Partnerships

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A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it “passes through” any profits or losses to its partners. Each partner includes his or her share of the partnership’s income or loss on his or her tax return.

Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.

If you are a partnership or a partner (individual) in a partnership, use the information in the charts below to help you determine some of the forms that you may be required to file.

If you are a partnership then you may be liable for:

- Annual return of income

- Employment taxes:
• Social security and Medicare taxes and income tax withholding
• Federal unemployment (FUTA) tax
• Depositing employment tax

- Excise Taxes

If you are a partner (individual) in a partnership then you may be liable for:

- Income Tax

- Self-employment tax

- Estimated tax

For more detailed information please do not hesitate to call us @ (310) 820-1080 or email @ info@onts9.com

Sole Proprietorships

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A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

If you are a sole proprietor you might be liable for:

- Income Tax

- Self-employment tax

- Estimated tax

- Social security and Medicare taxes and income tax withholding

- Providing information on social security and Medicare taxes and income tax withholding

- Federal unemployment (FUTA) tax

- Filing information returns for payments to non employees and transactions with other   persons

- Excise Taxes

Selecting the sole proprietorship business structure means you are personally responsible for your company’s liabilities. As a result, you are placing your assets at risk, and they could be held to satisfy a business debt or a legal claim filed against you. Therefore, there are a few disadvantages to consider.

Pay attention to our upcoming posts about selecting a business structure in details.

For more detailed information please do not hesitate to call us @ (310) 820-1080 or email @ info@onts9.com

Business Structures

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Out of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your business.

Based on the research we have done, we would like to go back to the structures of forming a business. Pay attention to our upcoming posts about selecting a business structure in details.

When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

Legal and tax considerations enter into selecting a business structure.

  • Sole Proprietorships
  • Partnerships
  • Corporations
  • S Corporations
  • Limited Liability Company (LLC)

If you want to start a new business or change the formation of your business from one to another, please contact us for any questions you might have at 310.820.1080 or email @ info@onts9.com      

 

Are You an Applicable Large Employer? Review Your Status Annually

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You are an applicable large employer if you averaged at least 50 full-time employees, including full-time equivalent employees, during the prior year. Applicable large employers are subject to information reporting and the employer shared responsibility provisions of the health care law.

Here are the steps to determine whether you are an applicable large employer:

  • Determine how many full-time employees you had each month of the prior year. This provision defines a full-time employee for any calendar month as one who has, on average, at least 30 hours of service per week.
  • Determine how many full-time equivalent employees you had each month of the prior year. To do this, combine the number of hours of service of all non-full-time employees for the month – but no more than 120 hours per employee – and divide that total by 120.
  • For each calendar month, add your full-time and full-time equivalent employees for a monthly total. Add the monthly totals. Divide the sum of the monthly totals by 12. If the result is 50 or more employees, you are an applicable large employer.

The law treats employers in an aggregated group as a single employer for determining applicable large employer status. You are part of an aggregated group if you have common ownership or are otherwise related to other employers.

We hope you will find this information valuable and share it with your friends.

For more information or any questions, please don’t hesitate to call us @ 310.820.1080 or email @ info@onts9.com

 

The Individual Shared Responsibility Provision and Your 2015 Income Tax Return

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The Affordable Care Act requires you, your spouse and your dependents to have qualifying health care coverage for each month of the year, qualify for a health coverage exemption, or make an Individual Shared Responsibility Payment when filing your federal income tax return. If you had coverage for all of 2015, you will simply check a box on your tax return to report that coverage.
However, if you don’t have qualifying health care coverage and you meet certain criteria, you might be eligible for an exemption from coverage. Most exemptions are can be claimed when you file your tax return, but some must be claimed through the Marketplace.
If you or any of your dependents are exempt from the requirement to have health coverage, you will complete IRS Form 8965, Health Coverage Exemptions and submit it with your tax return. If, however, you are not required to file a tax return, you do not need to file a return solely to report your coverage or to claim an exemption.
For any months you or anyone on your return do not have coverage or qualify for a coverage exemption, you must make a payment called the individual shared responsibility payment. If you could have afforded coverage for yourself or any of your dependents, but chose not to get it and you do not qualify for an exemption, you must make a payment. You calculate the shared responsibility payment using a worksheet included in the instructions for Form 8965 and enter your payment amount on your tax return.
Whether you are simply checking the box on your tax return to indicate that you had coverage in 2015, claiming a health coverage exemption, or making an individual shared responsibility payment, your tax professional can prepare and file your tax return electronically.
 
Make sure all your documents are in place and contact with us with any other questions you might have, we are here to help you get the best experience in Tax Preparation Services. Call us @ 310.820.1080 or email @ info@onts9.com

Standard Mileage Rate

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The IRS has released the 2016 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. The following chart reflects the new 2016 standard mileage rates compared to the 2015 and 2014 tax year standard mileage rates.

