Why do accruals increase expenses and prepayments reduce expences when referring to change in profits in Accounting? 

Answer by Wray Rives: Because when you accrue an expense you are recording an expense that you have not yet paid for, but know that you have a liability to pay in the future, so you are increasing the current period expenses for money that will be paid out in the future. Recording a pre-paid […]

I sent a 1099-MISC of $13,000 to my business partner, does the IRS deduct this from my taxes? 

Answer by Wray Rives: Your first problem is as others have noted the IRS is not going to automatically adjust the tax return you filed for yourself, just because you sent them a 1099.  You will have to file an amended return. Your possible second issue may be more important, because you refer to this […]

What are the benefits of becoming an S Corp instead of being a sole owner in a freelancing situation? 

Answer by Wray Rives: Mark Rigotti is correct that the primary benefit to S Corp vs sole proprietor is that given the right set of facts you may be able to save significant self-employment taxes.  Sole proprietors pay 15.3% SE tax in addition to income tax on the net profit from their business.  S Corps […]

Am I obligated to file an amended return if a contractor delivered a 1099-MISC to me well past the deadline and I have already filed my r… 

Answer by Wray Rives: Yes you absolutely are required to amend your tax return and report the additional income.  What is reported on a 1099 does not determine what you are obligated to report on your tax return.  You should have reported all of your income, even if you received no 1099 forms. If you […]

Are computers, computer networks and their programming that much less complicated than US tax code? 

Answer by Wray Rives: Mike Emeigh and Richard Fritzler make some very good points in their answers.  I would just add one more perspective.  In college I was required to take classes in Fortran and Basic, so I have a very rudimentary skill at computer programming and can even write a really simple program and […]

As a non-U.S. resident alien (citizen and resident of India), if I form a single member LLC in Delaware with no U.S. presence or U.S. sou… 

Answer by Wray Rives: First I would have some questions about your situation and some of the assumptions you present. You say owners.  An LLC with multiple owners could not be a disregarded entity.  An LLC with multiple owners where one or more of the owners is not a US resident or citizen would only […]

What are the top 3 legal tax shelters to reduce Airbnb federal tax income? 

Answer by Wray Rives: My first suggestion is that you should contact a tax professional to help you with your taxes.  No offense, but from the way you phrased parts of the question, my assumption is accounting and taxes is not your primary area of expertise.  Unfortunately Turbo Tax has done a great job of […]

2015 Tax Rates 

Individuals Tax Rate–Single Taxpayers–2015 Taxable Income Over But not over Tax Tax % On Amount Over $                     –        9,225.00                     – 10%                                  –        9,225.00      37,450.00            922.50 15%                     9,225.00      37,450.00      90,750.00        5,156.25 25%                  37,450.00      90,750.00    189,300.00      18,481.00 28%                  90,750.00    189,300.00 […]

Since DOMA was struck down, can same-sex couples who were legally married in their state refile their taxes as married filed jointly? 

Answer by Wray Rives: The answer is yes a same sex couple who are legally married in a state or foreign jurisdiction that allows same sex marriage can file an amended return to file as married filing jointly (MFJ) or married filing separate (MFS) as long as the 3 year statute of limitations has not […]

Selecting Your Small Business Legal Structure 

One important consideration when starting your business is determining the best legal organizational structure. Why? Because it will affect operating efficiency, transferability, control, the way you report income, the taxes you pay and your personal liability. Read the guide to selecting your small business legal structure.