Tips

When it comes to making a budget, good intentions only go so far. Find out how to keep your budget realistic.

If you’re a local artist or craftsman that’s turned your passion into a business, you’re quickly finding out the reality and needs of budgeting. Here are 3 common errors you’ll want to avoid:

1. Not Thinking of Upcoming Costs
With all you have on your plate today, it’s hard to even think about tomorrow let alone what’s coming up in the next 6 months. But planning for those things today will give you so much more peace in the coming months. Think about demand for your product or services in the next 6 months to a year. What’s a slow time you have coming up? What’s a peak time and how do you budget that out to cover the slower time. For example, if you’re a wedding photographer, you can’t plan on being busy in the winter so, how do you make income from the wedding season cover the offseason?

2. Not Having a Specific Goal
Hoping to make more this month than last month is not a goal. How much more you want to make is a goal though. When you exhaustively write down all your costs and have a cushion for unexpected costs paired with specific goals to increase revenue, you’ll get much closer to achieving them than you would without.

3. Setting It and Forgetting It
Managing a budget is an active ongoing exercise that evolves overtime. Setting up a spreadsheet and walking away is useless. You have to be able to adjust and improve the budget in the moment on a regular basis. Set aside a time every month to do this and you’ll see your money grow.

Remember to always consult with a professional financial advisor. You do your thing you’re good at doing and we do ours. Let’s partner together today!

Don’t wait until the last minute to itemize your deductions!

Starting to itemize now will greatly help you avoid stress when it gets to be tax season again. Here are some things to keep in mind to be prepared.

Talk with a tax professional about your situation as soon as possible. You’ll want to assess whether itemizing is right for you or not. Your income might be below the threshold of making it worth your while to itemize. And if it is below the threshold, we could help you by showing you ways to match the benefits you’d see from itemizing. For example, it may mean doubling up on a couple of mortgage payments or paying property taxes early that could change your taxable income. We’ll help you decide what’s best for you.

If you are planning to itemize, you’ve got to organize. Have a dedicated place in your house that is solely for tax records such as receipts or your log for business mileage. If you have a smartphone, it’s a best practice to take a photo of each receipt and record so you have a digital backup as well as a place to maintain receipts that you were sent via email. There are even apps like Genius Scan that turn your iPhone photos of receipts into PDFs.

Start now if you haven’t already. Your future self will thank you!

Determining what’s a business travel expense and what’s not can be a very gray area. Find out how to clear up the confusion.

Essentially, to be considered a business travel expense, the main question to ask yourself is, “Did this expense go towards moving my business forward?” If you can answer that question with a “yes,” here’s what you need to know about what you can deduct on your taxes.

You can deduct business expenses related to travel, such as, transportation, meals, lodging and entertainment.

Common Transportation Deductions

• Airline Tickets
• Rental Cars
• Taxis
• Trains
• Personal Car Mileage ($0.56 per mile as of 2014)
• Tips to Drivers
• Parking

Common Meals Deductions (Deductions for meals is limited to 50 percent of the costs)

• Breakfast
• Lunch
• Dinner
• Snacks (at the airport, for example)

Common Lodging Deductions

• Room Rate + Applicable Taxes
• Tips (to valets, for example)
• Parking
• Wifi charges necessary to doing business
• Laundry/Dry Cleaning

Common Entertainment Deductions (This one is more gray and more scrutinized by the IRS. Be sure you can prove the entertainment expense was directly related to the betterment of your business. Also only 50% of the amount is usually deductible.)

• Golf
• Cocktails
• Convention Receptions
• Nightclub Admission
• Sports Arena Parking

We’re here to help you deduct all the expenses you’re entitled to. Give us a call today!

Roth IRAs can be mystifying with all the conflicting information out there.

Investments in Roth IRAs are quite simple to understand despite what financial ads that run during major sporting events would lead you to believe.

Roth IRAs are for people who have an income of up to $112,000 per year or married couples who earn up to $178,000. What’s great about a Roth IRA is that you do not have to pay taxes on it. No matter how much your investments accumulate, Uncle Sam doesn’t see a nickel of it.

