If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.

1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.

3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

5. Employee Health Care.  The Small Business Health Care Tax Credithelps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details seePublication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review theQuestions and Answers on the Net Investment Income Tax on IRS.gov.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

We have a new fax number (864) 752-0873.

Woodruff Accounting has moved to a new office!! Don’t worry we haven’t moved far! We have just relocated upstairs!!

New York, NY – March 13, 2014 – Yodle, a leader in local marketing automation, today announced two new products – reviews management and photo syndication. The products help small businesses gain additional credibility online, improve organic ranking, and find and keep more customers. Yodle’s reviews management solution makes it simple for small businesses to generate, promote, and respond to online reviews from their customers, while its photo syndication offering enables clients to easily upload pictures of their business that Yodle then rapidly distributes across multiple online channels.

“We secured more than 20 customer reviews in just our first month of working with Yodle and it was easy to make it happen. These reviews give our business a lot more credibility,” said Corey Phillips, owner of P & M Services, a tree care company in Englewood, Florida, and a Yodle client since January 2014. “Being able to share photos has also made a huge difference because it increases awareness of the type of work that we do and enables us to better showcase our business.”

Court Cunningham, CEO at Yodle, stated: “Research shows that having reviews and sharing new photos significantly impacts a small business’ ability to acquire and retain customers. We are offering powerful online tools to small businesses that provide them with an effective and efficient way to market themselves.”

Despite the difference that reviews make, Yodle found in its recent “Small Business and Online Reviews Survey” that 55% of small businesses don’t get any reviews, just 13% ask their customers for reviews, and less than half that receive reviews and have a website are posting those reviews to their website. Through its reviews management offering, Yodle makes it easy for small businesses to collect reviews from their customers through review forms, hosts all customers’ reviews at RateABiz.com for free, and automatically posts positive reviews to customers’ websites as well as their Facebook pages. Yodle also provides specific tools to small businesses for responding to negative reviews.

Yodle’s photo syndication feature provides similar ease-of-use. Yodle clients simply need to upload photos of their business from either their desktop or mobile device. Yodle then uses automated technology to distribute and syndicate the photos within 24 hours across the small business’ website, social media pages and 45 directories.

“Early results and adoption rates for these new offerings are very positive,” added Mr. Cunningham. “These new products are just another sign of our ongoing commitment to providing a full platform of marketing essentials to our small business clients.”

For more information, see this video testimonial from P & M Services about their experience using Yodle’s reviews management and photos syndication offerings:http://www.yodle.com/success-stories/video-testimonials/video-testimonial-pm-services/.

About Yodle
Yodle empowers local businesses to find and keep their customers simply and profitably. Yodle offers all the online marketing essentials that local businesses need through one easy-to-use, affordable and automated platform, fully supported by a live customer service team. Today, Yodle simplifies success for 40,000+ local businesses with a comprehensive desktop and mobile web presence, social media automation, reviews management, Search Engine Optimization (SEO), listings distribution to 50+ directories, photos syndication, plus proprietary and optimized paid search technology – transparently reporting results in a performance dashboard. Also offered by Yodle is Lighthouse 360™, an award winning automated patient communications system that improves medical office efficiencies and reduces missed appointments. Additionally, Yodle for Brand Networks™ (YBN™), a division of Yodle, delivers Centermark™, a distributed marketing automation platform that helps network businesses unify, scale, and optimize their local and national marketing strategies. YBN’s 130+ current clients include Merry Maids, Miracle-Ear, and TWO MEN AND A TRUCK®.

Yodle is ranked #9 on the 2014 Forbes list of America’s most promising companies and has won multiple awards for its business growth, job creation, technology innovation, and workplace and culture. For more information, visit www.yodle.com, www.lh360.com,www.yodlebrandnetworks.com or www.yodlecareers.com.

The Internal Revenue Service has released the spring 2014 edition of its quarterly Statistics of Income Bulletin, with statistics up through 2011 indicating there are still people who earn over $200,000 a year who pay no federal income taxes, although the number of them has been decreasing.

“For 2011, there were 4.8 million individual income tax returns with an expanded income of $200,000 or more, accounting for 3.3 percent of all returns for the year. Of these, 15,000 returns had no worldwide income tax liability,” according to one report in the bulletin by Justin Bryan. “This was a 6.7-percent decline in the number of returns with no worldwide income tax liability from 2010, and the second decrease in a row since reaching an all-time high of 19,551 returns in 2009.”

