Worried about being unable to pay taxes in full after filling in your return? Never resort to the option of not filing your return at all. Whatever the problem file your return and inform the IRS about your inability to pay your taxes as lump sum. There is an option as far as Federal taxes are concerned you can request the IRS to accept the back taxes as EMI, or equated monthly installments. In the case of state taxes, you will have to determine whether the state allows this option. Or, you will have to make arrangements to pay state taxes in full.

Here is what you can do:

• Complete the tax return and sign it.

• Get a Form 9465, Installment Agreement Request if you owe taxes up to USD 25,000 or less. And, if you owe more than USD 25,000 in taxes you need Form 433F. See: [http://www.irs.gov/businesses/small/article/0],,id=108347,00.html . There is also an option to complete the agreement online if you owe USD 25,000 or less as taxes.

• Complete the requisite form accurately.

• Be sure to enter details like the form number used, the assessment year or tax year, and the amount of tax owed.

• Write a check for the amount you can afford to pay and establish that you do intend to pay the taxes.

• Calculate the maxium amount you can pay each month. Include penalties, interest, and any other charges the IRS may levy. Try and pay back in the shortest possible time and within one year.

• Commit to the exact day in which the money will reach the IRS each month. There is the option of instructing your bank to pay the amount to the IRS every month automatically.

• Make sure the form is signed and dated . In case it is a joint filing both spouses must sign the agreement.

• Attach the form on top of the income tax return.

• Send in or submit the form online.

It is important never to miss a payment. Send in the money even if you do not receive a statement from the IRS. If you delay or miss a payment, the agreement will be immediately terminated by the IRS.

If you are in deep trouble and there is no way you can pay the taxes even in installments you must consider an “offer in compromise”. To do this you will need the help of a tax attorney or CPA. The tax professional must be experienced in handling tax debt matters. He or she must be able to negotiate the most feasible terms with the IRS. It is important that the person you consult has in depth knowledge of the laws governing the IRS, laws concerning tax debt, laws specific to the place you reside in, and how the IRS evaluates installment payment requests.

This option for tax payers is quite recent and came into practice only in January, 2005.

It is no fun when the tax men come calling. However, taxes have to be paid whether we like it or not. Taxes are our obligation to the country and there is no getting away from this expense. Small businesses are especially affected by the need to pay taxes. First of all, they may not have hands-on accounting staff on their rolls. Second, they may not be in the position to provide adequate cash to meet the tax man’s demands. Being a small business in the modern world can be a scary thing. However, it does not have to be unbearably frightening.

These days, large numbers of smaller businesses are opting to pay their taxes through their business credit cards. If you thought that credit cards were only good for clothes and groceries and buying products online, you should change your ideas. Credit cards are on their way to becoming the favored mode of payment for everything — from mortgage and house rent to electricity, necessities, and taxes. Small businesses are especially happy with this state of affairs. Even if they do not have enough cash on hand to fill in their taxes, they can depend on their credit cards to take care of that bill. Later when the cash comes in from their various debtors, the credit card bill can be paid off.

One of the scariest things about defaulting on your taxes is that you might end up having to pay quite a large fine. However, paying by card helps reduce this problem. The business still has to pay the credit card company, but at least it will not get the tag of a tax defaulter. It is true that the tax authorities charge a relatively low interest on defaulting payments. However, this adds up. If you want to avoid paying exorbitant amounts of interest on your credit card bills, you should make the effort to find some really cheap credit cards. In fact, while searching for cards, I have on occasion found credit cards that charge no interest for up to fifteen months. If that is not a steal, what is?

The power of plastic has been growing over the years. Of late, even governments have begun to realize its importance. Credit cards are clearly on their way to becoming the currency of the future. We all must be ready for this. Maybe it is time for us to recognize the power of a credit card, and use it to pay for even more of our expenses.

Federal estate tax applies to the transfer of property at death. The estate of a person who died is liable for taxes on the estate. Taxpayers should use Form 706 U.S. Estate Tax Return to file Estate Tax returns. For decedents dying in 2006, Form 706 must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $2,000,000.

The executor of the estate must file returns for the deceased person. This return is due nine (9) months after the date of death. (IRS can extend the time for any payments due up to 10 years) Use Form 4768 to apply for an automatic 6-month extension of time to file.

Life insurance proceeds are included in the estate only IF the proceeds are received by the estate in any way.

The gross estate includes the value of ALL property belonging to the deceased at the time of death.

The value of the property is based upon fair market value at the time of death.

The taxable estate is the gross estate minus the following:

* Administration and funeral expenses

* Claims against the estate

* All outstanding obligations

* Casualty and theft losses

* Marital deductions

* Charitable deductions

It is highly recommended that you hire a Tax professional to complete the Estate Taxes, especially if you do not have access to the decedent’s most recent tax returns. All assets are to be listed on the Estate Tax return. If you are not sure of the assets; IRS can help your tax professional with assets that have been reported.

