Posts Tagged ‘federal’
Amending Tax Returns
January 7th, 2006
The basic concept of business value is that the future benefits (returns) of owning a company must be adjusted (discounted) for the risks associated with owning the company. The sales or earnings of a company are typically used to represent the benefits (returns). Multiples and rates are used to represent the risks. The basic formula of business value is – Value = Returns/Risks. This article will address how to quantify the returns of a business.
Earning Capacity
There are many benefits to owning a business (financial and non-financial). Non-financial benefits like: being your own boss, controlling your own destiny, prestige, etc. are impossible to quantify, so valuation focuses on the financial rewards. The returns from a company are generally measured by its ability to generate earnings (earning capacity). The value of a company that does not have earning capacity comes primarily from its tangible assets.
Earning capacity is not just the net profits from financial statements and tax returns. Net profits must be adjusted to compensate for accounting principles, tax regulations, and related party dealings that do not accurately portray what really happened. Cash flow is considered a purer form of earnings because it is not affected by accounting principles and tax regulations. For these reasons cash flow is the preferred measure of earning capacity for valuation purposes.
The earnings of a small, owner-operated company must do two things. First it must provide adequate compensation to the owner for the services he or she renders to the company. Any remaining cash flow or earnings represent the earning capacity of the company.
Many small businesses don’t earn enough to provide the owner with adequate compensation. Some of these companies have existed for decades, have established customer bases, and have excellent reputations. Their owners have worked hard to build the company to its current state, but they lack one important thing – earning capacity. Without it these small companies have little or no goodwill value. Essentially these companies have only been providing a job for the owner. Intangible assets like loyal, repeat customers and a great reputation have little value if the owners can’t convert them into earning capacity.
Earning capacity is not created in one year. A company must build a history of generating earnings consistently. Trends should be analyzed and unusual or non-recurring events should be eliminated. These events can sometimes be the accumulated effect of incremental changes, so don’t be too quick to factor them out. The earning capacity of a business can be used to value the entire entity or just its intangible (goodwill) value depending on the valuation method used. A three to five year period is often used to analyze earning capacity. A straight or weighted average of earnings over the period is often used in the valuation formula.
Past vs. Future Performance
Since the value of a company is based on future benefits, it would seem reasonable to use projections of future performance as the basis for a valuation. Using projections pose a number of practical problems. First, most small companies don’t normally prepare projections. It is impractical to prepare formal projections for a valuation. Doing quick and dirty projections to save time and money creates a valuation based on questionable earnings, so why bother? Second, projections tend to be unrealistic because they make assumptions that may not occur or have different outcomes. Because there are no good ways to estimate future results, assumptions are often based on arbitrary changes to prior year numbers. Finally, since every number is created from assumptions, it is subject to question or manipulation.
Past performance may not reflect future results, but at least it is based on actual numbers that can be traced back to financial statements or tax returns. Historical data can be adjusted to reflect expected changes in future performance. These adjustments should be limited to results expected from actions that were already implemented, are ongoing, or imminent. One of the goals of a valuation is to be able to explain and justify the results. Data from past performance is much easier to justify than projected data.
Conclusion
A key component in the business valuation formula is the expected returns from a company. Those returns are quantified by determining the earning capacity of the company. The next step to complete the equation is to quantify the risks associated with owning the company.
|
|
TurboTax Basic Federal + e-File 2010 – [Old Version] $4.99 The Intuit TurboTax Basic Tax Year 2010 Software automatically double-checks to help make sure your return is accurate. It features downloadable Audit Support Center, which provides guidance on everything you need to do if you are contacted by the IRS. And finally, it files your return electronically and prints it on plain paper…. |
|
|
Amending a partnership return.: An article from: The Tax Adviser $5.95 This digital document is an article from The Tax Adviser, published by American Institute of CPA’s on September 1, 2003. The length of the article is 988 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.Citation DetailsTi… |
|
|
Amending U.S. partnership and S corporation returns.: An article from: The Tax Adviser $5.95 This digital document is an article from The Tax Adviser, published by American Institute of CPA’s on November 1, 1992. The length of the article is 1157 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.From the supplier:… |
Consumers are leaving insurance-related tax rebates on the table
Property insurance policyholders who shelled out special assessments to help keep the state-run Louisiana Citizens Property Insurance Corp operating after Hurricanes Katrina and Rita have not claimed almost $215.6 million in tax rebates or credits they are due, Insurance Commissioner…
How To Claim the First-Time Homebuyer Credit in TurboTax
Posted in 
Tags: 
Federal Tax Payments
January 1st, 2006
Question: estimated tax payments for 2008?
