Method Man Is Arrested For Tax Evasion

Method Man joins a list of other celebrities including New York Mets pitcher Jerry Koosman who have had financial problems paying their taxes. Method Man, whose real name is Clifford Smith, is a Grammy award winning rapper and the founding member of the hip hop group Wu-Tang Clan. Method Man could face up to four years in prison for failing to pay his taxes.
The 38-year-old rapper turned himself in to police in Staten Island, New York for arrest. Authorities say he failed to pay nearly 33,000 US dollars in taxes between 2004 and 2007 and is being charged with repeated failure to file a return and failure to pay taxes.

Tax Related Provisions of The American Recovery and Reinvestment Act of 2009 Part 2

The following provisions pertain to individuals.



Enhanced Credits for Tax Years 2009, The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. ARRA also increases the beginning point of the phaseout range for the credit for all married couples filing a joint return, regardless of the number of children. These changes apply to 2009 and 2010 tax returns. The earned income tax credit is a refundable credit intended to help people who work but earn modest incomes.

In addition, under ARRA, more families will be eligible for the additional child tax credit because of a change to the way the credit is figured. Taxpayers who cannot take full advantage of the child tax credit because the credit is more than the taxes they owe may receive a payment for some or all of the credit not used to offset their taxes. It is a refundable credit, which means taxpayers may receive refunds even when they do not owe any tax.

ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. Reducing the amount to $3,000 permits more taxpayers to use the additional child tax credit and increases the amount of the payments they may receive

Increased Transportation Subsidy. The ARRA also increases employer-provided benefits for transit and parking in 2009. The monthly tax exclusion for employer-provided commuter highway vehicle transportation and transit pass benefits increased to $230, effective from March through December 2009. Employees may exclude from income $230 per month in transit benefits and $230 per month in parking benefits –– up to a maximum of $460 per month. Employees may receive benefits for commuter transportation and transit passes and benefits for parking during the same month; they are not mutually exclusive.
These qualified transportation fringe benefits are excluded from an employee's gross income for income tax purposes and from an employee's wages for payroll tax purposes.

Up to $2,400 in Unemployment Benefits Tax Free in 2009. Under the American Recovery and Reinvestment Act (ARRA), the first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009: Normally, unemployment benefits are taxable.

$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board. A one-time payment of $250 will be made in 2009 to:

• Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration.
  
• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs.
  
• Railroad Retirement beneficiaries.
  

The IRS will not make this payment, unlike last year's economic stimulus program. Individuals who may qualify for this year's economic recovery payment should contact their respective agency for more information.


Energy Efficiency and Renewable Energy Incentives. The ARRA provides several tax incentives for individuals to invest in energy efficient products. Here is a list of some of those incentives:

• Residential Energy Property Credit.
• Residential Energy Efficient Property Credit.
• Plug-in Electric Drive Vehicle Credit.
• Plug-In Electric Vehicle Credit.
• Conversion Kits
• Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT.

Health Coverage Tax Credit. The credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Tax-Related Provisions of the American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 (“ARRA”) was enacted in February, 2009 by the 111th Congress. Based largely on proposals made by President Obama, ARRA was intended to furnish a stimulus package to the U.S. economy in the form of various measures having a value of approximately $787 billion. These measures include a variety of federal tax cuts, increases in unemployment benefits, and spending in the areas of health care, education, social welfare, and infrastructure projects.

I am going to look at some of the key provision that were enacted to help individuals.

First-Time Homebuyer Credit. This credit applies to first-time homebuyers who purchased their homes in 2008 or 2009. The credit:

• Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
  


• Applies only to homes used as a taxpayer's principal residence.
  


• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
  


• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

According to US News and World Report, existing home sales rose in July for the fourth time in as many months, something the market hasn't seen since 2004. Inventory totals are off their record levels of a year ago. And prices, while still declining sharply, are no longer in free fall. However, the looming expiration of a popular federal tax credit has some worried that the housing market may give back its recent gains, and the real estate and home building industries are pushing lawmakers to extend the incentive.

Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans. To make sure enough tax is withheld from their pay, taxpayers can use the IRS withholding calculator. The Making Work Pay tax credit, normally a maximum of $400 for working individuals and $800 for working married couples, is reduced by the amount of any Economic Recovery Payment ($250 per eligible recipient of Social Security, Supplemental Security Income, Railroad Retirement or Veteran's benefits) or Special Credit for Certain Government Retirees ($250 per eligible federal or state retiree) that you receive. If you are affected by this reduction, you should review your withholding to ensure that sufficient funds have been withheld to meet your tax obligation.

Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax. ARRA permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from Feb. 17, 2009, through Dec. 31, 2009. In states that don't have a sales tax, the law provides a deduction for other taxes or fees paid. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A. Anyone who took advantage of the cash for clunkers program and purchased a new car should not forget this tax deduction.

NY Mets Pitcher Jerry Koosman goes To Jail For Tax Evasion

A serious blemish on an otherwise outstanding life.” That’s what U.S. District Court Judge Barbara Crabb said recently when she sentenced former Mets pitcher Jerry Koosman, age 66, to prison for tax evasion. Her comments are not surprising when you consider that, unlike most celebrities who get caught not paying their fair share, Koosman not only pleaded guilty and apologized as well.

