Five Tax Tips For VARs
1. Car Expenses
If a VAR uses a car or van for business or personal use, it can deduct either actual expenses such as gas, oil, tires, insurance, etc., for the portion used for business, or can use the 2009 standard use rate of 55 cents per mile. However, if the VAR deducts actual expenses the first year of the car, it cannot switch to the standard allowance formula later. But it can switch from the 55-cent-per-mile rate to the actual expenses reduction, according to ASCII.
2. How About A Hybrid ?
The New Energy Policy Act gives a tax credit, not a deduction, for the purchase of hybrid cars. A tax credit is virtually a full rebate on the price of the car, for business or personal use, Weinberger said.
3. The Real Tax Deadline
While most returns are due on April 15 each year, if the VAR is a registered C corporation, the company's tax returns are not due until two-and-a-half months after the close of its fiscal year, no matter where that falls in the calendar year.
4. Stay Reasonable
Owners of VARs structured as an "S" corporation should maintain only a "reasonable" salary, Weinberger said. The IRS has not clearly defined what is "reasonable compensation," but ASCII warns that it may appear like an attempt to avoid paying employment taxes by having officers treat compensation as cash contributions, payments of personal expenses and/or loans rather than wages. The IRS could reclassify these amounts as personal salary to the employee, resulting in additional taxes and very significant penalties for the S corporation, he said.
5. Keep Your Receipts
While not directly a tax-saving tip, ASCII recommends that VARs keep and back up all documents used in tax returns for a minimum of seven years. You never know when the IRS might come calling.