Taxation

From the Internal Revenue Service to your local governing regluations. This category deals with the area of income taxes, revenue taxes, personal property taxes, and other tax matters.

Constructive Dividends – Definition, Understanding and Application

When a corporation confers an economic benefit upon a shareholder, in his capacity as such, without an expectation of reimbursement, that economic benefit becomes a constructive dividend, taxable as such.   See INTERNAL REVENUE SERVICE NATIONAL OFFICE FIELD SERVICE ADVICE MEMORANDUM FOR DISTRICT COUNSEL, Number 200011003 dated October 27, 1999; specifically Page 4, 3rd paragraph.

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Basis in Business

Basis is a business term used to identify the value of an individual or entity’s investment in an entrepreneurial endeavor.   It is customarily linked to taxation as this term is used by the Internal Revenue Code to determine gain or loss.   To further compound its meaning  ‘basis’  is sometimes substituted for the term  ‘equity’.    Black’s...

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Double Taxation – Not an Issue in Small Business

In the world of big business corporate earnings are taxed twice under the Internal Revenue Code.   The first layer of taxation occurs with the traditional corporate income tax.   The second tier of taxation happens when dividends are issued to shareholders.   The shareholder pays an income tax at their personal rate.   The...

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Owner Compensation in an S-Corporation

One of the tax attributes of an S-Corporation over other forms of tax entities is the ability to reduce the overall tax obligation.  Naturally the lower the overall tax requirement the more profit generated for the owner(s).   The S-Corporation allows an owner to reduce their tax responsibility via the compensation package assigned to the owner. ...

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SS-4 IRS Application for an Employer Identification Number

An employer identification number (EIN) is the business equivalent of a Social Security number.  A unique identifier is assigned to the business for use in communicating and complying with the Internal Revenue Service.  Just like a Social Security number, it is a 9 digit number with the first two digits as the prefix. To obtain...

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Basis for Tax Purposes

Basis is a term used in computing gains and losses on the disposition of an asset.  For any business owner or individual taxpayer it is important to understand what the Internal Revenue Service (IRS) is really seeking.  What is your tax basis in an asset?  So in a simple transaction such as purchasing stock, assume...

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Nondeductible Expenses in Small Business

One of the more significant expenses for the small business owners is income taxes.  Since most small businesses are tax pass through entities, it is beneficial to the business to have the least amount of net income in order to reduce the tax obligations of the owner(s).  This is achieved by making sure every dollar...

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Estimated Tax Payments – Why and How

In the normal taxpayer relationship with the Internal Revenue Service, the taxpayer is an employee and via withholding, taxes are paid the U.S. Government by the employer.  Basically the employer pays the tax after each payroll run on behalf of all the employees and the corresponding mandated matching taxes (Social Security and Medicare).  But in...

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Organizational Expenses – Types and Tax Implications

Prior to initiating operations, every business spends money to develop the idea and create the legal entity.  These types of costs are referred to as ‘Organizational Expenses’.  There are several different types of organizational expenditures.  These include research and development, legal and start-up costs.  The following sections explain these expenses and how they are treated...

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