Such a scary situation happens all too frequently nowadays. But don’t worry, you are not going to jail. You are the target of a scam. Many popular scams involving persons pretending to be from the IRS are circulating, and at Ulrich & Associates, we want you to be prepared so that you don’t get the daylights scared out of you, or worse, victimized by these fraudsters.

The first thing to always keep in mind is that the IRS will not call you unsolicited. If the IRS is trying to contact you for the first time, they will always send you a written notice via mail. They do not use email, text, or social media to contact you. So if you receive a phone call claiming to be from the IRS that you are not expecting, be alert to a scam.

The IRS also shares five tell-tale signs that you are speaking with a scammer. From their website:

The IRS will never:

1. Call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

Scam phone calls involving the IRS generally fall into two categories: demands for payment on taxes owed, and alleged refunds that trick you into sharing private information. Remember, the IRS will never call you out of the blue to discuss such matters. They will always send you mail first. If you believe you are the victim of a scam, the IRS suggests taking the following steps:

• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.

• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.

• You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.

So beware of scammers. Don’t allow yourself to be bullied by these imposters and don’t give them any personal information. If in doubt, the professionals at Ulrich & Associates are happy to help you through any tax issues or questions you may be facing.

Meanwhile, some experts are predicting that many employees are having too little withheld and may face a tax bill when filing in 2019. What should your next step be?

1. Go to the IRS Withholding Calculatorto navigate the complexities of multiple employer tax situations and determine the correct amount of tax for each employer to withhold. It takes into account multiple jobs and two-income families.
2. Check your status regarding the following items: the increased standard deduction, the elimination of personal exemptions, the increased child tax credit, other limited or discontinued deductions, and changed tax rates and brackets.
3. Submit a new Form W-4. This is the form that tells your employer how much to withhold from your paycheck.

Indeed, Form W-4 is key to proper withholding. Most people submit one when they start a new job and then forget about it. But you can, and should, fill it out as often as necessary, i.e., whenever there is a life change. (Note that the IRS may be issuing a new Form W-4 later this year, and it may be very different from the current one.)

Here are the key issues to consider when filling out Form W-4:

• Generally, the fewer withholding allowances an employee enters on Form W-4, the higher the tax withholding.
• Entering 0 or 1 on line 5 of the W-4 means more tax withheld.
• Entering a larger number means less tax withheld, which would result in a smaller tax refund, or potentially a tax bill or penalty.
• Not having enough taxes withheld can occur when you get married or divorced, have a baby, or finally get that empty nest you dreamed about during your children’s teenage years.
• One of the most common under-withholding situations is the second-job scenario. To help you avoid the dreaded owe when you have two jobs, be sure to take into account second jobs and other special situations so there are no unpleasant surprises next April.

Does this sound confusing? It is, this year more than in any in recent memory. If you’re unsure what your status is, give us a call and we’ll help you figure it out. The sooner you do it, the better chance you have for good news when April 15 rolls around.

Some of the advantages of operating a business as an S corporation are:

1. Your personal assets will not be at risk because of the activities or liabilities of the S corporation (unless, of course, you pledge assets or personally guarantee the corporation’s debt).

2. Your S corporation generally will not have to pay corporate level income tax. Instead, the corporation’s gains, losses, deductions, and credits are passed through to you and any other shareholders, and are claimed on your individual returns. The fact that losses can be claimed on the shareholders’ individual returns (subject to what are known as the passive loss limits) can be a big advantage over regular corporations. Liquidating distributions generally also are subject to only one level.

3. The S corporation has no corporate alternative minimum tax (AMT) liability (however, corporate items passed through to you may affect your individual AMT liability).

4. FICA tax is not owed on the regular business earnings of the corporation, only on salaries paid to employees. This is a potential advantage over sole proprietorships, partnerships, and limited liability companies.

5. The S corporation is not subject to the so-called accumulated earnings tax that applies to regular corporations that do not distribute their earnings and have no plan for their use by the corporation. Nor because of their pass-through nature do they risk being characterized as a personal holding company.

Some of the disadvantages are:

1. S corporations cannot have more than 100 shareholders (but with husband and wife being considered as only one shareholder). Further, no shareholder may be a nonresident alien.

2. Corporations, nonresident aliens, and most estates and trusts cannot be S corporation shareholders. Electing small business trusts, however, can be shareholders, a distinct estate planning advantage.

3. S corporations may not own subsidiaries, which can make expansion difficult, unless the subsidiary is a Qualified Subchapter S Subsidiary (a 100% owned S corporation or QSub); and termination of the QSub’s status can be treated as a sale of assets.

4. S corporations can have only one class of stock (although differences in voting rights are permitted). This severely limits how income and losses of the corporation can be allocated among shareholders. It also can impair the corporation’s ability to raise capital.

5. A shareholder’s basis in the corporation does not include any of the corporation’s debt, even if the shareholder has personally guaranteed it. This has the effect of limiting the amount of losses that can be passed through. It is a disadvantage compared to partnerships and limited liability companies, and is one of the main reasons that those forms are usually used for real estate ventures and other highly-leveraged enterprises.

6. S corporation shareholder-employees with more than a 2-percent ownership interest are not entitled to most tax-favored fringe benefits that are available to employees or regular corporations.

