Selling TITLED equipment? Wisconsin Sales Tax Changes October 1, 2009

The Wisconsin Department of Revenue has posted its latest Sales Tax Bulletin on its website:  http://www.revenue.wi.gov/ise/sales/09-5.pdf

One huge change is requiring ANY BUSINESS that already has a SELLERS PERMIT, to collect and remit sales tax on the sale of any motor vehicle, trailer, ATV or any other equipment item with a title requiring registration.  This is a major change from the law prior to October 1, 2009 wherein only the dealers of such property had to collect and remit the tax. 

This new provision will catch a number of small business owners, even sole proprietors, by surprise.  The Department of Revenue will be able to target you for audit when the buyer goes to register the title.  

And you will also have to include sales of these items in your company’s gross sales reported on the sales tax returns.  This is contrary to what any unincorporated business would report on their Federal income tax returns.  When you sell equipment used in the business, it is NOT SELF-EMPLOYMENT INCOME and will appear on Form 4797.  The gain or loss on this equipment sale will be separately reported on the Form 1040 so that it is not subject to self-employment tax.  This law change will require a reconciliation be provided on your income tax return to show the Wisconsin Department of Revenue the difference between Sales reported on the sales tax returns as compared to sales reported on the income tax returns.

/0 Comments/by

Standard Mileage Rates for 2010

Beginning on Jan. 1, 2010, the standard mileage rates
for the use of a car (also vans, pickups or panel trucks)
will be:

* 50 cents per mile for business miles driven

* 16.5 cents per mile driven for medical or moving
  purposes

* 14 cents per mile driven in service of charitable
  organizations

For details go to:
http://www.irs.gov/newsroom/article/0,,id=216048,00.html

/0 Comments/by

First-Time Homebuyer Credit 2009 New Rules

Chart. The following chart summarizes some of the first-time homebuyer credit rules based on date of purchase from the Tax Authority Update Bulletin, published by Tax Materials Inc, www.thetaxbook.com

Date of Purchase Main home purchased after 4/8/2008 and before 1/1/2009. Main home purchased after 12/31/2008 and before 11/7/2009. Main home purchased after 11/6/2009 and before 7/1/2010 (written binding contract signed before 5/1/2010), or 7/1/2011 (written binding contract signed before 5/1/2011) for qualified official extended duty service.
Date of Purchase Definition The date of purchase is the date title closes. If the taxpayer constructs the residence, the date of purchase is the date the taxpayer first occupies the residence. The date of purchase is the date title closes. If the taxpayer constructs the residence, the date of purchase is the date the taxpayer first occupies the residence. The date of purchase is the date title closes. If the taxpayer constructs the residence, the date of purchase is the date the taxpayer first occupies the residence.
Credit Amount The smaller of 10% of the purchase price or $7,500 ($3,750 MFS). The smaller of 10% of the purchase price or $8,000 ($4,000 MFS). The smaller of 10% of the purchase price or $8,000 ($4,000 MFS), or $6,500 ($3,250 MFS) for certain long-time residents (see first-time homebuyer below).
First-Time Homebuyer Must not have owned a principal residence in the U.S. during the 3-year period prior to the purchase of the home. Must not have owned a principal residence in the U.S. during the 3-year period prior to the purchase of the home. Must not have owned a principal residence in the U.S. during the 3-year period prior to the purchase of the home. A long-time resident who has maintained the same principal residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a subsequent principal residence is treated as a first-time homebuyer.
AGI Phase-out Credit phases out when modified AGI is between $75,000 and $95,000 ($150,000 and $170,000 for MFJ). Credit phases out when modified AGI is between $75,000 and $95,000 ($150,000 and $170,000 for MFJ). Credit phases out when modified AGI is between $125,000 and $145,000 ($225,000 and $245,000 for MFJ).
Refundable? Yes Yes Yes
/0 Comments/by

Entrepreneurial Eight Ball

This is an article I wrote 10 years ago for a local newspaper.  There are so many people starting their own businesses today that it bears repeating all of this information.

