Or are we better off not taking out additional debt?

Answer – Yes, you can tap the Line of Credit to pay down vendors at year-end vendor as this will create additional permitted deductions for 2009.

My view is that this is not a “bad” use of debt. This recommendation assumes your company will be able to pay down the advance with the significant accounts receivable expected within the next 30 to 45 days. These amounts should be in excess of your daily operating needs.

Answer: Generally you only need to furnish 1099s to independent contractors who are individuals (SSN) or LLCs taxed as either sole proprietors or partnerships (EIN).  Currently only corporations are exempt from 1099-MISC requirements.

The preparation task is relatively simple and made easier if you require your contractors to submit Form W-9 (http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3) at the time of payment or with signed contract.

In order to obtain appropriate annual forms I suggest that you go the Internal Revenue Service located in the Federal Building here in Old Town Fort Collins on the corner of Howes and Olive.  You will need to ask for the following forms:

• Form 1096 (transmittal)
• Form 1099-MISC (carbonless forms)

You will then send the “red copies” to the Internal Revenue Service (Kansas City, MO 64999) while Copy B is mailed to the recipients.

Make copies for your records.

Form 941 – Federal payroll and withholding taxes

Form 940 – Federal unemployment insurance taxes

Form DR 1094 – Colorado withholding taxes

Form UITR-1 – Colorado unemployment insurance taxes

the late penalties can be substantial – 10% or more. Accordingly, I recommend that business owners consider paying the largest amount (typically Form 941 taxes) with a credit card via “official payments corp” whose website link is https://www.officialpayments.com/index.jsp.

Please note that you must pay a 2 to 3% convenience fee since government agencies do not eat this standard credit card merchant fee, but that’s considerably less than the potential government penalty.  So while the business owner may now have an outstanding debt, it’s with a credit card company and not a government agency.  Thus, the business owner is compliant in both filing required payroll tax returns and paying required payroll taxes in a timely manner.

A good thing indeed.

Answer – The best answer depends on three different circumstances.

• If the amount exclusively relates to a life insurance policy, then no amount is taxable and the fiduciary (life insurance company) should not have asked you to complete a Form W-9 or asked if you wanted any Federal or State income tax withheld.

• If the amount relates to an annuity whose fiduciary happens to be a life insurance company, then a portion of the required account liquidation is taxable (gross amount of contract less investment(s) made or allocated).

• If the amount relates to an IRA whose fiduciary happens to be a life insurance company, then a portion of the lump-sum or partial account withdrawal is taxable (you must consider any non-deductible contributions made and previously reported by the decedent on Form 8606).

For me good fit has three important criteria:

Size: Generally like-sized businesses seek a like-sized accountant. A business with a couple dozen employees will look for a CPA with a dozen or more employees. Generally, a larger CPA firms understands both the needs and nuances of small business. This strategy also preps for your growth as the larger firm can usually provide for future accounting and tax service needs.

Fees/Services: Sure, fees and services play a role in any decision. But in many instances the range in fees charged by different practices is relatively small and may not be that material. In addition, it is worth exploring how service issues are handled during each tax season given the compressed filing period and complexity of the tax code.

Intangibles: A little tougher to assess but just as important as the first two points.
• Will the CPA coordinate tax strategies between your separate business and individual tax returns?

• Will the CPA routinely consider appropriate legal and tax structures for your business venture(s)?

• Is the CPA able to answer a myriad of operational questions or suggest other knowledgeable experts?

• Is the CPA staying current with Federal, State, and local laws which may affect your business?

Case in point. The online Colorado Department of Revenue Wage Withholding Zero Filing System failed on October 31, 2009.

I happened to file a number of 3rd Quarter returns for my clients on that very date.I always print out the confirmation screen from the state DOR website as well as the received email confirmation.  Always.

Two weeks later my clients received a “nonfiler notification” letter informing each of them that the State’s records showed that their respective 3rd Quarter returns had not been received.

Fortunately no penalties or fines were assessed because we were able to demonstrate the returns had been submitted. What I couldn’t prevent was the initial shock my clients experienced upon opening the nonfiler correspondence ….and my frustration in having to respond to each erroneous letter.

Of course, as you may already know, starting on January 1, 2011 CPA practices will be required to file all client income tax returns electronically. Hopefully all of the bugs will be worked out of each separate filing system one year from now.

In practice however, a couple can file a joint return as Colorado residents as long as they meet these five widely-held tests:  1) they are not already married to someone else, 2) they present themselves as being husband and wife, 3) they consent to the common law marriage, 4) they cohabitate, and 5) they have the reputation in the community as being married.  Further, a signed affidavit can be presented when proof of common law marriage is required (e.g., for insurance).

As mentioned above, cohabitation is required but no specific duration is needed. The most critical item that can negate common law marriage marital status is not regularly introducing or referring to each other as “my wife…” or “my husband…”

Filing joint tax returns is widely regarded as the most important signifier of a common law marriage as the couple is representing themselves to the government, under penalty of perjury, as being married.

The so-called ‘existing homebuyer tax credit of $6,500’  is available for homeowners who sell their current primary residence and buy a new primary residence. In other words, it’s for repeat buyers and only those who have owned their current homes for at least five years. Thus, taxpayers are only eligible if they have owned their homes for at least five years and acquire another between November 6, 2009 and April 30, 2010.

The number one avoidable estate-planning mistake made by individuals is failing to name a living beneficiary on all retirement accounts. Regardless of your will, if not done properly with the fiduciary, your estate will be exposed to higher taxes than the circumstances would require.

Without a named living beneficiary, the required account closure distribution amounts are either treated as estate income where the 35% Federal tax rate kicks in at $10,700 or are allocated in lump-sum to the beneficiary via Schedule K-1 and taxed at the individual’s tax rate in the year disbursed.

As a result, generous inherited IRA rules, such as stretching the account withdrawal and related income tax hit, are relinquished.