2016 2015 2014
Business rate per mile 54.0¢ 57.5¢ 56.0¢
Medical and moving rate per mile 19.0¢ 23.0¢ 23.5¢
Charitable rate per mile 14.0¢ 14.0¢ 14.0¢
Depreciation rate per mile 24.0¢ 24.0¢ 22.0¢

On December 18, 2015, the President signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The new law extends several tax provisions retroactive to the beginning of 2015, and also makes some provisions permanent.

Additional Child Tax Credit. The refundable portion of the Child Tax Credit had an income threshold amount of $10,000, indexed for inflation. The extender legislation permanently sets the threshold at an unindexed $3,000, which will allow for a higher credit for taxpayers who qualify

Enhanced American Opportunity Tax Credit (Hope Credit). The American Opportunity Tax Credit (AOTC) is an enhanced version of the Hope Credit, allowing a credit of up to $2,500 for four years of post-secondary education. The new law makes the enhanced AOTC permanent.

Enhanced Earned Income Credit (EIC). As an extender item, the EIC credit amount was temporarily increased for taxpayers with three or more children, and the marriage penalty was reduced by increasing phase out ranges. The new law makes the enhanced EIC permanent.

Educator expenses. The new law makes the adjustment to income for qualified expenses of elementary and secondary school teachers permanent. The law also indexes the current expense cap of $250 for inflation beginning in 2016.

As always we hope this information is valuable to you and the ones you will share it with. Please do not hesitate to contact with us in case of any needs. 310.820.1080 or info@onts9.com

New W-2 Verification Code

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For filing season 2016, the Internal Revenue Service will test a capability to verify the authenticity of Form W-2 data. This test is one in a series of steps to combat tax-related identity theft and refund fraud.

The objective is to verify Form W-2 data submitted by taxpayers on e-filed individual tax returns. The IRS has partnered with certain Payroll Service Providers (PSPs) to include a 16-digit code and a new Verification Code field on a limited number of Form W-2 copies provided to employees.

The code will be displayed in four groups of four alphanumeric characters, separated by hyphens. Example: XXXX-XXXX-XXXX-XXXX.

The Verification Code will appear on some versions of payroll firms ’ Form W-2 copies B and C, in a separate, labeled box (Copy B is “To be filed with employee ’s federal tax return” and Copy C is “For employee ’s records.”)

The form will include these instructions to taxpayer and tax preparers:

Verification Code. If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.

Some W-2s that employees receive will have a “Verification Code” box which is blank. These taxpayers do not need to enter any code data into their tax software product.

For the purposes of the test, omitted and incorrect W-2 Verification Codes will not delay the processing of a tax return. The IRS will analyze this pilot data in a “test-and-learn” review to see if it is useful in evaluating the integrity of W-2 information.

The code will not be included in Forms W-2 or W-2 data submitted by the PSPs to the Social Security Administration or any state or local departments of revenue. Nor will this pilot affect state and local income tax returns or paper federal returns.

We hope you find this information valuable and in case of any questions call our office at 310.820.1080 or email us at info@onts9.com

Tips to Protect Your Personal Information While Online

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The IRS, the states and the tax industry urge you to be safe online and remind you to take important steps to help protect your tax and financial information and guard against identity theft. Treat your personal information like cash – don’t hand it out to just anyone.

Your Social Security number, credit card numbers, and bank and utility account numbers can be used to steal your money or open new accounts in your name. Every time you are asked for your personal information think about whether you can really trust the request. In an effort to steal your information, scammers will do everything they can to appear trustworthy.

The IRS has teamed up with state revenue departments and the tax industry to make sure you understand the dangers to your personal and financial data. Taxes. Security. Together. Working in partnership with you, we can make a difference.

Here are some best practices you can follow to protect your tax and financial information:

Give personal information over encrypted websites only. If you’re shopping or banking online, stick to sites that use encryption to protect your information as it travels from your computer to their server. To determine if a website is encrypted, look for “https” at the beginning of the web address (the “s” is for secure). Some websites use encryption only on the sign-in page, but if any part of your session isn’t encrypted, the entire account and your financial information could be vulnerable. Look for https on every page of the site you’re on, not just where you sign in.

Protect your passwords. The longer the password, the tougher it is to crack. Use at least 10 characters; 12 is ideal for most home users. Mix letters, numbers and special characters. Try to be unpredictable – don’t use your name, birth date or common words. Don’t use the same password for many accounts. If it’s stolen from you – or from one of the companies with which you do business – it can be used to take over all your accounts. Don’t share passwords on the phone, in texts or by email. Legitimate companies will not send you messages asking for your password. If you get such a message, it’s probably a scam. Keep your passwords in a secure place, out of plain sight.

Don’t assume ads or emails are from reputable companies. Check out companies to find out if they are legitimate. When you’re online, a little research can save you a lot of money and reduce your security risk. If you see an ad or an offer that looks too good, take a moment to check out the company behind it. Type the company or product name into your favorite search engine with terms like “review,” “complaint” or “scam.” If you find bad reviews, you’ll have to decide if the offer is worth the risk. If you can’t find contact information for the company, take your business and your financial information elsewhere. The fact that a site features an ad for another site doesn’t mean that it endorses the advertised site, or is even familiar with it.

