Tax Tips

Being a sole proprietor has its tax advantages. Find out how you can benefit.

A sole proprietor business structure is the most simple type of business one can establish. By being a sole proprietor, it means that you and only you own your company and that you are also personally responsible for its assets and liabilities — ‘personally’ meaning you can be sued for personal assets due to a business incident. However, there are great advantages to being a Sole Proprietor and it makes the most sense for many businesses.

You have direct discretion on expenses and revenue. As a result, you have more leeway with your tax situation by being strategic with income and expenses.

Your tax preparation is easier. This is because you can continue to file form 1040 and attach a Schedule C. S & C Corporations have more complex tax filings.

You can hire your family. You can continue to be considered a Sole Proprietor and have your spouse as an employee of the business as long as they’re truly an employee. Also you can hire your kids without having to pay into Social Security and Medicare. This typically saves you up to almost 8% versus having an employee that is not in your immediate family. Also, if you’re not paying them more than $6200 in a given tax year, they do not have to file federal taxes.

Let us help you determine the best business structure for your specific tax situation.

See if your moving expenses qualify for a deduction.

If you moved as a result of a job change or to start a new business, your expenses are more than likely eligible for a tax deduction.

Moving Expenses Tax Deduction Eligibility Requirements

• Your move must be in close relation to both the place and time of the start of your work at your new location. You can include moving expenses accumulated within 1 year from the date you started to work at the new location. A move usually relates closely in place when the distance from your new living quarters to your new job’s locale is not more than the distance from the last place you lived to your new job’s location.

• Your new place of business has to be at least 50 miles greater from where you used to live than your former workplace location was from your former home. If you had no previous job, your new place of business’s location must be at least 50 miles from your former residence.

• If you work for someone else, you have to have worked full-time for at least 39 weeks during the first 12 months right after your arrival in the general area of your new employer’s location.

• If you work for yourself, you have to have worked full-time for at least 39 weeks during the first 12 months and for a sum of at minimum 78 weeks during the first 24 months right after your arrival in the general area of your new work location.

There are exceptions to these requirements in the event of death, disability and involuntary separation, among other things. Also, if you are in the military and had to move, you do not have to meet the requirements to be eligible.

What You Can Deduct

• Moving Truck Rental

• Moving Company Costs

• Moving equipment such as boxes, hand trucks, etc

• Gas for moving truck

• Lodging if you had to drive overnight

• You cannot expense meals

• You cannot expense any moving expense that’s reimbursable by an employer

Use Form 3903 to figure your moving expenses.

Forgot or put off your tax return? Here’s what you need to know.

It’s going to be ok. Or at least if you take care of it now, it’s going to be better than it will be if you keep avoiding filing your return.

There are penalties if you fail to file and pay by April 15th. There are also penalties for failing to pay by the April 15th deadline. The penalties can start out somewhat minor but they can quickly escalate into very costly penalties once several penalties accumulate. Also, if you do not respond to the IRS’s attempts to collect on what you owe, they can take out a lien which negatively impacts your credit. You can also have your wages garnished.

So to avoid the above mentioned penalties, here’s what you need to do to get this handled.

Act now!
There is a 5% interest rate that gets tacked on per month for failing to file your return and that caps out at 25%. That’s a lot of money to unnecessarily pay when filing can be rather painless in comparison to the cost of the penalty.  

Failing to pay your amount owed is .05% per month and that caps out (although slower) at 25%.

However, if you exceed 60 days in filing, the penalty is no less than $135 or 100% of the balance due—whichever one is less.

File even if you can’t pay now.
The penalty for filing is much greater than the penalty for not paying right away. A payment arrangement can be set up with the IRS for paying taxes you owe.
 
Use a tax professional.
Using a tax professional like us can find ways to bring down your taxable income in ways you may not know about. This will help take the bite out of the penalties.

Learn how your personal vacation can be turned into a legal deduction.

If you own your own business and decide you want to take a two-week road trip across America, you can legally deduct almost every cent you spend on your vacation. Here's how you do it.

1. Set up business appointments prior to your trip.
Many folks think they can go on vacation and just dole out business cards and then the trip is considered deductible. However, they are wrong.

