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Thursday, June 16, 2016

Finance 10 Qualified Joint Ventures


Business Co-Owned by a Married Couple

A business co-owned by a married couple who file a joint return may elect to be taxed as a qualified joint venture instead of a partnership for federal income tax purposes.

A qualified joint venture is a joint venture involving the conduct of a trade or business if:

·                     the only members of the joint venture are a married couple,

·                     both spouses materially participate in the trade or business, and

·                     both spouses elect to have the provision apply.

All items of income, gain, loss, deduction, and credit from a qualified joint venture are divided between the spouses in accordance with their respective interests in the venture.

Each spouse takes into account his or her respective share of these items as a sole proprietor.

Each spouse should account for his or her respective share on a separate Schedule C or Schedule F Form 1040.

Each spouse may also need to file a separate Schedule SE for self-employment tax.  

Each spouse elects to have the provision apply by filing a separate Schedule C or F, and a separate Schedule SE.

Each spouse may also need to pay quarterly estimated federal income tax payments for self-employment tax using Form 1040-ES.


This article was written by  Donald M. Scherzi, CPA, CFP, LLC 

Mike Lupo, SCORE Counselor


 

 

Sunday, June 12, 2016

Another Bait and Switch?


Over a weekend my wife and I decided we would take advantage of a cruise which had been heavily advertised in the press and TV. We called the advertised number and an operator answered. We outlined our request and were transferred to a reservation agent, where after being placed on hold for over 15 minutes we were quoted a rate for an extended stay at a place we had enjoyed in the past. We confirmed the price with the agent multiple times while on the phone and he did so with consistency. Then he switched us to another agent to book the business, and in doing so we were again placed on a long hold. We did not understand why this switch was even made.

When the second agent came on the phone we had to repeat our requested dates and details (including names, addresses, date of birth and contact phone numbers) as well as the price quoted by the first agent (after the operator). This agent put us on hold two times presumably while inputting the information in a reservation system. She finally came back and said: “we are sorry but the rate quoted is not available for the trip you asked about.” By this time I had been on the phone for almost 25 minutes and was angry even before getting this news. After reciting the facts as stated above, I asked to speak to a manager, and was placed on hold once again.

A manager came on the phone and after a long discussion, placed me on hold again! He finally came back with the statement that the price quoted could not be honored and the new price was 50% more than that quoted. After a few choice words from me, including the phrase: “bait and switch”, he said he would try again and check with the “chief manager”. When he said he would put me on hold while he did this, I screamed NO MORE HOLDS! It had been almost 45 minutes. I gave him a phone number to call me back. He agreed.

He called back about 30 minutes later and said he could not honor the quoted price.

I told him is company was obviously in trouble and hung up!

I hate to see a company in trouble. But this is one that needs a new management

approach.

What would you have done?

How would you have handled a potential customer in a similar situation?

 

Steve Koenig, SCORE Counselor


 

 

Sunday, June 5, 2016

Restaurant Mayhem


I recently had the opportunity to go to a number of restaurants with various groups of people and experienced an interesting difference. I do not mean in the menu options or even the food quality or quantity, but in the organization of the service. Let me explain. In each case there were from six to eight people at the table. In some cases a person led the group to the table, helped people settle in, and offered something to drink.  Call this the Type A situation. In Type B situations the group wandered to a table, sat down and waited for a server.

In Type A, the person that took the drink orders returned, served the drinks and took the meal orders. For Type B, when a drink order was taken a different person came to serve the drinks and had to figure out, either with the help of notes left behind or by asking the patrons which drink to serve to each person. Another person came to take the meal orders.

The Type A group server had assistance removing the used tableware, but was the person that took additional drink orders as well as desert orders and served them as well, while the Type B group had different people for each of these activities. Anyone that walked by the table might (or might not) serve a course or remove used tableware. In each case a computer screen entry was made to issue orders to the bar and/or kitchen as well as keep track for billing and maybe inventory purposes.

When items arrived from the bar or kitchen, for Type A servers, they generally knew which items to serve to each patron. In the case of Type B, a sort of “Three Stooges event” took place to determine “who to serve what” among the available staff. This was a hard act to keep track of if there happen to be a few staff people available at a given time.

If most restaurants operate on a theory that “time is money”. Which of these examples made the best use of time and therefore made more money? And which one had the best customer satisfaction?

 
Steve Koenig, SCORE Counselor
Visit us at: www.scoresouthflorida.net

 

Wednesday, June 1, 2016

Finance 9 IRS Penalties & Interest Charges


 

The IRS has at its disposal various penalties for taxpayers who fail to comply with the tax laws. Below are some of the more common IRS penalties for taxpayers to be aware of.

 

Failure to File Tax Returns: A failure to file any tax return within the time prescribed by the tax law may result in a penalty. The failure-to-file penalty will not be imposed when the taxpayer can show that the failure to file was due to reasonable cause and not to willful neglect.

 

Failure to Pay Tax: A penalty is imposed for failure to pay, when due, those taxes (other than estimated taxes) shown by a taxpayer on a return, unless the failure is due to reasonable cause. A penalty is also imposed on additional taxes determined to be due on audit for which the IRS has made a demand for payment.

 

NOTE: An automatic extension of time to file a tax return is not an extension of time to pay tax due under the return.

 

Frivolous Return Penalty: There is a penalty for filing a frivolous tax return. A frivolous tax return is one that omits necessary information to determine the taxpayer's tax liability, shows a substantially incorrect tax, is based upon a frivolous position, or is based upon the taxpayer's desire to impede the collection of tax.

 

Information Reporting Penalties: Three categories of penalties apply to Failures to File required Information Returns and Payee Statements-

 

  • Failure to file an information return or to include correct information on an information return.
  • Failure to file a payee statement or to include correct information on a payee statement
  • Failure to comply with other information reporting requirements.
     
    Common examples are failing to file and furnish W-2's & W-3'S, 1099 Miscellaneous Income & 1096 Forms, Schedule K-1, missing Social Security Numbers, etc.
     
    Underpayment of Tax (Accuracy Related Penalties): Accuracy related penalties are imposed on the portion of any underpayment of tax that is due to:
     

  • Negligence or Disregard of Tax Rules and Regulations
  • Substantial Understatement of Income Tax
  • Underpayment of Tax Due to Undisclosed Foreign Financial Assets
  • Fraud.
     
    Abatement of Penalties:
        Requesting an abatement of IRS penalties requires that the taxpayer show “reasonable cause”.  What constitutes reasonable cause generally depends on the facts and circumstances. Common examples may include a death, disability, major illness, natural disaster, destroyed or stolen tax records,
    and other issues beyond the taxpayer's control. Taxpayers generally must request an abatement of penalties in a written letter to the IRS detailing the facts and circumstances of the situation.
     
    UNDERPAYMENTS OF TAX-IRS INTEREST
     
    Interest on Underpayment of Tax: Interest on underpayments of tax, including underpayments of estimated tax, is imposed on underpayment of tax. Interest accrues from the date the payment was due, determined without regard to any extensions of time, until it is received by the IRS. Interest is compounded daily.
     
    Abatement Of Interest:
        The IRS has the authority to abate interest in cases where the additional interest was caused by IRS errors or delays. Taxpayers requesting an abatement of interest must file a separate Form 843 for each tax period for each type of tax involved.
     
    BOTTOM LINE:
     
        IRS Penalties and interest charges can become substantial in a very short period of time. The best strategy to avoid and or minimize penalties and interest charges is to fully comply with the tax laws and regulations in a timely manner.


    This article was written by  Donald M. Scherzi, CPA, CFP, LLC
     
    Mike Lupo, SCORE Counselor