03
May 2020
0
(This is Blog Post #803)...
Financial statement manipulation is the costliest type of occupational fraud. The latest Report to the Nations published by the Association of Certified Fraud Examiners found that the median loss from financial statement fraud was $800,000, compared to median losses of $114,000 for asset misappropriation and $250,000 for corruption. With any type of fraud, the sooner it’s detected, the more likely losses can be mitigated. The Beneish model helps detect earnings manipulation. As such, this is one tool management and fraud experts might use to assess the likelihood of earnings manipulation. M score The Beneish model measures the probability that a company’s revenue has been inflated and its expenses have been understated. The model generally computes an “M score” from comparisons between consecutive financial reporting periods of various...
Do you conduct your business as a sole proprietorship or as a wholly owned limited liability company (LLC)? If so, you’re subject to both income tax and self-employment tax. There may be a way to reduce tax with an S corporation. Self-employment tax basics The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($137,700 for 2020) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases. Similarly, if you conduct your business as a partnership in which you’re a general partner, in addition...
03
May 2020
Married couples often wonder whether they should file joint or separate tax returns. When is married filing separate betrter? The answer depends on your individual tax situation. It generally depends on which filing status results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. This means that the IRS can come after either of you to collect the full amount. Although there are provisions in the law that offer relief, they have limitations. Therefore, even if a joint return results in less tax, you may want...
Perhaps you’re an investor in mutual funds or you’re interested in putting some money into them. You’re not alone. The Investment Company Institute estimates that 56.2 million households owned mutual funds in mid-2017. But despite their popularity, the tax rules involved in selling mutual fund shares can be complex. Selling mutual fund shares: tax basics If you sell appreciated mutual fund shares that you’ve owned for more than one year, the resulting profit will be a long-term capital gain. As such, the maximum federal income tax rate will be 20%, and you may also owe the 3.8% net investment income tax. When a mutual fund investor sells shares, gain or loss is measured by the difference between the amount realized from the sale and the investor’s basis in...
When you make the decision of going into business for yourself, you'll find that many people who launch small businesses start out as sole proprietors. Here are nine tax rules and considerations involved in operating as that entity. 1. You may qualify for the pass-through deduction. To the extent your business generates qualified business income, you are eligible to claim the 20% pass-through deduction, subject to limitations. The deduction is taken “below the line,” meaning it reduces taxable income, rather than being taken “above the line” against your gross income. However, you can take the deduction even if you don’t itemize deductions and instead claim the standard deduction. 2. Report income and expenses on Schedule C of Form 1040. The net income will be taxable to...
When Dan received a large shipment of highlighter markers, he was confused. He didn’t remember ordering them — and he was the company’s sole office supplies buyer. Yet when he received an invoice for the markers a week later, he approved it for payment. After all, employees were already using the highlighters. Dan fell for a typical office supply scam — and his company paid for the mistake. Here’s how to protect your business from this type of fraud. Common features Office supply scams typically begin as telemarketing fraud, with someone calling your business to obtain your street address and the name of an employee. Callers may ask for the person in charge, claim to need information to complete an order or pretend to verify an office machine’s...
28
Apr 2020
The Small Business Administration (SBA), in consultation with the Department of the Treasury, has issued guidance to assist businesses in calculating their payroll costs for purposes of determining the amount of a Paycheck Protection Program (PPP) loan businesses can apply for. Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rules. The U.S. government will not challenge lender PPP actions that conform to this guidance and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the time. Questions answered in the guidance related to Schedule C taxpayers are as follows: Self-Employed with No Employees Question: I am self-employed and have no employees, how do I calculate my maximum...
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