoyances you miss the 10/15 deadline, the penalty is about 50% of the tax due; in such cases, I prepare an estimated tax return, file it prior to 10/15, and then, prepare an amended tax return after 10/15. miss-categorizing employees, and independent contractors; you have to pay the Social Security tax, and the withholding tax, plus penalties, can be about a 100% penalty. failure to obtain a W-9 for a service contractor; the penalty can be about 100%. failure to pay the W-2 employee taxes due with the employment tax returns; the debt is not dischargeable in bankruptcy, and, follows you for life, penalties can be very large, there is no Offer in Compromise. you forget about the LLC gross receipts tax; $900/$250,000, or, $2,500/$500,000, or, $6,000/$1 million, or, $11,790/$5 million. relying upon a general attorney for tax advice is often a mistake. you miss your S-corp. election due date, then file as an unqualified S corp., so the dividends are taxed as income, but are not deductible at the corporate level, eg. double taxation. you try to zero out your C-corp. earnings, but create a loss instead, and lose the California Net Operating Loss deduction. you have an S-corp., but do not pay yourself a salary, or, pay a salary that is too small; therefore, all earnings are subject to Social Security tax. you sell an asset, such as shares of stock, or, a building, before the one year holding period is met for Long Term Capital Gain reduced tax rates., then you are taxed at ordinary income rates. you do not set up your S-corp. in time, and lose the tax savings. you use a SEP-IRA instead of a Unit K, or Solo K, for owners and their spouses, thus, you lose the 401k deduction. you forgot to set up a written medical reimbursement plan for your S-corp. you did not save all your tax records, the IRS lost your file, and considers the statute of limitations to still be open for a year that is more than three years in the past. you did not use a debit, or credit, card, and on-line bill pay, and lost all your tax records. Sometimes, you can use bank, or credit card statements, in lieu of receipts. you threw away your appointment book and all meeting notes. Your appointment book is good for establishing your auto use-age. Your meeting notes are good for establishing the business relationships with your colleagues. you did not keep a good record of income, and, are not able to reconcile bank deposits, to taxable income; so, the IRS calls all bank deposits taxable income. you did not scan your receipts, they faded, and now you are in an IRS audit. you did not back up your computer properly and have lost everything; use a small hard drive for daily/weekly backups; use a readonly CD-R, or DVD-R for monthly backups, and, put them in a safe deposit box. you incorporated on-line very cheaply, now you are being sued, and the judge ignores your corporation, and allows the plaintiff to sue you personally. you forgot to hold Board of Director meetings for your corp., you failed to have written contracts, and, you commingled business, and personal money; so now your corp. is invalid for the purposes of civil liabilities. you hired an attorney to set up your S-corp., first they missed the S-corp. election deadline, and second, they forgot to include your spouse s signature on the S-corp. election form, so now your S-corp. is a C-corp., and, you have a double taxation problem. you did not make the 83b election for your stock options at work, or, you made the election, paid the tax, and now the stocks are underwater financially. you waited until the last minute, just before the deadline, to send in your information, you did not give your CPA the necessary information, at least 30 days prior to the deadline, and now your CPA is telling you to find another accountant; you will pay penalties, and it is your fault, not the fault of the CPA. QuickBooks please attend my other seminar on Maintaining Tax Records, sign up here use QuickBooks to account for every penny spent, both business, and personal, link via Direct Connect, not Web connect. use a document management system to meet burden of proof to make business-development expenses tax deductible; use an appointment book, address book, to-do lists, memos, meeting notes, receipts, and neat receipts scanner Sole Proprietor, use one QuickBooks file. LLC, or Corp., use two QuickBooks files, toggle between them, for limited liability protection. QuickBooks for the Mac prior to 2010 does not work well, and, does not work with on-line QuickBooks either. at the end of the year, or periodically throughout the year, send your CPA the QuickBooks backup file (the.qbb file); as, this file is easier to attach to an than the regular.qbw company file. I have a pre-configured QuickBooks file, which simplifies the use of QuickBooks, will get you up and running quickly, and, it has all of the income, and expense items included in my Tax Data Organizer.

8 INDEPENDENT CONTRACTOR AGREEMENT This document outlines an agreement made on [date] between [name] and [independent contractor name]. [Name] has been retained as an independent contractor for [company], for the work or project described below: The project must be completed by [date], at a cost not to exceed [$ ]. Contractor shall provide [weekly/monthly] invoices. Because this business relationship is that of independent contractor, there is no entitlement to benefits such as health insurance, life insurance, retirement, or unemployment insurance. Taxes, FICA, nor any other deductions will be made. INDEPENDENT CONTRACTOR DATE REPRESENTATIVE DATE ALL INDEPENDENT CONTRACTORS NEED TO PROVIDE THE FOLLOWING; Evidence of Other clients (Three most recent client invoices) Copy of Local Business License or Tax Registration form Copy of Articles of Incorporation papers (if applicable) Advertising/Marketing samples (business card, website, etc) Federal Employer Tax ID Number Proof that employees are paid on W2 (latest 941 Quarterly or latest payroll summary report showing the number of W2 workers) if applicable Copy of current insurance vouchers - General Liability, Auto, Workers Comp and Errors & Omissions (Professional) if carried Ø Also, please advise if you will utilize any subcontractors paid on a 1099 for your project.