Accounting & Incorporation Information
- All Successful Business Operators Know What Their Numbers Are Telling Them
- Don’t wait until tax time to get feedback or plan what to do! – It may be too late to figure out what happened!!!
REMINDERS FROM ACCOUNTING AND INCORPORATION PARTNERS!!!
——————————– ACCOUNTING INFORMATION ——————————–
So many of us dislike the accounting and tax process so much that we put it off until the last minute. There are numerous major problems with this approach including the following – there are many more:
1.) If you end up having your taxes done all at once during the tax preparers busiest time, it can mean increased costs as compared to spreading it out throughout the year.
2.) Doing it this way also has one running the risk of mistakes or not getting them in on time, meaning the potential of fines and increased costs (especially if you haven’t done your quarterly filings).
3.) It also results in not having actual feedback in real time from which you can make decisions, potentially costing you in operational profitability.
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TAX TIPS FOR SMALL FLEETS AND INDEPENDENT CONTRACTORS
We are listing some of the most often-asked tax questions from the trucking industry. The following is input froms accounting, tax preparation and Internal Revenue Service personnel we have worked with in the past. We will be adding to this over time, so come back often.
Be sure to first ask your tax preparer about these tips and how they may apply to you.
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ITEMIZING DEDUCTIONS
Whether to itemize deductions on you tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2005, they are:
—Single $ 5,000
—Married Filing Jointly 10,000
—Head of Household 7,300
—Married Filing Separately 5,000
Some taxpayers have different standard deductions. The standard deduction is more for taxpayers age 65 or older and for those who are blind. It is generally less for those who can be claimed as a dependent on some other taxpayer’s return.
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FAILING TO FILE
The failure to file a federal tax return can be costly – whether you end up owing more or missing out on a refund.
There are several reasons taxpayers don’t file their taxes. Perhaps you didn’t know you were required to file or just kept putting it off. Whatever the reason, it’s best to file your return as soon as possible. If you need help, even with a late return, the IRS is ready to assist you.
Here are some things to consider:
— Failure to File penalty – If you owe taxes, a delay in filing may result in a “failure to file” penalty, also known as the “late filing” penalty, and interest charges. The longer you delay, the larger these charges grow.
— Losing your Refund – There is no penalty for failure to file if you are due a refund. However, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the return due date.
— EITC – Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.
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RECENTLY MARRIED OR DIVORCED TAXPAYERS
For recently married taxpayers, the tax scenario begins when the bride says “I do”. If she takes her husband’s last name, but doesn’t tell the SSA about the name change, a complication may result. If the couple files a joint tax return with her new name, the IRS computers will not be able to match the new name with the Social Security Number.
After a divorce, a woman who had taken her husband’s name and made that change known to the SSA should contact the SSA if she reassumes a previous name.
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TAX LAW CHANGES
The American Jobs Creation Act of 2004 – Public Law 108-357 is still in effect. One issue addressed eliminates the quarterly installment payment option of the Heavy Vehicle Use Tax (Form 2290). One must now make the single annual payment for these.
Also under this law, the Section 179 deduction has been extended until 2007 with some limits. This is the section that allows up to a $100,000 first-year write-off of equipment. The limit involves Big SUV’s, which will be limited to $25,000.
Regarding personal issues, the key issues include being able to potentially deduct State and local general sales taxes if one is in low or no income tax State. Additionally, the old law allowing one to name their deduction when donating vehicles, boats or airplanes to charities is gone. The new law allows only the amount received through auction, etc. by the charity to be deducted by the taxpayer.
As always, check with your tax preparer on how this new law, along with these noted issues and the others in this law not listed may affect your taxes.
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MILEAGE RATES
Mileage Rates – The Internal Revenue Service released the optional standard mileage rates to use for 2005 in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. Beginning Jan. 1, 2006, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
—44.5 cents a mile for all business miles driven, up from 40.5 cents amile in 2005 and 37.5 cents a mile in 2004. Additionally, there are higher rates for when fuel prices spiked, so check with your tax preparer;
—18 cents a mile when computing deductible medical or moving expenses, up from 15 cents a mile in 2005 and 14 cents a mile in 2004; and
—14 cents a mile when giving services to a charitable organization
—Special Hurricane Katrina relief rates are 44.5 cents per mile for reimbursement purposes and 32 cents per mile for deduction purposes.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire, or for more than four vehicles used simultaneously. Revenue Procedure 2004-64 contains additional information on these standard mileage rates.