Read complete story at Accountingweb

Tax Deductions Incurred As A Result of Job Loss

As the jobless rate is expected to reach 9.5 for August and 10 percent by 2010 and you unfortunately find yourself among the 6.7 million individuals who have lost their jobs since the recession officially began in 2007, here is some information you should know about the tax effects of your job loss.

Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time are also taxable. You should ensure that enough taxes are withheld from these payments or make estimated payments. Under the American Recovery and Reinvestment Act (ARRA), the first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009: Normally, unemployment benefits are taxable. Also, you may request that taxes be deducted from your unemployment benefits so that you do not wind up with an unexpected tax bill during tax time.

You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:

• You are looking for a job in a new occupation,
• There was a substantial break between the ending of your last job and your looking for a new one, or
• You are looking for a job for the first time.

Employment and outplacement agency fees. You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.

Employer pays you back. If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.

Employer pays the employment agency. If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. This one you do not have to worry about since fees paid to the employment agency are not disclosed.

Resume. You can deduct amounts you spend for preparing and mailing copies of a resume to prospective employers if you are looking for a new job in your present occupation. This includes the cost of typing, printing and mailing your resume.

Travel and transportation expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
You can choose to use the standard mileage rate to figure your car expenses. The 2008 rate for business use of a vehicle is 50½ cents per mile (58 ½ cents per mile after June 30, 2008).

How to Start A Limited Liability Corporation

A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. In a pass through entity, the profits or losses of the business pass directly through to the owners' personal income tax returns, on their Form 1040. The LLC files a Form 1065, and then lists each member's taxable profit on Form K-1. In other words, the LLC itself does not file taxes. However, if the LLC has just one owner, it will be taxed as a sole proprietorship.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

Additionally, there is a managing member, who also enjoys the rewards of limited liability and is typically the person responsible for managing the business. (However, if the LLC has just one owner, it will be taxed as a sole prprietorship.)

Advantages

• Owners have limited personal liability for business debts even if they participate in management.
  


• Profit and loss can be allocated differently than ownership interests.
  


• IRS rules now allow Limited Liability Corporation (LLC) to choose between being taxed as partnership or corporation.

Disadvantges

• More expensive to create than partnership or sole proprietorship
  


• State laws for creating Limited Liability Corporation (LLC) may not reflect latest federal tax changes

For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies (PDF).

How To Start A Business as a "S" Corporation

Suppose you can answer every personal tax problem that comes your way. Your friends and family call you to prepare their income tax returns because they are unhappy with their present tax return preparer. Word gets around that you are extremely good at taxes and soon their friends start calling you, and they’re willing to pay for your services. You figure if you do this a few evenings a`week, you could make a nice profit. After, doing some research into the different types of business structures, you decide that an "S" corporation would be the best type of business structure to operate under. The first reason why you chose a corporation is that you want protect your home, bank accounts and other personal assets against lawsuits made against the business. The second reason is that you don't want to be taxed at the corporate level and the shareholder level.

An S corporation is a regular corporation that has elected "S corporation" tax status. Forming an S corporation lets you enjoy the limited liability of a corporate shareholder but pay income taxes as if you were a sole proprietor or a partner.

An S corporation is a pass through entity. In a pass through entity all business profits "pass through" to the owners, who report them on their personal tax returns in the same matter as in sole proprietorships, partnerships, and LLCs. The corporation itself does not pay any income tax, although an S corporation with more than one owner must file an informational tax return, like a partnership or LLC, to report each shareholder's portion of the corporate income.

In order to create an S corporation, you must first create a regular corporation by filing articles of incorporation with your secretary of state's office. All shareholders must sign and file IRS Form 2553 in order to operate as a "S" corporation. The election should be made by

• No more than two months and 15 days after the beginning of the tax year the election is to take effect, or
• any time during the tax year preceding the tax year it is to take effect.

To qualify for S corporation status, the corporation must meet the following requirements:

• Be a domestic corporation
• Have only allowable shareholders including individuals, certain trust, and estates and
  may not include partnerships, corporations or non-resident alien shareholders
• Have no more than 100 shareholders
• Have one class of stock
• Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.

If anyone of these requirements are not met the "S" corporation status will be revoked by the IRS. For example, if your company was operating as an "S" corp and added 10 new shareholders so that the total amount of shareholders now exceed 100, then the "S" corporation status can be revoked.

An "S" corporation owners are called shareholders, and each shareholder includes his or her share of the corporation's income or loss on his or her tax return using Form 1040 and Schedule E. If you do business as a "S" corporation, the corporation will need to complete Form 1120S for and a 1120 Schedule K-1 for each shareholder. The corporation will be liable for paying employment taxes if it hires employees, and certain excise taxes. Since the corporation is a seperate legal entity, the shareholder(owner) does not have to pay self employment taxes. Some of the forms you will need for employment taxes are Form 940, Form 941, Form 943, and Form 8109-B.

The advantages of doing business as a "S" corporation are:

• Corporate losses can be passed through to the shareholders, and as a shareholder, you may be able to take the loss against income that appears on your personal return.
• You can have the protection of limited personal liability without having to pay corporate taxes.
• You can minimize self-employment tax and FICA tax.

The disadvantages of doing business as a "S" corporation are:

• Numerous regulations and requirements must be upheld by an S Corporation.
• Like a C Corporation, it can be costly to set up and follow corporate formalities.
• Close scrutiny by the IRS of shareholder-employees, who must receive reasonable compensation.