The IRS requires you to have at minimum one business appointment prior to your departure in order to establish a legitimate "business purpose." So if you make appointments prior to leaving you’ll be able to deduct the expenses of the trip.

It’s strongly recommended that make legitimate meetings that are truly relevant to your business. If you do not already have contacts at your destination, you could make new business contacts in the area you are traveling to. For example if your company is building a new website, you could send out an RFP looking for vendors and then meet with those who respond.

A vibrant Linkedin network can be incredibly beneficial when it comes to finding to people to meet with that could help your business in a place you wish to vacation.

It’s super important you keep documents of your planning and expenses on your trip.

2. Sight-seeing while on business vs. doing business while on vacation
If you want to be able to deduct your business expenses for the trip, business must be the primary purpose of your trip. According to the IRS, travel expenses are 100% deductible if your trip is business related and it’s consider to be travel that’s away from your regular place of business as well as longer than a typical day of work in which you’ll need to sleep away from from home to conduct your work.

You don't have to live far away to consider an overnight stay as business travel. It’s just important that you have good justification even if it’s 4 miles from your home. For example, if there is a conference for your industry that’s being held in a hotel in your city. Staying there allows you to get there early and stay late to connect with new contacts and attend late night events without having to drive home.

3. Keep diligent daily expense records.
Each day you’re traveling for business, you’re allowed to deduct up to 100% of lodging, tips and ground transportation. For food, you’re allowed to deduct 50% of your food expenses.

Regarding receipts, the IRS doesn't need a receipt for travel expenses seventy-five dollars or under with the exception of lodging. However, it’s a great best practice to document these items in an expense journal. You can keep track of these expenses there in your smartphone using an app like Evernote. A robust tax journal is immensely helpful if you’re ever audited. You should keep track of details such as amount, date, place and business purpose for the expense.

Again, you need all receipts for lodging even if it’s $6.

Deductible expenses are not just food, lodging and transportation. You can also deduct laundry, shoe shines, manicures, and dry-cleaning costs for clothes you wore on the trip. Your dry cleaning bill will likely come right before or right after your trip and the cost is 100% deductible. You’ll want to keep the receipt and make sure the dry cleaning happens within a couple of days of the trip.

4. Take four-day weekends.
If you do business on a Friday and on the following Monday as well, you can deduct the expenses over the weekend even though you were not technically conducting business over the weekend. However, if you do business on a Tuesday and then again on Friday, you can’t deduct expenses for Wednesday and Thursday.

5. Make sure the majority of your days are business days.
To deduct transportation expenses, business must the primary purpose of the trip and that is defined by most of the days of your stay are qualified business days. So if you go to Florida and only one of those days you do business, then you can only count expenses for that day. But if more than 50% of the days are business, you can deduct the transportation costs.

Granted, sometimes it’s best for your health and mental well-being to just get away from work entirely so don’t feel like you have to do business on your vacation for the sake of being frugal. Make sure you have ample time to relax and rejuvenate.

Automatic reinvestment is a great strategy but is still subjected to being taxed.

Many mutual funds give you the choice of automatically reinvesting dividends and capital gain allocations back into the fund. This is an excellent option to acquire new shares and build your investments.

The majority of shareholders indeed take advantage of this mechanism. However, it should be understood that this reinvestment is still subjected to taxation as any new investment would be. Some investors wrongly assume that because they did not pocket the dividend or gain that it won’t be considered taxable income. Dividends reinvested are treated as cash and thus you are taxed accordingly.

Likewise, capital gain allocations reinvested are taxed as long-term capital gain.

If you choose to reinvest, combine the total reinvested to the cost basis of your account. In other words, the amount for which you bought your shares. The cost basis of your newly purchased shares via automatic reinvesting can be seen on the account statements you receive from your fund.

You’ll want to make sure you keep this information as it’s critical when you sell shares.

The IRS requires you to meet specific obligations when hiring a new employee. Here’s a list of what you need to know to do

Proof of Citizenship
You need to confirm that every new hire is allowed to work in the US. To confirm this, you and the employee will need to complete the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. An I-9 form is available at USCIS offices or you can call 1-800-870-3676.

New Hire Notification
A new hire is someone that has not been worked for you as an employee or was an employee but has not worked as employee of yours for a total of 60 days in a Row.