However, the advocacy group Citizens for Tax Justice pointed out that the numbers are still high when looked at over a longer period.

“From the report’s first publication in 1977 through 2000, the number of high-income Americans paying no tax never exceeded 3,000,” said CTJ. “But the past four years have seen an explosion of high-end tax avoidance: in each of these years, the number of zero-tax Americans found in this report has exceeded 30,000. In 2011 (the latest year for which data are available), almost 33,000 people with incomes over $200,000 paid no federal income tax. For this group—less than one percent of all Americans with incomes over $200,000 in 2011—tax-exempt bond interest and itemized deductions are among the main tax breaks that make this tax-avoiding feat possible.”

In addition to the report on high-income tax returns through 2011, the spring 2014 Statistics of Income Bulletin also contains articles on individual income tax rates and shares, individual noncash contributions andindividual foreign-earned income and foreign tax credits for 2011.

The IRS noted that of the 145 million individual tax returns filed in tax year 2011, 91.7 million were classified as taxable returns or returns with a total income tax greater than $0. Adjusted gross income (AGI) for taxable returns was nearly $7.7 trillion, up 6 percent from the prior year. Total income tax was more than $1 trillion. To be included in the top 1 percent of returns for 2011 required an AGI of $388,905.

For tax year 2011, there were more than 22 million individual taxpayers who reported a total of $43.6 billion in deductions for noncash charitable contributions. About a third (7.5 million) of these taxpayers reported nearly $39 billion in deductions for charitable contributions of $500 or more.

Nearly 450,000 U.S. taxpayers reported $54 billion of foreign-earned income for tax year 2011, representing growth in real terms of over 32 percent since the last study in 2006.

BY MICHAEL COHN, EDITOR-IN-CHIEF, ACCOUNTINGTODAY.COM

It’s nearly 9,000 miles from New York City to Wellington, New Zealand, but that didn’t stop AWEB Managing Editor Richard Koreto from direct dialing the offices of Xero from his Android phone. And as he was connecting, he didn’t even stop to think why or how a global software company was thriving in a country with fewer than 5 million people: Geography is rapidly becoming irrelevant, whether it’s conducting an interview or growing a company. And that’s both the point of Xero’s model and the reason for its success.

Someday, we will tell our children about how software was “downloaded,” or even transferred to laptops, from something called a “CD.” This was before all software, and all the data the programs managed, were stored offsite, in the “cloud.” And in that future, we’ll be able to list companies like Xero, which provides accounting solutions, as one of the entities that paved the way.

Xero, based in Wellington, New Zealand, is not the only company in the cloud, or even the first. What helps set it apart is its origins as a cloud-based software company, rather than as one that retrofitted a traditional model to the cloud later on. Self-described “serial entrepreneur” Rod Drury founded a company in 2006 to meet the needs of small businesses. (He called it “Xero,” he said, because it’s a short memorable name and the domain was available.) AccountingWEB caught up with Drury in his Wellington offices in mid-May to hear more about his company, how the accounting world is changing, and what he sees for the future.

“We love the small business economy,” said Drury, to start. “The small businesses make a big difference,” and yet he found them poorly served by other software companies. There was a niche for a company that could get rid of much of what Drury called the “drudgery” of accounting. Indeed, Drury emphasized that the process was more important than the product—it was all about connections. “We want to exploit the cloud’s ability to connect small businesses to each other and to big businesses.”

The cloud is making all this possible, he said. With companies like Xero, the very nature of financial relationship between different companies changes. It becomes easier to access the cloud-based data to discuss business performance among companies and customers and suppliers. “Suddenly, the small business owner sees a new ability to work with its customers. Not only is the cost of compliance reduced, but we see the accounting department move from mere compliance to advice,” said Drury. “It’s like when Henry Ford automated car manufacturing.” The accountants are now free for new tasks.

Drury gave some specific examples. A small business, with its financials now in the cloud, can create and continually connect with an electronic supply chain. Sales staff, on the road, can easily check numbers from their tables. Processes like invoices and reconciliation are now automatic. Xero’s services can work in coordination with other companies’ applications, so tax filing, management reports and e-commerce all work together. In fact, Drury sees a massive investment in business software in the coming year, and this can only help companies. “Once your accounting is under control, everything comes together,” said Drury.