All executors are responsible for the return as filed and are liable for penalties provided for erroneous or false returns.

For more information visit the IRS web site at irs.gov and put in the keyword: estate taxes

The purpose of this article is to demonstrate the importance of the tax impact in the sale of your business. As an M&A intermediary and member of the IBBA, International Business Brokers Association, we recognize our responsibility to recommend that our clients use attorneys and tax accountants for independent advice on transactions.

As a general rule, buyers of businesses have already completed several transactions. They have a process and are surrounded by a team of experienced mergers and acquisitions professionals. Sellers on the other hand, sell a business only one time. Their “team” consists of their outside counsel who does general business law and their accountant who does their books and tax filings. It is important to note that the seller’s team may have little or no experience in a business sale transaction.

Another general rule is that a deal structure that favors a buyer from the tax perspective normally is detrimental to the seller’s tax situation and vice versa. For example, in allocating the purchase price in an asset sale, the buyer wants the fastest write-off possible. From a tax standpoint he would want to allocate as much of the transaction value to a consulting contract for the seller and equipment with a short depreciation period.

A consulting contract is taxed to the seller as earned income, generally the highest possible tax rate. The difference between the depreciated tax basis of equipment and the amount of the purchase price allocated is taxed to the seller at the seller’s ordinary income tax rate. This is generally the second highest tax rate (no FICA due on this vs. earned income). The seller would prefer to have more of the purchase price allocated to goodwill, personal goodwill, and going concern value.

The seller would be taxed at the more favorable individual capital gains rates for gains in these categories. An individual that was in the 40% income tax bracket would pay capital gains at a 20% rate. Note: an asset sale of a business will normally put a seller into the highest income tax bracket.

The buyer’s write-off period for goodwill, personal goodwill, and going concern value is fifteen years. This is far less desirable than the one or two years of expense “write-off” for a consulting agreement.

Another very important issue for tax purposes is whether the sale is a stock sale or an asset sale. Buyers generally prefer asset sales and sellers generally prefer stock sales. In an asset sale the buyer gets to take a step-up in basis for machinery and equipment. Let’s say that the seller’s depreciated value for the machinery and equipment were $600,000. FMV and purchase price allocation were $1.25 million.

Under a stock sale the buyer inherits the historical depreciation structure for write-off. In an asset sale the buyer establishes the $1.25 million (stepped up value) as his basis for depreciation and gets the advantage of bigger write-offs for tax purposes.

The seller prefers a stock sale because the entire gain is taxed at the more favorable long-term capital gains rate. For an asset sale a portion of the gains will be taxed at the less favorable income tax rates. In the example above, the seller’s tax liability for the machinery and equipment gain in an asset sale would be 40% of the $625,000 gain or $250,000. In a stock sale the tax liability for the same gain associated with the machinery and equipment is 20% of $625,000, or $125,000.

The form of the seller’s organization, for example C Corp, S Corp, or LLC are important to consider in a business sale. In a C Corp vs. an S Corp and LLC, the gains are subject to double taxation. In a C Corp sale the gain from the sale of assets is taxed at the corporate income tax rate. The remaining proceeds are distributed to the shareholders and the difference between the liquidation proceeds and the stockholder stock basis are taxed at the individual’s long-term capital gains rate.

The gains have been taxed twice reducing the individual’s after-tax proceeds. An S Corp or LLC sale results in gains being taxed only once using the tax profile of the individual stockholder.

Selling your business – tax consideration checklist:

1. Get good tax and legal counsel when you establish the initial form of your business – C Corp, S Corp, or LLC etc.

2. If you establish a C Corp, retain ownership of all appreciating assets outside of the corporation (land and buildings, patents, trademarks, franchise rights). Note: in a C Corp sale, there are no long-term capital gains tax rates only income tax rates. Long-term capital gains can only offset long-term capital losses. Personal assets sales can have favorable long-term capital gains treatment and you avoid double taxation for these assets with big gains.

3. Look first at the economics of the sales transaction and secondly at the tax structure.

4. Make sure your professional support team has deal making experience.

5. Before you take your business to the market, work with your professionals to understand your tax characteristics and how various deal structures will impact the after-tax sale proceeds

6. Before you complete your sales transaction work with a financial planning or tax planning professional to determine if there are strategies you can employ to defer or eliminate the payment of taxes.

7. Recognize that as a general rule your desire to “cash out” and receive all proceeds from your sale immediately will increase your tax liability.

