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Unlocking Financial Success: Your Guide to Small Business CPA Services in Atlanta

Are you a small business owner in Atlanta looking to navigate the complex world of finances with confidence? Look no further! In this comprehensive guide, we’ll explore the invaluable role of a CPA (Certified Public Accountant) for small businesses in Atlanta and introduce you to Metro Accounting and Tax Services CPA, your trusted partner in financial success.

Why Small Businesses in Atlanta Need a CPA

Running a small business comes with its own set of financial challenges and responsibilities. From managing day-to-day transactions to navigating tax regulations and planning for growth, the financial aspect of your business demands careful attention. This is where a skilled CPA can make all the difference.

  1. Expertise in Tax Compliance: Tax laws are constantly evolving, and compliance is crucial to avoid penalties and maximize deductions. A CPA specializing in small business taxes can ensure that your business remains compliant while identifying opportunities to minimize tax liabilities.
  2. Financial Planning and Analysis: Beyond tax preparation, CPAs offer valuable insights into your business’s financial health. They can analyze your financial statements, identify trends, and provide strategic recommendations to improve profitability and sustainability.
  3. Strategic Business Advice: CPAs are not just number-crunchers; they are trusted advisors who understand the intricacies of your business. They can assist with budgeting, cash flow management, and long-term financial planning to help you achieve your business goals.

Introducing Metro Accounting and Tax Services CPA

When it comes to finding a reliable CPA firm in Atlanta, Metro Accounting and Tax Services CPA stands out as a premier choice. Here’s why:

  1. Specialization in Small Business Needs: Metro Accounting and Tax Services CPA understands the unique challenges faced by small businesses in Atlanta. Their team is equipped with the knowledge and experience to provide tailored solutions that align with your business objectives.
  2. Comprehensive Services: From bookkeeping and payroll processing to tax planning and IRS representation, Metro Accounting and Tax Services CPA offers a comprehensive suite of services to meet all your financial needs under one roof.
  3. Personalized Approach: Unlike one-size-fits-all solutions, Metro Accounting and Tax Services CPA takes a personalized approach to client service. They take the time to understand your business’s specific requirements and develop customized strategies to optimize your financial performance.
  4. Proven Track Record: With years of experience serving small businesses across diverse industries, Metro Accounting and Tax Services CPA has built a reputation for excellence. Their track record of success and client satisfaction speaks volumes about the quality of their services.

Get Started Today!

Don’t let financial challenges hold your small business back. With the expertise of a qualified CPA firm like Metro Accounting and Tax Services CPA, you can unlock the full potential of your business and achieve your goals with confidence.

Contact Metro Accounting and Tax Services CPA today to schedule a consultation and take the first step towards financial success. Your business deserves nothing but the best, and Metro Accounting and Tax Services CPA is here to deliver.

 

Small Business CPA Atlanta

Metro Accounting and Tax Services in Atlanta specializes in providing comprehensive accounting and tax solutions tailored to the needs of small businesses in the metro area. Here’s why they could be the right choice for your small business:

  1. Expertise in Small Business Services:
    • Metro Accounting and Tax Services have extensive experience working with small businesses across various industries in Atlanta. Their team of Certified Public Accountants (CPAs) possesses in-depth knowledge of small business accounting, tax planning, and compliance requirements.
  2. Personalized Approach:
    • They understand that every small business is unique and requires personalized attention. Metro Accounting and Tax Services take the time to understand your business goals, challenges, and financial needs to develop customized solutions that meet your specific requirements.
  3. Comprehensive Services:
    • Whether you need assistance with bookkeeping, payroll processing, tax preparation, or financial planning, Metro Accounting and Tax Services offer a wide range of services to support your small business needs. From day-to-day accounting tasks to strategic tax planning, they’ve got you covered.
  4. Local Presence and Accessibility:
    • As a local firm based in Atlanta, Metro Accounting and Tax Services are easily accessible to small businesses in the metro area. Their convenient location ensures that you can meet with their team in person to discuss your accounting and tax needs, fostering a strong working relationship.
  5. Proactive Tax Planning:
    • They go beyond traditional tax preparation services by providing proactive tax planning strategies to help minimize your tax liabilities and maximize savings. Metro Accounting and Tax Services stay up-to-date on the latest tax laws and regulations to ensure compliance while identifying opportunities for tax savings.
  6. Transparent Pricing and Excellent Service:
    • Metro Accounting and Tax Services believe in transparent pricing and strive to offer affordable accounting and tax solutions without sacrificing quality. Their commitment to excellent service means you can expect prompt responses, clear communication, and reliable support throughout your engagement with them.
  7. Client Satisfaction and Trust:
    • With a track record of client satisfaction and trust, Metro Accounting and Tax Services have built a reputation for delivering exceptional results for small businesses in Atlanta. Their dedication to client success and professionalism sets them apart as a trusted partner for your accounting and tax needs.

If you’re a small business owner in Atlanta seeking reliable accounting and tax services, consider partnering with Metro Accounting and Tax Services. With their expertise, personalized approach, and commitment to excellence, they can help you achieve your financial goals and navigate the complexities of running a successful business.

Resolving IRS Tax Debts With The Assistance of A Certified Public Accountant (CPA).

Resolving tax debt with the assistance of a Certified Public Accountant (CPA) specialized in tax matters can provide valuable guidance and expertise to individuals facing tax challenges. Here’s how a CPA can help with tax debt resolution:

  1. Assessment of Tax Debt:
    • A CPA begins by conducting a comprehensive assessment of your tax debt situation. They review all relevant tax documents, including tax returns, notices from the IRS or state tax agencies, and financial records to understand the scope and nature of the debt.
  2. Analysis of Options:
    • Based on the assessment, the CPA evaluates available options for resolving the tax debt. This may include installment agreements, offers in compromise, penalty abatement, innocent spouse relief, currently not collectible status, or other tax relief programs offered by the IRS or state tax authorities.
  3. Negotiation with Tax Authorities:
    • A CPA acts as your advocate in negotiations with the IRS or state tax agencies to reach a favorable resolution to your tax debt. They communicate on your behalf, submit required documentation, and negotiate terms and conditions of payment plans or settlement agreements.
  4. Preparation of Documentation:
    • A CPA assists in preparing and submitting necessary documentation to support your case for tax debt resolution. This includes financial statements, income and expense records, bank statements, and any other documentation required by the taxing authorities.
  5. Representation in Audits or Appeals:
    • If your tax debt is under audit or appeal, a CPA provides representation and guidance throughout the process. They help prepare for audits, respond to audit inquiries, and represent you in appeals proceedings to ensure your rights are protected and the best possible outcome is achieved.
  6. Tax Compliance Assistance:
    • A CPA helps ensure ongoing tax compliance to prevent future tax debt issues. They provide guidance on tax planning, record-keeping, and compliance with tax laws and regulations to minimize the risk of future tax problems.
  7. Financial Planning and Budgeting:
    • In addition to resolving tax debt, a CPA offers financial planning and budgeting assistance to help you manage your finances effectively. They develop strategies to improve cash flow, reduce expenses, and establish a plan for repaying tax debt while maintaining financial stability.
  8. Communication and Support:
    • Throughout the tax debt resolution process, a CPA provides clear communication, guidance, and support. They keep you informed of progress, answer your questions, and provide reassurance and peace of mind during what can be a stressful time.

By enlisting the expertise of a CPA experienced in tax debt resolution, individuals can navigate the complexities of tax laws and regulations, negotiate effectively with tax authorities, and achieve a successful resolution to their tax debt issues. The guidance and support of a knowledgeable CPA can make a significant difference in achieving financial relief and peace of mind.

Finding a Good CPA For Your Taxes

A Tax CPA, or Certified Public Accountant, is a specialized accounting professional who has met the rigorous education, examination, and experience requirements set by the state boards of accountancy. These professionals provide a wide range of tax-related services, including tax planning, preparation, compliance, and representation before tax authorities. Here’s an overview of what a Tax CPA does:

  1. Tax Planning: Tax CPAs help individuals and businesses develop strategic plans to minimize tax liabilities while maximizing tax benefits. They analyze financial data, identify tax-saving opportunities, and recommend tax-efficient strategies tailored to their clients’ specific circumstances.
  2. Tax Preparation: Tax CPAs prepare and file tax returns for individuals, businesses, estates, and trusts. They ensure compliance with applicable tax laws, regulations, and filing requirements while maximizing available deductions, credits, and exemptions.
  3. Tax Compliance: Tax CPAs assist clients in complying with federal, state, and local tax laws by staying up-to-date on changes in tax regulations, deadlines, and filing requirements. They ensure accurate reporting of income, expenses, deductions, and credits to minimize the risk of audits or penalties.
  4. Tax Representation: Tax CPAs represent clients in tax matters before the Internal Revenue Service (IRS), state tax agencies, and other tax authorities. They communicate with tax authorities on behalf of their clients, respond to inquiries, resolve disputes, and negotiate settlements to achieve favorable outcomes.
  5. Tax Advisory Services: Tax CPAs provide expert advice on a wide range of tax-related matters, including tax implications of business transactions, investments, retirement planning, estate planning, and international taxation. They help clients make informed decisions to achieve their financial goals while minimizing tax consequences.
  6. Tax Compliance Reviews: Tax CPAs conduct reviews and audits of clients’ financial records, tax returns, and internal controls to ensure accuracy, completeness, and compliance with tax laws and regulations. They identify areas of potential risk or non-compliance and recommend corrective actions to mitigate exposure.
  7. Tax Research: Tax CPAs conduct thorough research on complex tax issues, rulings, and regulations to provide accurate and timely guidance to clients. They stay informed about changes in tax laws, court decisions, and regulatory updates that may impact clients’ tax situations.
  8. Client Education: Tax CPAs educate clients on tax laws, regulations, and compliance requirements to enhance their understanding of tax-related matters and empower them to make informed financial decisions. They provide guidance on record-keeping, documentation, and tax planning strategies to optimize tax outcomes.

Overall, Tax CPAs play a critical role in helping individuals and businesses navigate the complexities of the tax system, minimize tax liabilities, and achieve their financial objectives. Their expertise, professionalism, and commitment to client service make them valuable partners in achieving financial success.

Achieve a Zero Tax Rate Like Some Large Corporations

Achieving a tax rate of zero, like some large corporations, requires a sophisticated understanding of tax law and strategic planning. While replicating the exact tax strategies of companies like Amazon may not be feasible for most individuals or small businesses, there are some general principles and strategies that can help minimize tax liability legally and ethically:

  1. Utilize Tax Credits and Incentives: Research and take advantage of tax credits and incentives available for your business. These could include credits for research and development, energy efficiency, hiring certain demographics, or investing in specific industries or regions.
  2. Maximize Deductions: Ensure you’re taking advantage of all available deductions allowed by the tax code. Deductible expenses might include business expenses, depreciation of assets, healthcare costs, retirement contributions, and interest on business loans.
  3. Consider Entity Structure: Depending on your business type and size, different entity structures (such as sole proprietorship, partnership, S corporation, or C corporation) may offer different tax advantages. Consult with a tax professional to determine the most advantageous structure for your situation.
  4. Tax Loss Harvesting: If you have investments, consider tax loss harvesting, which involves selling investments at a loss to offset capital gains and reduce taxable income.
  5. Utilize Retirement Accounts: Contribute the maximum allowable amount to tax-advantaged retirement accounts such as IRAs, 401(k)s, or SEP IRAs. Contributions to these accounts can lower your taxable income and defer taxes on investment gains until retirement.
  6. Charitable Contributions: Consider making charitable contributions to qualified organizations. These contributions may be tax-deductible and can help lower your taxable income.
  7. Keep Detailed Records: Maintain meticulous records of all income, expenses, deductions, and credits. Accurate record-keeping ensures that you claim all eligible deductions and credits while also providing documentation in case of an audit.
  8. Stay Informed and Seek Professional Advice: Tax laws and regulations are complex and subject to change. Stay informed about changes in tax law and seek advice from qualified tax professionals who can help you navigate the tax code and implement strategies to minimize your tax liability legally and ethically.

While achieving a zero tax rate may not be realistic for most individuals or small businesses, implementing these strategies can help minimize your tax liability and optimize your financial situation within the bounds of the law. It’s essential to prioritize compliance and ethical conduct while striving to reduce taxes.

Master The Tax Game: Expert Tips for Maximizing Your Personal Refund

 

Who doesn’t love a heftier tax refund? With the right strategy and some savvy tips, you can ensure you’re squeezing every last dollar out of tax season. In this comprehensive guide, we’ll dive into expert advice tailored to help you turbocharge your refund and keep more money where it belongs—right in your pocket.

  1. Stay Organized Year-Round:
    • The key to a beefier refund lies in year-round organization. Keep meticulous records of all income, expenses, and receipts, laying the groundwork for a smooth tax season. With everything neatly organized, you’ll be primed to claim every deduction and credit owed to you.
  2. Unlock Deductions and Credits:
    • Deductions and credits are your secret weapons for maximizing your refund. Ensure you’re taking advantage of every eligible deduction, from mortgage interest to charitable donations. Explore tax credits like the Earned Income Tax Credit and education credits to further slash your tax bill.
  3. Boost Retirement Contributions:
    • Supercharge your refund by ramping up contributions to retirement accounts. Not only will you be securing your financial future, but you’ll also be reducing your taxable income in the process. Consider maxing out contributions to employer-sponsored plans and explore options like IRAs and HSAs for additional tax savings.
  4. Itemize Your Deductions:
    • While the standard deduction is convenient, itemizing deductions can often yield a larger refund. Dive into deductible expenses such as state and local taxes, mortgage interest, and medical costs to ensure you’re capitalizing on every available tax break.
  5. Tap into Tax-Advantaged Accounts:
    • Don’t overlook the power of tax-advantaged accounts. Contributions to FSAs and HSAs can slash your taxable income, providing a double benefit of tax savings and increased refund potential. Maximize these accounts to the fullest extent to reap the rewards come tax time.
  6. Strategic Timing is Everything:
    • Timing can be a game-changer in the world of taxes. Consider shifting deductible expenses into the current tax year and deferring income where possible to optimize your tax situation. By playing the timing game smartly, you can position yourself for maximum tax savings and a fatter refund.
  7. Stay Ahead of Tax Law Changes:
    • Knowledge is power when it comes to taxes. Stay vigilant about changes in tax laws and regulations, keeping abreast of new deductions, credits, and tax brackets. By staying informed, you’ll be better equipped to leverage every opportunity for a bigger refund.

Armed with these expert tax tips, you’re poised to conquer tax season like a pro and pocket your biggest refund yet. From meticulous organization and strategic planning to savvy deduction-maximizing tactics, every step you take brings you closer to financial success. So go ahead, tackle those taxes with confidence, and watch your refund soar to new heights!

 

Clear Path To Small Business Financial Success

“Unlock Business Success with Expert Financial Guidance: Your Path to Profitability Begins Here!”

As a savvy small business owner, making informed decisions about your business is the key to unlocking success. But do you know your business’s net position on a daily, weekly, or monthly basis? Can you pinpoint the star product or service that drives your bottom line? If these questions leave you pondering, worry not! We’re here to guide you on a journey towards financial empowerment.

Why Choose Us?

  1. Key Performance Indicators Unveiled: Your Roadmap to Profitability!
    • Wondering where to start? Our experienced CPA, with over 25 years of expertise, is here to demystify your financial landscape. We’ll help you gain insights into crucial Key Performance Indicators (KPIs), enabling you to boost profitability, streamline efficiency, maintain compliance, and enjoy peace of mind.
  2. Comprehensive Financial Services Tailored for You:
    • Meet Metro Accounting And Tax Services, LLC—your one-stop solution for a spectrum of financial needs. From QuickBooks cleanup, consulting, setup, and training to bookkeeping, accounting, payroll, tax planning, preparation, and financial planning, we’ve got your back.
  3. Empowering Your Financial Journey: Unleashing the Power of Informed Decisions!
    • Our mission is clear: to empower small business owners, non-profits, churches, and individuals. Through a personalized approach, we guide you to make informed decisions that lead to tax savings and substantial business growth.
  4. Part-Time CFO Service: Your Strategic Financial Partner!
    • Are you at a point where your growing business needs professional financial advice, but a full-time CFO seems out of reach? Introducing our Part-Time CFO service—a bespoke solution that provides you with a professional financial manager. Together, we’ll steer your business towards unparalleled success.
  5. Building Wealth, Ensuring Longevity: Your Personalized Financial Plan!
    • Your journey doesn’t end with business success. We specialize in building and preserving personal wealth. Receive one-on-one guidance, a comprehensive financial plan, and strategies that mitigate risk, enhance efficiency, and ensure exponential growth, securing the longevity of your wealth.

Conclusion:

Your path to business prosperity and personal financial growth starts with us. Metro Accounting And Tax Services, LLC is not just a service provider; we’re your dedicated financial partner. Let’s embark on a journey together—where informed decisions, profitability, and peace of mind become your everyday reality. Choose expertise, choose empowerment, choose success.

4 tips for Separating Business and Personal Expenses

Maintaining a clear distinction between business and personal expenses is crucial for financial organization and tax purposes. Here are four tips to help you effectively separate business and personal expenses:

1. Open a Dedicated Business Bank Account:

  • Tip: Establish a separate business bank account for all business-related transactions. Use this account exclusively for business income, expenses, and transactions. This separation simplifies tracking and ensures financial clarity.

2. Use Business Credit Cards for Business Expenses:

  • Tip: Obtain a business credit card and use it solely for business-related purchases. This not only streamlines expense tracking but also helps build a credit history for your business. Avoid using personal credit cards for business expenses.

3. Create a Detailed Expense Policy:

  • Tip: Develop a comprehensive expense policy that clearly outlines what constitutes a business expense and provides guidelines for employees if applicable. Educate everyone involved about the importance of adhering to the policy to maintain financial integrity.

4. Keep Thorough Documentation:

  • Tip: Retain meticulous records of all business expenses. This includes keeping receipts, invoices, and any supporting documentation. Use accounting software or apps to digitize and organize receipts for easy retrieval during tax season.

Separating business and personal expenses is not only a good practice for financial organization but is also crucial for accurate tax reporting. These tips will help you establish clear boundaries and maintain the distinction between your business and personal finances.

Minimizing small business taxes

Minimizing small business taxes is a key goal for entrepreneurs. Here are six effective strategies to help you reduce your tax liability:

1. Take Advantage of Tax Deductions:
Strategy:
Identify and maximize business-related deductions, including expenses for office supplies, travel, home office use, and qualified business equipment. Keep detailed records to support these deductions.

2. Explore Tax Credits:
Strategy:
Investigate available tax credits, such as the Small Business Health Care Tax Credit or the Work Opportunity Tax Credit. These credits can directly reduce your tax liability and provide financial benefits.

3. Utilize Section 179 Deduction for Asset Purchases:
Strategy:
Leverage the Section 179 deduction to deduct the full cost of qualifying business equipment and property purchases in the year they are placed into service, rather than depreciating them over time.

4. Optimize Retirement Contributions:
Strategy:
Contribute to tax-advantaged retirement accounts like SEP-IRA or Solo 401(k). Not only does this help secure your financial future, but it also provides immediate tax benefits by reducing your taxable income.

5. Implement a Health Savings Account (HSA):
Strategy:
If eligible, establish an HSA to contribute pre-tax dollars for qualified medical expenses. HSAs offer tax savings and can serve as a valuable tool for managing healthcare costs.

6. Consider Business Structure Optimization:
Strategy:
Evaluate your business structure for tax efficiency. Depending on your circumstances, a different structure (sole proprietorship, LLC, S corporation, etc.) may provide more favorable tax treatment.

Bonus Tip: Regularly Review Tax Laws and Consult Professionals:
Strategy:
Stay informed about changes in tax laws that may impact your business. Regularly consult with tax professionals who can provide guidance tailored to your specific situation and help you adapt your strategy accordingly.
Minimizing small business taxes requires a proactive approach, strategic planning, and a thorough understanding of available tax-saving opportunities. By implementing these strategies and staying informed about relevant tax regulations, you can optimize your tax position and keep more of your hard-earned money.

Unveiling the Essence of a Small Business CPA in Atlanta

In the vibrant tapestry of Atlanta’s business landscape, the role of a Small Business CPA is akin to a strategic navigator, steering enterprises through the intricate channels of financial success. Let’s unravel the essence of how a Small Business CPA in Atlanta becomes a pivotal ally in the pursuit of financial excellence.

Tailored Financial Solutions for Atlanta’s Entrepreneurs

Navigating Local Tax Complexities

In the heart of Atlanta’s dynamic business environment, a Small Business CPA serves as a local guide through the labyrinth of tax regulations. With an acute understanding of Atlanta’s unique tax landscape, they tailor financial strategies that align with the city’s economic nuances, ensuring businesses thrive within the local framework.

Personalized Tax Planning

Recognizing that each small business has its own narrative, a skilled Small Business CPA crafts personalized tax plans that resonate with the entrepreneurial spirit of Atlanta. Whether exploring the historic districts or venturing into emerging business hubs, they strategize tax solutions that are both comprehensive and uniquely tailored.

Financial Guardianship Amidst Regulatory Symphony

Compliance Choreography

Similar to orchestrating a symphony, a Small Business CPA choreographs financial compliance, ensuring every note aligns with regulatory harmony. From local ordinances to federal mandates, they meticulously lead small businesses through the intricate steps of financial adherence, safeguarding against discordant regulatory challenges.

IRS Liaison and Financial Sentinel

As the guardian of financial interests, a Small Business CPA acts as a liaison with the IRS. They interpret federal guidelines, ensuring businesses remain compliant while mitigating risks. With a vigilant eye on fiscal horizons, they become financial sentinels, preparing small businesses in Atlanta to navigate potential challenges.

Strategic Financial Forecasting for Business Citadel

Proactive Financial Insight

Within Atlanta’s bustling business citadel, a Small Business CPA transforms into a proactive financial sentinel. Through astute forecasting, they anticipate economic shifts and changes in tax laws, positioning small businesses to navigate the evolving financial landscape with resilience and agility.

Risk Mitigation Expertise

Acknowledging the inevitability of financial risks, a seasoned Small Business CPA employs expertise in risk mitigation. By ensuring adherence to tax regulations, they shield businesses from potential penalties, fostering a culture of financial resilience amidst the bustling economic activity of Atlanta.

Elevating Small Businesses in Atlanta’s Economic Symphony

Collaborative Financial Strategies

In a city where collaboration fuels success, a Small Business CPA becomes a collaborative partner in the financial journey of entrepreneurs. By weaving financial strategies that align with unique business goals, they contribute to the symphony of economic growth that resonates throughout Atlanta.

Local Insight with a Global Vision

While deeply rooted in local intricacies, a Small Business CPA in Atlanta possesses a global vision. They understand the international impact of financial decisions, equipping small businesses to navigate the global marketplace with acumen and foresight.

Choose Excellence with a Small Business CPA in Atlanta

Embark on a journey towards financial excellence in Atlanta’s diverse business landscape, guided by a Small Business CPA who understands the city’s intricacies. Elevate your entrepreneurial endeavors by choosing a strategic ally who not only comprehends local challenges but also collaborates in crafting financial success stories.

Navigate the intricate financial channels of Atlanta’s small business realm with confidence, supported by a Small Business CPA who transforms challenges into opportunities for growth and prosperity. 🌆📊🔍

Navigating Tax Waters: The Essence of a Tax Accountant in Atlanta

In the bustling cityscape of Atlanta, where the Southern charm meets the pulse of commerce, a Tax Accountant stands as a crucial navigator through the intricate waters of tax regulations. Let’s explore the indispensable role they play in the financial landscape of Atlanta.

The Tax Landscape of Atlanta

Local Tax Complexities

Just as the streets of Atlanta are a blend of history and modernity, the local tax landscape is a mix of traditional regulations and contemporary updates. A Tax Accountant in Atlanta is well-versed in the nuances of local tax codes, ensuring your business sails smoothly through the complexities unique to the city.

Georgia Peach Tax Deductions

In the heart of Georgia, tax deductions are as sweet as a ripe peach. A skilled Tax Accountant serves as a guide, helping you pluck every eligible deduction from the proverbial tax tree. From Peachtree Street to the historic districts, they navigate the tax orchard, ensuring your business enjoys the fruits of smart tax planning.

The Tax Maestro in the Symphony of Financial Compliance

Compliance Choreography

Just as a maestro directs a symphony, a Tax Accountant orchestrates the compliance dance required by federal and state tax authorities. They lead your business through the intricate steps of tax filing, ensuring harmony between financial transactions and regulatory requirements. In a city known for its diverse rhythms, a Tax Accountant ensures your financial melody stays in tune with tax laws.

IRS Liaisons

The IRS, like a watchful guardian, oversees the national tax landscape. A Tax Accountant serves as your liaison with this formidable guardian. They interpret IRS guidelines, ensuring your business follows federal tax regulations while maximizing opportunities for credits and deductions. From Midtown to Buckhead, they act as guardians of your financial interests.

The Financial Sentinel in Atlanta’s Business Citadel

Financial Forecasting

In the dynamic economic citadel of Atlanta, a Tax Accountant becomes a financial sentinel, scanning the horizon for potential fiscal storms. They employ financial forecasting to help your business prepare for changes in tax laws and economic trends. By forecasting financial shifts, they position your business to navigate the ever-evolving financial landscape.

Risk Mitigation

Amidst the vibrant energy of Atlanta’s business district, risk is an inevitable companion. A Tax Accountant acts as a risk mitigator , ensuring your business adheres to tax regulations and avoids potential penalties. They become the financial sentinels guarding your business from unforeseen tax challenges.

Atlanta’s Tax Accountant: Your Financial Ally

Personalized Financial Strategies

In a city where personal connections matter, a Tax Accountant crafts personalized financial strategies tailored to your business goals. They understand that every business has its unique financial narrative, and they weave a tax strategy aligned with your aspirations. From Inman Park to the BeltLine, they become partners in your financial story.

Local Expertise, Global Impact

While rooted in the local tax intricacies of Atlanta, a Tax Accountant also understands the global impact of financial decisions. They leverage their local expertise to navigate international tax considerations, ensuring your business is equipped to thrive in a globally connected marketplace.

Elevate Your Business with a Tax Maestro

In the symphony of Atlanta’s business orchestra, a Tax Accountant plays the role of a maestro, conducting financial harmony amidst the diverse melodies of commerce. Elevate your business by choosing a Tax Accountant who not only understands the tax intricacies of Atlanta but also becomes a partner in your journey towards financial excellence.

As you navigate the tax waters of Atlanta, let a Tax Accountant be your trusted guide, ensuring your business sails smoothly through the intricate channels of financial compliance and tax optimization. 🌆💼🧾

Small Business Accountant in Atlanta

In the bustling business landscape of Atlanta, where dreams transform into entrepreneurial ventures, the role of a Small Business Accountant stands as a beacon of financial guidance and strategic wisdom. Let’s delve into the pivotal aspects that make them the unsung heroes of the local business community.

Financial Sherpas Navigating Atlanta’s Business Peaks

Tailored Financial Guidance

Just as every street in Atlanta has its unique charm, every small business has its financial intricacies. A Small Business Accountant in Atlanta acts as a financial Sherpa, customizing guidance to fit the contours of your specific business terrain. From Ponce City Market to Buckhead, they understand the local nuances that can impact your financial journey.

Compliance Dance in the Peach State

Navigating the Georgia tax code is like learning a dance unique to the Peach State. A skilled Small Business Accountant is your dance partner, leading you through the intricate steps of compliance. They ensure your business complies with state regulations, helping you avoid missteps that could lead to financial penalties.

Financial Blueprint Crafters for Atlanta’s Entrepreneurs

Strategic Financial Planning

In the heartbeat of Atlanta’s entrepreneurial district, strategic financial planning is the key to longevity. A Small Business Accountant crafts a financial blueprint, aligning your goals with the rhythm of the local business scene. From Five Points to Inman Park, they strategize to ensure your business not only survives but thrives.

Tax Break Maestros

Amidst the vibrant energy of Atlanta, tax breaks are the applause for small business success. A savvy Small Business Accountant is a maestro in orchestrating deductions, ensuring you claim every tax break available. Whether you’re on the Belt-Line or in Midtown, they transform your financial performance into a symphony of savings.

The Tech-Savvy Financial Wizards of Atlanta

Streamlining with Technology

Atlanta’s tech scene is on the rise, and so is the need for businesses to embrace financial technology. A Small Business Accountant in Atlanta is your tech-savvy wizard, streamlining financial processes with innovative tools. They leverage technology to enhance efficiency, giving your business a competitive edge.

Financial Forecasting Amidst the Southern Breeze

Atlanta’s business climate, like its weather, can be unpredictable. A Small Business Accountant acts as your financial meteorologist, forecasting economic shifts and helping you navigate changing financial weather patterns. They ensure your business is prepared for the gentle Southern breeze or the occasional storm.

The Collaborative Business Allies of Atlanta

Collaboration at the Heart

In a city known for its collaborative spirit, a Small Business Accountant in Atlanta is your collaborative ally. They work alongside you, understanding your business dreams and weaving financial strategies that align with your aspirations. As you aim for success in the Atlanta market, they stand as partners in your journey.

Elevate Your Business with a Local Expert

In the vibrant tapestry of Atlanta’s business landscape, a Small Business Accountant is the brushstroke that adds financial brilliance to your entrepreneurial canvas. Elevate your business by choosing a local expert who understands the heartbeat of Atlanta’s commerce.

Your journey to success begins with a Small Business Accountant – the financial guide you can trust in the dynamic tapestry of Atlanta’s business realm. Let financial excellence be the legacy of your entrepreneurial adventure in the heart of Georgia. 🍑🏙️💼

The Indispensable Value of a Tax CPA in Small Businesses

Running a small business is like juggling a dozen flaming torches – it’s thrilling, but one misstep, and everything goes up in smoke. In this entrepreneurial circus, a Tax CPA emerges as the unsung hero, the master juggler who keeps the financial flames under control.

The Tax CPA: A Financial Maestro
Understanding the Business Symphony
Picture this: your small business is a symphony, each financial element playing a crucial note. The Tax CPA steps in as the conductor, orchestrating the harmony between income, expenses, and deductions. With an acute understanding of the tax code, they transform your financial composition into a masterpiece.

Navigating the Tax Jungle
Tax laws are like a dense jungle – intricate, confusing, and easy to get lost in. A Tax CPA acts as the seasoned guide, hacking through the tax underbrush to uncover hidden savings. They’re the compass leading your business through the complex tax terrain, ensuring compliance and minimizing liabilities.

The Tax CPA’s Arsenal of Superpowers
Strategic Tax Planning
Small businesses often overlook the power of strategic tax planning. Enter the Tax CPA, armed with the ability to foresee tax implications. They craft a roadmap that not only navigates the current tax landscape but also anticipates future changes, ensuring your business stays one step ahead.

Maximizing Deductions
Deductions are the magic spells that can minimize your tax burden. A Tax CPA possesses the wizardry to identify every eligible deduction, transforming your business expenses into strategic financial moves. They know the secret passages to ensure your business keeps more of its hard-earned gold.

Crisis Management
In the financial superhero realm, crises are the arch-enemies. A Tax CPA dons their cape during audits, helping your business emerge unscathed. With meticulous record-keeping and an arsenal of tax knowledge, they shield your business from financial storms.

The ROI of Tax CPA Investment
Time is Money
In the business arena, time is the currency of productivity. A Tax CPA saves you the hours spent deciphering tax laws, allowing you to focus on growing your business. Their expertise ensures efficiency, translating into tangible returns on investment.

Avoiding Costly Mistakes
Tax errors can be the landmines that cripple a small business. A Tax CPA serves as the bomb disposal unit, meticulously diffusing potential financial disasters. Their keen eye prevents costly mistakes, safeguarding your business from unnecessary expenditures.

Choosing Your Financial Champion: The Tax Optimized Finale
In the grand saga of small business finance, the Tax CPA emerges as the unsung hero, turning financial chaos into orchestrated success. When seeking this financial champion, consider the impact they can have on your business’s bottom line.

A Tax CPA isn’t just an expense; they’re an investment in financial prowess. By unleashing their superpowers, your small business can navigate the tax landscape, optimize deductions, and emerge victorious in the quest for financial prosperity.

Invest in a Tax CPA – the financial ally your small business deserves. Let the superhero symphony begin! 💼🚀💰

The Clear Choice Between A Tax Preparer And A CPA?

A tax preparer and a Certified Public Accountant (CPA) are both professionals involved in the field of taxation, but they differ in terms of qualifications, scope of services, and regulatory oversight. Here are the key distinctions between a tax preparer and a CPA:

Tax Preparer:

  1. Qualifications:
    • Tax preparers typically do not require extensive formal education or specific qualifications. Some may have completed a tax preparation course or gained experience through on-the-job training.
  2. Services:
    • Tax preparers focus primarily on the process of preparing and filing tax returns for individuals and businesses. Their expertise lies in understanding tax codes, filling out tax forms accurately, and ensuring compliance with tax laws.
  3. Regulation:
    • Tax preparers are subject to fewer regulatory requirements compared to CPAs. While they may need to register with the IRS and obtain a Preparer Tax Identification Number (PTIN), there is less stringent oversight compared to the regulatory framework for CPAs.
  4. Specialization:
    • Tax preparers may specialize in individual or business tax returns. Some may focus on specific industries, but their scope of services is generally narrower than that of CPAs.

Certified Public Accountant (CPA):

  1. Qualifications:
    • CPAs are highly qualified professionals who have completed extensive education, typically holding a bachelor’s degree in accounting or a related field. They must also pass the Uniform CPA Exam, which covers various aspects of accounting and taxation.
  2. Services:
    • CPAs offer a broader range of services beyond tax preparation. They are trained in accounting, auditing, financial planning, and consulting. CPAs can provide comprehensive financial advice, conduct audits, and assist businesses with strategic planning.
  3. Regulation:
    • CPAs are subject to strict regulatory oversight. They must adhere to a professional code of conduct and ethics, and they are often regulated by state boards of accountancy. This ensures a high level of professionalism and accountability.
  4. Specialization:
    • CPAs can specialize in various areas such as auditing, forensic accounting, management consulting, and taxation. They may work in public accounting firms, corporations, government agencies, or as independent consultants.

Conclusion:

In summary, while tax preparers focus primarily on the preparation and filing of tax returns, CPAs have a broader skill set and can provide a comprehensive range of financial services. CPAs undergo more rigorous education and regulatory scrutiny, making them well-equipped to handle complex financial matters and offer strategic advice to businesses and individuals. The choice between a tax preparer and a CPA depends on the specific needs and complexity of the financial situation.

How to get a larger tax refund?

Maximizing your tax refund involves strategic planning and taking advantage of available deductions, credits, and other tax-saving opportunities. Here are several tips to help you get a larger tax refund:

1. Claim All Eligible Deductions:

  • Ensure you are claiming all eligible deductions, including those related to homeownership (mortgage interest, property taxes), medical expenses, education expenses, and charitable contributions.

2. Contribute to Retirement Accounts:

  • Maximize contributions to tax-advantaged retirement accounts such as a 401(k) or IRA. Contributions can lower your taxable income, potentially leading to a larger refund.

3. Explore Tax Credits:

  • Take advantage of tax credits like the Child Tax Credit, Earned Income Tax Credit (EITC), education credits, and energy-efficient home improvement credits. Credits directly reduce your tax liability.

4. Health Savings Account (HSA) Contributions:

  • Contribute to an HSA if you have a high-deductible health plan. HSA contributions are tax-deductible, and qualified medical expenses can be withdrawn tax-free.

5. Flexible Spending Account (FSA) Contributions:

  • Contribute to an FSA for healthcare or dependent care expenses. FSA contributions are made on a pre-tax basis, reducing your taxable income.

6. Utilize Above-the-Line Deductions:

  • Take advantage of above-the-line deductions, such as contributions to health savings accounts, student loan interest, and educator expenses. These deductions directly reduce your adjusted gross income (AGI).

7. Optimize Business Expenses:

  • If you have a business, ensure you maximize business-related deductions, including expenses for home office use, travel, and necessary equipment.

8. Tax-Loss Harvesting:

  • Offset capital gains by strategically selling investments with losses. Capital losses can be used to offset gains, reducing your overall tax liability.

9. Maximize Education-Related Benefits:

  • Leverage education-related tax benefits, such as the American Opportunity Credit or the Lifetime Learning Credit, to offset the costs of higher education.

Navigating Financial Excellence: Top-Notch Accounting Services in Atlanta, GA

 

Atlanta, GA, is a thriving hub of businesses, each with its unique financial demands. The key to sustained success lies in efficient financial management, and that’s where top-notch accounting services play a pivotal role. In this blog, we’ll explore the importance of expert financial guidance and highlight Metro Accounting and Tax Services as the top choice for businesses and individuals seeking excellence in accounting in the vibrant city of Atlanta.


Why Expert Accounting Services Matter:

  1. Strategic Financial Planning:
    • Expert accountants bring strategic financial planning to the table. They analyze your current financial landscape, understand your goals, and craft personalized plans to ensure a secure financial future.
  2. Compliance and Regulation:
    • Navigating the complex landscape of tax laws and regulations is a daunting task. A top-notch accounting service ensures that your business stays compliant, avoiding legal pitfalls and financial penalties.
  3. Financial Efficiency:
    • Efficiency in financial operations is crucial for business growth. Professional accountants streamline processes, implement modern accounting technologies, and optimize financial workflows for enhanced efficiency.
  4. Data-Driven Decision Making:
    • Access to accurate and timely financial data empowers businesses to make informed decisions. Expert accountants provide insightful reports and analytics, enabling you to steer your business in the right direction.

Metro Accounting and Tax Services: Unparalleled Excellence in Atlanta:

Why Metro Accounting and Tax Services?

  1. Years of Experience:
    • With a wealth of experience, Metro Accounting and Tax Services have been serving the Atlanta community for 22 years. Their longevity in the industry is a testament to their reliability.
  2. Comprehensive Services:
    • Metro offers a comprehensive suite of accounting services, including tax preparation, bookkeeping, financial planning, and more. Their diverse expertise caters to the unique needs of businesses and individuals alike.
  3. Industry Specialization:
    • Understanding the nuances of different industries is a Metro Accounting specialty. Whether you’re in healthcare, real estate, or any other sector, their team is well-versed in industry-specific accounting practices.
  4. Cutting-Edge Technology:
    • Metro embraces cutting-edge accounting technologies, ensuring that your financial processes are modern, efficient, and secure. Stay ahead in the digital age with their tech-savvy approach.
  5. Client-Centric Approach:
    • Client satisfaction is at the core of Metro Accounting’s values. They prioritize clear communication, personalized attention, and a collaborative approach to meet the unique needs of every client.

Choosing Excellence for Your Finances:

In the bustling city of Atlanta, where financial landscapes are as diverse as its neighborhoods, choosing the right accounting service is paramount. Metro Accounting and Tax Services stand out as the top choice, offering a perfect blend of experience, expertise, and a commitment to client success.

Whether you’re a small business owner navigating tax complexities or an individual seeking financial clarity, Metro Accounting is the beacon guiding you towards financial excellence in Atlanta. Explore their services today and embark on a journey towards financial prosperity.

Remember, when it comes to financial success, it’s not just about managing numbers; it’s about partnering with a team that understands your unique financial story. Choose Metro Accounting and Tax Services – where financial excellence begins.

Tax Strategies For A Massive Refund

 

Tax season can be a stressful time for many, but with the right knowledge and strategies, you can turn it into an opportunity to secure a substantial refund. In this blog post, we’ll delve into the insider tips shared by an experienced Atlanta CPA. Discover effortless methods and lesser-known tax perks that can potentially boost your refund and make tax season a little more rewarding.

  1. Master the Art of Deductions:
    • One of the fundamental ways to increase your tax refund is by mastering the art of deductions. The Atlanta CPA recommends keeping meticulous records of your eligible expenses. From business-related costs to charitable contributions, understanding and claiming all eligible deductions can significantly impact your bottom line.
  2. Explore Often Overlooked Tax Credits:
    • Tax credits are powerful tools that can directly reduce your tax liability. The Atlanta CPA sheds light on lesser-known credits that individuals often overlook, such as energy-efficient home improvements or certain education-related credits. By exploring these credits, you can potentially enhance your refund without much hassle.
  3. Strategically Contribute to Retirement Accounts:
    • Planning for the future not only secures your financial well-being but can also have immediate benefits during tax season. The CPA advises on strategically contributing to retirement accounts like a 401(k) or an IRA. Contributions to these accounts are often tax-deductible, helping to lower your taxable income and increase your potential refund.
  4. Tap into Tax-Free Investments:
    • Understanding the tax implications of your investments is crucial. The Atlanta CPA highlights the advantages of tax-free investments, such as contributions to a Roth IRA. While these contributions are not tax-deductible, the qualified withdrawals are tax-free, providing a unique avenue for optimizing your tax situation.
  5. Uncover Hidden Business Deductions:
    • For business owners, the Atlanta CPA recommends a thorough examination of business-related deductions. From travel expenses to home office deductions, these can add up and contribute significantly to a larger tax refund. Being aware of the often overlooked deductions specific to your business is key.
  6. Stay Abreast of Tax Law Changes:
    • Tax laws are dynamic and subject to change. The Atlanta CPA advises staying informed about any updates or changes in tax regulations. New credits or deductions may be introduced, and being aware of these changes can help you make the most of available opportunities.

Conclusion:

Navigating the complexities of the tax code might seem daunting, but with the guidance of an Atlanta CPA and these insider tips, you can position yourself for a more substantial tax refund. By mastering deductions, exploring lesser-known credits, strategically planning your contributions, and staying informed about tax law changes, you can turn tax season into a period of financial opportunity. Remember, for personalized advice tailored to your unique situation, it’s always wise to consult with a qualified tax professional.

 

“Mastering Tax Strategies: Your Guide to Achieving a Big Tax Refund”

 

As tax season approaches, many individuals are eager to discover effective strategies to maximize their tax refunds. In this blog post, we will explore a range of proven tax strategies that can help you secure a substantial refund. By understanding these techniques, you can navigate the complex world of taxation and optimize your financial outcomes.

  1. Strategic Deduction Planning: One of the fundamental ways to increase your tax refund is by strategically planning your deductions. Ensure you are aware of all eligible deductions, including those for education, medical expenses, and charitable contributions. Keep meticulous records throughout the year to capture every deductible expense.
  2. Leveraging Tax Credits: Tax credits directly reduce your tax liability, providing a powerful tool for boosting your refund. Explore credits such as the Child Tax Credit, Earned Income Tax Credit (EITC), and education credits. Understanding the criteria and requirements for each credit is essential to maximizing your refund.
  3. Utilizing Retirement Account Contributions: Contributing to retirement accounts not only secures your financial future but can also result in immediate tax benefits. Contributions to traditional IRAs or 401(k)s can reduce your taxable income, leading to a larger refund. Take advantage of these tax-advantaged accounts and contribute up to the maximum allowed.
  4. Employing Tax-Efficient Investments: Investing wisely can have a significant impact on your tax liability. Consider tax-efficient investments, such as those with long-term capital gains, which are taxed at a lower rate. Understanding the tax implications of your investment choices can contribute to a more substantial tax refund.
  5. Optimizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs): If you have access to an HSA or FSA, make the most of these accounts to cover eligible medical expenses. Contributions to these accounts are often tax-deductible, reducing your taxable income and potentially increasing your refund.
  6. Educational Expense Deductions: Education-related expenses can be substantial, but they also offer valuable deductions. Explore deductions for tuition, student loan interest, and other eligible education-related costs. Keep accurate records and claim these deductions to maximize your refund.
  7. Homeownership Benefits: If you own a home, take advantage of homeownership benefits. Mortgage interest and property tax deductions can significantly reduce your taxable income. Additionally, consider energy-efficient home improvements that may qualify for tax credits.
  8. Small Business Deductions: If you are a small business owner or self-employed, explore the myriad of deductions available to you. From business-related expenses to home office deductions, understanding the tax implications of your business activities can contribute to a larger refund.
  9. Timing Your Income and Expenses: Consider timing when it comes to recognizing income and expenses. Deferring income or accelerating deductible expenses in the right circumstances can optimize your tax situation and result in a more substantial refund.

Conclusion: Mastering these tax strategies requires careful planning, attention to detail, and a proactive approach to your financial situation. By incorporating these tips into your tax planning, you can position yourself for a big refund and ensure that you’re making the most of the available opportunities within the tax code. Always consult with a tax professional for personalized advice based on your specific circumstances.

 

Excellence Defined: Choosing the Best Tax Preparer in Atlanta with Metro Accounting and Tax Services

 

 

 

In the dynamic financial landscape of Atlanta, where precision in tax preparation is non-negotiable, discerning individuals and businesses turn to the best in the business. Enter Metro Accounting and Tax Services, the epitome of excellence in tax preparation in the Atlanta metro area. Join us as we explore why Metro Accounting and Tax Services is not just a tax preparer but the unequivocal choice for those who demand the best.


1. Unparalleled Expertise: Metro Accounting’s Mastery

At the helm of tax preparation excellence is Metro Accounting and Tax Services, a team of experts whose mastery goes beyond the norm. With a deep understanding of tax codes and a commitment to staying ahead of industry changes, they ensure every return is a masterpiece of accuracy and optimization.


2. Strategic Partner for Businesses: Elevating Financial Strategies

For businesses navigating Atlanta’s financial currents, Metro Accounting and Tax Services is more than a preparer – they are strategic partners. Metro Accounting crafts bespoke solutions, aligning with each business’s unique goals and leveraging opportunities to elevate financial strategies.


3. Personalized Guidance: Your Tailored Financial Solution

Recognizing that every individual’s financial journey is distinct, Metro Accounting and Tax Services provides personalized guidance. They act as financial architects, navigating the intricacies of tax codes, identifying credits, and offering clear, tailored advice to meet individual financial aspirations.


4. Proactive Approach: Anticipating Changes, Seizing Opportunities

In the ever-evolving world of tax regulations, Metro Accounting and Tax Services adopts a proactive approach. Their experts anticipate changes, identify potential challenges, and unearth opportunities for financial growth, ensuring clients are well-prepared for the financial landscape ahead.


5. Transparent Communication: Clarity Amidst Complexity

In the realm of tax preparation complexity, Metro Accounting excels in transparent communication. Breaking down intricate details into understandable terms, they provide clients with clarity, empowering them to make informed decisions about their financial future.


6. Business Compliance Excellence: Navigating Regulatory Waters

Navigating the regulatory waters is a crucial aspect of tax preparation for businesses, and Metro Accounting and Tax Services excels in compliance excellence. They expertly navigate regulatory challenges, ensuring businesses not only meet but surpass compliance standards.


7. Client-Centric Approach: Your Financial Well-being First

Embodying a client-centric approach, Metro Accounting and Tax Services prioritizes your financial well-being. They go beyond the numbers to build lasting relationships based on trust, reliability, and an unwavering commitment to your financial success.


8. Comprehensive Services: Beyond Tax Preparation

Metro Accounting and Tax Services offers more than just tax preparation; they provide comprehensive services. From financial planning to business consulting, their expertise extends beyond the tax season, ensuring clients have a reliable partner for all their financial needs.


Conclusion: Elevate Your Financial Journey with Metro Accounting and Tax Services

In Atlanta’s bustling financial arena, where the demand for excellence is high, Metro Accounting and Tax Services stands out as the beacon of tax preparation superiority. Whether you’re an individual seeking personalized guidance or a business navigating complex financial landscapes, Metro Accounting and Tax Services is your definitive choice for excellence.

Choose the best. Choose reliability. Choose Metro Accounting and Tax Services for a seamless journey through the world of tax preparation. Your financial success begins here. 🌐💼

 

Getting A Big Tax Refund The Easy Way.

While it’s understandable that receiving a big tax refund can be satisfying, it’s important to approach tax planning with a focus on overall financial wellness rather than just aiming for a large refund. Here are some steps you can consider to optimize your tax situation and potentially increase your refund:

  1. Consult with a CPA:
    • Working with a Certified Public Accountant (CPA) can help you navigate the complexities of the tax code. They can identify deductions, credits, and strategies that are applicable to your specific situation.
  2. Review Your Withholdings:
    • Consider adjusting your tax withholdings on your W-4 form to align with your actual tax liability. While a large refund might be appealing, adjusting your withholdings can provide you with more money throughout the year, which you can use for investments, savings, or debt repayment.
  3. Maximize Deductions and Credits:
    • Ensure that you are taking advantage of all available deductions and credits. This may include deductions for homeownership, education expenses, and contributions to retirement accounts.
  4. Contribute to Retirement Accounts:
    • Contributing to retirement accounts, such as a 401(k) or IRA, can lower your taxable income, potentially leading to a larger refund. It also helps you save for the future.
  5. Utilize Tax-Efficient Investments:
    • Work with a financial advisor to structure your investments in a tax-efficient manner. This may involve considering tax-advantaged accounts and tax-efficient investment strategies.
  6. Charitable Contributions:
    • If you make charitable contributions, ensure that you are documenting them properly to qualify for deductions. Consider bundling donations in a single tax year to maximize the impact of deductions.
  7. Stay Informed About Tax Law Changes:
    • Tax laws can change, affecting deductions and credits. Stay informed about any changes that may impact your tax situation and consult with your CPA to adjust your strategies accordingly.
  8. Plan for Education Expenses:
    • If you have education-related expenses, explore the available tax credits and deductions. This includes the American Opportunity Credit and the Lifetime Learning Credit.
  9. Consider Health Savings Accounts (HSAs):
    • If eligible, contribute to an HSA, as contributions are tax-deductible. HSAs provide a tax-advantaged way to save for qualified medical expenses.
  10. Review Business Expenses (for Business Owners):
    • If you own a business, work with your CPA to maximize deductions for business-related expenses, potentially reducing your taxable income.

Remember, the goal should be to optimize your financial situation and make informed decisions that align with your overall financial goals. It’s advisable to work with financial professionals who can provide personalized advice based on your unique circumstances.

“Legally Supercharging Your Tax Refund: Strategic Tips for Maximum Returns”

 

As tax season approaches, individuals and businesses alike seek ways to legally optimize their tax refunds. In this guide, we’ll explore proven strategies and actionable tips to boost your tax refund within the bounds of the law. From leveraging deductions and credits to strategic financial planning, let’s delve into the avenues that can help you make the most of your tax situation.

Section 1: Understand Your Tax Situation

1.1 Know Your Eligible Deductions

Educate yourself on the deductions available to you, from business expenses and education costs to homeownership benefits. A thorough understanding of eligible deductions is the first step in maximizing your refund.

1.2 Explore Tax Credits

Identify and explore tax credits applicable to your situation. Credits directly reduce your tax liability, offering a powerful tool for boosting your refund. Examples include the Child Tax Credit, Earned Income Tax Credit, and education-related credits.

Section 2: Optimize Income Management

2.1 Strategic Timing of Income

Consider the timing of your income, especially if you have flexibility in receiving bonuses or other discretionary payments. Strategic income management can impact your taxable income and, consequently, your refund.

2.2 Maximize Retirement Contributions

Take advantage of tax-advantaged retirement accounts, such as 401(k)s and IRAs. Contributing to these accounts not only secures your financial future but also lowers your taxable income, potentially leading to a larger refund.

Section 3: Homeownership and Real Estate Benefits

3.1 Mortgage Interest Deduction

If you own a home, leverage the mortgage interest deduction. This deduction allows you to subtract the interest paid on your mortgage from your taxable income.

3.2 Capitalize on Real Estate Tax Benefits

Explore real estate tax benefits, including deductions for property taxes and eligible home improvements. These deductions contribute to reducing your overall tax liability.

Section 4: Utilize Tax-Advantaged Accounts

4.1 Health Savings Accounts (HSAs)

Contribute to Health Savings Accounts (HSAs) if eligible. HSA contributions are tax-deductible and can be used for qualified medical expenses, providing both short-term and long-term financial benefits.

4.2 Flexible Spending Accounts (FSAs)

Participate in Flexible Spending Accounts (FSAs) for medical or dependent care expenses. Contributions to FSAs are made with pre-tax dollars, offering an additional avenue for reducing taxable income.

Section 5: Collaborate with Tax Professionals

5.1 Consult Certified Tax Professionals

Engage the services of certified tax professionals, such as Certified Public Accountants (CPAs). Their expertise can uncover additional opportunities, ensure accurate filings, and provide strategic advice for maximizing your refund.

5.2 Year-Round Tax Planning

Adopt a year-round tax planning approach. Consistent and proactive planning throughout the year positions you to make informed decisions that positively impact your tax situation when filing season arrives.

Conclusion:

Boosting your tax refund legally requires a combination of informed decision-making, strategic planning, and leveraging available deductions and credits. By understanding your tax situation, optimizing income management, exploring homeownership benefits, utilizing tax-advantaged accounts, and collaborating with tax professionals, you can legally supercharge your tax refund. As you embark on this journey, remember that adherence to tax laws not only ensures compliance but also unlocks the full potential of legitimate opportunities to maximize your financial returns.

“Demystifying Small Business Taxes: A Comprehensive Guide for Success”

Navigating the tax landscape is a critical aspect of running a successful small business. In this comprehensive guide, we’ll break down the complexities of small business taxes, providing essential insights and actionable tips to help entrepreneurs optimize their tax strategies, minimize liabilities, and ensure compliance.

Section 1: Understanding Small Business Tax Structures

1.1 Sole Proprietorship, LLC, or Corporation?

Explore the tax implications of different business structures, including sole proprietorships, Limited Liability Companies (LLCs), and corporations. Understanding the tax advantages and disadvantages of each structure is crucial for making informed decisions.

1.2 Selecting the Right Accounting Method

Delve into the two primary accounting methods—cash basis and accrual basis—and choose the one that aligns with your business operations. This decision can impact how you report income and expenses for tax purposes.

Section 2: Essential Small Business Tax Deductions

2.1 Home Office Deductions

Understand the criteria for claiming home office deductions. Learn how to calculate the percentage of your home used for business and maximize this deduction.

2.2 Business Expenses

Identify deductible business expenses, from supplies and utilities to travel and entertainment. Properly categorizing and documenting these expenses is vital for reducing taxable income.

Section 3: Small Business Tax Credits

3.1 Research and Development (R&D) Tax Credit

Explore potential tax credits for research and development activities. Understand eligibility criteria and how to leverage this credit to encourage innovation in your business.

3.2 Small Employer Health Insurance Tax Credit

Learn about the Small Employer Health Insurance Tax Credit, designed to assist small businesses in providing health insurance coverage to employees. Uncover eligibility requirements and how to maximize this credit.

Section 4: Tax Planning and Compliance

4.1 Estimated Quarterly Taxes

Navigate the process of paying estimated quarterly taxes to avoid penalties and stay current with your tax obligations. Calculate and remit payments based on your business’s projected income.

4.2 Tax Planning Strategies

Implement effective tax planning strategies, such as timing income and expenses, optimizing depreciation, and exploring credits unique to your industry. Proactive planning can lead to significant tax savings.

Section 5: Seeking Professional Assistance

5.1 The Role of a Small Business Accountant

Understand the valuable role of a small business accountant or Certified Public Accountant (CPA). From tax preparation to strategic financial advice, professionals can provide crucial support for small business owners.

5.2 Importance of Record Keeping

Emphasize the significance of meticulous record-keeping. Maintain organized financial records, receipts, and documentation to streamline tax preparation and ensure accurate filings.

Conclusion:

Mastering small business taxes is a dynamic process that requires ongoing attention and strategic planning. By understanding your business structure, optimizing deductions and credits, staying compliant with tax obligations, and seeking professional assistance when needed, you can navigate the complexities of small business taxes with confidence. Remember, proactive tax management is not just about compliance—it’s a key component of building a financially resilient and thriving business.

Strategic Approaches for a Larger Tax Refund: Navigating Proactive Planning and Synergies with Credits

 

When it comes to tax season, a proactive approach can make all the difference in maximizing your refund. In this detailed exploration, we will unravel strategic approaches that extend beyond the Child Tax Credit, offering insights into proactive planning and the synergies between various credits and deductions. By implementing these strategic moves, you can shape your financial landscape for a more favorable tax season, ensuring you unlock the full potential of your tax refund.