Overall, the processes will work much more smoothly, continued Drury. Everyone will be able to gain access to data they need much more simply. “Everyone is developing a cloud strategy. We’re seeing an opening of the accounting industry so data can flow.”

A brief look at some of Xero’s recent achievements shows that other companies are getting it too, including some big ones. In March, Xero announced a strategic alliance in the United Kingdom with KPMG, to provide select online accounting and tax services to small and medium-sized enterprises using the cloud. Meanwhile, in the United States, Xero formed a strategic alliance with H&R Block, as part of Block’s Small Business Program suite of services. Block will promote Xero as the sole recommended small business online accounting solution.

Major publications are taking note: Forbes put Xero on the #1 spot of the world’s “Most Innovative Growth Companies,” noting it had a 5-year average sales growth of 210.2 percent.

“We see it as a real endorsement that these big names want to partner with us. It’s a big deal that they’re working with the kinds companies that didn’t even exist until recently. But that’s the way it goes—the big companies working with the entrepreneurial companies.” And will others be following suit? Absolutely. “We see the Big Four actively moving into the cloud space. And they’re doing so because they’re getting pressure from the smaller firms.”

Throughout the interview, Drury emphasized that accounting was just the beginning. “It’s about more than that—it’s about ending the need for desktop software entirely.” Just think if everything you have in Excel and Word is all online—all the information accessible. This could happen in the next two to five years, said Drury. As a result, banks will have all a company’s information at its fingertips, when applying for a line of credit, for example. The accountants will become even more important, working with the banks, as the data transfer process becomes streamlined.

It will be a new world for companies and their customers, suppliers, banks, and insurers. And most of all, “it will be a new world for accountants,” said Drury.

by Richard Koreto on Jun 4 2014

The first five 2014 tax brackets and their rates should look very familiar. The income levels have been bumped up a little for inflation, as they are every year. The 25% rate for single filers, for example, applied to taxable income between $36,251 and $87,850 in 2013. In 2014, the 25% rate for singles applies to income between $36,901 and $89,350.

That’s not going to make a huge difference in your final tax bill. If nothing else material changes in your tax situation this year, and you generally don’t have too little or too much withheld from your pay, you probably don’t have much to worry about.

You may need to estimate your tax liability more carefully. For example, if you pay estimated taxes, or you’re tired of having way too much withheld from your pay all year, it’s time to pay attention.

If you’re in the 39.6% tax bracket, it’s especially important to plan ahead so you don’t have a rude shock in April of next year.

Follow these steps to take better control of your taxes in 2014:

1. Estimate your 2014 taxable income.
This is your income after taking into account before-tax payroll deductions, personal exemptions, the standard deduction or itemized deductions, and a host of other additions to and subtractions from your income. Start by looking at your 2013 return, and make adjustments as necessary to estimate your 2014 taxable income as closely as possible.

2. Find your tax bracket.
Using your taxable income and your filing status, find your marginal tax rate on this chart:

Tax Brackets, 2014 tax year.

Your marginal tax rate is the rate you pay on each additional dollar within this tax bracket. Your marginal rate does not affect the rate you pay on income in the other brackets.

For example, you pay 10% federal income tax on your first $18,150 of taxable income if you are married filing jointly, no matter how much money you make. You pay 15% tax on the amount of taxable income you have between $18,151 and $73,800.

If your income is $406,751 or more and you are a single filer, or it’s $457,601 or more and you file jointly or are qualifying widow(er), welcome to the 39.6% tax bracket. You’ll pay almost 5% more on your highest level of income in 2014 than you would have before this rate went into effect.

4. Use your tax rate to make better money decisions.
For example, say you’re thinking about making a retirement plan contribution. You might be able to afford to put away more in your plan if you figure out how much state and federal income tax you save contributing to a non-Roth plan.

On the other hand, perhaps you’re deciding whether to take money out of a retirement account now, or five years from now when you are retired. (Assume you are over age 59 ½ and won’t pay a penalty.) Furthermore, say you’re in a 35% bracket now, and you expect to be in a 25% bracket after retirement. By withdrawing the money from a retirement account now, you’re paying 10% more than you would if you withdrew it later.

