Tax Refunds, Corporate, Business and Individuals

Tax Refunds, Corporate, Business and Individuals

It is tax time again and most people don’t realize there is a great opportunity to get refunds and generate found cash flow at the corporate, business and individual levels.. Instead of waiting for the dreaded March and April deadlines, it is important to consider getting your tax returns done early this year.

Many businesses have lost money in 2008 due to the bad economic times. If you had business losses at the corporate and/or proprietorship levels for 2008 and had income for either/ both 2006 and 2007, you could be eligible for a net operating loss carryback which could generate a substantial tax refund…This could generate a substantial amount of available cash that you may not have anticipated.. You should also consult your tax professional to ascertain where you stand. Additionally, individuals should be talking with their tax advisor to see if there is tax refunds due to them for either overpayment and/or new tax benefits offered by the government….This could generate needed cash either to invest and/or survive debt demands…..

Many businesses have lost money in 2008 due to the bad economic times. If you had business losses at the corporate and/or proprietorship levels for 2008 and had income for either/ both 2006 and 2007, you could be eligible for a net operating loss carryback which could generate a substantial tax refund…This could generate a substantial amount of available cash that you may not have anticipated.. You should also consult your tax professional to ascertain where you stand. Additionally, individuals should be talking with their tax advisor to see if there is tax refunds due to them for either overpayment and/or new tax benefits offered by the government….This could generate needed cash either to invest and/or survive debt demands…..

In order to obtain these objectives, it is highly recommended you get your 2008 books, financial statements in order to ascertain where you stand for the calendar year ended 2008. These books can be prepared by either your in house computer system, a bookkeeper and/or outside accountant. Additionally, you should make sure that your bank accounts are reconciled therefore all cash transactions have been accounted for. Depreciation and all other bookkeeping adjustments should be recorded, therefore giving you an accurate 2008 balance sheet and profit and loss statement.

These 2008 financial statements with appropriate tax adjustments should be compared to the 2006 and 2007 federal income tax returns. In order to get carryback refunds from prior years, the current tax return must be filed first making you eligible to get carryback refunds from prior years.

Here is a brief edited example…. Lets assume the C Corporate Tax Return for 2006 generated taxable income of ,000 and 2007 taxable income was ,000. For the current year, the corporation lost 0,000 and paid in estimated taxes of ,000 for 2008… Based upon this example, the corporation would receive its ,000 estimated taxes back and could carryback the 0,000 loss back to 2006 and 2007 and recover those taxes paid in those years. In addition, the remaining ,000 unused losses could be carried forward to year ended 2009 and offset against future taxable incomes….Please consult a tax professional to go over the exact details of your situation…..

Companies that have sole proprietorships or pass thru entities like a S Corporation and/LLC may be able to recover business taxes at the personal level. Once again, obtain all your information for 2008 and sit down with a qualified professional to plan out and execute your situation…

In conclusion, start off 2009 with a quick jump with preparing your tax returns early vs the normal last minute and/or extension type thinking. These tax refund monies could be used for any purpose and get the year off to a good start…

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IRS Payment Plans and Current Year Refunds

IRS Payment Plans and Current Year Refunds

How Will Your Refund This Year Affect Your Payment Plan for Prior Years?

It can happen pretty easily.  You make more one year than you did the previous year, but don’t adjust your withholding.  Or, you claimed more deductions on your W-4 than you ended up claiming on your tax return.  In any case, you owed money to the IRS that you couldn’t pay.  So, you set up a payment plan.  But what happens if you get a refund for this year?

You Owe, You Owe, So Off Your Refund Goes

That’s right.  Even if you’ve set up a payment plan with the IRS to pay down a previous years’ debt, the IRS will take any refund you receive for later years and apply them toward that debt.  The good news is that if you’re paying interest on that debt, this payment via your refund will lower the amount of interest you end up paying.  It will also reduce the amount of time you are paying on this debt because the principal amount is being reduced.

How Do I Avoid Using My Refund Toward Previous Tax Debt?

You can’t avoid the IRS taking your refund; however, you can avoid having a refund in the first place.  The key here is to reduce your tax liability instead of increasing your refund.  Take a close hard look at your Adjusted Gross Income, or AGI.  This is basically the total of all your income minus any deductions and credits.

At the beginning of the tax year, use a free calculator online to determine approximately what your tax liability will be at the end of the year.  Adjust your withholding from your paycheck accordingly using your W-4 form filed with your employer.   This way you’re not overpaying into the system causing a refund at the end of the year.  Take the additional money in your paycheck and have it automatically deposited into an interest-bearing savings account.  Not only will you now make money on those savings but you will have it immediately available to you in case of an emergency.  You could also take this extra money to pay down the principal balance on what you owe the IRS to avoid some of the interest charges.