The IRS requires you to report any new employee to an appointed state registry for new hires. Most states accept a copy of the W-4 with your information added.

W-4
Each new employee needs to fill out and submit to you a W-4. They must include their name and social security number. Employees without a social security card should apply for one.

Employers are required to give you your W-2 by January 31st. Here’s what to do if you don’t have it.

You should follow the four steps below if you’ve not received your W-2 from your employer.

1. Reach out to your employer.
Ask your employer the date as to when the W-2 was mailed. There is a chance it was returned to them. Most large companies are pretty good at complying with these so it’s likely there was an error. Even small business usually use some sort of payroll system that handles the sending of these. If it’s been mailed and enough time has gone by for you to have received it, ask your employer to resend your W-2.
2. Let the IRS Know.
If you don’t have your W-2 by February 14th, call the IRS at 1-800-829-1040. You’ll have to provide your name, address, city, state, zip code, Social Security number, phone number and also be prepared with the following info: Employer’s name, address, city, state, zip code and phone number. You’ll also need to have dates you were employed by them. Lastly, you’ll have to give an estimate of the wages you earned, how much federal income tax was withheld. You may be able to get a lot of this information from a most recent pay stub.
3. File your return.
You’ll still need to file a return prior to April 15th even without a W-2. Not having a W-2 is not a reason to not file.
4. File an amendment.
Once you’ve filed your taxes based on your estimated W-2 and then you receive your actual W-2 from your employer, you’ll need to file a 1040X if any info is different than what you estimated.

You can find intructions for Form 4852 and Form 1040X online at https://www.irs.gov/ or you can call 1-800-TAX-FORM (800-829-3676).

If you’re taking a vacation, you can rent your house out while you’re away. You can make money and have a housesitter all tax free.

The IRS allows you to rent your home up to 2 weeks without having to pay income taxes. This can be an ideal scenario if you’re concerned about leaving your house empty for 2 weeks. You can use an online service like AirBnB to find qualified people to rent your house.

If you live in a city where there is an event that comes to town that pretty much takes over the whole town, this can be fairly lucrative for you. For example, if you live in Austin and all the hotels are booked a year in advanced for the SXSW conference, you can charge a significant amount tax-free. During the week of The Masters Golf Tournament in Augusta, Georgia, it’s been reported that some homeowners have rented their houses out for the week for a whopping $25,000!

If you have more than one home you can rent each home out for 14 days. So with 3 houses, that’d be 42 days you’d be able to have non-taxed income.

If you have neglected to file past taxes, you’ll be surprised it isn’t as stressful as it you might think.

However, the longer you wait to deal with paying your taxes and filing a claim, it just gets more expensive. It’s best to take care of it now. You’ll be so happy you did!

Even if you know you can’t pay all you owe, it’s best to make sure you file on time as you may qualify for a payment plan. However, paying by the due date is the way to go about paying the least.

And if it’s already late, here’s what you need to do:

• You most definitely want to see a tax professional like us. We know just how to deal with situations like the one you’re in. Get together all possible tax information you have relevant to the year you need to file for and set up an appointment with us.
• Then you need to make some sort of a payment when we file for you. Ideally, you’ll want to pay all that you owe. If not all, there are a few options such as an installment plan, an extension or perhaps a settlement.

Continuing to neglect filing your taxes can lead to serious enforcement actions taken by the IRS. We’ll take good care of you though. Let us help you through this time. Calling us now is the best first step you can take.

You may be eligible for a deduction when making your itemized deductions if you incurred a significant amount of healthcare and dental cost costs last year.

If your health care costs were over at least ten percent of your yearly gross income, there are several things that you can deduct:

• Surgeries
• Hospital Stays
• Prescriptive Eyewear
• Prescription Drugs
• Doctor Visits (including therapists and medical counsellors)
• Travel Costs (if you had to travel for a specific treatment)

Note that the above is not a complete list, you can check out Publication 502 on the IRS page. It’s also important to note that the costs are the costs you incurred and not the total costs.

For example, if your insurance company paid a portion of the bill, that costs the insurance company paid are not eligible.

We’re more than happy to make sure that you qualify for claiming medical expenses. It’s always best to have tax professional like us assess your unique situation so you don’t end up missing out on deductions you’re eligible for as well as deductions you’re not eligible for.