The IRS is still being incompetent

[Doug]

Don't mail it. Use the web. Register at EFTPS.gov. You get a confirmation number and emailed receipt. No fiddling with certified mail which is great. Quicker and you can do it at midnight in your underpants. Or commando if you prefer.

That may not work in all cases. My wife and I have a trust that requires all tax documents related to the trust be mailed in. No electronic filing allowed. They need the paper copies in their hands. I have no idea why.

In a typical display of incompetence they tried to penalize us $564 for a late filing in the year 2020. After a half dozen letters from us and out accountant asking the IRS to justify the penalty they recently dropped their demands. It's obvious they're too short handed to handle the country's tax collection duties.

 

[cnctoolcat]

Once the books are clean, it's actually not that expensive to have them file a return.

You must have a fair accountant, in these parts it's about $2k for one to complete a simple company's 1120S.

And since most people "hate taxes and financials", they pay it without question.

Most accountants only have four-year degrees (the CPA is just an exam they optionally take once working), and thus I don't refer to them as "professionals". I just can't justify paying thousands for some clerk working in an accountant's office to plug some numbers in a form.

And I'm not sure about the "penny wise-pound foolish" comment. Thanks to Quickbooks and a file-folder drawer, all of my companies accounting records are in perfect order. And thus it takes maybe two hours to do the annual 1120S. It's easy when you use the previous year's returns as a template!

A small business tax returns and accounting is easy, if you are organized. Sales minus expenses/costs = taxable profits. The sales are simple. The only issues up for any kind of dispute (and thus the need for an accountant) are the expenses.

Dividends (or owner's draws) are not deductible, meals and entertainment are only 50% deductible, and you can't deduct your personal cell phone, computer, or car ("listed" property it's called)., You can deduct a percentage of listed property if used for business purposes, but that requires intricate record keeping. Just like with a home office, not worth the hassle to try and deduct for it.

Other than these obvious ones, virtually every penny your company spends in operations is deductible.

Most audits for a small business center around the deductions. And whether they are deductible or not. Yet 99% of it is common sense. And the other 1% is solved with a few minutes of reading...

Depreciation schedules can complicate a business's tax return, but most equipment is depreciated 100% in the year it's purchased using Section 179. And for long-term assets that must be depreciated over many years (like your building or high-dollar equipment), again it's just "follow the directions", and put the correct number on a line on the tax form each year until the asset is amortized (fully deducted from sales).

And you know the irony in all this "anti-accountant" talk? My daughter is a financial accountant for PWC in Chicago, haha! (But, after a year she's ready for something different...I tried to warn her about the boredom and monotony of accounting when she was in college.)

 

[Scruffy887]

4 on payroll including myself. I have an independent book keeper in for a few hours every week, and an accountant for the bigger issues. Lets me do my thing without worry.
I get 2 to 4 letters from the IRS every year. 2 at a time. One will say they corrected my address to the PO Box, other will say they corrected my address to the street number. No mailbox at street number and IRS wants only street address when you file.

 

[DanASM]

You must have a fair accountant, in these parts it's about $2k for one to complete a simple company's 1120S.

And since most people "hate taxes and financials", they pay it without question.

Most accountants only have four-year degrees (the CPA is just an exam they optionally take once working), and thus I don't refer to them as "professionals". I just can't justify paying thousands for some clerk working in an accountant's office to plug some numbers in a form.

And I'm not sure about the "penny wise-pound foolish" comment. Thanks to Quickbooks and a file-folder drawer, all of my companies accounting records are in perfect order. And thus it takes maybe two hours to do the annual 1120S. It's easy when you use the previous year's returns as a template!

A small business tax returns and accounting is easy, if you are organized. Sales minus expenses/costs = taxable profits. The sales are simple. The only issues up for any kind of dispute (and thus the need for an accountant) are the expenses.

Dividends (or owner's draws) are not deductible, meals and entertainment are only 50% deductible, and you can't deduct your personal cell phone, computer, or car ("listed" property it's called)., You can deduct a percentage of listed property if used for business purposes, but that requires intricate record keeping. Just like with a home office, not worth the hassle to try and deduct for it.

Other than these obvious ones, virtually every penny your company spends in operations is deductible.

Most audits for a small business center around the deductions. And whether they are deductible or not. Yet 99% of it is common sense. And the other 1% is solved with a few minutes of reading...

Depreciation schedules can complicate a business's tax return, but most equipment is depreciated 100% in the year it's purchased using Section 179. And for long-term assets that must be depreciated over many years (like your building or high-dollar equipment), again it's just "follow the directions", and put the correct number on a line on the tax form each year until the asset is amortized (fully deducted from sales).