There are several ways you can invest in a Roth IRA. You can set up a Roth IRA as a mutual fund, buy bonds or even invest in real estate. However, as of 2014, you can only invest up to $5,500 per year—$6,500 if you’re over 50 years old. It’s also important to note that you have to earn an income to be able to contribute.

To make investing easier, set up automatic investments to be deducted from your account. This will help you not forget as well as take away any temptation to skip a payment here or there.

Saving for retirement shouldn’t be complex. Here’s how to keep it simple.

The number 1 thing to keep in mind when saving for retirement is consistency. Overthinking elaborate investment schemes is not as effective as it is to keep things simple and invest on a regular basis.

Whether you have a 401k (or 403b) and/or a Roth IRA, it’s best to put away 12 to 17 percent of your income. If you work for a company that matches your investments, but not up to the recommended percentage, invest up to what your company will match and put the rest in a Roth IRA.

It’s important to keep in mind, that obviously, saving for your golden years is a slow process over many years. And the longer it’s in there, the more it accumulates interest—it begins to ‘snowball’ if you will.  

Where a lot of people fail saving for retirement is that their retirement savings is their only emergency funds. Having to take money out of retirement to pay debt, cover loss of job or pay for medical bills is extremely costly and unfortunate. The most secure way to save for retirement is to make sure you have plenty of savings for urgent needs so you’re never in a position to take money from your future self.

Everybody’s situation is different. It’s best to get sound counsel from a financial expert. We get you going in the right direction today. Give us a call.

Image courtesy of jeremypair on flickr;

Will your itemized deductions for 2013 be right around the standard reduction amount? If so, you can bundle expenses for every other year and claim the standard deduction in the in between years. Over two years, this will significantly cut how much income you’re taxed on.

For example, the standard deduction for those filing jointly is $12,200. And let’s say you’re only deductions for 2013 are $4k in property taxes and $8k in home mortgage interest. If you go ahead and pay your property tax of $4k in 2013 for 2014, you can claim $16,000 in deductions for your 2013 return. The following year, you can claim the standard deduction of $12,200 but only have about $8k in mortgage interest.

You can do the same if you are filing individually ($6,100) or head of household ($8,950).

If this seems tricky, we’re here to help you with advice. Everyone has a unique situation and it’s always best to get advice from a professional that understands where you are financially.

Did you know anyone paid for babysitting has to report that income to the IRS if they made over $600? Or let’s say you and a neighbor want to trade cars, you’ll still have to pay taxes on what the fair market value of the car you bartered. But not all income is taxable. Here are some examples of income you don’t have to pay taxes on:

• Rebates from manufacturers

• Gifts that are not more than the annual exclusion rate

• Inheritances

• Child support paid to you

• Damages payouts

• Frequent flyer miles you earned from business trips and then used for personal trips

There are other types of income that are tax-free under certain conditions. Here is a look at those:

• Reimbursements for qualified adoptions

• Selling items on Craigslist is taxable income. But if you make it a charity tag sale where 100% of the sales goes towards charity, it’s nontaxable.

• You don’t have to pay taxes on life insurance proceeds paid to you as the result of someone’s death but, you do have to pay taxes when you cash in a life insurance policy.

The IRS recommends that when you make these types of deductions, you use CPA or Enrolled Agent. We’re always more than happy to help you find ways to keep more of your money at tax time as well as giving advice throughout the year for tax strategies.

Important: ALL income has to be reported. Even if it is income that is nontaxable.

Give us a call today to start saving your taxes.

Living abroad for work can be a tricky tax situation. In many cases both countries want to tax your income that you’re making while working and living overseas. While many countries have different requirements, here’s what you need to know about the IRS’s requirements.

• You may have a U.S. tax liability and a filing requirement in 2014 if you’re a U.S. citizen, resident aliens or have dual citizenship and you lived or worked abroad during all or part of 2013.

