Tips

When you need some hired help around the house, you’ll need to know how to handle your tax obligations. This post will tell you how.

It may seem ok to hire a family friend just graduating high school for the summer to take care of the kids and pay some cash to her every week. Or perhaps have one of the guys from church do the lawn every week. You know, “under the table.” It’s normal to feel this way when you’re part of a close community. But the consequences can be dire if you didn’t do your part to meet tax requirements.

Say that family friend stays on and she winds up taking care of your kids while she goes to college for the next four years and then looks for a real job and can’t find one. So she then goes to claim unemployment. She’ll list who her past employers were and the state and IRS will find out. This can lead to a number of undesirable consequences like back taxes, interests, penalties and even tax evasion charges.

Any time you hire someone that does not qualify as an independent contractor, you will need to hire them as an employee. Here’s what you need from them to get started off on the right foot:

1. An EIN: This is an employer identification number. You’ll can get that here and that is what you’ll use to get an ID for the state.

2. You’ll also need to keep up with how much you are paying and make sure the right amount of taxes are withheld. We can help you with that with our Payroll services. (You’ll need to pay quarterly taxes for both state and federal.)

3. You should have an I-9 as well to prove that your employee is a legal resident. There are 3rd party vendors you can use to process and verify I-9s.

4. You’ll also have to provide the w-2 to employees at the end of the fiscal year.

5. You’re employee will also have to complete a W-4 upon hire which is what will tell you how much you need to withhold each month.

We’re more than happy to help you answer any questions you may have about meeting your obligations in regards to paying for household assistance and caregivers. Give us a call today.

While the IRS considers rent paid to you as income, there is one way to make some extra cash and keep it all.

No, unfortunately you can’t just rent out your properties tax-free indefinitely, but you can for up to fourteen days. This is an exemption called the “Masters Exemption.” Under the Masters Exemption, you are allowed to rent out your property for up to 14 days and not have to pay taxes on the income.

This could be a huge deal if people are willing to pay large sums because you live somewhere exotic or perhaps close to where a big conference or annual event takes place. In fact, that’s how the exemption got its name—homeowners near the Masters tournament in Georgia rent out their houses during the tournament. It’s been reported that some have received up to twenty thousand dollars—all tax-free.

The tax-free duration can only be 14 days total in a tax year. And it can be used for more than one property per filing. So someone with 3 houses could collect tax-free rent for up to 42 days provided that not one property exceeded the the rental by 14 days.

There are simple tax strategies and there are complex strategies. At the end of the day, these fundamental goals should still be reached.

There are many tax strategies out there to help you. It can be a little overwhelming determining which ones can help. As you examine each one, measure the strategy against these 5 goals.

A good tax planning strategy should:
1. Lower your amount of taxable income
2. Reduce the rate at which you are taxed
3. Empower you to control when taxes get paid
4. Ensure you get all credits available to you
5. Put you in charge of the Alternate Minimum Tax

Of course, tax planning hinges on accurate estimations of your income of the next 3-5 years. The more precise you can be with your projections, the better your strategy will be when it comes to taxes.

We can help you with sound and experienced tax planning. Give us a call today!

Why is it some businesses seem to simply “go out of business” and some have a liquidation? Find out what liquidation really means.

Essentially, liquidation means that a company’s assets are worth more than the value of the business’s ability to generate income. So when you see a furniture store having an “Everything Must Go” sale, they mean it. They are selling everything! So it’s interesting to note that liquidation is also referred to as “winding-up.”

The money the business makes from selling not only their remaining inventory but also the staff’s desks, lamps and printers, is going towards paying off any remaining debt the business may have outstanding with the hope of having some money left over for the owners.

You rarely see liquidation in businesses that specialize in more service-oriented businesses because they value is intangible and the assets are minor.

If you’re the owner of a business that’s struggling and looking for a way out from under the business, a liquidation may be right for you. We can help you determine if it is or not, so give us a call today!

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!