Tag: Income Taxes
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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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Bookkeeping – Tracking Income Taxes (Lesson 58)
It is important for the bookkeeper to track income taxes for the business and the owners. Tracking includes apprising management of current status and pending obligations.
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Economic Substance Principle
The taxpayer must prove that the underlying economic transaction was not concocted to avoid or reduce tax liability. In the Gregory Vs. Helvering case, the Supreme Court actually uses the word ‘sham’.
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Using Cash in Construction
There is a notion in business that using cash to pay for materials or service is illegal. IT IS NOT ILLEGAL TO PAY FOR MATERIALS OR SERVICE WITH CASH. It is illegal to do this if you do not properly document the transaction.
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Individual Retirement Accounts (IRA’s) – Basic Rules
The American Benefits Council estimates that about 80% of all American workers have access to an employer sponsored retirement plan. This means that 20% of the workforce has no access to a formal retirement plan. To alleviate this issue, Congress created laws allowing those with earned income access to a retirement via Individual Retirement Accounts or more…
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Capital Gains – Introduction to Fundamentals
When an individual or business sells an asset, the gain or loss is classified into one of two distinct tax groups – ordinary or capital. The tax classification is strictly tied to the nature of the asset sold. For most businesses, the assets sold are inventory.
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Mileage Deduction – Rate for 2015
On December 10, 2014, the Internal Revenue Service announced the mileage rate deduction for 2015. They increased the amount allowed 1.5 cents to 57.5 cents per mile. How do you calculate and use the mileage rate formula for tax purposes?
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Mailbox Rule in Business
There is one tax rule that confuses business owners and it relates to the year-end practice of paying bills and receiving compensation for receivables. This is referred to as the ‘Mailbox Rule’. This is strictly a tax issue for cash basis taxpayers. I’m here to set the record straight!
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Form 1099-C: Cancellation of Debt
If you received a 1099-C, the first question you ask is: ‘Do I have to include this in my taxable income?’ Well, the answer is ‘it depends’. Not what you want to hear but there are a lot of variables involved in answering this question.
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Internal Revenue Service – Definition of Revenue
The Sixteenth Amendment to the Constitution of the United States gives authority to Congress to tax income. The Internal Revenue Service defines revenue via a term ‘Gross Income’. In Chapter 26 of the Federal Code (Chapter 26 is the Internal Revenue Code) Section 61, Congress defines gross income as “… all income from whatever source derived…”. This means…