7. S corporations generally must operate on a calendar year.

8. An S corporation may be liable for a tax on its built-in gains, if, among other things, it was a C corporation prior to making its S corporation election. Under the American Recovery and Reinvestment Act of 2009, no tax will be imposed on an S corporation’s net recognized built-in gain if the seventh tax year in the 10-year recognition period preceded the tax year for a tax year in 2009 or 2010. Under the Small Business Jobs Act of 2010, Congress shortened the holding period even further, to five years, in the case of any tax year beginning in 2011, if the fifth year in the recognition period precedes the tax year beginning in 2011. The American Taxpayer Relief Act of 2012 extended the five-year holding period requirement through the end of 2013.

Some of these factors will be more important than others, depending upon the particular circumstances. If you would like to pursue this matter further, and have us fully evaluate your situation, please do not hesitate to call.

A Sole Proprietorship is a company run by one person – you. You hold all the decisions of running the business. It is easy to form and simple to operate. The entity is not taxed separately; rather all income and losses pass through to your personal taxes. The major drawback here is that the owner (you) is personally liable for all obligations of the business.

Advantages – easy to form and operate; fewer administrative burdens; all taxation is at the owner level, not the business level.

Disadvantages – raising capital can be difficult; you are personally liable for all obligations of the business; there is no continuation of the business past you; all net income of the business is subject to self-employment (SE) tax.

A Partnership is a company run by two or more people, called partners. These partners agree, generally through a document called a partnership agreement, on the way that operations, profit, and loss are divided amongst the partners. Like a sole proprietorship, income and loss from the business pass through to the partners, although they remain personally liable for all obligations of the business.

Advantages – more sources of capital and more management resources; pass–through taxation.

Disadvantages – transfer of interest is difficult; partners are personally liable for the business; partnership tax rules are generally more complex than other entities.

A Corporation (or C-Corp) is a legal entity, separate from its owners, created to conduct business. Unlike other entities, owners are not personally liable for the obligations of the business. The main disadvantage is that all earnings of the company are subject to taxation at the corporate level, and then taxed again at the personal level on earnings distributed as dividends to shareholders.

Advantages – owners have limited liability; corporations have perpetual life spans; capital is easily raised and transferred through the use of stock.

Disadvantages – earnings may be subject to tax on the corporate and personal levels; corporations are relatively more difficult to form and dissolve; administration becomes increasingly burdensome.

An S Corporation (or S-Corp) is a variation of a C-Corp which is generally advantageous to smaller entities. Like a C-Corp, the owners have limited liability on the obligations of the business. However, the entity remains “pass-through,” meaning the earnings of the S-Corp are not subject to corporate tax.

Advantages – owners have limited liability; it is a pass-through entity, so it is not subject to corporate tax.

Disadvantages – number of shareholders limited to 100 – no corporations, partnerships, or nonresident aliens are allowed as shareholders; there are restrictions on the choice of tax year.

A Limited Liability Company (or LLC) is a hybrid entity which combines many of the advantages of partnerships and corporations.

Advantages – all members have limited liability; no limit on the number of members; may elect to be taxed under partnership, S-Corp, or C-Corp rules; members may participate in management.

Disadvantages – LLC laws vary from state to state; transferability of interests may be limited; entity may have a limited life and the tax year choice may be restricted.

With this quick overview, hopefully you have a better understanding of the options available to you. Of course, one size doesn’t fit all, so let the experts at Ulrich & Associates work with you to determine the best course of action. After all, your livelihood is at stake!

The first thing to do is to consider what laws are pertinent for your business. For example, if you own a restaurant in a city, you are privy to the food and health department of that city. They will have inspectors who will regularly come to check the safety of your business. They will make sure that food is adequately cooked and that all of the storage devices are safe and clean. They will also check to make sure that all of your business processes are safe for the serving and preparation of food. Your inspector will also ask to see all of your employees’ food handling permits, if such a training system exists in your state and city. Failure to adhere to state and federal code will result in a fine.

There are other types of business laws and regulations to follow. OSHA is perhaps the most famous of workers’ rights organizations. OSHA is charged with making sure that your business is safe for your workers. When you have a business that has an incident, OSHA will send an inspector or team of inspectors to find out what the cause of the problem was. If a worker was hurt and it is the fault of the company, OSHA will write up a report describing what exactly happened and what needs to happen in order to prevent such an incident from happening again. OSHA plays a very important role in making sure that employees are kept safe when they work for a particular company, especially in heavy industry and manufacturing.

Another type of business regulatory model can exist in the financial sector. There are very strict rules for handling money. Consider an investment firm. Investment firms are under very strict guidelines to keep investor money separate from company money. The investor money is supposed to be kept in a different account from the rest of the company. Often, more than one person is supposed to be involved in the process to guarantee safety and security of the money. A company is not supposed to spend customer money on anything other than investing it. The company can charge fees of the customers for managing their money, but they cannot pay employees of the company with the investor money nor take profits for themselves if the firm loses money.

There are many different types of business law and regulations to follow. It is best to practice good ethics when running a business. Breaking the law will result in criminal penalties. Poor ethics will result in a firm getting sued in civil court. When a company has many different liabilities, it is up to the company to make sure that they are interpreting the law and rules to the best of its ability. Often, companies have compliance officers to make sure that people are adhering to the rules. The laws that are in place exist for a reason and they are supposed to protect the marketplace and the consumer from any sort of dishonesty.