You can also reduce your AGI by contributing to an IRA or 401k.  This money goes into that account tax free and builds interest for you over the years as you reach retirement.  Not only is this money reducing your AGI but it’s another way for you to save without giving your refund to the IRS.

Using an online tax preparation site will help you get the most deductions and credits when filing your taxes.  The system is designed to ask you questions about your income, family and expenses and may catch credits you wouldn’t have known you qualify for, thereby lowering your tax liability even further.

Keep Paying on Your Debt

No matter what you do, be sure to keep making those payments to the IRS.  If you don’t, things can get ugly fast.  The IRS can put a lien on your house and other property, garnish your wages or even haul you off to jail for not paying your taxes.  Communication is the key, so make sure if you anticipate any problems making your tax payments you contact the IRS before missing a payment.

Yes, the IRS will take your refund this year for prior-years’ tax debt.  The good news is you can avoid getting a refund at all by adjusting your withholding or you use that extra money to pay down your debt to the IRS.

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Business Losses, Tax Refunds for 2008, 2007, 2006

Business Losses, Tax Refunds for 2008, 2007, 2006

As we come to the conclusion of 2008, many businesses have lost money in this year. The economy for 2009 looks very volatile and some industries may start to recover in 2009, while others may take a little longer. One positive area to bring to the table is that the price of oil has decreased significantly and regular gas prices have come down below .00 or so per gallon depending upon your location.

The question through this difficult year where losses have mounted up, why do you have to tax plan? If you were profitable in year 2006 and/or 2007 and paid business taxes in those years, you may be entitled due a tax refund in 2008 to recover part or all of these monies paid in previous years. This tax recovery is called a net operating loss carryback claim…This situation applies to proprietorships, corporations, limited liability corporations, and so forth.

The first part of this discovery phase is to identify whether you are a qualified individual and/or company to recapture monies paid in from prior years…It would be a good idea to obtain from your accountant, bookkeeper, CPA, or your own in house books an updated balance sheet and profit and loss statement for 2008. Additionally, you may want to locate your 2006 and 2007 either personal and or corporate tax returns and review the past years information. If you have paid business taxes in those past years and are in loss situation for 2008, there is a good chance you will be able to recover either partial or all monies paid to the
government for 2006 and/or 2007.

.If you are a farmer and have losses in 2008, you should locate your 2003, 2004, 2005, 2006, and 2007 prior years tax returns because your eligible carryback years extend back for five years. Everybody else, for the most part, can carry back their business losses two years…

Once you have located your prior years tax returns and reviewed the business taxes paid into those years, compare this to the 2008 Profit and Loss Statement. It is good idea that your 2008 information should be current and accurate because it could have a major effect on your decision making. Assuming you are in a loss situation for 2008, you may want to plan you year end cash flow accordingly. For

this illustration, we will assume everyone is on a cash not accrual basis accounting system. Because of your tax situation and the possibility of recovering a tax refund back in early 2009, you may, if cash flow permits, pay more bills in December 2008 than the normal January 2009 payment cycle. The bottom line here is that a qualified professional should be assisting you at this stage because of the cash flow and tax effect though the period ending December 31, 2008. The professional cost vs tax recovery benefit could be a big plus to you.

This carryback claim process is important because it can generate needed working capital if the economy hasn’t recovered in your niche for 2009. Additionally, with all the available acquisition and financing deals available for commercial vehicles, construction trucks, office equipment, computer systems etc, these monies could be used as a down payment or a combination of working capital and acquisition funds.

These carryback claims can be carried back two years, except for farmers, five for them, and if needed carry forward for twenty years. It doesn’t matter what your business structure is…There are exemptions to these rules and you should consult your tax professional for advise on these carry back and carry forward rules.

For illustration the types of industries that would qualify for these carryback losses include construction, trucking, farming, restaurants, all retail shops, mail centers, franchise operations, consulting firms, manufacturers, wholesalers, service providers, This is obvious a partial list of qualified businesses. In addition, the type of entity doesn’t play a role in these carryback claims. There are a few exceptions to the rules, therefore consult a good tax adviser.

In addition to the carry back rules, there are numerous business and individual tax changes for 2008. It would be a good idea to get a head start at the end of this year to understand them and see if there are any you want to take advantage of before December 31, 2008.

In conclusion, 2008 was a trying year for many, but this recapture of tax monies shouldn’t be ignored. If done properly, you can get a head start on 2009 and have a profitable and less stressful year… … Who says Tax Planning is boring

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Business Losses, Tax Refunds for 2008, 2007, 2006