Taxpayer indentification numbers for aliens

There are several types of taxpayer identifying numbers: social security numbers, Internal Revenue Service (IRS) individual taxpayer identification numbers, IRS adoption taxpayer identification numbers, and employer identification numbers.

Social security numbers (SSNs) are used to identify most individuals.  Sole proprietors use employer identification numbers (EINs). Aliens who aren't eligible for SSNs must use IRS individual taxpayer identification numbers (ITINs).

Source IRS.

Note:  Aliens and ilegal Aliens are not one in the same. Ilegal aliens are not authorized to work in the USA.  Ilegal Aliens work status are outside of this blog, and you must consult an Imigration Attorney.  



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Setting a price for your product.

The case for calculating a Selling price for your products. 
Let say you want to open a Specialty store like the one you saw in the town you grow-up as a child. The store still selling the same specialty products and they have been in business for over 25 years in the same town. You liked the store so much that you think you can do the same in your neighborhood and you are sure you can make some money selling the same products.  Well, after all, they are the same products and people have been buying these products for decades.  You open your new store and repeat everything you saw, but after the three years you find out that you sold as many products as the other store but you are loosing money and you can't keep the store open.  What happens?  Why my store sell as much as the other one and I can't keep my open any longer?

Many reasons, but maybe is that your cost structure does not allow you to sell at the same price the other store is selling their products.  And, I am not even considereing discounts, tax strategies, salaries, cost of leaving, and other considerations- 'cause they are multiple factors. 

It all boils down to good recodkeeping, tax planning, cost structures, volume of sales, break-even point analysis, taxes, product mix, etc.  The failure to do these calculations and adapt to changes in the environment could depend your sucess as an enterpreneur.  

So, what you should do if you want to stay in business?  You either have to hire an accountant (CPA) to cruntch all the numbers for you and keep him/her on the payroll to monitor your progress and help you adapt to the changes on the environment, or inmerse yourself in the mechanics of the process and forget about managing your day to day operations.  Setting a price for your product based on your cost structure is paramount to your sucess.

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First Time Homebuyer Credit

If you purchased a home in 2010, you may be eligible to claim the First-Time Homebuyer Credit, whether you are a first-time homebuyer or a long-time resident purchasing a new home.

Criteria: Must be at least 18 years old on the date of purchase (married couple-only one spouse), and you must not be a dependent on someone else tax return.

Some of the provisions and requirements:

1. You must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010- you must have closed on the home on or before September 30, 2010.

2. You and your spouse – if you are married – must not have jointly or separately owned another principal residence during the 3 years prior to the date of purchase.

3. Under the long-time resident homebuyer provision: You and your spouse – if you are married – must have lived in the same principal residence for any consecutive 5 year period during the 8 year period that ended on the date the new home is purchased.

4. The maximum credit for a first-time homebuyer is $8,000, half that amount for married individuals filing separately. The maximum credit for a long-time resident homebuyer is $6,500, half for married individuals filing separately.

5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit.

6. Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.

For more information about these rules including details about documentation and other eligibility requirements for the First-Time Homebuyer Tax Credit, consult your accountant or the IRS.

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Jan 31, 2011 due date...

Tax reports due today:

• Form 720 - 4th Qtr ending 12/31/2010
• Form 730- December 2010
• Forms 1098, 1099, W-2, and W-2G
• Form 2290, 940, 941, 943, 944/945

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IRS Begin processing tax return date

Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.  Source IRS

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Tipical E-file Errors

Taxpayers can be missing thousand of dollars worth of tax credits if they do not know how to do the calculations correctly and/or do not understand the tax law.  For example:

Form 1040-EZ:  Work pay (could be worth $400-$800), Schedule M and govt retiree credit calculations.

Form 1040A:   Same as above, plus the education credits (Could be worth $1,000+) and the computation of education interest deductions (could be worth $1,000+).

Form 1040:  Work pay ($400-$800) Credit, Schedule M and govt retiree credit calculations.  Health savings account deductions, student loan interest deductions (could be worth $1,000+).

Source IRS (January to December 2010 data)

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Tax Tips for Self-employed Individuals

If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

Here are six things the IRS wants you to know about self-employment:

 

• Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

• If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE.
•  
• If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.

• You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.  

• To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
• Source IRS 

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FY 2011 US Budget: Part 1

The tax gap, or diference between the amount owed under tax law and the amount actually paid on time, is estimated to be $345 billion.  Addressing this gap through improved voluntary compliance is a top priority of the treasury department.

The US budget provides $250 million in new enforcement initiatives to improve compliance.  These initiatives are expected to produce $1.9 Billion in additional annual enforcement revenues once the new hires reach full potential in 2013. 

What is this mean?  It means more audits and compliance issues for taxpayers.

Source: US Treasury



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Payroll Deposits

If you are required to make by-weekly payroll deposits to the IRS, you have until this Wednesday, January 26, 2011.  (Apply for payroll payments pay between January 19-21) And If you have not done your tax return yet, you can still notify me to set an appointment.   

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Work Pay Tax Credit

Are you eligible for the Making Work Pay Tax Credit in 2010?  it would depend on several factors like: What s your filing status?  How much you earned in 2010? Are you a dependent of someone else? These are some of the relevant questions .

  

Practical information to know about this tax credit:

• The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
• Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
• Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
• Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.

You cannot take the credit if:

1. your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return,
2. you do not have a valid social security number or
3. you are a nonresident alien.

Source IRS


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