1 Proactive Planning: Tax Moves for Success

Understanding the Power of Proactive Planning

Proactive planning is the cornerstone of a successful tax strategy. By anticipating and preparing for tax implications throughout the year, individuals and families can set the stage for a larger tax refund. This section will delve into key aspects of proactive planning:

Planning Ahead:

Explore the benefits of planning ahead by considering major life events, changes in income, and adjustments to your financial situation. Anticipating these changes allows you to make informed decisions that can positively impact your tax liability.

Adjusting Withholding:

Fine-tuning your withholding is a strategic move that can prevent overpayment or underpayment of taxes. Adjusting your W-4 to align with your financial goals ensures that you don’t give the government more than necessary throughout the year, potentially leading to a larger refund at tax time.

Strategic Timing of Expenses:

Timing is everything when it comes to tax deductions. Learn how strategically timing certain expenses, such as charitable contributions or medical expenses, can optimize your deductions and contribute to a more substantial tax refund.

Shaping Your Financial Landscape

By incorporating these proactive planning strategies into your financial routine, you not only minimize surprises during tax season but also create a financial landscape that sets the stage for a larger tax refund.

2 Synergies with Additional Credits and Deductions

Complementary Credits and Deductions

While the Child Tax Credit plays a pivotal role, synergizing its benefits with additional credits and deductions can further amplify your overall tax refund. This section will uncover opportunities for leveraging complementary elements:

Education Credits:

Explore credits such as the American Opportunity Credit or the Lifetime Learning Credit. By understanding the eligibility criteria and requirements for these credits, you can optimize your tax refund while investing in education.

Earned Income Tax Credit (EITC):

For eligible taxpayers, the EITC can be a substantial source of additional refund. Uncover the qualifying criteria and strategies for maximizing this credit, particularly for low to moderate-income individuals and families.

Deductions for Homeownership:

Owning a home opens doors to various deductions, including mortgage interest, property taxes, and home office expenses. Learn how to navigate these deductions to further enhance your tax refund.

Creating a Synergistic Approach

By identifying and strategically combining various credits and deductions, you can create a synergistic approach that maximizes your tax refund. Understanding the interplay between these elements ensures you don’t leave money on the table.

Conclusion:

Proactively shaping your tax strategy and leveraging synergies with additional credits and deductions are key ingredients in the recipe for a larger tax refund. By gaining insights into these strategic approaches, you empower yourself to navigate the complexities of the tax landscape with confidence, ensuring that your efforts translate into tangible financial benefits. As you embark on your tax journey, remember that informed and strategic decision-making can transform your tax season experience, putting you on the path to a more significant and rewarding refund.

Maximizing Your Tax Refund: A Comprehensive Exploration of the Child Tax Credit

Unveiling the Essence and Eligibility Criteria of the Child Tax Credit

In the intricate landscape of tax credits, few shine as brightly as the Child Tax Credit. This financial lifeline has been meticulously crafted to serve as a beacon of relief for families, offering a credit for each qualifying child. In this detailed exploration, we will delve into the very essence of the Child Tax Credit, understanding its role as a game-changer in alleviating the tax burden on families and providing a substantial boost to overall tax refunds.

Unveiling the Essence of the Child Tax Credit

The Genesis of Financial Lifeline

The Child Tax Credit is more than a mere line item on your tax return—it’s a lifeline designed to provide tangible financial relief. By understanding the core essence of this credit, families can appreciate its transformative impact. At its heart, the Child Tax Credit is a commitment to supporting parents and guardians, acknowledging the financial responsibilities that come with raising children.

Alleviating the Tax Burden

One of the primary roles of the Child Tax Credit is to alleviate the tax burden that families often face. By offering a credit for each qualifying child, the government acknowledges the costs associated with child-rearing and seeks to ease the financial strain on parents. This credit becomes a crucial component in the larger picture of family financial planning.

A Game-Changer in Tax Refunds

The significance of the Child Tax Credit extends beyond a mere reduction in tax liability. It can be a game-changer in the realm of tax refunds. By strategically navigating the eligibility criteria and understanding the nuances of claiming this credit, families can unlock a substantial boost to their overall tax refunds. This financial windfall, in turn, can be directed towards various needs, from educational expenses to quality-of-life improvements.

Navigating Eligibility Criteria

The Mosaic of Qualification Factors

To fully harness the benefits of the Child Tax Credit, families must navigate a mosaic of eligibility criteria. These criteria, though multifaceted, are pivotal in determining qualification for the credit. Explore the following key factors that influence eligibility:

Age and Relationship:

The age of the child is a crucial determinant, and to qualify, the child must be under 17 at the end of the tax year. Additionally, the qualifying relationship spans a spectrum from sons and daughters to stepchildren, eligible foster children, siblings, step-siblings, and even descendants like grandchildren, nieces, and nephews.

Residency and Living Arrangements:

For a child to qualify, they must have lived with the claiming taxpayer for more than half of the tax year. Understanding the intricacies of residency requirements is essential to meeting this criterion.

Financial Support:

A qualifying child should not provide more than half of their own financial support during the tax year. This criterion aims to ensure that the financial responsibility lies primarily with the claiming taxpayer.

Citizenship or Residency Status:

The child must be a U.S. citizen, U.S. national, or U.S. resident alien. This citizenship or residency status requirement forms a foundational aspect of eligibility.

The essence of the Child Tax Credit goes beyond its monetary value; it represents a commitment to supporting families in their journey of raising the next generation. By understanding the core of this credit and navigating the eligibility criteria with clarity, families can unlock the true potential of the Child Tax Credit—a potential that extends far beyond tax reduction, becoming a pivotal force in shaping a brighter financial future for all.

“Unlocking Wealth: Top Tax Secrets for Realtors to Maximize Refunds”

 

For realtors, navigating the intricate landscape of tax regulations can be both challenging and rewarding. The real estate profession presents unique opportunities for tax savings that, when strategically harnessed, can lead to a substantial refund. In this guide, we unveil top tax secrets specifically tailored for realtors, offering insights to help you optimize your tax position and achieve a more significant financial return.

  1. Maximizing Deductions with Home Office Expenses:
    • Establishing and maintaining a dedicated home office space can open the door to valuable deductions. Realtors who use part of their home exclusively for business purposes may qualify for deductions related to rent, mortgage interest, utilities, and maintenance.
  2. Leveraging Mileage Deductions for Business Travel:
    • As a realtor, you likely spend a considerable amount of time on the road. Keeping detailed records of business-related mileage can result in significant deductions. The standard mileage rate or actual expenses related to your vehicle use can contribute to a larger refund.
  3. Strategic Timing of Expenses and Income:
    • Timing is crucial when it comes to tax planning. Consider deferring income to a later tax year or accelerating deductible expenses into the current year to optimize your taxable income and increase your potential refund.
  4. Utilizing Depreciation for Investment Properties:
    • If you own investment properties, take advantage of depreciation deductions. Depreciating the cost of the property over its useful life can result in substantial tax savings, contributing to a larger refund.
  5. Exploring Section 179 for Equipment Purchases:
    • Realtors frequently invest in equipment such as computers, cameras, and office furniture. Section 179 allows you to deduct the full cost of qualifying equipment in the year of purchase, rather than depreciating it over time.
  6. Claiming Deductions for Marketing and Promotion:
    • Realtors invest in marketing to promote their listings and services. Expenses related to advertising, promotional materials, and even hosting client events can be deducted, contributing to a lower taxable income and a potential refund boost.
  7. Understanding 1031 Exchanges for Investment Properties:
    • If you engage in real estate investment, consider utilizing a 1031 exchange to defer capital gains taxes. This strategy allows you to reinvest the proceeds from the sale of one property into another without triggering immediate tax obligations.
  8. Staying Compliant with Local and State Tax Incentives:
    • Be aware of local and state tax incentives that may benefit realtors. Some regions offer tax credits or deductions for specific business activities or investments. Staying informed about these opportunities can contribute to a more substantial refund.
  9. Engaging Professional Tax Advice:
    • Seek the expertise of a tax professional with experience in real estate. A knowledgeable tax advisor can help you navigate complex tax laws, identify overlooked deductions, and ensure you make informed decisions that maximize your refund.

For realtors, the path to a bigger tax refund lies in strategic planning, meticulous recordkeeping, and a thorough understanding of industry-specific deductions. By incorporating these top tax secrets into your financial strategy, you can unlock the full potential of tax savings and enhance your overall financial well-being. As you embark on your journey in real estate, consider these secrets as your guide to navigating the tax landscape and securing a more significant refund.

“Unlocking Tax Advantages: Real Estate Investing Strategies for a Substantial Tax Refund”

 

Real estate investing not only offers the potential for long-term wealth accumulation but can also serve as a strategic avenue to optimize your tax situation and secure a larger refund. In this comprehensive guide, we’ll delve into the world of real estate tax advantages, exploring proven strategies to help you navigate the complexities of tax laws and unlock the full potential of your real estate investments.

  1. Leveraging Mortgage Interest Deductions:
    • One of the most significant tax advantages of real estate ownership is the deduction of mortgage interest. Interest paid on mortgage loans for primary and secondary residences is generally tax-deductible.
    • This deduction can significantly reduce your taxable income, leading to a larger tax refund.
  2. Exploring Depreciation Benefits:
    • Depreciation is a non-cash deduction that allows you to deduct the cost of the property over its useful life.
    • Residential real estate typically has a depreciation period of 27.5 years, providing an annual deduction that can offset rental income and reduce your taxable liability.
  3. Utilizing 1031 Exchanges for Tax Deferral:
    • A 1031 exchange allows you to defer capital gains taxes by reinvesting the proceeds from the sale of one property into a similar, like-kind property.
    • This strategy enables you to defer tax payments, potentially freeing up more capital for future investments.
  4. Taking Advantage of Qualified Business Income Deduction (QBI):
    • Real estate investors may qualify for the QBI deduction, which allows for a deduction of up to 20% of qualified business income.
    • This deduction applies to income from pass-through entities, such as partnerships, LLCs, and sole proprietorships, commonly used in real estate investment structures.
  5. Employing Cost Segregation Studies:
    • Cost segregation studies involve identifying and reclassifying certain property components to accelerate depreciation.
    • This strategy can front-load depreciation deductions, providing increased tax benefits in the earlier years of ownership.
  6. Exploring Real Estate Professional Status:
    • Real estate professionals who meet specific criteria may be able to deduct rental real estate losses against other income.
    • Meeting the “material participation” requirements is essential to qualify for this tax advantage.
  7. Engaging in Active Property Management:
    • Actively managing your real estate investments can position you to qualify for tax advantages that may not be available to passive investors.
    • Regular involvement in property-related decisions and activities can enhance your eligibility for certain deductions and credits.
  8. Staying Informed on Tax Law Changes:
    • Real estate tax laws are subject to changes and updates. Stay informed about any legislative adjustments that may impact your tax strategy.

Real estate investing offers a multitude of tax advantages that savvy investors can leverage to secure a larger tax refund. By understanding and strategically implementing these strategies, you can optimize your tax situation, maximize deductions, and potentially enjoy more substantial returns on your real estate investments. As you embark on your real estate journey, consider this guide as a roadmap to unlocking the full potential of tax advantages and ensuring a more significant impact on both your financial portfolio and your annual tax refund.

“Generosity That Gives Back: Maximizing Charitable Giving for a Larger Tax Refund”

 

Charitable giving not only provides a meaningful way to support causes close to your heart but can also serve as a strategic tool to enhance your tax refund. In this guide, we’ll explore the ins and outs of charitable giving, shedding light on effective strategies to maximize your contributions and ensure a more significant impact on both your chosen causes and your financial bottom line.

  1. Understanding Charitable Contributions:
    • Charitable contributions encompass various donations made to qualifying organizations, including cash donations, goods, and even certain expenses incurred while volunteering.
    • To claim a deduction, donations must be made to IRS-recognized tax-exempt organizations.
  2. Types of Deductible Charitable Contributions:
    • Cash Donations: Direct financial contributions to eligible charities.
    • Non-Cash Contributions: Donations of goods, such as clothing, furniture, or electronics, which must be valued appropriately.
    • Mileage and Expenses: Costs incurred while volunteering or using your vehicle for charitable activities may be deductible.
  3. Recordkeeping and Documentation:
    • Proper documentation is critical when claiming charitable deductions. Maintain detailed records of all donations, including receipts, acknowledgment letters from charities, and appraisals for non-cash contributions.
    • For cash donations exceeding $250, a written acknowledgment from the charity is generally required.
  4. Maximizing Deductions through Planning:
    • Consolidate Donations: Consider consolidating your charitable contributions into a single tax year to surpass the standard deduction threshold.
    • Bundle Charitable Contributions: Explore strategies like “bundling” several years’ worth of donations into a single year to exceed the standard deduction, especially if your giving varies annually.
  5. Qualified Charitable Distributions (QCDs) from IRAs:
    • Individuals aged 70½ or older can donate up to $100,000 annually directly from their IRA to a qualified charity, known as a QCD.
    • QCDs count toward the Required Minimum Distribution (RMD) and are excluded from taxable income.
  6. Researching Tax-Advantaged Giving Strategies:
    • Explore charitable giving strategies that offer tax advantages, such as establishing a Donor-Advised Fund (DAF) or contributing to a Charitable Remainder Trust (CRT).
    • These strategies can provide both immediate and long-term tax benefits.
  7. Stay Informed on Tax Law Changes:
    • Tax laws related to charitable giving can change. Stay informed about any updates or changes that may affect your ability to claim deductions for charitable contributions.

Charitable giving is a powerful means of making a positive impact on society, and by strategically incorporating it into your financial planning, you can simultaneously enhance your tax refund. Understanding deductible contributions, meticulous recordkeeping, and exploring tax-advantaged strategies can help you make the most of your generosity while enjoying the financial benefits of a larger tax refund. Embrace the spirit of giving that gives back, and let your charitable contributions contribute not only to the causes you care about but also to your own financial well-being.

“Energize Your Finances: Leveraging Energy Credits for a Boost in Your Tax Refund”

 

In the pursuit of a bigger tax refund, savvy taxpayers explore various avenues, and one often overlooked opportunity lies in energy credits. These credits not only contribute to a more sustainable lifestyle but can also lead to substantial savings come tax season. In this comprehensive guide, we’ll explore energy credits, providing insights on how you can harness their potential to optimize your tax situation and enjoy a larger refund.

  1. Understanding Energy Credits:
    • Energy credits are financial incentives provided by the government to encourage individuals to adopt energy-efficient practices.
    • These credits aim to promote the use of renewable energy sources, reduce environmental impact, and contribute to energy conservation.
  2. Popular Energy Credits to Consider:
    • The Residential Energy Efficient Property Credit: Offers credits for qualifying expenses related to solar panels, solar water heaters, wind turbines, geothermal heat pumps, and fuel cell property.
    • The Nonbusiness Energy Property Credit: Provides credits for energy-efficient improvements to the home, such as insulation, energy-efficient windows, doors, and certain heating and cooling systems.
  3. Eligibility Criteria for Energy Credits:
    • Eligibility for energy credits varies based on the type of improvement or technology installed.
    • Understanding specific requirements, such as ENERGY STAR certification or manufacturer specifications, is crucial to ensure eligibility.
  4. Documenting Energy-Efficient Improvements:
    • Proper documentation is essential when claiming energy credits. Keep records of receipts, product certifications, and installation documentation to substantiate your claims.
    • Certain improvements may require certification from manufacturers, so it’s essential to retain these documents for tax purposes.
  5. Limits and Phaseouts:
    • Energy credits come with certain limits and phaseouts. For example, the Residential Energy Efficient Property Credit has a maximum credit amount, while the Nonbusiness Energy Property Credit has specific limits for different types of improvements.
    • Familiarize yourself with these limitations to optimize your credit claims.
  6. Filing Requirements for Energy Credits:
    • To claim energy credits, ensure that you file the appropriate forms with your tax return.
    • For residential energy credits, use IRS Form 5695, and for certain business-related energy improvements, consider IRS Form 3468.
  7. Staying Updated on Legislative Changes:
    • Tax laws and credits may be subject to changes and updates. Stay informed about any legislative changes or extensions that may affect the availability of energy credits.

As you aim for a bigger tax refund, integrating energy credits into your tax strategy not only benefits your wallet but also supports environmentally conscious practices. By understanding the types of credits available, meeting eligibility criteria, and documenting improvements appropriately, you can optimize your tax situation. Embrace the opportunity to energize your finances and contribute to a sustainable future while enjoying the perks of a larger tax refund.

“Unlocking Your Tax Refund Potential: A Comprehensive Guide to Earned Income Tax Credit (EITC)”

The Earned Income Tax Credit (EITC) is a powerful financial tool designed to provide a significant boost to the tax refunds of eligible individuals. In this informative guide, we will delve into the intricacies of the EITC, offering practical insights and tips to help you maximize this valuable tax credit and secure a more substantial tax refund.

  1. Understanding the Earned Income Tax Credit (EITC):
    • The EITC is a federal tax credit designed to assist low to moderate-income working individuals and families.
    • This credit is refundable, meaning that if the credit amount exceeds the taxes owed, the excess is refunded to the taxpayer.
  2. Eligibility Criteria for EITC:
    • Eligibility for the EITC is based on factors such as earned income, filing status, and the number of qualifying children.
    • Taxpayers without children may also qualify for the credit, but the eligibility criteria differ.
  3. Calculating EITC Amounts:
    • The EITC amount varies based on income, filing status, and the number of qualifying children.
    • The IRS provides an EITC table to help taxpayers determine the credit amount they may be eligible for.
  4. Qualifying Children for EITC:
    • To claim the EITC, taxpayers must have one or more qualifying children. These children must meet specific criteria related to age, relationship, and residency.
    • Understanding the rules for qualifying children is crucial for accurate EITC calculations.
  5. Benefits of EITC for a Bigger Tax Refund:
    • The EITC can result in a substantial tax refund, especially for families with multiple qualifying children.
    • The credit provides a direct reduction in taxes owed and can lead to a refund that may positively impact financial well-being.
  6. Filing Requirements and EITC:
    • To claim the EITC, taxpayers must file a federal tax return, even if they do not owe any taxes.
    • Staying informed about filing requirements ensures that eligible individuals do not miss out on this valuable credit.
  7. EITC Awareness and Advocacy:
    • Raising awareness about the EITC is crucial, as some eligible individuals may not be aware of their eligibility.
    • Advocacy efforts and community outreach play a significant role in ensuring that those who qualify for the EITC can access this financial benefit.

 

The Earned Income Tax Credit is a game-changer for eligible individuals and families, providing a pathway to a more substantial tax refund. By understanding the eligibility criteria, calculating potential credit amounts, and staying informed about filing requirements, you can unlock the full potential of the EITC. As you embark on your tax journey, consider this guide as your roadmap to optimizing your tax refund through the valuable benefits of the Earned Income Tax Credit.

Unearth Tax Gold Mine: 5 Stealthy Tax Strategies to Supercharge Your Tax Refund

As the tax season curtain rises, the quest for a turbocharged refund intensifies. While many tax-savvy individuals are already familiar with the usual suspects of deductions and credits, there exists a trove of hidden strategies and lesser-known terms that can transform your tax return into a financial masterpiece. In this thrilling exploration, we’ll delve into five clandestine ways to optimize your tax refund, unraveling the mysteries of filing statuses, tax credits, and strategic financial moves.

  1. Masterful Maneuvers with Job Search Expenses:
    • Enter the covert world of job search expenses, where the careful documentation of resume crafting, interview travel, and career counseling unveils a secret passage to deductible treasures. As you embark on your career quest, remember that these stealthy deductions could be the key to unlocking a more substantial tax refund.
  2. Championing Health Accounts – HSA and FSA Alchemy:
    • Behold the alchemy of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Contribute to these magical coffers with pre-tax gold and watch your taxable income shrink. These enchanted funds, earmarked for medical expenses, can conjure up a refund-boosting spell that lingers beyond tax season.
  3. Saver’s Credit – A Knight in Shining Armor for Retirement Contributions:
    • Gird yourself with the armor of the Retirement Savings Contributions Credit, known as the Saver’s Credit. A gallant ally in the quest for tax relief, this credit rewards contributions to retirement accounts like 401(k)s and IRAs. Ensure you qualify for this noble credit and revel in the spoils of reduced tax liability.
  4. Navigating the Tax Academia – Uncover Education Credits and Deductions:
    • Venture into the hallowed halls of education-related tax benefits, where the American Opportunity Credit and the Lifetime Learning Credit await. Arm yourself with knowledge on filing statuses and leverage these tax weapons to shield your income from the taxman’s advances. Don the mantle of a strategic tax scholar, and your refund shall flourish.
  5. Capital Loss Harvesting – A Stealthy Art to Offset Gains:
    • Engage in the subtle dance of capital loss harvesting, a clandestine art for investors. Meticulously sell investments to offset gains, ensuring that no financial stone is left unturned. Consult with tax artisans to craft a masterpiece that not only shields your gains but could also carve out a path to an even grander tax refund.

Conclusion: In the riveting saga of tax optimization, these covert strategies, coupled with a deep understanding of filing statuses and tax lingo, could be the secret weapons that propel your refund into legendary territory. As you embark on this tax adventure, remember to enlist the guidance of tax professionals who can illuminate the path and help you unravel the mysteries of the tax code. Unearth the gold mine of hidden tax treasures, and may your tax refund be a tale of triumph in the financial realm.

Illuminating Tax Loopholes: What the Wealthy Know and You Should Too

 

Unraveling the intricacies of tax loopholes can provide a roadmap to financial efficiency, allowing individuals to retain more of their hard-earned money. While these strategies aren’t clandestine, they often escape the attention of the average taxpayer. Let’s delve into some tax loopholes that the affluent leverage and explore how you can navigate the tax landscape more advantageously.

1. Strategic Use of Tax-Advantaged Accounts: High-net-worth individuals are adept at maximizing contributions to tax-advantaged accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs). These accounts offer potential tax deductions, tax-free growth, or tax-free withdrawals, contributing to significant wealth preservation.

2. Capitalizing on Tax Credits: The wealthy meticulously identify and capitalize on available tax credits. Whether it’s renewable energy credits, education credits, or credits for adopting environmentally friendly practices, these incentives can substantially reduce tax liabilities.

3. Leveraging Business Deductions: Establishing a business or utilizing existing business structures is a common avenue for the affluent to optimize deductions. Business expenses, travel, and even home office costs can be strategically utilized to minimize taxable income.

4. Offshore Investments and Income Shifting: While complex and subject to stringent regulations, the affluent often explore offshore investments and income shifting to mitigate tax obligations. International tax laws can offer opportunities for minimizing taxes on certain types of income.

5. Estate Tax Planning: Wealthy individuals engage in meticulous estate planning to navigate inheritance and estate taxes. Strategies such as establishing trusts, gifting, and taking advantage of stepped-up basis provisions can safeguard family wealth from excessive taxation.

 

Empowering yourself with knowledge about these tax strategies can level the playing field, allowing you to make informed decisions and potentially optimize your own tax situation. While it’s crucial to adhere to legal and ethical practices, understanding these loopholes can help you navigate the tax landscape more effectively.

Unveiling Atlanta’s Premier Tax Preparation Service: Metro Accounting and Tax Services, CPA

Atlanta, Georgia, a vibrant metropolis known for its dynamic energy, is also home to a premier tax preparation service dedicated to transforming your tax experience. Metro Accounting and Tax Services, led by experienced CPAs, stands as your trusted partner in navigating the intricate world of taxes. Let’s embark on a journey to discover the unique offerings that set this service apart, blending factual insights with an engaging narrative.

Navigating Atlanta’s Tax Landscape: The Role of Metro Accounting and Tax Services, CPA
1. The Metro Advantage:

Metro Accounting and Tax Services, CPA, brings a wealth of experience to the table. As seasoned professionals, they understand the nuances of Atlanta’s tax landscape, ensuring a tailored approach to meet the diverse needs of individuals and businesses alike.

2. Comprehensive Tax Expertise:

Explore the depth of expertise offered by Metro Accounting and Tax Services. From individual tax returns to intricate business taxation, their comprehensive services cater to a spectrum of financial scenarios, providing clients with peace of mind.

3. Personalized Approach:

What sets this service apart is its commitment to a personalized approach. Recognizing that each client’s financial situation is unique, Metro’s team takes the time to understand individual needs, ensuring a bespoke tax strategy designed for optimal outcomes.
Unveiling the Metro Experience: A Blend of Service and Innovation

1. Cutting-Edge Technology:

Metro Accounting and Tax Services leverages cutting-edge technology to streamline the tax preparation process. Experience the convenience of digital solutions that enhance accuracy, efficiency, and the overall client experience.

2. Client Education Initiatives:

Beyond preparing tax returns, Metro is dedicated to client education. Engage in insightful resources and workshops designed to empower clients with knowledge, making them active participants in their financial journey.

3. Strategic Tax Planning:

Uncover the strategic approach to tax planning provided by Metro’s team of CPAs. Gain insights into potential deductions, credits, and future tax-saving strategies that go beyond the current filing, setting the stage for long-term financial success.

In the heart of Atlanta, Metro Accounting and Tax Services, CPA, stands as a beacon of excellence in tax preparation. This comprehensive blog serves as your guide to uncovering the distinctive offerings that make this service a trusted ally in navigating the complexities of Atlanta’s tax landscape. Elevate your tax experience and embark on a journey toward financial empowerment with Metro Accounting and Tax Services.

“Demystifying Big Refunds: Unveiling Insider Strategies for Ethical Tax Optimization”

Securing a sizable tax refund is the dream of every taxpayer. However, achieving this goal can often seem like navigating a labyrinth of complex rules and regulations. In this blog, we will demystify the process and unveil insider strategies that not only lead to big refunds but do so ethically. Join us on a journey through the overlooked deductions and credits that form the foundation of billionaire tax strategies, providing you with the tools to optimize your tax return and retain more of your hard-earned earnings.

The Quest for Big Refunds

1. Understanding Overlooked Deductions:

  • Start by unraveling the often overlooked deductions that can significantly impact your refund.
  • Explore common deductions such as business expenses, home office deductions, and unreimbursed employee expenses.

2. Mastering Credits for Maximum Impact:

  • Delve into the world of tax credits and understand how they differ from deductions.
  • Uncover credits like the Child Tax Credit, Education Credits, and Renewable Energy Credits, which can substantially enhance your refund.

Decoding Billionaire Tax Strategies

3. Leveraging Strategic Investments:

  • Explore how billionaires strategically invest to not only grow their wealth but also to minimize their tax liability.
  • Learn about tax-friendly investment options and how they can contribute to a more substantial refund.

4. Maximizing Retirement Contributions:

  • Understand the significant impact of contributing to retirement accounts on your tax liability.
  • Discover how billionaires leverage retirement accounts like 401(k)s and IRAs to optimize their returns.

Optimizing Your Tax Return Ethically

5. Documenting Your Deductions:

  • The devil is in the details – maintain meticulous records to substantiate your deductions.
  • Learn the art of record-keeping to ensure you have the necessary documentation to support your claims.

6. Seek Professional Guidance:

  • Consider consulting with a tax professional to navigate the complexities of the tax code.
  • Tax experts can provide personalized advice tailored to your specific financial situation, helping you uncover additional opportunities for a bigger refund.

Conclusion: Ethical Refund Optimization

In conclusion, the journey to big refunds doesn’t have to compromise ethical standards. By understanding and leveraging overlooked deductions, mastering tax credits, adopting strategic investment approaches, and maximizing contributions to retirement accounts, you can optimize your tax return ethically. Remember to document your deductions diligently and, when in doubt, seek professional guidance to ensure you’re making the most of every opportunity to retain more of your earnings. With these insider strategies, you can embark on your path to a more substantial and ethically achieved tax refund.

 

Unlocking Tax Success: Diving into Fundamental Principles for a Lucrative IRS Tax Refund

 

Understanding the fundamental principles of taxation is akin to wielding a powerful key that unlocks the door to a potentially lucrative tax refund. Let’s embark on a journey to delve into these essential principles, offering both clarity and strategic insights.

Income Categories: Navigating the Taxable Terrain

Understanding income categories is the cornerstone of tax comprehension. Differentiate between earned income (salaries, wages) and unearned income (dividends, capital gains). This awareness empowers you to assess which part of your income is subject to taxation and lays the groundwork for strategic planning.

Deductions: Crafting Your Tax Arsenal

Deductions are your tax arsenal, allowing you to reduce your taxable income. Uncover the array of deductions available, from business expenses to medical costs. Meticulously tracking and documenting these deductions ensures you capitalize on every opportunity to lower your taxable income, ultimately enhancing your refund potential.

Tax Credits: Direct Refund Boosters

Tax credits are direct refund boosters, providing a dollar-for-dollar reduction in your tax liability. Familiarize yourself with credits like the Earned Income Tax Credit (EITC) and Child Tax Credit. These credits, when applicable, can significantly augment your refund. Mastery over tax credits transforms them into strategic tools in your pursuit of a lucrative refund.

Tax Brackets: Strategically Navigating Income Levels

Understanding tax brackets is crucial for strategic income management. Assess how your income aligns with various tax brackets to optimize your tax liability. Strategic planning can potentially keep you in lower tax brackets, minimizing the percentage of your income subject to higher tax rates.

Filing Status: Choosing Wisely for Maximum Benefits

Your filing status plays a pivotal role in determining your tax obligations. Whether single, married filing jointly, or another status, each has distinct implications on your tax liability. Choosing the most advantageous filing status is a strategic move that can impact your refund size.

Tax Planning: A Year-Round Endeavor

Tax planning is not confined to the tax season; it’s a year-round endeavor. Engage in proactive planning, adjusting your strategies as life circumstances change. Staying vigilant and adapting your approach ensures you’re consistently optimizing your tax position, setting the stage for a potentially larger refund.

Record Keeping: The Foundation of Tax Success

Solid record-keeping is the bedrock of a successful tax strategy. Maintain meticulous records of income, expenses, and relevant documents. This not only ensures accurate tax filing but also provides a comprehensive view of your financial landscape, allowing you to spot opportunities for deductions and credits.

Tax Legislation Awareness: Navigating a Changing Landscape

Tax laws are dynamic, subject to revisions and updates. Stay informed about changes in tax legislation, as they can introduce new opportunities or alter existing ones. A keen awareness of evolving tax laws positions you to adapt your strategy and maximize your refund under the current legal framework.

Empowering Your Tax Refund Journey

Understanding the fundamental principles of taxation is more than a preliminary step; it’s an ongoing journey of empowerment. By mastering these principles, you not only navigate the complexities of the tax landscape but also position yourself strategically to maximize your refund potential. The key lies in continuous learning, proactive planning, and a keen awareness of the evolving tax environment. Armed with this knowledge, you embark on a path to unlock the full financial benefits of a well-deserved tax refund.

S-Corp vs. LLC, which is better?

The decision between forming an LLC (Limited Liability Company) or an S-Corporation (S-Corp) depends on various factors related to your business goals, structure, and tax preferences. Let’s explore the key differences and considerations to help you make an informed choice:

1. Limited Liability Protection:

  • LLC: Both LLCs and S-Corps provide limited liability protection, shielding personal assets from business liabilities. This means your personal assets generally won’t be at risk if the business faces legal or financial issues.

2. Taxation:

  • LLC: By default, LLCs are pass-through entities for tax purposes. Profits and losses are reported on the owners’ personal tax returns. This simplifies taxation, but you may be subject to self-employment taxes on all profits.
  • S-Corp: S-Corps also have pass-through taxation, but they offer the opportunity to minimize self-employment taxes. Owners, or shareholders, can receive both a salary and distributions, with only the salary subject to employment taxes.

3. Ownership Structure:

  • LLC: Flexible ownership structure. Members can be individuals, other LLCs, corporations, or foreign entities. There are no restrictions on the number of members.
  • S-Corp: Limited to 100 shareholders, who must be U.S. citizens or residents. S-Corps cannot have non-individual shareholders, such as other corporations.

4. Formalities and Administration:

  • LLC: Generally has fewer formalities and administrative requirements. There is no need for annual meetings or a board of directors.
  • S-Corp: Involves more formalities, such as regular meetings, maintenance of minutes, and adherence to specific corporate governance rules.

5. Profit Distribution:

  • LLC: Members receive profits and losses according to the terms outlined in the operating agreement. Distribution is flexible.
  • S-Corp: Profits and losses are distributed according to the percentage of ownership. Shareholders receive distributions in proportion to their shares.

6. Flexibility in Allocations:

  • LLC: Flexibility in allocating profits and losses among members, not necessarily based on ownership percentages.
  • S-Corp: Profits and losses must be allocated based on ownership percentages.

7. Ease of Formation:

  • LLC: Generally simpler and more flexible to form. Fewer administrative requirements and paperwork.
  • S-Corp: Involves more paperwork and formalities in the formation process.

8. Ideal for Different Businesses:

  • LLC: Often favored by small businesses, startups, and single-owner businesses.
  • S-Corp: Suitable for businesses looking to minimize self-employment taxes and willing to comply with additional formalities.

Conclusion: Choosing between an LLC and an S-Corp depends on your specific business needs, goals, and the tax structure that aligns with your preferences. Consulting with a business advisor or tax professional can provide personalized guidance based on your unique circumstances.

 

 

“Unlocking Your Biggest Return: Critical IRS Tax Mistakes to Avoid for Maximum Refund”

Introduction:

Maximizing your IRS tax return requires strategic planning and avoiding common pitfalls. In this guide, we’ll delve into crucial mistakes to sidestep, ensuring you get the biggest return possible while staying compliant with tax regulations.

1. Missing Out on Deductions:

Explore all eligible deductions—from education expenses to charitable contributions. Thorough research ensures you capture every opportunity to reduce taxable income.

2. Overlooking Tax Credits:

Identify and claim applicable tax credits, such as the Child Tax Credit or Earned Income Tax Credit. These directly reduce your tax liability, potentially leading to a larger refund.

3. Incorrectly Filing Your Filing Status:

Choosing the right filing status is critical. Ensure accuracy in selecting Single, Married Filing Jointly, Head of Household, or another appropriate status for your situation.

4. Ignoring Above-the-Line Deductions:

Don’t disregard above-the-line deductions like student loan interest or educator expenses. These deductions contribute to lowering your taxable income.

5. Failing to Report Additional Income:

Report all income sources, including freelance work or side hustles. Full disclosure prevents penalties and ensures your return reflects your complete financial picture.

6. Neglecting Retirement Contributions:

Contributions to retirement accounts, like 401(k)s or IRAs, can lead to valuable deductions. Ensure you’re taking full advantage of these opportunities to boost your return.

7. Mishandling Health Savings Accounts (HSAs):

Contribute to HSAs and benefit from tax-free withdrawals for qualified medical expenses. Mishandling these accounts can result in missed tax advantages.

8. Inaccurate Recordkeeping:

Maintain meticulous records of receipts and expenses. Accurate recordkeeping substantiates your claims and provides a clear financial trail.

9. Disregarding State-Specific Deductions:

Research and capitalize on state-specific deductions and credits. Each state has unique opportunities that can enhance your overall refund.

10. Delaying Professional Guidance:

When in doubt, seek professional advice. A tax professional can uncover additional opportunities, navigate complex tax situations, and ensure you’re optimizing your return.

Conclusion:

Avoiding these IRS tax mistakes is the key to unlocking your biggest return. By staying informed, meticulous in your reporting, and proactive in seeking professional guidance, you set the stage for a tax season that maximizes your refund. Start now, navigate wisely, and watch your efforts translate into financial gains come tax time.

“Cracking the Code on IRS Back Taxes: Unveiling Causes and Solutions”

Introduction

The specter of IRS back taxes can cast a daunting shadow over anyone’s financial landscape. In this blog, we’ll unravel the mysteries behind owing back taxes to the IRS, shedding light on the root causes and practical solutions to navigate this complex terrain. Whether you’re an individual facing personal tax challenges or a business owner dealing with corporate tax complexities, understanding the causes and corrective actions is crucial.

Understanding IRS Back Taxes: Peeling Back the Layers

1. Unfiled Tax Returns: One of the primary culprits behind owed back taxes is failing to file tax returns. Whether due to oversight, complexity, or financial distress, unfiled returns can accumulate and lead to a mounting tax debt.

2. Underpayment of Taxes: Sometimes, individuals and businesses find themselves in hot water due to insufficient tax payments. This could result from inaccurate withholding, miscalculated estimated tax payments, or unforeseen financial difficulties.

3. Errors in Tax Returns: Mistakes happen. Errors in tax returns, whether accidental or intentional, can trigger audits and potentially result in owed back taxes. It’s crucial to address any discrepancies promptly.

4. Life Changes and Financial Challenges: Major life events, such as job loss, divorce, or unexpected medical expenses, can significantly impact your financial standing, making it challenging to meet tax obligations.

5. Business-Related Taxes: Small business owners may grapple with various business-related taxes, including payroll taxes, self-employment taxes, or business income taxes, leading to owed back taxes.

Unveiling the Magic: 3 Ways a CPA Can Maximize Your Tax Return

In the vast and often perplexing landscape of taxes, the quest for a substantial return stands as a financial milestone. Certified Public Accountants (CPAs), wielding a unique blend of expertise, become indispensable allies in this pursuit. This blog will unravel the intricacies of their role, spotlighting three powerful strategies employed by CPAs to elevate your tax return game. Prepare for a journey through precision, strategy, and preparedness, where the magic of a CPA transforms tax season from a challenge into a triumph.

Precision in Deduction Identification:

Beyond a mere understanding of deductions, CPAs delve into the specifics of your financial situation. This could involve unraveling complex business expenses, identifying eligible home office deductions, or uncovering credits that align perfectly with your financial profile. Their precision ensures that no potential deduction is left unexplored, maximizing your tax savings.

 

Strategic Tax Planning and Forecasting:

CPAs go beyond the annual tax return crunch, adopting a proactive approach to tax planning. By forecasting income, evaluating investment strategies, and considering the timing of significant financial moves, they strategically position you for a tax-efficient future. Their foresight ensures that your financial decisions align seamlessly with your long-term tax goals.

 

Audit Preparedness and Risk Mitigation:

A. Factual Insights: CPAs are not just tax preparers; they are your first line of defense against potential audits. By ensuring meticulous accuracy in your tax return and implementing rigorous record-keeping practices, CPAs prepare you for the unexpected. Their expertise acts as a shield, mitigating risks and providing peace of mind.

 

Conclusion:

In conclusion, the role of a CPA transcends mere number crunching; it becomes a strategic partnership aimed at maximizing your tax return. Precision in deduction identification, strategic tax planning, and audit preparedness are the pillars upon which CPAs build financial success. Metro Accounting And Tax Services stand as a beacon for those seeking not just a tax preparer but a financial ally in the form of a Certified Public Accountant.

Navigating the IRS: Simplifying the Quest for Your Biggest Tax Refund in Atlanta, GA

Introduction: When it comes to tax season, every penny counts. Maximizing your IRS tax refund isn’t just about filling out forms; it’s about strategic planning, awareness, and making the most of available opportunities. In this blog, we’ll unravel the complexities of IRS tax refunds and guide you through the process of securing your biggest refund yet in the vibrant city of Atlanta, GA.

1. Early Planning for Success:

  • Start your tax planning early to identify potential deductions and credits.
  • Leverage the expertise of Metro Accounting and Tax Services, CPA Atlanta, to navigate the intricacies of tax regulations.

2. Keep Impeccable Records:

  • Maintain detailed records of income, expenses, and receipts throughout the year.
  • Organized documentation is key to claiming all eligible deductions and credits.

3. Capitalize on Tax Credits:

  • Explore available tax credits such as the Child Tax Credit, Earned Income Tax Credit, and Education Credits.
  • Each credit can significantly impact your refund amount.

4. Deductions That Matter:

  • Understand itemized deductions and explore opportunities in areas like homeownership, charitable contributions, and medical expenses.
  • Metro Accounting and Tax Services can guide you in identifying deductions tailored to your financial situation.

5. Leverage Retirement Contributions:

  • Contribute to retirement accounts such as a 401(k) or IRA.
  • Contributions may be tax-deductible, reducing your taxable income.

6. Explore Education Savings:

  • Investigate tax-advantaged education savings options.
  • Educational expenses, including student loan interest, may contribute to a higher refund.

7. Stay Informed About Changes:

  • Stay updated on any changes in tax laws and regulations.
  • Metro Accounting and Tax Services ensures you’re well-informed, helping you adapt to evolving tax landscapes.

8. Seek Professional Assistance:

  • Collaborate with Metro Accounting and Tax Services, CPA Atlanta, for personalized tax planning.
  • Professional guidance can uncover opportunities and pitfalls you might overlook.

9. Electronic Filing and Direct Deposit:

  • Opt for electronic filing to expedite the processing of your return.
  • Choose direct deposit for a faster refund delivery.

10. Post-Filing Review:

  • Review your tax return post-filing to catch any errors.
  • Addressing discrepancies promptly ensures you receive the maximum refund.

Conclusion: Securing your biggest IRS tax refund in Atlanta, GA, involves a combination of proactive planning, awareness, and professional guidance. Metro Accounting and Tax Services, CPA Atlanta, stands as your ally in navigating the complexities of tax regulations, ensuring you make informed decisions that contribute to a substantial refund. As you embark on your tax refund journey, remember that expertise and early planning are your greatest assets. Let Metro Accounting and Tax Services empower your financial success in Atlanta, GA, and make this tax season a rewarding experience.

Maximizing Your IRS Tax Refund: The Role of a CPA Unveiled

Introduction: When it comes to navigating the intricate landscape of IRS tax refunds, enlisting the expertise of a Certified Public Accountant (CPA) can be a game-changer. In this guide, we will explore the pivotal role a CPA plays in optimizing your tax refund, shedding light on the factual benefits and actionable strategies that can make a significant impact on your financial bottom line.

Section 1: The Expertise of a CPA Certified Public Accountants are not just number crunchers; they are financial architects with a deep understanding of the ever-evolving tax code. The expertise that CPAs bring to the table are varied and range from staying abreast of tax law changes to employing nuanced strategies that maximize your IRS tax refund.

Section 2: Personalized Tax Planning One-size-fits-all tax solutions rarely yield optimal results. A CPA takes a personalized approach, analyzing your unique financial situation to identify deductions, credits, and exemptions that align with your specific circumstances. It is important to note the importance of personalized tax planning and how a CPA can tailor strategies to suit your individual needs.

Section 3: Navigating Complex Tax Forms IRS tax forms can be a labyrinth of confusion for the uninitiated. A CPA serves as your guide through this maze, ensuring accurate and timely completion of all necessary documents. From intricate deductions to complex credits, a CPA’s attention to detail can eliminate errors and streamline the filing process.

Section 4: Strategic Advice for Tax Efficiency Beyond mere form-filling, a CPA provides strategic advice to enhance your overall tax efficiency. A CPA can offer insights, such as investment choices, retirement planning, and business strategies, all of which contribute to maximizing your IRS tax refund.

Section 5: Proactive Audit Support The mere thought of an IRS audit can be daunting, but having a CPA in your corner provides a sense of security.  Navigating IRS Audits is an invaluable expertise a  CPA brings to the table, ensuring compliance and mitigating potential issues that could impact your tax refund.

Conclusion: In the realm of IRS tax refunds, partnering with a CPA is not just a prudent decision; it’s a strategic investment in your financial well-being. This guide has illuminated the factual benefits of having a CPA by your side, from personalized tax planning to proactive audit support. By leveraging the expertise of a Certified Public Accountant, you not only optimize your IRS tax refund but also gain a trusted advisor dedicated to your financial success.

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“Unlocking Your Maximum Tax Refund: Expert Strategies for 2023”

Introduction: Did you know that there are legitimate and often overlooked strategies that can help you maximize your tax refund? In this guide, we’ll explore some fascinating facts and expert tips to ensure you’re making the most of your tax return in 2023.

  1. Leverage Tax Credits: Explore available tax credits to reduce your tax liability. Common credits include the Child Tax Credit, Earned Income Tax Credit, and Education Credits. Stay informed about changes in tax laws to take advantage of new credits that may be introduced.
  2. Deductions Matter: Dive into the details of tax deductions. From charitable contributions to medical expenses, make sure you’re claiming all eligible deductions. Keep meticulous records throughout the year to substantiate your claims.
  3. Invest Wisely for Capital Gains: If you’re an investor, understand the tax implications of your investments. Holding onto investments for more than a year may qualify you for lower capital gains tax rates. Be strategic in managing your portfolio to optimize tax outcomes.
  4. Take Advantage of Tax-Advantaged Accounts: Contributing to retirement accounts like 401(k)s and IRAs not only secures your financial future but can also result in significant tax savings. Learn about contribution limits and explore options such as Roth conversions.
  5. Small Business Benefits: If you’re a business owner or self-employed, explore the tax benefits available to you. Deductible business expenses, home office deductions, and Section 179 depreciation can contribute to a substantial reduction in your taxable income.
  6. Stay Informed About Tax Law Changes: Tax laws can change, affecting your potential refund. Regularly check for updates, and consider consulting a tax professional to ensure you’re aware of any changes that could impact your financial situation.
  7. Seek Professional Guidance: Enlisting the help of a tax professional can provide personalized advice tailored to your unique circumstances. Tax experts can help you navigate complex tax laws and identify opportunities for maximizing your refund.

Conclusion: By staying informed, leveraging available credits and deductions, and seeking professional advice when needed, you can ensure you’re on the right track to secure the biggest tax refund possible. Implement these strategies in 2023, and watch your refund grow while staying within the bounds of the law.

Christmas Spending Equals Tax Savings!!

Introduction: As the festive season rolls around, the spirit of giving and celebration takes center stage. What if the joy of Christmas could extend beyond the immediate gratification of gift-giving and into the realm of long-term financial benefits? This blog unveils strategic ways to turn your Christmas spending into tax savings, creating a win-win scenario for your festive spirit and your financial well-being.

**1. Leverage Charitable Contributions:

  • Channel the holiday spirit by making charitable donations to eligible organizations.
  • Qualifying donations can be deducted from your taxable income, translating into potential tax savings.

**2. Gifts That Keep on Giving:

  • Consider gifting appreciated stocks or investments.
  • This not only aligns with the spirit of giving but can also provide capital gains tax advantages.

**3. Maximize Annual Gift Exclusions:

  • Leverage the annual gift exclusion limit set by the IRS.
  • Gifting within this limit allows you to share the joy of the season while potentially reducing your taxable estate.

**4. Host a Business Gathering:

  • If you’re a business owner, hosting a holiday gathering for clients or employees can be tax-deductible.
  • Ensure the event has a clear business purpose to maximize tax benefits.

**5. Utilize Flexible Spending Accounts (FSAs):

  • If you have a Health FSA, consider using it for eligible medical expenses.
  • This not only maximizes the use of pre-tax dollars but also reduces taxable income.

**6. Take Advantage of Year-End Sales:

  • Plan your major purchases strategically to coincide with year-end sales.
  • Deductible business expenses made before the year’s end can contribute to tax savings.

**7. Document Holiday Business Expenses:

  • If you’re combining business with pleasure during the holidays, keep meticulous records of business-related expenses.
  • Documenting travel, meals, and entertainment expenses can potentially lead to deductions.

**8. Explore Energy-Efficient Home Upgrades:

  • Some energy-efficient home improvements qualify for tax credits.
  • Consider making eco-friendly upgrades as a festive investment with long-term tax benefits.

Conclusion: Turning Christmas spending into tax savings is a thoughtful way to infuse the season with financial prudence. By strategically aligning your holiday activities with potential deductions and credits, you can extend the joy of giving into a year-round gift for your financial health. Consult with Metro Accounting and Tax Services, CPA Atlanta, to explore personalized strategies that make the most of the festive season while optimizing your tax profile. As you celebrate the holidays, remember that a little financial foresight can go a long way in creating a brighter, more prosperous future.

Demystifying Tax Refunds: Unveiling Their Worth and Optimal Strategies

Understanding the nuances of tax refunds is crucial in navigating the complex realm of taxation. This guide seeks to demystify tax refunds, evaluate their worth, and shed light on the best strategies to optimize this financial aspect.

What is a Tax Refund? A tax refund is a reimbursement issued by the government when an individual’s total tax payments exceed the amount owed. It essentially represents the return of overpaid taxes throughout the year.

Is It Worth It? The worth of a tax refund depends on individual financial circumstances. While receiving a lump sum can be beneficial for some, others may prefer adjusting their withholding to have more disposable income throughout the year. The key lies in aligning the refund strategy with your financial goals.

Best Way to Get a Refund:

  1. Strategic Withholding Adjustments:
    • Tailor your W-4 withholding form to match your financial situation.
    • Adjust exemptions and allowances to balance accurate withholding throughout the year.
  2. Leverage Tax Credits:
    • Explore available tax credits, such as the Earned Income Tax Credit (EITC), Child Tax Credit, and education credits.
    • These credits can substantially increase your refund amount.
  3. Deductions and Itemizing:
    • Identify eligible deductions, including mortgage interest, medical expenses, and charitable contributions.
    • Itemizing deductions can contribute to a larger refund compared to the standard deduction.
  4. Invest in Retirement Accounts:
    • Maximize contributions to retirement accounts like 401(k)s and IRAs.
    • Retirement contributions reduce taxable income, potentially leading to a higher refund.
  5. Explore Tax-Favored Investments:
    • Invest in tax-efficient funds and explore options like municipal bonds.
    • These investments can generate tax-free income, enhancing your overall tax strategy.
  6. Utilize Health Savings Accounts (HSAs):
    • Contribute to HSAs for tax-deductible contributions and tax-free withdrawals for medical expenses.
    • HSAs provide a dual benefit of saving for healthcare costs while optimizing tax advantages.

Navigating the realm of tax refunds requires a strategic and personalized approach. Whether adjusting withholdings, leveraging tax credits, or exploring deductions, the key is aligning your strategy with your financial goals. Consulting with financial professionals, such as Metro Accounting and Tax Services, CPA Atlanta, can provide tailored advice for maximizing your refund while ensuring financial well-being throughout the year. Remember, the optimal approach varies from person to person, and understanding your unique circumstances is paramount.

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CPA Atlanta – Navigating Finances: CPA vs. Tax Accountant for Small Businesses

In the realm of small business finance, the choice between a Certified Public Accountant (CPA) and a Tax Accountant is crucial for ensuring financial stability and compliance. This blog will provide a detailed comparison of these professionals, shedding light on their roles, qualifications, and how each can benefit small businesses. As you embark on this financial journey, consider Metro Accounting and Tax Services, CPA in Atlanta, your go-to source for comprehensive and expert accounting solutions.

Understanding the Roles:

1. Certified Public Accountant (CPA):

Certified Public Accountants are licensed professionals with a broad skill set beyond tax preparation. They undergo rigorous education and examination, covering areas such as auditing, financial planning, and business strategy. CPAs can offer a holistic approach to financial management, making them valuable assets for small businesses seeking comprehensive financial guidance.

2. Tax Accountant:

Tax Accountants specialize in tax-related matters, focusing on the preparation and filing of tax returns. While they possess expertise in tax codes and regulations, their scope is narrower than that of CPAs. Tax Accountants are pivotal during tax season, ensuring accurate and compliant submissions while maximizing potential deductions for the business.

Qualifications and Expertise:

1. CPA:

  • Education: A CPA must hold a bachelor’s degree in accounting or a related field, followed by passing the Uniform CPA Examination.
  • Licensing: CPAs are licensed by state boards of accountancy, ensuring adherence to professional standards.
  • Expertise: Beyond tax, CPAs are proficient in financial planning, auditing, and advising on strategic business decisions.

2. Tax Accountant:

  • Education: Tax Accountants typically have a degree in accounting or a related field, with a focus on taxation.
  • Certifications: While not mandatory, certifications such as Enrolled Agent (EA) or Certified Tax Professional (CTP) enhance a Tax Accountant’s expertise.
  • Expertise: Specialized in tax laws and regulations, Tax Accountants excel in preparing accurate and optimized tax returns.

Key Responsibilities:

1. CPA:

  • Financial Planning: CPAs can create comprehensive financial plans for small businesses, integrating tax strategies with broader financial goals.
  • Audit Services: CPAs conduct financial audits, ensuring transparency and compliance with accounting standards.
  • Strategic Business Advice: Offering valuable insights, CPAs guide businesses in making informed decisions affecting their financial health.

2. Tax Accountant:

  • Tax Compliance: Tax Accountants focus on preparing accurate and compliant tax returns, minimizing the risk of audits.
  • Deduction Maximization: They specialize in identifying and maximizing deductions, ensuring businesses benefit from available tax incentives.
  • Year-Round Tax Planning: Tax Accountants provide ongoing advice, helping businesses make tax-efficient decisions throughout the year.

Choosing the Right Professional for Your Small Business:

1. Consider Your Business Needs:

  • CPA: Ideal for businesses requiring a holistic financial approach, encompassing tax planning, financial planning, and strategic guidance.
  • Tax Accountant: Suited for businesses seeking specialized expertise in tax-related matters, especially during tax season.

2. Complexity of Financial Matters:

  • CPA: Essential for businesses with complex financial structures, intricate tax scenarios, or those navigating significant growth and change.
  • Tax Accountant: Ideal for businesses with straightforward financial structures and tax requirements.

Metro Accounting and Tax Services, CPA Atlanta:

Why Choose Metro Accounting and Tax Services?

Metro Accounting and Tax Services, CPA in Atlanta, stands as a reliable partner for small businesses seeking expert financial guidance. With a team of qualified CPAs, they offer a comprehensive suite of services, including tax planning, financial consulting, and strategic business advice. Their commitment to excellence makes them the go-to source for all your accounting needs, ensuring your small business thrives financially.

Conclusion:

In the realm of small business finance, both CPAs and Tax Accountants play vital roles. The choice between them depends on the specific needs and complexity of your business. For a holistic and expert approach, Metro Accounting and Tax Services, CPA in Atlanta, is your trusted ally, providing tailored solutions to navigate the intricate landscape of small business finances. Whether you need strategic financial planning or meticulous tax compliance, Metro Accounting and Tax Services has you covered.

Atlanta CPA – Navigating Employment Tax: A Comprehensive Guide for Employers

Introduction:

Understanding the intricacies of employment taxes is crucial for employers to stay compliant and ensure the smooth operation of their businesses. In this comprehensive guide, we’ll delve into key aspects of employment taxes, drawing insights from authoritative sources like the Internal Revenue Service (IRS). Additionally, we’ll highlight Metro Accounting and Tax Services CPA in Atlanta as your trusted partner for all your accounting and tax needs.

Employment Tax Deposits and Reporting:

Employers are responsible for both depositing and reporting employment taxes. For specific forms and due dates, the Employment Tax Due Dates page is a valuable resource. Timely and accurate deposits are vital to avoid penalties and maintain financial integrity.

Form W-2 Filing at Year-End:

At the close of the fiscal year, employers must prepare and file Form W-2, Wage and Tax Statement. This form details wages, tips, and other compensation, including noncash payments, provided to each employee. Form W-3, Transmittal of Wage and Tax Statements, is then used to transmit these forms to the Social Security Administration. Furnishing a copy of Form W-2 to employees is essential for accurate personal tax reporting.

Federal Income Tax Withholding:

Employers have the responsibility to withhold federal income tax from employees’ wages. The amount to withhold is determined using the employee’s Form W-4, Employee’s Withholding Certificate, coupled with the appropriate method and withholding table outlined in Publication 15-T, Federal Income Tax Withholding Methods. Employers can leverage the Tax Withholding Estimator tool to help employees estimate the federal income tax to be withheld from their paychecks.

Social Security and Medicare Taxes:

Employers must also withhold Social Security and Medicare taxes from employees’ wages, in addition to covering the employer’s share of these taxes. Social Security and Medicare taxes have distinct rates, with only the former having a wage base limit. This limit represents the maximum wage subject to taxation for the year. Calculating the withholding for Social Security and Medicare taxes involves multiplying each payment by the employee tax rate.

Why Choose Metro Accounting and Tax Services CPA in Atlanta?

For businesses in Atlanta seeking expert guidance on employment taxes, Metro Accounting and Tax Services CPA in Atlanta is the go-to choice. Here’s why:

  1. Expertise and Experience: Metro Accounting and Tax Services boasts a team of seasoned CPAs with extensive knowledge in employment tax regulations. Their experience spans various industries, ensuring tailored solutions for your business.
  2. Comprehensive Services: From employment tax compliance to strategic planning, Metro Accounting and Tax Services provides a full spectrum of services, meeting all your accounting and tax needs under one roof.
  3. Reliable Guidance: As tax laws evolve, Metro Accounting and Tax Services remains up-to-date, offering reliable guidance to keep your business in compliance and financially resilient.

Conclusion:

Navigating employment taxes requires precision and expertise. By following the guidelines provided by authoritative sources like the IRS and partnering with Metro Accounting and Tax Services CPA in Atlanta, employers can ensure compliance, mitigate risks, and optimize their financial strategies. From timely deposits to year-end filings, make informed decisions with the support of trusted professionals, ensuring the success and financial well-being of your business.

CPA Atlanta – Unlocking the Mysteries of Income Tax: A Guide for Businesses

 

In the intricate world of taxation, understanding the nuances of income tax is paramount for businesses. While partnerships follow a different filing route with an information return, all other businesses must submit an annual income tax return. The choice of form hinges on the unique organizational structure of your business.

Federal income tax operates on a pay-as-you-go model. As income is earned or received throughout the year, the corresponding tax must be paid. Typically, employees have income tax automatically withheld from their paychecks. However, if withholding doesn’t cover your tax obligations, or you’re not subject to it, estimated tax payments might be necessary.

Estimated Tax: Staying Ahead of Your Obligations

In the realm of income tax, regular payments of estimated tax are a must. This includes self-employment tax, discussed shortly. For detailed insights, delve into the world of Estimated Taxes to ensure you meet your obligations throughout the year.

Self-Employment Tax: Navigating Social Security and Medicare Contributions

For those venturing into the world of self-employment, the Self-Employment Tax (SE tax) comes into play. This tax, contributing to your social security coverage, is crucial for individuals working for themselves. SE tax payments play a pivotal role in securing your future, offering benefits like retirement, disability, survivor, and Medicare coverage.

Key Points on Self-Employment Tax:

  1. Earnings Threshold: If your net earnings from self-employment reach $400 or more, you’re required to pay SE tax and file Schedule SE (Form 1040 or 1040-SR).
  2. Church Affiliation: Working for a church or a qualified church-controlled organization? If they’ve elected an exemption from social security and Medicare taxes, you’ll still be subject to SE tax if your wages exceed $108.28.
  3. Special Considerations: Special rules and exceptions exist for various groups, including aliens, fishing crew members, notary public, state or local government employees, and foreign government or international organization employees. For detailed information, consult the Self-Employment Tax guide.

In essence, mastering the intricacies of income tax is not only a legal necessity but a strategic move for financial stability. As you navigate this complex landscape, remember that Metro Accounting and Tax Services, CPA in Atlanta, stands as a trusted ally for all your tax needs. From understanding your filing obligations to optimizing your tax position, they are your go-to source for expert guidance. Dive into the world of income tax with confidence, armed with knowledge and a reliable partner by your side.

Tax CPA – Investors and Small Business Owners: Decoding the Tax Puzzle

Tax season may seem like an annual trek through a labyrinth for small business owners, but fear not! This blog unveils the secrets of effective tax strategies, combining insights from the IRS playbook with the expert guidance of Atlanta’s own Metro Accounting And Tax Services CPA. Let’s embark on this journey to financial enlightenment!

The IRS Handbook: A Treasure Trove of Tax Wisdom

Before delving into specific strategies, it’s crucial to consult the ultimate source—the IRS. The Internal Revenue Service provides a wealth of information on tax codes, deductions, and credits, acting as the compass for small business owners navigating the complex tax landscape. Understanding the IRS guidelines is like having a roadmap through the tax labyrinth.

Metro Accounting And Tax Services CPA: Your Local Tax Sherpa

In the heart of Atlanta, Metro Accounting And Tax Services CPA emerges as the trusted guide for small business owners. Their team of experts combines local knowledge with a deep understanding of federal tax regulations. With Metro Accounting And Tax Services CPA, you’re not just getting an accountant; you’re gaining a partner in financial success.

Tax Strategy #1: Mastering Deductions like a Pro

Small business owners, rejoice! The IRS offers an array of deductions that can significantly reduce your taxable income. From home office expenses to business-related travel, Metro Accounting And Tax Services CPA can help identify and maximize every deductible, ensuring you keep more of your hard-earned money.

Tax Strategy #2: The Art of Expense Tracking

Nothing impresses the IRS more than meticulous record-keeping. Small business owners should adopt robust expense tracking systems to substantiate deductions. Metro Accounting And Tax Services CPA recommends modern accounting tools and apps that streamline the process, leaving no room for discrepancies.

Tax Strategy #3: Embrace Tax Credits for a Financial Boost

The IRS rewards certain behaviors with tax credits, providing a direct reduction in your tax liability. Metro Accounting And Tax Services CPA can guide small business owners through the world of tax credits, helping them leverage opportunities like the Small Business Health Care Tax Credit or the Work Opportunity Tax Credit.

Tax Strategy #4: Plan Ahead with Metro Accounting And Tax Services CPA

Proactive tax planning is a game-changer. Metro Accounting And Tax Services CPA emphasizes the importance of strategic planning throughout the year, ensuring small business owners are well-positioned for tax season. From quarterly estimates to long-term strategies, their experts are dedicated to optimizing your financial picture.

Tax Strategy #5: Stay Informed and Adapt

Tax laws are as dynamic as a thriving city like Atlanta. Metro Accounting And Tax Services CPA stays ahead of the curve, constantly updating clients on changes that may impact their tax situation. Small business owners should stay informed, attending workshops, webinars, and seeking expert advice to adapt their strategies accordingly.

Conquering the Tax Maze with Metro Accounting And Tax Services CPA

In the world of small business taxes, knowledge is power. By combining insights from the IRS and the expertise of Metro Accounting And Tax Services CPA, small business owners in Atlanta can navigate the tax labyrinth with confidence. Embrace deductions, track expenses diligently, leverage credits, plan strategically, and stay informed to conquer the challenges of the ever-evolving tax landscape.

Remember, with Metro Accounting And Tax Services CPA by your side, the tax maze becomes not a daunting challenge, but a pathway to financial success for your small business in Atlanta.

CPA Atlanta – “Maximizing Success: The Invaluable Role of a CPA in Your Atlanta Small Business”

Running a small business in Atlanta, Georgia, comes with its share of challenges, and navigating the complex world of finances is often a top concern. Enter the Certified Public Accountant (CPA), your strategic partner in financial success. In this blog, we’ll explore the undeniable value of having a CPA for your small business, shedding light on the crucial role they play.  Metro Accounting and Tax Services, CPA Atlanta, is the go-to choice for small business owners, individuals, and investors seeking expert financial guidance.

The Power of a CPA in Your Small Business: Unlocking Success

  1. Financial Expertise and Strategy: CPAs are financial experts with a deep understanding of tax laws, accounting principles, and financial strategies. They provide valuable insights that go beyond basic bookkeeping, helping you make informed decisions to maximize profitability.
  2. Tax Planning and Compliance: Navigating the intricacies of tax regulations is no small feat. A CPA ensures your small business remains compliant with tax laws, maximizes eligible deductions, and strategically plans for tax liabilities.
  3. Risk Management: CPAs assess financial risks and implement strategies to mitigate them. This includes advising on cash flow management, budgeting, and identifying potential financial pitfalls before they become significant issues.
  4. Business Structure and Formation: Choosing the right business structure is critical for legal and financial reasons. CPAs guide small business owners in selecting the most suitable structure, whether it’s a sole proprietorship, LLC, or corporation.
  5. Financial Reporting and Analysis: CPAs generate accurate and comprehensive financial reports, offering a clear snapshot of your business’s financial health. This information is instrumental in making informed decisions and securing financing when needed.

Metro Accounting and Tax Services, CPA Atlanta: Your Trusted Financial Ally

Metro Accounting and Tax Services exemplifies the epitome of CPA excellence in Atlanta. Here’s why they stand out:

  • Holistic Financial Services: Metro offers a wide range of financial services, including tax planning, accounting, auditing, and strategic financial consulting, making them a one-stop solution for all your financial needs.
  • Personalized Guidance: Recognizing that every small business is unique, Metro tailors its services to meet your specific requirements. This personalized approach ensures that you receive solutions crafted for your business’s success.
  • Proactive Problem Solvers: Metro’s team of CPAs goes beyond the numbers. They proactively identify potential challenges, offering solutions to steer your business towards growth and sustainability.
  • Technology Integration: Staying ahead in the digital age, Metro embraces technology to streamline financial processes, ensuring efficiency and accuracy in all their services.

Conclusion: Elevate Your Business with Metro Accounting and Tax Services, CPA Atlanta

The value of having a CPA for your small business in Atlanta cannot be overstated. With Metro Accounting and Tax Services, you’re not just partnering with certified professionals; you’re aligning your business with a team dedicated to your financial success.

As you navigate the complexities of entrepreneurship, let Metro be your guide. Elevate your small business to new heights with the expert financial services of Metro Accounting and Tax Services, your trusted CPA in Atlanta, and witness the transformative impact on your business’s bottom line.

CPA Atlanta – “Mastering Your Finances in Atlanta: Unveiling the Magic of CPAs and Metro Accounting And Tax Services CPA”

Welcome to the captivating world of managing finances, where the unsung heroes, Certified Public Accountants (CPAs), play a significant role in the financial success of small businesses and individuals. In bustling Atlanta, one firm stands out among the rest—Metro Accounting And Tax Services CPA. Join us on an illuminating journey as we uncover the crucial role of CPAs and the unique benefits they bring to the dynamic landscape of Atlanta.

The Hidden Heroes of Finances: CPAs Unveiled
CPAs are the wizards of the financial realm, armed with extensive knowledge and expertise in navigating the complex landscape of taxes, audits, and financial planning. They’re like the Gandalfs and Hermiones of the financial world, wielding their expertise to guide individuals and businesses through the intricate maze of financial management.

The Atlanta Connection: Small Businesses and Individuals
Atlanta, a thriving hub of creativity and entrepreneurship, boasts a multitude of small businesses and individuals striving for success. In this vibrant setting, CPAs serve as the guiding compass, offering invaluable financial advice and services to these aspiring ventures and individuals.

Metro Accounting And Tax Services CPA: The Magicians Amongst CPAs
Among the many splendid CPA firms in Atlanta, Metro Accounting And Tax Services CPA shines bright like a diamond in the realm of financial services. They’re not your typical number-crunchers; they’re more like financial superheroes with capes made of balance sheets!

Metro Accounting And Tax Services CPA understands the unique financial needs of small businesses and individuals in Atlanta. They offer a magical array of services including tax planning, bookkeeping, financial consulting, and much more. Their secret sauce lies in their personalized approach, tailoring their services to fit the exact needs of their clients. It’s like having a financial best friend who always has your back!

The Marvelous Benefits of CPAs for Small Businesses and Individuals
Tax Relief Charm: CPAs have the knack for unraveling the mysteries of taxes, helping businesses and individuals save money and minimize liabilities, ensuring compliance with ever-changing tax laws.

Financial Strategy Sorcery: With their expertise, CPAs assist in crafting financial strategies that pave the way for long-term success, aiding in wealth accumulation and proper financial planning.

Time-Turning Efficiency: By outsourcing financial tasks to CPAs, businesses and individuals save precious time that can be redirected towards their core pursuits.

Error-Proofing Elixir: CPAs act as guardians against financial blunders, ensuring accuracy and compliance, thus preventing costly mistakes.

Embrace the Magic of Metro Accounting And Tax Services CPA
Metro Accounting And Tax Services CPA isn’t just a firm; they’re the enchanters of financial stability, working diligently to unlock the potential of small businesses and individuals in Atlanta. By leveraging their services, clients discover the true power of financial control and prosperity.

So, let your financial worries dissipate into thin air as Metro Accounting And Tax Services CPA takes the stage, transforming your financial journey into a magical and prosperous adventure!

The Grand Finale
In the mystical world of finances, CPAs are the unsung heroes, and Metro Accounting And Tax Services CPA stands out as a beacon of hope for small businesses and individuals in Atlanta. With their expertise and personalized approach, they work wonders, ensuring financial success and stability.

If you’re in Atlanta and seeking financial brilliance, look no further than Metro Accounting And Tax Services CPA. Let them weave their financial magic, and watch as your financial dreams materialize into reality!

Whether you’re a small business owner or an individual navigating the financial maze, CPAs and firms like Metro Accounting And Tax Services CPA are here to guide you towards financial prosperity in Atlanta.

Tax Resolution CPA Atlanta – IRS Tax Relief: Your Guide to Managing Tax Debt

IRS tax debt can be a heavy burden for individuals and businesses. However, the IRS offers various relief programs and options to help taxpayers manage their tax liabilities. In this comprehensive guide, we’ll delve into IRS tax relief programs, eligibility criteria, and steps to take to address and potentially reduce your tax debt.

Understanding IRS Tax Relief

1. Types of IRS Tax Debt Relief:

  • Overview: The IRS provides several tax debt relief programs, including installment agreements, offers in compromise, and penalty abatement, to help taxpayers resolve their tax liabilities.

2. Eligibility Criteria:

  • Overview: Eligibility for IRS tax debt relief programs varies depending on factors such as your financial situation, the amount of tax debt owed, and your compliance history.

3. Tax Liabilities Covered:

  • Overview: IRS tax debt relief programs typically cover various types of tax debt, including income tax, payroll tax, and self-employment tax.

IRS Tax Debt Relief Options

1. Installment Agreements:

  • Description: Installment agreements allow you to pay your tax debt over time through regular monthly payments.
  • Eligibility: Generally available to taxpayers with less than $50,000 in tax debt, but eligibility criteria may vary.

2. Offer in Compromise (OIC):

  • Description: An OIC allows you to settle your tax debt for less than the full amount owed if you meet specific eligibility criteria.
  • Eligibility: Typically available to taxpayers who demonstrate financial hardship or doubt about the collectibility of the debt.

3. Penalty Abatement:

  • Description: Penalty abatement may reduce or eliminate IRS penalties associated with tax debt.
  • Eligibility: Typically available to taxpayers who can demonstrate reasonable cause for the penalty.

4. Currently Not Collectible (CNC) Status:

  • Description: If you can’t afford to pay your tax debt due to financial hardship, the IRS may temporarily halt collection efforts.
  • Eligibility: Requires proof of financial hardship, such as inability to meet necessary living expenses.

Steps to Address IRS Tax Debt

1. Assess Your Tax Debt:

  • Action: Review your tax debt and financial situation to determine the most suitable IRS tax relief option.

2. Complete Necessary Forms:

  • Action: Depending on the relief program, you may need to complete specific IRS forms and provide supporting documentation.

3. Submit Your Application:

  • Action: Submit your application for the chosen IRS tax debt relief program, either online or by mail.

4. Communicate with the IRS:

  • Action: Maintain open communication with the IRS throughout the process, responding promptly to inquiries and requests for additional information.

5. Comply with Agreements:

  • Action: If approved for relief, ensure you comply with the terms of the agreement, such as making timely payments.

Conclusion

IRS tax debt relief programs offer a lifeline for individuals and businesses struggling with tax liabilities. By understanding the available relief options, assessing your eligibility, and taking proactive steps to address your tax debt, you can work towards achieving financial stability and resolving your tax issues with the IRS. Remember that the IRS is willing to work with taxpayers who make a genuine effort to address their tax debt and fulfill their tax obligations.

Tax CPA Atlanta – “Navigating IRS Tax Resolution Challenges: Solutions and Strategies”


Introduction

IRS tax resolution challenges can be a formidable source of financial stress and legal uncertainty for individuals and businesses alike. These challenges often emerge when taxpayers find themselves owing substantial back taxes or encountering complex tax-related issues.

In this comprehensive blog, we’ll explore the most common IRS tax resolution problems and outline potential solutions and strategies to address them effectively. Additionally, we at Metro Accounting and Tax Services, a renowned Atlanta CPA firm can provide expert guidance and representation to help you navigate these complex tax issues.

Understanding the Spectrum of IRS Tax Resolution Problems

Unpaid Taxes: This is a prevalent tax resolution issue, often arising from underpayment, non-filing, or financial hardships. Owing the IRS money can lead to a variety of challenges.

Tax Liens: When back taxes remain unpaid, the IRS may impose a tax lien on your property, which can hinder property sales or refinancing.

Levies: The IRS can take measures such as wage garnishments, bank levies, or asset seizures to collect unpaid taxes.

Audits: IRS audits can be time-consuming and stressful, even if you are ultimately found to be in compliance.

Installment Agreements: If you have substantial tax debt but cannot pay in full, installment agreements may be the solution, allowing you to pay off your taxes over time.

Offer in Compromise: In specific cases, the IRS may consider an offer in compromise, a settlement for a reduced amount to resolve your tax debt.

Innocent Spouse Relief: When one spouse is unaware of discrepancies in their joint tax return, innocent spouse relief can help avoid liability.

Penalties and Interest: Accumulating penalties and interest can significantly inflate your tax debt.

Payroll Tax Problems: Businesses may grapple with unpaid payroll taxes, which can lead to severe consequences.

Failure to File: Neglecting to file tax returns can result in penalties and a backlog of unfiled returns.

Tax Identity Theft: Falling victim to tax-related identity theft can lead to complications when fraudulent tax returns are filed in your name.

Trust Fund Recovery Penalty: Business owners and responsible individuals can face personal liability for unpaid payroll taxes through the Trust Fund Recovery Penalty.

Foreign Account Reporting: Failing to report foreign financial accounts can trigger severe penalties and legal challenges.

Business Closure and Taxes: When businesses shutter their operations or file for bankruptcy, unresolved tax issues may require attention.

Tax Appeals: Taxpayers who disagree with IRS decisions can file appeals to resolve disputes.

Metro Accounting and Tax Services, Atlanta CPA

In the face of IRS tax resolution challenges, Metro Accounting and Tax Services, a reputable Atlanta CPA firm, is here to provide expert assistance. Their team of Certified Public Accountants (CPAs) boasts the knowledge and expertise needed to serve as authorized representatives and guide you through these complex tax matters.

How Metro Accounting and Tax Services Can Assist You:

Tax Issue Resolution: Metro’s professionals act as advocates in audits, negotiations, and dispute resolutions with the IRS, striving to achieve the best possible outcomes for you.

Compliance Assistance: They ensure you remain in compliance with IRS requirements, guaranteeing accurate and timely tax filings.

Strategic Tax Planning: Metro offers comprehensive tax planning to help minimize your tax liability, enhance financial efficiency, and prepare for future tax obligations.

Conclusion

IRS tax resolution challenges are multifaceted and necessitate tailored strategies to address them effectively. Seeking professional guidance from a tax attorney, Certified Public Accountant (CPA), or enrolled agent is often essential to navigate these intricate issues, negotiate with the IRS, and attain satisfactory resolutions. Timely resolution is key to preventing escalating penalties and legal actions. With Metro Accounting and Tax Services, a reputable Atlanta CPA firm, by your side, you can confidently tackle these tax challenges and safeguard your financial stability.

Tax Resolution CPA – How to Challenge the IRS and Achieve a Successful Outcome, Atlanta CPA.

 

 Challenging the IRS can be an intimidating prospect, but it’s important to know that you have rights as a taxpayer and avenues to dispute IRS decisions. In this guide, we’ll explore strategies and steps to help you effectively challenge the IRS and achieve a favorable resolution to your tax dispute.

Understand Your Rights

Before challenging the IRS, it’s crucial to understand your rights as a taxpayer. Familiarize yourself with the Taxpayer Bill of Rights, which outlines protections such as the right to:

  • Be informed.
  • Quality service.
  • Pay no more than the correct amount of tax.
  • Challenge the IRS’s position and be heard.
  • Appeal an IRS decision in an independent forum.
  • Finality, including a right to know the maximum time the IRS has to audit a particular tax year or collect a tax debt.
  • Privacy and confidentiality.
  • Representation.

Knowing your rights empowers you when dealing with the IRS.

Open Communication

Start by opening lines of communication with the IRS. Often, tax issues can be resolved through straightforward discussions. Contact the IRS agent assigned to your case or the IRS customer service line to discuss your concerns and seek clarification.

Request a Review

If you believe the IRS has made an error, request a review of your case. This could involve:

  • Providing additional documentation or information.
  • Demonstrating that the IRS’s assessment is incorrect.
  • Showing that you’ve already paid the disputed amount.

Requesting a review is often the first step in addressing discrepancies.

File an Appeal

If you disagree with the outcome of the review, you have the right to file an appeal. The IRS Appeals Office operates independently and can provide a fresh perspective on your case. Be prepared to present your argument and provide supporting evidence during the appeals process.

Seek Professional Representation

Consider enlisting the services of a tax professional, such as a tax attorney or enrolled agent, when challenging the IRS. These experts have in-depth knowledge of tax laws and can effectively advocate for your position. They can also guide you through the appeals process and represent you before the IRS.

Understand the Statute of Limitations

The IRS has specific time limits for auditing tax returns and collecting tax debt. Understanding these statutes of limitations is essential when challenging the IRS. If the IRS exceeds these time limits, you may have a valid defense.

Explore Alternative Dispute Resolution

Alternative dispute resolution methods, such as mediation or arbitration, can offer an efficient way to resolve tax disputes without going to court. Discuss these options with your tax professional.

File a Lawsuit

As a last resort, you can file a lawsuit in federal court to challenge the IRS’s decision. This can be a lengthy and costly process, so it’s typically pursued when all other options have been exhausted.

Document Everything

Throughout the entire process of challenging the IRS, maintain meticulous records. Document all communications, agreements, and paperwork. Having a comprehensive record of your case can strengthen your position.

Be Persistent and Patient

Challenging the IRS can be a lengthy process, and it may require patience and persistence. Stay committed to your case, follow up regularly, and be prepared for negotiations.

Challenging the IRS can be a daunting task, but with knowledge of your rights, effective communication, professional representation, and a commitment to the process, it is possible to achieve a successful outcome. Remember that the IRS, like any government agency, can make errors, and taxpayers have the right to challenge those errors through the appropriate channels.

By understanding your rights, seeking professional assistance, and following the steps outlined in this guide, you can navigate the IRS dispute process with confidence and work toward a resolution that aligns with your interests.

Back Tax CPA – Resolving Back Taxes with IRS Representation: Your Solution in Atlanta with Metro Accounting and Tax Services, CPA

Back taxes can be a heavy burden, causing stress and financial strain for both individuals and businesses. If you’re in Atlanta and find yourself facing back taxes, it’s crucial to seek professional help to navigate the complex IRS processes and find a resolution. Metro Accounting and Tax Services, a trusted CPA firm in Atlanta, offers expert IRS representation services to assist you in resolving your back tax issues. In this article, we will explore the importance of addressing back taxes and how Metro Accounting and Tax Services, CPA, can be your guide to financial recovery.

The Challenge of Back Taxes:

Back taxes are unpaid taxes from previous years, and they can accumulate for various reasons, such as:

Failure to file tax returns.
Inaccurate tax reporting.
Financial hardship.
Ignorance of tax obligations.
Accumulated back taxes can result in penalties, interest, and legal actions by the IRS, making it essential to address them promptly and correctly.

 

The Importance of IRS Representation:

IRS representation is a critical component in handling back taxes effectively. Here’s why it’s essential:

Expertise: IRS representation services are provided by experienced tax professionals who are well-versed in IRS regulations and procedures. They understand how to navigate the complex tax system.

Negotiation: IRS representatives can negotiate with the IRS on your behalf to reach a favorable resolution, such as an installment agreement or an offer in compromise to settle your debt for less than the full amount.

Protection: IRS representation services help protect your rights and ensure the IRS follows proper procedures during the resolution process.

Minimized Stress: Handling back taxes can be stressful and overwhelming. IRS representation allows you to focus on your life or business while experts handle the tax-related matters.

Metro Accounting and Tax Services, CPA: Your Atlanta IRS Representation Experts:

Metro Accounting and Tax Services, CPA, in Atlanta, is your go-to partner for resolving back taxes and ensuring IRS representation. Here’s why they stand out:

 

Our Expert Team

Metro Accounting and Tax Services, CPA, boasts a team of experienced tax professionals who specialize in IRS representation and resolution.

Comprehensive Services: They offer a wide range of services, including tax planning, tax preparation, accounting, and bookkeeping, in addition to IRS representation.

Personalized Approach: Recognizing that every financial situation is unique, they tailor their services to meet your specific needs and goals.

Proactive Strategies: Their proactive approach to tax planning ensures you’re well-prepared for any tax-related changes that may affect your financial situation.

 

Back taxes can create financial stress and legal complications, but with the help of IRS representation services provided by experts like Metro Accounting and Tax Services, CPA, in Atlanta, you can find a resolution and regain your financial stability. Don’t let back taxes overwhelm you—contact Metro Accounting and Tax Services, CPA, to start the journey toward financial recovery and peace of mind. Your trusted partners in Atlanta are here to assist you.

Small Business CPA – Unlocking Financial Success: Metro Accounting and Tax Services – Your Trusted Small Business CPA in Atlanta, Georgia

In the bustling heart of Atlanta, Georgia, Dekalb, Marietta, College Park, Douglasville, Stone Mountain and surrounding communities, small businesses thrive as the backbone of the local economy. Amidst the dynamic landscape of commerce, these enterprises often find themselves navigating complex financial challenges. That’s where Metro Accounting and Tax Services comes into play, offering a dedicated and expert hand to guide small business owners toward financial success.

A Pillar of Support for Small Businesses:

Metro Accounting and Tax Services is more than just an accounting firm. It is a partner in the journey of local small businesses, providing a wide array of essential services designed to alleviate financial burdens and drive growth. From accounting and part-time CFO services to tackling the most daunting IRS tax problems, Metro Accounting is a trusted ally.

Small Business Accounting Services:

Accurate financial records are the cornerstone of any successful business. Metro Accounting understands the unique needs of small businesses and offers comprehensive accounting services. Whether you’re a startup looking to establish a solid financial foundation or an established business seeking to streamline your financial processes, their expert team has you covered.

Part-Time CFO Services:

Many small businesses may not require a full-time Chief Financial Officer (CFO), but they can certainly benefit from their expertise. Metro Accounting provides part-time CFO services, offering strategic financial guidance that can be a game-changer for your business. Their CFOs help you make informed decisions, manage cash flow, and plan for sustainable growth.

IRS Tax Problem Representation:

Facing IRS tax problems can be incredibly daunting for any business owner. Metro Accounting and Tax Services specializes in IRS tax problem representation. They’re your advocate when dealing with IRS audits, levies, liens, and back taxes owed. Their experienced team knows the intricacies of tax law, ensuring that your rights are protected while working to resolve your tax issues efficiently.

Payroll Tax Problems:

Payroll tax problems can disrupt the smooth operation of your business and lead to serious consequences. Metro Accounting can step in to address payroll tax issues, helping you rectify discrepancies, meet tax obligations, and avoid penalties.

Why Choose Metro Accounting and Tax Services:

  1. Local Expertise: With a deep understanding of the Atlanta business landscape, Metro Accounting tailors its services to meet the specific needs of local businesses.
  2. Experience Matters: Their team of seasoned CPAs and financial experts brings years of experience to the table, ensuring that you receive top-notch service and guidance.
  3. Comprehensive Solutions: From everyday accounting to complex tax problems, Metro Accounting is a one-stop solution for all your financial needs.
  4. Personalized Attention: Small businesses are not just clients; they’re partners. Metro Accounting takes the time to understand your unique challenges and goals.
  5. Peace of Mind: With Metro Accounting by your side, you can focus on what you do best – running your business – while they handle the financial intricacies.

Join the Metro Accounting Family:

For small businesses in Atlanta and the surrounding communities, Metro Accounting and Tax Services isn’t just a financial service provider; it’s a trusted companion on the path to financial success. With their expertise, dedication, and personalized approach, they empower small businesses to overcome financial challenges, achieve stability, and set their sights on new heights of growth.

So, if you’re a small business owner in Atlanta, Georgia, seeking expert accounting, tax representation, or financial guidance, Metro Accounting and Tax Services is ready to be your partner in success. Together, you can unlock the full potential of your business, ensuring a prosperous and secure future.

 

Back Tax CPA Atlanta – “Navigating the Maze of Owing the IRS Back Taxes”

Introduction:
Owing the IRS back taxes may not be the most exciting topic, but it’s one that millions of Americans have had to confront at some point. Don’t worry; we’re here to make this journey a little less taxing (pun intended). In this witty and informative guide, we’ll explore what it means to owe the IRS, why it happens, and what you can do to remedy the situation and regain your financial peace of mind.

How Did We Get Here?
Picture this: You’re living your life, going about your daily business, and suddenly you receive a letter from the IRS. It’s not a love letter, and it certainly doesn’t contain good news. You owe back taxes. How did this happen? Life’s twists and turns, changes in income, or simply honest mistakes on your tax returns can lead to this situation.

Facing the IRS: The Dreaded Letter
Getting a letter from the IRS can feel like a scene from a suspenseful thriller. But fear not! It’s not the end of the world. The first step is to open the letter, read it carefully, and understand what they want from you. Ignoring it won’t make it go away, but confronting it head-on can save you from sleepless nights.

Options for Resolving Your Tax Debt
So, you owe the IRS some money—what now? Here are some witty ways to tackle the issue:

a. Payment Plans: Think of it as paying for that fancy coffee machine in monthly installments. The IRS offers various payment plans to help you settle your debt gradually.

b. Offer in Compromise: This is like negotiating with your sibling for a bigger slice of the pie, only more complicated. You might be able to settle for less than you owe if you meet certain criteria.

c. Tax Relief Programs: These are the golden ticket for those who qualify. They can provide a break from penalties and interest, giving you a fresh start.

d. Professional Help: When all else fails, consider seeking the assistance of a tax resolution professional, like Metro Accounting And Tax Services, CPA. They’ll help you navigate the maze and ensure you’re making the right choices.

After you’ve sorted things out with the IRS, it’s time to think about the future. Here are some witty tips to help you avoid this predicament in the future:

a. Keep Accurate Records: Think of it as a diary for your finances. Accurate records will make tax time less stressful.

b. Adjust Withholding: Tweaking your withholding can prevent owing large sums at the end of the year. It’s like finding that sweet spot on the seesaw.

c. Seek Professional Advice: Don’t be a lone wolf; tax professionals are there to guide you. Consult with them regularly to ensure you’re on the right track.

Owing the IRS back taxes isn’t an ideal situation, but it’s also not the end of the world. With a bit of wit, some knowledge, and a proactive approach, you can navigate this financial maze successfully. Remember, the IRS isn’t the enemy; they’re just here to ensure everyone pays their fair share. So, roll up your sleeves, face it with a dash of humor, and regain your financial footing. In the end, you’ll come out wiser and with your wallet intact.

Tax Resolution Atlanta CPA – Settling Back Taxes for Pennies on the Dollar: An In-Depth Guide

Tax debt can feel like an insurmountable burden, causing stress and anxiety for individuals and businesses alike. While there’s a common belief that you can settle your tax debt for pennies on the dollar, the reality is more nuanced. In this comprehensive guide, we’ll explore the steps involved in settling back taxes, including the Offer in Compromise (OIC) program, which allows some taxpayers to indeed settle for less than the full amount owed. However, it’s crucial to understand that not everyone qualifies for this program, and eligibility depends on individual circumstances.

Understanding Tax Debt
Tax debt accumulates when individuals or businesses owe the IRS more money than they’ve paid in taxes. This can result from unfiled tax returns, unpaid taxes, or discrepancies between reported income and actual earnings. Unresolved tax debt can lead to severe consequences, including IRS collection actions, tax liens on property, and wage garnishments. Therefore, addressing tax debt proactively is essential to avoid these issues.

Eligibility for an Offer in Compromise (OIC)
The OIC program is a lifeline for many struggling taxpayers, allowing them to settle their tax debt for less than the full amount owed. To be eligible for an OIC, you must meet specific criteria:
• Doubt as to Collectability: You must demonstrate that you can’t pay the full amount of your tax debt due to financial hardship.
• Doubt as to Liability: You believe the assessed tax liability is incorrect.
• Effective Tax Administration: Paying the full amount would create an undue hardship, even if you can technically afford it.
It’s essential to understand that approval for an OIC is not guaranteed, and the IRS will thoroughly evaluate your financial situation before accepting or rejecting your offer.

Preparing for an Offer in Compromise
Before applying for an OIC, gather the necessary financial documents, including tax returns, bank statements, pay stubs, and documentation of your monthly expenses. It’s crucial to have all your financial records organized and up-to-date to present a compelling case.

Calculating Your Offer Amount
The IRS calculates the acceptable offer amount based on your reasonable collection potential (RCP). RCP includes your ability to pay based on income, expenses, and asset equity. The IRS will consider factors like your monthly income, necessary living expenses, and the value of your assets when determining the offer amount. Negotiation with the IRS may also play a role in reaching an acceptable offer.

Submitting the Offer and Associated Costs
Once you’ve calculated your offer amount, it’s time to prepare and submit your OIC. There is a non-refundable application fee associated with this process, although low-income taxpayers may qualify for a fee waiver. You can choose between two payment options:
• Lump-Sum Cash Offer: Pay the offer amount in a lump sum within 5 months.
• Periodic Payment Offer: Pay the offer amount in fixed monthly installments over 6 to 24 months.

What Happens After Submitting an OIC
After submitting your OIC, the IRS will review and process your application. This process can take several months. The IRS will evaluate your offer to determine if it’s reasonable based on your financial circumstances. You may receive one of three possible outcomes:
• Acceptance: Your offer is approved, and you must adhere to the agreed-upon payment terms.
• Rejection: The IRS rejects your offer for reasons such as incomplete information or an unreasonably low offer amount.
• Negotiation: In some cases, the IRS may negotiate with you to reach a more acceptable offer amount.

Appeals and Disputes
If your OIC is rejected, you have the right to appeal the decision. The appeal process allows you to present additional information or arguments to support your case. It’s essential to follow the prescribed appeal procedures and provide a strong argument to improve your chances of success. Dispute resolution options are also available if you disagree with other IRS decisions during the OIC process.

Alternatives to an OIC
While an OIC can be an effective way to settle tax debt, it’s not the only option. Depending on your circumstances, you may consider alternative solutions, including:
• Installment Agreements: Arrange a payment plan with the IRS to pay your debt over time.
• Hardship Status: Prove financial hardship to temporarily delay collection actions.
• Bankruptcy: In certain situations, filing for bankruptcy may discharge or reduce tax debt.
Each alternative has its advantages and disadvantages, so it’s crucial to explore the best option for your specific case.

Avoiding Tax Debt in the Future
The best way to prevent tax debt is through proactive tax planning and responsible financial management:
• Tax Planning: Plan your finances to ensure you have sufficient funds to meet your tax obligations.
• Budgeting: Create a budget to manage your expenses and avoid overspending.
• Professional Guidance:
• Staying Informed: Stay updated on changes in tax laws and compliance requirements to ensure you remain in good standing with the IRS.

Settling back taxes for pennies on the dollar is possible through the Offer in Compromise program, but eligibility depends on your financial situation and other factors. While this guide provides a comprehensive overview of the process, it’s essential to consult with tax professionals or legal experts for personalized guidance. Remember that addressing tax debt promptly and responsibly is key to regaining financial stability and peace of mind.

Tax CPA Atlanta – Individual Tax Changes

The tax rate structure, which ranges from 10 to 37 percent, remains similar to 2021; however, the tax-bracket thresholds increase for each filing status.

Standard deductions also rise, and as a reminder, personal exemptions have been eliminated through tax year 2025.

Standard Deduction
The standard deduction increases to $12,950 for individuals (up from $12,550 in 2021) and to $25,900 for married couples (up from $25,100 in 2021).

Alternative Minimum Tax (AMT)
AMT exemption amounts saw an increase to $75,900 for individuals (up from $73,600 in 2021) and $118,100 for married couples filing jointly (up from $114,600 in 2021).

“Kiddie Tax”
The “kiddie tax” is $1,150.

Estate and Gift Taxes
The maximum tax rate remains at 40 percent. The annual exclusion for gifts increases to $16,000.

Adoption Credit
In 2022, a nonrefundable credit of up to $14,890 is available for qualified adoption expenses for each eligible child.

Earned Income Tax Credit
The maximum Earned Income Tax Credit (EITC) for low, and moderate-income workers and working families increases to $6,935 (up from $6,728 in 2021).

Child Tax Credit
For tax years 2018 through 2025, the child tax credit is $2,000 per child.

Child and Dependent Care Tax Credit
You may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2022

Don’t hesitate to call if you have any questions or want to get a head start on tax planning for the year ahead.




Taxes – Tax Preparation

Tax preparation is simply the process of preparing and filing a tax return.

This is generally one time a year that culminates in signing your tax return and finding out whether you owe the IRS money or will be receiving a refund.

For most small business owner this process involves one or two trips to see their accountant (CPA), around tax time (i.e., between January and April).
At this time they would hand over any financial documents necessary to prepare the tax return.

At times an enrolled agent, attorney, or a tax preparer who doesn’t necessarily have a professional credential may be engaged by the small business owner or individual to prepare their taxes.

For simple returns, some individuals may even prepare and file their taxes with the IRS themselves.

It is important to note that no matter who prepares your tax return, they should be trustworthy as you will be entrusting them with your personal financial details, skilled in tax preparation, and accurately file your income tax return in a timely manner.

If you’re ready to learn how a tax and accounting professional (CPA), can help you save money on your tax bill this year, don’t hesitate to call the office today.

 



Forming a S Corporation

For the small business owner a S Corporation can provide several tax benefits compared to other form of business entities. However, the challenge face is how to form a S Corporation?

A Certified Public Accountant (CPA), can help you in this regard. Click the link below to secure your complimentary consultation.
Generally S corporations begin as C corporations and then they elect to be treated as S corporations for tax purposes.

They are required to:
• be a domestic corporation.
• have only allowable shareholders (individuals, certain trusts, and estates).
• have no more than 100 shareholders.
• have only one class of stock, although different voting rights are permitted.
• not be an intelligible corporation (certain financial institutions, insurance companies, or domestic international sales corporations).

Form 2553 will be filled to make the election. The election must be signed by all shareholders of the corporation.
Once approved, the corporation will be treated as an S corporation for tax purposes.

Although all shareholders must consent to the election initially, no consent is required for shareholders that join after the election is made.
Shareholders must be individuals, certain trusts, or estates.

They may not be partnerships, corporations, or nonresident aliens.

Qualified retirement plans, trusts, and 501(c)(3) organizations are allowable shareholders.
Grantor and voting trusts may be shareholders as well. The limit of 100 shareholders is firm but members of the same family may elect to be treated as one shareholder.

The election can be made at any time during the year prior to the election taking effect; or no later than “two months and 15 days” after the beginning of the tax year. However, businesses that intended to be treated as S corporations and otherwise meet all the requirements of being an S corporation may file the election late if they have (and can show) reasonable cause. They must explain the reasonable cause for late filing on Line I of Form 2553.



Heavy Highway Vehicle Use Tax – Reminder!!

Truckers, be reminded that if you have registered or is required to register a heavy highway motor vehicle with a taxable gross weight of 55,000 pounds or more at the time of first use on any public highway during the reporting period, you are required to file Form 2290, Heavy Highway Vehicle Use Tax Return.

Form 2290 should be filled for any taxable vehicles first used on a public highway during or after July 2021 by the last day of the month following the month of first use. This means that for vehicles first use on a public highway in July, Form 2290 must be filled between July 1 and August 31.

Taxes for the current filing season will be prorated for any vehicle that was first used on a public highway after July.

Every registrant must complete the first and second pages of Form 2290 along with both pages of Schedule 1.

You will only need to complete the “Consent to Disclosure of Tax Information” and “Form 2290-V, Payment Voucher” pages when applicable.

It is worthwhile to note that the filing deadline for truckers is not tied to the vehicle registration date.

Regardless of the vehicle’s registration renewal date, the taxpaying trucker must file Form 2290 by the last day of the month following the month in which the taxpayer first used the vehicle on a public highway during the taxable period.

Truckers, if you require any help with getting your accounting records in order, help is just a click away. Schedule your no cost appointment with our office today. Learn more below.



Sale Of Home – Real Estate Tax Tip.

The gain realized from the sale of your main home may be fully or partially excluded from your income if you meet certain qualifications. Your main home is the one in which you live most of the time.

Two such qualifications that are required for this exclusion to take effect: the ownership and use tests.

This means that during the 5-year period ending on the date of the sale, you must have:

  • Owned the home for at least two years (the ownership test)
  • Lived in the home as your main home for at least two years (the use test)

You will be allowed to exclude up to $250,000 of the gain from your income if you are single and $500,000 if you filled a joint return.

It is important to note that you will not be allowed to deduct any losses incurred from the sale of the main home.

Among other things, the tax payer will need to arrive at:

  • Adjusted basis of the home you sold
  • Gain (or loss) on the sale
  • Gain that you can be exclude

In order to report the sale or exchange of the home, Form 8949, Sale and Other Dispositions of Capital Assets, must be utilized if:

  • There is a gain that does not qualify for total exclusion,
  • You have a gain and choose not to exclude it, or
  • You are in receipt of a Form 1099-S.

For persons who own more than one property gains can only be excluded to the extent that they are from the sale of the main home. Taxes must be paid on the gain from selling any other home. If you have two homes and live in both of them, your main home is the one you live in most of the time.



What is a S Corporation?

As a small business owner I’m sure you’ve heard of an S corporation but do you know what it really is?

A S corporation (or “S corp”) is a corporation that “elects to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes.”

The taxation of S corporations is similar to that of partnerships, while the operations are more similar to that of a C corporations, but there are some restrictions on the number and type of shareholders.

In fact, S corporations are formed as C corporations; they then elect to be treated as S corporations, assuming the requirements for such classification are met.
S corporations retain pass-through tax benefits while providing inherent liability protection to the shareholders.

Why is it called an S corporation? Although some people are of the view that the S stand for small (since S corporations cannot have more than 100 shareholders), the real reason for the name is that rules governing this entity type are contained under Subchapter S of the Internal Revenue Code.

This entity type is the first to combine the liability protection of a corporation structure with the tax benefits of a sole proprietorship or partnership.
According to the IRS, the number of S corporation returns (Forms 1120- S) surpassed the number of C corporation returns in 1997 and continued rising through 2015 (the last year for which tax statistics were reported in this area).

To learn more about S-Corps and the many benefits they offer, schedule your no cost consultation with a Certified Public Accountant (CPA), below.



Federal Taxes For Truckers

In the United States the trucking industry is a nearly $800-billion industry that is responsible for moving just over 70 percent of the country’s freight.
The trucking industry is subject to a handful of unique income tax issues. In addition, changes under the Tax Cut and Jobs Act (TCJA) affect “nearly all carrier types and fleet sizes, from owner operators with a few power units all the way up to Fortune 500 transporters.”

The primary income tax issues discussed here today will be that of an employee versus a contractor.

Employee/contractor distinction
The general rule is that someone is treated as a contractor if the payer “controls the result of the work, not what will be done or how it will be done.”
Trucking companies, especially the largest companies, often hire drivers as employees.
However, they also may engage owner-operators who act as independent contractors and own their own vehicles.

The general rule is amplified by examining:
• Behavioral control. The type and degree of instructions given, plus training and evaluation, speak to this category.
• Financial control. This category is informed by the party that bears the expenses associated with the work, the opportunity for profit or loss, and the type of compensation received.
• Type of relationship. The type of benefits associated with the relationship, whether it is permanent, and the type of services provided are all considered in this category.

A Certified Public Accountant can provide you with guidance as to the classification of persons you engage for services. Help is just a phone call away and you can schedule a no cost consultation today.

Let’s say Trans Company operates in the trucking industry transporting goods between major manufacturers and retail locations along the eastern sea belt of the United States. Trans Company employs 50 full-time truck drivers. However, as the company’s volume often increases during the holidays, Trans Company sometimes hires independent contractors to assist with local deliveries during the peak months of November and December.

In November, Trans Company contracted with John Brown, who is an independent driver from Mississippi who has his own truck. Mr. Brown is going to assist with several hauling jobs during the last two weeks of November and the first week of December. The amount paid to Mr. Brown for each job will be a function of a flat rate adjusted based on mileage and weight.

In this case:

• It is important to note that the 50 full-time drivers are treated as employees. Trans Company withholds income taxes from the employees’ paychecks and pays related payroll taxes including FICA and unemployment taxes. The employees are sent a W-2 reporting their wages at the end of the year.

John Brown on the other hand is not treated as an employee; he is treated as an independent contractor for tax purposes. The company will issue a check to pay him for his services and send him a Form 1099 at the end of the year to report the total payments made.

Mr. Brown will be responsible for paying his own self-employment taxes.
Companies are responsible for complying with employment and income tax withholding requirements for employees, but the same is not true for independent contractors unless such contractors are statutory employees.

 



Profits are rarely accidental

As a small business owner it is important to note that a number of important factors contribute to profitability.

Factors such as the quality of the product, customer service, the ability of the product or service to meet a specific need of the consumer and many other factors.

In the small business environment a large gap exist between the operational and the financial functions.

Often the small business owner wear both hats and this prevent the focus and attention that’s needed on the business core operation.

The small business owner must apply a process of maximizing profitability, but more importantly, to make the effort more targeted by facilitating the conversion of profits into cash in the shortest possible time.

More than 50% of all business failures are due to them being undercapitalized and the inability to generate enough cash flow to keep operations going.

Many business failures could be avoided if the business owners had operated with a more profit centric mindset.

This involves the efficient and effective use of the capital at hand, and this starts with the planning process.

As a small business owner, have you given thought to developing a strategic plan to move your business forward?

If you need help in this regard or just need to get the conversation started call our office today and a Certified Public Accountant (CPA) will be happy to assist. You can also click the link below to learn more.



Setting The Foundation For Small Business Growth.

Setting the foundation for growth in your small business entails taking your small business to the next level. As a small business owner there is always a desire to take your business to the next level, but have you examine where you’re at today and why you want to take your small business to the next level? If you need help in navigation this process, call our office today for guidance.

In your quest to get to the next level, the small business owner should be asking themselves the following question:
Are they in a rut?
Are sales leveling off?
Are they having trouble finding quality employees?
Are they overwhelmed?
Do you find that your bottom line is not what you want you want it to be?
Or are you thinking about your exit strategy?

When the small business owner thinks that they are ready to make the big move, it is advisable that their starting point is with the implementation of a strategic plan.
A strategic plan is like a blue print that lays out the action for the future, it consist of a mission statement, a vision statement, a values statement which is the guiding principles, a gap analysis, an environmental scan, a SWOT analysis, the setting of strategic objectives and an implementation plan. Metro Accounting And Tax Services is always here to help the small business owner in getting through this process, don’t hesitate to call our office @ 404-9903365 if help is needed.

One of the major component of a strategic plan is the business mission statement.
The mission statement clearly defines why the small business exist and what its operations are intended to achieve.
It is important to note that the mission statement although changeable over time, doesn’t change every year and is something that resonate with the business for the long term.

Next, the small business must have a vision statement of the future. It is really defining the small business future, where you want to go and where do you want to grow. The vision statement is a short concise statement of the organization’s future and answers the question of what it intends to become.

 

 

Along with the mission and vision statements, the small business must define its guiding principles or values statement. This relates to the distinctive core beliefs of the organization. These beliefs are part of the organization’s strategic foundation and rarely change.

Conducting a “gap” analysis between the organization’s current state and vision state will amplify what actions are need to be taken in-order to close the gap. A gap analysis can take the form of an environmental scan or a SWOT analysis.

An environmental scan allows the small business to perform an analysis and evaluation of both internal and external forces that affect the organization.
The small business might want to evaluate their customer base, asking question such as who are their clients. Are we meeting the needs of our clients?
Technological changes should also be evaluated, what are the effects changes in technology is having on the business.
Regulatory compliance issues should also be examined. What regulation issues are affecting the company?
The economic climate should also be examined. What are the likely effects of a downturn in business?
Relationships with suppliers should be examined to see what makes the company most vulnerable to changes in the suppliers?
Quality of employees should be evaluate to see how do we retain top talent?
An eye must always be focus on the competition, always evaluation what differentiates us from our competition?

The other part of the “gap” analysis is the SWOT analysis. This analysis supports the gap analysis with additional information about what actions are needed to be taken in the organization to get it to the desired state.
This is where we look at the strengths, weaknesses, opportunities and threats face by the small business.
Typically the strengths and weaknesses or things that are internal to your organization. Opportunities and threats are things that are external to the organization.
It is important to note that these are not analysis that you do independent they’re really done across the firm and can include customers and clients.

The SWOT analysis coupled with the environmental scan allow the small business owner to look at the gaps that exist between where you are and where you want to be. This then allow the business owner to create the company’s strategic objectives by identifying the things to focus on for the next three to five years. They answer the question of what the organization must focus on to achieve the vision.

The strategic objectives must always be checked and calibrated for changes as it’s not something you create and put on the shelf and forget about. Performing a review and making the necessary changes every six months to a year is recommended.

The next stage in setting the foundation for growth is the implementation of the plan. You have completed the hard work, you know what to do now you have to figure out how you’re going to break that down into bite size pieces to achieve the strategic objectives. This can be broken down into short-term and long-term goals. The small business owner might consider what are they going to do this quarter, next quarter, next year and who does what and by when. Then there has to be a monitoring process to ensure performance and attainment of these goals.

The final step in setting the foundation is examining the value proposition of the small business. Setting the foundation is really looking at your firm’s value proposition. This is typically what your business can do for your clients, the tangible benefits that clients get from using your products, service or solution.
What is your product for your clients what is your product or service somebody wants to use your firm services and when you write
Your value proposition should be short, concise and defines what you do and explains how you’re going to solve the problem of your client or customer.



Do I need a Certified Public Accountant (CPA)?


As a small business owner you are often told that in-order for your business to be successful it’s best to engage the services of a CPA.

You might be wondering who is a CPA and what does a CPA do and why you are being told to engage one in your business.

A CPA or a Certified Public Accountant is an accounting professional who has met the state requirements to earn the CPA designation in a chosen state through education, experience and sitting and passing the CPA Examination administered by The American Institute of Certified Public Accountants (AICPA).

Having a CPA engaged in your business is engaging a professional accountant that has met the profession’s highest standard of achievement.

CPA’s are sought out for their industry knowledge, reliability and at times their independence to provide assurance services to the general public.

It should be noted that all Certified Public Accountants are accountants but not all accountants are CPAs.

Accountants are persons who keep and interprets financial records, while a CPA does the same they are not limited to one industry or job function. In-addition, a CPA can provide a higher level of services than an accountant.



IRS TAX PROBLEMS?

IRS Problems Have a Way of Ruining All Aspects Of Your Life. They Take A Toll On You Financially, Physically, and Emotionally.

You Can Never Really Forget About Them. They creep out of that mental compartment to keep you awake late at night.

They Distract Your Days with IRS Notices, Letters, And Threats. In General, IRS Problems Make Life Miserable.

Your IRS Problems are unlike many other problems in life, which may go away by themselves.

Unfortunately, IRS Problems just continue to get worse and more costly with more penalties and interest being added daily.

I don’t know what the IRS thinks, but I do know that they ruin people’s lives every day with these ridiculous penalties.

Your IRS problem will not go away by itself. You only have three choices to end your IRS Nightmare. You can do one of the following:

1. Pay the IRS 100% of What They Think You Owe Today.

2. Set up a Monthly Payment Which Never Goes Away Due to the Additional Penalties and Interest That Continue to Add Up.

3. Reduce the Total amount Owed to an Affordable Number and Get on with Your Life!

Metro Accounting And Tax Services can help you explore all the options, but you must take the first step.

Don’t make the mistake of dealing with someone who is not qualified to represent you before the IRS.

Schedule a Free Consultation to discuss your options in confidence. You have nothing to lose.

Call my office today at 404-990-3365



Small Business Accounting & Bookkeeping

The backbone of small business accounting lies in proper record keeping.

This basically entails the orderly and disciplined practice of storing business records. Business success depends on creating and maintaining an effective accounting system via keeping good records.

An effective accounting system is one of the most important responsibilities of any small business owner.

This is applicable regardless of the number of persons employed, type of services provided, period of operations, financial status or the entity type, be it a sole proprietorship, partnership, limited liability company, C corporation or a S Corporation.

Recordkeeping not only facilitates regulatory compliance but also provides owners with relevant and timely information to help in making good business decisions.

The importance of small business accounting is amplified in that it allows the business owner to monitor business performance and prepare timely financials.

Three fundamental financial statements are:
1. The income Statement
2. The Balance Sheet
3. The Cash Flow Statement

Having a proper accounting system allows for:
1) Identify sources of income
2) Track deductible expenses
3) Track basis in property
4) Prepare and support items on tax returns

Just like how having a good accounting system in your small business supports positive management functions and decisions, poor recordkeeping practices can lead to the small business failure.



Small Business Owners Guide To Record Keeping

What is small business recordkeeping?

Recordkeeping is the orderly and disciplined practice of storing business records. Business success depends on creating and maintaining an effective record system.

Effective recordkeeping is one of the most important responsibilities of any small business owner and is applicable regardless of the following:

 

  • Number of employees
  • Type of services provided
  • Period of operations
  • Financial status
  • Entity type (i.e., sole proprietorship, partnership, limited liability corporation, C corporation, or S corporation)

Recordkeeping assists owners with key business functions:

  1. Monitoring business progress

Records provide important financial and nonfinancial information, including sales trends, changes in costs, and customer complaints. Owners and managers can use records to evaluate business progress and determine any changes that should be made.

 

  1. Prepare financial statements

Records allow for the preparation of accurate financial statements, which are important documents to help a small business owner work with a bank or creditors.

 

Please note that small business recordkeeping not only facilitates regulatory compliance but also provides owners with relevant and timely information to help in making good business decisions.

 

There are three fundamental financial statements that small business owners need to be mindful of. These are:

  • Income Statement

This shows the income and expenses of the business for a given period of time.

 

  • Balance Sheet

Provides a listing of the small business assets, liabilities, and equity on a given date.

 

  • Cash Flow Statement

This shows cash generated from day-to-day operations, cash used for investing in assets, proceeds received from asset sales, and cash paid or received from issuing or borrowing funds.

Good record keeping helps the small business owner identify the source of income. It allows the business owner to track the receipt of cash and other assets in-order to appropriately classify the receipts and determine the tax consequences.

Also, the business owner can track deductible expenses. Good recording keeping by the small business owner allows for the identification and support tax deductible expenses using invoices, cash payments or other purchasing records.

Good record keeping is very important when tracking the basis of assets. Records help the small business owner in the determination of basis to figure the gain nor loss on the sale, exchange, or other disposition of property, as well as deductions for depreciation, amortization, depletion, and casualty losses.

Just to clarify, basis is the amount of the investment in property for tax purposes.

In the preparation of tax returns, proper record keeping is crucial. Records provide owners with the information needed to appropriately prepare tax returns and related filings.

Proper record keeping also supports items reported on tax returns. In the unfortunate event of an audit or examination by the Internal Revenue Service (IRS), proper  record keeping allows for accurate and reliable information to be provided.

 

To learn more, schedule your no cost consultation below to ensure you’re keeping good records.




 

 

 

 

 

 

 

 

 

Small Business Record Keeping [To-Do’s]

For the small business owner it is important to note that just like how good record keeping practices support a positive management function and decision making process, poor record keeping practices can lead to negative consequences, including the making of poor business decisions.

Therefore, in-order to get an accurate measure of an entity’s performance and financial position, adequate records are necessary.

Poor record keeping may result in missed sale opportunity or profitability targets, cash-flow issues, mismanaged funds or exhausted budgets.

Records provide a basis for sound business decisions. If the small business owner is relying on missing or inaccurate records, they risk making ill-advised strategic decisions.

As a small business owner, you may have to produce records at the request of investors, customers, vendors, employees and even the IRS.

Without records in place, the information retrieval process can be long and daunting and may even halt the business growth and forward progress. The IRS may also assess up to a 20 % negligence penalty.

Among other things records are important for resource tracing, control and protection. It’s a well-known fact that without records in place, assets can be easily stolen.

It is imperative that small business owners keep adequate records from the beginning.
In some cases, small business owners may be forced to file for bankruptcy or shut their doors.



Small Business Growth Formula [Step-By-Step-Guide]

Every small business owner knows that dealing with complex tax preparations for their small business can be a daunting task.

Without the right support, it can be challenging to sift through paperwork, determine the right forms to fill out, and properly document cash flow.

Moreover, rushing to meet filing deadlines increases the likelihood of making mistakes that will attract IRS scrutiny.

Therefore, seeking the expertise of a professional tax service team is one of the best investments to make as a small business owner.

