Tax Return 2009
Kris
You can see all the documents in by downloading the zip archive at:
http://fireworks-project.googlegroups.com/web/2009PublicTaxReturn.zip
I took notes for the Federal Return on a line by line basis as I
thought was relevant. However, I didn't do this for the Vermont State
return because there is not much to say about that one yet, other than
the fact that we will have to pay $250 min tax to Vermont every year
that more than $0 in revenue.
Also, we may need to pay state taxes for every state in which we do
business. I'll need to look into this some more. Eventually we'll need
to look into the tax implications of doing business in other countries
as well.
Notes on Taxation for The Fireworks Project
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Federal Taxes
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### We file federal form 1120.
### Section A
(1) We are not a consolidated return. A consolidated return is a
conglomerate of smaller companies that file a single return. That's
not us.
(2) We are not a personal holding company. A personal holding company
must have at least 60% of the corporation's adjusted ordinary gross
income for the tax year from dividends, interest, rent, and royalties
AND at any time during the last half of the tax year, more than 50% in
value of the corporation's outstanding stock is owned, directly or
indirectly, by five or fewer individuals. While we fit the second half
of that statement, we don't fit the first.
(3) We are not a personal service corporation. A personal service
corporation must have substantially all of the corporation’s
activities involve the performance of services in the fields of
health, law, engineering, architecture, accounting, actuarial science,
performing arts, or consulting AND must be employee owned. While we
are close to filling both of those requirements we miss each of them
by a technical whisker. Incidentally I'm not really sure what the
advantages are to be classified as a personal service corporation.
(4) Schedule M-3 required instead of Schedule M-1 if total assets are
$10 million or more. That's not us.
### Sections B, C, D, and E
Are all self explanatory.
### Income
Self explanatory. This is easy to understand now, because we have no
income. In the future we will want to take another look at how income
is classified to reduce our tax liability.
### Deductions
Self explanatory. This is also easy to understand now, because we have
no income to deduct against. However, in future years these
deductions will play a big role in our strategies to reduce our tax
liability. Here are some notes, going line by line from the return.
(12) We can only claim a deduction for compensation of our officers if
total receipts (line 1a plus lines 4 through 10 on page 1) are
$500,000 or more. Why the Feds allow corporations to deduct the
compensation of their officers is beyond me.
(13) Employee wages can also be deducted, but don't have employees.
(14) I wonder if the repair and maintenance of software can be
deducted?
(17) Any licenses we need from regulators (to sell software to
hospitals for example) are deductible.
(18) Interest we pay on loans is deductible.
(19) Charitable contributions are deductible. We could contribute to
any open source project that is a 501 non profit (The Mozilla
Foundation comes to mind) as well as many other great charities.
(20) We need to do some research on what we can count as assets and
how we can depreciate them for future years.
(21) We also need to see if depletion of assets will apply to us in
future years.
(22) And believe it or not, we can deduct advertising costs.
(23) Our profit sharing plan actually goes under "Cost of goods sold"
on line 1.
(24) We have no employees.
(25) We can get a deduction for manufacturing in the US. I wonder if
the "manufacturing of software" counts?
(29) We'll want to keep tabs on our net operating loss for 2009 so
that we can deduct it in 2010. Assuming we do not also have a net
operating loss in 2010.