Feds bust Idaho promoter of Corporation Sole Scam – And IRS will be in touch with the 400 people who were stupid enough to pay him thousands of dollars for this ridiculous scheme.

The mystical date of April 15th has become so synonymous with “Tax Day” in this country that they are interchangable.  I have been seeing all kinds of people, including tax scholars and pros, say that 2005 tax returns are due on April 15 this year.  That is not true.

Ever since I have been in this business, IRS has had a policy of automatically extending tax filing deadlines if the statutory one falls on a weekend or a holiday.  Since April 15, 2006 is a Saturday, the normal deadline to file either the 1040 or the extension (4868) is on Monday, April 17. 

For some states in the eastern part of the country, they celebrate Patriots’ Day on the third Monday of April, which just happens to be April 17 this year.  This moves their tax deadline to Tuesday, April 18.  The affected states are: Maine, Massachusetts, New Hampshire, New York and Vermont.

This may seem like a minor technicality to some people. However, any tax pro can relate to the experience of having hundreds of clients panicking at not having their 1040 or 4868 done by April 15, when there are actually two or three more days until the actual deadline.  That extra breathing room is extremely valuable in the pressure cooker world of tax preparation.  

Also, one more reminder that the Form 4868 extension that you file by April 17 is for six months, moving the 2005 1040 deadline to October 16, 2006 because October 15 is a Sunday.  Even though we are including an explicit statement of this fact on the 4868s we are preparing, I’m sure we will be receiving a ton of panicky calls from clients around August 15 assuming that is the deadline.  Old habits do die hard. 

As I’ve pointed out for decades, the higher the adjusted gross income on your 1040, the more likely IRS will be to hassle you.  This is in addition to the fact that our rulers also have you in their cross-hairs by phasing out deductions, exemptions and credits for those they consider to be evil rich, as defined by high AGI. 

IRS Audits Increase By 21 Percent

IRS also says the number of audits of high-income taxpayers – defined as those with income of  $100,000 or more – reached 219,208, the highest figure in 10 years.

2005 IRS Data Book Details Rise in Audits – From IRS, reminding us all that Big Brother is watching us more closely than ever.

What to do about this? 

You can utilize income smoothing techniques, such as with C corporations, in order to keep your 1040’s AGI from reaching into the higher profile levels.   

You should make sure your books are in good shape and can support everything shown on your tax returns.  The best way to to do this is to have all of your records entered properly into QuickBooks.  Audits I have handled where the clients had their stuff in QB were completed very quickly and successfully.  Those for shoe-box clients drag on for years, costing huge amounts in fees and ultimately taxes. 

Work with a qualified tax professional. It is too dangerous to swim in the IRS shark infested waters alone. 

You also have the option to do nothing special to protect yourself from IRS hassles.  Some refer to that as the “ostrich” or “it can’t happen to me” approach.  These are often the same people whose retirement planning consists of buying lottery tickets.

 

Q:

Subject: Corporate Tax Rate Schedule

Hey Kerry,

I’m a student at Binghamton University and I’m trying to understand you’re tax rate schedule after looking at the 1120-W form.  What I’m having trouble with is how the rate resets at 335,000 and 18,333,334. 

The first makes sense, but I do not understand either the $550,000 at the second to last bracket, or the reset rate for all income over $18,333,334.

Thanks for any help,

Oh, and I’m doing this for a simulated 2% reduction in the corporate tax rate, just to let you know what I’m trying to do.

A:

This is a good time to repeat my long standing policy on not answering homework questions.  This has always been my online policy, going back several years ago when I was answering questions on the old AskMe.com website. 

I barely have time to address real life questions from many people; much less provide short-cuts for students who should be doing their own research and utilizing the resources they are paying for with their tuition. 

The answers to your questions are very easy if you work through the figures in the tax rate schedules.  If you can’t figure it out on your own, you should ask your professor or his/her teaching assistant to explain it to you.  That’s what they are there for.

Good luck.

Kerry Kerstetter

 

Q:

Subject: In regards to something you wrote…..

“The most confusing thing about running so many versions of QuickBooks at the same time is that the icons that show up on your desktop and QuickLaunch bar look exactly the same for each year. I have to float the cursor arrow over them to find which is which, and even then I occasionally open the wrong program.”

I am not sure if you are referring to your desktop icon, but if you are, you can change the icon by right-clicking it. Go to properties, and then select “change icon” Maybe that will help with the minor frustration of running multiple Quickbooks programs on your desktop.

A:

I had tried that years ago and was disappointed to find the icons that come with the program all look almost exactly the same, with nothing to distinguish their year. I’m sure it’s because most people only have one version of QB installed, so have no need to worry about identifying different ones.

I launch most of my programs from the Quick-Launch tool-bar at the bottom of my screen, where I currently have over 80 tiny icons in alpha order.

I guess I could design my own icon for each version of QB; but that sounds too time consuming.

The icons that come with my Lacerte tax prep programs each have the last two digits of the year very prominently displayed in their tiny quick-launch bar icons; so I don’t even need to float my cursor over them to know which is which, as I need to do for the QB programs.

Thanks for writing.

Kerry Kerstetter

Q:

Subject: quickbooks tips

Hi Kerry,

I see you’re a quickbooks expert, so here’s a quick question for you. Is there an easy way to enter monthly recurring bills once so that they show up in the unpaid bills (or checks to print) automatically? I’m thinking of stuff like my monthly rental payment.
It’s a total pain to have to enter the bill every month when it never changes.

A:

It’s quite simple. When you memorize the payment, you are given a choice to have it entered automatically on a variety of time schedules, including monthly.

Kerry Kerstetter