Owning Corporate Equipment
There are two basic reasons for incorporating. One is to save money on your income taxes, and the other is for liability protection against accidents & lawsuits. When operating as a corporation, your losses are generally limited to the assets of the corporation, not to your personal assets.
However, it seems many corporations we run into do not own the equipment they operate. When independent contractors incorporate, many fail to transfer the equipment into the corporate name, possibly because of transfer fees. By leaving equipment in their own name, they leave themselves open to a lawsuit.
Now, they can make a rental agreement between the owner of the equipment and the corporation and have the corporation pay for the use of the equipment. But are the owners of the equipment protecting themselves for liability purposes in the above scenario? Who knows?
If it's not feasible to transfer the equipment into the corporate name, should a limited liability company (LLC) be set up to own the equipment and, consequently, lease it to the corporation? Will that then give you your liability protection? We know it still will give you your tax benefits.
BUT SINCE WE ARE NOT ATTORNEYS, WE CANNOT ADVISE YOU HOW BEST TO PROTECT YOURSELVES FOR LIABILITY PURPOSES.
If you are facing this same scenario, we strongly recommend seeking the advice of an attorney.
Claiming a home-office deduction can cost you tax if you sell your home at a profit even if the gain is less than the tax free exemption under the home sale rules. That is because you must recapture the depreciation taken.
The thing to do is to not claim home-office deductions for more than three of the last five years before you plan to sell your home. By so doing, the home-office portion of your home would meet the two-of-five-year personal-use requirement to qualify for the home-sale exemption.
Haven't Filed A Tax Return In Years?
Not filing your income tax return can get you into serious trouble. If you don't file for one year, the odds are you are going to be afraid to file for the next year. And suddenly you haven't filed for 3, 4, or 5 years because you are afraid to contact the IRS.
Since the IRS is more interested in getting the delinquent taxpayers back in the habit of filing the returns and making up for the past filings, non-filers do not have to worry about going to jail. As long as they cooperate and file their tax returns, the IRS is not going to lock you up.
It is best to file the omitted returns prior to the IRS contacting you. The fact that you are not able to pay the back taxes should not prevent you from filing those returns. Once the return has been filed, you may discuss with the IRS your payment options. You may find them surprisingly lenient.
You should also try to get the penalties waived if you have a reasonable excuse. The interest, however, cannot be waived except in rare cases.
If the IRS comes after you before you have taken the steps to file the delinquent returns, it is still not too late to work out a solution. The IRS will accept a timetable for filing the back returns.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century.
Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at 800-697-5153.
"Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional."