Tips

Avoid IRS hassles by starting off on the right foot.

You start your own business because you found you have something valuable to give the world and you’re good at it. But like most entrepreneurs starting out, you learn there’s a bunch of red tape that has to be handled in order for you to get to the business you set out to start. Following these tips will get you on your way:

1. Determine Your Business Type
The most typical business types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company (LLC). You can find out more about what’s right for you here at the Small Business Administration site.

2. Determine Kind of Taxes You’ll Be Responsible For
There are generally 4 kinds of taxes businesses pay and depending on what your business is, one of these may be right for you: income tax, self-employment tax, employment tax and excise tax. Learn more about these taxes on the IRS website.

3. Get an EIN
Your business type may require you to have an EIN (Employee Identification Number). One reason for this number is this is the number your employees would use on the W-2 to do file their taxes. You can determine your need for an EIN here.

Businesses are also required to estimate and pay taxes on a quarterly basis. It’s critical you have sound bookkeeping so you can accurately stay up to date with the IRS and avoid headaches. If you’re not sure about your tax situation or your bookkeeping, when can get you on the right path. Give us a call today!

The IRS can’t audit everybody but just how many taxpayers are being audited? Find out the percentage by income.

There are over 200 million tax returns filed every year. There’s no way the IRS could audit all of them. So just how many of these returns are being audited? Out of all of those filings, the IRS audits just a little over 1%.

It turns out, as you might guess, the less you make, the better chance you have of steering clear of auditors—unless, of course, you claimed zero. And as you grow financially, you are sure to have closer attention paid to you by Uncle Sam.

Below is a breakdown of how many audits are performed according to taxpayers’ total income as of 2010 which is the most recent available data:

• No income reported: 3.9% of returns audited
• $1 to $25,000: 1.18% of returns audited
• $25,000 to $50,000: 0.73% of returns audited
• $50,000 to $75,000: 0.78% of returns audited
• $75,000 to $100,000: 0.64% of returns audited
• $100,000 to $200,000: 0.71% of returns audited
• $200,000 to $500,000: 1.92% of returns audited
• $500,000 to $1,000,000: 3.37% of returns audited
• $1,000,000 to $5,000,000: 6.67% of returns audited
• $5,000,000 to 10,000,000: 11.56% of returns audited
• $10,000,000 and up: 18.38% of returns audited

Our job is to help you make sure you avoid any mistakes that would increase you chances of an audit. Contact us today so we can help you navigate through your unique situation. And if you are being audited, we can help you through that experience as well. Give us a call!

When it comes divorce or being an unmarried parent, who gets to claim your dependents can be a bit tricky. Here’s what you need to know.

Many times, divorced or unmarried parents can cause headaches because both parents attempt to claim their son or daughter as a dependent. The headache comes when the parent to claim the child second gets their claim rejected.

The basic rule imposed by the IRS is that the parent with whom the child spends the majority of the tax year with gets to claim the child. In the case of joint custody, or in the event there is an equal amount of time between the 2 parents, the parent with the largest adjusted gross income will be able to claim the dependent.

Although, a parent who has the majority custody of the child may opt to fill out an IRS form to allow the parent with less custody to claim the child. This can be done yearly or multi-yearly.

One problem that confuses unmarried parents is that rulings from family courts are not always in sync with the IRS tax laws. In some cases, divorce judges award a parent the right to claim a child even though they are not qualified to do so according to the Federal tax law, which trumps family court rulings.

We’re here to walk through your unique filing situations and we’ll make sure you get all the tax breaks you have a right to. Give us a call today!

Ever wonder about what the Earned Income Tax Credit is? You just might qualify!

Essentially, the Earned Income Tax Credit, also known as the EITC, is way to help US citizens that work hard but still have lower income. What’s great about this credit is that it is a refundable credit. That means that even if you don’t owe taxes, you can get a refund of the credit.

The refund is a great way to start a savings emergency fund or pay down debt. You can qualify based on your income status and/or if you have qualifying dependents. Below is the criteria for being eligible for the EITC:

• No children and your income is less than $14,590 if single, $20,020 if you’re married and filing jointly.
• One child and your income is less than $38,511 if single, $43,941 if you’re married and filing jointly.
• Two children and your income is less than $43,756 if single, $49,186 if you’re married and filing jointly
• More than two children and your income is less than $46,997 if single, $52,427 if you’re married and filing jointly.

Just keep in mind that your children must have valid Social Security numbers and if you’re married, you cannot file separately. Give us a call today and we’ll help you determine your eligibility for the EITC! We want to make sure you get all that’s coming to you so you can give you and your family the financial security you deserve. It’s why we do what we do.

Putting off your taxes until it’s too late can be damaging.

Filing your taxes late can mean that you’ll owe even more money. Or, if you have a refund due, it can lessen how much you get back. Either way, you’re losing money.

If you owe money, filing late may result in significant penalties and interest charges. These extra charges can be from 5 to 25 percent of the amount you owe. You should always file your taxes whether you can pay them or not. You may be eligible for making an installment plan. Continuing to not file your taxes as well as avoiding requests from the IRS will have extremely negative consequences imposed on you by IRS enforcement agencies.

In the case that you are owed money, you will not be penalized for not filing. However, you’re giving up money that is yours. You have up to 3 years to file a claim and receive a refund. Once the third year has passed, that money is gone for ever.

If you’re filing late, we’ll help you make sure that you keep the money you owe to a minimum.  A tax professional like us has years of experience dealing with the IRS as well as taxpayers unique situations. 

If you bought a house or owned in house in 2013, there may be more deductions than you knew about.

For itemized deductions, most people know that you can deduct the interest you pay on your mortgage. Here’s a list more deductions you may be able to take as well.

• Property Taxes
• Home Improvements that are done for medical reasons such as accessibility features.
• Insurance premiums for private mortgages
• Home equity loan interest

There are many other deductions that relate to home ownership like improving energy efficiency or using part of your house exclusively for your business. We’re here to help you take full advantage of all the tax breaks home ownership affords you. Give us a call today!

Sure getting married means you’ll more than likely change your filing status, but there are also some other administrative things that need to happen as well.

Congrats on getting married! And now there’s some paperwork that needs to get done. Here’s a list of some steps you need to make before filing your taxes with your new spouse.

1. The first thing you’ll want to do is update your information with the USPS so any tax information will be sent to the right address.

2. If you’re changing your name, you want to make sure you update the Social Security Administration. This is so your name will match on your return. And you’ll want to get a new Social Security Card as well. If you the name the Social Security has on record doesn’t match your name on your return, this could create a delay in processing your return, not to mention the hassle.

3. If you moved, you’ll also want to make sure you fill out a change of address form with the IRS.

It’s always best to work with a seasoned tax professional like us so you can take full advantage of your new tax status. We’ll help you decide the best way to file for your unique situation. Give us a call!

Not sending out 1099s can be costly. Here’s what business owners are responsible for.

If you used independent contractors such as graphic designers, consultants, and attorneys, you are required by the IRS to send a 1099 if you paid them more than 600 dollars in the tax year at hand. Not doing so can result in a penalty of 250 dollars; that can really rack up quick if you used several contractors throughout the year.

The consultant will need to have received their 1099 from you by January 31st. You have until February 28th to turn it in signed by the contractor to the IRS. If you are filing electronically, you have until March 31st.

Note: you don’t have to send a 1099 out to an entity you paid that is a corporation.

You can learn more about 1099s here on the IRS’s site.

Everyone’s tax situation is different and we’re here to help you meet your legal requirements and navigate any complex tax issue. Give us a call today so we can help.

The distinction between capital expenditures and expenses may seem obvious. But the IRS may see it differently.

There are capital expenditures and there are expenses. And most of the time, the line between them seems pretty clear to business owners come tax season. But there can be some gray areas.

If you bought new equipment like a computer, a bulldozer, or a coffee shop espresso machine, you probably know that these are capital expenditures you can write off in one year or deduct and depreciate over the years it is in use. Essentially, capital expenditures are assets that help you generate revenue for years to come but go down in value.

Expenses on the other hand, are simply the costs that occur in a year for supplies consumed doing business within that year. These are expenses like paper, breakroom coffee, travel costs, business cards and so on.

But because businesses are unique and everyone’s situation is different, there are gray areas that filers don’t always quite understand and improperly file as a result which can send a red flag to the IRS—especially in the Digital Age. What about a website? Or software? Where do these fall in relation to Capital Expenditures and Expenses?

Deductions for business owners can be tricky. It’s always best to use a qualified tax professional like us to help you ensure your chances of filing properly and minimizing your chances of an audit. Give us a call today!

If you’re taking care of a parent in their sunset years, you may be able to claim them as a dependent.

It doesn’t have to be a parent per se, it can be a family member that you are giving care to. It can be a family member such as an aunt or uncle.

Obviously you’ll need to meet some requirements to be eligible to claim them. Although, they don’t necessarily have to live with you. There are four tests that must be met to qualify. Here’s a list of the tests and you can see Publication 501 for more details:

• Not A Qualifying Child Test
• Member of The Household or Relationship Test
• Gross Income Test
• Support Test

We’re more than happy to help you understand if your unique situation qualifies for claiming your parent or elderly family member as a dependent. It’s always best to go with a qualified tax professional like us to relieve any ambiguity and help you from claiming someone when you’re not eligible for it.

Image courtesy of wiremoons on flickr; reproduced under Creative Commons 2.0