PLEASE NOTE: This does NOT allow one to deduct personal miles operated in a truck (bobtail or unpaid deadhead) as some in the industry purport. The deductions taken in normal operations for equipment payment, depreciation, fuel, maintenance, etc. already account for this. Additionally, many truckers often ask whether doing their own maintenance is a deduction. You cannot deduct your time for working on the equipment. Even though you are not able to deduct your time, the benefit is that you are saving the cost of having someone else do the work. Also, you cannot deduct your time for waiting to load or unload.
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EQUIPMENT DEDUCTIONS
If you are selling or trading your truck, there are various potential tax implications to the transaction. With lease-purchase financing, the process is relatively simple. You deduct the entire payment on your taxes and no depreciation. To review details on this type financing, Click Here or click UP to “Industry Services” and then click on “Equipment Financing.”
If you have conventional financing where you depreciate and take interest deductions, there are a couple of things to remember. If you sell your equipment for more than the depreciated value, you must pay taxes on the difference as ordinary income. If you trade your equipment in on a newer one, your depreciation value starts from your new pieces’ value less the depreciated value of the trade.
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PER DIEM / MEAL AND INCIDENTAL EXPENSE (M&IE)
Over the last several years, Per Diem for the transportation industry has been $38 per day in the United States, but is $41 per day for tax year 2004 and 2005. The Per Diem rate for 2006 (effective October 1, 2005) is computed at $52 per day under the special rules for the transportation industry. Seventy Five percent (75%) of the Per Diem is now deductible versus 70% for 2005. It is for the most part tied to logs and number of days away from home. Reminder of percentage deductible of the per day amount by tax year: 2002-2003 is 65%; 2004-2005 is 70%; 2006-2007 is 75%; and 2008-beyond is 80%.
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LUMPER PAYMENTS
If you pay cash to lumpers, you need to keep a record with name, address and social security number of the person you have paid. If you paid that social security number $600 or more, you must issue a 1099 to them at the end of the year. If you are working for a household mover who has agencies for lumpers nationwide, then you should be able to get receipts when you pay those people.
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HEALTH INSURANCE
For 2003 and thereafter, you can deduct your entire premium from your taxes (70% for 2002 and 60% before that). You cannot deduct if you qualified for your spouses employer-funded plan, until it exceeds 7.5% of your adjusted gross income and you must show a taxable profit. Another approach is to utilize MSA’s (Medical Savings Accounts) or HSA’s (Health Saving Accounts) with high deductible policies, as the MSA’s & HSA’s can be saved tax-free.
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FILING STATUS
Your filing status on your federal tax return is a category that identifies you based on your marital and family situation.
— Single – A taxpayer is single if unmarried or separated from a spouse, either by divorce or maintenance decree, on December 31
— Married Filing Jointly – Taxpayers may file jointly if on the last day of the tax year they are: married and living together, married and living apart, but not legally separated or divorced, separated under an interlocutory divorce decree, or living in a common-law marriage, if common-law marriage is recognized in the state where they currently reside or in the state where the marriage began.
— Married Filing Separately – Any taxpayer who is married at the end of the year can elect to file separately.
— Head of Household – The taxpayer must meet all of the following tests: the taxpayer is not married at the end of the year; the taxpayer paid more that half the cost of keeping up his or her home; the home was the main home for more than half the year of the taxpayer’s child, including step-, adopted or grandchild, the child does not need to be a dependent if the child is unmarried, a foster child who is a dependent and a member of the taxpayer’s household for the entire year, another dependent relative who is the taxpayer’s dependent and related to the taxpayer as a parent or grandparent, sibling, step-sibling or half-sibling, mother-, father-, daughter-, son-, brother- or sister-in law, or uncle, aunt, nephew or niece (blood-related); the taxpayer is a U.S. citizen or resident during the entire year.
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DEPENDENT DEDUCTIONS
If you are living together and are not married, you can claim your partner as a dependent if your relationship is legal in the State you reside, you have lived together for the full year and you furnish more than half of their income (not to exceed $3,050).
