June, 2010

Time to Hire Employees or Collectivize?

Here’s a new one that’s not quite law yet, and to be honest, I wish it would just go away.

HR 4213 has passed both the House and the Senate and now a committee is trying to resolve the differences between the House and Senate versions before it goes before the President.

In amongst some good things, in Section 413, they’re taking away the exclusion for distributions from SE tax in “Professional Service Businesses” if the principal asset of the firm relies on 3 or fewer employees’ reputation and/or skill. Professional Service Business is defined for this purpose as “any trade or business if substantially all of the activities of such trade or business involve providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.” All this would start 1/1/11.

This basically says that for many S Corporations, the tax advantage of splitting your income into payroll and distribution will go away, unless you have 4 or more key employees. So you might as well be a sole proprietor and save the $800 going to the Franchise Tax Board. Plus you’re going to help fund the Social Security and Medicare shortfall of funds (recently exacerbated by the HIRE Act’s ‘forgiveness’ of the employer side of Social Security tax for hiring previously un- or under-employed people). Welcome to the ‘extra’ 15% tax bracket.

I believe I’ve been quoted as saying the pendulum has swung too far towards shareholders and that it would swing back. I’ve also been quoted as saying the S Corporation offer tax advantages—and now they’re trying to take these away from smaller firms. The rich get richer?

If you’re not in a defined “Professional Service Business” or if you have more than 3 key employees, this doesn’t affect you.

Makes me want to “associate in” three other people and add in some employees.

We’ll be discussing this in my various professional groups—I’ll let you know what I come up with!

The Eightfold Path to Pay Less Tax and Avoid an Audit

Eight basic things business owners want to know printed in booklet form. This is ten years of working with the IRS Tax Code distilled down so it doesn’t take YOU ten years.

Just another way we’re trying to simplify your life. And the purchase is tax deductible!

You can order from Amazon.com. Here’s the link to Amazon:

The booklet also contains a sections on how returns are selected for audit, when to seek professional help, and how long to keep your tax records

Classes ­ Balance Sheets and Basis, Intermediate S Corporation, Basic Payroll, Schedule C and Household Employees

Balance Sheets and Basis
Dinner meeting speech for CSATP Tuesday June 22nd 6-9 pm including dinner
Francesco's Restaurant, 8529 Pardee Dr, Oakland, CA. See their website for more details, registration and fee to attend. We’ll discuss basis, both inside and outside, for corporations and partnerships, including the principles that should allow you to recognize and solve basis issues on your own, and why you might care to do so.

Intermediate S Corporation Class will be presented in Alameda in May and Lafayette in July. This is an intermediate class, so we won’t be discussing how to fill out the form. Rather, we’ll be looking at how to quickly solve the most common problems encountered with preparing an 1120S, and what to do now to reduce the likelihood of future problems. July class is limited to 10 participants, so you’ll be able to ask all your questions. We’ll also cover the complex issue of basis and why we care what it is.

“This is the best class on S Corps I’ve ever been to, and I’ve been to a lot.”

Monday, July 19th, 2010 from 10 am to 2 pm
July 19th class will be held in the Lafayette Chamber of Commerce Conference Room, 100 Lafayette Circle, Suite 103, Lafayette CA 94549

Fee to attend is $225, but reduced to $175 for NAEA/CSEA members. CPE credit of 4 hours available for Enrolled Agents who attend, no credit currently available for CTEC, but it’s a good class.

Send me an e-mail if you want to attend for reservation of your spot and directions. Class size is limited. Flyer is on the website at www.TaxBuddha.com/1120_S_Flyer_2010.pdf

In conjunction with the IRS and EDD, Andy’s going to be doing some Basic Payroll seminars coming up in the near future.

Basic Payroll: Seminar runs 9 am – 3 pm with an hour for lunch

The next seminars will be
Basic Payroll in San Francisco at the SBA office 455 Market Street, 6th floor (I take BART to Embarcadero or Montgomery Street) 9 am – 3 pm, June 23rd and August 11th.

Basic Payroll in Oakland at Elihu M. Harris State Building,1515 Clay Street, Room 1, Second Floor, 9 am – 3 pm, June 10 and July 8th.

Register by going to http://www.edd.ca.gov/Payroll_Tax_Seminars/ and find your favorite location. We’re working on the 2010 schedule and trying to figure out how I can present this in other states.

These seminars have proven to be very popular, plus they’re free.

How to Prepare your Own Schedule C
Prepare your business taxes for ’10 and get ready for ‘11. Review what the IRS wants to know from you and how to report it on the Schedule C for your business. This is a class for business owners who need a basic understanding of their 1040 Schedule C tax forms. We’ll also talk about what to do with the numbers once you have them. We can’t guarantee you won’t get audited, but this class will make it less likely.

This class will be presented for free in San Jose Wednesday, August 4th 10 am – 12:30 pm at the SBA Entrepreneur Center, downtown, 84 W Santa Clara St, Suite 100, San Jose, but the address may change. Still in San Jose, but the SBA may move.

Andy will be at the US Small Business Administration offices in San Francisco at 455 Market Street, 6th Floor Tuesday July 6th, 6-8:30 pm. This class will be free. To register, check out the SBA website www.SBAtraining.eventbrite.com, or just show up. This class will be limited to 20 people.

Household Employees class was very successful and I’m working on finding an additional venue to present this again in 2010. It turns out the EDD is giving their own version of this information June 15th at 10 am in San Jose, but I’m not expecting it to include the federal side…we’ll see! I’ll have another date for my own class set by the next newsletter publication in July. If you want to join me in San Jose June 15th, see the EDD website—I think you may have to call to get a reservation.

I went to a class on QuickBooks given by Kim Woodrum. If you’re in the market for QuickBooks training in a classroom setting, I recommend her. She teaches a two day QuickBooks seminar and travels a great deal. Kim says she’ll be in Oakland June 23-24, and San Jose June 25-26th. Her website is http://www.manibusinessservices.com/

For Relaxation and Clear Thinking: On The Spot

To carry you through the stressful tax season, we recommend meditation and that you check out On The Spot Massage at http://www.onthespotmassage.com/corporate.html to help you relax. A relaxed mind is a clear thinking mind. We have some discount cards for $5 off at the Alameda Natural Grocery location on Park Street, open daily 11 am ­ 7 pm.

Phone and Fax Numbers

Our northern California physical office is shared commercial space in Alameda. Phone numbers are:
Phone (510) 522-2300
Fax (510) 522-2307
Our mailing address:
3527 Mt. Diablo Blvd #366, Lafayette CA 94549

“The hardest thing in the world to understand is the income tax.” — Albert Einstein, physicist