• Eligible taxpayers normally get one two-month extension (June 15, June 16th this year). You are required to explain your expat situation in a written statement attached to your return.

• If you are not a citizen of the US but have income from US sources, you may have a tax obligation in the US and that will need to be filed by April 15th or June 15th depending on your situation.

• The IRS requires U.S. citizens and resident aliens to claim any global income, including money from banks, stocks and securities overseas.

• More than likely you’ll need to fill out Schedule B that asks about the existence of banking, stocks and foreign income, You’ll also need denote the country the account is created and managed.

• If you have accounts that go over $10,000 during the tax year, you’re required to file with the Treasury Department a Financial Crimes Enforcement Network using Form 114.

As mentioned, living and working abroad is a tricky tax situation. This is not something you want to do on your own. We’ll make sure you meet all of your tax obligations as well as making sure you get to keep as much of your money as possible. Call us today!

Looking for work costs money. Things like resume paper and printing, a new suit, and paying for premium online job search services can add up. This can be a little tough on job seekers who are likely unemployed. Sometimes these job seekers even have to take a class or two to be more marketable. The government tries to mitigate these expenses by allowing these folks searching for work deductions on their tax returns.

Here’s a list of common deductions you can take:

• If you travel for an interview that’s not paid for by the company you are interviewing with, you can deduct your expenses as long as the trip was for the sole purpose of finding a job.

• You can deduct costs around creating, printing and mailing resumes.

• You can also deduct the costs you incur by hiring a recruiter or job placement agency.

Things that disqualify you from taking job search deductions:

• Your search must be for a job within your current field and you are not looking for a job for the first time.

• There has not been a long gap in employment.

• The expenses you take on such as travel must be primarily related to your job search.

• If another party or employer reimburses you for the expenses you’re not able to take the deductions.

Of course, it’s always best to have a professional like us to do your taxes so you don’t increase your risks for an audit. Additionally, we may be able to find even more deductions you can take; everyone’s situation is unique.

Starting a new business is exciting! At least until you get the paperwork part. It’s important that you first identify just what type of business you in regards to the IRS.

If you’re starting a new business here’s what you need to know about filing statuses for businesses:

• LLC or Limited Liability Corporation - An LLC protects you from personal responsibility of business debts and claims. So, if you owe money through debt or lawsuit, only the assets owned by the business can be sought to satisfy those claims. However, you still report the profit and losses of the business on your personal tax filings. Visit IRS page on LLCs for more details>>

• Sole Proprietorship - Basically, this is when you and only you are the company. For example, you’re a consultant, carpenter or photographer. You claim profits and losses on your personal income tax and are taxed on your profits. The drawback here versus an LLC is that you CAN be held personally liable for costs incurred by the business. A pro to this classification though is that it is easy to setup and usually requires very little paperwork, especially if you’re doing business as (DBA) your own name–for example, “John Smith Photography.” Visit IRS page on Sole Proprietorships for more details>>

• Partnership - This one is a bit more obvious. It’s when two or more people go into business together pooling together money, labor and/or skills with an expectation of sharing the profits. Under this structure, a partner does not report the entire profit and loss of the business but reports only their own share of the profits. Visit IRS page on Partnerships for more details>>

• Corporation (C Corporation) - Corporations are their own entity and report a profit and losses the way a sole proprietor would. A corporation differs from a Partnership because shareholders, while investing assets like a partnership, are receiving capital stock in exchange for said investments. A corporation is taxed on its profits and then the shareholder is taxed on the profit they receive from the corporation. Visit IRS page on Corporations for more details>>

• S Corporation - An S Corporation is much like a C Corporation but passes all profits, losses and deductions on to its shareholders. This prevents the entity from being taxed twice like a C Corporation is taxed. However, there are multiple requirements the organization must meet to be eligible. For example, you have to be a domestic corporation with no foreign shareholders and you must have less than 100 shareholders. Visit IRS page on S Corporations for more details>>

Keep in mind these filing statues are for Federal only and each state has their own criteria and you’ll want to check with them. Give us a call today and we can help you get set up or any any questions you may have.