8. Get your professionals involved early and keep them involved in analyzing various bids to determine your best offer.

Again, the purpose of this article was not to offer you tax advice (which I am not qualified to do). It was to alert you to the huge potential impact that the deal structure and taxes can have on the economics of your sales transaction and the importance of involving the right legal and tax professionals.

There is an old saying “When There is a Will, There is a Way” And many people definitely have a desire to avoid capital gain taxes when selling investment property.

Tax Loophole: When one kind of investment real estate is traded for another, the capital gains tax is fully deferred.

Generally you are not required to report a taxable gain when business or investment property is exchange for “like kind” business or investment property. The key here is the term “like kind” which refers to the characteristic of the property – NOT it’s quality. Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality.

Examples of Exchanges:

1. Exchange a rental apartment in the city for a rental home in the country.

2. Exchange a city block for farm land

3. Exchange a rental house for a commercial building.

Note: If cash is received in a tax-free exchange you may have to report and pay capital gains taxes based upon the cash received.

The possibilities and options are many. Imagine trading a rental home with a low monthly cash flow for a commercial building with a higher monthly cash flow, just because the owners want to retire?

The most common type of Exchange is known as the Forward Delayed Exchange. The Taxpayer sells investment property and will acquire a replacement property of equal or greater value within 180 days. There are stick stipulations and loads of paper work; you will need a real estate professional or attorney that specializes in 1031 Exchanges.

If you are planning to move to Arizona or if you are yourself a new Arizona resident who are not familiar with Arizona State taxes, you can read this detailed summary about your state taxes. Another site that will provide elaborate information about Arizona State taxes will be their official website, but I believe it is enough to see below for the taxes and complete descriptions that you are supposed to know.

If you are a working resident of Arizona state, then the most crucial Arizona State taxes is that you will need to pay attention for is the income tax rates. They are divided into five different groups, ranging from about 2.7 percent to about 4.8 percent. For the complete list of the five groups and their respective rates, you can refer to the data below

For single or married who filed separately:
- 2.73% will be taxed on the first $10,000 of chargable income
- 3.04% on chargable income from $10,001 to $25,000
- 3.55% on chargable income from $25,001 to $50,000
- 4.48% on chargable income from $50,001 to $150,000
- 4.79% on all chargable income over $150,000.

The deadline of filing income levy returns is on the 15th of April. It is not fixed though; if it is on a weekend or if it is on a public holiday, then it will be shifted to other dates. There are also extra days that are provided to you by the tax company. For more information of the deadline for the current tax year, you can go to the Arizona State taxes official website directly. There, you can find what the deadline is so that you will not be fined for paying late after the deadline. Remember, deadline is always important because you will not want to spend extra money only because you miss the deadline, won’t you?

The law of Arizona needs the residents and the visitors of Arizona to add in extra goods to Arizona gross product. This comprises of interest income from civic trades that do not come from Arizona state. The capital income must also be included and taxes will be applied to it. For the taxpayers, sales tax is also crucial every time we talk about Arizona State taxes. The current rate for the sales tax is at, more or less, 5.6 percent. Medicine that the residents take and sustenance that the residents possess will not be taxed. However, not all the cities do this; some still charge Arizona state taxes for these two needs. To check for more elaborate information, you can just visit the Arizona official website, so that you know it very well.

Another important information is that Arizona State taxes will comprise of private property taxes. Insubstantial personal property taxes, however, are not charged.

Income taxes need to be filed within the specific time period, so that unnecessary penalties and problems can be avoided. Doing taxes is one of those issues that need to be done properly. You have to deal with various forms, documents, receipts for the whole year, and other required information. In order to avoid complexities, you can consider doing your taxes online using software programs available.

During the tax season, most of the accounting firms have heavy load of work. Also, you will see that the majority of the certified public accountants are busy in paper work. With online tax return preparation and e-filing option, things have come a bit easier and faster. You do not have to rush to your accountant now and then for seeking his or her guidance. You can do it easily and conveniently using software online. Using internet facilities, you can contact a certified public accountant and send your tax details online.

There are numerous websites offering online income tax preparation and e-filing options. You will be able to save your valuable time as well as your money if you choose to do your task online. Most online tax filing companies provide the facility of calculating or estimating the exact amount of taxes that need to be filed.

Now preparing and filing return online is not only easy but also free. You can visit the IRS website to avail the benefit of using Free File software when it comes to filing online federal tax return. If your AGI income is something less than $57,000, you can use this free file option. If you do not qualify for using this software, then you can consider Free File Fillable Forms to prepare and file your return forms electronically. Most tax return preparation and e-filing firms provide services at a reasonable rate. Calculating tax amount using online calculators and filing your return online is easy now.

Do you realize that some tax forms ask you to check a box if
you are BLIND?