And you know the irony in all this "anti-accountant" talk? My daughter is a financial accountant for PWC in Chicago, haha! (But, after a year she's ready for something different...I tried to warn her about the boredom and monotony of accounting when she was in college.)

You could write off 100% of your meals up until Dec 31 2022. Covid era rules.

IRS Tax Tip 2022-91, June 14, 2022

The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal

 

[cnctoolcat]

I've never used a meals and entertainment deduction, so I wasn't aware of the Covid-era rule change. (I don't take customers out to eat, don't travel overnight for the business, and when we drop off doughnuts I pay it out of my pocket.)

M&E is one of those deductions that can get you on the IRS radar (similar to home office), so why fool with it? It's a record-keeping nightmare. Is saving a couple-hundred dollars on your actual taxes this year worth it?

My shop has enough easy, legitimate deductions (steel, tooling, labor, electricity, etc.) to offset about 80% of our sales. The other 20% might get knocked down a bit in a given year if I buy a machine or something. Otherwise the 20% profit roles onto my W2, and I pay the taxes on it.

 

[Bill D]

The IRS is down about 30,000 employees That the previous administration did not allow them to spend money to hire and train. I assume many retired early during covid. That means they are down about 30%.
Rumor is they are down so low in experienced employees that they do not waste time on auditing big complicated mega companies returns that use every trick in the book. Instead they focus on auditing individual and small businesses that one IRS person can quickly evaluate and locate any missing irs payments due. This yields a better return on employee time rather then wading through the extremely complicated and confusing interleaved returns of a multi state and country business.
Bill D

 

[adamm]

You must have a fair accountant, in these parts it's about $2k for one to complete a simple company's 1120S.

Same deal in my area. I found for that price, I supply all the books, all the summaries, all the reports. They then shuffle around a few numbers from one category of expense to another to make it look like they did something (no change to taxes owed), then fill out 5 forms and submit it.

I've found in Canada, the government pdf forms are the simplest way to file the taxes. I've tried the third party on-line vendors, but their "simplified" and "helpful" forms on their website are more convoluted and difficult to understand than the paper forms. I have my reports configured so that I just run 3 reports, and all the numbers I need to copy over to the forms are ready for me.

Filing the taxes for my corporation on paper (actually editable pdfs), myself takes less time than using an accountant or third party "tax filing software", and costs less than $5 for printing the forms and mailing them in.

 

[Doug]

Regarding accountants.... our guy we used for 15 years retired. We think maybe he didn't actually retire, but only eliminated a number of clients like us who only saw him once a year prior to filing time and made about $2500/year off us. Over the years we got to know him and his family stories like he did with us. It was convenient for us, a one man office local to our home.

But, over time it was becoming obvious he was less and less happy with his career. He talked about the IRS putting more requirements on accountants. Mostly it was requiring accountants to verify and be liable for the truthfulness of information the clients supplied. He was active in the local accountant's organization and talked about how fewer young people were pursuing accountanting as a career.

Another accountant bought his customer list just before the pandemic and after three filing years we still haven't met the new guy.

As for not using a professional to handle your tax filings, one of my fast growing customers used a bookkeeper lady from their church as their accountant. Unfortunately the business got into tax issues the lady wasn't familiar with. First they got audited by the state, then coincidently the county and finally the IRS. All told it cost them $80K..!!!

 

[ttrager]

The additional 87,000 IRS agents added to the Federal payroll last year or so are clearly making an improvement in Government Performance.

 

[adamm]

As for not using a professional to handle your tax filings, one of my fast growing customers used a bookkeeper lady from their church as their accountant. Unfortunately the business got into tax issues the lady wasn't familiar with. First they got audited by the state, then coincidently the county and finally the IRS. All told it cost them $80K..!!!

Do you know how much of that $80k was tax they should have paid anyway, and how much was the additional fines/levies/interest?

Like all service providers, hiring an accountant is a decision. Do they provide more value than they cost? Not always.

 

[Freedommachine]

Taxation is theft!

That is all, carry on.

 

[cnctoolcat]

As for not using a professional to handle your tax filings, one of my fast growing customers used a bookkeeper lady from their church as their accountant. Unfortunately the business got into tax issues the lady wasn't familiar with. First they got audited by the state, then coincidently the county and finally the IRS. All told it cost them $80K..!!!