Here are eight essential edicts for establishing an entrepreneurial enterprise.

Remember Calvin and Hobbs with their CalvinBall game? The players made up the rules as the game was played. The only real rule was to let the other person know the rules, but only after the other person broke a rule. In order to win, you had to outwit while out-ruling your opponent. This is a lot like starting your own small business. If you want to win in your own business, here are the rules to the game, in order of importance, to outwit while out-ruling your competition.

1. Have customers. A good idea alone will not work. If you don’t have customers already, you will need a lot of cash for those operating losses you will have until you build up a steady flow of incoming customer revenues. Do you have the cash to throw away like this?

2. Comply with the rules and regulations governing your business. There are local ordinances, State and Federal laws, licenses and permits that you will need to obtain before making your first sale. You can have customers but if you don’t operate by the government agency and general business rules, you can be shut down before you make your first bank deposit. Do you know all about sales taxes, employment taxes, income taxes, excise taxes, local zoning ordinances, and sign permits? Professional legal counsel and Certified Public Accountants aren’t just for getting you out of trouble; they are best used to prevent trouble from happening. Find yourself a good team of business counselors to learn all you can. Ask your friends and business contacts whom they would recommend.

3. Keep control of and understand your financial records. How do you know if you’re making money? The easiest gauge is to see if you have any money left in your pocket at the end of the week. But what if you spent all your profits on personal things, before you paid income taxes? You could be in for a real big surprise on April 15th. What if you need to borrow money? Lenders don’t go on your word alone, they need to see financial statements. You also need to be sure your customers are paying you on time. The biggest killer of small business can be delinquent customer accounts. You need to be organized and you need to know the numbers to get your own answers about how you are doing financially.

4. Communicate and connect with everyone you know. Be proactive, ask questions more than once and get confirmations that you’ve heard correctly, get understandings down in writing (customer contracts, employee policies, and buy-sell agreements with partners, etc.). If it isn’t in writing, it didn’t happen according to you, but rather according to someone else’s perception, which will always differ from yours.

5. Choose your business partners and key employees with as much or more care as you might choose a marriage partner. The same things work in both relationships… you need to complement each others’ skills, there has to be trust between you, and everyone has to have a commitment to the same goals. To prevent your optimism from taking over common sense in the interviewing stage, start with a half full glass, and see if it is still full after you subtract the negatives. Learn as much as you can about what motivates people to do anything, especially wanting to work for you!

6. Don’t spend money unless absolutely needed for survival. A dollar spent for business is a dollar gone. A dollar spent for personal reasons is between $1.37 and $1.50 gone, depending upon your tax bracket. You still have to earn the money to spend it. And you have to pay income tax on anything spent for personal, nondeductible purposes. The difficult part is when you’ve spent all the profits on personal things and then you are faced with one huge April 15 tax bill. Conserve your money when starting a business. You can always spend a chunk on equipment on the last day of the year, and deduct it immediately, known as the “Section 179 Election”, for at least $25,000 for Wisconsin tax laws.  But the used equipment financing market is pretty bleak when you find you need the cash more than the equipment. Even worse for converting past purchases to cash are household rummage sales. Don’t spend…

7. Offer more service. The difference between products and services has become very blurred. Make sure you have the service edge working for you. The more you can do (and get paid for) the more revenues you will generate. Do not go in as the price underdog. There is no customer loyalty in low price. You will only trap yourself into always being a starving entrepreneur.

8. If you go under, it’s no one’s fault but your own. You are behind the eight ball, controlling its every movement. Recognizing, or ignoring any of the above, is your own choice. You may feel pressured to go one way or another, but it is still your choice. Make the right choices and when you succeed at Entrepreneurial Eight Ball, it’s all your money, after taxes.

/1 Comment/by