When you are starting a small business, it is important to consider all of the tax implications. Proper planning when you start your business can save you time and money. Contact an attorney to discuss how to best prepare for all of the tax issues that go along with a business entity.
Dedicated Attorney with Extensive Tax Planning Knowledge
At the Irvine, California, Law Offices of Scott Kauffman, clients in need of tax counsel work personally and directly with a dedicated lawyer who has focused exclusively on taxation, tax law, and tax planning for well over 20 years. If you are considering incorporating your business and want to understand the tax implications of choosing a particular entity — or have questions about other high-stakes tax matters — please contact attorney Kauffman today.
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Respected tax attorney Scott Kauffman — also a published novelist — devotes all his professional energies to helping people with tax issues, whether due to a problem such as a pending audit or in the course of planning for the future. In addition to his Juris Doctor degree, attorney Kauffman has two tax-related L.L.M. (Master of Laws) degrees, and his knowledge and reputation for integrity are tremendous benefits for many clients.
Throughout Orange County, Riverside and San Bernardino counties and beyond, small business owners and entrepreneurs frequently consult tax attorney Scott Kauffman as they choose between entities such as S corporation, C corporation, LLC or a form of partnership, or sole proprietorship. The tax planning implications of this decision and others involving your business may prove critical in the future, and we urge you to contact the Law Offices of Scott Kauffman for a consultation.
Federal Income Tax
Federal income tax is the largest contributor of revenue to the federal budget. Income tax law is complex, especially when applied to businesses. It is critical for businesses to have an understanding of these laws and how they will affect the business' tax liability and bottom line. A tax attorney at Scott Kauffman, A Professional Law Corporation in Irvine, California, can assist your business with understanding and complying with the federal income tax laws.
Sources of Tax Law
The Sixteenth Amendment to the US Constitution gave Congress the power to tax income from "whatever source derived." All residents and businesses are subject to the federal income tax. The Internal Revenue Code (IRC) is the main source of federal tax law. It is found in Title 26 of the US Code and is administered by the Internal Revenue Service (IRS). Title 26 of the Code of Federal Regulations provides guidance and explanations on IRC provisions. IRS regulations, rulings and policy statements and federal tax court decisions also shape federal income tax law.
What is Income?
In general, all "income" is subject to federal tax. However, the IRC does not specifically define "income" and it may have differing meanings. Gross income is generally defined as all income from whatever source derived, including:
- Pay for services such as wages, fees and commissions
- Interest earned
- Business income
- Royalties
- Rent payments
- Alimony
- Income from life insurance
- Endowment
- Pensions
- Income from a decedent
- Discharge of debt
- Income from an estate or trust
- Income from illegal activities
26 U.S.C. §61. The IRC also includes several exceptions to gross income, including the following:
- Any contribution to the capital of the corporation (26 U.S.C. §118(a))
- Employer-provided coverage under an accident or health plan (26 U.S.C. §106(a))
- The value of any meals or lodging given to an employee by an employer for the convenience of the employer (26 U.S.C. §119(a))
- Fringe benefits given to an employee if the fringe benefit qualifies as a: no-additional-cost service, qualified employee discount, working condition fringe, de minimis fringe, qualified transportation fringe, qualified moving expense reimbursement, qualified retirement planning services or qualified military base realignment and closure fringe (26 U.S.C. §132)
Adjusted gross income is gross income less certain allowable deductions, but before standard or itemized deductions and personal exemptions. 26 U.S.C. §62. Taxable income is defined in 26 U.S.C. §63 as gross income minus the deductions allowed by that chapter of the IRC. Essentially, it is the income on which the taxpayer will be taxed.
Conclusion
Determining a business' taxable income can be a complex task. IRC provisions and IRS regulations are generally not easy to understand and apply. A tax attorney at Scott Kauffman, A Professional Law Corporation in Irvine, California can advise your business on federal income tax issues.
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