It will take the stress off your shoulders, help you save time and money, and ensure your compliance with the IRS.

A tax professionals, preferably a Certified Public Accountant (CPA), can save you time you would otherwise spend on tax planning and preparation.

A Certified Public Accountant (CPA), can tailor the services offered throughout the year to target your long-term financial growth objectives.

This frees you up to prioritize the aspects of your business that need your attention.

A tax and accounting firm can also advise you on strategies to efficiently managing your accounts and cash flow in a way that minimizes your tax liability.

By enlisting the help of small business tax professionals, you can achieve long-term savings and gains that outweigh your initial investment.



IRS Tax Issues [ How To-Resolve-IRS-Tax-Problems]

Tax problems come in many different forms; IRS tax problems, State tax problems, and Sales tax problems.

The IRS for example has ramped up its’ staff to increase their tax enforcement efforts through tax collection and tax audit.

When a taxpayer or a small business owner receive the dreaded tax notice that their tax return or their business is going to be audited and examined, the first thing they should do is seek professional tax advice.

Contact a Certified Public Accountant (CPA), who can represent you before the IRS or other taxing authority.

The same goes when the taxpayer receives collection letters threatening levying or garnishing of wages, paychecks or bank accounts. The taxpayers should seek out a Certified Public Accountant (CPA) for help.

The most common options to resolve your tax problems are:
• Full Payment – paying the amount on the tax notice.
• Pay The Correct Tax Only – paying the actual amount of taxes if you can afford to.
• Installment Agreement – paying the taxes owed through an installment agreement.
• Offer In Compromise – an offer in compromise, OIC, is an agreed amount less than what is owed.

So, if you have a tax problem do yourself a favor and contact us today to assist you in resolving your tax problem.

 

 



Avoid an IRS Tax Lien

Notification of an IRS Tax Lien can be intimidating to process. But dealing with it doesn’t have to be. This is important to know: if you have a Federal Tax Lien filed against you, it’s important that you handle it quickly and effectively or you may lose your assets. These can include money in your bank account, an IRS bank levy, your car, and other property, your paycheck, wage garnishment, your retirement funds, and even your home.

The best way to avoid a lien is to file and pay taxes, on time and in full. If something prevents you from doing so, you need to communicate with the IRS to make some type of payment arrangement.

There are payment options and ways to settle your tax debt for pennies on the dollar. This of course is dependent on your individual situation.

Ignoring the correspondence from the IRS only compounds the matter. You would best be served by retaining a tax professional, like a Certified Public Accountant (CPA), to determine your best path forward in solving your tax debt.

A lien is a legal claim against your property to secure payment of your tax debt.

A federal tax lien comes into being when the IRS assesses a tax against you and sends you a bill that you neglect or refuse to pay it. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

You have the right to appeal if the IRS advises you of the intent to file a Notice of Federal Tax Lien.

Credit reporting agencies may find the Notice of Federal Tax Lien and include it in your credit report.

 

Getting Rid of an IRS Tax Lien

The best way to get rid of a federal tax lien is to pay your tax debt – in full if you can.

The next best way of getting rid of the IRS Tax Lien is employ a tax resolution expert, preferably a Certified Public Accountant, (CPA) who will be able to help you  by negotiating a suitable payment program (if you have the financial means to pay your back taxes) or to assist you in filing for an Offer in Compromise (OIC).

Don’t fight the IRS alone, it’s like going to court without a lawyer, your chance of winning is very slim. Employ a tax resolution specialist who understands how to deal with the IRS.



Needed Business Financial Statements

Similar to how an odometer provides insight as to the proper running of your motor vehicle, the gas level, the temperature etc., financial statements highlight the status of your business at any given time. Monitoring the financial health of your company can make the difference between success and failure.

By properly scrutinizing your financial statements, you can avoid spending money that you don’t have and know when to deploy funds to drive your business to the next level.

Creditor and investors will want to look at your financial statements, including balance sheet, income statement, cash flow statement, and statement of owner’s equity, to what health your business is in and see if you are on track to reach your financing goals.

As a small business owner and tax payer, it’s very important to understand the three basic types of financial statements and the wealth of information they reveal to you and the extent to which they can provide insights as to your success or failure.

  1. Income Statement

The income statement provides the business owner and other users with a picture of your business’s financial performance over a specified period, usually a year.

Sometimes this statement is also known as a profit and loss statement (P&L) or statement of revenue and expense, it shows the operating and non-operating income and expenses of a business entity.

Among other things, the information contained in an income statement can be used to calculate financial ratios that provide insights into your business’s performance.

A professional accountant preferably a Certified Public Accountant (CPA), can be of assistance to help you extract and use this information to setup your business for success.

  1. Balance Sheet

Commonly referred to as a statement of net worth or a statement of financial position, the balance sheet is one of the essential financial statements. It is based on the basic accounting equation that states (Assets = Liabilities + Equity), providing the small business owner with a snapshot of the business’s equity, assets, and liabilities.

The balance sheet also highlights your business’s financial position at any specific point in time.

Financial statement analysts can use the information contained in the balance sheet to calculate several critical financial ratios. This will allow the business owner to make informed decisions.

The owner’s equity or retained earnings portion on the balance sheet details your business’ included earnings at the end of a financial period.

It shows the profit maintained within the company rather than distributed to owner at the beginning and the end of a specified operating period.

Retained earnings are used to either reinvest in the business or to pay off debt obligations. It provides insight as to the financial health of your business.

This is so because it indicates whether your business can meet ongoing financial and operating obligations without requiring the business owner to contribute additional capital.

  1. Cash Flow Statement

The cash flow statement (or a statement of changes in financial position) gives the business owner an understanding of how well the business manages its cash flow.

Financial analysts can use the information in a cash flow statement to evaluate whether your business is generating sufficient cash to meet its debt obligations as well as operating expenses.

A typical cash flow statement provides information about your business’s cash from operating activities, revenue from financing activities, and investing.

Preparing for Business Success with Financial Statements

By preparing these three financial statements, you will be able to have a clear vision and provide prospective lenders, investors or creditors with the critical information they need to assess your business success. It will also afford the business owner that ability to make informed decision.

The business owner will also be able to identify trends in the company’s performance so as to help position the business for continued success.

Always work with an experienced Certified Public Accountant (CPA), to help ensure that your company is compliant with financial reporting and obligations throughout the year.



Cashflow – The Lifeblood Of Your Business

Many small business owners do not fully understand their cash flow statement. This is surprising, given that all businesses essentially run on cash, and cash flow is really the lifeblood of any business.

Some business experts even say that a healthy cash flow is more important than your business’s ability to deliver its goods and services! That’s hard to swallow, but consider this: if you fail to satisfy a customer and lose that customer’s business, you can always work harder to please the next customer. But if you fail to have enough cash to pay your suppliers, creditors, or employees, you’re out of business!

 

What Is Cash Flow?
Cash flow, simply defined, is the movement of money in and out of your business; these movements are called inflow and outflow. Inflows for your business primarily come from the sale of goods or services to your customers. The inflow only occurs when you make a cash sale or collect on receivables, however. Remember, it is the cash that counts! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

Outflows for your business are generally the result of paying expenses. Examples of cash outflows include paying employee wages, purchasing inventory or raw materials, purchasing fixed assets, operating costs, paying back loans, and paying taxes.

An accountant is the best person to help you learn how your cash flow statement works. Please contact us and we can prepare your cash flow statement and explain how the numbers were derived and what they really mean. Cash Flow Versus Profit

Profit and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner. It is concerned with the movement of money in and out of a business. But more important, it is concerned with the times at which the movement of the money takes place.

Theoretically, even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business.

If your retail business bought a $10,000 item and turned around to sell it for $20,000, then you have made a $10,000 profit. But what if the buyer of the item is slow to pay his or her bill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits you earned on the sale. Furthermore, this cash flow gap may cause you to miss other profit opportunities, damage your credit rating, and force you to take out loans and create debt. If this mistake is repeated enough times, you may go bankrupt.

Analyzing Your Cash Flow
The sooner you learn how to manage your cash flow, the better your chances of survival. Furthermore, you will be able to protect your company’s short-term reputation as well as position it for long-term success.

The first step toward taking control of your company’s cash flow is to analyze the components that affect the timing of your cash inflows and outflows. A thorough analysis of these components will reveal problem areas that lead to cash flow gaps in your business. Narrowing, or even closing, these gaps is the key to cash flow management.
Some of the more important components to examine are:
• Accounts receivable. Accounts receivable represent sales that have not yet been collected in the form of cash. An accounts receivable is created when you sell something to a customer in return for his or her promise to pay at a later date. The longer it takes for your customers to pay on their accounts, the more negative the effect on your cash flow.

• Credit terms. Credit terms are the time limits you set for your customers’ promise to pay for their purchases. Credit terms affect the timing of your cash inflows. A simple way to improve cash flow is to get customers to pay their bills more quickly.

• Credit policy. A credit policy is the blueprint you use when deciding to extend credit to a customer. The correct credit policy – neither too strict nor too generous – is crucial for a healthy cash flow.

• Inventory. Inventory describes the extra merchandise or supplies your business keeps on hand to meet the demands of customers. An excessive amount of inventory hurts your cash flow by using up money that could be used for other cash outflows. Too many business owners buy inventory based on hopes and dreams instead of what they can realistically sell. Keep your inventory as low as possible.

• Accounts payable and cash flow. Accounts payable are amounts you owe to your suppliers that are payable sometime in the near future – “near” meaning 30 to 90 days. Without payables and trade credit, you’d have to pay for all goods and services at the time you purchase them. For optimum cash flow management, examine your payables schedule.
Some cash flow gaps are created intentionally. For example, a business may purchase extra inventory to take advantage of quantity discounts, accelerate cash outflows to take advantage of significant trade discounts, or spend extra cash to expand its line of business.

For other businesses, cash flow gaps are unavoidable. Take, for example, a company that experiences seasonal fluctuations in its line of business. This business may normally have cash flow gaps during its slow season and then later fill the gaps with cash surpluses from the peak part of its season. Cash flow gaps are often filled by external financing sources. Revolving lines of credit, bank loans, and trade credit are just a few of the external financing options available that you may want to discuss with us.
Monitoring and managing your cash flow is important for the vitality of your small business. The first signs of financial woe appear in your cash flow statement, giving you time to recognize a forthcoming problem and plan a strategy to deal with it. Furthermore, with periodic cash flow analysis, you can head off those unpleasant financial glitches by recognizing which aspects of your business have the potential to cause cash flow gaps.



Which Form of Business Organization Should You Choose?

The decision as to which type of business organization to use when starting a business is a major one. And, it’s a decision to be revisited periodically as your business develops. While professional advice is critical in making this decision, it’s also important to have a general understanding of the options available.

Businesses fall under one of two federal tax systems:

1. Taxation of both the entity itself (on the income it earns) and the owners (on dividends or other profit participation the owners receive from the business). This system applies to the business called the “C-corporation” (C-corp) for reasons we’ll see shortly and the system of taxing first the corporation and then its owners is called the “corporate double tax.”

2. Pass-through taxation. This type of entity is in itself not taxed; however, each owner is each taxed on their proportionate shares of the entity’s income. The leading forms of pass-through entity (further explained below) are:
A Partnerships, of various types.
B S-corporations (S-corps), as distinguished from C-corps.
C Limited liability companies (LLCs).

A sole proprietorship such as John Wayne Plumbing or Marcus Garvey, M.D. is also considered a pass-through entity even though no “organization” may be involved.


The first major consideration (in this case, a tax consideration) in choosing the form of doing business is whether to choose an entity (such as a C-corp) that has two levels of tax on income or a pass-through entity that has only one level (directly on the owners).
Co-owners and investors in pass through entities may need to have their operating agreements require a certain level of cash distributions in profit years, so they will have funds from which to pay taxes.

Losses are directly deductible by pass-through owners while C-corp losses are deducted only against profits (past or future) and don’t pass through to owners.
Business and tax planners therefore typically advise new businesses-those expected to have startup losses-to begin as pass through entities, so the owners can deduct losses currently against their other income, from investments or another business.

The major business consideration (as opposed to tax consideration) in choosing the form of business is limitation of liability, that is, to protect your assets from the claims of business creditors. State law grants limitation of liability to corporations (C and S-corps), LLCs, and partners in certain forms of partnership. Liability for corporations and LLCs is generally limited to your actual or promised investment in the business.



Vacation Equals Tax Deduction

 

With vaccination being ramped up all over the country to address the Covid-19 pandemic, there is a semblance of society getting back to a new “normal”.
With that being said, how would you like to legally deduct every dime you spend on a well-deserved vacation this year? This financial guide offers strategies that help you do just that.
If a Small Business Owner decides to take a two-week trip around the US, you can and you can also legally deduct every dime on that “vacation.” Here’s how.

1. Make all your business appointments before you leave for your trip.
Most people believe that they can go on vacation and simply hand out their business cards in order to make the trip deductible. Wrong.
You must have at least one business appointment before you leave in order to establish the “prior set business purpose” required by the IRS. Small Business Owners, Keep this in mind before you leave for your trip.
Set up appointments with business colleagues in the various cities that you plan to visit.
Let’s say you are a manufacturer looking to expand your business and distribute more of your product. One possible way to establish business contacts–if you don’t already have them–is to place advertisements looking for distributors in newspapers in each location you plan to visit. You can then interview those who respond when you get to the business destination.
2. Make Sure your Trip is All “Business Travel.”
In order to deduct all of your on-the-road business expenses, you must be traveling on business.
The IRS states that travel expenses are 100 percent deductible as long as your trip is business related and you are traveling away from your regular place of business longer than an ordinary day’s work and you need to sleep or rest to meet the demands of your work while away from home.
It the small business owner wanted to go to a regional meeting in Atlanta, Georgia which is only a one-hour drive from his home all that would be needed is for him to sleep in the hotel where the meeting was being held (in order to avoid possible automobile and traffic problems), his overnight stay qualifies as business travel in the eyes of the IRS.
Remember that you don’t need to live far away to be on business travel. If you have a good reason for sleeping at your destination, you could live a couple of miles away and still be on travel status.

3. Make sure that you deduct all of your on-the-road -expenses for each day you’re away.
For every day you are on business travel, you can deduct 100 percent of lodging, tips, car rentals, and 50 percent of your food.
The IRS doesn’t require receipts for travel expense under $75 per expense–except for lodging.

So if the business owner pays $6 for drinks on the plane, $6.95 for breakfast, $12.00 for lunch, $50 for dinner, he does not need receipts for anything since each item was under $75.

However, the small business owner would need to document these items in a diary. A good tax diary is essential in order to audit-proof your records. Adequate documentation shall consist of amount, date, and place along with the business reason for the expense.

You’ll need receipts for all paid lodging.

Not only are your on-the-road expenses deductible from your trip, but also all laundry, shoe shines, manicures, and dry-cleaning costs for clothes worn on the trip.

Thus, your first dry cleaning bill that you incur when you get home will be fully deductible. Make sure that you keep the dry cleaning receipt and have your clothing dry cleaned within a day or two of getting home.

4. Sandwich weekends between business days.
If you have a business day on Friday and another one on Monday, you can deduct all on-the-road expenses during the weekend.
If the small business owner have business appointments in Atlanta, Georgia on Friday and one on the following Monday, even though there’s no business on Saturday and Sunday, he may deduct on-the-road business expenses incurred during the weekend.

5. Make the majority of your trip days business days.
The IRS says that you can deduct transportation expenses if business is the primary purpose of the trip. A majority of days of the trip must be for business activities, otherwise, you cannot make any transportation deductions.
Let’s say the small business owner travelled to and spend six days in Atlanta, Georgia. He arrives early in Atlanta on Thursday morning. He had a seminar on Friday and meets with distributors on Monday and flies home on Tuesday, taking the last flight out of Atlanta after playing a complete round of golf. The entire trip can be classified as a business trip.

Thursday is a business day since it includes traveling – even if the rest of the day is spent at the beach. Friday is a business day because he had a seminar. Monday is a business day because he met with prospects and distributors in pre-arranged appointments. Saturday and Sunday are sandwiched between business days, so they count, and Tuesday is a travel day.
Since the small business owner accrued six business days, he could spend another five days having fun and still deduct all his transportation to Atlanta, Georgia. The reason is that the majority of the days were business days (six out of eleven).
However, he would only be able to deduct six days’ worth of lodging, dry cleaning, shoe shines, and tips. The important point is that the small business owner would be spending money on lodging, airfare, and food, but now most of his expenses will become deductible.
With proper planning, you can deduct most of your vacations if you combine them with business. Bon Voyage!



Important Tax Changes For Individuals

 

Every year, it’s goes without saying that there will be changes to current tax law and this year is no different. From standard deductions to health savings accounts and tax rate schedules, here’s a checklist of tax changes to help you plan the year ahead.

In 2021, a number of tax provisions are affected by inflation adjustments, including Health Savings Accounts, retirement contribution limits, and the foreign earned income exclusion.

The tax rate structure, which ranges from 10 to 37 percent, remains similar to 2020; however, the tax-bracket thresholds increase for each filing status. Standard deductions also rise, and as a reminder, personal exemptions have been eliminated through tax year 2025.

 

Standard Deduction

There has been an increase in the standard deduction increases to $12,550 for individuals (up from $12,400 in 2020) and to $25,100 for married couples (up from $24,800 in 2020).

Alternative Minimum Tax (AMT)
The AMT exemption amounts also saw an increase. Moving to $73,600 for individuals (up from $72,900 in 2020) and $114,600 for married couples filing jointly (up from $113,400 in 2020).

The phase-out threshold also saw an increases to $523,600 ($1,047,200 for married filing jointly). Keep in mind that both the exemption and threshold amounts are indexed annually for inflation.

“Kiddie Tax”
For taxable years beginning in 2021, the amount that can be used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,100.

This amount is also used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.

One of the requirements for the parental election is that a child’s gross income for 2021 must not be more than $11,000 with a floor of $1,100.

Health Savings Accounts (HSAs)
Current or future medical expenses can be paid for with the contributions  made to a Health Savings Account (HSA).

This can be for the owner of such account, his or her spouse and any qualifying dependent.   However, these medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

Medical Savings Accounts (MSAs)
Medical Savings Accounts (MSAs) are of two types: There is The Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA but is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder.

To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare but note that both MSAs require that you are enrolled in a high-deductible health plan (HDHP).

High Deductible Health Plan – for self only coverage.

A high deductible health plan for self-only coverage refers to a health plan that has an annual deductible that is not less than $2,400 ($2,350 in 2020)and not more than $3,600 (up $50 from 2020).

Under this plan the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits cannot not exceed $4,800 (up $50 from 2020).

 

High Deductible Health Plan – family coverage. For taxable years beginning in 2021, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,800 and not more than $7,150, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,750.

AGI Limit for Deductible Medical Expenses
In 2021, the deduction threshold for deductible medical expenses is 7.5 percent of adjusted gross income (AGI), made permanent by the Consolidated Appropriations Act, 2021.

Eligible Long-Term Care Premiums
Long-term care premiums are treated the same as health care premiums and are deductible on your taxes subject to certain limitations.

For individuals who are age 40 or younger at the end of 2021, the limitation is $450. Persons more than 40 but not more than 50 can deduct $850. Those more than 50 but not more than 60 can deduct $1,690 while individuals more than 60 but not more than 70 can deduct $4,520. The maximum deduction is $5,640 and applies to anyone more than 70 years of age.

Medicare Taxes
The additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly) remains in effect for 2021, as does the Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (AGI) more than $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts, and self-employed individuals are all liable for the tax.

Foreign Earned Income Exclusion
The foreign earned income exclusion amount is $108,700 for 2021, up from $107,600 in 2020.

Long-Term Capital Gains and Dividends
Tax rates on capital gains and dividends for 2021, remain at the same rates as 2020 (0%, 15%, and a top rate of 20%); however, threshold amounts have increased: the maximum zero percent rate amounts are $40,400 for individuals and $80,800 for married filing jointly.

For an individual taxpayer whose income is at or above $445,850 ($501,600 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent. All other taxpayers fall into the 15 percent rate amount (i.e., above $40,400 and below $445,850 for single filers).

Estate and Gift Taxes
During calendar year 2021, for an estate of any decedent the basic exclusion amount is $11.70 million, indexed for inflation (up from $11.58 million in 2020). However, the maximum tax rate remains at 40 percent. The annual exclusion for gifts remains at $15,000.

Tax Credits

Adoption Credit
A non-refundable (only those individuals with tax liability will benefit) credit of up to $14,440 is available for qualified adoption expenses for each eligible child during calendar year 2021.

Earned Income Tax Credit
The maximum Earned Income Tax Credit (EITC) for low and moderate-income workers and working families rises to $6,728 up from $6,660 in 2020.

The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Child Tax Credit
The child tax credit is $2,000 per child for tax years 2020 through 2025. The refundable portion of the credit is $1,400 so this means that even if taxpayers do not owe any tax, they can still claim the credit.

A $500 nonrefundable credit is also available for dependents who do not qualify for the Child Tax Credit (e.g., dependents age 17 and older).

Child and Dependent Care Tax Credit
There is no change to the Child and Dependent Care Tax Credit. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2021.

If you have two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher-income earners, the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income. This tax credit is nonrefundable.

Education

American Opportunity Tax Credit and Lifetime Learning Credit
For the American Opportunity Tax Credit the maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return.

To claim the full credit for either, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).

Prior to the passage of the Consolidated Appropriations Act, 2021, taxpayers with MAGI of $139,000 (joint filers) or $69,500 (single filers) were not able to claim the Lifetime Learning Credit.

Taxpayers, please be aware that while the phase-out limits for Lifetime Learning Credit have been increased, the qualified tuition and expenses deduction has been repealed starting in 2021.

Interest on Educational Loans
The maximum deduction for interest paid on student loans is $2,500. The deduction begins to be phased out for higher-income taxpayers with modified adjusted gross income of more than $70,000 ($140,000 for joint filers) and is completely eliminated for taxpayers with modified adjusted gross income of $85,000 ($170,000 joint filers).

Retirement

Contribution Limits
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains at $19,500.

Contribution limits for SIMPLE plans also remain at $13,500. The maximum compensation used to determine contributions increases to $290,000 (up from $285,000 in 2020).

Income Phase-out Ranges
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $66,000 and $76,000.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range increases to $105,000 to $125,000.

For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s modified AGI is between $198,000 and $208,000.

The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $125,000 to $140,000 for singles and heads of household, up from $124,000 to $139,000. For married couples filing jointly, the income phase-out range is $198,000 to $208,000, up from $196,000 to $206,000.

The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver’s Credit
The AGI limit for the Saver’s Credit (also known as the Retirement Savings Contribution Credit) for low and moderate-income workers is $66,000 for married couples filing jointly, up from $65,000 in 2020; $49,500 for heads of household, up from $48,750; and $33,000 for singles and married individuals filing separately, up from $32,500 in 2020.

 



Year End Tax Planning Strategies.



Preparing an Effective Business Plan

A business plan is a valuable tool whether you’re seeking additional financing for an existing business, starting a new company, or analyzing a new market. Think of it as your blueprint for success. Not only will it clarify your business vision and goals, but it will also force you to gain a thorough understanding of how resources (financial and human) will be used to carry out that vision and goals.

Before you begin preparing your business plan, take the time to carefully evaluate your business and personal goals as this may give you valuable insight into your specific goals and what you want to accomplish. Think about the reasons why you need additional financing or want to start a new business. Whatever the reason it is important to determine the “why.”

Next, you need to figure out what type of business or new business direction you are interested in pursuing. Chances are you already have a specific business in mind but if not you might want to think about your business in terms of what technical skills and experience you have, whether you have any marketable hobbies or interests, what competition you might have, how you might market your products or services, and how much time you have to run a successful business (it may take more time than you think).

Finally, if you are starting new business, you’ll need to figure out how you want to get started. Most people choose one of three options: starting a business from scratch, purchasing an existing business, or operating a franchise. Each has pros and cons, and only you can decide which business fits.

 

 

 

 

Pre-Business Checklist

The final step before developing your plan is developing a pre-business checklist which might include:

  • Business legal structure
  • Accounting or bookkeeping system
  • Insurance coverage
  • Equipment or supplies
  • Compensation
  • Financing (if any)
  • Business location
  • Business name

Based on your initial answers to the items listed above, your next step is to formulate a focused, well-researched business plan that outlines your business mission and goals, how you intend to achieve your mission and goals, products or services to be provided, and a detailed analysis of your market. Last, but not least, it should include a formal financial plan.

 

 

Preparing an Effective Business Plan

Now, let’s take a look at the components of an effective business plan. Keep in mind that this is a general guideline, and any plan you prepare should be adapted to your specific business with the help of a financial professional.

 

 

 

 

Introduction and Mission Statement

In the introductory section of your business plan, you should make sure you write a detailed description of your business and its goals, as well as ownership. You can also list skills and experience that you or your business partners bring to the business. And finally, include a discussion of what advantages you and your business have over your competition.

 

 

 

Products, Services, and Markets

In this section, you will need to describe the location and size of your business, as well as your products and/or services. You should identify your target market and customer demand for your product or service and develop a marketing plan. You should also discuss why your product or service is unique and what type of pricing strategy you will be using.

 

 

 

 

 

Financial Management

This section is where you should discuss the financial aspects of your business–and where the advice of a financial professional is vital. The following financial aspects of your business should be discussed in detail:

 

 

  • Source and amount of initial equity capital.
  • Monthly operating budget for the first year.
  • Expected return on investment (ROI) and a monthly cash flow for the first year.
  • Projected income statements and balance sheets for a two-year period.
  • A discussion of your break-even point.
  • Explanation of your personal balance sheet and method of compensation.
  • Who will maintain your accounting records and how they will be kept.
  • Provide “what if” statements that address alternative approaches to any problem that may develop.

 

Business Operations

 

The Business Operations section generally includes an explanation of how the business will be managed on a day-to-day basis and discusses hiring and personnel procedures (HR), insurance and lease or rent agreements, and any other pertinent issues that could affect your business operations. In this section, you should also specify any equipment necessary to produce your product or services as well as how the product or service will be produced and delivered.

 

 

Concluding Statement

 

The concluding statement should summarize your business goals and objectives and express your commitment to the success of your business.

 

 

 

 

Help is Just a Phone Call Away

Please contact a financial professional if you need help or if you have any unanswered questions about creating a business plan or need any assistance. Remember help is just a phone call away.

 



Is Your Worker an Employee or an Independent Contractor?

If you engage a worker for a long-term, full-time project or a series of projects that are likely to last for an extended period, it is important that you pay special attention to the difference between the classification of an independent contractors and that of an employee.

 

Why It Matters

This is so because the Internal Revenue Service and state regulators scrutinize the distinction between both because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do so because independent contractors are not covered by unemployment and workers’ compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors.

Please note that if a business owner incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

 

What’s the Difference between Employees and an Independent Contractors?

An Independent Contractor is an individual who contracts with a business to perform a specific project or set of projects. The business has the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

For example, John Tom, an electrician, submitted a bid of $8,400 to a housing complex for electrical work. Per the terms of his contract, every two weeks for the next 10 weeks, he is to receive a payment of $1,680. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will still receive $8,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. John Tom is considered as and should be categorize as an independent contractor.

Labor laws vary by state. Please call if you have specific questions.

 

An Employee on the other hand provides work in an ongoing, structured situation. Generally, anyone who performs services for you is your employee if you can control what will be done and how it will be done. Even if a worker is given freedom of action they are still considered an employee, what matters is that you have the right to control the details of how the services are performed.

 

Mary Jane is a salesperson employed on a full-time basis by City Auto, an auto dealer. She works 6 days a week and is on duty in City Auto’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by the company. City Auto also pays the cost of health insurance and group term life insurance for Mary. Mary is considered and should be classified as an employee of the company.

 

 

Independent Contractor Qualification Checklist

The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is though their means of categorizing workers as independent contractors are similar.

 

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS, which considers the following:

 

 

  1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.
  2. What training the employer gives the worker? Independent contractors generally do not receive training from an employer.
  3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.
  4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.
  5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.
  6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.
  7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.
  8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.
  9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.
  10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.
  11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

 

 

Minimize the Risk of Misclassification

Misclassifying an employee as an independent contractor can cause the small business owner a huge headache and you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or federal authority. At a minimum, you should:

  • Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.
  • Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

Questions about how to classify workers? Don’t hesitate to call and speak to a tax professional who can assist you.

 



Home-based Business Guidance.

More than half of all businesses today are home-based and this trend has been magnified because of the Covid-19 pandemic.  People are striking out and achieving economic and creative independence by turning their skills into a means of earnings.

Garages, basements, and attics are being transformed into the corporate headquarters of the newest entrepreneurs that is, the home based business people.

And, with technological advances in the virtual space, along with smartphones, tablets, and iPads as well as rising

the demand for “service-oriented” businesses, the opportunities seem to be endless.

 

 

Is a Home-Based Business Right for You?

 

Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take the time to learn as much about the market for the products or services you intend to offer. Before you invest any time, effort, or money take a few moments to answer the following questions:

 

 

  • Can you describe in detail the business you plan on establishing?
  • What will be your product or service?
  • Is there a demand for your product or service?
  • Can you identify the target market for your product or service?
  • Do you have the talent and expertise needed to compete successfully?

 

Before you dive headfirst into a home based business, you must know why you are doing it and how you will do it. To achieve success your business must be based on something greater than a desire to be your own boss and involve an honest assessment of your personality, an understanding of what’s involved, and a lot of hard work. You have to be willing to plan for the long-term and be willing to make improvements and adjustments along the way.

While there are no “best” or “right” reasons for starting a home based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

 

  • Are you a self-starter?
  • Can you stick to business if you’re working at home?
  • Do you have the necessary self-discipline to maintain schedules?
  • Can you deal with the isolation of working from home?

 

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment. If at all possible, you should set up a separate office in your home. You must consider whether your home has space for a business and whether you can successfully run the business from your home. If so, you may qualify for a tax break called the home office deduction. Please call if you’d like more information about this tax break or to find out if you qualify for the deduction.

 

 

 

 

Compliance with Laws and Regulations

A home based business is subject to many of the same laws and regulations affecting other businesses, and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.

 

 

Zoning

Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.

Restrictions on Certain Goods

Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.

Registration and Accounting Requirements

You may need the following:

  • Work certificate or a license from the state (your business’s name may also need to be registered with the state)
  • Sales tax number
  • Separate business telephone
  • Separate business bank account

If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.

 

Planning Techniques

Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

 

Estimating Start-Up Costs

To estimate your start-up costs include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment, and promotional expenses. In addition, business experts say you should not expect a profit for the first eight to ten months, so be sure to give yourself enough of a cushion if you need it.

Projecting Operating Expenses

Include salaries, utilities, office supplies, loan payments, taxes, legal services, and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs but make sure it meets yours as well.

Projecting Income

One of the most important skills you will need is knowing how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points, and cash-flow statements. Use your marketing research to estimate the initial sales volume.

Determining Cash Flow

Working capital – not profits – pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

If a home based business is in your future, then a tax professional can help. Don’t hesitate to call if you need assistance setting-up your business or making sure you have the proper documentation in place to satisfy the IRS.

 



7 Essential Small Business Record Keeping Tips

It’s now the 4th quarter and tax season is right around the corner. For many small business owners that means scrambling to collect receipts, mileage logs, and other tax related documents needed to prepare their tax returns. If this describes you, chances are, you’re wishing you’d kept on top of it during the year so you could avoid this scenario. With this in mind, here are seven suggestions to help the small business owner like you keep good records throughout the year:

 

 

The small business owner should develop a system that keeps all their important business information together. Small business owners are encouraged to use a software program for electronic recordkeeping. Also, paper documents can be stored in labeled folders.

 

 

 

 

Throughout the year tax records should be added to the files as they are received. Having records readily at hand makes preparing a tax return easier.

 

 

 

 

 

This approach will help the small business owner discover potentially overlooked deductions and credits. The IRS should be notified of any address changes, likewise the Social Security Administration of any legal name changes to avoid processing delays with their tax return.

 

 

 

 

Records that the small business owner should keep include receipts, canceled checks, and other documents that support income, deductions and credits taken on the tax return.

 

 

 

 

Taxpayers should also keep records relating to property they dispose of or sell. This information is important to help figuring the basis for computing gain or loss.

 

 

 

 

 

 

It is generally suggested by the IRS that taxpayers keep records for three years from the date they filed their tax returns.

 

 

 

 

 

For the small business owners, there’s no particular method of bookkeeping that must be use.  However, a method that clearly and accurately reflects the business gross income and expenses. The records should confirm income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.

Well-organized records make it easier for the business owner taxpayer to prepare their tax returns. Good recordkeeping also helps to provide answers in the event that a taxpayer’s return is selected for examination or if the business owner receives an IRS notice. If you need help setting up a recordkeeping system that works for you, don’t hesitate to call.



Want to Create Generational Wealth?

If you’re an individuals with significant assets and you want to transfer wealth to your heirs tax-free, as well as minimize estate taxes, you should take advantage of the proven tax strategies such as gifting and direct payments to educational institutions for your loved ones. The current low interest rate environment and the volatility of the stock market are creating additional opportunities. Let’s take a look at some of the strategies available:

 

Gifting

The annual gift tax exclusion provides a simple, effective way of cutting estate taxes and shifting income to heirs. For example, in 2020, you can make annual gifts of up to $15,000 ($30,000 for a married couple) to as many donees as you desire. The $15,000 is excluded from the federal gift tax so that you will not incur gift tax liability. Furthermore, each $15,000 you give away during your lifetime reduces your estate for federal estate tax purposes. Any amounts above this limit, however, will reduce an individual’s federal lifetime exemption and require filing a gift tax return.

 

Direct Payments

Another way to shift income to your heirs is through direct payments. Direct payments for medical or educational purposes indirectly shift income to heirs; however, it only works if the payments are made directly to the qualifying educational institution or medical provider. This strategy allows you to give more than the annual gifting limit of $15,000 per donee. For example, if you’re a grandparent, you can pay tuition directly to your grandchild’s boarding school, college, or university. Room and board, books, supplies, or other nontuition expenses are not covered. Likewise, in the case of direct payments to a hospital or medical provider. Medical expenses reimbursed by insurance are not covered, however.

 

Loans to Family Members

This strategy works by loaning cash to family members at low interest rates, which is then invested with the goal of reaping significant profits down the road. With mid and long-term applicable federal rates (AFR) rates for June 2020, as low as 0.43 and 1.01 percent, respectively, heirs can lock in these rates for many years – three to nine years (mid-term) and nine to more than 20 years (long-term).

 

Roth IRA Conversions

Contributions to a traditional IRA are made pre-tax, which means distributions are considered taxable income; however, with a Roth IRA, the tax is paid up front, and distributions are completely exempt from income tax. It is this feature that makes converting a traditional IRA to Roth IRA and rolling it over to an heir an attractive option, especially during a financial crisis. The conversion is treated as a rollover, and typically would be accomplished via a trustee to trustee transfer where the trustee of the traditional IRA is directed to transfer an amount from the traditional IRA to the trustee of the Roth IRA. The account owner pays income tax on the amount rolled over in the year the account is converted, which allows the account to accumulate assets tax-free and future distributions are tax-free.

 

Grantor Retained Annuity Trust (GRAT)

Another relatively low-risk strategy is the grantor retained annuity trust (GRAT), where the donor transfers assets to an irrevocable trust and receives an annuity payment back from the trust each year. This strategy enables heirs to profit from their investments long-term – as long as returns are higher than the IRS interest rate. This is easier than ever now that IRS interest rates are so low. In June 2020, the interest rate used to value certain charitable interests in trusts such as the GRAT is 0.60 percent.

To learn more about these and other tax strategies related to wealth management, please call the office and speak to a tax professional who can assist you.

 

 

 

 



Job Loss And Your Tax Situation

If you’ve lost your job during the Covid-19 pandemic, you may have questions about the effects this could have your tax situation.

One question asked frequently is, if I’ve lost my job how does this affect my tax situation?

The loss of a job may create new tax issues for the individual. For example, any severance pay you receive is considered taxable income as are any payments for accumulated vacation or sick time. While it isn’t always possible to do so, making sure that enough taxes are withheld from these payments will help you to avoid a big bill at tax time.

Another thing to keep in mind is that if you receive unemployment compensation, this money is taxable. However, SNAP payments formerly known as food stamps and public assistance are not taxable – nor are Economic Recovery Payments sent during the coronavirus pandemic.

 

 

Another question that is front and center of the minds of the unemployed is, am I eligible to receive unemployment compensation?

This is dependent on your individual situation, you may be eligible for one of the following types of unemployment compensation:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability payments from a government program paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act
  • Pandemic Unemployment Assistance (PUA) under the CARES Act of 2020

 

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, states are permitted to provide Pandemic Unemployment Assistance (PUA) to individuals who are self-employed, seeking part-time employment, or who otherwise would not qualify for regular unemployment compensation. To verify income, states are generally requiring applicants to provide current year tax forms.

It is important to note that voluntarily deciding to quit your job out of a general concern about exposure to COVID-19 does not make you eligible for PUA; however, there are circumstances where an individual may be eligible for PUA.

 

Recipients of unemployment compensation often wrestles with the question of, is unemployment compensation tax-free?

Unemployment compensation received under the unemployment compensation laws of the United States or of a state is considered taxable income and must be reported on your federal tax return.

Benefits from regular union dues paid to you as an unemployed member of a union must be included in your income as well. However, if you contribute to a special union fund and your contributions are not deductible, then other rules apply. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

You can choose to have federal income tax withheld from your unemployment benefits by filling out Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office (e.g., your state’s Department of Labor), 10 percent of your payment amount will be held as tax. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

You will receive Form 1099-G, Certain Government Payments (Info Copy Only), showing the amount you were paid and any federal income tax you elected to have withheld if you received unemployment compensation. You may owe tax when you file your tax return next year if no taxes were withheld initially.

 

You might also have questions about expenses related to a job search? You are no longer allowed to deduct certain expenses such as travel, resume preparation, and outplacement agency fees incurred while looking for a new job. In prior years, job-seekers were able to deduct these expenses even if they did not get a new job. Under the tax reform, many miscellaneous deductions were eliminated for tax years 2018-2025.

Previously, to collect unemployment compensation you have to actively be searching for work. However, the CARES Act gives states flexibility in determining whether an individual is “actively seeking work” if he or she is unable to search for work because of COVID-19, including because of illness, quarantine, or movement restrictions.

If your employer went out of business or filed for bankruptcy, they should provide you with a Form W-2 showing your wages and withholding by January 31. You should keep up-to-date records or pay stubs until you receive your Form W-2. If your employer or its representatives fail to provide you with a Form W-2, contact the IRS. They can help by providing you with a substitute Form W-2.

If you’ve experienced a job loss during this difficult time and have questions about how it could affect your tax situation, please don’t hesitate to call our office or visit us on the web.

 



Looking Ahead….What You Need to Know About Your 2020 Taxes

As we enter the final month of the third quarter of 2020 and as everyone continues to deal with the Corona virus COVID-19 pandemic, it’s not too early to look ahead to the 2020 tax year filing season. In so doing, the small business owner has to consider the impact of existing and recently passed legislation on how they will file their taxes in 2021.

In addition to several changes brought on by the corona virus other legislative changes for tax year 2020 were set to happen anyway. These include the new standard deduction amounts, the income thresholds for tax brackets, certain tax credits, and an increase in retirement savings limits. Others, including deductions for medical and dental expenses, and state and local sales taxes have remained the same.

 

Stimulus Payments

Image of $1200 stimulus check

The $1,200 stimulus payment for a single person or the $2,400 for couples, officially known as a “Recovery Rebate,” is an advance refundable tax credit on your 2020 taxes. This means that no matter how much taxes you owe or don’t owe for that matter in 2020, you’ll get to keep all the money with no taxes due on it.

It is worth noting that your recovery rebate is not taxable. It will not add to your taxable income in 2020 (or any other year). All of this is based on the fact that the CARES Act contains no “claw back” mechanism by which the government can reclaim funds that were legitimately extended.

Since the stimulus payment was based on your adjusted gross income (AGI) for 2018 or 2019, but technically applies to your 2020 AGI, there may be some discrepancy and confusion, but not need to worry as the news here is good:

  • If your AGI for 2018 or 2019 (whichever one the IRS bases your stimulus payment on), is lower than your AGI for 2020, resulting in a higher payment, you can keep the overage.
  • If your AGI for 2018/19 is higher than your AGI in 2020, you can claim the additional amount owed when you file your 2020 taxes in 2021.
  • This applies to dependents under 17 as well. If someone else claims a child now, based on 2018/19 returns, but you legitimately claim that child on your 2020 return, you will get a $500 tax credit when you file in 2021 and the person who got it based on 2018/19 returns will not have to pay it back.
  • If you have a child in 2020 you can claim the child when you file in 2021 and receive the $500 credit then.

 

Tax Deductions

The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from 2019. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for 2020, up $200 from 2019. For heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.

The alternative minimum tax (AMT) exemption amount for single filers for tax year 2020 is $72,900, up $1,200 from 2019, and begins phasing out at $518,400. For married couples filing jointly, the AMT exemption amount is $113,400, which begins phasing out at $1,036,800.

The CARES Act allows a $300 “above-the-line” deduction for cash contributions to charity if you take the standard deduction when you file in 2021. For those who itemize, the law lifts the 60% of adjusted gross income (AGI) limitation, on cash contributions. Note: Donations to donor advised funds and supporting organizations do not qualify.

 

Tax Credits

The tax year 2020 maximum earned income credit (EIC) is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for 2019.

For tax year 2020, the modified adjusted gross income (MAGI) amount used by married joint filers to determine the reduction in the lifetime learning credit is $118,000 and phases out at $138,000, up from $116,000–$136,000 for tax year 2019. For single filers and heads of households, the MAGI range is $59,000–$69,000 for 2020, up from $58,000–$68,000 in 2019. You can’t claim the credit if you are a married individual filing separately.

 

 

Tax Brackets and Rates

For tax year 2020, the top tax rate remains 37% for individual taxpayers filing as single and with income greater than $518,400, which is a modest bump up from $510,300 for 2019. The income threshold for this rate will be $622,050 for married couples filing jointly (MFJ) and $311,025 for married individuals filing separately (MFS).

Income ranges of other rates up to the next-highest threshold are as follows:

  • 35% for single and MFS income exceeding $207,350 ($414,700 for MFJ)
  • 32% for single and MFS income exceeding $163,300 ($326,600 for MFJ)
  • 24% for single and MFS income exceeding $85,525 ($171,050 for MFJ)
  • 22% for single and MFS income exceeding $40,125 ($80,250 for MFJ)
  • 12% for single and MFS income exceeding $9,875 ($19,750 for MFJ)

The lowest rate is 10% for single individuals and married couples filing separately, whose income is $9,875 or less. For married individuals filing jointly, the combined income may not exceed $19,750.

For those filing as head of household (HOH), the income thresholds are the same as rates for singles in the 37%, 35%, and 32% brackets.

In other HOH brackets, the income thresholds are now $85,501 to $163,300 in the 24% bracket; $53,701 to $85,500 in the 22% bracket; $14,101 to $53,700 in the 12% bracket; and up to $14,100 in the 10% bracket.

 

Retirement Plans

The contribution limit for employees who participate in employer retirement plans such as 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan (TSP) has been increased to $19,500, up from $19,000 in 2019. The catch-up contribution limit for employees age 50 and older increased to $6,500, up from $6,000 in 2019. The contribution limit for SIMPLE retirement accounts for 2020 has been raised to $13,500, up from $13,000 for 2019.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. During the year, if either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced or phased out. If neither the taxpayer nor his or her spouse is covered by an employer-sponsored retirement plan, the phase-outs of the deduction do not apply. Phase-out ranges for 2020 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For MFJ, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000.
  • For an IRA contributor who is not covered by a workplace retirement plan, but who is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000, up from $193,000 and $203,000.7

For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.7

The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up $2,000 from 2019. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up $3,000.7

The income limit for the saver’s credit (also referred to as the retirement savings contributions credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000 in 2019; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.

 



Keeping Your Own Books?

Most owners of small businesses know that it isn’t easy to maintain their company’s financial records, however, keeping such records help your business to run effectively and smoothly. But one might ask, is it a wise idea for the small business owner to do their own bookkeeping?

 

If you are an owner of a small business and have enough time to do your own bookkeeping that is excellent but doing so reduces the time you’ll have to do what you do best and that’s running your business.

 

Bookkeeping is the part of accounting used for collecting, classifying, and recording the commercial and financial operations carried out by the company. It is the record of financial transactions and information related to a business every day operation.

 

A bookkeeper is responsible for:

  • Collecting, registration, and classifying business transactions.
  • Narrate the accounting facts in written form.
  • Execute the tasks according to the accounting procedures adopted.

If you insist on doing your own bookkeeping here are some financial transactions to be mindful of while doing the books:

  • billing of goods or services sold to customers
  • registration of customer receipts
  • verification
  • recording of supplier invoices
  • payment to suppliers
  • Processing of employee payment and government reports and the creation of financial statements.

 

One of the most important aspect of bookkeeping is maintaining an accurate and up-to-date record of all information. Accuracy is an essential part of this entire process. It ensures that the record of individual financial transactions is correct, up-to-date, and comprehensive. For this reason, accuracy is vital to bookkeeping.

 

The process of bookkeeping focuses on providing preliminary information, which is necessary to create financial statements. Transactions are entered in the books, and all changes in the financial records are continuously updated. The building blocks of bookkeeping requires a knowledge of debits and credits and fundamental understanding of financial accounting, which includes the overall balance sheet, cash-flow statement and the income statement. The bookkeeping process involves the preparation of accounting records, which enhances an evaluation of the company’s present position and allows the business owner to forecast with relative certainty the future position.

 

One of the main principle of bookkeeping is that the transaction log records all transactions that occur within the organization on a daily basis.  For each transaction, there must be documentation describing the business transaction. This may include a sales invoice, sales receipt, payments to a supplier, a bill from a supplier, and payments made to a bank. These accompanying documents provide the audit record (any item that gives the documented history of a transaction in a company) for each transaction. They are an essential part of maintaining adequate audit trail in the business.

 

Modern accounting consists of a cycle of seven stages. The first three refer to bookkeeping, that is, the systematic compilation and recording of financial transactions. Bookkeeping is vital to manage your business resources properly. Also, you will need these records for tax purposes. Whether you prepare them on your own or outsource the process, you must understand the importance and basic principles of bookkeeping.

 

Keeping accurate records of transactions will help you identify and spot any problems in the flow of money, that is, the inflows – receipts and the outflows – payments.

These are some basic principles that should become a standard practice of your books.

 

If you decide to do bookkeeping on your own, please consult an expert in the field of accounting, especially at the beginning, to make sure that you are doing the right thing because it can cost you more in the long run to fix a problem than to avoid a problem  initially. And as your business grows, you may want to hire someone or implement a more sophisticated bookkeeping software.

 

Another primary benefit of bookkeeping is that it helps eliminate the need to hire a full-time accountant for your business. The business owner only has to pay when accounting work needs to be done, which is considerably cheaper than employing a full-time accountant.

This process is found useful mostly for small businesses in that, it helps in saving money that you would typically spend on training an accountant for your firm. The small business owner also save in other employee related costs, such as health insurance, employer portion of employment taxes, sick days, vacation pay, time off delays , unemployment taxes, workers compensation insurance and overtime pay.



Federal Income Taxes & Your Business.

Welcome to Metro Accounting and Tax Services information series, What You Need to Know about Federal Taxes and Your New Business. Today we’ll be examining the Employer Identification Number or EIN, Record Keeping Requirements and Bookkeeping System for the small business owner.

As a small business owner you might be experiencing a little difficulty keeping up with all of your business recordkeeping.

You might be asking yourself what is an EIN? And what does EIN stand for, anyway?

You know it’s an Entrepreneur Something Number?

That doesn’t sound right.

You have receipts, receipts, receipts! You don’t know what to keep and what you can get rid of. You might have a restaurant receipt, and you’re of the opinion that you might not need it so you’re contemplating whether or not to keep it. You’re not even sure if you have all the information needed.

You’re a sole proprietor, but you’re thinking that maybe you should be a Limited Liability Company or maybe you should just incorporate.

You have lots and lots of questions. But presently your first bone of contention is that maybe you should just get through this mess first and deal with the rest later.

And you’re thinking that you still need to make sure you’re using the right accounting method.

The cash method, you guess… or maybe accrual is better. You don’t know.

How long should you keep records for? Maybe you should just pay someone to do it for you. But who?

Let’s see if we can help bring some order to the chaos that most small business owners are experiencing.

 

 

Employer Identification Number, or EIN

The federal Employer Identification Number, or EIN identifies tax returns filed with the IRS, and, as a business owner, you may be required to get an EIN.

As a small business owner will need an EIN if you pay wages, have a self-employed retirement plan, operate your business as a partnership or corporation, or if you are required to file any of these tax returns: employment; excise; fiduciary; or alcohol, tobacco, and firearms.

It is important to note that even if you are a sole proprietor with no employees and don’t meet any of these requirements, you may still need an EIN for dealing with other businesses, including banks, they require an EIN to set up a business bank account.

 

Recordkeeping

It is imperative that small business owners keep receipts, sales slips, invoices, bank deposit slips, canceled checks, and other documents to substantiate items of income, deductions, and credits. Although it may sound like a lot of work, unless you have records showing the sources of your receipts and payments you may not be able to prove that some are non-business related or non-taxable. Remember, recording these items will help you pay only the tax you owe.

Please remember that records must support the claimed amount, the time and the place, the business purpose, and your business relationship to any other person involved.

As a small business owner if your records are incomplete, they may not support your deductions. To support items of income or deduction on your tax return, you must keep records until the statute of limitations for that tax return expires. Usually, the statute of limitations for an income tax return expires three years after the return is due or filed or two years from the date the tax is paid, whichever is later.

So the moral of the story is, as a business owner you must keep your records as long as their contents may be material in the administration of any Internal Revenue Service law.

You’ll be required to keep employment tax records too if you have employees. All employment tax records must be kept for at least four years after the date on which the tax return becomes due or the tax is paid, whichever is later.

However, if you change your method of accounting, records supporting the necessary adjustments may be material for an indefinite amount of time. In addition, records relating to the basis of property must be kept for as long as they are material in determining the basis of the original or replacement property. They might be important to figuring out depreciation, amortization or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property.

In the unfortunate even that you’ve lost your records due to circumstances beyond your control, such as a flood or an earthquake, you may substantiate a deduction by a reasonable reconstruction of your accounting records.

 

Bookkeeping Systems

Surprisingly, many persons who operate their own one-person business never bother to set up a business bookkeeping system. Their personal checking account serves as both a personal and a business account. The IRS, however, recommends that you open a separate business bank account for your business.

It is also recommended that business adopt the double entry bookkeeping system for maintaining their accounting records. Although more complex: it has built-in checks and balances, it’s self-balancing, and is more accurate than the single entry system. Because all businesses consist of an exchange of one thing for another, double entry bookkeeping is used to show this two-fold effect.

Along with the selected a bookkeeping system, the small business owner will also need to select an accounting method. This basically is a set of rules that you use to decide when and how you report your income and expenses.

The two most commonly used accounting methods are the cash method and the accrual method. On your tax return, you must use the same accounting method you used to keep your accounting records.

Under the cash method, the business owner reports all income in the year received and expenses are deducted only in the tax year in which they are paid.

With the accrual method of accounting, income is reported in the year it is earned, regardless of when it’s received. Expenses are deducted in the tax year they are incurred, whether or not they are paid that year.

Generally businesses that have inventory for sale to customers must use an accrual method for sales and purchases. However, many small businesses with gross receipts averaging less than 10 million dollars a year may use a cash method for sales and purchases.



Cash Flow Crisis In The Face Of A Pandemic, COVID-19.

It  goes without saying that the COVID-19 pandemic is affecting millions of businesses across the world, causing stress and strain on businesses like we have never seen before.

Although this is certainly a difficult storm for businesses to weather, this is not the first nor will it be the last crisis that will affect the small business owner.

The best way to navigate any crisis is to be fully prepared, but that’s almost impossible, so the best thing businesses can do to be prepared is to understand and forecast your cash flow on an ongoing and scheduled basis.

The review of financials by most businesses is done on a monthly basis. Although this is an important step, relying solely on monthly financial statements to drive or inform business decisions can result in missed opportunities and a delay the response times to any cash challenges.

To combat this, and particularly to help the small business owner  weather the storm, we recommend implementing a weekly cash flow process or at a minimum, monthly.

The weekly process includes 3 components: (1) reviewing what happened (the past), (2) where we are today (the present) and (3) where we are going (the future). Whether you find yourself in crisis mode or not, this guide will help you get started with developing your Baseline Forecast and introduce scenario planning to make better decisions.

Having a system in place to focus on cash flow – both where you have been (monitoring) and where you are going (forecasting) will put your company in the best position to survive and thrive, regardless of the present circumstances.

Cash flow is like oxygen to a business, without it the small business will suffocate and die.

A business needs the right amount, at the right intervals, to maintain good business health. Too little and a business may survive, but it will be in a weakened state. This can make it difficult to survive an economic downturn or fend off competitors. Too much and a business may become “lightheaded”. This can cause poor decisions and swing the pendulum the other way, suddenly the business finds itself suffocating and gasping for the cash air needed.

“Do we have enough money? Can we afford it?”  Is often times the questions asked by Entrepreneurs & small business owners. Why are these questions asked?

In today’s age, you can log into your bank account in seconds using your smartphone and know exactly how much cash you have available. Why isn’t that enough? The short answer may surprise you: your current cash balance is only one piece of the puzzle.

Just imagine driving your car without a windshield or a rearview mirror, just windows on the left and right. You could see where you are at that given moment by looking side-to-side, but not where you came from or where you are going. You wouldn’t know if you were inches away from an accident or if a broken bridge lies ahead. Pretty scary right? Sometimes, ignorance is bliss. But this does not apply to cash flow or in this instance driving your car.

In today’s world, monitoring and forecasting your small business cash flow is as critical as having a business bank account.

Without monitoring and continually projecting future cash balances, you’ll simply be using your bank balance as a marker at that given moment, that is, our side windows. When we monitor our historical cash flow, we have a clear view of what happened and where we came from, our rearview mirrors.

And the small business owner can go one step further, with cash flow forecasting, they have visibility into what is coming so they can make decisions and plan ahead, their windshield.

The COVID-19 pandemic is affecting millions of businesses across the world, causing stress and strain on individuals, companies, entire industries, and even national economies. Although this is proving to be a particularly difficult storm for businesses to weather, this is not the first nor will it be the last crisis that will affect your small business. Monitoring and forecasting cash flow is as critical to a business as having a bank account.

A crisis can take many forms. It can be company specific such as losing a large client or supplier relationship, industry specific in the form of shifts in technology or processes used or it can affect a whole economy in the form of a recession.

As businesses struggle to deal with the COVID-19 crisis, the common cash flow questions during normal times, “Do we have enough money? Can we afford it?” are followed by more difficult ones. These questions challenge the very survival of a business and the livelihood of its owners and employees.

“Do I need to lay people off? How long will the cash we have today last? Are we going to go out of business?”

Small business owners hate uncertainty and neither do they like surprises. This is especially true when it comes to cash balances, availability of cash, and certainly the ultimate survival of a business.

How do you know if you’re headed towards a potential cash flow crisis? Here are a few symptoms you may experience:

  • Hesitation in paying vendors because those funds are needed for payroll
  • Dipping into your personal funds to pay for business expenses
  • Taking on more debt (loans, lines of credit) to pay for operating expenses
  • Inability to reward your hard-working employees with a raise, small bonus or even something as simple as a company lunch
  • Calling customers to collect amounts owed to you and offering discounts to speed up payment
  • Avoiding calls in case someone is calling to collect on your outstanding bills
  • If you are the business owner and you are paying yourself little or not at all, this is a BIG RED FLAG

 

If there is a good process in place for monitoring and forecasting cash, you can immediately start weighing options and strategizing for how to navigate the crisis. You can outline different scenarios and what-ifs to map out your options and possibilities. Most importantly, you can start on the fly from a position of confidence.

If you do not have a process for monitoring and forecasting cash flow, this is often referred to as starting “behind the eight ball”. Meaning, the race has already begun, and you are not yet at the starting gate.

Critical time must be spent gathering information to figure out not only where we are today, but a reasonable expectation for the future, that is your ‘Baseline Forecast’.

If you start from scratch, it could take days to gather enough information from your accounting software, bank registers, sales forecasts, debt schedules and more to be ready to sit down and try to interpret the information.

And gathering all that data is just the first step, you will still need to analyze and assemble it in order to develop a plan and forecast in order to take actionable steps.

In a crisis, fast decisions can be the difference between survival and all kinds of unpleasant alternatives.

 

What about… When things return to ‘Normal’?

Even when there isn’t a crisis like the COVID-19 pandemic, small businesses have historically struggled with managing their cash flow position. According to Intuit’s ‘State of Small Business Cash Flow’ report, 61% of small businesses regularly struggle with cash flow and 69% of their owners have been kept up at night by cash flow concerns.

Without a doubt, cash is very critical to business survival and most business owners identify cash flow as a source of worry, its struggle that causes them stress, then why don’t they focus on managing it more often?

The simple answer is that the traditional financial statements, that is, the income statement, balance sheet and cash flow statement provided to the small business owners by their accountants can be difficult to interpret and don’t tell the whole cash flow story.

Surprisingly even the cash flow statement, which based solely by name you would think would help, does little more than tell us the major categories where cash was spent, but tells us nothing about the future.

This is amplified by the fact that financial statements are prepared and reviewed monthly.

Reviewing your numbers monthly works for measuring performance against budgets and benchmarks, but you can lose sight of important activity and miss out on opportunities if you rely solely on monthly financial statements.

Let’s look at a simple example of insights and opportunities that are lost on the collections, accounts receivable side by only looking at information on a monthly basis.

  • July 6, the accountant reviews June financials statements with the owner and notes a large accounts receivable balance. Specifically one “Big Customer” invoice was overdue
  • July 7, the owner assigns the follow up to a team member
  • July 8, the “Big Customer” says they will send the payment today. Great!
  • August 4, the accountant reviews June financial statements with the owner and unfortunately, the “Big Customer” invoice is still outstanding

The invoice is now 30 days older and more difficult to collect. Worse, when the business owner calls, they learn the customer has cash flow problems and are now unable to pay. What now? A once thought-to-be profitable job just became a huge expense and cash flow headache. Had the missed payment been noted during the June 19 weekly cash flow meeting, the business may have been able take action to reduce the impact. But now, facing the full brunt of this situation at once, the business has fewer options.

It is important for the small business owner to note that a lack of focus on cash can actually create a cash flow crisis!

If the business had a weekly or bi-weekly process in place to review cash activity and update their cash flow forecast, the payment delay would have been caught much earlier and they would have been able to take action sooner.



7 Cash Flow Tips Every Business Owner Needs

Every business knows that cash is king, yet an alarming number of businesses (only 33%) don’t even use a tech platform, tool or app to manage their cash flow. Here are 7 practical tips that every business owner should use to help with their cash flow.

For those that do not use a tech platform, tool or app, it is probably a manual process done in Microsoft Excel which is a great tool but takes a considerable amount of work to get an effective cash flow forecast.   Furthermore, 74% of businesses judge cash flow tasks as difficult according to a 2019 study.

This is precisely why we are here to help business owners get a handle on their cash flow forecasting.  If you use Quick Books Online or Quick Books Desktop we can forecast your future cash flow up to 6-months, you’ll instantly see KPIs and future forecast that you simply don’t get in Quick Books.

Every small business owner will appreciate being able to unlock insights into their cash flow so that they can run and operate their businesses successfully.

 

Here are 7 important cash flow tips that you should consider when running your business and we’ll make it dramatically easier for you to manage and forecast your cash flow.

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           1) Your days cash on hand should be 45 days or better


Most business owners look at their current cash balance (cash on hand) in their check book and make quick decisions whether they can afford something or not. The reality is that there may be expenses coming in that will claim the cash balance at some point in the future, so you must know what the day’s cash on hand really are. Two great dashboard KPIs that you can keep your eye on:

Cash on hand shows you the sum of all the cash in your bank accounts plus any deposited funds that you have.

In this example, it looks like the amount is very strong, yet the business owner must look at all the other factors that will use the cash and once done, can judge if this is really good or not.

 

 Days cash on hand.  

This shows the number of days that cash is available factoring in expenses and assuming no new sales.     Below is a chart that gives you guidance of where you should be.

 

 

 

 

 

                                                                                                                                                                                                                                                                                                                                                                                                                           2) Understanding your payment terms are

You might have some great contracts with your customers and yet many larger customers have longer payment terms (Net 120, Net 60, etc.).
There was a time when I landed a large contact with a large company that required me to ramp up people and resources. I was super excited, and we were making strong progress on the new contact. As things ramped up, so did the expenses and the fact that I had to pay the people that were doing the work. The problem however, was the large company had a Net 60 which meant the first check would not come in for 2 months and yet I had to pay the expenses and payroll out of my own pocket which put me in a significant cash crunch position.

The Average days to collect from customers gives the business owner an overall summary of how all of your customers combined on average pay you in number of days. Generally, this should be as low as possible.

                               3) Pay particular attention to your expenses                                                                                                                                                                                                                                                                    

Be very careful as expenses can add up quickly. Some new expenses seem harmless to add to your overall bills like a license to zoom or new software as an example. Furthermore, most expenses these days are put on a company charge card with an annual billing that is done initially and not remembered until the following year. And the larger your company gets, the more expenses come in with possible duplication – maybe one employee thought it was great to use zoom, while another got a license for another conferencing tool.

It’s important to keep an eye on your expenses. Perform an annual audit to ensure you need all your expenses and decide if you should cut some. This is one of the strongest ways that you can increase your cash flow. We’ll make it easy to see your monthly expenses and trend:

At times you may have an unexpected or higher than normal bill that you didn’t even know about. An example might be a water bill where every month it is roughly the same and auto paid through your business checking account or credit card. You don’t see a bill come in and maybe it was dramatically higher due to a leak or higher than normal usage. How would you really know about this anomaly?  The tools and built in features we provide in our cash management program will watch over your business expenses and alert you to anything out of the norm so you can take action.

                           4) Try increasing your sales

This is an obvious, yet often times over looked by the small business owner.   You can set goals for your sales team and then use our program to know how your monthly sales is doing and also how it is trending over the past few months.   You can analyze the sales along with the expenses and you’ll start to see a better trend on how your cash flow is really doing.

 

                              5) Don’t rely on too few customers, know your Customer Concentration
                                                                                                                                                                                                                                                                     It’s a dangerous practice but many small businesses rely on sales from just a handful of customers and in some cases rely on sales from just one or two customers. Having a high customer concentration puts your business at risk. If you lose your top customer, your business is at risk. Don’t be too dependent on just one or two customers because losing one could potentially really hurt your business. Focus on getting more customers to broaden your revenue stream. We can help you to avoid this scenario and let you see the impact of losing your top customer.


You can see your top customers very easily today and projected out 6-months in the future.

Customer concentration is where you calculate the revenue coming in as a percentage of your total revenue and understanding the dependence your business has on your customers.   You can see this in Excel when you export your forecast and total all of your customers revenue and simply calculate each customer as percent of total.

 

                                 6) Don’t pay your vendors too quickly


Everyone in business wants to be paid. Just like you want your customers to pay you in a timely manner, your vendors want their payments quickly as well. However, if you are paying your vendors too early it can hurt your cash flow position.  You can delay payment as long as possible while meeting the terms of your vendor contact.  Among other things, we’ll show you the average days to pay your vendors and you should consider stretching this out as long as possible without being late on your payments.  You’ll always want to have a good relationship with your vendors and avoid late payments as it can hurt the relationship and potentially impact your good credit rating.

 

 

                               7) Know your cash flow forecast

Knowing your future cash flow forecast gives your business a cash road map. You get a much clearer idea of where your business is headed versus using just your cash on hand as a means to make decisions.

We’ll makes it simple to know your future cash flow as we look at your historical Quick Books data and projects a 6-month future forecast. You’ll have interactive chart at your fingertips to make it simple for you to see how you are doing each month and this gives you an opportunity to do a few what-if scenarios.   For example, you need to buy your employees new laptops and you are not sure what month is the best month to do it. We’ll let you easily add a manual Cash-Out transaction and immediately see the impact on your future 6-month cash flow. If you put the laptop expense on a specific day in a future month and you realize that might not be the best month due to other expenses, you can quickly change the date of the laptop expense and see if that will work for your situation.

Small business owners, we can help you to run your business more efficiently and help you to be more profitable. Call the office of Metro Accounting And Tax Services at 404-990-3365 and schedule at 15 mins no cost consultation to get a cash flow checkup for your business.

 

 



Are you lonely at the top?

Most Business Owners know how to sell something or make something to be sold. Very few have any formal financial management experience.

The signs are there and they feel the pain

Connecting the dots are difficult

They cannot see what’s coming

This lead to improvised management strategies

Cognitive biases and mental shortcuts can lead management into making costly errors as people routinely employ heuristic rules of thumbs or mental shortcuts to simplify and oversimplify the decision making process  under uncertainty.

 

 

These may stem from:

The business owner inappropriately anchoring to an easily available and sometimes arbitrary point of reference when forming estimates and then adjusting to fit the circumstance.

Poorly constructed framing or presentation of the situations when deciding a course of action.

Overconfidence or extreme optimism that, when carried to the excess, causes a business owner to make poor decisions.

Self-serving bias leads people to see data in the way they most want to see it.

 

 

 

Dangerous situational dynamics are created when business owners don’t have the objective systems in place to collect key factual information that can mitigate the use of convenient facts or the predisposition of being too certain of personal opinions.

Examples of these situations are:

  • Extreme overconfidence and self-serving biases
  • Seemingly early success, but near disaster in the end
  • No accountability and constantly changing rules
  • Difficulties from the beginning, minimal return in the end
  • Inappropriate anchoring and poorly constructed framing

 

 

This leads to a very dangerous situation

  • No plan
  • Poor reporting
  • Disorganized approach
  • Haphazard effort
  • The ostrich effect

 

 

 

Are you ready to?

  • Focus on the fundamental financial dynamics inherent in your business
  • Understand the nuances associated with each process or functional area
  • Develop informed and target inspired decision making
  • Create the discipline where every decision is anchored in a return mindset

 

 

In other words, are you ready to have?

 

  • The RIGHT FACT!   
  • At the RIGHT TIME!!
  • TO MAKE THE RIGHT DECISIONS!!!!                                                                                                          

 

 

 

As a business owner, at times it can be lonely at the top, but it doesn’t have to be that way. If you need to define a strategy to move your business to the next level, the Operational and Financial Advisors at Metro Accounting are ready to help you chart the way forward. Don’t hesitate to email or call us at clientservice@metroaccountingandtaxes  or 404-990-3365.

 

 



Which is more important, cashflow or profits?

It goes without saying that the goal of every business owner is to operate a profitable business. Being able to pay the bills when they are due and having some residual income at the end of the period is a satisfying feeling. With that in mind, business owners wrestle with the question of, what’s more important Cash flow or profits.

What Is Cash Flow?

Cash flow is the inflow and outflow of money from a business. It is necessary for daily operations, taxes, purchasing inventory, and paying employees and operating costs.

Positive cash flow indicates that a company’s liquid assets are increasing. This enables it to settle debts, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges. Negative cash flow indicates that a company’s liquid assets are decreasing.

What Is Profit?

Profit is the surplus after all expenses are deducted from revenue. Profit is the overall picture of a business and the basis on which tax is calculated.

There are three major types of profit that small business owners should pay attention to : gross profitoperating profit, and net profit. The business owner is provided meaningful insight when each type of profit is understood and analyzed and thus can make informed decisions that will aid in the company’s profitability.

Each type of profit gives the owner information about the company’s performance, especially when compared against prior operating periods and other companies in the same industry. All three levels of profitability can be found on the income statement.

Which One Is of Greater Importance to a Business?

When determining which one is of more importance, one has to take each business individually and evaluate and analyze its operational and financial position to make such a determination.

For example, a business may see a profit every month, but its money is tied up in hard assets or accounts receivable, and there is no cash to pay the daily operational cost of the business, i.e. employee salaries, electricity etc.

Once the company collects on those accounts receivable the business sees an influx in revenue, it starts to see positive cash flow again. In this example, cash flow is more important because it keeps the business running while still maintaining a profit. Alternately, a business may see increased revenue and cash flow, but the company has a huge amount of debt, so the business does not make a profit.

In the long run the absence of a profit eventually has a debilitating effect on the cash flow. In this instance, profit is more important. Another thing to remember when determining whether to focus on cash flow or profit, is the fact that there can be an infusion of cash into a business from external sources. A business owner can put up his or her personal assets as capital into the business. A small business loan can be secured from a bank to keep the business running until it begins to cash flow again.

Cashflow and profits are both crucial aspects of any business. In the long run for a business to be successful it must be profitable while generating a positive cash flow.

Profit is more indicative of your business’s success, but cash flow is more important to keep the business operating on a day-to-day basis. They can be viewed as a coin with two sides, both are equally important.



Why Outsource Your Accounting & Bookkeeping Needs

Having More Time to Focus on Your Business

By outsourcing your accounting operations to a professional accounting firm, you’re effectively hiring a team of experts.  As an outsourced CFO, I work with clients from varied fields and backgrounds, each having a different level of complexity and challenge with their financials.

However, there seem to be a common theme with all these businesses: With the growth of their companies they eventually realize that they lack the expertise needed to fulfill all their accounting and bookkeeping functions and they really need to spend the time doing what they all do best and that’s running their businesses.

It is often the case where these business owners find that accounting and bookkeeping can be stressful and time consuming if not done correctly in the first place. Going back to find and correct errors can consume a lot of their energy and time which should be devoted to two vital areas of their businesses: specifically, business development and strategic planning.

Partner with the right professional and both challenges will be addressed. When you outsource your accounting and bookkeeping services to a Certified Public Accountant, you’ll be working with a team that has extensive experience. You’ll be provided with real-time financial insight that will aid your decision making process, you’ll have at your fingertips monthly financial packages (e.g. balance sheets, income statements and statements of cash flow) to more advanced analysis (e.g. cash reporting, budget-vs.-actual analysis, make or buy decision), simply put, you’ll have up-to-date financial information needed to make critical business decisions.

Risk and Fraud Prevention

Having a Certified Public Accountant as a valued business partner help you not only to address the first challenge but also affords you the opportunity to receive invaluable support in addressing the second challenge as well.

As a business owner you’ll need to comply with and be current with many rules and regulations that change frequently. Having to worry about being in compliant with all these rules and regulations can be another source of stress and distraction. You can eliminate this added source of stress by outsourcing your accounting and bookkeeping to a professional company, you’ll gain the peace of mind you deserve.

Among other things, you’ll need to prepare and submit sales tax filings, collect W-9s and manage submission of 1099s to the IRS, a professional accountant knows all the rules and will ensure you remain in compliance.

Other ways in which a Certified Public Accountant can reduces your exposure to risk is through the strengthening your system of internal control and with the segregation of duties. We’ll help you to define your company’s policies and procedures, and be that extra set of eyes to help in the prevention of errors or intentional mistakes (fraud prevention).

According to Association of Certified Fraud Examiner’s in one of their released study, most common victims of fraud are privately owned small businesses with less than 100 employees with an astounding median fraud amount of $147,000. This is due the fact that most small companies don’t have access to a controller or CFO who could look at the KPI and metrics which show abnormal activity in the transactional and billing data.

Cost Reduction

Outsourced accounting operations save you money by eliminating costly benefit packages to a full-time or part-time employee.  When you outsource accounting, you only pay for the actual accounting, nothing else.  This saves in productivity costs as well as payroll costs.  The cost benefit analysis of outsourced accounting vs. in-house bookkeeping can save up to 40% in monthly costs.

 

Prepare for Business Growth

Starting a business and just having a couple of clients makes it easy for the business owner to be act as the company’s accountant. Afterall, it’s easy to record few revenue and expense transactions in a simple excel spreadsheet. This initial ease and simplicity can set you up for big problems down the road once you start to grow. Things get complicated fast and very soon you realize that you’ve actually become the company’s bookkeeper while trying to run a business on the side, instead of the other way around.

When you start your business with a scalable system in place,  you won’t need to scramble to find a new system or resources when you’re in the middle of rapid growth. Your clients and vendors will enjoy the seamless operation—and you’ll have a much smoother path to growth, especially at tax time.

A Certified Public Accountant as you valued business partner can also draw upon their wide knowledge base and provide you with additional services as needed. You might be able to benefit from class and project accounting or analysis and planning. You might not know the financial ramifications of opening a new location or starting a new product line — but your Certified Accountant will. And you can enjoy the benefit of this expertise without having to provide benefits or devote management time to overseeing an in-house hire.

Now that you see how beneficial outsourcing your accounting really is, the next step is finding the right CPA for your business. In the end its really about different companies facing different problems that have a common solution.

Three of the Biggest Challenges Unique to Small Business Owners

Having that grand opening for your business is a great achievement and every business owner should be commended for making that big step. However, maintaining the business has proven to be a big challenge for many owners, here are three of the biggest challenges unique to small business owners.

Finding Customers

Not having a steady supply of customers is a problem face by all businesses and particularly the smaller ones. Companies big and small can’t just sit around waiting for leads to come in. One has to be engaged in marketing everyday to find new customers. For the small business owner who don’t have a household name this can be particularly challenging. There seem to be so many avenues you can choose to focus your marketing on, how do you know what to prioritize and where to allocate your scarce resources?

Figuring out who your ideal customer is should actually the starting point for small business owners and any businesses for that matter.

Hope and wishing that customers will show up at your business just doesn’t work. You need to make sure you’re spreading the word to a targeted set of people, the right people.

Develop an idea of what your ideal customers look like, what they do, where they spend time online by building your buyer personas. Once you’ve built your buyer personas, you can start creating content and getting in front of your target customers in the places they spend time online and with the messages that they care about.

      Client Dependence

Depending on a single client or groups of clients is a sure recipe for disaster. If a single client makes up more than half of your income, you are in trouble. At this point you would be considered more of an independent contractor than a business owner. Diversifying your client base is vital to growing a business, but it can be difficult, especially when the client in question pays well and on time.

Such dependence can actually result in the longer-term handicap of your business and it is generally better for a business to have a diversified client base to pick up the slack if and when any single client quits paying.

Self-doubt

A small business owner’s life is not without trials and tests, in-fact it’s not an enviable life, at least in the beginning. It’s extremely easy to get discouraged when something goes wrong or when you’re not growing as fast as you’d like. Self-doubt creeps in, and you feel like giving up at times.

Having the conviction to believe in yourself, your dreams and aspirations and having the temerity to stick it out are necessary trait for entrepreneurs. It helps also to have a good support system of family and friends who know your goals and support your struggles, as well as like-minded entrepreneurs who can be objective as it relates to the direction of your business. There is a very motivational poem called, “Success is failure turned inside out”. This can help the entrepreneur to refocus when things aren’t going the way expected.

The bottom line is this, a competitive drive is often one of the reasons people start their own business, and every challenge represents another opportunity to compete. One of the worst things a small business owner can do is to go into business without being cognizant of the challenges that lie ahead. Remain focus and don’t give up in the face of challenges.

13 Tax Deductions Overlooked By Real Estate Agents or Brokers

Most real estate professionals manage their finances themselves, finding the time and energy to organize business expenses can be a daunting task in and of itself.  If this sounds like you get the needed help from an accounting professional and focus on running your business. Remember, it’s not recommended to be “penny wise and pound foolish”.

To help you get started on the right footing, we’ve outlined some overlooked tax deductions to help real estate professionals reduce their tax liability and keep more of their hard-earned money in their pockets.

Real Estate Rental Property Losses

Losses on rental properties owned – provided there was material participation as a landlord.

Real Estate Agent Business Expenses

Office-related expenses like photocopies, letterhead, and other products you need to keep your business going.

Other items such as furniture, a new copier, computers, fax machines, or phone systems can either be expensed in full the year they are purchased, or depreciated over a certain number of years.

A dedicated landline used for your business, that expense can also be fully deducted.

You can also deduct the business percentage use of your cell phone bill if you use it for work.

Meals while traveling on business

Are you constantly taking clients out for lunch or hosting dinners to generate referral business?

You’re able to deduct 50% of the total expense.

Note: entertainment expenses are no longer deductible.

Continuing education or other training courses.

You may be eligible to deduct expenses like materials costs, registration fees, and related travel expenses.

Digital and online advertising

Digital and online advertising similar to expenses related to ordinary advertising like marketing materials, signs, photography, and staging are all deductible.

Real Estate – Specific Tax-Deductible Business Expenses

Commissions you’ve paid to employees or other agents are fully deductible as business expenses.

 Fees

Annual fees are an expected cost of doing business.  Other deductible fees include: renewal fees for your state license, the cost of professional memberships, and MLS dues.

Note: Professional fees excluding the amount used for political advocacy & lobbying.

Business Insurance

General business insurance and Errors & Omissions (E&O) insurance are fully deductible.

Real Estate Taxes

Deduct real estate taxes that are necessary for your business.

Real Estate Closing Gifts

Real estate closing gifts are tax deductible, as are other gifts given to clients or other business associates, provided that: a) the gifts do not exceed $25 per person, b)incidental cost s do not count towards the $25, e.g. packaging & shipping, c)husband and wife is counted as one person for gift giving purposes.

Mileage

Each and every mile you drive for your real estate business can be deducted from your taxes.

It’s advisable for agents to get an automatic mileage tracker app.

If you drive over 10,000 miles annually for your real estate business, you’ll likely get the best deduction by using the standard mileage deduction.

However, if you drive less frequently for realty or have a car payment that’s quite high, you might benefit from using the actual cost method to calculate your mileage deduction.

Home Office Deduction

If you use part of your home, you may be able to take advantage of the home office deduction as a real estate tax deduction.

Note: Unless you’re already deducting desk fees you can deduct a portion of expenses like rent or mortgage interest payments, utility bills, insurance costs, internet bills, and costs associated with repairs and maintenance.

Your home office must be used exclusively for business in order to qualify for the deduction

If you exercise your license for an independent broker or a national franchise, your desk fees are fully deductible; just note that you won’t be able to take the home office deduction.  Desk fees can constitute a sizable tax write off for realtors.

Software

Any software or app you use to run your business is fully tax deductible, including business and accounting software, lead generation subscription services, CRM software, your Spotify subscription, even your automated mileage tracker.

Keeping your business income and expenses organized doesn’t have to be this complicated.  Let’s face it, you cannot do everything by yourself, focus on running your business and get the needed professional accounting help. It’s now tax time, free yourself of lots of stress and sleepless nights.

 

5 Incredible Ways to Reduce Small Business Taxes

Running a small business can be a demanding endeavor. The small business owner wears many hats and the last thing you want to do is to pay too much of your earnings in taxes to the IRS. As a small business owner there are many ways to reduce your taxable liability and keep more of your hard earned money in your pockets.

If you need ways to reduce your tax burden this year, consider some of the following methods to do just that. However, always consult a tax professional before taking action on any of these suggestions.

  • Employ a Family Member

One way you can reduce taxes for your small business is by hiring a family member. There are a variety of options available to the small business owner in the regard. These options allow the small business owner to basically shelter some of his income from taxes and this is allowed by the  Internal Revenue Service (IRS).

Hiring of your children – with this strategy small business owners are able to pay a lower marginal tax rate, or eliminate the tax on the income paid to their children. Their salary can be put in a Roth IRA for future purposes thus allowing you the tax benefit plus a way to provide for their future needs.

Hiring your spouse – taking into consideration the benefits they have through another job; you may be able to put aside an amount in retirement savings for them thus reducing your tax liability.

  • Start a Retirement Plan

As a small business owner, you don’t have a 401(k) match from an employer but there are several retirement account options that can maximize your retirement savings and reap valuable tax benefits. For example, your traditional IRA contribution may be tax deductible.

  • Saving Money for Healthcare Needs

A small business owner can reduce his tax liability by establishing a Health Savings Account (HSA). With the continued rise in health care cost this is a proven method to plan for the future while getting a tax benefit for doing so.

There is a triple tax advantage of establishing a HSA

1) You can claim a tax deduction for contributions you make to a HSA,

2) The interest or other earnings on the assets in the account are tax free,

3) Distributions are tax free when withdrawn for qualified medical expenses.

  • Change Business Structure

You don’t have the luxury of an employer paying a portion of your taxes as a small business owner. You’re on the hook for the entire amount of Social Security and Medicare taxes. Those amounts only increase an already high tax bill. If your business is set up as a Limited Liability Company (LLC), you still have to pay those taxes.

In certain circumstances, just by changing your business structure you can eliminate the employer half of those two tax responsibilities. There are many things to consider in this change, such as paying yourself a reasonable salary and other associated risks, but it can be a good way to reduce your taxable responsibility.

  • Deduct Travel Expenses

If you travel a lot for both business and pleasure, you may be able to reduce your business taxes. Business travel is fully deductible, though personal travel does not enjoy the same benefit. There are several ways to manage travel to save on business taxes. You can combine personal travel with a justifiable business purpose. You can also use the frequent flier miles you earn for personal travel.

The Bottom Line

With wise planning, you can reduce your small business taxes and keep more of your money working for you. Just remember to consult a tax professional first to make sure you qualify for the potential savings discussed here.

Are you an Employee or an Independent Contractor?

An independent contractor is a person or entity employed to perform work for—or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. The payer must correctly classify each payee as either an independent contractor or employee. Another term for an independent contractor is a freelancer.

 

Doctors, dentists, realtors, lawyers, and many other professionals who provide independent services are classified as independent contractors by the Internal Revenue Service (IRS). However, the category also includes contractors, subcontractors, freelance writers, software designers, auctioneers, actors, musicians and many others who provide independent services to the general public. Independent contractors have become increasingly prevalent in the rise of what has been dubbed “the gig economy.”

 

For tax purposes independent contractors are considered sole proprietors or single member limited liability companies (LLCs). They must report all their income and expenses on Schedule C of Form 1040 or Schedule E if they have profits or losses from rental properties. Further, they must submit self-employment taxes to the IRS, usually on a quarterly basis using Form 1040- ES.

 

However, as sole proprietors, independent contractors do not necessarily pay taxes on their gross earnings. Applicable business expenses can reduce their overall tax obligation. The difference between gross earnings and business expenses is the net income, the amount on which taxes are due. Independent contractors must keep track of their earnings and include every payment received from clients.

Getting Paid!!!!!

It goes without saying that for many business owners, collecting on accounts receivables can be challenging especially as more people switch from established collection procedures to online payment methods. The good news is that the small business owner can take positive actions to improve collection rates, shorten the aging days of your accounts receivable, improve the business cash flow and tighten up its credit and collections policies. While some of the tips discussed here may not be suitable for every business most can serve as general guidelines to the small business more financial stability.

Define and stick to a concrete credit policy

It is imperative that the small business define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.

It is of vital importance that you have a system of controls for checking out a potential customer’s credit, and it should be used before an order is shipped. Further, there should be clear communication between the accounting department and the sales department as to current customers who become delinquent.

Clearly Explain Your Payment Policy

Invoices should contain clear written information about how much time customers have to pay, and what will happen if they exceed those limits.

Making sure that invoices (both paper and electronic) include a telephone number and website address so customers can contact you with any billing questions. If you send an invoice via the US mail, also include a pre-addressed envelope.

Timing is everything

The faster invoices are sent, the faster you receive payment. For most businesses, it’s best to send an invoice when you complete the service or with a shipment, rather than in a separate mailing or online invoice days or weeks later.

Follow Through on Your Stated Terms

If your policy stipulates that late payers will go into collection after 60 days, then you must stick to that policy. A member of your staff (but not a salesperson) should call or email a reminder invoice or notice of late payment to all late payers and politely request payment. Accounts of those who exceed your payment deadlines should be penalized and or sent into collection if that is your stated policy.

Train Staff Appropriately

The person you designate to make calls to delinquent customers must understand the seriousness of and the professionalism required for the task. When calling a delinquent payer, the caller should:

  • Become familiar with the account’s history and any past and present invoices.
  • Call the customer and ask to speak with whoever has the authority to make the payment.
  • Demand payment in plain, non-apologetic terms.
  • If the customer offers payment, ask for specific dates and terms. If no payment is offered, tell the customer what the consequences will be.
  • Take notes on the conversation.
  • Make a follow-up call if no payment is received and refer to the notes taken as to any promised payments.

Switch to an Online Payment System

Studies show that customers and clients prefer to pay with debit and or credit cards or EFTs vs. checks and to have multiple payment options (including traditional paper invoicing) available to them. Furthermore, when you use the latest online payment technology clients are more likely to feel that you run a more efficient streamlined operation and are “up-to-date.”

If you are a business owner who is struggling to get paid on time or are ready to make the switch to an online invoicing and payment system, help is just a phone call away.



Small Business Survival Guide

Less than one-third of family businesses survive the transition from first to second generation ownership. Of those that do, about half do not survive the transition from second to third generation ownership. At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue. Founders are trying to decide what to do with their businesses; however, the options are few.

Road Map To Retirement

The number of people who are financially unprepared for retirement is staggering. One study revealed that more than half of the adults in the U.S. were planning to depend solely on Social Security for retirement income. Another study indicated that the great majority of Americans do not save nearly enough money. This Financial Guide developed by Metro Accounting And Tax Services, CPAs provides you with the information you need to get started on this important task.

It is very simple, to enjoy your retirement years you’ll need to begin planning early. With longer life expectancies and the growing senior population, people need to begin planning and saving for retirement in their 30s or even sooner. Adequate planning can help to ensure that you will not outlive your savings and that you will not become financially dependent on others.

It is never too late to start or to improve a retirement plan. This Financial Guide shows you the basics of retirement planning, and will enable you to get started or to revamp an existing plan. Basically, there are three steps to retirement planning:

  1. Estimating your retirement income
  2. Estimating your retirement needs
  3. Deciding on your investment vehicle(s)

In-order to ensure that you don’t shortchange yourself, in making estimates of future income needs and sources of income, be sure to estimate conservatively.

Estimating Your Retirement Income

Most people have three possible sources of retirement income: (1) Social Security, (2) pension payments, and (3) savings and investments. The income that will have to be provided through savings and investments (which you can plan for) can be determined only after you have estimated the income you can expect from Social Security and from any pension plans (over which you have little control).

Social Security

Estimate how much you can expect in the way of Social Security retirement income. To do this, you should file a “Request for Earnings and Benefits Estimate” with the Social Security Administration. This form can be obtained from SSA by calling their toll-free number: 800-772-1213. You can also request a benefits statement online through the Social Security Administrations Web Site.

Many people are being sent estimates of their future Social Security benefits without having to make a request. You may have received such an estimate in the mail.

The amount of Social Security benefits you will receive depends on how long you worked, the age at which you begin receiving benefits, and your total earnings.

If you wait until your full retirement age (65 to 67, depending on your year of birth) to begin receiving benefits, your monthly retirement benefit will be larger than if you elect to receive benefits beginning at age 62. The full retirement age will increase gradually to age 67 by the year 2027.

It is important to note that Social Security benefits may be subject to income tax. The basic rule is that if your adjusted gross income plus tax-exempt interest plus half of your Social Security benefits are more than $25,000 for an individual or more than $32,000 for a couple, then some portion of your Social Security benefit will be subject to income tax. The amount that is subject to tax increases as the level of adjusted gross income goes up.

Also, if you earn income while you are receiving Social Security, your benefit may be decreased.

Pension Plans

Estimate how much you can expect to receive from a traditional pension plan or other retirement plan. If you are covered by a traditional pension plan and you are vested, ask your employer for a projection of what you can expect to receive if you continue working until retirement age or under other circumstances, for example, if you terminate before retirement age. You may already have received such an estimate.

If you are covered by a 401(k) plan, a profit-sharing plan, a Keogh plan, or a Simplified Employee Pension, make an estimate of the lump sum that will be available to you at retirement age. You may be able to get help with this estimate from your employer.

If you are in the military or formerly served in the military, contact the relevant branch of service to find out about retirement benefits.

Establishing Goals For Retirement

Determine how much income you will need (or want) after retirement. Once you have determined this amount, you can figure out how much you will need to put away to have a big enough nest egg to fund your desired income level.

Many people don’t realize that their retirement could last as long as their careers: 35 years or longer. Your nest egg may have to last much longer than you might think. Remember that the earlier you retire, the more you will have to save. If you want to retire at age 55, you’ll have to save a lot more than if you retire at age 65.

A general guideline is that you will want to have at least 70 percent of whatever income stream you have before retirement. If you have any special needs or desires, for example, a desire to travel extensively-the percentage should be adjusted upward. The 70 percent figure is not a substitute for a thorough analysis of your income needs after retirement, but is only a guideline.

Here are some suggestions for estimating how much of an income stream you will want to have coming in after retirement:

  1. Figure Your Current Annual Expenses.

The first step in trying to figure out what your annual expenses will be after retirement is to figure what your expenses are now. Take a year’s worth of checkbook, credit card, and savings account records, and add up what you paid for insurance, mortgage, food, household expenses, and so on.

  1. Figure Out How Your Expenses Will Differ After Retirement. After you retire, your expenses will generally be a lot lower than they are while you are working. To help determine how much lower, here are some questions you might ask yourself:
  • Will your mortgage be paid off?
  • Will you still be paying for commuting expenses?
  • How much will you pay for health insurance?

If you are not among the lucky few that will have post-retirement health insurance coverage from an ex-employer, you will probably pay more for health coverage after you retire you may have to take out so-called “Medigap” coverage.

Other Expenses To Consider includes:

  • Will you increase or decrease your life insurance coverage?
  • How much will you pay for travel expenses? (Do you want to travel after you retire, either on vacation or to visit relatives? Will you be commuting between a winter and summer home?)
  • Will you be spending more on hobbies after retirement?
  • Will your children be financially independent by the time you retire or will you have to factor in some sort of support for them?
  • Will your income tax bills be the same, lower, or higher?

If you are planning to retire to another state, take into account the different state taxes you will be paying.

The answers to these questions will help you determine your estimated annual expenses after retirement. Then subtract from this estimate the anticipated annual income from already-viable sources. (Do not subtract the lump-sum payments you expect to receive, for example, lump sum payments from 401(k) plans. The difference is the annual shortfall that will have to be financed by the nest egg you will need to accumulate.

Now you will have to determine how much you need to save each year to accumulate a nest egg of that size by your retirement age.

The table below will help in this determination which assumes an after-tax return of 5 percent per year. Just multiply the required nest egg by the Savings Multiplier for the number of years until retirement.

For example, if you are 40 years old and want to retire at age 65. You determine that you need a nest egg of $350,000 to fund your annual shortfall. To find out how much you must save each year to have that $350,000 nest egg by the time you are 65, multiply $350,000 by the 25-year savings multiplier (2.1 percent). You will need to save $7,350 (2.1 percent times $350,000) a year for 25 years.

Subtract from this nest egg any lump sums that you expect to receive at retirement. To project the value at retirement of a present asset (retirement account, savings, investments, etc.); multiply the current value of this asset by the Growth Multiplier for the number of years until retirement.

Let’s assume that you already have $75,000 in a 401(k) plan. To find out what that amount will grow to in 25 years, multiply it by the growth multiplier for 25 years. This $75,000 will grow to $254,250 (339 percent times $75,000) by the time you retire. Subtract this $254,250 from the $350,000 needed in the previous example. This amount ($95,750) is the amount you must accumulate by age 65 to meet the income shortfall. Multiply this $95,750 by the 25-year savings multiplier (2.1 percent). You now know that, after taking the projected lump sum into consideration, you will still need to save $2,010.75 per year to accumulate $95,750.

Years Until Retirement

Savings Multiplier

Growth Multiplier

5

18.1%

128%

10

8.0%

163%

15

4.6%

208%

20

3.0%

265%

25

2.1%

339%

30

1.5%

432%

Deciding on Investments

It is a known fact that the longer you have until retirement, more of your savings should be invested in vehicles with a potential for growth. If you are very close to or at retirement, you may wish to put the bulk of your savings into low-risk investments. However, this formula is subject to your own financial profile: your tolerance for risk, your income level, your other sources of retirement income (e.g., pension payments), and your unique needs.

Pros And Cons of Various Retirement-Savings Vehicles.

Tax-Deferred Retirement Vehicles

Each year, maximize your deposits in a 401(k) plan, an IRA, a Keogh plan, or some other form of tax-deferred savings. Because this money grows tax-deferred, returns will be greater. Further, if the amount you put in is deductible, you are reducing your income tax base.

Lowest Risk Investments

Money market funds, CDs, and Treasury bills are the most conservative investments. However, of the three, only the Treasury bills offer a rate that will keep up with inflation. For the average individual saving for retirement, it is recommended that these vehicles make up only a portion of investments.

Bonds

Bonds provide a fixed rate of income for a certain period. The income from bonds is higher than income from Treasury bills.

Bonds fluctuate in value depending on interest rates, and are thus riskier than the lowest risk investments. If bonds are used as a conservative investment, it is a good idea to use those of a shorter term, to minimize the fluctuation in value that might occur.

Stocks

Although common stock is riskier than any other investment options, it offers greater return potential.

Mutual Funds

Mutual funds are an excellent retirement savings vehicle. By balancing a mutual fund portfolio to minimize risk and maximize growth, a higher return can be achieved than with safer investments.

Remember that it is never too late to start or to improve a retirement plan. Contact our office at 404-990-3365 for all your retirement and accounting needs.

Build Your Business With A Personal Touch

“People don’t care how much you know until they know how much you care.”

It’s interesting to see how many small businesses try to emulate and follow in a mirror image pattern the example of some large corporations to build an impersonal “corporate image.”

People actually prefer to do business with people, not institutions. The last time you called an organization with a problem, weren’t you frustrated and didn’t you experience emotional pain while “going through voice mail hell” or being transferred until you got connected with a person who could solve your problem? Corporate leaders with good marketing sense understood this.

When we think of Hewlett Packard, we think of Bill and Dave. Lee Iacocca rebuilt Chrysler largely by being the corporate spokesperson in commercials. No advertising has been more successful for Wendy’s than Dave Thomas telling us about his latest fast food offering. It requires 16 times the investment for an existing customer to replace the profits of one who is lost, according to the former president of Apple Computer, John Sculley.

Therefore, keeping existing customers is a key to running a successful business.

Why we lose customers?

According to a study conducted by the Technical Assistance Research Project in Washington D.C., 3 percent leave for convenience, 9 percent because of a relationship, 15 percent because of product, price or delivery problems, and 5 percent for other miscellaneous reasons.

That leaves 68 percent for the most significant reason: perceived indifference. Customers want to feel important and appreciated. A key to building customer loyalty is to build a relationship with customers and potential clients to ensure that they feel important and appreciated!

In any business, but especially a business where there is contact with a customer and a representative of the company either in person or on the telephone, the best way to cement that relationship is through personal notes – thank you notes!

Personalize thank you notes by hand addressing the envelope and using a real postage stamp. A hand-written note is best. But if your handwriting is terrible, be sure to sign the letter in blue ink.

When should you write thank you notes?

When you are getting started in business or in sales, you should write a note after any contact, including meeting someone at a seminar or when you exchange business cards. Learn to be sincerely appreciative and express that appreciation. If you deal with a problem, apologize personally with a personal note and be sure the problem is resolved as quickly as possible; maybe even sending another note after it’s done.

You certainly will want to acknowledge major purchases and referrals with thank you notes. You can sometimes exploit or manipulate people and make a sale. But when you become an “assistant buyer,” a friend who helps the customer make transactions in his or her best interest, and express your interest in the customer as a person, you are building a business or a sales career that will provide for you and your family for years to come.

Tax Saving Strategies For Small Business Owners

It is worth noting that according to the US Small Business Administration, small businesses employ half of all private-sector employees in the United States. However, a majority of small businesses do not offer their workers any form of retirement savings benefits.

If you’re like many other small business owners in the United States, you may be considering the various retirement plan options available for your company. Employer-sponsored retirement plans have become a key component for retirement savings. They are also an increasingly important tool for attracting and retaining the high-quality employees.

Besides helping employees save for the future, however, instituting a retirement plan can provide you, as the employer, with benefits that enable you to make the most of your business’s assets. Such benefits include:

  • Tax-deferred growth on earnings within the plan
  • Current tax savings on individual contributions to the plan
  • Immediate tax deductions for employer contributions
  • Easy to establish and maintain
  • Low-cost benefit with a highly-perceived value by your employees

Types of Plans

Most private sector retirement plans are either defined benefit plans or defined contribution plans.

Defined benefit plans are designed to provide a desired retirement benefit for each participant. This type of plan can allow for a rapid accumulation of assets over a short period of time. The required contribution is actuarially determined each year, based on factors such as age, years of employment, the desired retirement benefit, and the value of plan assets. Contributions are generally required each year and can vary widely.

A defined contribution plan, on the other hand, does not promise a specific amount of benefit at retirement. In these plans, employees or their employer (or both) contribute to employees’ individual accounts under the plan, sometimes at a set rate (such as 5 percent of salary annually). A 401(k) plan is one type of defined contribution plan. Other types of defined contribution plans include profit-sharing plans, money purchase plans, and employee stock ownership plans.

Small businesses may choose to offer a defined benefit plan or a defined contribution plans. Many financial institutions and pension practitioners make available both defined benefit and defined contribution “prototype” plans that have been pre-approved by the IRS. When such a plan meets the requirements of the tax code it is said to be qualified and will receive four significant tax benefits.

  1. The income generated by the plan assets is not subject to income tax because the income is earned and managed within the framework of a tax-exempt trust.
  2. An employer is entitled to a current tax deduction for contributions to the plan.
  3. The plan participants (the employees or their beneficiaries) do not have to pay income tax on the amounts contributed on their behalf until the year the funds are distributed to them by the employer.
  4. Under the right circumstances, beneficiaries of qualified plan distributors are afforded special tax treatment.

It is necessary to note that all retirement plans have important tax, business and other implications for employers and employees. Therefore, you should discuss any retirement savings plan that you consider implementing with your accountant or financial advisor.

Plans that can help you and your employees save money.

SIMPLE: Savings Incentive Match Plan

A SIMPLE IRA plan allows employees to contribute a percentage of their salary each paycheck and to have their employer match their contribution. Under SIMPLE IRA plans, employees can set aside up to $12,500 in 2017 (same as 2016) by payroll deduction. If the employee is 50 or older then they may contribute an additional $3,000 (same as 2016). Employers can either match employee contributions dollar for dollar – up to 3 percent of an employee’s wage – or make a fixed contribution of two percent of pay for all eligible employees instead of a matching contribution.

SIMPLE IRA plans are easy to set up by filling out a short form. Administrative costs are low and much of the paperwork is done by the financial institution that handles the SIMPLE IRA plan accounts. Employers may choose either to permit employees to select the IRA to which their contributions will be sent or to send contributions for all employees to one financial institution. Employees are 100 percent vested in contributions, get to decide how and where the money will be invested, and keep their IRA accounts even when they change jobs.

SEP: Simplified Employee Pension Plan

A SEP plan allows employers to set up a type of individual retirement account – known as a SEP IRA – for themselves and their employees. Employers must contribute a uniform percentage of pay for each employee. Employer contributions are limited to whichever is less: 25 percent of an employee’s annual salary or $54,000 in 2017 (up from $53,000 in 2016). SEP plans can be started by most employers, including those that are self-employed.

SEP plans have low start-up and operating costs and can be established using a single quarter-page form. Businesses are not locked into making contributions every year. You can decide how much to put into a SEP IRA each year – offering you some flexibility when business conditions vary.

401(k) Plans

401(k) plans have become a widely accepted savings vehicle for small businesses and allow employees to contribute a portion of their own incomes toward their retirement. The employee contributions, not to exceed $18,000 in 2017 (same as 2016), reduce a participant’s pay before income taxes, so that pre-tax dollars are invested. If the employee is 50 or older then they may contribute another $6,000 in 2017 (same as 2016). Employers may offer to match a certain percentage of the employee’s contribution, increasing participation in the plan.

While more complex, 401(k)plans offer higher contribution limits than SIMPLE IRA plans and IRAs, allowing employees to accumulate greater savings.

Profit-Sharing Plans

Employers also may make profit-sharing contributions to plans that are unrelated to any amounts an employee chooses to contribute. Profit-sharing Plans are well suited for businesses with uncertain or fluctuating profits. In addition to the flexibility in deciding the amounts of the contributions, a Profit-Sharing Plan can include options such as service requirements, vesting schedules and plan loans that are not available under SEP plans.

Contributions may range from 0 to 25 percent of eligible employees’ compensation, to a maximum of $54,000 in 2017 (up from $53,000 in 2016) per employee. The contribution in any one year cannot exceed 25 percent of the total compensation of the employees participating in the plan. Contributions need not be the same percentage for all employees. Key employees may actually get as much as 25 percent while others may get as little as three percent. A plan may combine these profit-sharing contributions with 401(k) contributions (and matching contributions).

Your Goals for a Retirement Plan

Business owners set up retirement plans for different reasons. Why are you considering one? Do you want to:

  • Take advantage of the tax breaks, to save more money than you’d otherwise be able to?
  • Provide competitive benefits in addition to – or in lieu of – high pay to employees?
  • Primarily save for your own retirement?

You might say “all of the above.” Small employers who want to set up retirement plans generally fall into one of two groups. The first group includes those who want to set up a retirement plan primarily because they want to create a tax-advantage savings vehicle for themselves and thus want to allocate the greatest possible part of the contribution to the owners. The second group includes those who just want a low-cost, simple retirement plan for employees.

If there were one plan that was most efficient in doing all these things, there wouldn’t be so many choices. That’s why it’s so important to know what your goal is. Each type of plan has different advantages and disadvantages, and you can’t really pick the best ones unless you know what your real purpose is in offering a plan. Once you have an idea of what your motives are, you’re in a better position to weigh the alternatives and make the right pension choice.

If you do decide that you want to offer a retirement plan, then you are definitely going to need some professional advice and guidance. Pension rules are complex and the tax aspects of retirement plans can also be confusing. You can consult with Metro Accounting And Tax Services, CPAs before deciding which plan is right for you and your employees.

Common Budgeting Errors & How To Avoid Them.

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are five budget-related errors commonly made by small businesses and some tips for avoiding them.

  1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.
  2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
  3. Forgetting about Tax Obligations. While your financial statements may seem adequate, don’t forget to set aside enough money for tax (e.g., sales and use tax, payroll tax) owed to state, local, and federal entities. Don’t make the mistake of thinking this is “money in the bank” and use it to pay for expenses you can’t really afford or worse, including it in next year’s budget and later finding out that you don’t have the cash to pay for your tax obligations.
  4. Assuming Revenue Equals Positive Cash Flow. Revenue on the books doesn’t always equate to cash in hand. Just because you’ve closed the deal, it may be a long time before you are paid for your services and the money is in your bank account. Easier said than done, perhaps, but don’t spend money that you don’t have.
  5. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

Please call our office at 404-990-3365 if you need assistance setting up a budget to meet your business financial goals.

The Business Owner’s Blue Print For Success

Whether you’re starting a new company, seeking additional financing for an existing one, or analyzing a new market, a business plan is a valuable tool. Think of it as your blueprint for success. Not only will it clarify your business vision and goals, but it will also force you to gain a thorough understanding of how resources (financial and human) will be used to carry out that vision and goals.

Before you begin preparing your business plan, take the time to carefully evaluate your business and personal goals as this may give you valuable insight into your specific goals and what you want to accomplish. Think about the reasons why you are starting a new business; maybe you’re ready to be your own boss, or you want financial independence. Whatever the reason it is important to determine the “why.”

Next, you need to figure out what business is “right for you.” Chances are you already have a specific business in mind but if not you might want to think about your business in terms of what technical skills and experience you have, whether you have any marketable hobbies or interests, what competition you might have, how you might market your products or services, and how much time you have to run a successful business (it may take more time than you think).

Finally, you’ll need to figure out how you want to get started. Most people choose one of three options: starting a business from scratch, purchasing an existing business, or operating a franchise. Each has pros and cons, and only you can decide which business fits.

Pre-Business Checklist

The final step before developing your plan is developing a pre-business checklist which might include:

  • Business legal structure
  • Accounting or bookkeeping system
  • Insurance coverage
  • Equipment or supplies
  • Compensation
  • Financing (if any)
  • Business location
  • Business name

Based on your initial answers to the items listed above, your next step is to formulate a focused, well-researched business plan that outlines your business mission and goals, how you intend to achieve your mission and goals, products or services to be provided, and a detailed analysis of your market. Last, but not least, it should include a formal financial plan.

Preparing an Effective Business Plan

Now, let’s take a look at the components of an effective business plan. Keep in mind that this is a general guideline, and any plan you prepare should be adapted to your specific business with the help of a financial professional.

Introduction and Mission Statement

In the introductory section of your business plan, you should make sure you write a detailed description of your business and its goals, as well as ownership. You can also list skills and experience that you or your business partners bring to the business. And finally, include a discussion of what advantages you and your business have over your competition.

Products, Services, and Markets

In this section, you will need to describe the location and size of your business, as well as your products and/or services. You should identify your target market and customer demand for your product or service and develop a marketing plan is. You should also discuss why your product or service is unique and what type of pricing strategy you will be using.

Financial Management

This section is where you should discuss the financial aspects of your business–and where the advice of a financial professional is vital. The following financial aspects of your business should be discussed in detail:

  • Source and amount of initial equity capital.
  • Monthly operating budget for the first year.
  • Expected return on investment (ROI) and a monthly cash flow for the first year.
  • Projected income statements and balance sheets for a two-year period.
  • A discussion of your break-even point.
  • Explanation of your personal balance sheet and method of compensation.
  • Who will maintain your accounting records and how they will be kept.
  • Provide “what if” statements that address alternative approaches to any problem that may develop.

Business Operations

The Business Operations section generally includes an explanation of how the business will be managed on a day-to-day basis and discusses hiring and personnel procedures (HR), insurance and lease or rent agreements, and any other pertinent issues that could affect your business operations. In this section, you should also specify any equipment necessary to produce your product or services as well as how the product or service will be produced and delivered.

Concluding Statement

The concluding statement should summarize your business goals and objectives and express your commitment to the success of your business.

Who Can Represent Tax Payers Before The IRS?

Many tax payers use a paid tax professional to prepare their taxes. All paid tax professionals are not viewed the same way in the eyes of the IRS and of such have different level of representation rights.

Anyone who prepares, or assists in preparing, all or substantially all of a federal tax return for compensation is required to have a valid Preparer Tax Identification Number (PTIN). This include enrolled agents and certified public accountants. When a tax payer chooses to have someone prepare their federal tax return, it is of paramount importance to know who can represent you before the IRS if there is a problem with your tax return.

Representation rights, also known as practice rights, fall into two categories:

  • Unlimited Representation
  • Limited Representation

Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include:

  • Enrolled agents
  • Certified Public Accountants
  • Attorneys

Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return. They can do this only before IRS revenue agents, customer service representatives and similar IRS employees. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question.

For returns filed after December 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants. The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.

Other tax return preparers have limited representation rights, but only for returns filed before Jan. 1, 2016. Keep these changes in mind and choose wisely when you select a tax return preparer. If you need expert assistance and representation before the IRS, contact the office of Metro Accounting And Tax Services, CPAs at 404-990-3365. We’ll speak to the IRS on your behalf.

Tax Planning For Small Business Owners

Tax planning is the process of looking at various tax options to determine when, whether, and how to conduct business and personal transactions to reduce or eliminate tax liability.

Many small business owners ignore tax planning and don’t even think about their taxes until it’s time to meet with their accountants once a year. But tax planning is an ongoing process and good tax advice is a valuable commodity. It is to your benefit to review your income and expenses monthly and meet with your CPA or tax advisor quarterly to analyze how you can take full advantage of the provisions, credits, and deductions that are legally available to you.

Although tax avoidance planning is legal, tax evasion – the reduction of tax through deceit, subterfuge, or concealment – is not. Frequently what sets tax evasion apart from tax avoidance is the IRS’s finding that there was fraudulent intent on the part of the business owner. The following are four of the areas the IRS examiners commonly focus on as pointing to possible fraud:

  1. Failure to report substantial amounts of income such as a shareholder’s failure to report dividends or a store owner’s failure to report a portion of the daily business receipts.
  2. Claims for fictitious or improper deductions on a return such as a sales representative’s substantial overstatement of travel expenses or a taxpayer’s claim of a large deduction for charitable contributions when no verification exists.
  3. Accounting irregularities such as a business’s failure to keep adequate records or a discrepancy between amounts reported on a corporation’s return and amounts reported on its financial statements.
  4. Improper allocation of income to a related taxpayer who is in a lower tax bracket such as where a corporation makes distributions to the controlling shareholder’s children.

Tax Planning Strategies

Countless tax planning strategies are available to small business owners. Some are aimed at the owner’s individual tax situation and some at the business itself, but regardless of how simple or how complex a tax strategy is, it will be based on structuring the strategy to accomplish one or more of these often overlapping goals:

  • Reducing the amount of taxable income
  • Lowering your tax rate
  • Controlling the time when the tax must be paid
  • Claiming any available tax credits
  • Controlling the effects of the Alternative Minimum Tax
  • Avoiding the most common tax planning mistakes

In order to plan effectively, you’ll need to estimate your personal and business income for the next few years. This is necessary because many tax planning strategies will save tax dollars at one income level, but will create a larger tax bill at other income levels. You will want to avoid having the “right” tax plan made “wrong” by erroneous income projections. Once you know what your approximate income will be, you can take the next step: estimating your tax bracket.

The effort to come up with crystal-ball estimates may be difficult and by its very nature will be inexact. On the other hand, you should already be projecting your sales revenues, income, and cash flow for general business planning purposes. The better your estimates are, the better the odds that your tax planning efforts will succeed.

Maximizing Business Entertainment Expenses

Entertainment expenses are legitimate deductions that can lower your tax bill and save you money, provided you follow certain guidelines.

In order to qualify as a deduction, business must be discussed before, during, or after the meal and the surroundings must be conducive to a business discussion. For instance, a small, quiet restaurant would be an ideal location for a business dinner. A nightclub would not. Be careful of locations that include ongoing floor shows or other distracting events that inhibit business discussions. Prime distractions are theater locations, ski trips, golf courses, sports events, and hunting trips.

The IRS allows up to a 50 percent deduction on entertainment expenses, but you must keep good records and the business meal must be arranged with the purpose of conducting specific business.

Important Business Automobile Deductions

If you use your car for business such as visiting clients or going to business meetings away from your regular workplace you may be able to take certain deductions for the cost of operating and maintaining your vehicle. You can deduct car expenses by taking either the standard mileage rate or using actual expenses. The mileage reimbursement rate for 2017 is 53.5 cents per business mile.

If you own two cars, another way to increase deductions is to include both cars in your deductions. This works because business miles driven is determined by business use. To figure business use, divide the business miles driven by the total miles driven. This strategy can result in significant deductions.

Whichever method you decide to use to take the deduction, always be sure to keep accurate records such as a mileage log and receipts. If you need assistance figuring out which method is best for your business, don’t hesitate to contact the office.

Increase Your Bottom Line When You Work At Home

The home office deduction is quite possibly one of the most difficult deductions ever to come around the block. Yet, there are so many tax advantages it becomes worth the navigational trouble. Here are a few common tips for home office deductions that can make tax season significantly less traumatic for those of you with a home office.

Try prominently displaying your home business phone number and address on business cards, have business guests sign a guest log book when they visit your office, deduct long-distance phone charges, keep a time and work activity log, retain receipts and paid invoices. Keeping these receipts makes it so much easier to determine percentages of deductions later on in the year.

Section 179 expensing for tax year 2017 allows you to immediately deduct, rather than depreciate over time, up to $510,000, with a cap of $2,030,000 worth of qualified business property that you purchase during the year. The key word is “purchase.” Equipment can be new or used and includes certain software. Generally, depreciable equipment for a home office meets the qualification.

Some deductions can be taken whether or not you qualify for the home office deduction itself. It’s never too early to meet with a tax professional to learn more about home office deductions. Call today to schedule a no cost consultation.

Tips For A Stress Free Tax Season

Earlier is better when it comes to working on your taxes but many people find preparing their tax return to be stressful and frustrating. Fortunately, it doesn’t have to be. Here are six tips for a stress-free tax season.

1. Don’t Procrastinate. Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error. Getting a head start will not only keep the process calm but also mean you get your return faster by avoiding the last-minute rush.

2. Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.

3. Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS. Submitting an error-free return will also speed up your refund.

4. E-file for a faster refund. Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as 10 days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.

5. Don’t Panic if You Can’t Pay. If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.

6. Request an Extension of Time to File (But Pay on Time). If the clock runs out, you can get an automatic six-month extension bringing the filing date to October 15, 2018. However, the extension itself does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.

If you run into any problems, have any questions, or need to file an extension, help is just a phone call away, Metro Accounting And Tax Services, CPAs, 404-990-3365.

A recap of The Income Tax Provisions for Individuals in 2017

Many of the income tax changes affecting individuals and businesses for 2017 were related to the Protecting Americans from Tax Hikes Act of 2015 (PATH) that modified or made permanent numerous tax breaks (the so-called “tax extenders”). To further complicate matters, some provisions were only extended through 2016 and are set to expire at the end of this year while others were extended through 2019. With that in mind, here’s what individuals and families need to know about tax provisions for 2017.

Personal Exemptions 
The personal and dependent exemption for tax year 2017 is $4,050.

Standard Deductions
The standard deduction for married couples filing a joint return in 2017 is $12,700. For singles and married individuals filing separately, it is $6,350, and for heads of household the deduction is $9,350.

The additional standard deduction for blind people and senior citizens in 2017 is $1,250 for married individuals and $1,550 for singles and heads of household.

Income Tax Rates 
In 2017 the top tax rate of 39.6 percent affects individuals whose income exceeds $418,400 ($470,700 for married taxpayers filing a joint return). Marginal tax rates for 2017–10, 15, 25, 28, 33 and 35 percent–remain the same as in prior years.

Due to inflation, tax-bracket thresholds increased for every filing status. For example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $75,900 for a married couple filing a joint return.

Estate and Gift Taxes 
In 2017 there is an exemption of $5.49 million per individual for estate, gift and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $14,000.

Alternative Minimum Tax (AMT) 
AMT exemption amounts were made permanent and indexed for inflation retroactive to 2012. In addition, non-refundable personal credits can now be used against the AMT.

For 2017, exemption amounts are $54,300 for single and head of household filers, $84,500 for married people filing jointly and for qualifying widows or widowers, and $42,250 for married people filing separately.

Marriage Penalty Relief 
The basic standard deduction for a married couple filing jointly in 2017 is $12,700.

Pease and PEP (Personal Exemption Phaseout) 
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations were made permanent by ATRA (indexed for inflation) and affect taxpayers with income at or above $261,500 for single filers and $313,800 for married filing jointly in tax year 2017.

Flexible Spending Accounts (FSA) 
Flexible Spending Accounts (FSAs) are limited to $2,600 per year in 2017 (up from $2,550 in 2016) and apply only to salary reduction contributions under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.

Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,600 limit for the subsequent plan year.

Further, employers may allow people to carry over into the next calendar year up to $500 in their accounts, but aren’t required to do so.

Long Term Capital Gains 
In 2017 taxpayers in the lower tax brackets (10 and 15 percent) pay zero percent on long-term capital gains. For taxpayers in the middle four tax brackets the rate is 15 percent and for taxpayers whose income is at or above $418,400 ($470,700 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Individuals – Tax Credits

Adoption Credit 
In 2017 a nonrefundable (i.e. only those with a lax liability will benefit) credit of up to $13,570 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit 
The child and dependent care tax credit was permanently extended for taxable years starting in 2013. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit 
For tax year 2017, the child tax credit is $1,000. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Earned Income Tax Credit (EITC)
For tax year 2017, the maximum earned income tax credit (EITC) for low and moderate-income workers and working families increased to $6,318 (up from $6,269 in 2016). The maximum income limit for the EITC increased to $53,930 (up from $53,505 in 2016) for married filing jointly. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals – Education Expenses

Coverdell Education Savings Account 
You can contribute up to $2,000 a year to Coverdell savings accounts in 2017. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit
For 2017, the maximum American Opportunity Tax Credit that can be used to offset certain higher education expenses is $2,500 per student, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Employer-Provided Educational Assistance 
In 2017, as an employee, you can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.

Lifetime Learning Credit 
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2017, the modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $112,000 for joint filers and $56,000 for singles and heads of household.

Student Loan Interest 
In 2017 you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $65,000 (single) or $135,000 (married filing jointly). The deduction is phased out at higher income levels. In addition, the deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.

Individuals – Retirement

Contribution Limits
For 2017, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $18,000 (same as 2016). For persons age 50 or older in 2017, the limit is $24,000 ($6,000 catch-up contribution). Contribution limits for SIMPLE plans remain at $12,500 (same as 2016) for persons under age 50 and $15,500 for anyone age 50 or older in 2017. The maximum compensation used to determine contributions increased from $265,000 to $270,000.

Saver’s Credit 
In 2017, the adjusted gross income limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and-moderate-income workers is $62,000 for married couples filing jointly, $46,500 for heads of household, and $31,000 for married individuals filing separately and for singles.

Please call Metro Accounting And Taxes, CPAs at 404-990-3365 if you need help understanding which deductions and tax credits you are entitled to.

Missing Important Tax Forms? Here’s what to do.

Form w-2

By now you should receive a Form W-2, Wage and Tax Statement, from each of your employers for use in preparing your federal tax return. Employers must furnish this record of 2017 earnings and withheld taxes no later than January 31, 2018 (allow several days for delivery if mailed).

If you do not receive your Form W-2, it is important that you contact your employer to find out if and when the W-2 was mailed. If it was mailed, it may have been returned to your employer because of an incorrect address. After contacting your employer, allow a reasonable amount of time for your employer to resend or to issue the W-2.

Form 1099

If you received certain types of income, you may receive a Form 1099 in addition to or instead of a W-2. Payers also have until January 31 to mail these to you.

In some cases, you may obtain the information that would be on the Form 1099 from other sources. For example, your bank may put a summary of the interest paid during the year on the December or January statement for your savings or checking account. Or it may make the interest figure available through its customer service line or Web site. Some payers include cumulative figures for the year with their quarterly dividend statements.

You do not have to wait for Form 1099 to arrive provided you have the information (actual not estimated) you need to complete your tax return. You generally do not attach a 1099 series form to your return, except when you receive a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that shows income tax withheld. You should, however, keep all of the 1099 forms you receive for your records.

When to Contact the IRS

If, by mid-February, you still have not received your W-2 or Form 1099-R, contact the IRS for assistance at 1-800-829-1040. When you call, have the following information handy:

  • the employer’s name and complete address, including zip code, and the employer’s telephone number;
  • the employer’s identification number (if known);
  • your name and address, including zip code, Social Security number, and telephone number.

Misplaced W-2

If you misplaced your W-2, contact your employer. Your employer can replace the lost form with a “reissued statement.” Be aware that your employer is allowed to charge you a fee for providing you with a new W-2.

You still must file your tax return on time even if you do not receive your Form W-2. If you cannot get a W-2 by the tax filing deadline, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement, but it will delay any refund due while the information is verified.

Filing an Amended Return

If you receive a corrected W-2 or 1099 after your return is filed and the information it contains does not match the income or withheld tax that you reported on your return, you must file an amended return on Form 1040X, Amended U.S. Individual Income Tax Return.

Health Insurance Forms 1095-A, 1095-B, or 1095-C

Most taxpayers will receive one or more forms relating to health care coverage they had during the previous year. If you think you should have received a form but did not get one contact the issuer of the form (the Marketplace, your coverage provider or your employer). If you are expecting to receive a Form 1095-A, you should wait to file your 2017 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.

Form 1095-A 

If you enrolled in 2017 coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement in early 2018.

Forms 1095-B or 1095-C

If you were enrolled in other health coverage for 2017, you should receive a Form 1095-B, Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage by early March.

If you have questions about your Forms W-2 or 1099 or any other tax-related materials, don’t hesitate to contact the office, Metro Accounting And Tax Services, CPAs 404-990-3365.

Tax Saving Strategies – Frequently asked questions by tax payers.

In our practice, tax payers often have a slew of questions relating to the best possible ways to save money and ultimately pay the least amount of taxes legally possible. As of such, Metro Accounting And Tax Services, CPA has complied these question with the requisite answers in an attempt to help these tax payers. If you have any additional questions, feel free to contact our office at 404-990-3365 and we’ll be happy to provide you with the guidance needed.

What special deductions can I get if I’m self-employed?

As a self-employed tax payer, you may be able to take an immediate expense deduction of up to $510,000 for 2017 ($500,000 in 2016), for equipment purchased for use in your business, instead of writing it off over many years. There is a phaseout limit of $2,030,000 in 2017 ($2,010,000 in 2016). Additionally, self-employed individuals can deduct 100 percent of their health insurance premiums. You may also be able to establish a Keogh, SEP or SIMPLE IRA plan and deduct your contributions (investments).

Can I ever save tax by filing a separate return instead of jointly with my spouse?

A tax payer may sometimes benefit from filing separately instead of jointly with their spouse. Consider filing separately if you meet the following criteria:

  • One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses.
  • The spouses’ incomes are about equal.

Separate filing may benefit such couples because the adjusted gross income “floors” for taking the listed deductions will be computed separately.

Why should I participate in my employer’s cafeteria plan or FSA?

In 2017 (as in 2016), medical and dental expenses are deductible to the extent they exceed 10 percent of your adjusted gross income (AGI). As such, many tax payers are not able to take advantage of them. There is, however, a way to get around this if your employer offers a Flexible Spending Account (FSA), Health Savings Account or cafeteria plan. These plans permit you to redirect a portion of your salary to pay these types of expenses with pre-tax dollars.

What’s the best way to borrow to make consumer purchases?

For tax payers who are also homeowners, it’s the home equity loan. Other consumer-related interest expenses, such as from car loans or credit cards, is not deductible.

Interest on a home-equity loan can be deductible. It is important that the tax payer avoid other nondeductible borrowings and use a home-equity loan if there is a need to borrow for consumer purchases.

What’s the best way to give to charity?

It is often the care where tax payers are philanthropic in nature, if you’re planning to make a charitable gift it generally makes more sense to give appreciated long-term capital assets to the charity. This is the preferred method to make your donation instead of selling the assets and giving the charity the after-tax proceeds. Donating the assets instead of the cash avoids capital gains tax on the sale, and the tax payer can obtain a tax deduction for the full fair-market value of the property.

What tax-deferred investments are possible if I’m self-employed?

The tax payer should consider setting up and contributing as much as possible to a retirement plan. These are allowed even for a sideline or moonlighting businesses. Several types of plan are available: the Keogh plan, the SEP, and the SIMPLE IRA plan.

I have a large capital gain this year. What should I do?

If the tax payer also have investments with accumulated losses, it may be advantageous to sell those investments prior to year-end. Capital losses are deductible up to the amount of your capital gains plus $3,000. If you are planning on selling an investment on which you have an accumulated gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements).

What other tax-favored investments should I consider?

The tax payer should also take into consideration growth stocks that is held for the long term. No tax is paid on the appreciation of such stocks until you sell them. No capital gains tax is imposed on appreciation at your death.

Interest on state or local bonds (“municipals”) is generally exempt from federal income tax and from tax by the issuing state or locality. For that reason, interest paid on such bonds is somewhat less than that paid on commercial bonds of comparable quality. However, for individuals in higher brackets, the interest from municipals will often be greater than from higher paying commercial bonds after reduction for taxes.

For high-income taxpayers living in high-income-tax states, investing in Treasury bills, bonds, and notes can pay off in tax savings. The interest on Treasuries is exempt from state and local income tax.

How can I make tax-deferred investments?

Through the use of tax-deferred retirement accounts the tax payer can invest some of the money that they would have otherwise paid in taxes to increase the amount of their retirement fund. Many employers offer plans where the tax payer can elect to defer a portion of their salary and contribute it to a tax-deferred retirement account. For most companies, these are referred to as 401(k) plans. For many other employers, such as universities, a similar plan called a 403(b) is available.

Some employers match a portion of employee contributions to such plans. If this is available, you should structure your contributions to receive the maximum employer matching contribution.

What can I do to defer income?

If the tax payer is due a bonus at year-end, a good strategy to employ would entail the deferring of the receipt of these funds until January. This can defer the payment of taxes (other than the portion withheld) for another year. If the tax payer is a self-employed individual, defer sending invoices or bills to clients or customers until after the new year begins. Here too the tax payer can defer some of the taxes, subject to estimated tax requirements.

The tax payer can achieve the same effect of short-term income deferral by accelerating deductions, for example, paying a state estimated tax installment in December instead of at the following January due date.

Why should I defer income to a later year?

Most tax payers are in a higher tax bracket in their working years than during retirement. Deferring income until retirement may result in paying taxes on that income at a lower rate. Deferral can also work in the short term if the tax payer expects to be in a lower bracket in the following year or if you can take advantage of lower long-term capital gains rates by holding an asset a little longer.

TAX PAYERS MISSING OUT ON $$$$MILLIONS$$$$$

As is the case each year, millions of taxpayers miss out on getting their money from Uncle Sam, yes, they do. And at times the amount missed out on by these tax payers can be in the thousands of dollars. This is so because for whatever reason, on an annual basis tax paying citizens and resident aliens refuse to file a federal tax refund.

If you are due a tax refund but you fail to file a tax return claiming that refund within three years of the due date, you lose that refund. That is three years from the original due date, usually April 15. So, if a tax payer allows the time to file to claim the refund to run out, the tax refund that would have been received now becomes the property of the US Treasury. In-order to get the money you are due, the tax payer has to file a tax return. It’s very simple, you file for it or you lose it!!!!!

The statistic of the amount of money lost by tax payers due to the non-filing of tax returns is mind boggling. According to the IRS, it has over $1 BILLION for persons who fail to file their tax return in the year 2011. In the year 2012 the amount of tax refunds transferred to the US Treasury due to the non-filing of tax returns by tax payerspayers amounted to over $950 MILLION. However, in 2013 the trend of tax payers not filing their tax return again increased and this resulted in the forfeiture of over $1 BILLION to the US Treasury.

“People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”

The IRS reminds taxpayers seeking a 2014 refund that their checks may be held if they have not filed tax returns for 2015 and 2016.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during the year. Many low and moderate-income workers may have been eligible for the Earned Income Tax Credit (EITC). For 2017, the credit is worth as much as $6,318. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2017 are as follows:

  • $48,340 ($53,930 if married filing jointly) for those with three or more qualifying children;
  • $45,007 ($50,597 if married filing jointly) for people with two qualifying children;
  • $39,617 ($45,207 if married filing jointly) for those with one qualifying child, and;
  • $15,010 ($20,600 if married filing jointly) for people without qualifying children.

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2014, 2015 or 2016 should request copies from their employer, bank or other payer.

As a tax payer you must file a tax return if income earned was above a certain amount. This amount is dependent on the individual tax payer’s situation and takes into consideration the tax payer’s filing status, age and the type of income you received during the tax year. A taxpayer may choose not to file a tax return if not required to do so but you are encouraged to file a tax return even if you had a small amount of income. This is due to the fact that you may be due a refund if you had federal taxes withheld from your income. Also, when in this position, the tax payer may be eligible for tax benefits afforded to low income earners such as the Earned Income Tax Credit which could amount to thousands of dollars in tax refund.

The moral of this blog is simple, tax payers must file a federal tax refund to claim the thousands of dollars that belong to them. IF YOU DON’T CLAIM IT, YOU LOSE IT!!!!!!!!!

IT’S YOUR MONEY. . . BUT YOU HAVE TO FILE A TAX RETURN TO CLAIM IT……AND YOU ONLY HAVE THREE YEARS. SO, GET STARTED…….

The tax payer can start the process by contacting the office of Metro Accounting And Tax Services, CPAs. We’ll be happy to guide you through the income tax filing process, ensuring that you get every penny that belong to you.

Maximizing Your Tax Refund With The EITC

The Earned Income Tax Credit, EITC or EIC, is a benefit afforded to working people with low to moderate income. In-order to qualify for this credit, a tax payer must meet certain requirements and file a tax return.  A tax payer is encouraged to file a tax return even if they do not owe any taxes or are not required to file a return. By doing so the EITC reduces the amount of tax you owe and may even give the tax payer a refund.

To qualify for EITC the individual tax payer must have earned income from working for someone or from running or owing a business and meet some basic rules. If the tax payer does not have a qualifying child additional rules must be met.

Qualifying for EITC:

For a tax payer to qualify for the earned income tax credit:

1.    you must have earned income and adjusted gross income within certain limits; AND

2.    you must meet certain basic rules and

3.    either meet the rules for tax payer without a qualifying child

4.    or have a child that meets all the qualifying child rules

EITC Basic Rules:

Social Security Number

A social security number is required for all persons listed on a tax return, this includes, the tax payer, the tax payer’s spouse and any qualifying child listed on the tax return. Such social security number must be valid for employment and must have been issued before the due date of your return (including extensions).

Filing Status

The tax payer must file as either:

  • Married filing jointly
  • Head of household
  • Qualifying widow or widower
  • Single

It is important to note that a tax payer cannot claim EITC if their filing status is married filing separately.

Income Earned During 2017 and AGI Limits

For income tax year 2017, if the tax payer filing status is single, head of house hold or widowed, the tax payer’s earned income and adjusted gross income (AGI) cannot be more than:

A)  $15,010.00 If the tax payer has no qualifying child.

B)  $39,617.00 If the tax payer has one qualifying child.

C)  $45,007.00 If the tax payer has two qualifying children.

D)  $48,340.00 If the tax payer has three or more qualifying children.

For income tax year 2017, if the tax payer filing status is married filing a joint return, the tax payer and spouse earned income and adjusted gross income (AGI) cannot be more than:

·        $20,600.00 If the tax payer has no qualifying child.

·        $45,207.00 If the tax payer has one qualifying child.

·        $50,597.00 If the tax payer has two qualifying children.

·        $53,930.00 If the tax payer has three or more qualifying children.

Also of importance to the tax payer is the fact that for 2017, any income from investment is limited to $3,450.

Maximum Credit Amounts

The maximum amount of earned income tax credit a tax payer can claim for Tax Year 2017 is:

  • $6,318 with three or more qualifying children
  • $5,616 with two qualifying children
  • $3,400 with one qualifying child
  • $510 with no qualifying children

To claim the earned income tax credit a tax payer must file a Federal tax return and claim the credit. If you have a qualifying child, you must file the Schedule EIC listing the children with either the Form 1040A or the Form 1040. If you do not have a qualifying child, you can use the Forms 1040EZ or the 1040A or 1040.

For all your accounting and tax needs, the office of Metro Accounting And Tax Services, CPA is ready to provide the tax payer with professional guidance.

Reasons Tax Payers Should Consider Incorporating.

It goes without saying and all legal and tax professionals agree that if a tax payer business is not incorporated you may be throwing away thousands of dollars in tax savings and deductions.

In addition, at tax payer’s personal assets such as your home, cars, boats, savings and investments are at risk and could be used to satisfy any law suits, debt or liability incurred by the business. Forming a Corporation can provide the protection and give the tax payer peace of mind and allow for the laser focus that is needed to make your business even more successful and profitable.

Benefits of incorporating include:

Liability Protection: Properly forming and maintaining a corporation will provide personal liability protection to the owners or shareholders of the corporation for any debt or liability incurred by the business. Personal liability of the shareholders is normally limited to the amount of money invested in the corporation.

Tax Advantages: Another important benefit is that a corporation can be structured many ways to provide substantial tax savings. You can minimize self-employment taxes and increase the number of allowable deductions lowering the taxes you pay on the income of the business. Many corporations structure retirement and tax deferred savings plans for their owners and employees which can provide even greater tax savings.

Raising Capital: Sale of stock for the purposes of raising capital is often more attractive to investors than other forms of equity sales. A corporation can also issue Corporate Bonds to raise capital for expenditures without compromising the ownership of the business.

What is a corporation?

A corporation is a legal entity that exists separately from its owners. Creation of a corporation occurs when properly completed articles of incorporation are filed with the correct state authority, and all fees are paid.

What is the difference between an “S” corporation and a “C” corporation?

All corporations start as “C” corporations and are required to pay income tax on taxable income generated by the corporation. A C-corporation becomes an S-corporation by completing and filing federal form 2553 with the IRS. An S-corporation’s net income or loss is “passed-through” to the shareholders and are included in their personal tax returns. Because income is not taxed at the corporate level, there is no double taxation as with C-corporations. Subchapter S-corporations, as they are also called, are restricted to having no more than 100 shareholders.

Do I need an attorney to incorporate?

An attorney is not a legal requirement for incorporating a business in any state except South Carolina, where a signature by a South Carolina attorney licensed to practice in the state is required on articles of incorporation. In every other state, you can prepare and file the articles of incorporation yourself. However, if you are unsure of what steps your business should take and you don’t have the time to research the matter yourself, a consultation with Metro Accounting And Tax Services, CPA is often well worth the money you spend.

Starting A Business – 3 Things To Be Mindful Of.

Starting a new business is a very exciting and busy time. There is so much to be done and so little time to do it in. If you expect to have employees, there are a variety of federal and state forms and applications that will need to be completed to get your business up and running. That’s where we can help.

Employer Identification Number (EIN)
Securing an Employer Identification Number (also known as a Federal Tax Identification Number) is the first thing that needs to be done since many other forms require it. The fastest way to apply for an EIN is online through the IRS website or by telephone. Applying by fax and mail generally takes one to two weeks. Note that effective May 21, 2012, you can only apply for one EIN per day. The previous limit was 5.

State Withholding, Unemployment, and Sales Tax
Once you have your EIN, you need to fill out forms to establish an account with the State for payroll tax withholding, Unemployment Insurance Registration, and sales tax collections (if applicable).

Payroll Record Keeping
Payroll reporting and record keeping can be very time-consuming and costly, especially if it isn’t handled correctly. Also, keep in mind, that almost all employers are required to transmit federal payroll tax deposits electronically. Personnel files should be kept for each employee and include an employee’s employment application as well as the following:

Form W-4 is completed by the employee and used to calculate their federal income tax withholding. This form also includes necessary information such as address and social security number.

Form I-9 must be completed by you, the employer, to verify that employees are legally permitted to work in the U.S.

Understanding Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)

Understanding Schedule C tax guide was developed by Metro Accounting And Tax Services, CPAs  in an effort to help Small Business Owners stay on top of all their accounting and tax needs.

In this guide, we will address how to calculate gross profit and gross income, show you how to identify and deduct expenses, and how to calculate net profit or loss. If help is needed by the small business owner in relation to any accounting or tax needs, our office can be reached at 404-990-3365. Our goal is to help you to focus on running your business and pay the least amount of taxes legally possible.

Understanding Schedule C: Introduction.

To complete a Schedule C the tax payer is required firstly to fill in standard information about themselves and their business. Information required includes: name of proprietor, social security number, principal business or profession – this is basically a description of the type of business you are in, business name, business address and the business employer ID number or EIN.  The tax payer will also notice that there’s a place to enter a Principal Business or Professional Activity Code. These codes are based on the North American Industry Classification System, and the Schedule C instructions contain a list of the six-digit codes relating to business trades or professions.

Next the tax payer will decide on the accounting method used by the business, cash – meaning that income and expenses are only recognized when received or paid, or the accrual method – this is where income and expenses are recognized when they are incurred by the tax payer rather than when they are received or paid. For example, let’s say your power bill for March is not paid until April.  Under the cash method of accounting, the tax payer would recognize and account for the bill when paid in April, however under the accrual method of account the bill would be recognized and accounted for in March even though it was not paid until April. The other questions in this section would be answered accordingly by the tax payer.

Understanding Schedule C: Part I, Income.

The first term we’re going to talk about is Gross Receipts. Gross Receipts are the income that a business receives from the sale of its products or services.

The second term is Returns and Allowances. Returns and Allowances include cash or credit refunds the business   makes to customers, this include rebates and other allowances off the actual sales price. Individuals who don’t make or buy products for resale as part of their business wouldn’t have returns or allowances to deduct from gross sales.

The third term is Cost of Goods Sold. Cost of Goods Sold is the cost to a business to buy or to make the product that is sold. It is easy to calculate the cost of goods sold if you sell all your merchandise during the same year when they were purchased. However, some of your sales will probably be from inventory that you carried over from earlier years and you will probably have inventory left unsold at the end of the year.

To calculate the cost of goods sold you will start with the cost of the inventory on hand at the beginning of the year. You will add the cost of additional goods purchased or manufactured during the year. The cost of any merchandise withdrawn for personal use such as food a grocer may take home or gasoline a garage owner may give to his relatives is then subtracted. This results in the cost of items available for sale during the year. The value of your inventory at the end of the year is then substracted. Your cost of goods sold is the remaining amount.

Some businesses may choose to keep a continuous or automated inventory record for reordering stock. But no matter what type of system you have in place, the tax payer must keep good beginning and year-end inventory records.

The fourth term is Gross Profit. To calculate Gross Profit, first subtract the returns and allowances from total gross receipts. Then, subtract the cost of goods sold from that difference.

The final term for this section is Gross Income. Gross Income is simply the sum of gross profit and other income received during the period.

Understanding Schedule C Part II, Expenses.

According to the IRS, a tax payer can only consider the day-to-day ordinary and necessary business expenses incurred in running his or her business. As of such, expenses must be considered ordinary and necessary in order to be deducted for tax purposes.

The first expense we are going to discuss is car and truck expense. If a taxpayer uses a car for business only the full cost of operating it may be deducted. If the taxpayer uses the car for both business and personal purposes, the expenses must be divided between both uses on the basis of mileage to compute a business percentage.

If the taxpayer claims any car or truck expenses, additional information pertaining to such use must be provided on Schedule C, Part IV, Information on Your Vehicle. Please note that the taxpayer is only required to complete this part if car or truck expenses are entered on line 9 of Schedule C and the taxpayer is not required to file Form 4562, Depreciation and Amortization.

It is important to note that the taxpayer should not include commuting miles to and from work as business mileage. You may take a deduction for your actual business expenses for the car or use a standard mileage rate. Standard mileage means multiplying your business mileage by the IRS standard rate. Actual business expenses include gas, oil, repairs, insurance, depreciation, tires, and license plates. Under either method, parking fees and tolls are deductible

The second expense is depreciation. Depreciation is the annual deduction allowed to recover the cost, or other basis of business, or investment property having a useful life substantially beyond the tax year. Depreciation starts when you first use the property in your business for the production of income, and it ends when you take the property out of service, deduct all your depreciable cost, or other basis, or no longer use the property in your business.

Of importance to the tax payer is the fact that land, inventory, or property placed in service and disposed of in the same year are not depreciated.

Depreciation Methods

There are two main methods to calculate depreciation: They are the Modified Accelerated Cost Recovery System and the Section 179 deduction.

For most tangible property, that is, properties you can see or touch, the acceptable depreciation method is the Modified Accelerated Cost Recovery System. It’s commonly referred to by its initials, MACRS, and pronounced “makers.”

For the other method, under Section 179 of the Internal Revenue Code, you can elect to recover all or parts of the costs of certain qualifying property, up to a limit, by deducting it in the year you place the property in service.

The third and fourth expenses up for discussion are those for legal, professional services and office expenses incurred by the taxpayer in running their business. Included in these expenses are fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to the operating of the business. Also included are fees for tax advice related to the business and for preparation of the income tax return and the various forms related the business. In addition, under the category of office expense, office supplies and postage are also included.

The fifth expense that is of importance to the small business owner is the supplies expense. In most cases, a taxpayer can deduct the cost of materials and supplies only to the extent they were actually consumed and used by the business during the tax year, unless they were deducted in a prior tax year. You can also deduct the cost of books, professional instruments, equipment, etc., if you normally use them within a year.

If their usefulness, however, extends substantially beyond a year, you must generally recover their costs through depreciation.

Next up is the travel, meals, and entertainment expenses. For the travel part of these expenses, the taxpayer is allowed to deduct expenses for lodging and transportation connected with overnight travel for business while away from your tax home. This is simply the main place of business, regardless of where you maintain your family home.

For the meals and entertainment expenses the taxpayer would enter the total deductible business meal and entertainment expenses. This includes expenses for meals while traveling away from home for business and any meals that are business-related entertainment. Business meal expenses are deductible only if they are directly related to or associated with the active conduct of your trade or business; not lavish or extravagant; and incurred while you or your employee is present at the meal.

After you’ve completed entering your individual expenses, add them up and enter them as your Total Expenses. If you run your business out of your home, don’t forget to enter those expenses, too. This is done a few lines down.

Next, you have to enter your Net Profit or Loss. Net Profit or Loss is the amount by which the gross profit and any other income for a period is more, or less in the case of a loss, than the business expenses and depreciation for the same period.

To calculate net profit or loss, the tax payer would subtract from the gross profit the total expenses incurred and any expenses for the business use of your home.  The tax payer would then report this profit or loss on line 12 of Form 1040, U.S. Individual Income Tax Return.

Completing the Schedule C can be a bit challenging at times, but doing so accurately can have a big impact on your tax refund. The Certified Public Accountants at Metro Accounting and Tax Services are ready to take this weight off your shoulders. Don’t hesitate to contact the office for all your accounting and tax needs.

Is Your Passport In Jeopardy?

In today’s income tax environment, The Internal Revenue Service is strongly encouraging taxpayers who are seriously behind on their taxes to pay what they owe or if they can’t, to enter into a payment agreement with the Service in-order to avoid putting their passports in jeopardy.

Beginning immediately, the IRS is implementing new procedures that will adversely affect individuals with “seriously delinquent income tax debts.” These new procedures and provisions which are a part of the FAST Act, that is the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015, requires the IRS to notify the State Department of taxpayers that it has certified as owing a seriously delinquent tax debt. The FAST Act also requires the State Department to deny a delinquent tax payer’s passport application and to deny such tax payer’s passport renewal. With this mandate, the State Department is empowered to even revoke a delinquent tax payer passport.

Therefore, if you are a taxpayer with a seriously delinquent tax debt, you are in the cross-hairs of the IRS and you need to take immediate action to prevent the non-issuance, non-renewal or revocation of your passport. If you need expert guidance in settling your IRS debt, the Tax Resolution Experts at Metro Accounting and Tax Services will be happy to be of assistance. At times we are able to get an IRS Offer In Compromise for taxpayers that amounts to far less than what is owed to the IRS.  Taxpayers affected by this law are those with a seriously delinquent tax debt.  A taxpayer with a seriously delinquent tax debt is defined by the IRS as generally being someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

  • Paying the tax debt in full – who has the money to do that?
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having requested or have a pending collection due process appeal with a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

Let’s face it, the IRS is going to collect on the taxes owed by tax payers. Therefore, it is recommended that tax payers who are behind on their tax obligations should approach the IRS with a view to have a dialogue to pay the back taxes or enter into a payment plan with the IRS.

The reality is that most people are unable to pay the IRS the full amount owed. If you are a financially distressed taxpayer and you cannot pay what is owed, Metro Accounting And Tax ServicesCPA can held. We are tax resolution experts. We can negotiate a lower tax bill on your behalf with the IRS. Just give us a call and we can get on working for you so, 404-990-3365.

Know Your Status

One of the first steps to complete in relation to filing your income tax is to figure out which filing status to use. This is very important as it can significantly affect the amount of your tax refund.

It is important to note that what is of importance is your status as of December 31, 2017 and not at any other time during the year. If you have been married for the year and unfortunately got divorced on December 31, 2017, you are considered for tax purposes single for the entire year.

There are five filing statuses on can use when filing their income taxes. These include: single, married filing jointly, married filing separately, head of household and qualifying widow or widower with a dependent child.

For income tax purposes if you’re single, divorced or legally separated as of December 31, 2017, the status that you will most probably fall in is that of being a single person.

Married filing jointly as its name suggest, is where a married couple files their returns together as one return. Most couples tend to file a joint income tax return as it’s usually easier but couples do have a choice when it comes to filing their tax returns.

Couples can also file their income tax returns separately if they so desire, in this case their filing status would be married filing separately. This entails a little extra effort on the couple’s part but you might want to figure your taxes both ways and see which way results in the least amount of tax liability.

Next up is the head of household filing status that is available when filing your tax return.

Lots of single parents qualify as head of household filing status. If you’re not married but you pay more that half the cost of keeping up with a home for a qualifying person, then this status might be the best filing status for you.  There are lots of special rules one has to meet to be able to qualify for this filing status but it is worth the extra work as the financial implication on your tax return can be great.

The final filing status for income tax purposes is that of a qualifying widow or widower with a dependent child. If your spouse died within the last two tax year and you have a dependent child, you might be able to use this filing status.

This income tax filing status has special rules that apply but the financial implication on your tax refund is worth the extra work. The best way to determine your filing status is to call our offices, Metro Accounting And Tax Services, CPA at 404-990-3365 and one of our accountants will be happy to guide you through the process.

What’s Taxable Income?

As a tax payer you probably know that you must include income from all sources on your tax return. Income is derived from either of two sources: you work for someone who pays you or you operate your own business. Income includes things like salary, wages, overtime pay, tips, interest, net earnings from self-employment.

But did you know that you are required to report other types of miscellaneous income you receive on your tax return?

Other types of income received include the value of services of goods exchanged in a barter arrangement, awards, prizes or other contest winnings including gambling winnings.

As it relates to barter, tax is levied on the fare market value of the goods or services exchanged and both parties are required to report such barter exchange on their individual tax return.

The cash value of awards and prizes is also usually taxable and should therefore be include on the tax return of the tax payer.

Regardless of the amount of gambling winnings, the tax payer is required to report the winning on their tax return. Among other things, gambling income includes winnings from lotteries, raffles, horse racing, poker tournaments and even casino winnings.

The Earned Income Tax Credit

From an income tax perspective, many low to moderate income earners may qualify for a tax credit that could boost their income tax refund by thousands of dollars. That’s right, we are referring to the earned income tax credit more frequently known as the E-I-T-C.

Taking advantage of this credit can be substantial for some tax payers but exactly how much of the credit you get depends on your individual situation. The E-I-T-C takes into consideration your income and family size. In addition, you must meet special rules to qualify for the E-I-T-C. These rules can be a bit complicated and challenging for the average tax payer but the tax professionals at Metro Accounting And Tax Services are ready to help you navigate this process.

It is important to note that since the earned income credit can add thousands of dollars to your tax refund, all returns claiming this credit are examined thoroughly by the IRS. The IRS takes the filing of a false claim for E-I-T-C very seriously. Among other things, the tax payer needs to ensure that any child claimed is indeed a qualifying child. Tax payers need to be very careful is this regard as errors on your return could delay your tax refund or your E-I-T-C may even be denied.

The Tax Reform Bill – What It Means For You?

The Tax Cuts and Jobs Act, H.R. 1, agreed to by a congressional conference committee on Friday and expected to be voted on by both houses of Congress during this week, contains a large number of provisions that would affect individual taxpayers and in effect the amount of income taxes they would end up paying. It is important to note that all of the income tax changes affecting individuals would expire after 2025 if no future Congress acts to extend the bill’s provisions. The individual tax provisions would sunset, and the tax law would revert to the current laws that are on the books.

Standard deduction

The bill would increase the standard deduction through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of households, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers is not changed by the bill. The standard deduction change may have a profound impact on the individual tax payer and the amount of taxes paid depending on their individual situation.

Personal exemptions

In the present format of the tabled bill, personal exemptions would be repealed, this change might have far reaching impact on the individual tax payer and the amount of income taxes paid.

Passthrough income deduction

For income tax years after 2018 to 2025, individuals would be allowed to deduct 20% of “qualified business income” from a partnership, S corporation, or sole proprietorships, as well as 20% of qualified real estate investment trust (REIT) dividends, qualified cooperative dividends, and qualified publicly traded partnership income. “Qualified business income” is interpreted as the net amount of qualified items of income, gain, deduction, and loss with respect to the qualified trade or business that is undertaken by the taxpayer within the United States. These do not include specified investment-related income, deductions, or losses.

It is important to note that if W-2 wages are present and are above the threshold of the taxable income, a limitation on the deduction would phased in. Also, if income is above the threshold for specified service trades or businesses the deduction would be disallowed.

A specified service trade or business is defined as any trade or business in the fields of accounting, health, law, consulting, athletics, financial services, brokerage services, or any business where the principal asset of the business is the reputation or skill of one or more of its employees. However, a taxpayer is excluded from taking this deduction if the taxpayer has taxable income in excess of $157,500 or $315,000 in the case of a joint return from such operation.

The taxpayer is allowed to deduct 20% of the qualified business income with respect to such trade or business. In general, the deduction is limited to 50% of the W-2 wages paid with respect to the business. Capital-intensive businesses are allowed 25% of wages paid plus a portion of the business’s basis in its tangible assets. However, if the taxpayer’s income is below the threshold amount, the deductible amount for each qualified trade or business is equal to 20% of the qualified business income with respect to each respective trade or business.

An S corporation shareholder’s reasonable compensation, guaranteed payments, or payments to a partner who is acting outside of his capacity as a partner would not be included as “Qualified business income”.

Child tax credit

Individuals would see an increase in the amount of the child tax credit allowed on their income tax return if the proposed changes are enacted. The amount would increase to $2,000 per qualifying child. The maximum refundable amount of the credit would be $1,400. A new nonrefundable $500 credit for qualifying dependents who are not qualifying children is also created. The phase out threshold would increase to $400,000 for married taxpayers filing a joint tax return and $200,000 for other taxpayers.

Education provisions

The bill would modify Sec. 529 plans, this modification would allow them to distribute no more than $10,000 in expenses for tuition incurred during the tax year at an elementary or secondary school. It is worth noting that this limitation applies on a per-student basis. Also, certain homeschool expenses would qualify as eligible expenses.

Certain student loan would discharge on account of death or disability. These proposed changes can have significant monetary effect on an individual’s income tax return.

Itemized deductions

The limitation on itemized deductions would not exist through 2025. This change could have significant monetary implications on the individual tax payer.

Mortgage interest

Home mortgage interest on acquisition indebtedness has been reduced to $750,000 down from the current amount of $1 million. This change can also be impactful of the individual tax payers.

The proposed changes will not affect a taxpayer who has entered into a binding written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and who purchases that residence before April 1, 2018, will be considered to have incurred acquisition indebtedness prior to Dec. 15, 2017. As of such, they will be allowed the current-law $1 million limit.

Home equity loans.

The home equity loan interest deduction would be repealed through 2025. This can also affect a tax payer negatively in that it can result in them getting a smaller income tax refund when they file their taxes.

State and local taxes

Under the final bill, individuals would be allowed to deduct up to $10,000 ($5,000 for married taxpayers filing separately) in state and local income or property taxes. This is another limitation that will adversely affect tax payers if they have in-excess of $10,000 in state and local taxes.

However, the bill specifies that taxpayers cannot take a deduction in 2017 for prepaid 2018 state income taxes.

Casualty losses

Under the bill, taxpayers can only take a deduction for casualty losses if the loss is attributable to a presidentially declared disaster. Therefore, any losses not attributed to a presidentially declared disaster is not deductible. This change can also affect negatively affect the tax payers and the refund they receive from filing their income taxes.

Gambling losses

The term “losses from wagering transactions” is clarified to include not only to the actual costs of wagers, but also other expenses incurred by the taxpayer in connection with his or her gambling activity.

Charitable contributions

The bill would increase the income-based percentage limit for charitable contributions of cash to public charities to 60%. A charitable deduction for payments made for college athletic event seating rights would not be allowed.

Miscellaneous itemized deductions

All miscellaneous itemized deductions subject to the 2% floor under current law would be repealed through 2025 by the bill.

Medical expenses

The bill would reduce the threshold for deduction of medical expenses to 7.5% of adjusted gross income for 2017 and 2018.

Alimony

Alimony and separate maintenance payments are not deductible by the payor spouse for any divorce or separation agreement executed after Dec. 31, 2018. Neither would such payments are included in income by the payee spouse. This is another change that will affect the refund received by tax payers.

Moving expenses

Except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station, the moving expense deduction would be repealed. This an above the line deduction that will affect the tax return received by tax payer.

Exclusion for bicycle commuting reimbursements

The bill would repeal through 2025 the exclusion from gross income or wages of qualified bicycle commuting expenses.

Moving expense reimbursements

The bill would repeal through 2025 the exclusion from gross income and wages for qualified moving expense reimbursements, except in the case of a member of the armed forces on active duty who moves pursuant to a military order.

IRA recharacterizations

The bill would exclude conversion contributions to Roth IRAs from the rule that allows IRA contributions to one type of IRA to be recharacterized as a contribution to the other type of IRA. This would prevent taxpayers from using recharacterization to unwind a Roth conversion.

Estate, gift, and generation-skipping transfer taxes

There will be a doubling of the estate and gift tax exemption for estates of decedents dying and gifts made after Dec. 31, 2017, and before Jan. 1, 2026. The basic exclusion amount provided would increase from $5 million to $10 million and would be indexed for inflation.

Alternative minimum tax

The ATM exemption has been increased for tax years beginning after Dec. 31, 2017, and beginning before Jan. 1, 2026. The AMT exemption amount would increase to $109,400 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return) and $70,300 for all other taxpayers (other than estates and trusts). The phaseout thresholds would be increased to $1 million for married taxpayers filing a joint return and $500,000 for all other taxpayers (other than estates and trusts). The exemption and threshold amounts would be indexed for inflation.

Individual mandate

The amount of the penalty imposed on taxpayers who do not obtain insurance that provides at least minimum essential coverage, effective after 2018 would be eliminated.

All in all, the current bill with all the proposed changes will have far reaching financial implication on the individual tax payer. In some instances, the tax payer will have a larger tax refund, in other cases a smaller tax refund will be had by the tax payer.

Moving Expenses – What can I deduct?

Moving expenses are deducted as an adjustment to income on Form 1040, but only to the extent that they are unreimbursed by your employer. You cannot deduct any moving expenses covered by reimbursements from your employer that are excluded from income. However, you have to meet the requirements of the tax law in-order to be able to deduct these expenses. The following types of moving expenses are deductible as long as they are “reasonable”:

  1. Moving your household goods and personal effects (including in-transit or foreign-move storage expenses) and
  2. Traveling (including lodging but not meals) to your new home.

It is important to note that the rules applicable to moving within or to the United States are different from the rules that apply to moves outside the United States.

Qualifying for Moving Expenses

If your move was due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses; however, you may not deduct any expenses for meals.

You can deduct allowable expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one United States location to another or from a foreign country to the United States.

To qualify for the moving expense deduction, you must satisfy three requirements.

A)   Your move must closely relate to the start of work. Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement. Please contact us if you need assistance understanding this requirement.

B)   The “distance test;” must also be met for moving expense to be deductible. Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. For example, if your old main job location was 15 miles from your former home, your new main job location must be at least 65 miles from that former home. However, if you had no previous workplace, your new job location must be at least 50 miles from your old home.

C)   Time is of the essence, therefore the “time test” must also be met. If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test in case of death, disability, and involuntary separation, among other things. And, if your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.

As a grateful nation, if you are a member of the armed forces and your move was due to a military order and permanent change of station, you do not have to satisfy the “distance or time tests.”

What Are “Reasonable” Expenses?

You can deduct only those expenses that are reasonable under the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you make side trips for sightseeing, the additional expenses for your side trips are not deductible as moving expenses.

The purchase price of your new home or any part thereof cannot be deducted as moving expenses. Neither the costs of buying or selling a home, or the cost of entering into or breaking a lease can be deducted as moving expenses. Don’t hesitate to call if you have any questions about which expenses are deductible.

Reimbursed moving expenses for which you took a deduction must be included in your total income figure on your tax return.

Travel by Car – How to Calculate the Deduction

If you use your car to take yourself, members of your household or your personal effects to your new home, you can figure your expenses by using either the actual expenses or the standard mileage rate allowance.

  1. Your actual expenses include gas, oil and other direct expenses for your car use in the move if you keep an accurate record of each expenses, or
  2. The standard mileage rate of 17 cents per mile for miles driven during 2017 (19 cents per mile in 2016).

When you choose the standard mileage rate you can deduct parking fees and tolls you pay in moving. You cannot deduct any general repairs, general maintenance, insurance, or depreciation for your car.

Member of Your Household

You can deduct moving expenses you pay for yourself and members of your household. A member of your household is anyone who has both your former and new home as his or her home. It does not include a tenant or employee unless you can claim that person as a dependent.

Moves Within or to the United States

If you meet the requirements of the tax law for the deduction of moving expenses, you can deduct allowable expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one United States location to another or from a foreign country to the United States.

Household goods and personal effects. The cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home can be deducted as moving expenses. If you use your own car to move your things, compute the deduction under the rule discussed above under “Travel by Car.”

The cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home can also be deducted.

Like-wise you can deduct any costs of connecting or disconnecting utilities due to the moving your household goods, appliances, or personal effects.

Also, you can deduct the cost of shipping your car and your pets to your new home.

It is important to note that you can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.

Let’s say Paul Brown is a resident of North Carolina and has been working there for the last four years. Because of the small size of his apartment, he stored some of his furniture in Georgia with his parents. Paul got a job in Washington, DC. It cost him $300 to move his furniture from North Carolina to Washington and $1,100 to move his furniture from Georgia to Washington; however, if Paul had shipped his furniture in Georgia from North Carolina (his former home), it would have cost him $600. He can deduct only $600 of the $1,100 he paid. He can deduct $900 ($300 + $600).

The cost of moving furniture you buy on the way to your new home cannot be deducted.

Travel expenses. The cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home can be deducted. This includes expenses for the day you arrive. You can include any lodging expenses you had in the area of your former home within one day after you could not live in your former home because your furniture had been moved. However, you can deduct expenses for only one trip to your new home for yourself and members of your household. However, all of you do not have to travel together to be able to take this deduction. If you use your own car, calculate your deduction as explained under Travel by Car, earlier.

Moves Outside the United States

To deduct allowable expenses for a move outside the United States, you must be a United States citizen or resident alien who moves to the area of a new place of work outside the United States or its possessions. You must meet the requirements of the tax law for deducting moving expenses.

In addition to the expenses discussed earlier, the following may be deductible for moves outside the United States.

Storage expenses. All reasonable expenses of moving your personal effects to and from storage can be deducted. You can also deduct the reasonable expenses of storing your personal effects for all or part of the time the new job location remains your main job location. The new job location must be outside the United States.

Moving expenses allocable to excluded foreign income. If you live and work outside the United States, you may be able to exclude from income part of the income you earn in the foreign country. You may also be able to claim a foreign housing exclusion or deduction. Please note that if you claim the foreign earned income or foreign housing exclusions, you cannot deduct the part of your allowable moving expenses that relates to the excluded income.

10 Credits Often Overlooked On Tax Returns.

1) Bad debt expense: If you are owed money and are not going to receive it, you may be able to write this off.

2) Traditional IRA Contributions: Whether you can take this deduction depends on if you have a retirement plan at work or not. You WILL have to pay taxes on when you take it out though.

3) Moving expenses for work: must be 50 miles away

4) Charity Donations: you can deduct money and services/goods, as well as the related miles you drove

5) American Opportunity Credit: refundable credit of $2500 for four years of high education if you qualify

6) Student Loan Interest Deduction: can deduct interest payments up to $2500

7) Unemployment expenses: can deduct business cards, resume costs, etc. to find a new job

8) Child Care Deduction: If under age 12, you can pay an outside party to take care of your kids and deduct that amount

9) Child Tax Credit: if child is under 17, can you deduct $1000 for each kid

10) Earned Income Credit: if you are a low-income earner and have qualifying children, you can take this credit on your tax return. 

Section 1031 Exchange

In most situations when a taxpayer disposes of property, taxes must be paid on any gain at the time of sale. However, if a taxpayer exchanges business or investment property solely for other business or investment property similar to the one originally held, that is of a “like-kind,” section 1031 provides that no gain or loss will be recognized.

If as part of the exchange, the taxpayer also receives other property or money (i.e., non-like-kind), gain must be recognized on the exchange to the extent of the other property and money received. It is important to note that in the event that there are losses, these are not recognized.

Who may make a Sec. 1031 exchange?

Any owners of business and investment property—individuals, C corporations, S corporations, partnerships, limited liability companies, trusts, and any other taxpaying entity—may participate in a Sec 1031 exchange.

Like-kind property

To qualify under Sec. 1031, both the property given up and the property received must meet certain requirements. Both properties must be held for use in a trade or business or for investment.

Properties are of a like-kind if they are of the same nature or character, even if they differ in grade or quality. Most real estate will be considered like-kind to other real estate, regardless of its’ state; for example, improved real property and unimproved real property. Therefore, a lot with an office building is of a like-kind to a vacant lot. However, real property in the United States and real property outside the United States are not considered to be of like-kind.

Personal property of a like class are like-kind properties; however, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not considered like-kind.

It is important to note that the rules pertaining to what qualifies as like-kind personal property are much more restrictive than those relating to real property, an example of this can be seen where cars are not considered like-kind to bikes.

Both real property and personal property can qualify for like-kind exchanges, but real property cannot be considered a like-kind to personal property, it’s just a case where we have to compare apples with apples.

Exclusions. Under 1031 exchange, certain types of property are not eligible for like-kind treatment:

·         Inventory or stock in trade;

·         Stocks, bonds, or notes;

·         Other securities or debts;

·         Partnership interests; and

·         Certificates of trust.

Time is of the essence.

Like in most things, time is of the essence in a 1031 exchange. While it is not imperative that there be a simultaneous swap of properties, in a 1031 exchange you must meet two-time lines or the entire gain on the transaction will be taxable. These time limits are hard limits and cannot be extended in any circumstances except for situations in which a presidential disaster is declared.

·         The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties.

  1. The identification of such property must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. A mere notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.
  2.  The replacement property must identification must be such that it is clearly describe with written identification, legal description, street address etc.

 

·         The second limit is that the exchange be completed no later than 180 days after the sale of the exchanged property or the income tax return due date in the year the relinquished property was sold (whichever is earliest). The replacement property received must be substantially the same as property identified within the 45-day limit described in the first limiting factor.

Assumption of liabilities

If the relinquished property is subject to a liability, or any of the taxpayer’s liabilities are assumed, the net aggregate amount of those liabilities is treated as cash received in the exchange. Consequently, if the taxpayer transfers relinquished property subject to a liability, the taxpayer will have gain realized on the transaction to the extent of the lesser of the gain realized or the amount of the liability to which the relinquished property is subject.

Special rules determine the amount of boot a taxpayer receives when each party to a like-kind exchange assumes a liability of the other party, depending on whether any net consideration was received as a result of the difference in the liabilities exchanged and whether any cash (or other non-like-kind property) changed hands to account for a difference in the net values of the exchanged properties. If a taxpayer is deemed to receive net consideration on the liabilities (i.e., the liabilities the taxpayer gives up are more than the liabilities received), the boot is equal to the amount of that net consideration plus the amount of any cash received (or minus the amount of any cash paid) to account for a difference in the net values of the exchanged properties.

If a taxpayer is deemed to pay net consideration on the liabilities (i.e., the liabilities given up are less than the liabilities received) and the taxpayer receives cash from the other party to account for this difference in the net property values, the boot is the amount of cash received. If a taxpayer is deemed to pay net consideration on the liabilities and also pays cash to the other party to account for a difference in net property values, the taxpayer does not have any boot.

Structures of a 1031 exchange

To accomplish a Sec. 1031 exchange, there obviously must be an exchange of properties. The simplest way this can be achieve is by having a simultaneous exchange of one property for another. However, deferred exchanges and reverse exchanges may also be used even though they are more complex, they offer a great deal of flexibility.

Deferred exchanges

A deferred exchange occurs when the property received in an exchange is received after the transfer of the property given up, allowing a taxpayer to dispose of property and subsequently acquire like-kind replacement property.

A deferred exchange is different than the case of a taxpayer simply selling one property and using the proceeds to purchase another piece of property; this transaction would be taxable. In a deferred exchange, the disposition of the relinquished property (and the acquisition of the replacement property) must be mutually dependent parts of one integrated transaction. Taxpayers that engage in deferred exchanges usually use qualified intermediaries (QIs) under written exchange agreements.

Reverse exchanges

A reverse exchange is done whereby the replacement property is acquired before the relinquished property is transferred. The acquired property is literally “parked” for no more than 180 before disposing of the relinquished property.

Restrictions for deferred and reverse exchanges

Please note that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from considered a like-kind exchange and make all gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange.  Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

Using a qualified intermediary or other exchange facilitator is one way to avoid premature receipt of cash or other proceeds until the exchange is completed. You or your agent can not act as your own facilitator.

Computing the basis in the new property

In-order to comply with section 1031 rules, it is vital that the basis of the property be adjusted and tracked. This is due to the fact that gains are merely deferred and not forgiven. The basis of the property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments.  This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition.  A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

When the replacement property is ultimately sold not as part of another exchange, the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

Reporting Sec. 1031 exchanges

A taxpayer is required to report a Section 1031 exchange to the IRS on Form 8824, Like-Kind Exchanges. This form is filed with the taxpayer’s tax return for the year in which the exchange took place.

Requirement for Form 8824:

·         Descriptions of the properties exchanged;

·         The dates on which the properties were identified and transferred;

·         A disclosure of any relationship between the parties to the exchange;

·         The value of the like-kind and any other property received;

·         Any gain or loss on the sale of other (non-like-kind) property given up;

·         Any cash received or paid, or any liabilities relieved or assumed; and

·         The adjusted basis of the like-kind property given up and any realized gain.

If the rules for like-kind exchanges are not followed, a tax payer may be held liable for taxes, penalties, and interest on your transactions.

Taking The Home Office Deduction

Under the IRS rules, a taxpayer is allowed to deduct expenses related to business use of a home, but only if the space is used “exclusively” on a “regular basis.” To qualify for a home office deduction, you must meet one of the following requirements:

  1. Exclusive and regular use as your principal place of business
  2. A place for meeting with clients or customers in the ordinary course of business
  3. A place for the taxpayer to perform administrative or management activities associated with the business, provided there is no other fixed location from which the taxpayer conducts a substantial amount of such administrative or management activities

 

A separate structure not attached to your dwelling unit that is used regularly and exclusively for your trade or profession also qualifies as a home office under the IRS definition.

The exclusive-use test is satisfied if a specific portion of the taxpayer’s home is used solely for business purposes or inventory storage. The regular-basis test is satisfied if the space is used on a continuing basis for business purposes. Incidental business use does not qualify.

In determining the principal place of business, the IRS considers two factors: Does the taxpayer spend more business-related time in the home office than anywhere else? Are the most significant revenue-generating activities performed in the home office? Both of these factors must be considered when determining the principal place of business.

Employees
To qualify for the home-office deduction, an employee must satisfy two additional criteria. First, the use of the home office must be for the convenience of the employer (for example, the employer does not provide a space for the employee to do his/her job). Second, the taxpayer does not rent all or part of the home to the employer and use the rented portion to perform services as an employee for the employer. Employees who telecommute may be able to satisfy the requirements for the home-office deduction.

Expenses
Home office expenses are classified into three categories:

Direct Business Expenses relate to expenses incurred for the business part of your home such as additional phone lines, long-distance calls, and optional phone services. Basic local telephone service charges (that is, monthly access charges) for the first phone line in the residence generally do not qualify for the deduction.

Indirect Business Expenses are expenditures that are related to running your home such as mortgage or rent, insurance, real estate taxes, utilities, and repairs.

Unrelated Expenses such as painting a room that is not used for business or lawn care are not deductible.

Deduction Limit

You can deduct all your business expenses related to the use of your home if your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation). But, if your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited.

Nondeductible expenses such as insurance, utilities, and depreciation that are allocable to the business are limited to the gross income from the business use of your home minus the sum of the following:

  • The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). These expenses are discussed in detail under Deducting Expenses, later.
  • The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself.

If your deductions are greater than the current year’s limit, you can carry over the excess to the next year. They are subject to the deduction limit for that year, whether or not you live in the same home during that year.

Sale of Residence
If you use property partly as a home and partly for business, tax rules generally permit a $500,000 (married filing jointly) or $250,000 (single or married filing separately) exclusion on the gain from the sale of a primary residence provided certain ownership and use tests are met during the 5-year period ending on the date of the sale:

  • You owned the home for at least 2 years (ownership test), and
  • You lived in the home as your main home for at least 2 years (use test).

If the part of your property used for business is within your home, such as a room used as a home office for a business there is no need to allocate gain on the sale of the property between the business part of the property and the part used as a home. However, if you used part of your property as a home and a separate part of it, such as an outbuilding, for business other rules apply such as whether the use test was met (or not met) for the business part and whether or not there was business use in the year of the sale.

If you need more information about whether you qualify for the exclusion, please don’t hesitate to call us.

Simplified Home Office Deduction

If you’re one of the more than 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction), don’t forget about the new simplified option available for taxpayers starting with 2013 tax returns. Taxpayers claiming the optional deduction will complete a significantly simplified form.

The new optional deduction is capped at $1,500 per year based on $5 a square foot for up to 300 square feet. Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

Tax Deductions
The “home office” tax deduction is valuable because it converts a portion of otherwise nondeductible expenses such as mortgage, rent, utilities and homeowners insurance into a deduction.

Remember however, that an individual is not entitled to deduct any expenses of using his/her home for business purposes unless the space is used exclusively on a regular basis as the “principal place of business” as defined above. The IRS applies a 2-part test to determine if the home office is the principal place of business.

  • Do you spend more business-related time in your home office than anywhere else?
  • Are the most significant revenue-generating activities performed in your home office?

If the answer to either of these questions is no, the home office will not be considered the principal place of business, and the deduction cannot be taken.

A home office also increases your business miles because travel from your home office to a business destination–whether it’s meeting clients, picking up supplies, or visiting a job site–counts as business miles. And, you can depreciate furniture and equipment (purchased new for your business or converted to business use), as well as expense new equipment used in your business under the Section 179 expense election.

Taxpayers taking a deduction for business use of their home must complete Form 8829. If you have a home office or are considering one, please call us. We’ll be happy to help you take advantage of these deductions.

What Is Income?

The receipt of income is not limited to the receipt of money, you can also receive income in the form of property or services.  From an employee’s perspective income is viewed as wages and fringe benefits received from an employer. We will be exploring other forms of income to include that from bartering, partnerships, S corporations, and royalties. It is important to note that some income might be taxable while others aren’t.

Income is generally taxable unless it is specifically exempt by the operation of law. Taxable and non-taxable income must both be report on your tax return. However, tax is only levied on the income that’s taxable.

Constructively-received income. 

Income is viewed as being received and taxable if it is available to you irrespective of the fact that it is not actually in your hands at the close of the period.

For example, an employee check mailed before year end for services performed in December, is not received until the first week in January. This wage is considered income received for December and is tax in that same month.

Assignment of income.

Income received by any agent on your behalf is deemed to be income received by you and should be included in your total income in the year received. This is due to the fact that the agent acted on your behalf so in essence you have constructively received that income when they did.

If for example with you are a philanthropic person and with your employer you designate that a percentage of your salary should be directly paid to a particular organization. That amount must be considered and included in your income when the organization receives it.

Unearned or Prepaid income.

From a cash basis point of view, prepaid income, such as compensation for future services, is generally included in your income in the year the income is received. Such income can be deferred if the accruals method of accounting is used and thus the income is recognized in the period service is rendered.

Employee Compensation

As a generally rule, one should include in gross income all income received irrespective of the form of receipt. This includes all wages, salaries, commissions, fees, tips and even fringe benefits and stock options.

Employed persons should receive a Form W-2, Wage and Tax Statement, from their employer at the end of the year. This shows the pay received for services performed. Self-employed persons would need to prepare their financial statement to arrive at income for the period.

Childcare providers.

As stated earlier, all payment received should be include in total income. Therefore, if you provide child care, either in the child’s home or in your home or other place of business, the pay you receive must be included in your income.

It is worth noting that if you babysit for friends, relatives or even the neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you.

If you are not an employee, you are probably a self-employed independent contractor and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it.

Rental Income.

Generally, if your primary reason for undertaking an activity is for income or profit, any amounts received is viewed as income. This is also the case if you are involved in the rental activity with continuity and regularity, your rental activity is a business.

If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is generally determined by:

  • Whether or not the rental activity is a business, and
  • Whether or not the rental activity is conducted for profit.

Partnership Income

A partnership does not pay taxes, rather the income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner’s distributive share of these items.

A partner is required to report his or her distributive share of these items on his or her tax return whether or not they have actually been distributed. However, the distributive share of the partnership losses is limited to the adjusted basis of your partnership interest at the end of the partnership year in which the losses took place.

S Corporation Income

Like a partnership, in general an S corporation does not pay tax on its income. Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder’s pro rata share. You must report your share of these items on your return. Generally, the items passed through to you will increase or decrease the basis of your S corporation stock as appropriate.

Royalty Income

Royalties from copyrights, patents, and oil, gas and mineral properties are taxable as ordinary income.

Part I of Schedule E (Form 1040), Supplemental Income and Loss is utilized to report this form of income.  However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ.

Tax Withholding Check-Up

It is important that as the end of the year approaches taxpayers consider the amount of withholding that are being deducted from their pay, in fact, they are encouraged to perform a tax withholding checkup to ensure that they are not allowing more to be withheld than is needed. Also, by performing this checkup now, taxpayers can adjust their withholding to avoid paying less than the required taxes and thus avoid an unexpected tax bill later.

Who would benefit from a withholding check-up:

1.     Taxpayers who received large tax refunds in past years
Having large refunds in prior years might be due to the taxpayers having too much taxes withheld from their paychecks over and about what is required. When a taxpayer has too much tax withheld from their paycheck, they end up paying too much tax during the year, hence the large tax refund. They can change their withholding to pay just the right amount of taxes and have money upfront rather than waiting for a bigger refund.

2.     Taxpayers who owed taxes in years past
The goal here is to get the amount of taxes withheld to be as close as possible to the taxes due. Taxpayers with too little tax withheld might find themselves with a tax bill at the end of the year. Under-withholding can lead to both a tax bill and an additional penalty. Similar to overpayment of taxes, tax payers can remedy this situation by adjusting their withholdings so that withholding and taxes due are as close as possible.

3.     People with a second job
It is important that taxpayers who work more than one job check the total amount of taxes they have withheld so that it approximates taxes due as close as possible and make adjustments as necessary. This includes adjusting their withholdings up or do so that their withholding covers the total amount of the taxes they owe, based on their combined income from all their jobs.

4.     Taxpayers who make estimated tax payments
Also, there are some taxpayers who make quarterly estimated tax payments throughout the year. Among these persons are: self-employed individuals, partners, and S corporation shareholders.  Some of these persons also have an employer. If this is the case, these taxpayers can often forgo making these quarterly payments by having more tax taken out of their pay via withholdings.

5.     People with a new job
If you are starting a new job it is imperative that you ensure that enough taxes are being withheld from your pay. This should be to the point where your withholdings are enough to cover the taxes due from your old and new job. withheld.

Form W-4 is used by employees to make the adjustment to their withholdings. To make sure their employer withholds the right amount of tax, employees can prepare a new Form W-4, Employee’s Withholding Allowance Certificate. In many cases, this is all they need to do. The employer uses the form to figure the amount of federal income tax to be withheld from pay. This takes time, so taxpayers should make adjustments as soon as possible so the changes can take affect during the final pay periods of 2017.


Financial Planning Tips For Business Owners

Consider establishing an employee stock ownership plan (ESOP).

If you own a business and need to diversify your investment portfolio, consider establishing an ESOP. ESOP’s are the most common form of employee ownership in the U.S. and are used by companies for several purposes, among them motivating and rewarding employees and being able to borrow money to acquire new assets in pretax dollars. In addition, a properly funded ESOP provides you with a mechanism for selling your shares with no current tax liability. Consult a specialist in this area to learn about additional benefits.

Make sure there is a succession plan in place.

Have you provided for a succession plan for both management and ownership of your business in the event of your death or incapacity? Many business owners wait too long to recognize the benefits of making a succession plan. These benefits include ensuring an orderly transition at the lowest possible tax cost. Waiting too long can be expensive from a financial perspective (covering gift and income taxes, life insurance premiums, appraiser fees, and legal and accounting fees) and a non-financial perspective (intra-family and intra-company squabbles).

Consider the limited liability company (LLC) and limited liability partnership (LLP) forms of ownership.

These entity forms should be considered for both tax and non-tax reasons.

Avoid nondeductible compensation.

Compensation can only be deducted if it is reasonable. Recent court decisions have allowed business owners to deduct compensation when (1) the corporation’s success was due to the shareholder-employee, (2) the bonus policy was consistent, and (3) the corporation did not provide unusual corporate prerequisites and fringe benefits.

Purchase corporate owned life insurance (COLI).

COLI can be a tax-effective tool for funding deferred executive compensation, funding company redemption of stock as part of a succession plan and providing many employees with life insurance in a highly leveraged program. Consult your insurance and tax advisers when considering this technique.

Consider establishing a SIMPLE retirement plan.

If you have no more than 100 employees and no other qualified plan, you may set up a Savings Incentive Match Plan for Employees (SIMPLE) into which an employee may contribute up to $12,500 per year if you’re under 50 years old and $15,500 a year if you’re over 50 in 2017 (same as 2016). As an employer, you are required to make matching contributions. Talk with a benefits specialist to fully understand the rules and advantages and disadvantages of these accounts.

Establish a Keogh retirement plan before December 31st.

If you are self-employed and want to deduct contributions to a new Keogh retirement plan for this tax year, you must establish the plan by December 31st. You don’t actually have to put the money into your Keogh(s) until the due date of your tax return. Consult with a specialist in this area to ensure that you establish the Keogh or Keoghs that maximize your flexibility and your annual contributions.

Section 179 expensing.

Businesses may be able to expense up to $510,000 in 2017 for equipment purchases of qualifying property placed in service during the filing year, instead of depreciating the expenditures over a longer time period. The limit is reduced by the amount by which the cost of Section 179 property placed in service during the tax year 2017 exceeds $2,030,000.

Don’t forget deductions for health insurance premiums.

If you are self-employed (or are a partner or a 2-percent S corporation shareholder-employee) you may deduct 100 percent of your medical insurance premiums for yourself and your family as an adjustment to gross income. The adjustment does not reduce net earnings subject to self-employment taxes, and it cannot exceed the earned income from the business under which the plan was established. You may not deduct premiums paid during a calendar month in which you or your spouse is eligible for employer-paid health benefits.

Review whether compensation may be subject to self-employment taxes.

If you are a sole proprietor, an active partner in a partnership, or a manager in a limited liability company, the net earned income you receive from the entity may be subject to self-employment taxes.

Don’t overlook minimum distributions at age 70½ and rack up a 50 percent penalty.

Minimum distributions from qualified retirement plans and IRAs must begin by April 1 of the year after the year in which you reach age 70½. The amount of the minimum distribution is calculated based on your life expectancy or the joint and last survivor life expectancy of you and your designated beneficiary. If the amount distributed is less than the minimum required amount, an excise tax equal to 50 percent of the amount of the shortfall is imposed.

Don’t double up your first minimum distributions and pay unnecessary income and excise taxes.

Minimum distributions are generally required at age seventy and one-half, but you are allowed to delay the first distribution until April 1 of the year following the year you reach age seventy and one-half. In subsequent years, the required distribution must be made by the end of the calendar year. This creates the potential to double up in distributions in the year after you reach age 70½. This double-up may push you into higher tax rates than normal. In many cases, this pitfall can be avoided by simply taking the first distribution in the year in which you reach age 70½.

Don’t forget filing requirements for household employees.

Employers of household employees must withhold and pay social security taxes annually if they paid a domestic employee more than $2,000 a year in 2017 (same as 2016). Federal employment taxes for household employees are reported on your individual income tax return (Form 1040, Schedule H). To avoid underpayment of estimated tax penalties, employers will be required to pay these taxes for domestic employees by increasing their own wage withholding or quarterly estimated tax payments. Although the federal filing is now required annually, many states still have quarterly filing requirements.

Consider funding a nondeductible regular or Roth IRA.

Although nondeductible IRAs are not as advantageous as deductible IRAs, you still receive the benefits of tax-deferred income. Note, the income thresholds to qualify for making deductible IRA contributions, even if you or your spouse is an active participant in an employer plan, are increasing.

The $100,000 income test for converting a traditional IRA to a ROTH IRA was permanently eliminated in 2010, allowing anyone to complete the conversion.

You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10 percent additional tax on early distributions will not apply. However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax.

Caution: You must roll over into the Roth IRA the same property you received from the traditional IRA. You can roll over part of the withdrawal into a Roth IRA and keep the rest of it. However, the amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions) and may be subject to the 10 percent additional tax on early distributions.

Calculate your tax liability as if filing jointly and separately.

In certain situations, filing separately may save money for a married couple. If you or your spouse is in a lower tax bracket or if one of you has large itemized deductions, filing separately may lower your total taxes. Filing separately may also lower the phase-out of itemized deductions and personal exemptions, which are based on adjusted gross income. When choosing your filing status, you should also factor in the state tax implications.

Avoid the hobby loss rules.

If you choose self-employment over a second job to earn additional income, avoid the hobby loss rules if you incur a loss. The IRS looks at a number of tests, not just the elements of personal pleasure or recreation involved in the activity.

Review your will and plan ahead for post-mortem tax strategies.

A number of tax planning strategies can be implemented soon after death. Some of these, such as disclaimers, must be implemented within a certain period of time after death. A number of special elections are also available on a decedent’s final individual income tax return. Also, review your will as the estate tax laws are in flux and your will may have been written with differing limits in effect. In 2017, estates of $5,490,000 (up from $5,450,000 in 2016) are exempt from the estate tax with a 40 percent maximum tax rate (made permanent starting in tax year 2013).

Check to see if you qualify for the Child Tax Credit.

A $1,000 tax credit is available for each dependent child (including stepchildren and eligible foster children) under the age of 17 at the end of the taxable year. The child credit generally is available only to the extent of a taxpayer’s regular income tax liability. However, for a taxpayer with three or more children, this limitation is increased by the excess of Social Security taxes paid over the sum of other nonrefundable credits and any earned income tax credit allowed to the taxpayer. For 2017 (as in previous years), the income threshold is $3,000.

For more information concerning these financial planning ideas, please call the office of Metro Accounting And Tax Services at 407-240-5143.

Hobby Income

To determine if you are really running a business or just enjoying a hobby you must take into account the facts and circumstances of your situation. A hobby for tax purposes is defined as an activity engaged in “for sport or recreation, not to make a profit.” So even if you earn occasional income from doing such an activity, the primary purpose must be something other than a profit motive.

So, from horse breeding to glass blowing, many persons enjoy hobbies that are also income generating. A taxpayer is required to report all income on their tax return even if it is earned from participation is a related hobby activity.

The rules on how to report the income and expenses earned and incurred depends on whether the activity participated in is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. In general, you are allowed to deduct ordinary and necessary hobby expenses with certain limitations. An ordinary and necessary hobby expense is one that’s considered common and accepted for the activity. A “necessary” expense is one that’s considered helpful and appropriate for the activity.

Since a hobby is not a business, hobbyists are not entitled to the same tax deductions that businesspeople can claim. As a hobbyist, you can usually deduct your hobby expenses up to the amount of your hobby income. But any expenses that exceed your hobby income are considered personal losses and are not deductible from your other income.

Here are four things to consider:

1)    Determine if the activity is a business or a hobby. If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby, and base their determination on all the facts and circumstances of their activity.

·         Whether you carry on the activity in a businesslike manner

·         Whether the time and effort you put into the activity indicate that you intend to make it profitable

·         Whether you depend on income from the activity for your livelihood

·         Whether your losses are due to circumstances beyond your control, or are normal in the startup phase of your type of business

·         Whether you adjust your methods of operation in an attempt to improve profitability

·         Whether you (or your advisors) have the knowledge needed to carry on the activity as a successful business

·         Whether you were successful in making a profit in similar activities in the past

·         Whether the activity makes a profit in some years, and how much profit it makes

·         Whether you can expect to make a future profit from the appreciation of the assets used in the activity

2)    Allowable hobby deductions. Taxpayers can usually deduct ordinary and necessary hobby expenses within certain limits:

o    Ordinary expense is common and accepted for the activity.

o    Necessary expense is appropriate for the activity.

3)    Limits on hobby expenses. Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

4)    How to deduct hobby expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions and must be taken in the following order:

  •       Category 1: Deductions you can take for personal as well as business activities are allowed in full. For individuals, all non-business deductions (such as those for home mortgage interest, taxes, and casualty losses) belong in this category.
  •       Category 2: Deductions that don’t result in an adjustment to the basis of property are allowed next, but only to the extent that your gross income from the activity exceeds your deductions under the first category.
  •       Category 3: Business deductions that decrease the basis of property are allowed last, but only to the extent that your gross income from the activity exceeds your deductions from the first 2 categories.

Estate Planning Basics – Wills & Trusts

Proper estate planning can help to increase the size of your estate, whether large or small. Its basic purposes are to help you to decide how your property will be distributed after your death, to help assure that your property will be distributed in an orderly and efficient way and to minimize the amount of taxes paid by your estate. This Financial Guide gives you a roadmap to the estate planning process, in particular we will be examining wills, trusts, post-mortem letters, living wills, life insurance, life time gifts and disclaimers.

The goal is to get started so that you’ll be able to provide for your heirs, lessen the administrative burden on your survivors, and to understand what you’ll have to do to minimize your estate and income taxes. It will enable you to approach your attorney and other professional advisors with a clearer idea of what the process should entail. Should you need further assistance in your tax planning endeavors, the advisors at Metro Accounting And Tax Services, CPA are ready to help. Call the office today at 470-240-5143.

Wills

The will is the foundation of good estate planning and it’s critical to obtain competent legal help when drafting a will. A will that is poorly drafted or does not dot every legal “i” and cross every legal “t” can be the cause of endless trouble for your survivors.

It is recommended that you do not keep original copies of your will in a safe deposit box. Instead, keep them in a fireproof safe at home and give copies to your attorney and your executor as well.

Many people believe they do not need a will, but there are many good reasons, other than saving estate taxes, for having a valid and updated will.

Why You Need a Will

There are five basic reasons to prepare a will:

1. To Choose Beneficiaries. The laws of the state in which you live determine how your property will be distributed if you die without a valid will. For example, in most states the property of a married person with children who dies intestate (i.e., without a will) generally will be distributed one-third to his or her spouse and two-thirds to the children, while the property of an unmarried, childless person who dies intestate generally will be distributed to his or her parents (or siblings if there are no parents). These distributions may be contrary to what you want. In effect, by not having a will, you are allowing the state to choose your beneficiaries. Further, a will allows you to specify not only who will receive the property, but how much each beneficiary will receive. You may also wish to leave property to a charity after your death, and a will may be needed to accomplish this goal.

2. To Minimize Taxes. Many people feel they do not need a will because they believe their taxable estate is below that taxable amount for federal estate tax purposes. However, your taxable estate may be larger than you think. For example, life insurance, qualified retirement plan benefits, and IRAs typically pass outside of a will or of estate administration. But these assets are still part of your federal estate and can cause your estate to go over the threshold amount. Also, in some states, an estate becomes subject to state death taxes at a point well below the federal threshold. A properly prepared will is necessary to implement estate tax reduction strategies.

Periodically reviewing your estate plan is advisable to take into account the changes in estate and gift tax rules, as well as rules on items that affect the size of your estate including retirement and education funding plans. Amounts subject to estate tax, and estate and gift tax rates, are scheduled to change periodically in future years.

3. To Appoint a Guardian. Your will should name a guardian for your minor children in the event of your death and/or the death of your spouse. While naming a guardian does not bind either the named guardian or the court, it does indicate your wishes, which courts generally try to accommodate.

4. To Name an Executor. Without a will, you cannot appoint someone you trust to carry out the administration of your estate. If you do not specifically name an executor in a will, a court will appoint someone to handle your estate, perhaps someone you would not have chosen. Obviously, there is an advantage, as well as peace of mind, in selecting an executor you trust.

5. To Establish Domicile. You may wish to firmly establish domicile (permanent legal residence) in a particular state, for tax or other reasons. If you move frequently or own homes in more than one state, each state in which you reside could try to impose death or inheritance taxes at the time of death, possibly subjecting your estate to multiple probate proceedings. To lessen the risk of this, you should execute a will that clearly indicates your intended state of domicile.

You should review your will every two or three years, or whenever your circumstances change. Changes that warrant revising your estate plan might include:

  • Divorce,
  • Having a child,
  • Having children move out of the house,
  • Acquiring a large asset,
  • Selling a large asset, or
  • A change in the tax laws.

Trusts

Today, trusts are not just used by the very wealthy, people with a wide range of income levels use them as estate planning tools too, despite the fact that trusts are complex and costly to set up and run, and require a higher level of services from an attorney than a will does.

What is a Trust?

A trust owns its own property (holds the title). When it is set up, the trust appears on official papers and records as the legal owner of any property that is placed into it. The trust’s principal is the property that the trust owns, as distinguished from the interest or dividends earned by that property. The terms of the trust dictate who will get the benefit of the income from the trust property, how long the trust will last, and so on.

The trustee is the person or entity whose job it is to administer and manage the trust: make investment decisions, pay taxes, make sure the terms of the trust are carried out, and take care of the trust’s property. Generally speaking, the trust must pay income tax on any of its undistributed interest or other income.

There are basically two types of trusts:

  • An irrevocable trust is a separate entity, for both legal and tax purposes, and pays its own taxes. The irrevocable trust cannot be revoked or changed.
  • A revocable trust is not considered a separate entity for tax purposes, although it may be considered a separate legal entity. The revocable trust can be changed or revoked (taken back) by the creator of the trust.

Another way to categorize trusts is the living (or inter vivos) trust, which is set up by a living person, or a testamentary trust, which is created by a will.

What is a Trust Used For?

A trust can be used for many worthwhile purposes:

  1. Give property to children.
  2. Reduce estate taxes.
  3. Leave assets to a spouse.
  4. Provide for life insurance used to pay estate tax.

Giving property to children. People generally do not want to give property to a minor child outright because of the financial risks involved (e.g., the child could squander it). Many people give property to a minor through a trust. The trust’s terms can be written so that the child does not get outright ownership until he or she has achieved a certain age so that the child receives only the income from the trust property until that time. Another way to give property to a minor is via the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. These provisions, which apply in most states, provide for a custodianship over property given to a minor.

Reducing estate taxes. As noted earlier, if you leave everything to your spouse, it passes free of federal estate tax. However, when your surviving spouse dies, anything in his or her estate over the exclusion amount (also called “exemption amount”) would be subject to estate tax. The exclusion amount for 2017 is $5,490,000. In 2016 it was $5,450,000 and in 2015 it was $5,430,000. In 2014 it was $5,340,000, in 2013 it was $5,250,000, in 2012 it was $5,125,00, in 2011 it was $5,000,000, and there was no limit in 2010. The credit shelter trust or bypass trust is used to shelter up to the exclusion amount from the estate tax. Here’s a simplified example of how it might work:

Example: Simon and Sylvia have an estate worth $4 million. Simon’s will put $2,000,000 worth of assets in a bypass trust. The ultimate beneficiary of this trust is Simon and Sylvia’s daughter. (The beneficiary can be anyone other than Sylvia.) Sylvia is to receive the income from that trust for her life, but her rights in the trust are limited so that she is not considered the owner. The rest of Simon’s estate ($2,000,000) is left to Sylvia in his will.

Assuming Simon dies in 2017, the $2,000,000 in the bypass trust is sheltered by his estate tax exemption. The $2,000,000 that goes to Sylvia is deducted from the estate because of the marital deduction. Thus, on Simon’s death, the federal estate tax due is zero. When Sylvia dies, her estate will include only the $2,000,000 (if she still has it), plus any other assets she has accumulated. It will not include the $2,000,000 put into the bypass trust, which will be exempt from tax because of the $2,000,000 estate tax exemption.

Thus, the federal estate tax on Sylvia will apply only to her assets in excess of $5,490,000. Result: The family has sheltered assets worth $4 million from estate tax in the Simon/Sylvia generation. Without the bypass trust, the estate tax would have applied to an additional $2,000,000 of the estate.

Wills may be drafted to leave a bypass trust an amount equal to the exclusion amount in the year of death, rather than a specific dollar amount. However, because amounts change, review of the estate plan may be needed to keep the desired balance between what the spouse is to get and what trust beneficiaries are to get.

Leaving an asset to a spouse. The marital deduction trust allows the first spouse to die to place estate assets in a trust for the surviving spouse, instead of leaving them to him or her outright. If the legal requirements are met, the estate gets the marital deduction, but can still preserve assets for heirs other than the surviving spouse. Typically, the income of such trusts will go to the surviving spouse for life and the principal will go to children. All of the income must go to the surviving spouse for the trust to qualify for the marital deduction. It must be paid out at least once a year. The spouse may have some access to the principal. When the second spouse dies, the property is included in his or her estate for estate tax purposes.

Pay estate tax. Complex and expensive arrangements, life insurance trusts are usually used to finance future estate taxes on an estate that contains a business interest or real estate.

Post-Mortem Letters

Does anyone but you know where your tax records and supporting tax documents are located? How about deeds, titles, wills, insurance papers? Does anyone know who your accountant is? Your lawyer? Your broker? If you pass away without leaving your heirs this information, it will cause a lot of headaches. Worse than that, part of your estate may have to be spent in needless taxes, claims, or expenses because the information is missing.

The post-mortem letter is an often-overlooked estate planning tool. It tells your executors and survivors what they need to know to maximize your estate such as the location of assets, records, and contacts. Without the post-mortem letter, you risk losing part of your estate’s assets because necessary documentation cannot be located.

Livings Wills

A living will, which is sometimes called a health care proxy, makes known your wishes as to what medical treatment or measures you want to have if you become incapacitated and unable to make the decision yourself. It tells family and physicians whether you want to be kept alive through mechanical means or whether you would prefer not to have such means used. If there is no living will, this decision is left up to the family, or the physicians, to decide. Stating your preference in a living will can take some of the burden off family members and decrease the stress in an emergency.

Life Insurance

The main purpose of life insurance is to provide for the welfare of survivors. But life insurance can also serve as an estate planning tool. For example, it can be used to finance the payment of future estate taxes or to finance a buy-out of a deceased’s interest in a business. It can also be used to pay funeral and final expenses and debts.

If the decedent owns the policy, the proceeds will be included in the estate and subject to estate tax. However, if the decedent gives away all incidents of ownership in the policy, and names a beneficiary other than the estate, the proceeds will not be included in the estate.

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Disclaimers

The disclaimer is a way for an heir to refuse all or part of property that would otherwise pass to him or her, via will, intestacy laws, or by operation of law. An effective disclaimer passes the property to the next beneficiary in line.

With a properly drawn disclaimer, the property is treated as if it had passed directly from the decedent to the next-in-line beneficiary. This may save thousands of dollars in estate taxes. The provision for a disclaimer in a will and the wise use of a disclaimer allows intra-family income shifting for maximum use of the estate tax marital deduction, the unified credit, and the lower income tax brackets.

It is important to note that disclaimers can also be used to provide for financial contingencies. For example, a beneficiary can disclaim an interest if someone else is in need of funds.

Lifetime Gifts

The annual gift tax exclusion provides a simple, effective way of cutting estate taxes and shifting income. You can make annual gifts in 2017 of up to $14,000 ($28,000 for a married couple) to as many donees as you desire. The $14,000 is excluded from the federal gift tax so that you will not incur gift tax liability. Further, each $14,000 you give away during your lifetime reduces your estate for federal estate tax purp

Minimize Taxes On The Gain From Selling Your House

Many tax benefits are available to you when you sell your principal residence. However, the rules are complex and personal guidance is necessary to take full advantage of these benefits so that you and your tax advisor can best work together to minimize the tax on the gain. This financial guide by Metro Accounting And Tax Services, CPA discusses the key rules so that you can minimize the tax on the gain.

The IRS allows an exclusion of up to $250,000 of the gain on the sale of your main home ($500,000 if you are married and file a joint return. Most taxpayers can take advantage of the exclusion and will not have to pay any tax on the sale of a main home as long as they meet the IRS ownership and use tests (see below).

It is important to note that if you have a loss from the sale, it is a personal loss. You cannot deduct the loss.

If you don’t qualify for exclusion and your gain exceeds the exclusion, or you used part of the property in business or for rent, you have a taxable gain and must report the sale of your main home on your tax return on IRS Form 8949 and Schedule D.

Principal Residence

Usually, the home you live in most of the time is your main home. In addition to a standard dwelling unit, your home can also be a houseboat, mobile home, cooperative apartment, or condominium.

Example: You own and live in a house in town. You also own beach property, which you use in the summer months. The town property is your main home; the beach property is not.

Example: You own a house, but you live in another house that you rent. The rented home is your main home.

Where a second residence has soared in value and you want to sell, some tax advisors have suggested moving to the second residence for the required period to qualify for exclusion on its sale. If this is your situation, please consult with a tax professional.

How to Figure Gain or Loss

Key information for determining gain or loss is the selling price, the amount realized, and the adjusted basis.

The selling price is the total amount you receive for your home. It includes money, all notes, mortgages or other debts assumed by the buyer as part of the sale, and the fair market value of any other property or any services you receive. Next, you deduct the selling expenses such as commissions, advertising, legal fees, and loan charges paid by the seller from the selling price.

The difference is the “amount realized.” If the amount realized is more than your home’s “adjusted basis,” discussed later, the difference is your gain. If the amount realized is less than the adjusted basis, the difference is your loss.

However, it does not include amounts you received for personal property sold with your home. Personal property is property that is not a permanent part of the home, such as furniture, draperies, and lawn equipment.

Jointly owned home. If you and your spouse sell your jointly owned home and file a joint return, you figure and report your gain or loss as one taxpayer. If you file separate returns, each of you must figure and report your own gain or loss according to your ownership interest in the home. Your ownership interest is determined by state law.

If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure and report your own gain or loss according to your ownership interest in the home. Each of you applies the exclusion rules individual basis.

Trading homes. If you trade your old home for another home, treat the trade as a sale and a purchase.

Foreclosure or repossession. If your home was foreclosed on or repossessed, you have what the IRS calls a disposition and will need to determine if you have ordinary income, gain, or loss. The amount of your gain or loss depends on whether you were personally liable for repaying the debt secured by the home and whether the outstanding loan balance is more than the fair market value (FMV) of the property.

If you were not personally liable for repaying the debt secured by the home, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer.

If you were personally liable for repaying the debt secured by the home and the debt is canceled, the amount realized on the foreclosure or repossession includes the smaller of the outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or the Fair Market Value (FMV) of the transferred property.

In addition to any gain or loss, if you were personally liable for the debt you may have ordinary income. If the canceled debt is more than the home’s fair market value, you have ordinary income equal to the difference. However, the income from cancellation of debt is not taxed to you if the cancellation is intended as a gift, or if you are insolvent or bankrupt.

Example: You owned and lived in a home with an adjusted basis of $41,000. A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new house priced at $80,000 (its fair market value). You are considered to have sold your old home for $50,000 and to have had a gain of $9,000 ($50,000 minus $41,000). If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, $50,000 would still be considered the sales price of the old home (the trade-in allowed plus the mortgage assumed).

Transfer to spouse. If you transfer your home to your spouse, or to your former spouse incident to your divorce, you generally have no gain or loss, even if you receive cash or other consideration for the home. Therefore, the rules explained in this Guide do not apply.

If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. You have no gain or loss.

If you buy or build a new home, its basis will not be affected by your transfer of your old home to your spouse, or to your former spouse incident to divorce. The basis of the home you transferred will not affect the basis of your new home.

Basis

You will need to know your basis in your home as a starting point for determining any gain or loss when you sell it. Your basis in your home is determined by how you got the home. Your basis is its cost if you bought it or built it. If you acquired it in some other way, its basis is either its fair market value when you received it or the adjusted basis of the person you received it from.

While you owned your home, you may have made adjustments (increases or decreases) to the basis. This adjusted basis is used to figure gain or loss on the sale of your home.

Cost as Basis

The cost of property is the amount you pay for it in cash or other property.

Purchase. If you buy your home, your basis is its cost to you. This includes the purchase price and certain settlement or closing costs. Your cost includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home.

Seller-paid points. If you bought your home after April 3, 1994, you must reduce the basis of your home by any points the seller paid, whether or not you deducted them. If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by the amount of seller-paid points only if you chose to deduct them as home mortgage interest in the year paid.

Settlement fees or closing costs. When buying your home, you may have to pay settlement fees or closing costs in addition to the contract price of the property. You can include in your basis the settlement fees and closing costs that are for buying the home. You cannot include in your basis the fees and costs that are for getting a mortgage loan. A fee is for buying the home if you would have had to pay it even if you paid cash for the home.

Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance.

Some of the settlement fees or closing costs that you can include in the basis of your property are:

  • Abstract fees (sometimes called abstract of title fees),
  • Charges for installing utility services,
  • Legal fees (including fees for the title search and preparing the sales contract and deed),
  • Recording fees,
  • Surveys,
  • Transfer taxes,
  • Owner’s title insurance, and
  • Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.

Some settlement fees and closing costs not included in your basis are:

  • Fire insurance premiums.
  • Rent for occupancy of the house before closing.
  • Charges for utilities or other services relating to occupancy of the house before closing.
  • Any item that you deducted as a moving expense (settlement fees and closing costs incurred after 1993 cannot be deducted as moving expenses).
  • Fees for refinancing a mortgage.
  • Charges connected with getting a mortgage loan, such as mortgage insurance premiums (including VA funding fees), loan assumption fees, cost of a credit report, and fee for an appraisal required by a lender.

Real estate taxes.

Real estate taxes for the year you bought your home may affect your basis, as follows:

If you pay taxes that the seller owed on the home up to the date of sale and the seller does not reimburse you, then the taxes are added to the basis of your home.

If you pay taxes that the seller owed on the home up to the date of sale and the seller does reimburse you, then the taxes do not affect the basis of your home.

If the seller pays taxes for you (taxes owed beginning on the date of sale) and you do not reimburse the seller, then the taxes are subtracted from the basis of your home.

If the seller pays taxes for you (taxes owed beginning on the date of sale) and you reimburse the seller, then the taxes do not affect the basis of your home.

Construction. If you contracted to have your house built on land you own, your basis is the cost of the land plus the amount it cost you to complete the house. This amount includes the cost of labor and materials, or the amounts paid to the contractor, and any architect’s fees, building permit charges, utility meter and connection charges, and legal fees directly connected with building your home. Your cost includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller or builder. It also includes certain settlement or closing costs. You may have to reduce the basis by points the seller paid for you. If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Do not include the value of your own labor, or any other labor you did not pay for, in the cost of the house.

Cooperative apartment. Your basis in the apartment is usually the cost of your stock in the co-op housing corporation, which may include your share of a mortgage on the apartment building.

Condominium. Your basis is generally its cost to you. The same rules apply as for any other home.

Basis Other Than Cost

If your home was acquired in a transaction other than a traditional purchase (such as gift, inheritance, trade, or from a spouse), you may have to use a basis other than cost, such as fair market value.

Note: Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of the relevant facts. Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property.

Home received as gift. If your home was a gift, its basis to you is the same as the donor’s adjusted basis when the gift was made. However, if the donor’s adjusted basis was more than the fair market value of the home when it was given to you, you must use that fair market value as your basis for measuring any loss on its sale.

If you use the donor’s adjusted basis to figure a gain and get a loss, and then use the fair market value to figure a loss and get a gain, you have neither a gain nor a loss on the sale or disposition.

If you received your home as a gift and its fair market value was more than the donor’s adjusted basis at the time of the gift, you may be able to add to your basis any federal gift tax paid on the gift. If the gift was before 1977, the basis cannot be increased to more than fair market value of the home when it was given to you. On the other hand, if you received your home as a gift after 1976, you would add to your basis the part of the federal gift tax paid that is due to the home’s “net increase” in value (value less donor’s adjusted basis).

Home received from spouse. You may have received your home from your spouse or from your former spouse incident to your divorce.

  • If you received the home after July 18, 1984, you had no gain or loss on the transfer. Your basis in this home is generally the same as your spouse’s (or former spouse’s) adjusted basis just before you received it. This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other consideration.
  • If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, your basis in the half interest received from your spouse is generally the same as your spouse’s adjusted basis just before the transfer. This rule also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Your basis in the half interest you already owned does not change. Your new basis in the home is the total of these two amounts.
  • If you received your home before July 19, 1984, in exchange for your release of marital rights, your basis in the home is generally its fair market value at the time you received it.
  • Home acquired from a decedent who died before or after 2010. If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent’s death (or the later alternate valuation date chosen by the personal representative of the estate). If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes.
  • Surviving spouse. If you are a surviving spouse and you owned your home jointly, your basis in the home will change. The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). The basis in your interest will remain the same. Your new basis in the home is the total of these two amounts.

Example: Your jointly owned home had an adjusted basis of $50,000 on the date of your spouse’s death, and the fair market value on that date was $100,000. Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value).

In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. When either spouse dies, the fair market value of the community property becomes the basis of the entire property, including the portion belonging to the surviving spouse. For this to apply, at least, half of the community interest must be included in the decedent’s gross estate, whether or not the estate must file a return.

Home received in trade.

If you acquired your home in a trade for other property, the basis of your home is generally its fair market value at the time of the trade. If you traded one home for another, you have made a sale and purchase. In that case, you may have realized a capital gain.

For all your tax planning strategies call the office today 470-240-5143.

Tax Breaks For Charitable Givings

Tax breaks for charitable giving aren’t limited to individuals, small businesses  can benefit too. If you own a small to medium size business and are committed to giving back to the community through charitable giving, here’s what you should know.

1. Verify that the Organization is a Qualified Charity.

Once you’ve identified a charity, you’ll need to make sure it is a qualified charitable organization under the IRS. Qualified organizations must meet specific requirements as well as IRS criteria and are often referred to as 501(c)(3) organizations. Note that not all tax-exempt organizations are 501(c)(3) status, however.

There are two ways to verify whether a charity is qualified: use the IRS online search tool or ask the charity to send you a copy of their IRS determination letter confirming their exempt status.

2. Make Sure the Deduction is Eligible

Not all deductions are created equal. In order to take the deduction on a tax return, you need to make sure it qualifies. Charitable giving includes the following: cash donations, sponsorship of local charity events, in-kind contributions such as property such as inventory or equipment.

Lobbying. A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks the loss of its tax-exempt status. As such, you cannot claim a charitable deduction (or business expense) for amounts paid to an organization if both of the following apply.

  • The organization conducts lobbying activities on matters of direct financial interest to your business.
  • A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses.

Further, if a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues.

3. Understand the Limitations

Sole proprietors, partners in a partnership, or shareholders in an S-corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Corporations (other than S-corporations) can deduct charitable contributions on their income tax returns, subject to limitations.

Note: Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Likewise, if the payments are charitable contributions or gifts, you cannot deduct them as business expenses.

Sole Proprietorships

As a sole proprietor (or single-member LLC), you file your business taxes using Schedule C of individual tax form 1040. Your business does not make charitable contributions separately. Charitable contributions are deducted using Schedule A, and you must itemize in order to take the deductions.

Partnerships

Partnerships do not pay income taxes. Rather, the income and expenses (including deductions for charitable contributions) are passed on to the partners on each partner’s individual Schedule K-1. If the partnership makes a charitable contribution, then each partner takes a percentage share of the deduction on his or her personal tax return. For example, if the partnership has four equal partners and donates a total of $2,000 to a qualified charitable organization in 2017, each partner can claim a $500 charitable deductions on his or her 2017 tax return.

Note: A donation of cash or property reduces the value of the partnership. For example, if a partnership donates office equipment to a qualified charity, the office equipment is no longer owned by the partnership, and the total value of the partnership is reduced. Therefore, each partner’s share of the total value of the partnership is reduced accordingly.

S-Corporations

S-Corporations are similar to Partnerships, with each shareholder receiving a Schedule K-1 showing the amount of charitable contribution.

C-Corporations

Unlike sole proprietors, Partnerships and S-corporations, C-Corporations are separate entities from their owners. As such, a corporation can make charitable contributions and take deductions for those contributions.

4. Categorize Donations

Each category of donation has its own criteria with regard to whether it’s deductible and to what extent. For example, mileage and travel expenses related to services performed for the charitable organization are deductible but time spent on volunteering your services is not. Here’s another example: As a board member, your duties may include hosting fundraising events. While the time you spend as a board member is not deductible, expenses related to hosting the fundraiser such as stationery for invitations and telephone costs related to the event are deductible.

Generally, you can deduct up to 50 percent of adjusted gross income. Non-cash donations of more than $500 require completion of Form 8283, which is attached to your tax return. In addition, contributions are only deductible in the tax year in which they’re made.

5. Keep Good Records

The types of records you must keep vary according to the type of donation (cash, non-cash, out of pocket expenses when donating your services) and the importance of keeping good records cannot be overstated.

Ask for–and make sure you receive–a letter from any organizations stating that said organization received a contribution from your business. You should also keep canceled checks, bank and credit card statements, and payroll deduction records as proof or your donation. Further, the IRS requires proof of payment and an acknowledgment letter for donations of $250 or more.

Here are six things to keep in mind about charitable donations and written acknowledgments:

1. Taxpayers who make single donations of $250 or more to a charity must have one of the following:

  • A separate acknowledgment from the organization for each donation of $250 or more.
  • One acknowledgment from the organization listing the amount and date of each contribution of $250 or more.

2. The $250 threshold doesn’t mean a taxpayer adds up separate contributions of less than $250 throughout the year. For example, if someone gave a $25 offering to his or her church each week, they don’t need an acknowledgment from the church, even though their contributions for the year are more than $250.

3. Contributions made by payroll deduction are treated as separate contributions for each pay period.

4. If a taxpayer makes a payment that is partly for goods and services, their deductible contribution is the amount of the payment that is more than the value of those goods and services.

5. A taxpayer must get the acknowledgment on or before the earlier of these two dates:

  • The date they file their return for the year in which they make the contribution.
  • The due date, including extensions, for filing the return.

6. If the acknowledgment doesn’t show the date of the contribution, the taxpayers must also have a bank record or receipt that does show the date.

If you’re a small business owner, don’t hesitate to call if you have any questions about charitable donations.

Tax Overhaul – What We Might See in 2018.

An attempt to overhaul the current tax structure is currently taking place in both the House and the Senate. From a tax payers perspective, it is important to note that whatever new tax bill is agreed upon, there will be no effect on the filing of taxes for the next tax season. So I just wanted to let everone know that there is no need to panic as this bill, whatever it turns out to be,  will not affect the tax fillings for the year 2017.

Standard Deductions

The House & Senate versions are almost the same. The Proposals would eliminate:

– Personal & dependent exemption deductions.

– The House version eliminates the Age and blind addons –  the Senate version retains them.

Categories:                                   Proposed              Currently

1) Joint Filers                                $24,400                $12,700

2) Single + 1 Qualifying Child       $18,300                  $9,350

3) Others:                                     $12,200                  $6,350

Standard Deduction Example

Current           Proposed

Single $6,350 + $4,050 (1 exemptions)                $10,400           $12,000

Single + 2 $6,350 + (3 exemptions) (3x$4,050)    $18,500           $12,000

MFJ $12,700 + (2 exemptions) (2x$4,050)           $20,800           $24,000

MFJ + 2 $12,700 + (4 exemptions) (4x$4,050)     $28,900           $24,000

MFJ + 4 $12,700 + (6 exemptions) (6x$4,050)    $37,000            $24,000

Individual Tax Brackets

Proposed:

• House: 12%, 25%, 35% and 39.6%

• Senate:  10%, 12%, 22.5%, 25%, 32.5%, 35%, 38.5%

Currently:

• Seven Tax Brackets  10%, 15%, 25%, 28%, 33%, 35% & 39.6%

House Version

%      S                 HH             MFJ           MFS

12%  45,000       87,500       90,000       45,000

25%  200,000     200,000     260,000     130,000

35%  500,000     500,000     1mil            500,000

39.6%

Senate Version

%     S                 HH             MFJ           MFS

10     9,250        13,600        19,050        9,525

12     38,700      51,800        77,400      38,700

22.5 60,000       60,000      120,000      60,000

25     170,000  170,000      290,000     145,000

32.5 200,000   200,000      390,000     195,000

35     500,000  500,000      1Mil           500,000,

38.5

12% Bracket

A)   Phased Out – House Only

B)    The tax benefit of the 12% bracket is phased out at $6 for Every

$100 AGI exceeds:

1)   $1 Mil for Single Individuals

2)   $1.2 Mil for MFJ

Itemized Deductions

• Medical Expenses

• House – Repealed

• Senate – Retained

• Taxes

• House – $10,000 of Property Tax

• Senate – None

Home Mortgage Interest 

House

  •  Debt Limited to $500,000 For New Purchases After 11/2/2017
  •  Existing Debt $1 Million
  • Limited To Acquisition Debt
  • Primary Residence Only

Senate

  •  Debt $1 Million
  • Limited To Acquisition Debt
  • Primary & Secondary Residence Only

Charity

  •  Remains a Deduction
  • 50% AGI Limit Goes To 60%
  • Charity Mileage Rate Inflation Adj –House Only
  • 5 Year CO continues

Certain Miscellaneous, Repealed – House & Senate

  • Employee Business Expenses
  • Tax Preparation Fees
  • Casualty Losses

*However, Senate Version allows Disaster Losses

Senate Version Repeals all Tier II

Child & Family Credits

  • Increase CTC to $1,600 ($1,650 Senate)
  • First $1,000 of CTC refundable.
  • Add $300 ($500Senate) nonrefundable credit for other dependents.
  • House Only Add $300 nonrefundable credit for Filer & Spouse.
  • Senate Only – Retains the EI refundable threshold

Due Diligence

·       Senate Version

1.)  Adds HH Due Diligence

2)   $500 Penalty

Kiddie Tax

•     House Version

1)   Changes the computation

2)   Cuts connection to parent’s return

•     Senate Version

1)   Changes the computation

2)   Cuts connection to parent’s return

3)    Unearned Income taxed at Fiduciary Rates

Education – House Only

• Credits Consolidated.

1)   AOTC – Only One

2)   Extended To 5 Years

3)   5th Year

1)  Only half credit

2) Only $500 Refundable

• Education Loans

1)   Forgiven Because of Death or Disability

2)   No COD Income

• Repealed Benefits

1)   Above the line Deduction

2)   U.S. Savings Bonds Interest

3)   Employer Provided Education Assistance

 

 Alimony • House Only

1)    For Decrees After 2017

2)    Not Deductible To Payer

3)    Not Income To Recipient

 

Moving Expense • House & Senate

1)    Repealed

2)    Employer Reimbursement Taxable

 

 Adoption Credit • House

1)   Original Draft Axed Both the Credit and Tax-Free Reimbursement

2)    Amended to Retain Credit

• Senate – Not Mentioned

 

Archer MSA – House Only

1)    No Further Contributions

2)   Can Rolled Into An HSA

 

Home Sale Exclusion – House Only

1)  Phase Out – $1 or every $ AGI Exceeds

1) $500,000 MFJ

2) $250,000 Single

• Ownership/Use – House & Senate

1)  5 out of 8 Years

 

Employee Fringe Benefits • House Repealed

1)   Achievement Awards

2)   Dependent Care Assistance –2023

3)   Transportation – Transit passes etc.

• Senate Repealed

1)  Bicycle Commuting

 

Credits • House Only

1)   Electric Vehicle – Repealed

2)   Mtg Credit Certificates Repealed

3)   Wind Energy, Geothermal & Fuel Cell Restored along with Solar Thru 2022 – Subject to The Existing Phaseouts

 

 Capital Gains • Essentially Same For House & Senate

1)    0% Below the Old 15% Tax Bracket

2)    $77.3K MFJ $51.7K HH $38.6 Others

3)   15% Below 20% Tax Bracket

4)   $479K MFJ $239 MFS $425 Others

5)   20% On The Balance

 

AMT • Repealed – House & Senate

AMT Tax Credit  House

1)      50% in 2019 thru 2021

2)      Balance in 2022

Being Self Employed

Who is Self-Employed?

According to the IRS, generally a person is considered self-employed if any of the following apply to you.

1)    If you are engaged in a trade or line of business as a sole proprietor or as an independent contractor, that is, you will receive a 1099 at the end of the year.

2)    If you are a member of a partnership whereby you’ll receive a K1 from the business at the end of the year.

3)    If you are otherwise engaged in any business venture for yourself, this includes any part-time business gig.

If you made or received a payment as a small business or as a self-employed person, you are generally required to file an information return to the IRS.

What are My Self-Employed Tax Obligations?

As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly. This is similar to the scheme that exist for an employed person whereby tax is withheld from their paychecks every time they are paid.

Unlike an employed person, self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. It should be noted that in general, anytime the wording “self-employment tax” is used, it only refers to Social Security and Medicare taxes and not any other taxes like income tax.

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business operations. This is done by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040.

You are required to file an income tax return if your net earnings from self-employment (excluding church income) were $400 or more or if you had church income of $108.28 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the instructions to Form 1040.

It is important to note that the self-employment tax rule is applicable irrespective of the age of the tax payer or even if the tax payer is already receiving social security or Medicare benefits. The SE tax rate on one’s earnings is calculated at 15.3% (12.4% social security tax plus 2.9% Medicare tax).

Also of importance is the fact that the maximum earnings subject to SE tax is the first $118,500 of your combined wages, tips, and net earnings in 2016.

All your combined wages, tips, and net earnings in 2016 are subject to any combination of the 2.9% Medicare part of SE tax, Medicare tax, or Medicare part of railroad retirement tax.

If wages and tips you receive as an employee are subject to either social security or the Tier 1 part of railroad retirement tax, or both, and total at least $118,500, do not pay the 12.4% social security part of the SE tax on any of your net earnings. However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings. Deduct one-half of your SE tax as an adjustment to income on line 27 of Form 1040.

If you are married filing a joint return and your income exceeds $250, 000, if you are single and your income exceeds $125, 000 or you are head of household or qualifying widow(er) earning is over $200,000, an additional Medicare tax of 0.9% may apply. The threshold amount for applying the Additional Medicare Tax on the self-employment income is reduced by the amount of wages subject to Additional Medicare Tax (but not below zero) if you have both wages and self-employment income.

Making My Quarterly Payments?

Because of your self-employed status, estimated tax is the method used to pay Social Security and Medicare taxes and income tax this is due to the fact that you do not have an employer withholding these taxes for you. Form 1040-ES is used to figure these taxes and basically contains a worksheet that is similar to Form 1040. You will need your prior year’s annual tax return in order to fill out Form 1040-ES.

Use the worksheet found in Form 1040-ES, Estimated Tax for Individuals to find out if you are required to file quarterly estimated tax.

Blank vouchers are also included in Form 1040-ES that you can use when you mail your estimated tax payments or you may make your payments using the Electronic Federal Tax Payment System (EFTPS). If this is your first year being self-employed, you will need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated taxes for the next quarter.

Filing My Annual Return?

In-order to file your annual tax return, you will need to use Schedule C or Schedule C-EZ to report your income or loss from any business you operated or a profession you practiced as a sole proprietor. Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. To find out if you can use Schedule C-EZ, see the instructions in the Schedule C-EZ form.

In order to report your Social Security and Medicare taxes, you must file Schedule SE Form 1040, Self-Employment Tax. Use the income or loss calculated on Schedule C or Schedule C-EZ to calculate the amount of Social Security and Medicare taxes you should have paid during the year.

For all your small business tax and accounting related issues, the staff at Metro Accounting and Tax Services, CPA is your trusted partners. Call us today at 470-240-5143.

Are You Getting Married?

The decision to get married is more about romance than finances for most people. However, it should be noted that money is an integral part of what creates a compatible couple. For anyone getting married, it would be foolish to ignore the financial consequences of marriage – specifically, the tax implications. Smart couples face a number of key tax decisions that can save or cost them thousands of extra dollars per year in taxes. Today, Metro Accounting And Tax Services, CPAwill review the very important implications of getting married.

What are the major differences between married and unmarried couples?

When it comes to legal rights and being married vs. unmarried, there are several major issues to consider. Specifically, unmarried couples do not:

  • Automatically inherit each other’s’ property. Married couples who do not have a will have their state intestacy laws to back them up; the surviving spouse will inherit at least a fraction of the deceased spouse’s property under the law.

Have the right to speak for each other in a medical crisis. If your life partner loses consciousness or capacity, someone will have to make the decision whether to go ahead with a medical procedure. That person should be you. But unless you have taken care of some legal paperwork, you may not have the right to do so.

  • Have the right to manage each other’s’ finances in a crisis. A husband and wife who have jointly owned assets will generally be affected less by this problem than an unmarried couple.

What estate and financial planning steps are particularly important for unmarried couples?

The following steps are particularly important for couples who are not married:

  • Prepare a will. If both partners make out wills, the chances are that the intentions expressed in the wills will be followed after one partner dies. If there are no wills, the unmarried surviving partner will probably be left high and dry.
  • Consider owning property jointly. Joint ownership of property with right of survivorship is a way of ensuring that property will pass to the other joint owner on one joint owner’s death. Real property and personal property can be put into this form of ownership.
  • Prepare a durable power of attorney. Should you become incapacitated, the durable power of attorney will allow your partner to sign papers and checks for you and take care of other financial matters on his or her behalf.
  • Prepare a health care proxy. The health care proxy (sometimes called a “medical power of attorney”) allows your partner to speak on your behalf when it comes to making decisions about medical care, should you become incapacitated.
  • Prepare a living will. A living will is the best way to let the medical community know what your wishes are regarding artificial feeding and other life-prolonging measures.

Do married couples need life insurance?

The purpose of life insurance is to provide a source of income for your children, dependents, or whoever you choose as a beneficiary, in case of your death. Therefore, married couples typically need more life insurance than their single counterparts. If you have a spouse, child, parent, or some other individual who depends on your income, then you probably need life insurance. Here are some typical families that need life insurance:

  • Families or single parents with young children or other dependents. The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. If the family cannot afford to insure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap. If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, and bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.
  • Adults with no children or other dependents. If your spouse could live comfortably without your income, then you will need less insurance than the people in situation (1). However, you will still need some life insurance. At a minimum, you will want to provide for burial expenses, for paying off whatever debts you have incurred, and for providing an orderly transition for the surviving spouse. If your spouse would undergo financial hardship without your income, or if you do not have adequate savings, you may need to purchase more insurance. The amount will depend on your salary level and that of your spouse, on the amount of savings you have, and on the amount of debt you both have.
  • Single adults with no dependents. You will need only enough insurance to cover burial expenses and debts, unless you want to use insurance for estate planning purposes.
  • Children. Children generally need only enough life insurance to pay burial expenses and medical debts. In some cases, a life insurance policy might be used as a long-term savings vehicle.

If one spouse changes their name after marriage, who should be notified?

You should notify all organizations with which you previously corresponded with your maiden name. The following is good list to start with:

  • The Social Security Administration
  • Driver’s license bureau
  • Auto license bureau
  • Passport office
  • Employer
  • Voter’s registration office
  • School alumni offices
  • Investment and bank accounts
  • Insurance agents
  • Retirement accounts
  • Credit cards and loans
  • Subscriptions
  • Club memberships
  • Post Office

Do I need to update my will when I get married?

Absolutely. Your will should be updated often, especially when such a significant life event occurs. Otherwise you spouse and other intended beneficiaries may not get what you intended upon your death.

What are the tax implications of marriage?

Once you are married you are entitled to file a joint income tax return. While this simplifies the filing process, you may find your tax bill either higher or lower than if each of you had remained single. Where it’s higher it’s because when you file jointly more of your income is taxed in the higher tax brackets. This is frequently referred to as the “marriage tax penalty.” Tax law changes in the form of marriage penalty relief were made permanent by the American Taxpayer Relief Act of 2012, but don’t eliminate the penalty for taxpayers in the higher brackets.

You cannot avoid the marriage penalty by filing separate returns after you’re married. In fact filing as “married filing separately” can actually increase your taxes. Consult Metro Accounting And Tax Services, CPA if you have any questions about the best filing status for your situation.

Note: Under a joint IRS and U.S. Department of the Treasury ruling issued in 2013, same-sex couples, legally married in jurisdictions that recognize their marriages, are treated as married for federal tax purposes, including income and gift and estate taxes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or not.

In addition, the ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country is covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

How can married couples hold property?

