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Free eNewsletter & Special Promotions
Volume 3, Issue 9, December 2005
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Year-End Information Needed to Prepare Your 2005 Business Income Tax Return
It’s that time of year again – time to celebrate the holidays with family and friends, and time to gather year-end information in preparation for tax season. In order to assist you in organizing the documents necessary to file your 2005 business income tax return, and to give you a little more time to spend celebrating the holidays, Kemper CPA Group LLP reminds you to gather the following important tax information:
Cash on hand and in bank: Deposit all cash received through December 31, 2005, and prepare a bank reconciliation as of December 31st.
Bank loans: List each loan and its unpaid balance at December 31, 2005.
For new 2005 loans: Furnish a copy of the loan agreement, and answer these questions: How were the loan proceeds deposited in your business account? How were the loan proceeds used in your business?
For loans paid in full during 2005: Indicate the date and amount of the final payment.
Inventory: Compile a list of merchandise on hand at December 31, 2005, and indicate value at your cost.
Accounts receivable: List the amounts customers owe you at December 31, 2005, including any amounts due to you from VISA, MasterCard, American Express, etc. Identify any that are uncollectible.
Accounts payable: List amounts owed to suppliers at December 31, 2005, showing their names and the amount owed to each, regardless of due date.
Documentation of passenger vehicles used in your business: If you use passenger-type vehicles in your business, certain questions must be answered on your tax return, or you risk losing the tax deductibility of ALL vehicle expenses. You must keep a record of business use and total use of all vehicles and record year-end odometer readings.
Business entertainment and meals: Expenses paid for these items must be separately identified on your business tax return; therefore, you will need to maintain detailed records of these expenses, including:
Amounts spent
For whom
Where and when
Business purpose
Equipment and vehicles acquired: Provide a copy of the invoice for each item purchased during 2005, and if a trade-in was involved, explain as requested below.
Sale or trade-in of equipment, vehicles, etc.: If you sold or traded any business assets during 2005, then describe each such asset and provide the following information:
If sold: Date of sale, sales price, to whom
If traded: Date of trade, what it was traded for, cash difference paid, to whom it was traded
Bartering transactions: Did you, or your business engage in any bartering, (i.e., exchange of services for services or products for services, etc.), during 2005? If so, explain.
Group term life insurance: Premiums may be subject to FICA and Medicare if you provide any employee with more than $50,000 coverage. If you do, please contact us so we can explain your IRS reporting requirements.
Medical insurance: Premiums paid by an “S” Corporation (or partnership) for coverage of an owner are includable in income on the owner’s 2004 W-2 form for income tax purposes, but they are not taxable for FICA or Medicare purposes. If you pay such premiums, please call for further explanation of your reporting requirements.
Cash transaction report: Surveillance has been stepped up by the IRS. If you have customers who remit $10,000 or more in cash to you during 2005, you are required to file an information Form 8300 with the IRS. For this reporting purpose, cash includes traveler’s checks, cashier checks, and bank drafts. The $10,000 threshold is a cumulative total for the calendar year, and not a single remittance.
For additional assistance in determining what information you need to gather in order to prepare your 2005 business income tax return, contact a Kemper CPA Group LLP office near you.
In order to improve navigation and provide easier access to information, the Internal Revenue Service (IRS) has unveiled a redesigned website. In addition to the new color scheme, the new website offers navigation buttons for Individuals, Businesses, Nonprofits and Charities, and others, which allow easier access to information relevant to your tax needs. A second layer of navigation is now available for each of the sections accessible on the homepage. Additional efforts to improve the website’s search feature, including keyword searches and advanced searches, make finding exactly what you are looking for even easier.
The redesigned website also offers the following new features:
Most Requested Forms and Publications – The five forms and publications most frequently requested are featured in this section.
Online Tools – The Online Tools section includes popular tools such as electronic filing and checking refund status.
Featured Content – News and headlines, and other information currently important to many taxpayers is featured in the center of the home page.
Information About – General information accessed by many users is located in this section.
I need to… – The “I need to…” dropdown menu offers quick access to information relevant to a specific task.
Promotional Advertisements – When the IRS introduces new programs, information, or features on the website, that information will be posted here.
As tax season approaches, the IRS website is likely to experience heavier than normal traffic, and improvements made to the site should help reduce the frustration associated with not being able to find what you are looking for. If you can’t find what you need on the IRS website, don’t hesitate to contact the tax professionals at Kemper CPA Group LLP.
