Liens

Once the Internal Revenue Service has assessed a tax and has sent the taxpayer a bill in the form of a Notice and Demand for Payment, a lien arises in favor of the government on all real, personal, tangible, or intangible property of the delinquent taxpayer until the amount is paid. By filing notice of the lien, the IRS has publicly notified all creditors of the taxpayer that it has a claim against the taxpayer's property, including property acquired after the lien was filed. The notice establishes priority of the government's lien in circumstances such as bankruptcy proceedings or sales of real estate. A federal tax lien may harm a taxpayer's credit rating and impair his or her ability to get a loan, a credit card, or a mortgage.

Employer Identification Numbers

An Employer Identification Number (EIN) is a nine-digit number that the Internal Revenue Service assigns to identify taxpayers that are required to file various business tax returns. EINs are used by employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities.

Taxation of Dividends

There are many types of dividends, but they generally consist of distributions of cash, stock, or other property paid to a taxpayer by a corporation. Most dividends consist of cash, but they can be distributions of more stock, stock rights, other property, or even services.

Taxation of Commissions

Generally, commissions are taxed in the same way as other forms of compensation. They are taxable in the year that they are credited to your account and you are entitled to draw on them. The question of whether or not you actually withdraw them is irrelevant so long as they are subject to your withdrawal.

Preparing for an Audit

Substantiation is the key to a successful audit of your small business tax return. The Internal Revenue Service has the right to look at any records used to prepare the return, so get ready to bring them in. But do not bring in a crate of receipts for the auditor to wade through. This is one situation where neatness really does count. The more receipts and paperwork the auditor has to search through, the more errors he or she can find. When the examiner asks about automobile deductions, your ability to produce a file labeled "car" not only builds the appearance of credibility but also prevents the auditor from finding potentially problematic items in your crate. In addition, going through all that paperwork to organize it refreshes your memory concerning the year in question.