It seems my whole life is on hold right now until we get this first wave of people taken care of.  I’m going to have some good stories to blog about when I get caught up, so stay tuned!!

Tax season is just about to get started.  The phones are ringing off the hook with people calling about tax loans and wanting to know when they can get their money.  With the current economic conditions, I think that everyone will be in extremely early to get their taxes done this year.  Of course, the IRS doesn’t open until the 16th of January, so it is still a couple of weeks away.

I hope everyone who reads this had a Happy Holiday season and I hope the New Year will be prosperous for all of you.  I’ll be posting more on Income Tax and continue with my series on business entities later this week.

It’s hard to think about a breakup when the business is just getting started, but many partnerships split up at crisis times, and unless there is a defined process, there will be even greater problems.  They must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership

Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.

With more than one owner, the ability to raise funds may be increased.

The profits from the business flow directly through to the partners’ personal tax returns.

Prospective employees may be attracted to the business if given the incentive to become a partner.

The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

Partners are jointly and individually liable for the actions of the other partners.

Profits must be shared with others.

Since decisions are shared, disagreements can occur.

Some employee benefits are not deductible from business income on tax returns.

The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

Types of Partnerships that should be considered

General Partnership – Partners divide responsibility for management and liability as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states otherwise.

Limited Partnership and Partnership with limited liability – Limited means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects or for investing in capital assets.  This form of ownership is not often used for operating retail or service businesses.  Forming a limited partnership is more complex and formal than that of a general partnership.

Joint Venture – Acts like a general partnership, but is clearly for a limited period of time or a single project.  If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such as well as distribute accumulated partnership assets upon dissolution of the entity.

That’s it for Partnerships.  My next post will take up Corporations. I’ll deal with regular corporations, Subchapter S Corporations, and Limited Liability Companies (LLC).

I’m closing down next week for the Christmas Holiday and will not post again until after Christmas. I hope all of you have a Happy Holiday Season.

I will get some posts out now that I’m home and have the time.

What amazes me is the attitude that I get from so many clients is that “I don’t think I should pay any taxes, and why should I pay when everyone else isn’t paying any.”

How do you deal with that attitude? I’ll have a client and I’ll ask them how much they donated to charity or to their church, and they will reply, “How much can I claim?”

I have fired, or refused to do the returns for clients that I know are trying to “game the system” or just flat out lying.  The largest fradulant violation we have to deal with is the “earned income” claim.”  A married couple with 3 or 4 children will file separately, but each will file “Head of Household” with dependents.  They will claim that they are not married but have dependents, or they will state that they have not lived with their spouse for the last year.  If both taxpayers file this way,  they can get several thousand dollars in refunds in excess of what they would get if they were to file legally.

We have instances of where the couple will come to the tax office together and attempt to file separately to get the larger refund.  My policy has always been that once I discover they aren’t truthful, I inform them that I cannot file their tax return.  They usually leave my office and go someplace else that will file their return without asking the questions that an ethical office should and is required to ask. Bottom line is, I have to look at myself in the mirror every morning and I want to like what I see.

I want to keep the content low key, but I want to post helpful topics that people will find interesting and useful.  Hopefully, I should be able to keep it interesting with all the stories and day to day events in an active Income Tax Office.  I want to post at least 5 days per week, but my wife and I are leaving Sunday to attend our annual Convention in Las Vegas.  I will attempt to blog from Vegas, but I may be too busy with the training and of course the Slots, Blackjack and all else.