Don’t overshare on social media – Do a web search of your name and review the results. Mostly likely, the results while turn up your past addresses, the names of people living in the household as well social media accounts and your photographs. All of these items are valuable to identity thieves. Even a social media post boasting of a new car can help thieves bypass security verification questions that depend on financial data that only you should know. Think before you post!

Back up your files. No system is completely secure. Copy important files and your federal and state tax returns onto a removable disc or a back-up drive, and store it in a safe place. If your computer is compromised, you’ll still have access to your files.

Save your tax returns and records. Your federal and state tax forms are important financial documents you may need for many reasons, ranging from home mortgages to college financial. Print out a copy and keep in a safe place. Make an electronic copy in a safe spot as well. These steps also can help you more easily prepare next year’s tax return. If you store sensitive tax and financial records on your computer, use a file encryption program to add an additional layer of security should your computer be compromised.

Our clients can have a peace of mind as we have secured online cabinet file for them and they can have access to their information 24/7 from where ever they are.

As always we hope this information is valuable to you and to the ones you will share with. Please do not hesitate to contact with us in case of any needs.

 310.820.1080 or info@onts9.com

Why the Number of Your Employees Matters

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Employer benefits, opportunities and requirements under the health care law are dependent upon the employer’s workforce size.

The vast majority of employers fall below the workforce size threshold for applicable large employers. Generally, an employer with 50 or more full-time employees or equivalents will be considered an applicable large employer. Applicable large employers can find a complete list of resources and the latest news at the Applicable Large Employer Information Center on IRS.gov/aca.

If you have:

- Fifty or more full-time equivalent employees, you will need to file annual reporting whether and what health insurance you offered your full-time employees. In addition, you are subject to the Employer Shared Responsibility provisions.

- Fifty or fewer employees, you are generally eligible to buy coverage through the Small Business Health Options Program. Learn more at HealthCare.gov.

- Fewer than 25 full-time equivalent employees, you may be eligible for a Small Business Health Care Tax Credit to help cover the cost of providing coverage.

Regardless of size, all employers that provide self-insured health coverage to their employees must file an annual return reporting certain information for each employee they cover.

For More Information contact our office by calling 310.820.1080 or email us @ info@onts9.com

General Employment Tax Issues

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The Internal Revenue Service reminds business owners how critical it is to understand the various types of employment-related taxes they may be required to deposit and report.

This fact sheet provides information on some of the more common employment tax topics posed by business owners, including:
Worker Classification
Voluntary Classification Settlement Program
Fringe Benefits
Officer Compensation
• Backup Withholding and Information Return Penalties

Worker Classification
A common error is not correctly classifying a worker.
The IRS classifies workers as either independent contractors or employees. Tax responsibilities are different based on how the worker is treated; an employee requires employment tax withholding and matching by the business on wages paid to them while payments made to an independent contractor do not.
Contractors and subcontractors who are engaged in an independent trade, business or profession, in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts and circumstances of each case.

Voluntary Classification Settlement Program
Worker classification can greatly affect a business well beyond the initial determination. The Voluntary Classification Settlement Program, commonly called VCSP, is a program that allows taxpayers to voluntarily reclassify their workers as employees for future tax periods for federal employment tax purposes and to obtain partial relief from the federal employment taxes due during the misclassified periods of employment.
The VCSP process is simple. To participate, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP and, if accepted, enter into a closing agreement with the IRS.
Taxpayers should file Form 8952, Application for Voluntary Classification Settlement Program at least 60 days before the date that they want to begin treating their workers as employees. In order for their application to be considered, taxpayers must attach a list of names and Social Security numbers of all workers to be reclassified as part of the VCSP agreement.

Fringe Benefits
A fringe benefit is a form of payment for the performance of services. Businesses provide fringe benefits to all types of workers, including employees, independent contractors, partners and directors. Any fringe benefit is taxable and must be included in the worker’s income unless the law specifically excludes it or the recipient pays for the benefit.

Officer Compensation
Corporate officers are, by statute, employees. Although the statutes are clear, many S Corporations and closely held C Corporations fail to treat payments to their officers for services as wages. Instead, they improperly treat the payments as corporate distributions, loans and payments of personal expenses.

Most businesses use Form 1099-MISC to report payments to non-employees to the IRS. The Internal Revenue Code (IRC) requires a business to report payments to the IRS for services rendered by non-employees if the business paid the non-employee $600 or more during the calendar year.

A business should always secure the Taxpayer Identification Number, commonly called TIN, for any workers to whom the business makes reportable payments, so they can properly report those payments on Form 1099-MISC. A TIN is often, though not always, a Social Security number. Businesses can use Form W-9, Request for Taxpayer Identification Number and Certification, to obtain the worker’s TIN.

As always we hope you find this information valuable and in case of any questions call our office at 310.820.1080 or email us at info@onts9.com