“TAX SAVINGS” “Tax Reduction” TIPS and “IRS audit triggers” “ IRS audit red flags”

“TAX SAVINGS 2013”  “Tax Reduction”  TIPS and “IRS audit triggers”  “ IRS red flags”   By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

 

 

 

Tax Savings and Tax Reduction Idea:

 

Can you give your employees a cell phone and not tax them in their Wages W-2?

I believe that IF you follow the rules and have great business purposes and documentation you can!

 

  1. You would have to have a legitimate business purpose for the employee to use the cell phone.  Now many employees are listing their cell phone numbers on their business cards.
  2. You would have them sign an agreement and you would accept the agreement as employer that they need to have a cell phone for your businesses convenience.
  3. You would spell out in an agreement they sign that they will always have their cell phone available for questions (i.e. patient’s care, customer pet peeves, supplier commitments, etc).
  4.   You would need to LIST specific examples of when they need to have the cell phone available to answer your questions, receive and send to texts from customers, clients, patients, etc.
  5. Smart phones have APPs that make the employees more successful such as note taking software, business contacts, etc. These APPs can help your business and could be reimbursed.  
  6. Another recent example is this: A customer texts them, they then text the supplier.  The more reasons, the better.

        Ask them to help you by coming up with additional   reasons.  Cell phones formerly were listed property that you and your employee could ONLY be reimbursed for the business percentage of the calls.  Now your employees can get reimbursed fully if they must have the phone available for the convenience of their employer (your business) and they agree that they will use the phone primarily for business.

 

You as the employer will save on payroll taxes unless the employee puts down additional time to answer texts and make phone calls.

“IRS audit triggers”  “ IRS red flags

When you have a business, what should you NEVER do? And how did a fictitious client “Burned Badly” get burned by the IRS and lose legitimate tax deductions?

Burned did not understand that IRS is always suspicious that business owners are always trying to deduct personal expenses and lifestyle through the business. Here is how Burned Badly got “burned” by the IRS:

 1. Burned looks at this business account as his personal “piggy bank” and writes personal checks out of his business account. Burned is creating a lot of IRS tax problems and lawsuit liability problems.  The IRS will make the assumption that if a lot of the payments are for personal reasons, Burned did not take a large enough payroll, resulting in additional payroll taxes and that legitimate business expenses are personal expenses.

2.  Burned uses the bank balance and credit card accounts to decide which account to write checks out of or charge expenses.  The business bank account has a lot of money while the personal bank account is close to zero. Burned writes checks out of the business account because that that is “where the money is”.  The result is that if Burned is audited, the IRS will assess tax, interest and penalty, and perhaps even criminal charges and open the prior years’ returns AND the ollowing years’ returns.  Burned will also have to take valuable time from his business in exchange for unproductive and stressful hours.  In addition, Burned Badly’s CPA will charge Burned thousands of dollars in fees!!  

3.  Since Burned writes checks or charges on his credit card where the money is, he might pay for legitimate business expenses out of his personal account resulting in loss of tax deduction and tax savings!

 

 

 

 

 

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com