Make Money Online
Sunday, September 26, 2010
What Is An IRS Tax Return?
An IRS tax return is a form used to file income taxes with the Internal Revenue Service. Tax returns are usually set up in a worksheet form. They must be filed each year for an individual or business receiving an income during the year, regardless if it is regular or wage income, dividends, interest, capital gains and other profits.
The IRS or Internal Revenue Service is a US government institution assigned in collecting both annual income and state tax from residents and businesses. Many people pay their income taxes to the IRS every year, although some may be required to make quarterly prepayments exceeding the income threshold. Income tax returns are based on the calendar year with yearly payments due not later than April 15 of the following year. An extension request may be acceptable, although estimated payments should accompany the request for an extension, which should be filed early.
IRS tax returns are calculated on a sliding scale, with higher incomes in higher IRS tax groups. While the exact table of taxes change every year, the bottom line is the more you earn, the more you will be taxed. For people who are paid on an hourly basis, the estimated taxes are derived from every pay check. At the year's end, one may get refund for overpayment or requires to pay more tax if an inadequate amount was deducted during the year.
Tax returns are based on the net income or the amount left after deductions. A person falling within the poverty bracket may not be required to pay an income tax at all, although a salary of $50,000 every year could end up costing the person earning it roughly twenty percent of his or her net income. Those earning $120,000 or more might actually fall into the tax bracket nearer to twenty-five percent of his or her income.
The importance of your income tax forms does not always end after you file them. In several instances, whether you are going to buy a car, get a mortgage or trying o acquire loan from a bank, a record of your latest income tax returns will be required for them to be able to approve your request. Actually, the IRS tax return transcript is not a replica or copy of your income tax form, but rather it is a summary of the details that you should know with regards to your income tax.
Furthermore, this form can also be used if you want to make adjustments on your income tax. Additionally, this also shows detailed information about you as the taxpayer, which includes some basic information such as your present marital status and the final adjusted gross income that you have applied.
Income Tax Return Forms - Stop battling the IRS and visit http://www.irs-relief.org
Tuesday, September 21, 2010
Significant differences between US GAAP and IFRS
US GAAP: Generally, comparative financial statements are presented; however, a
single year may be presented in certain circumstances. Public companies must
follow SEC rules, which typically require balance sheets for the two most recent
years, while all other statements must cover the three-year period ended on
the balance sheet date.
IFRS:Comparative information must be disclosed in respect of the previous
period for all amounts reported in the financial statements.
2. Income statement —classification of expenses
US GAAP:SEC registrants are required to present expenses based on function (for
example, cost of sales, administrative).
IFRS: Entities may present expenses based on either function or nature (for example,
salaries, depreciation). However, if function is selected, certain disclosures
about the nature of expenses must be included in the notes.
3.Changes in equity
US GAAP:Present all changes in each caption of stockholders’ equity in either a footnote
or a separate statement.
IFRS:At a minimum, present components related to “recognized income and
expense” as part of a separate statement (referred to as the SORIE if it
contains no other components). Other changes in equity either disclosed in the
notes, or presented as part of a single, combined statement of all changes in
equity (in lieu of the SORIE).
4.Disclosure of performance measures
US GAAP:SEC regulations define certain key measures and require the presentation
of certain headings and subtotals. Additionally, public companies are
prohibited from disclosing non-GAAP measures in the financial statements
and accompanying notes.
IFRS:Certain traditional concepts such as “operating profit” are not defined;
therefore, diversity in practice exists regarding line items, headings and
subtotals presented on the income statement when such presentation is
relevant to an understanding of the entity’s financial performance
Saturday, August 28, 2010
Accrual Accounting and Bad Debt
In accrual accounting, revenues and expenses are reported in the period when transactions occur, regardless of whether payment has been received. While this practice may seem strange at first, many Americans use it everyday without thinking about it. Consider credit cards. Whenever someone uses a credit card, there is no cash changing hands, only an understanding that if everything runs smoothly, the purchaser will pay their credit card company who in turn will reimburse the seller. This is a form of accrual accounting.
Another form of accrual accounting is accounts receivable. When retailers sell products on credit (think of the countless advertisements offering "no money down, no payments until the next year"), this is an example of accounts receivable. In this case, a retailer agrees to accept payments over time in exchange for a good or service. For example, if a shopper were to purchase a $1,000 television on credit from TV Shack, there would be an agreement that they would pay the store back in monthly payments until the full $1,000 is paid off. This $1,000 to be paid off in time would be considered accounts receivable.
The store is able to report the $1,000 sale in the current period even though it will not be receiving payment until a later date. The net realizable value, in this case $1,000, is what the store will receive back from the customer if the customer pays his debts according to the agreement. It reports that it has made a $1,000 sale, based on the assumption that it will be receiving the cash eventually. But what if the customer is unable to pay back the loan on time? What if the customer is unable to pay back the debt in full? Or at all? This would mean that the $1,000 revenue that was reported by the company was never realized. In other words, the company is out $1,000 that it told investors that it had. This phenomenon is known as bad debt.
Businesses know that in some cases they will not recoup what they have lent, but rather than abandon lending, these firms take precautions against bad debt. In some cases, businesses will only lend to the most qualified buyers. In others, the businesses simply demand a larger down payment and charge a higher rate of interest to less qualified buyers. Anyone who has purchased a home is familiar with these strategies that businesses take to insulate themselves from defaults. Many have heard of subprime mortgages, fewer know that this is simply an example of offering mortgages with higher interest rates to buyers who are more likely to default. These are simply methods that companies use to improve their chances of getting their loans paid back.
Another method businesses use to hedge bad loans is a bad debts expense. Also known as an uncollectible debt expense, firms are able to calculate with some degree of accuracy the amount of money that they will need to set aside in case some of their loans are not repaid. In some cases, firms simply assume that a given percent of their loans will default and set aside this percentage of their total loans. In others, the businesses keep track of which loans are most likely to default in order to determine their bad debts expense. This money that is set aside is known as the loan loss reserve.
There is some concern that companies' loan loss reserves are inadequate in the face of an economic downturn. Using the percentage model noted earlier, these firms only keep a fraction of the money that they have lent out on hand in case of defaults. This is not unlike the fractional reserve system that our banks use. And like a run on a bank, if for some reason enough of the debtors default on their loans, the company may not have enough money to write off these expenses. Because of this vulnerability, there is a concern that many companies are not as healthy as they may appear.
Recall from above the example where TV Shack lent someone $1,000 to buy a television on credit and then reported $1,000 profit before the customer had begun to pay it off. This may be fine in good economic times, and the customer will likely be able to pay off his debt. But if the economy declines, the customer may not be able to pay the debt because of unforeseen circumstances. TV Shack feels the impact of this as well because they do not get all or any of their $1,000. Because of this, TV Shack is weaker than it looks on paper. TV Shack's investors were unintentionally misled when they read TV Shack's statements reporting $1,000 profit that will never come. For this reason there is concern that the current methods for dealing with bad debt in accrual accounting are inadequate.
Article Source: http://EzineArticles.com/?expert=Jeremy_Saul