Know When You Can, and Can’t, Write Off the Fun Stuff

Recruiting and gaining clients gets your business the work it needs to stay afloat. So, when pitching your firm’s services to those prospective clients over lunch, make sure to follow all the rules when deducting expenses for meals and travel.

To be able to wine and dine – and deduct – the main purpose of the event must be business. A requirement is that a client or customer be present, and you’ll likely be able to deduct half of the meal’s price tag as a business entertainment expense. Also, take notes after, as you’ll have to document the business discussed during the meal.

If you’re traveling, then half of the meal costs related to traveling and business are deductible (including tip and tax). But, if your business trip isn’t an overnighter, then your meals don’t count.

You don’t need to necessarily travel cheap to deduct transportation costs for traveling, but don’t overdo it. Booking that cruise through the Caribbean on your way to Europe probably won’t be considered appropriate. First class can pass, but know the IRS may ask you about it.

Adding some personal time to your business trip is doable, but don’t think you can deduct non-business expenses. It’s convenient to tack on a couple days to that business trip or bring people like family. But, you’ll only be able to deduct the costs for getting to your location and for going back home. The original purpose of the trip must be business related, too.

Running your own business or firm is exciting, along with the traveling and eating that goes with it. But no amount of meals or traveling can get rid of that back tax debt owed to the IRS.

If you owe back tax debt to the IRS, hiring a tax attorney or seasoned tax professional is your best way to increase your chances of obtaining an outcome that works in your favor. And after everything is worked out, you may be able to go out for a nice meal with the money you save.

 

Tax Attorneys Help Famed Electronics Company Gut Tax Bill

Apple’s products are everywhere. The iPhone is one of the most popular cell phones on the market, and the iPad is increasingly becoming a necessity for white collar professionals.

But while Apple products are somewhat omnipresent, its tax bill isn’t. Recent reports indicate that through the use of international tax shelters and shell companies, the Cupertino-based electronics giant was able to decrease its tax bill by $2.4 billion.

Big companies using laws from foreign countries or other states to decrease its tax bill is nothing new. When people joke about companies hoarding cash in a Cayman Islands bank account, it’s usually about avoiding taxes.

Apple didn’t have to go to the Cayman Islands. Instead, it went to Reno, Nevada, known as the Biggest Little City in the World. Apple reportedly opened an office there with a few employees to collect and invest the company’s profits. That allowed it to avoid California’s 8.84 percent corporate tax rate and enjoy Nevada’s zero percent rate.

With an army of tax attorneys deployed to help it lower its tax bill, Apple joins other big corporations who try to lower or even ditch its tax bill altogether. In 2010, General Electric was able to pay no taxes at all with the help of its tax attorneys.

Apple’s methods are legal, but individuals trying to lower their tax bills by using certain deductions and other methods may be in for a big surprise.

The IRS is now auditing 1 out of every 8 or 9 US millionaires. And with 3.7 million tax levies waged by the IRS in 2011 alone, individuals aren’t likely to get as lucky as Apple.

You may not be an international corporation, but that doesn’t mean you can’t obtain a favorable outcome if you owe back taxes to the IRS. With the help of a tax attorney or tax professional, you can reach a deal with the IRS that Steve Jobs would be proud of.

Major Tax Implications to Arise

With 800 million users across the world, Facebook is perhaps one of the most successful websites the Internet has ever seen.

And when the Menlo Park-based company goes public, the site borne in a dorm room is set to have major tax implications after its initial public offering (IPO) is released.

For starters, founder Mark Zuckerberg’s taxes are set to rise to $1.5 billion in May after the company’s shares begin their public trading. Zuckerberg was granted stock options in 2005 as part of his compensation, and once they’re exercised after the IPO he’ll get to buy them for the 2005 price. The difference between that and the post-IPO price is considered taxable income and is likely to be worth billions.

Sacramento politicians have also gotten into the mix. With a ballpark figure of $500 million in state tax revenue from Facebook’s IPO, Republicans in the legislature used the expected windfall as an excuse to defriend the governor’s proposal to raise some taxes.

It’s no surprise Facebook’s IPO has become political football. The popular website sees major activity, with about half its users logging on every day. That’s a lot of potential eyeballs viewing its internet ads, which generate a lot of income and a lot of taxes to pay.

After Facebooks shares start selling on the stock market, more people in Silicon Valley will rise to the top tax bracket. But you don’t have to be a Silicon Valley millionaire to owe back tax debt to the IRS.

The IRS’ collection action is the extreme opposite of a friend request. If you owe back tax debt, hiring a tax attorney can increase your chances of avoiding a wage garnishment or tax lien and obtaining a tax settlement that works in your favor.

House Rejects Rare Senate Compromise

Benjamin Franklin once said that nothing was certain except for death and taxes. And while the politicians in Washington bicker and feud, it seems more taxes are certain starting Jan. 1.

After a rare compromise had been reached in the Senate, all eyes turned on the House of Representatives to pass a two-month extension of the payroll tax break on Tuesday. But it was voted down instead, giving workers a likely tax hike for a New Year’s gift.

The center of the storm is the payroll tax break originally part of the stimulus passed in early 2009. Policymakers sought a payroll instead of an income tax break because the slightly larger paychecks were likely to be spent into the economy. Now, Republicans and Democrats are squabbling whether to keep the rate at 4.2% (originally at 6.2%) for the first $110,000 in pay.

While the in-fighting may have been expected, what was unexpected was how anti-tax Republicans took the lead in shelving the tax break. The Senate passed a temporary payroll tax break with an unemployment insurance extension aimed at getting through the New Year. The House, however, effectively shot it down, stating that a year-long plan was the only way to go.

With Senators already back to their home states during the Senate’s holiday recess, House leaders want them to come back to DC again, restarting the process to negotiate a long-term package. Whether the Senate’s or House’s leadership blinks first remains to be seen. If both sides don’t, payroll taxes on families are expected to increase by more than $1,000 over 2012.

While the politicians who write the tax laws bicker, make sure to hire someone who knows the laws if you owe back tax debt to the IRS. Hiring a tax attorney puts you in the best position to negotiate and settle with the IRS.

Celebrate the Holidays on Uncle Sam’s Dime

It’s that time of the year, when enthusiastic office workers decorate the office with colorful post-it notes, make-shift holiday trees, and ornaments on cubicles. But while decorations can add a treat to your workplace’s holiday spirit, nothing is appreciated more than capping it off with a holiday party for your employees.

So why not throw a holiday party and write off the expenses? It’s the IRS’ way of having a little holiday spirit. Just abide by some rules and your party-related expenses can be deducted at tax time:

• Keep it business-related: Use it to promote a product or make a sales pitch. And, use it to conduct business at some time before, during or after the party. Keep the atmosphere and the invitation professional to keep the IRS at bay.
• Don’t go overboard: Paying the big bucks to have Tony Bennett visit your office and sing “White Christmas” won’t be looked at too kindly by the IRS. Spending lavishly won’t help if your business gets audited.
• Keep records: Keep your receipts and a list of who came and whether they’re a customer or an employee. Also, document the event by taking pictures. If the IRS decides to be a Grinch and audit your business, having the proof will help you defend the expenses.
• Do the math: Expenses for employees are 100 percent deductible, while those for customers are deductible at 50 percent. Apportion the expenses by the ratio of employees to customers who attended.

Holiday parties can be an enjoyable event for a business’s employees, and Uncle Sam is willing to pick up part of the tab.

If you have back tax debt, Uncle Sam may also pick up part of the tab – if you hire a tax attorney. If not, you could end up with a lump of coal like a wage garnishment or bank levy in your Christmas stocking.