The IRS audits only a small percentage of business and personal tax returns annually, because they lack the manpower to do extensive audits. However, there are “Red Flags” the tax return scanning system picks up that could target your corporate or personal return.

If your return is selected for review, you have nothing to worry about if you haven’t mis-stated the numbers on your return, and you have receipts to back you up.

Even though the odds of you getting audited may seem low, those odds increase dramatically based on your income and the types and amounts of deductions you claim. The higher your income the more likely your return will be selected, math errors make you more suspect, and taking larger than normal amounts of deductions in certain categories can trigger an audit. (more…)

[Video] Money Management Solutions for U.S. Congress – 545 people – an article by Charley Reese presented in video format by Money Management Solutions, Inc. (more…)

The tax planning clock is clicking away toward the end of the year.  Is your business ready to take advantage of the tax saving measures available to you? Tax planning is essential for business owners, and should be done on a quarterly basis. However, it’s not too late if you do it before mid-December. Here are some words of wisdom from financial planner, P. Christopher Music.

Well, the year is coming to an end and many business owners are meeting with their accountants and tax advisors to figure out how to reduce that inevitable income tax burden coming in April.  Here are a few strategic ways to keep some more of that money at home.

Business owners are often successful in earning some money beyond the expenses of acquiring it—in short, profit.  The only problem is, the profit is taxed.  So, we work with our tax advisors to lower this burden by strategically spending money in various ways by the end of the year in an attempt to cut off the bleeding.

One of the most popular techniques is to “spend the money since it’s going to be taxed anyway”.  I always get a charge out of this technique since it does not evaluate on what the money is spent.  One of the laws of economics is that money derived from production must be reinvested into production to expand the organization.  In other words, the expense must buy something of value that can further grow in value.

This technique can be summed up in “accelerating expenses”.  Next year the company will have expenses like rent, promotion and marketing, utilities, etc.  Accelerating these expenses only defer the tax owed since you will have to do the same thing next year to avoid the tax.  This has some limited workability, especially if you have volatility in your annual income and can pay the taxes at lower rates in a year with lower income.

There are, however, other options.  One of these options is to use some form of retirement plan.  These can range from a traditional Individual Retirement Account (IRA) where a person can invest up to $5000 ($6000 over age 50), to something called a “Super 401k” that combines various types of retirement plans to allow someone to contribute upwards of $200,000 or more per year.  That’s right.  Now, the benefit of this kind of expense is that it can not only save income taxes in the current year, but it will create an additional asset of value that can be used in the future to create retirement income.

If you have a C corporation, there is a plan called a Section 79 plan (so named after the IRS Code section) that will allow a business owner to purchase cash value life insurance with potentially tax-deductible dollars.  Of course, you have to purchase life insurance on your employees (inexpensive term) and you will only be able to deduct a portion of the annual life premiums, but this may make sense if you qualify for such a plan.  This type of benefit plan would allow the business owner to accumulate assets inside a life insurance policy that can later be used to provide supplemental retirement income.

These are just a couple of options available to business owners besides just spending money “because it will be taxed anyway”.  Use the tools available to lower your taxes and build wealth for the future.

For more information, contact Christopher Music. Wealth Advisory Associates www.wealthadvisoryassociates.com a Registered Investment Advisor, is a comprehensive financial planning firm serving professionals and small business owners nationally. We focus on assisting our clients in achieving a truly affluent lifestyle by using the natural laws of personal economics.

Many taxpayers who owe taxes believe tax extensions protect them, but they are only partially right. Do you know the rules and deadlines for filing corporate and personal tax extensions? For companies it is March 15 and for personal tax returns it is April 15.

Here’s the ugly truth about tax extensions, but first if you need to file one, do it before midnight on the deadline by using Form 7004 for a company that you can get here: http://www.irs.gov/pub/irs-pdf/f7004.pdf or Form 4868 for personal extensions that you can get here: http://www.irs.gov/pub/irs-pdf/f4868.pdf

Penalty for not filing tax returns on time

The IRS is much worse than any credit card company, charging a 5% PER MONTH penalty up to 25% of what you owe for late filing that compounds DAILY. That’s a whopping 60% per year, even if you did file an extension!

Interest charges for late filing of tax returns

As of midnight on tax deadline day, the interest on any taxes you owe, but do not pay, with your return accrues at the rate of 3% PER MONTH up to 25% of what you owe for late filing that compounds DAILY. That’s a whopping 36% per year!

The total? A unbearable 8% per month (96% per year) compounding daily. Another “Pay For Life” program.

If you can’t pay what you owe, ask for a payment plan by filing Form 9465 Installment Agreement Request that you can get here: http://www.irs.gov/pub/irs-pdf/f9465.pdf

Note: the caution on the form that states: Do not file this form if you are currently making payments on an installment agreement or can pay your balance due in full within 120 days. Instead, call 1-800-829-1040. And yes, unfortunately, interest and penalties continue until it is paid in full.

The remedy is paying quarterly estimated tax payments if you owe taxes each year. At least what you pay in these payments cannot accrue penalties and interest.

The best money management remedy would be to join the grass roots movement to get Congress to get the FairTax Act passed. To find out more about what you can do to get involved and make that happen, visit www.fairtax.org today.

If you are in debt, claim your free copy of the Debt Reduction Solutions Guide here: http://www.thedebtreductionsolution.com/

If you have anything to say about taxes, leave a comment.

Sandra Simmons, President of Money Management Solutions (www.moneymgmtsolutions.com) specializes in helping business owners and individuals manage their money and do tax planning to achieve their financial goals.