1040 instructions says “enter any estimated federal Income Tax Payments you made for 2008″
I’m given a life of ’08 quarterly payments and one estimated payment on 1/15/09. Would I be able to classify that 1/09 payment as a 2008 estimated tax payment?
Answer: yes the 1/09 payment is the 4th quarter.
The First quarter is April 15
Second Quarter is June 15
Third Quarter is September 15
Fourth Quarter is January 15 of the following year.You can waive having to pay the 4th quarter Estimated Tax payment if you file by January 22nd.
I am also posting a link the the 1040 ES vouchers. http://www.irs.gov/pub/irs-pdf/f1040es.pdf
HR Block — Tax Advisor I — Over 5 years experience
|
|
Garmin nüvi 265W/265WT 4.3-Inch Widescreen Bluetooth Portable GPS Navigator with Traffic $130.00 … |
|
|
TOPS Tax Form/1098T Federal Copy A, 3.66 x 8 Inches, 50 Loose Sheets per Pack (2298TA) $12.99 Designed for colleges and universities to report tuition and other payments made. A 1098T must be issued for every student attending a college or university. Government approved forms accepted by the IRS. Letr-Trim perforation tears off easily leaving a clean edge. Heat-resistant inks for problem-free printing. Global Product Type: Forms-Tax; Form Size (W x H): 8 in x 3.667 in; Format: Loose Sheet… |
|
|
The Student Loan Scam: The Most Oppressive Debt in U.S. History – and How We Can Fight Back $16.80 Alan Collinge never imagined he would become a student loan justice activist. He planned to land a solid job after college, repay his student loan debt, and then simply forget the loans ever existed. Like millions of Americans, however, in spite of working hard, Collinge fell behind on payments and entered a labyrinthine student loan nightmare.High school graduates can no longer put themselves thr… |
Former Yonkers official arrested on federal conspiracy, bribery charges
WHITE PLAINS – Federal authorities Wednesday charged former Yonkers City Council Democratic Majority Leader Sandy Annabi with conspiracy, bribery, extortion, false statements and tax crimes.
What we know and don’t know about using the $8,000 tax credit for down payment assistance
Real Estate Professional Tax Rules
December 31st, 2005
|
|
Property Management for Dummies $21.99 You’ll need to wear many hats in the business of property management: advertiser/promoter (in seeking tenants), host (in showing your property), handyman (in keeping up with and arranging repairs), bookkeeper (in maintaining records), and even counselor (in dealing with tenants and their problems). But Property Management For Dummies will help you maintain your sense of humor â and your sanit… |
|
|
The Real Estate Agent’s Tax Deduction Guide $21.99 The real estate agent’s essential guide to tax deductions Understanding tax deductions can be the difference between having a successful year–or not–for real estate agents and brokers. By taking advantage of the many tax deductions available to them, real estate professionals can end each year with more money in their pockets and less owed to the IRS. Too often, these valuable deductions are … |
|
|
Defining real estate professional for PAL purposes.(passive activity loss): An article from: The Tax Adviser $5.95 This digital document is an article from The Tax Adviser, published by American Institute of CPA’s on December 1, 2003. The length of the article is 594 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.Citation DetailsTit… |
Fairbanks Ranch deal protested
Fairbanks Ranch Country Club By Joe Tash Contributor The Fairbanks Ranch Country Club, according to its Web site, is a “distinctly private, member-owned Club consisting of the most prominent business, professional and social personalities of the community.” While the club itself may be private, its 27-hole golf course, opulent clubhouse and other facilities sit on public land, owned by the city …
Austin Real Estate Broker Reminds First Time Homebuyer Tax Credit Expires