I would about guarantee it was an issue with deductions. The owner probably bought his wife a new $90k SUV, and was letting the company make all the payment and pay all the insurance and what-not. Unless the vehicle is used 100% exclusively for business purposes (including being parked at the business overnight), this is a no-no.

As a business owner it's fairly easy to determine what deductions would be legal, and those that may not be. How? Just pretend you're an employee of the company, and the money you receive every week on your paycheck has been taxed already. So when you go buy a new SUV for personal use, it is with money that has ALREADY been taxed.

Just because you own a business, does not mean you get to buy a personal vehicle (or anything for personal use) with PRE-TAX money.

Legitimate business deductions are easy (materials, labor, utilities, etc.). It's the short-sighted owner who tries to go outside the tax laws with deductions.

Many business owners tend to use the business account as their personal piggy bank, often with their accountant scheming-up something to cover it.

One thing to remember: the IRS may be incompetent, but once you're under audit, they are NOT stupid.

 

[Glug]

First class mail sent via companies like stamps.com or pirateship.com has tracking. That isn't the same as certified, but at least you know when someone received an invoice, etc.

I like pirateship. Simple website that just works, and lower rates for usps and ups package shipping.

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[neilho]

...
Rumor is they are down so low in experienced employees that they do not waste time on auditing big complicated mega companies returns that use every trick in the book. Instead they focus on auditing individual and small businesses that one IRS person can quickly evaluate and locate any missing irs payments due...

I've heard much the opposite (from an IRS talking head on the radio), that the IRS doesn't bother going after anyone who owes less than a million bucks. Seems to me that would be a more efficient use of auditors time.

 

[Ox]

Owe the IRS $M?

I remember once about 30 yrs ago that we got a month behind (payroll deductions) and you'd'a thunk that I was headed to Leavenworth by this time tomorrow if'n we didn't cough up the bucks!
(Only a cpl/three employees at that time too!)

How doo you git behind with the IRS?
Other than make a WHOLE bunch more $ than you expected to, and your quarterlies just weren't up to snuff, but if'n that's the case, paying the tax shouldn't seem to be a hardship?


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Think Snow Eh!
Ox

 

[jhov]

Hanlon's razor: "Never attribute to malice that which is adequately explained by stupidity." I find the opposite to be true when it comes to government and their agents. Their incompetence is our only reprieve, not the other way around.

 

[neilho]

Owe the IRS $M?....
How doo you git behind with the IRS?
Other than make a WHOLE bunch more $ than you expected to, and your quarterlies just weren't up to snuff, but if'n that's the case, paying the tax shouldn't seem to be a hardship?

Ox

That's if you've been paying taxes on time and have got your manure in a pile. If your cash flow is high or you're rich, don't pay taxes on time, incur penalties and interest, stretch it out, etc, don't pay for another coupla years, lose your case against the IRS, it ain't hard to incur 1M.

Somewhere there's a map of folks owing over 1M. Can't find it at the moment, 10 such victims/perps in VT as of about 5 years ago.

 

[Ries]

The additional 87,000 IRS agents added to the Federal payroll last year or so are clearly making an improvement in Government Performance.

they did not hire 87,000 new agents. 80,000, plus or minus, is how many they could have added over the next ten years, IF the debt ceiling bill had not slashed the ten year IRS budget by 20%.
In reality, they hired mebbe 4000 customer service reps, who are not "agents".
I wish they would hire 80,000 new employees- but its a myth.

 

[Freedommachine]

they did not hire 87,000 new agents. 80,000, plus or minus, is how many they could have added over the next ten years, IF the debt ceiling bill had not slashed the ten year IRS budget by 20%.
In reality, they hired mebbe 4000 customer service reps, who are not "agents".
I wish they would hire 80,000 new employees- but its a myth.

Yeah, I too would love to see more tax collectors

Paying taxes should be inconvenient. It stands as a yearly reminder for all US business owners of just what it is that we're paying for... Get it wrong; and the strong hand of big government will wipe you out.

It's good for people to reflect upon the fact that the US government sends our money all over the world while not being able to fill the pot holes in front of your shop.

Or, spending millions on things like Pakistani gender studies; yet some businesses here have to take out high interest predatory loans to make payroll, waiting on their net90 gov contractor customers to pay up.

No need to worry though. The Central Bank Digital Currency will be here soon enough to make our lives easier. We won't even need an IRS anymore, they can tax income as it's earned.
Every single transaction, private or business. It makes more sense to wait 6-10 years for the CBDC roll out than it does to recruit 80,000 people and then figure out what to do with them after, right?