Quote: “Two years ago it was impossible to get through on
the phone to the IRS. Now it’s just hard to get through.
That’s progress.”
-Charles Rossotti, former IRS Commissioner

Disappointed that you never had time to write the great
American novel? Don’t fret, just go dig out your past tax
returns.

Quote: “The Eiffel Tower is the Empire State Building after
taxes.”

Under the Freedom of Information Act, a man with a small
business sent a request to the IRS asking if they had a file
on him. The IRS wrote back, “There is now.”

Quote: “It would be nice if we could all pay our taxes with
a smile, but normally cash is required.”

Q: Who audits IRS agents?

Quote: “Next to being shot at and missed, nothing is quite
as satisfying as an income tax refund.”

Q: How do you drive a CPA insane?

A: Fill out Form 1040EZ.

Quote: “The government deficit is the difference between the
amount of money the government spends and the amount it has
the nerve to collect.”

Why is it that when the IRS loses a tax return, it is
considered a mistake, but when you lose a receipt, it is
considered tax evasion?

Quote: “The wages of sin are death, but by the time taxes
are taken out, it’s just sort of a tired feeling.”

Q: How do you humble a person that flaunts their wealth?

A: Have them fill out a tax return.

Quote: “Even when you make a tax form out on the level, you
don’t know when it’s through if you are a crook or a
martyr.”

Q: Why is a tax audit like a tornado?

A: There’s a lot of screaming and you end up losing your house.

Quote: “When are we going to be allowed to list the
government as a dependent?”

People often say death and taxes are the same, but this
is wrong. Death is a taxable event, but taxes never
die.

In October of 2002, a 3-year partnership agreement between a group of tax software companies including Turbo Tax and the Internal Revenue Service (IRS) was formed. This partnership was formed to provide a free Federal tax filing program for at least 60 percent of American taxpayers. This program is known as the Free File Alliance.

In October of 2005, the IRS and the same group of tax software companies reached a new four year partnership agreement for free filing of taxes online. The new Free File Alliance agreement continues to provide free Federal tax filing to those who have an adjusted gross income (AGI) of $52.000 or less. This amount will vary among the tax software partners.

Why is the Internal Revenue doing this?

The IRS has a goal of 80% of all Federal tax returns to be filed online by the year 2007. Currently over 70 million people are filing their taxes online. The Federal Government believes that electronic tax preparation provides a more accurate way of preparing and filing taxes. The Federal Government also believes that a partnership with existing tax software companies will provide the the best service to taxpayers. The Free File Alliance provides free federal tax filing and preparation at no cost to those who qualify.

If your adjusted gross income is less than $52.000 or, You qualify for the earned income credit (EIC) for tax year 2006, then you qualify for the free Federal tax filing program or, You are an active Military, Reservist, or National Guard member whose gross income (AGI) for 2006 is less than $52.000.

Self employed people in the United States feel differently when it comes to having to shrug out hard earned cash in the form of taxes. Self employed individuals have to pay as much tax as an employer and an employee combined – so much for helping the unemployment scenario in the country!

This is a give and take situation. The US government allows self employed individuals a lot of deductions on their taxes. These taxes may be so high that people think twice before taking up any self employment opportunities. Entrepreneurs in the US claim that the government is indulging in the biggest fraud ever by imposing huge taxes on self employed individuals and then giving them tax deductions. This amounts to them having to pay a set amount of taxes anyway – so why not do away with the deductions and lower the taxes charged in the first place?

So far as Medicare and Social security taxes are concerned if your income crosses $400 you are liable to pay more than 15% of your income as tax to the government. That is 15% over and above the usual income tax self employed individuals are expected to shrug out. And then if you own your home you will find that you are paying the government more than half your total income in the form of taxes.

Self employed people argue that this is a very unfair level of taxation and is not encouraging at all for people who want to get into self employment in the United States. Countries like Spain and Italy have self employment taxed designed in a way that will encourage their citizens to seek self employment and in a way help ease the unemployment situation in the country.

When you get into self employment you will be lucky to earn a little over $100,000 in the first year. You will not have to pay the 12% Social Security tax on the amount that exceeds the 100,000 this is a saving but you will have to pay the Medicare part of the tax. Then when you are calculating the income tax part of your taxes you can deduct a half of the taxes from your self employment taxes -these are significant savings on the tax front.

Claiming rent deductions for a home office is another way of saving on taxes. Just calculate the annual rental for the home office and deduct it from your income. This is considered as an expense – but then the government will tax you on an income from your property, anyway it still saves you a few bucks in the long run.

So if you do diligent research you will find that there are many ways you can save on taxes you would normally pay as a self employed person. But then it all calls for additional effort and time – why not just do away with the deductions and lower the taxes?