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TAX FORMS TO USE
Here are some general guidelines:
— If you are preparing your own federal income tax return, use the simplest form you can, the IRS advises. The simpler the form, the less chance of an error that may cost you money or delay the processing of your return. The simplest is Form 1040EZ. Form 1040A covers several additional items not addressed by the EZ. Form 1040 should be used when itemizing deductions and reporting more complex investments and other income. Beginning in 2004, the income limit for using Forms 1040EZ and 1040A has increased to taxable income of less than $100,000, up from previous years’ limit of less than $50,000
Summarizing:
— 1040EZ – Taxable income below $100,000; Single or Married Filing Jointly; Under age 65; No dependents; Interest income of $1,500 or less
— 1040A – Taxable income below $100,000; Capital gain distributions, but no other capital gains or losses; Only tax credits for child, education, earned income, child and dependent care expenses, adoption, elderly and retirement savings contributions; Only deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees; No itemized deductions
— 1040 – Taxable income of $100,000 or more; Itemized deductions; Self-employment income; Income from sale of property.
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FORM 1099
If you receive certain types of income, you may get a Form 1099 for use with your Federal Tax return. Form 1099 is an information return provided by the payer of the income. You should receive your Form 1099-series information returns by January 31st.
If you have not received an expected Form 1099 by a few days after that, contact the payer. If you still do not receive the form by February 15th, call the IRS for assistance at 1-800-829-1040. When you call, have the following information handy:
— The employer’s name and complete address, including zip code, the employer’s identification number (if known), and telephone number.
— Your name and address, including zip code, Social Security number, and telephone number; and
— An estimate of the wages you earned, the Federal Income Tax withheld, and the dates you began and ended employment.
In some cases, you may obtain the information that would be on the Form 1099 from other sources. For example, total the gross income from your settlement sheets or from your check stubs received from your carrier. If you are able to get the accurate information needed to complete your tax return, you do not have to wait for the Form 1099 to arrive.
You will not usually attach a 1099-series form to your return, except when you receive a Form 1099-R that shows income tax withheld. You should keep a copy of all the 1099s that receive with your tax records for the year.
—————————- INCORPORATION INFORMATION ——————————
See The Latest From Laughlin USA — A company with true trucking roots.
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SEVENTY PERCENT OF TRUCKERS OVERPAY THEIR TAXES!!!
Anybody in business can take advantage of the benefits of incorporating. Whether you are the sole employee or you have 50 employees, you can take advantage of the same tax savings, asset protection and privacy benefit that much larger companies use.
Just the simple act of incorporating your business can protect your personal assets, reduce your taxes and the universe of “fringe benefits” such as retirement plans, deferred compensation, annuities, life insurance and medical reimbursement plans.
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WHAT IF YOU ARE INVOLVED IN AN ACCIDENT OR LEGAL ACTION?
As a sole proprietor, you are personally liable for all debts and lawsuits against your business. With a corporation, you establish a protective shield between your personal assets and your business (for what you don’t sign personally for).
Even if an accident isn’t your fault, you can end up with the BIG TRUCK versus little car situation where you pay anyway. You could also be tied up in legal proceedings for years trying to protect your business, your house, cars, boats, future earnings and any retirement you may have.
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SUMMARY
Tax savings can be a result of a properly structured asset protection plan.
Are you wondering what you can do to reduce your level of taxation and protect your hard-earned assets in the coming year? If you are, please contact Meghan Cole or simply e-mail a phone number and convenient time for you to be called back. Your initial 30 minute consultation is complimentary with no obligation of any sort.
Laughlin USA has the capabilities and can explain the benefits of incorporating in Nevada, in any of State in the US and even off-shore.
Laughlin USA
2533 North Carson Street
Carson City, Nevada 89706
***The Capitol of Nevada***
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Please contact:
Meghan Cole – Director of Marketing
Email: MCole@LaughlinUSA.com
Toll Free: 1-800-648-0966
Web: www.LaughlinUSA.com
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WHO IS LAUGHLIN USA?
Harley Laughlin formed Laughlin. He was also the owner of Laughlin Lines – a nationwide trucking company. He recognized the need for small fleets and independent contractors to treat their livelihood like a business in order to gain the benefits and protection needed to be successful.
Laughlin has assisted over 75,000 small businesses just like yours since 1972. Laughlin International is in business to meet the needs of the transportation industry with quality and professional service.
They understand that you should be in business for yourself – not by yourself. If you choose to incorporate through Laughlin International, they will be there to assist you with all of your incorporating needs. They will walk you through your paperwork, assist you with your questions and help you develop a solid strategy.
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