Business Tips . . And Information

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Business Tips: Hobby versus Business – Worth Repeating!

Some folks would rather earn a living doing the things they enjoy.  Is your business a hobby or a business? Business Tips – A hobby is an activity that you don’t expect to be making any profits from.  To operate your business – or any business as if it is not an investment activity that you are earning an income from, then you definitely are decreasing the deductions it is possible to take.

You have to include with your income tax return any income you earn – even from an activity you do not expect to make a profit on. Business Tips Example:  A garden you sell vegetables from, but you primarily run your garden for personal satisfaction and fun. You can’t use a loss from the activity to offset your other income. Hobbies, or activities that consist of something you do mainly for exercise or fun, are ‘unbrella’d’ under this title. So does an investment activity intended only to produce tax losses for investors.

To decide whether or not you are carrying on an business for an income, all facts are relevant. Not one single factor would decide. Among these facts are these Business Tips Guidelines:

1. You conduct the duties of the activity as a business
2. The time and energy you give to the business or duty indicates that you have intentions for earning a profit
3. Your existence and welfare depends on the profits of your business.
4. Your losses are because of conditions beyond your control (or are normal in the start-up phase for your type of business)
5. You change your methods of operation to improve profits
6. You, or your advisers, have the knowledge you need to carry on that activity as a successful business
7. You were successful in making a profit in similar businesses or opportunities in the past
8. The business makes a profit in some years and the amount of profit it makes, AND
9. You expect to make a future profit from the appreciation of business assets used in it.

7.  Business Tips: Are you eligible for any of these tax credits?

Taxpayers may consider claiming these tax credits that you may qualify for when finishing your federal income tax returns, says the IRS. Business Tips Fact-A tax credit can actually lower  the amount of taxes that taxpayers owe. Some tax credits are actually refundable – your taxes could be lowered to a point that a taxpayer gets a refund versus owing taxes. Identified below are business tips that list some eligible tax credits taxpayers may claim:

• Earned Income Tax Credit
  This is a refundable credit for low-income working people and families. Income and family size decide EITC amounts. When the EITC is more than tax amounts owed, it results in a tax refund to people who claim and qualify for the credit. For more information, see IRS Publication 596, Earned Income Credit (EIC).
• Child Tax Credit
  This credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see Pub. 972, Child Tax Credit.
• Child and Dependent Care Credit
  This is for monies paid for the care of children under age 13, or for a disabled spouse or dependent, to allow a taxpayer to work. There are limits to the qualifying expense amounts. The credit is a percentage of those qualifying expenses. For more information, see Pub. 503, Child and Dependent Care Expenses.
• Adoption Credit
  Adoptive parents can take a tax credit of up to $11,650 for qualifying expenses paid to adopt an eligible child. For more information, see Pub. 968, Tax Benefits for Adoption.
• Credit for the Elderly and Disabled
  This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are citizens or residents. There are income limitations. For more information, see Pub.524, Credit for the Elderly or the Disabled.
• Education Credits
  There are two credits available, the Hope Credit and the Lifetime Learning Credit, for people who pay higher education costs. The Hope Credit is for the payment of the first two years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. For more information, see Publication 970, Tax Benefits for Education.
• Retirement Savings Contribution Credit
  Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions to a traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount. For more information, see chapter four in Publication 590, Individual Retirement Arrangements (IRAs).

Business Tips – There are other credits for eligible taxpayers.
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8.  Business Tips: File An Extension

If you find you need more time to finish your return, you can get a five or six month extension of time to file using Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, Other Returns. And if you have trouble paying your tax bill, the IRS has several payment options available.  Always use this Business Tips Advice – Call them to discuss your options.

The extension will give you extra time to get the paperwork to the IRS, but it does not extend the time you have to pay any tax due. You have to make an accurate estimate of any tax due when you request an extension. You can also send a payment for the expected balance due, but this is not required to get the extension. However, you will owe interest on:

Any amounts not paid by the March 15 deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

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9.  Business Tips – Your Appeal Rights

One of the guaranteed rights for all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case.

IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important taxpayer rights. During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal.

The IRS appeals system is for people who do not agree with the results of an examination of their tax returns or other adjustments to their tax liability. In addition to examinations, you can appeal many other things, including:

• Collection actions such as liens, levies, seizures, installment agreement terminations and rejected offers-in-compromise
• Penalties and interest
• Employment tax adjustments and the trust fund recovery penalty

Appeals conferences are informal meetings. The local Appeals Office, which is independent of the IRS office that proposed the disputed action, can sometimes resolve an appeal by telephone or through correspondence.

The IRS also offers an option called Fast Track Mediation, during which an appeals or settlement officer attempts to help you and the IRS reach a mutually satisfactory solution. Most cases not docketed in court qualify for Fast Track Mediation. You may request Fast Track Mediation at the conclusion of an audit or collection determination, but prior to your request for a normal appeals hearing. Fast Track Mediation is meant to promote the early resolution of a dispute. It doesn’t eliminate or replace existing dispute resolution options, including your opportunity to request a conference with a manager or a hearing before Appeals. You may withdraw from the mediation process at any time.

When attending an informal meeting or pursuing mediation, you may represent yourself or you can be represented by an attorney, certified public accountant or individual enrolled to practice before the IRS. ss strongly advises you to send a representative in your place.

If you and the IRS appeals officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases you may take your disagreement to federal court.

Business Tips Advice – Taxpayers can settle most differences without expensive and time-consuming court trials.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice provides specific instructions explaining what you should do if action is necessary to satisfy the inquiry. Most notices also give a phone number to call if you need further information.

Most correspondence can be handled without calling or visiting an IRS office, if you follow the instructions in the letter or notice. However, if you have questions, call the telephone number in the upper right-hand corner of the notice, or call the IRS at 1-800-829-1040. Have a copy of your tax return and the correspondence available when you call so your account can be readily accessed.

Before contacting the IRS, review the correspondence and compare it with the information on your return. If you agree with the correction to your account, no reply is necessary unless a payment is due. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write an explanation why you disagree, and include any documents and information you wish the IRS to consider. Mail your information along with the bottom tear-off portion of the notice to the address shown in the upper left-hand corner of the IRS correspondence. Business Tips says , “Be Patient,” and Allow at least 30 days for a response.

Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you.

Noteworthy Business Tips – Be sure to keep copies of any correspondence with your records.

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10.   Business Tips:  Donate!

Your donations can add up to a nice tax deduction for your corporation or your personal taxes if you are a member of a flow-through business entity and itemize deductions on IRS Form 1040, Schedule A.

Here are a few business tips to help make sure your contributions pay off on your tax return:

• You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.
• To be deductible, contributions must be made to qualified organizations.
• Organizations can tell you if they are qualified and if donations to them are deductible. IRS.gov has an exempt organization search feature to help you see if an organization is qualified. IRS Publication 78, Cumulative List of Organizations, lists all charitable organizations except those most recently granted tax exempt status. Pub. 78 is available online and in many public libraries.

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