Be aware that tax rates don’t tell the whole story. When your income rises, you can lose tax benefits, such as credits, that phase out at higher income levels.

Watch out for tax items that change your marginal tax rate. If you’re single with a taxable income of $36,000, for example, your marginal tax rate is 15%. If your taxable income goes up by $10,000, however, you’re now in the 25% tax bracket. The tax you pay on your first $36,900 of taxable income doesn’t change, but most of the additional $10,000 is in the higher tax bracket.

Don’t forget to estimate your state taxes, and self-employment taxes if they apply.

Tax situations can be complicated, and taxable and nontaxable income can affect your tax liability in more ways than you might expect. If you use tax software, you can use their planning features to do the calculations for you with your best estimates for 2014. If you take your taxes to an accountant, consider asking the accountant to help you estimate your taxes.

5. Continue to monitor your tax situation all year.
Revisit your tax plan at least once a quarter, and before you make any major financial decision. That’s the best way to make sure you’re never surprised by the results when you file your return.

Many students take a job in the summer after school lets out. If it’s your first job it gives you a chance to learn about the working world. That includes taxes we pay to support the place where we live, our state and our nation. Here are eight things that students who take a summer job should know about taxes:

1. Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.

2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. The IRS Withholding Calculatortool on IRS.gov can help you fill out the form.

3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.

4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.

5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.

6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.

7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.

8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded. You can prepare and e-file your tax return for free usingIRS Free File. It’s available exclusively on IRS.gov.

The Eleventh Circuit Court of Appeals upheld a deficiency notice of more than $5 million against a taxpayer who reported adjusted gross income of $22,921 and taxable income of $13,221 on his late-filed 2006 return (Hoang, No. 13-14398 (11th Cir. 5/2/14), aff’g T.C. Memo. 2013-127).

Diep Hoang’s 2006 tax return was due Oct. 15, 2007, but he did not file it until Sept. 2, 2009, and the IRS was suspicious of the low income reported on the return because it had received Forms 1099 from various brokerage firms indicating he received $14,855,797 from securities sales in 2006. In response, the IRS issued a notice of deficiency for 2006 for $5,188,587 in income tax, an addition to tax of $1,297,534 for failure to timely file, and an understatement penalty of $1,037,717. The IRS treated the total amount reported on the 1099s from the sale of the securities as capital gain because it did not have any information about the basis of the stock that was sold.

In response to the IRS’s notice of deficiency, Hoang filed a petition with the Tax Court claiming that the notice was “totally invalid and illegal” because the IRS was not authorized under the Code to issue the notice, the tax increase was fabricated, the IRS did not meet its burden of proving the legality of the notice, and the IRS was issuing the notice to retaliate for Hoang’s earlier claim that it had committed perjury in a prior controversy with Hoang. Hoang also tried to file a counterclaim arguing that the notice was a criminal act disguised as tax collection and asking for $75 million in damages from the IRS.

While preparing for the Tax Court trial, the IRS tried many times to get cost basis information from Hoang but was unsuccessful. With its first request, the IRS provided a listing of each sale and its amount and date; Hoang responded by saying the request was unconstitutional. In response to the second request, Hoang responded that the IRS lacked jurisdiction because the notice was issued on Aug. 3, 2010, which, he claimed, was after the statute of limitation had run on his 2006 return. Hoang also claimed there were no more documents to provide because “all of them were discarded after April 15, 2010.” 

During the trial, the IRS again tried to get the cost basis information. In one response, Hoang claimed he provided it when he filed his return, but the IRS threw it away. He also tried to submit a 13-page exhibit that was a compendium of various papers, including a document purportedly from his broker that did not identify the account holder. The Tax Court refused to admit the exhibit into evidence because the documents in it appeared to be incomplete and altered, they had not been authenticated, and they had not been provided before trial.

In 2013, the Tax Court issued a 48-page memorandum detailing all of these facts and upheld the IRS’s notice of deficiency in full. The Eleventh Circuit affirmed the Tax Court’s decision, finding that the statute of limitation had not run on Hoang’s return because he did not file it until 2009, and that the deficiency was correct because Hoang failed to provide any cost basis information despite numerous opportunities to do so. All IRS determinations have a presumption of correctness that taxpayers can rebut, but, in this case, the taxpayer presented no evidence that would rebut that presumption.