As the tax year winds down, remember the following:
FICA tax base increases for 2006 as follows:
Social Security – @6.20% on earnings up to $94,200 per employee
Medicare – @1.45% on Total Income per employee
The overall tax rate of 7.65% remains the same.
For self-employed persons, the rate will be 15.3% up to $94,200; and 2.9% on earned income in excess of $94,200 (with no maximum).
Paychecks issued on January 1, 2006 and after must be treated as 2006 payroll for FICA and withholding purposes, regardless of when the work was performed.
Provide Form 1099 to recipients to whom you paid rents, commissions, interest, sub-contract, and fees for services rendered. They must receive them not later than January 31, 2006. For 2005, you must include your telephone number with your address.
IRA contributions for 2005 must be made on or before April 16, 2006, if you are eligible.
Group term life insurance cost is subject to FICA and Medicare taxes, as well as income tax. The reportable portion relates to the cost of insurance coverage over $50,000.
Should you have any additional questions as you begin thinking about preparing your 2005 income tax return, feel free to contact the tax professionals at Kemper CPA Group LLP. We're here to help!
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As you prepare for the new year, it may be helpful to review your current portfolio and determine if you need to make any changes to it so that it more closely fits your investment needs today. A variety of circumstances may necessitate changes to your portfolio, and the beginning of the year is a great time to stop by for a visit with the professionals at Kemper Capital Management LLC.
Kemper Capital Management LLC offers a variety of financial services for you, your family, and your business. Whether you need asset and risk management services alone or in conjunction with Kemper CPA Group LLP accounting services, the professionals at Kemper Capital Management LLC are equipped with the knowledge necessary to help you make informed financial decisions.
Contact Kemper Capital Management LLC for all of your investing needs.
Investment advisory services offered by KCPAG Financial Advisors LLC, a registered investment advisor. Securities officered through Securities America, Inc., a registered broker/dealer. Member NASD/SIPC. Thomas A. Moore, John D. Porter, Polly Reynolds, Shawna D. Horne, Jeffery C. Holt, CA insurance Lic. #0E38034, Jessica Daugherty, Sheila R. Lautenbacher, Joseph M. Mendes, CA Insurance Lic. #0C62535, Regina S. Hughes, Gregory Meador, Marcia Elder, Registered Representatives. Insurance services offered through KCPAG Insurance Services LLC. Kemper Capital Management LLC and its subsidiaries are not affiliated with Securities America.
According to federal copyright law, which protects software copyright holders in the same manner as it does all copyright holders, the penalties for under-licensing software are the same as those for committing software piracy – up to $150,000 for each instance of infringement!
It is becoming increasingly important to monitor the use of software in your company, as a company may be held liable for an employee’s act of infringement, whether or not that employee knew his or her actions were wrong. Private monitoring organizations, formed by software companies with a vested interest in punishing copyright violators, often set up anonymous hotlines for individuals to report instances of copyright infringement, and tips received via these hotlines can result in a full-fledged investigation of the company’s software licensing practices.
In addition to posing a legal risk, failure to follow software licensing restrictions also leads to:
Increased risk of introducing software viruses to the network
Unavailable technical support and software warranties
Ineligibility to obtain software upgrades
In order to protect your business from the heavy fines allowed by federal law and the other nuisances created by using unlicensed software, it is important to develop and strictly adhere to a software asset management policy, and to make employees aware of the policy. The policy should focus on informing employees about software installation procedures and software usage, while also relaying the company’s goal of using only licensed software applications.
Once a software asset management policy is in place, it is also important to:
Take a full and accurate inventory of all software assets, and determine whether the software is licensed or not by reviewing the terms of the software’s license.
Remember that software management is a continual process, and develop a schedule for routine software audits.
The professionals at Kemper Technology Consulting are committed to helping our clients adhere to a software asset management policy in order to protect you from potential fines and aid you in managing your software licenses to maximize the software’s benefit to you. For more information on developing a software asset management policy, contact Kemper Technology Consulting today.
Kemper Technology Consulting
Robinson, IL
618-546-5633
www.kempertc.com
Evansville, IN • Indianapolis, IN • Paducah, KY
Please be advised that, based upon current Internal Revenue Service (IRS) rules and standards, the advice herein is not intended to be used, nor can it be used, as the sole basis for decisions. Additional issues may exist that could affect the treatment of the individual transactions, and this narrative does not provide a conclusion with respect to all such issues.
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