There are several ways of owning property after marriage, but keep in mind that they may vary from state to state. Here are the most common:

  • Sole Tenancy. Ownership by one individual. At death the property passes according to your will.
  • Joint Tenancy, with right of survivorship. Equal ownership by two or more people. At death property passes to the joint owner’s. This is an effective way of avoiding probate.
  • Tenancy in Common. Joint ownership of property without the right of survivorship. At death your share of the property passes according to your will.
  • Tenancy by the Entirety. Similar to Joint Tenancy, with right of survivorship. This is only available for spouses and prevents one spouse from disposing of the property without the others permission.
  • Community Property. In some states, referred to as community property states, married people own property, assets, and income jointly; that is, there is equal ownership of property acquired during a marriage. Community property states are AZ, CA, ID, LA, NV, NM, TX, WA, and WI.

For these and other pertinent life changing events, let the Financial Advisors at Metro Accounting And Tax Services, CPA be your trusted financial partner. Call the office at 470-240-5143.

Misconceptions Of Business Owners

As a small business owner one of the biggest hurdles you’ll face in running your own business is trying to stay on top of your numerous obligations to federal, state, and local tax agencies. Tax codes seem to be in a constant state of flux making the Internal Revenue Code barely understandable to most people.

“Ignorance of the law is no excuse”, is perhaps most often applied in tax settings and it is safe to assume that a tax auditor presenting an assessment of additional taxes, penalties, and interest will not look kindly on an “I didn’t know I was required to do that” excuse. However, it is surprising how many small businesses actually overpay their taxes, neglecting to take deductions they’re legally entitled to that can help them lower their tax bill.

Preparing your taxes and strategizing as to how to keep more of your hard-earned dollars in your pocket becomes increasingly difficult with each passing year. Your best course of action to save time, frustration, money, and an auditor knocking on your door, is to have Metro Accounting And Tax Services, CPA handle your taxes.

As tax professionals, we have years of experience with tax preparation, religiously attend tax seminars, read scores of journals, magazines, and monthly tax tips, among other things, to correctly interpret the changing tax code.

When it comes to tax planning for small businesses, the complexity of tax law generates a lot of folklore and misinformation that also leads to costly mistakes. With that in mind, here is a look at some of the more common small business tax misperceptions.

A. All Start-Up Costs Are Immediately Deductible

Business start-up costs refer to expenses incurred before you actually begin operating your business. Business start-up costs include both start up and organizational costs and vary depending on the type of business. Examples of these types of costs include advertising, travel, surveys, and training. These start up and organizational costs are generally called capital expenditures.

Costs for a particular asset (such as machinery or office equipment) are recovered through depreciation or Section 179 expensing. When you start a business, you can elect to deduct or amortize certain business start-up costs.

Starting in tax year 2011, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.

For example:

Let’s say you started a LLC in 2017. You have $10,000 in deductible startup costs and $2,000 in costs to set up the LLC. Here’s how the deduction might work:

  • You can deduct the $2,000 in LLC setup costs on your 2017 business tax return, as organizational expenses.
  • You can also deduct $5,000 of your other startup costs on your 2017 taxes.
  • The other $5,000 in startup costs must be amortized over the following few years, as required by the IRS.

B. Overpaying the IRS Makes You “Audit Proof”

The IRS doesn’t care if you over pay your taxes. All they care about is that you pay the right amount of taxes. They also care if you pay less taxes than you owe and you can’t substantiate your deductions.

It is important to note that even if you overpay in one area, the IRS will still hit you with interest and penalties if you underpay in another. It is never a good idea to knowingly or unknowingly overpay the IRS. The best way to “Audit Proof” yourself is to properly document your expenses and make sure you are getting good advice from your tax accountant.

C. Being incorporated enables you to take more deductions.

Self-employed individuals (sole proprietors and S Corps) qualify for many of the same deductions that incorporated businesses do, and for many small businesses, being incorporated is an unnecessary expense and burden. Start-ups can spend thousands of dollars in legal and accounting fees to set up a corporation, only to discover soon thereafter that they need to change their name or move the company in a different direction. In addition, plenty of small business owners who incorporate don’t make money for the first few years and find themselves saddled with minimum corporate tax payments and no income.

D. The home office deduction is a red flag for an audit.

While it used to be a red flag, this is no longer true–as long as you keep excellent records that satisfy IRS requirements. Because of the proliferation of home offices, tax officials cannot possibly audit all tax returns containing the home office deduction. In other words, there is no need to fear an audit just because you take the home office deduction. A high deduction-to-income ratio however, may raise a red flag and lead to an audit.

E. If you don’t take the home office deduction, business expenses are not deductible.

You are still eligible to take deductions for business supplies, business-related phone bills, travel expenses, printing, wages paid to employees or contract workers, depreciation of equipment used for your business, and other expenses related to running a home-based business, whether or not you take the home office deduction.

F. Requesting an extension on your taxes is an extension to pay taxes.

Extensions enable you to extend your filing date only. Penalties and interest begin accruing from the date your taxes are due.

G. Part-time business owners cannot set up self-employed pensions.

If you start up a company while you have a salaried position complete with a 401K plan, you can still set up a SEP-IRA for your business and take the deduction.

A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records and understanding how the tax system works is beneficial to any business owner, whether you run a small to medium sized business or are a sole proprietor.

And, even if you delegate the tax preparation to someone else, you are still liable for the accuracy of your tax returns. If you have any questions, don’t hesitate to give us a call.

Metro Accounting And Tax Services, CPA 470—240-5143.

Credit Evaluation Factors Revealed

Part 1

By explaining what you need to make full use of your credit report, to determine your credit standing, and to maximize your chances for credit approval this Guide developed by Metro Accounting And Tax Services, CPA will help you to:

1)Better understand your credit report,

2)Know the meaning of jargon used in the credit industry, and

3)Find out exactly what you can do to improve your credit standing.

One question that is frequently asked is how do lenders determine who is approved for a credit card, mortgage, or car loan? Why are some individuals flooded with credit card offers while others get turned down routinely?

Because creditors keep their evaluation standards secret, it is difficult for you to know just how to improve your credit rating, that is, until now. This Financial Guide explains how, and gives you a look into the practices of lenders and credit bureaus.

Credit Evaluation Factors

When you apply for a loan, how is your application processed? In some cases, such as applying for a loan from your bank, it may as simple as going to the bank, giving brief information about why you need a loan, signing a loan contract and getting a check immediately. Other banks use loan committees – a group of bank employees who decide which applications to approve. Still others use sophisticated, complex computer analysis to evaluate applications.

Other creditors use credit scoring, this is the process in which point values are assigned to various credit characteristics. Those who get enough “points” get credit. Credit scoring can vary in complexity, according to the creditor’s policy.

Most creditors also have certain minimum requirements before they will consider an application. For instance, anyone who does not have a minimum annual income (perhaps $25,000) or who has been through bankruptcy may be automatically rejected.

However, most credit-scoring systems are more complicated than depicted here, with many different pieces of data selected to be analyzed for each application. A clerk enters information from both the credit application and the credit report onto a computer system, and the system evaluates it and produces an acceptance or rejection letter. Smaller creditors using a simpler credit scoring system have each loan evaluated by a loan officer who makes the decision.

The Age Factor

If a lender’s credit experience shows that people in a certain age group have a better record of paying their bills than people of other ages, the lender may – legally – give a higher score to the better-paying age group.

However, the Equal Credit Opportunity Act (ECOA), a federal law intended to prevent discrimination in lending, does not allow lenders to discriminate against people age 62 or over. The ECOA requires creditors using a scoring system to give those aged 62 and older an age-factor score at least as high as that given to anyone under age 62.

For example: A lender gives the following age scores to applicants:

A) Age 18 -25             Point = 1

B) Age 26 – 35            Points = 5

C) Age 36 – 45            Points = 4

D) Age 47 –  61           Points = 3

E) Age 62 and above Points = 5

To prevent discrimination against older people, the lender must give anyone age 62 or older at least 5 points for age, since 5 points is the highest score available to anyone under 62 (i.e., those aged 26-35).

The Residency Factor

Creditors may take into account your geographic location in scoring your length of time at one address. If you live in a city, where people move more often, the length of time at your address will probably count less than if you live in the country.

It is important to note that many creditors give a higher score to those who have lived at the same address for at least two years. Some lenders just give extra points for living in the same area for two years or more.

Also of importance is the fact that if your address is a post office box, you may find yourself turned down for credit. Also, to fight fraud, some creditors screen out applicants whose addresses indicate commercial offices, mail drops, or prisons.

Since post office boxes or rural delivery boxes are commonplace in rural areas, however, a lender may issue a card to that address while rejecting applicants with a P.O. Box in a large city.

People who own their homes earn a higher score than renters.

The “Authorized User” Or Payment History Factor

An authorized user is someone who has permission to use a credit card but is not legally liable for the bills. If you are an authorized user on someone’s account, the payment history will likely be reported in your credit file, but you will not be able to rely on it to help you build your own credit rating.

Please not that “an authorized user status” usually will neither help you nor hurt you when you apply for a loan.

The Bank Card History Factor

The reason a bankcard is a strong reference is that it shows a bank has trusted you with hundreds or even thousands of dollars on the basis of just your signature. Also, bankcards are more difficult to get than department store cards or travel and entertainment cards, so your qualifications must have been closely scrutinized when you applied.

So, one of the best things you can have on a credit report is a bankcard-a Visa, MasterCard or Discover card that has been paid on time over a period. In a scoring system, a good bankcard reference usually carries more weight than a department store card or American Express card.

Department store charge cards have lower credit limits and if used will typically have a higher debt to limit ratio, which has a negative impact on credit scores.

In addition, American Express is a charge card. As such users must pay in full, the amount due when the monthly statement arrives. There is no minimum payment, interest rate, or spending limit, and while American Express reports the high balance to credit bureaus, it doesn’t impact FICO credit scores.

The Checking And Savings Account Factor

People who have checking and savings accounts usually score better than those who do not. Some banks give you extra points if you have checking or savings accounts with them. Some banks also give discounts on loan rates when you hold other accounts with them.

As always, the CPAs at Metro Accounting And Tax Services, stand ready to assist you with all your accounting and any financial planning issues you might be experiencing in your business or personal life. Call the office today at 470-240-5143 for expert guidance.

Are You Running a Business or In A Job?

In the spirit of helping business owners run and operate their businesses in an efficient manner, Metro Accounting And Tax Services, CPA has developed this business guide to ask the question, are you in a job or are you running a business? The goal here is to help small business owners make the transition from just going to a job to running a business. For all your accounting and business planning needs the CPAs at our office are ready to help you in this transformation process. Call us @ 470-240-5143.

As a business consulting “guru”, Michael Gerber observations concerning small businesses have had a profound impact on how business owners and aspirants saw their businesses and their role as a business owner.

Gerber observed that most people go into business for the wrong reason. Most people that start businesses are nothing but skilled technicians. They do a good job of what the business provides to the customer. They believe they can earn more by doing it in their own business than for someone else. They leave and open their own shop. This is what Gerber calls an “entrepreneurial seizure.

There is the belief by these technicians that they will find more freedom in their business but they discover it is the hardest job in the world. There is no escape. They are the ones who are doing all the work! They are literally the “business!” But if they are the business, they haven’t really created a business at all. They have only created a job for themselves! They work longer hours and they work harder by trying to do everything themselves. The goal of every business owner according to Gerber should be to get their business set up and working efficiently but without them.

To empahsize, the role of the business owner is to create a business that works independently of him or herself. There is an “end point” where the business functions independently of the owner. At this point, the business owner may choose to sell it or not. By then, he or she will have created a ready-to-sell “money making machine” and may choose whether to devote effort to it or not. The business can also be duplicated from place to place.

The model for this effort is the “turnkey franchise,” such as McDonalds. The franchise creator, by establishing, documenting, and testing detailed systems, Ray Kroc made a uniform business with a certain look, providing a consistent experience to the customer. Ray controlled the design of the restaurant, sold uniformly made food and equipment, and provided the “scripts” for the service people. These scripts contained detailed procedures for preparing the food.

Likewise, the business owner should start with an idea of what this business should look like. This includes an organizational chart that could start with the business owner in each box. The chart documents the organization with responsibilities for chief executive, marketing, accounting, finance, and production employees. Gradually, the business owner tests, measures, and documents procedures for each position then replaces them with others until he or she isn’t needed at all.

The shorthand phrase for the business systems could be “Here’s how we do it here.”

The business becomes a learning place where each person finds satisfaction in performing their parts to the best of their abilities.

Small business owners should be grateful to Michael Gerber for his profound observations and the challenge he has presented to us. Each morning, we should ask ourselves: “Am I going to a business, or am I going to a job?” If we are going to a job, we have Gerber’s model for change.

Employees must think in order to provide outstanding service. Gerber’s approach can sometimes be inflexible when dealing with changes we deal with today.

More important than “Here’s how we do it here,” we need to know “What’s important here.” We need to define the values of our business. People need to be more important than the systems that are supposed to serve them. Systems shouldn’t override common sense.

10 Major Ways To Increase Your Nest Egg

Reducing your spending is one sure fire way to accumulate assets for retirement, education or other major goals in life. It has been shown that these savings can add up over the years to a substantially increased ones’ nest egg.

There is that familiar saying that “A penny saved is a penny earned” but this expression overlooks the impact of taxes; a saved penny is, in fact, worth more, often much more, than an earned penny because you pay tax on an earned penny but not on the penny you save.

Thus, tax-free savings, with earnings compounding over the years, can really increase your nest egg, making it worthwhile to explore the following money-saving techniques.

This Financial Guide compiled by Metro Accounting And Tax Services, CPA, provides you with 10 tips for making sure that more of your money is slated for saving and investment. To get started you should:

A. Prepare a Financial Plan

While the importance of a financial plan is appreciated by most people appreciate, too many put it off to tomorrow and tomorrow never comes. It is important to identify your goals and determine how best to achieve them. A financial plan can help you do this.

B. Save Your Income

For every payroll period make sure that you save a percentage of your paycheck, this can be done through the use of an automatic savings plan. The percentage saved should be determined by your financial planning needs. Some people need to save 10 percent of their gross pay while others need to save more. If the amount saved goes to a 401(k) plan or another tax-deferred plan, so much the better.

But don’t stop with automatic savings. Put aside everything you can. If you invest $50 a month in a mutual fund, you could have as much as $25,000 in ten years, depending on the rate of return. A well-thought-out budget will help you determine how much you should and can save.

C. Cut Your Mortgage Costs

  • If possible consider paying down your mortgage. For most people, paying down a mortgage is an effective way of saving and increasing net worth. Make an extra payment per year or a $100 or $200 per month more in mortgage principal, and do it faithfully.
  • Consider refinancing your mortgage. See if you can save money by refinancing your mortgage. Go through the calculations and see whether the reduction in your monthly payments would be worth the costs involved with refinancing. The general rule is that a reduction of at least two points will make it worthwhile to refinance, if you intend to stay in the house for at least five years.

D. Cut Your Consumer Debt

It is imperative that you try to cut your consumer debt as much as you can. To save interest, you can consider replacing your consumer debt with a no-fee, no-points home equity loan. The interest on a home equity line is deductible, however, bear in mind that you are putting your home at risk.

Once you have paid off a car loan or other debt, keep sending that payment to a mutual fund or other investment.

E. Cut Your Credit Card Costs

There are many ways to cut your credit card costs, e.g., switching to a card that charges less interest.

Its best to try to pay for everything in cash. It’s a good way of disciplining yourself.

F. Cut Your Bank Fees

There are many ways to reduce your bank fees. Consider:

  • Is your checking account resulting in wasted fees? Find out what you need to do to get free checking and free ATM usage and do it. Keep a minimum balance in the account, and use only ATMs at your own bank, for example. You may want to join a credit union instead of using a bank, since credit unions typically charge less for banking services.
  • Don’t keep too much money in a low-interest savings account. Find out how much money you’ll need access to in an emergency, three to six months’ worth of expenses, and keep only that amount in savings. The rest of your funds should be put to work.
  • When ordering checks, don’t order them through your bank. Many check printers charge less for check orders than the printers used by banks.

You should stop using your ATM card if you find you are withdrawing too much cash. Make yourself go to the bank and withdraw the money instead. This may help you to spend less cash.

G. Fine Tune Your Insurance Coverage

Here are some ways to save on insurance of all types:

  • Do some shopping for a life insurance policy. It pays to check prices on life insurance policies periodically. Rates change frequently. Also, if you’ve quit smoking, you may be entitled to better rates after a few years.
  • Examine your life insurance needs to see whether you are paying for too much coverage.
  • Insure your home and autos with the same insurer. You may be able to get a break by doing this.
  • Shop for auto insurance to try to get a lower rate.
  • Install smoke detectors, burglar alarms, and sprinkler systems to save on homeowner’s insurance. Ask your insurance agent about other savings.
  • Get rid of private mortgage insurance. Once you have enough equity in the home, ask your lender to cancel your private mortgage insurance.

H. Cut Your Utility Costs

Here are some thoughts to keep in mind in cutting utility costs:

  • Your utility may have a program that subsidizes making your home more energy-efficient. Look into this possibility. Even if there is no help available from the utility, it is worth it to caulk your windows and make sure your insulation is a high enough “R” factor.
  • Use CFLs (compact fluorescent lights) instead of incandescent bulbs.
  • Keep the thermostat set at the lowest comfortable temperature in winter and the highest comfortable temperature in summer.

I. Cut Your Phone Bills

Today’s cost-cutting competition among phone service providers offers many opportunities for savings on your phone bills, such as:

  • Make sure you’re paying as little as possible for long-distance charges. Take the time to investigate which long-distance carrier will save you the most, and switch to that carrier.
  • Don’t dial “Information.” Look it up online or in the phone book.
  • Use e-mail or a VoIP such as Skype to correspond with relatives and friends.

J. Forego One Big Expense per Year

Foregoing one big expense per year will really help. For instance, skip your yearly vacation this year or take a less expensive one. Another way to save one big yearly expense is to swap an expensive health club membership for a YMCA plan.

For help with all your accounting, taxes and financial planning needs give the accountants at Metro Accounting And Tax Services a call at 470-240-5143.

Year End Tax Saving Strategies For Businesses

As the year end approaches, businesses are scrambling to implement tax saving strategies to reduce their 2017 tax burden. Here are a number of year-end tax planning strategies developed by Metro Accounting And Tax Services that businesses can use to achieve this goal.

It should be noted that these are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2017. If you’d like more information about tax planning for 2018, please call to schedule a consultation to discuss your specific tax and financial needs, and develop a plan that works for your business.

Deferring Income

Businesses using the cash method of accounting can defer income into 2018 by delaying end-of-year invoices, so payment is not received until 2018. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2018.

Purchase New Business Equipment

Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2017 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $510,000 for the first $2,030,000 million of property placed in service by December 31, 2017. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. The deduction is phased out dollar for dollar on amounts exceeding the $2.03 million threshold and eliminated above amounts exceeding $2.5 million.

Bonus Depreciation. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016 and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. It is important to note that property placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Please contact the Metro Accounting And Tax Services if you have any questions regarding qualified property.

Timing Of Purchases

If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here’s a simplified explanation:

Conventions. The tax rules for depreciation include “conventions” or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

  1. The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as “placed in service” (or “disposed of”) at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.

Example: You buy a $40,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.

  1. The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.
  2. The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

If you’re planning on buying equipment for your business, call the office and speak with a tax professional who can help you figure out the best time to buy that equipment and take full advantage of these tax rules.

Other Year-End Moves to Take Advantage Of

Small Business Health Care Tax Credit. Small business employers with 25 or fewer full-time-equivalent employees (average annual wages of $52,400 in 2017) may qualify for a tax credit to help pay for employees’ health insurance. The credit is 50 percent (35 percent for non-profits).

Business Energy Investment Tax Credit. Business energy investment tax credits are still available for eligible systems placed in service on or before December 31, 2021, and businesses that want to take advantage of these tax credits can still do so.

Business energy credits include geothermal electric, large wind (expires in 2019), and solar energy systems used to generate electricity, to heat or cool (or to provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible; however, passive solar and solar pool-heating systems excluded are excluded. Utilities are allowed to use the credits as well.

Repair Regulations. Where possible, end of year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor rule by electing to deduct smaller purchases ($2,500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small business with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call us at 470-240-5143 if you would like more information on this topic.

Partnership or S-Corporation Basis. Partners or S corporation shareholders in entities that have a loss for 2017 can deduct that loss only up to their basis in the entity. However, they can take steps to increase their basis to allow a larger deduction. Basis in the entity can be increased by lending the entity money or making a capital contribution by the end of the entity’s tax year.

Caution: Remember that by increasing basis, you’re putting more of your funds at risk. Consider whether the loss signals further troubles ahead.

Section 199 Deduction. Businesses with manufacturing activities could qualify for a Section 199 domestic production activities deduction. By accelerating salaries or bonuses attributable to domestic production gross receipts in the last quarter of 2017, businesses can increase the amount of this deduction. Please call to the office at 470-240-5143 to find out how your business can take advantage of Section 199.

Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2017. Call today if you need help setting up a retirement plan.

Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders.

Budgets. Every business, whether small or large should have a budget. The need for a business budget may seem obvious, but many companies overlook this critical business planning tool.

A budget is extremely effective in making sure your business has adequate cash flow and in ensuring financial success. Once the budget has been created, then monthly actual revenue amounts can be compared to monthly budgeted amounts. If actual revenues fall short of budgeted revenues, expenses must generally be cut.

Tip: Year-end is the best time for business owners to meet with their accountants to budget revenues and expenses for the following year.

If you need help developing a budget for your business, don’t hesitate to call Metro Accounting And Tax Services @ 470-240-5143.

Small Business Owners – Are You Keeping Your Own BooKs?

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Vacation = Tax Deduction!!

How would you like to legally deduct every dime you spend on vacation this year? This financial guide offers strategies that help you do just that.

Mark is the owner of a small business and he decided that he wanted to take a two-week trip around the US. So, he did–and was able to legally deduct every dime that he spent on his “vacation.” Here’s how he did it.

1.    Make all your business appointments before you leave for your trip.

Most people believe that they can go on vacation and simply hand out their business cards in order to make the trip deductible. That’s not the case and that will not pass the muster test with the IRS. In-order to make the trip deductible, you must have at least one business appointment before you leave in order to establish the “prior set business purpose” required by the IRS. Keeping this in mind, before he left for his trip, Mark set up appointments with business colleagues in the various cities that he planned to visit.

In this instance Mark is a manufacturer of green office products looking to expand his business and distribute more product. One possible way to establish business contacts–if he doesn’t already have them–is to place advertisements looking for distributors in newspapers in each location he plans to visit. He could then interview those who respond when he gets to the business destination.

If Mark wanted to vacation in Hawaii for example and he places several advertisements for distributors, or contacts some of his downline distributors to perform a presentation, then the IRS would accept his trip for business.

It is imperative for Mark to document the business purpose of his trip by keeping a copy of the advertisement and all correspondence along with noting what appointments he will have in his diary.

2.    Make Sure your Trip is All “Business Travel.”

In order to deduct all of your on-the-road business expenses, the travel must be business related. The IRS states that travel expenses are 100 percent deductible as long as your trip is business related and you are traveling away from your regular place of business longer than an ordinary day’s work and you need to sleep or rest to meet the demands of your work while away from home.

Let’s say Mark wanted to go to a regional meeting in Las Vegas, which is only a one-hour drive from his home. If he were to sleep in the hotel where the meeting will be held (in order to avoid possible automobile and traffic problems), his overnight stay qualifies as business travel in the eyes of the IRS.

Contrary to popular belief, you don’t need to live far away to be on business travel. If you have a good reason for sleeping at your destination, you could live a couple of miles away and still be on travel status.

3.    Make sure that you deduct all of your on-the-road -expenses for each day you’re away.

You are allowed for every day you are on business travel to deduct 100 percent of lodging, tips, car rentals, and 50 percent of your food. Mark spends three days meeting with potential distributors. If he spends $50 a day for food, he can deduct 50 percent of this amount, or $25 per day. The IRS doesn’t require receipts for travel expense under $75 per expense–except for lodging.

If Mark pays $6 for drinks on the plane, $6.95 for breakfast, $12.00 for lunch, $50 for dinner, he does not need receipts for anything since each item was under $75.

He would, however, need to document these items in your diary. A good tax diary is essential in order to audit-proof your records. Adequate documentation shall consist of amount, date, place and business reason for the expense.

A receipt is however needed for all paid lodging. If Mark stays in the Bates Motel and spends $50 on lodging, will he need a receipt? The answer is yes as you need receipts for all paid lodging.

Not only are your on-the-road expenses deductible from your trip, but also all laundry, shoe shines, manicures, and dry-cleaning costs for clothes worn on the trip. Thus, your first dry cleaning bill that you incur when you get home will be fully deductible. Make sure that you keep the dry-cleaning receipt and have your clothing dry cleaned within a day or two of getting home.

4.    Sandwich weekends between business days.

If you have a business day on Friday and another one on Monday, did you know that you can deduct all on-the-road expenses during the weekend.

Mark makes business appointments in Florida on Friday and one on the following Monday. Even though he has no business on Saturday and Sunday, he may deduct on-the-road business expenses incurred during the weekend.

5.    Make the majority of your trip days business days.

The IRS says that you can deduct transportation expenses if business is the primary purpose of the trip. A majority of days in the trip must be for business activities, otherwise, you cannot make any transportation deductions.

If Mark spends six days in Las Vegas. He leaves early on Thursday morning. He had a seminar on Friday and meets with distributors on Monday and flies home on Tuesday, taking the last flight of the day home after playing a complete round of golf. How many days are considered business days?

All of them. Thursday is a business day since it includes traveling – even if the rest of the day is spent at the beach. Friday is a business day because he had a seminar. Monday is a business day because he met with prospects and distributors in pre-arranged appointments. Saturday and Sunday are sandwiched between business days, so they count, and Tuesday is a travel day.

Since Mark accrued six business days, he could spend another five days having fun and still deduct all his transportation to San Diego. The reason is that the majority of the days were business days (six out of eleven). However, he can only deduct six days of lodging costs, dry cleaning costs, shoe shines, and tips. The important point is that Mark would be spending money on lodging, airfare, and food, but now most of his expenses will become deductible.

With proper planning, Metro Accounting And Tax Services, CPA will show you how you can deduct most of your vacations if you combine them with business. Call the Office today, 470-240-5143 and we’ll show you how.

Cash Flow: The Life Blood Of Your Business

According to some business experts, having a healthy stream of cash flow is more important than your business’s ability to deliver its goods and services!

That’s a hard pill to swallow, but consider this: if you fail to satisfy a customer and lose that customer’s business, you can always work harder to please the next customer. But if you fail to have enough cash to pay your suppliers, creditors, or employees, you’re out of business! This cash flow guide was developed by Metro Accounting And Tax Services, CPA to help the small business owner navigate the choppy seas of running a business and being cash positive. For all your accounting needs please call the office at 470-240-5143 for expert advice and guidance.

Cash flow, simply defined, is the movement of money in and out of your business; these movements are called inflows and outflows. Inflows for your business primarily come from the sale of goods or services to your customers. The inflow only occurs when you make a cash sale or collect on receivables.

Remember, it is the cash that counts! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

A certified accountant is the best person to help you learn how your cash flow statement works. Please contact us and we can prepare your cash flow statement and explain where the numbers come from.

Profit and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Theoretically, even profitable companies can go bankrupt if they lack the cash flow and are unable to pay their bill when they become due. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business.

Analyzing Your Cash Flow

The first step toward taking control of your company’s cash flow is to analyze the components that affect the timing of your cash inflows and outflows. A thorough analysis of these components will reveal problem areas that lead to cash flow gaps in your business. Narrowing, or even closing, these gaps is the key to cash flow management.

·         Credit terms. Credit terms are the time limits you set for your customers’ promise to pay for their purchases. Credit terms affect the timing of your cash inflows. A simple way to improve cash flow is to get customers to pay their bills more quickly.

·         Inventory Management. Inventory describes the extra merchandise or supplies your business keeps on hand to meet the demands of customers. An excessive amount of inventory hurts your cash flow by using up money that could be used for other cash outflows. Too many business owners buy inventory based on hopes and dreams instead of what they can realistically sell. Keep your inventory as low as possible.

·         Cashflow Gaps. Some cash flow gaps are created intentionally. For example, a business may purchase extra inventory to take advantage of quantity discounts, accelerate cash outflows to take advantage of significant trade discounts, or spend extra cash to expand its line of business.

Avoid running into cash flow problems
As a small business owner, you might be concerned with how to avoid running into cash flow problems in the first place, and if these problems exist, what’s the best plan of action to mitigate and reverse these trends in your business.

Plan cash flows. A failure to properly plan cash flow is one of the leading causes of small business failures. Experience has shown that many small business owners lack an understanding of basic accounting principles. Knowing the basics will help you better manage your cash flow.

A business’s monetary supply can exist either as cash on hand or in a business checking account available to meet expenses. A sufficient cash flow covers your business by meeting obligations (i.e., paying bills), serving as a cushion in case of emergencies, and providing investment capital.

Prepare a cash flow statement. Preparing, monitoring and managing your cash flow statement is critical to the effective and efficient running of any business operations. This aid in assessing the vitality of the business entity. The first signs of financial woe appear in your cash flow statement, giving you ample time to recognize a forthcoming problem and enough breathing space to deal with the underlying issues. With the periodic cash flow analysis, you can head off any unpleasant financial glitches and avoid unwanted surprises. You’ll be able to dial into the root cause of the problem and recognize aspects of your business that have the ability to cause and exacerbate cash flow gaps.

As always, the CPAs at Metro Accounting And Tax Services, stand ready to assist you with your cash flow or any other accounting issues you are experiencing in your business. Call the office today at 470-240-5143 for expert guidance.

The Home Office Deduction.

Based on IRS guidelines, a taxpayer is allowed to deduct expenses related to business use of a home, but only if the space is used “exclusively” on a “regular basis” for business purposes. To qualify for a home office deduction, you must meet one of the following requirements:

  1. Exclusive and regular use as your principal place of business
  2. A place for meeting with clients or customers in the ordinary course of business
  3. A place for the taxpayer to perform administrative or management activities associated with the business, provided there is no other fixed location from which the taxpayer conducts a substantial amount of such administrative or management activities

A separate structure not attached to your dwelling unit that is used regularly and exclusively for your trade or profession also qualifies as a home office under the IRS definition.

The exclusive-use test is satisfied if a specific portion of the taxpayer’s home is used solely for business purposes or inventory storage. The regular-basis test is satisfied if the space is used on a continuing basis for business purposes. Incidental business use does not qualify.

In determining the principal place of business, the IRS considers two factors: Does the taxpayer spend more business-related time in the home office than anywhere else? Are the most significant revenue-generating activities performed in the home office? Both of these factors must be considered when determining the principal place of business.

Employees
To qualify for the home-office deduction, an employee must satisfy two additional criteria. First, the use of the home office must be for the convenience of the employer (for example, the employer does not provide a space for the employee to do his/her job). Second, the taxpayer does not rent all or part of the home to the employer and use the rented portion to perform services as an employee for the employer. Employees who telecommute may be able to satisfy the requirements for the home-office deduction.

Expenses
Home office expenses are classified into three categories:

Direct Business Expenses relate to expenses incurred for the business part of your home such as additional phone lines, long-distance calls, and optional phone services. Basic local telephone service charges (that is, monthly access charges) for the first phone line in the residence generally do not qualify for the deduction.

Indirect Business Expenses are expenditures that are related to running your home such as mortgage or rent, insurance, real estate taxes, utilities, and repairs.

Unrelated Expenses such as painting a room that is not used for business or lawn care are not deductible.

Deduction Limit

You can deduct all your business expenses related to the use of your home if your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation). But, if your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited.

Nondeductible expenses such as insurance, utilities, and depreciation that are allocable to the business are limited to the gross income from the business use of your home minus the sum of the following:

  • The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)).
  • The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself.

If your deductions are greater than the current year’s limit, you can carry over the excess to the next year. They are subject to the deduction limit for that year, whether or not you live in the same home during that year.

Simplified Home Office Deduction

If you’re one of the more than 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction), don’t forget about the new simplified option available for taxpayers starting with 2013 tax returns. Taxpayers claiming the optional deduction will complete a significantly simplified form.

The new optional deduction is capped at $1,500 per year based on $5 a square foot for up to 300 square feet. Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

Tax Deductions
The “home office” tax deduction is valuable because it converts a portion of otherwise nondeductible expenses such as mortgage, rent, utilities and homeowners insurance into a deduction.

Remember however, that an individual is not entitled to deduct any expenses of using his/her home for business purposes unless the space is used exclusively on a regular basis as the “principal place of business” as defined above. The IRS applies a 2-part test to determine if the home office is the principal place of business.

  • Do you spend more business-related time in your home office than anywhere else?
  • Are the most significant revenue-generating activities performed in your home office?

If the answer to either of these questions is no, the home office will not be considered the principal place of business, and the deduction cannot be taken.

A home office also increases your business miles because travel from your home office to a business destination–whether it’s meeting clients, picking up supplies, or visiting a job site–counts as business miles. And, you can depreciate furniture and equipment (purchased new for your business or converted to business use), as well as expense new equipment used in your business under the Section 179 expense election.

Taxpayers taking a deduction for business use of their home must complete Form 8829.

If you have a home office or are considering one, please call us.

Metro Accounting And Tax Services, CPA, 470-240-5143. We’ll be happy to help

You take advantage of these deductions.

Information Needed To Do My Taxes

In order to do your taxes, you’ll need to Keep detailed records of your income, expenses, and other information you report on your tax return. A complete set of records can help you save money when you do your taxes and will be your trusty ally in case you are audited.

There are several types of records that you should keep. Most experts believe it’s wise to keep most types of records for at least seven years, and some you should keep these records indefinately.

It is imperative that you keep records of all your current year income and deductible expenses. These are the records that an auditor will ask for if the IRS selects you for an audit.

Here’s a list of the kinds of tax records and receipts to keep that relate to your current year income and deductions:

  • Income (wages, interest/dividends, etc.)
  • Exemptions (cost of support)
  • Medical expenses
  • Taxes
  • Interest
  • Charitable contributions
  • Child care
  • Business expenses
  • Professional and union dues
  • Uniforms and job supplies
  • Education, if it is deductible for income taxes
  • Automobile, if you use your automobile for deductible activities, such as business or charity
  • Travel, if you travel for business and are able to deduct the costs on your tax return

While you’re storing your current year’s income and expense records, be sure to keep your bank account and loan records too, even though you don’t report them on your tax return. If the IRS believes you’ve underreported your taxable income because your lifestyle appears to be more comfortable than your taxable income would allow, having these loan and bank records may be your saving grace.

One frequent question asked by tax payers is how long should they keep these records for. It is recommended that you keep the records of your current year’s income and expenses for as long as you may be called upon to prove the income or deduction if you’re audited.

For federal tax purposes, this is generally three years from the date you file your return (or the date it’s due, if that’s later), or two years from the date you actually pay the tax that’s due, if the date you pay the tax is later than the due date. IRS requirements for record keeping are as follows:

1) You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.

2) You do not report income that you should report, and it is more than 25 percent of the gross income shown on your return; keep records for 6 years

3) You file a fraudulent return; keep records indefinitely.

4) You do not file a return; keep records indefinitely.

5) You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.

6) You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.

7) Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Another frequent question asked is if old tax returns should be kept, and if so for how long? The answer to this question again is a resounding yes.

One of the benefits of keeping your tax returns from year to year is that you can look at last year’s return while preparing this year’s. It’s a handy reference and reminds you of deductions you may have forgotten.

Another reason to keep your old tax returns is that there may be information in an old return that you need later.

Another reason to keep your tax returns is that if the IRS calls you in for an audit, the examiner will more than likely ask you to bring your tax returns for the last few years. You’d think the IRS would have them handy, but that’s not the way it works. More than likely, your old returns are stored in a computer, in a storage area, or on microfilm somewhere. Usually, your IRS auditor has just a report detailing the reason the computer picked your return for the audit. So having your old returns allows you to easily comply with your auditor’s request.

You may want to keep your old returns forever, especially if they contain information such as the tax basis of your house. Probably, though, keeping them for the previous three or four years is sufficient.

If you throw out an old return that you find you need, you can get a copy of your most recent returns (usually the last six years) from the IRS. Ask the IRS to send you Form 4506, Request for Copy or Transcript of Tax Form. When you complete the form, send it, with the required small fee, to the IRS Service Center where you filed your return.

You’ll need to keep some other types of tax records and receipts because they tell you how much you paid for something that you may later sell.

These tax records may include:

  • Records of capital assets, such as coin and antique collections, jewelry, stocks, and bonds.
  • Records regarding the purchase and improvements to your home.
  • Records regarding the purchase, maintenance, and improvements to your rental or investment property.

These records should be kept for as long as you own the item so you can prove the cost you use to figure your gain or loss when you sell the item.

There are other records you should keep, even though they don’t appear to have any use for your tax returns. Here are a few examples:

  • Insurance policies, to show whether you were to be reimbursed in case you suffer a casualty or theft loss, have medical expenses, or have certain business losses.
  • Records of major purchases, in case you suffer a casualty or theft loss, contribute something of value to a charity or sell it.
  • Family records, such as marriage licenses, birth certificates, adoption papers, divorce agreements, in case you need to prove change in filing status or dependency exemption claims.
  • Certain records that give a history of your health and any medical procedures, in case you need to prove that a certain medical expense was necessary.
  • These categories are the most universal and should cover most of your recordkeeping needs. Everyone’s needs are unique, however, and there may be other records that are important to you. Skimming through our Tax Library Index might highlight other categories that apply to you.

Unless you own or operate your own business, partnership, or S corporation, recordkeeping does not have to be fancy.

Your recordkeeping system can be as casual as storing receipts in a box until the end of the year, then transferring the records, along with a copy of the tax return you file, to an envelope or file folder for longer storage.

To make it easy on yourself, you might want to separate your records and receipts into categories, and file them in labeled envelopes or folders. It’s also helpful to keep each year’s records separate and clearly labeled.

If you have your own business, or if you’re a partner in a partnership or an S corporation shareholder, you might find it valuable to hire a bookkeeper or accountant.

If you donate to a charity, you must have receipts to prove your donation and beginning in 2007, contributions in cash or by check aren’t deductible at all unless substantiated by one of the following:

  1. A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.
  2. A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
  3. Payroll deduction records. The payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.

Besides deducting your cash and non-cash charitable donations, you can also deduct your mileage to and from charity work. If you deduct mileage for your charitable efforts, keep detailed records of how you figured your deduction.

Also, if you work for someone else and spend your own money on company business, keep good records of your business expense receipts. You will need these records to either get a reimbursement from your employer or to prove business-related deductions that you take on your taxes.

If you make tips from your job, the hand of the IRS reaches here too, and if you are ever audited, the IRS will be interested in records of how much you made in tips.

If you own property, be particularly careful to keep receipts or some other proof of all your expenses, especially for repairs and improvements.

It’s important to keep accurate information about who works for you, including nannies and housekeepers, when and where they worked for you, and how much you paid them for the work.

If you have a business, you must keep very careful records of all your business expenses, including vehicle mileage, entertainment expenses, and travel expenses.

Keeping up-to-date records of all transactions and costs will not only help you tax wise, it will tell you if your business is actually profitable.

If you travel for business, keep good receipts and logs of all your travel expenses, including those for meals and entertainment. You will need this information whether you work for yourself or for someone else.

The Deductibility of Points

This Financial Guide explains when and to what extent points paid on the purchase of a home or on a refinancing are deductible. It explains the rules for deducting points and discusses special circumstances and situations.

What Are Points?

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.

Points are prepaid interest and may be deductible as home mortgage interest if you itemize deductions on Form 1040, Schedule A. Generally, if you can deduct all of the interest on your mortgage, you may be able to deduct all of the points paid on the mortgage. If your acquisition debt exceeds $1 million or your home equity debt exceeds $100,000, you cannot deduct all the interest on your mortgage and you cannot deduct all your points.

One important point to note is that a borrower is treated as paying any points that a home seller pays on his or her behalf  to obtain the mortgage.

Deductibility test.

Generally, the borrower cannot deduct the full amount of points in the year paid. Because they are prepaid interest, the borrower generally is required to deduct them over the life (term) of the mortgage.

However, the borrower can fully deduct points in the year paid if all of the following tests are applicable:

  1. Your loan is secured by your main home (the one you live in most of the time).
  2. Paying points is an established business practice in the area where the loan was made.
  3. The points paid were not more than the points generally charged in that area.
  4. You use the cash method of accounting (the method used by most individual taxpayers).
  5. The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
  6. You use your loan to buy or build your main home.
  7. The points were computed as a percentage of the principal amount of the mortgage.
  8. The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller’s.
  9. The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The funds you provided do not have to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. You cannot have borrowed these funds from your lender or mortgage broker.

Home improvement loan. You can also fully deduct in the year paid points paid on a loan to improve your main home if statements (1) through (5) above are true.

Non-Deductible Amounts

You cannot deduct amounts charged by the lender for specific services connected to the loan that are not considered to be interest. These amounts cannot be deducted in the year paid or over the life of the mortgage. Examples of these charges are:

  1. Appraisal fees
  2. Notary fees
  3. Preparation costs for the mortgage note or deed of trust
  4. Mortgage insurance premiums
  5. VA funding fees.

Points Paid by Seller

The term “points” includes loan placement fees that the seller pays to the lender on behalf of the buyer to secure the financing arrangement. The seller cannot deduct these fees as interest. But they are a selling expense that reduces the seller’s amount realized. The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. If all the tests explained earlier are met, the buyer can deduct the points in the year paid. If any of those tests is not met, the buyer deducts the points over the life of the loan.

Funds Provided Are Less than Points

If you meet all the tests referred to earlier; except that the funds you provided were less than the points charged to you (test 9), you can deduct the points in the year paid, up to the amount of funds you provided. In addition, you can deduct any points paid by the seller.

A) When you took out a $ 200,000 mortgage loan to buy your home in December, you were charged one point ($2,000). You meet all the nine tests for deducting points in the year paid, except the only funds you provided were a $1750 down payment. Of the $2,000 charged for points, you can deduct $1,750 in the year paid. You spread the remaining $250 over the life of the mortgage.

B) The facts are the same as above, except that the person who sold you your home also paid one point ($2,000) to help you get your mortgage. In the year paid, you can deduct $3,750 ($1750 of the amount you were charged plus the $2,000 paid by the seller). You must reduce the basis of your home by the $2,000 paid by the seller.

Excess Points

If you meet all the tests except that the points paid were more than generally paid in your area (test 3), you should deduct in the year paid only the points that are generally charged. You must spread any additional points over the life of the mortgage.

Points Paid on Second Home

The general rule of instant deductibility does not apply to points you pay on loans secured by your second home. You can deduct these points only over the life of the loan.

Mortgage Ends Early

If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan.

A mortgage may end early due to a prepayment, refinancing, foreclosure, or any similar event.

A) Joan paid $3,000 in points in 2006 that she had to spread out over the 15-year life of the mortgage. She had deducted $1,200 of these points through 2011. Joan prepaid her mortgage in full in 2012. She can deduct the remaining $1,800 of points in 2012.

Points Paid on Refinancing

Even in the case of a refinancing and the mortgage is secure by your main home, generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them.

However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first five tests listed earlier; you can fully deduct the part of the points related to the improvement in the year paid. You can deduct the rest of the points over the life of the loan.

A) In 1999, Joe Gibbs got a mortgage to buy a home. The interest rate on that mortgage loan was 11 percent. In 2008, Joe refinanced that mortgage with a 15-year $100,000 mortgage loan that has an interest rate of 7 percent. The mortgage is secured by his home. To get the new loan, he had to pay three points ($3,000). Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Joe paid the points out of his private funds, rather than out of the proceeds of the new loan. The payment of points is an established practice in the area and the points charged are not more than the amount generally charged there. Joe’s first payment on the new loan was due July 1. He made six payments on the loan in 2008 and is a cash basis taxpayer.

Joe used the funds from the new mortgage to repay his existing mortgage. Although the new mortgage loan was for Joe’s continued ownership of his main home, it was not for the purchase or improvement of that home. For that reason, Joe does not meet all the tests, and he cannot deduct all of the points in 2008. He can deduct two points ($2,000) ratable over the life of the loan. He deducts $67 [($2,000 ÷ 180 months) x 6 payments] of the points in 2008. The other point ($1,000) was a fee for services and is not deductible.

B) The facts are the same as above, except that Joe used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Joe deducts 25 percent ($25,000 ÷ $100,000) of the $2,000 prepaid interest in 2008. His deduction is $500 ($2,000 x 0.25).

Joe also deducts the ratable part of the remaining $1,500 ($2,000 – $500) prepaid interest that must be spread over the life of the loan. This is $50 [($1,500 ÷ 180 months) x 6 payments] in 2008. The total amount Joe deducts in 2008 is $550 ($500 + $50).

It is important to note also that you cannot fully deduct points paid on a mortgage that exceeds the limits on the home mortage.

The mortgage interest statement (Form 1098) you receive should show not only the total interest paid during the year but also your deductible points.

The statement will show the total interest you paid during the year. If you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. However, it should not show any interest that was paid for you by a government agency.

As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan.

Charity Contribution – Giving Wisely.

Since charities ask for larger and more frequent donations from the public these days, soliciting by mail, telephone, television, and radio, for example, they should be checked out before you donate money or time. Here are some tips on how to maximize your charity dollar and avoid scams.

Avoid Being Ripped-Off

Avoid being ripped-off by charities, here are some basic, common-sense suggestions for avoiding rip-offs in making charitable contributions:

  • Do not contribute cash. All contributions should be in the form of a check or money order made out to the charity never to the individual soliciting the donation.
  • Do not be misled by a charity that resembles or mimics the name of a well-known organization–all charities should be checked out.
  • Ignore pressure to donate immediately. Wait until you are sure that the charity is legitimate and deserving of a donation.
  • When appropriate, ask for written descriptions of the charity’s programs and/or finances, especially if the intended contribution is substantial.
  • If you have any doubt about the legitimacy of a charity, check it out with the local charity registration office (usually a division of the state attorney’s general office) and with the Better Business Bureau (BBB).

Volunteering

Although volunteering your time can be personally rewarding, it is important to consider the following factors before committing yourself:

  • Make sure you are familiar with the charity’s activities. Ask for written information about the charity’s programs and finances.
  • Be aware that volunteer work may require special training and the devotion of a scheduled number of hours each week to the charity.
  • If you are considering assisting with door-to-door fund-raising, be sure to find out whether the charity has financial checks and balances in place to help ensure control over collected funds.

Tip: Although the value of your time as a volunteer is not deductible, out-of-pocket expenses (including transportation costs) are generally deductible.

Direct Mail Solicitation

As the old saying goes, trust but verify. Many charities use direct mail to raise funds. While the overwhelming majority of these appeals are accurate and truthful, be aware of the following:

  • The mailing piece should clearly identify the charity and describe its programs in specifics. If a fund-raising appeal brings tears to your eyes but tells you nothing about the charity’s functions, investigate it carefully before responding.
  • It is against the law to demand payment for unsolicited merchandise-e.g., address labels, stamps, bumper stickers, greeting cards, calendars, and pens. If such items are sent to you with an appeal letter, you are under no obligation to pay for or return them.
  • Appeals that include sweepstakes promotions should disclose that you do not have to contribute to be eligible for the prizes offered. To require a contribution would make the sweepstakes illegal as a lottery operated by mail.
  • Appeals that include surveys should not imply that you are obligated to return the survey.
  • Beware of fund-raising appeals that are disguised as bills or invoices. It is illegal to mail a bill, invoice or statement of account that is, in fact, an appeal for funds unless it has a clear and noticeable disclaimer stating that it is an appeal and that you are under no obligation to pay unless you accept the offer.

Caution: Deceptive-invoice appeals are most often aimed at businesses, not individuals. If you receive one of these, contact your local Better Business Bureau.

Public Education Solicitation

If you respond to mail appeals, you should be aware that certain charities consider this to be a significant part of their educational budgets. In a recent survey, half of 150 well-known national charities included their direct mail and other fund-raising appeals in their public education programs. This practice makes fund-raising drives look like a smaller part of a charity’s expenses than they are. These 75 charities allocated $160 million of their direct mail and other appeal costs to public education programs.

For example: A charity whose purpose is to combat cruelty to animals uses direct mail to raise funds. The cost of a nationwide direct mail campaign is $1 million much more than the $200,000 the charity has budgeted for its program of research grants. This embarrassingly high allotment for fund-raising costs can be significantly reduced if the direct mail pieces include some information about cruelty to animals. Since the information is considered educational, the charity calls it a program expense and allots half the cost of the mailing to public education, thus reducing fund-raising expenses from $1 million to only $500,000, and bumping up program spending from $200,000 to $700,000.

The line between pure fund-raising and genuine public education activities is not always clear. However, if the charity is confident that the fund-raising appeal truly serves its educational purposes, it should be willing to disclose this fact in the appeal. This disclosure allows donors to make an informed decision about whether to support the activity.

Giving of Money or Time

If approached by a charity to make a contribution of time or money, ask questions – and do not give until you are satisfied with the answers. Charities with nothing to hide will encourage your interest. Be wary of any reluctance to answer reasonable questions.

  • Ask for the charity’s full name and address. Demand identification from the solicitor.
  • Ask if the contribution is tax-deductible.
  • Ask if the charity is licensed by state and local authorities. Registration or licensing is required by most states and some local governments.

Caution: Contributions to tax-exempt organizations are not always tax-deductible.

Caution: Registration, by itself, does not mean that the state or local government endorses the charity.

  • Do not give in to pressure to make an immediate donation or allow a runner to pick up a contribution.
  • Statements such as “all proceeds will go to charity” may mean money left after expenses, such as the cost of fund-raising efforts, will go to the charity. These expenses can be big ones, so check carefully.
  • When asked to buy candy, magazines, or tickets to benefit a charity, be sure to ask what the charity’s share will be. Sometimes the organization will receive less than 20 percent of the amount you pay.
  • If a fund raiser uses pressure tactics- intimidation, threats, or repeated and harassing calls or visits-call your local Better Business Bureau to report the actions.

Sweepstakes Appeals

For many years it has been the practice of companies to use sweepstakes mailings to promote their products, this practice have recently become popular with charities. Here are some points to consider when reviewing a sweepstakes appeal.

  • The sweepstakes mailing should clearly disclose that no contribution is necessary to participate.

* If you wish to participate, read the sweepstakes promotion and direct mail contents carefully. Your entry may be discarded if the rules are not followed to the letter.

  • If the charity sweepstakes promotion says you are a pre-selected winner, you will usually receive a prize only if you respond to the sweepstakes. Most “pre-selected winners” receive just pennies per person.
  • Both donor and non-donor sweepstakes participants must have an equal chance of winning a prize.

Caution: For a national campaign, the probability of winning the big prize may be quite low. Some campaigns involve mailings of a half-million to ten million or more letters.

Caution: If you are considering a donation, check out the appeal as you would any other request for funds. Does it clearly specify the programs your gift would be supporting? Do not hesitate to ask for more information on the charity’s finances and activities.

Charity Thrift Stores

Becuase all charity thrift stores do not necessarily operate the same way, it is important to find out if the charity is benefiting from thrift sales. There are three major types of thrift store operations:

  • Conduit-type shops run by volunteer church and civic groups. These thrift stores generally distribute most of their proceeds to various charitable organizations, often community-based.
  • Thrift operations are represented by service organizations such as The Salvation Army and Goodwill Industries. Here, the thrift stores are operated as part of their program activities through the goal of “rehabilitation through employment.”
  • Charities that collect and sell used merchandise to raise funds for their own use. This arrangement is popular for a number of veterans organizations and other charities. Such arrangements generally work one of two ways: (1) the charity owns and operates the store or (2) more commonly, variously charities solicit and collect used items, which are then sold to independently managed stores for an agreed-upon amount.

Tip: The fair market value of goods donated to a thrift store is deductible as a charitable donation, as long as the store is operated by a charity. To determine the fair market value, visit a thrift store and check the going rate for comparable items. If you are donating directly to a for-profit thrift store or if your merchandise is sold on a consignment basis whereby you get a percentage of the sale, the thrift contribution is not deductible.

Tip: Remember to ask for a receipt that is properly authorized by the charity. It is up to the donor to set a value on the donated item.

Caution: If you plan to donate a large or unusual item, check with the charity first to determine if it is acceptable.

If you are approached to donate goods for thrift purposes, ask how the charity will benefit financially. If the goods will be sold by the charity to a third party such as an independently managed thrift store, then ask what the charity’s share will be.

Tip: Sometimes the charity receives a small percentage, e.g., 5 to 20 percent of the gross or a flat fee per bag of goods collected.

Charity Fundraiser

Dinners, luncheons, galas, tournaments, circuses, and other events are often put on by charities to raise funds. Here are some points to consider before deciding to participate in such events.

  • Check out the charity. The fact that you are receiving a meal or theater tickets should not justify less scrutiny.
  • Your purchase of tickets to such events is generally not fully deductible. Only the portion of your gift above the fair market value of the benefit received (i.e., the meal, show, etc.) is deductible as a charitable donation. This rule holds true even if you decide to give your tickets away for someone else to use.

Tip: If you decide not to use the tickets, give them back to the charity. In order to be able to deduct the full amount paid, you must either refuse to accept the tickets or return them to the charitable organization. In this way, you will not have received value for your payment.

Caution: Make donations by check or money order out to the full name of the charity and not to the sponsoring show company or to an individual who may be collecting donations in person.

  • Watch out for statements such as “all proceeds will go to the charity.” This can mean the amount after expenses have been taken out, such as the cost of the production, the fees for the fund-raising company hired to conduct the event, and other related expenses. These expenses can make a big difference and sometimes result in the charity receiving 20 percent or less of the price paid.

Tip: Ask the charity what anticipated portion of the purchase price will benefit the organization.

  • Solicitors for some fund-raising events such as circuses, variety shows, and ice skating shows may suggest that if you are not interested in attending the event you can purchase tickets that will be given to handicapped or underprivileged children. If such statements are made, ask the solicitor how many children will attend the event, how they will be chosen, how many tickets have been already distributed to these children, and if transportation to the event will be provided for them.

Caution: It has happened that the number of children eligible to receive free tickets has been limited or transportation has not been arranged. So, in effect, free tickets given to the few needy children who attend the event are paid for many times over by businesses and individuals who purchase tickets.

Affinity Credit Cards

Also, you may receive an offer to apply for an affinity credit card bearing the name and logo of a particular charity. Sometimes this is offered exclusively to an organization’s donors or members, these cards are issued by banks and credit card companies under agreements worked out with individual charities. These cards are just like other credit cards, but the specified charity gets some kind of financial benefit.

All affinity credit cards are not created equal. Offers vary in terms of how the charity benefits as well as the terms of the credit agreement with consumers. So check the terms carefully!

Caution: Consider the specific terms as you would any credit card offer: the amount of the interest rate/finance charges, the amount of the annual fee, if any, the amount of late fees and over-the-limit fees, if any, and the length of the grace period, or amount of time after which finance charges begin to accrue on any unpaid balance.

The charity usually receives a benefit in one or more of the following ways:

  • The charity receives a certain percentage of each purchase or a specified amount every time the consumer makes a purchase with the card,
  • The charity receives a certain dollar amount every time a new customer signs up for a card, or
  • The charity receives a portion of the annual renewal fee for the card.

Caution: Make sure the promotional literature states exactly how the charity benefits. For example, one affinity card offer declared that a specified national charity would receive half of one percent of all transactions made with the card (that works out to 5 cents for every $10 worth of purchases). If the financial benefit for the charity is not spelled out, then ask.

Caution: Contributions made by a bank and/or credit card company through the use of an affinity credit card are not deductible to consumers as charitable donations for federal income tax purposes.

Remember also to consider your interest in the charity and not to hesitate to seek out more information on the charity’s programs and finances.

Tip: If saving money is your bottom line, make a direct donation to the charity and seek a credit card with the best terms and lowest interest rates, regardless of affinity.

Charity Marketing

When considerting promotions that partner charities and businesses make the following points should be kept in mind:

  1. Charity/business marketing campaigns should clearly disclose the actual or estimated portion of the purchase price that will benefit the specified cause. Without such information, you cannot know how much of your purchase will aid a charity participating in such a campaign.
  2. Read the disclosure carefully. Some charity/business marketing campaigns have an expiration period (for example, ten cents goes to the charity for all purchases made until October 31.) If there is no disclosure, be aware that the amount that goes to the charity is usually between one and ten percent of the retail price.
  3. In schemes during the Gulf War, businesses made no arrangements with the named charity and no contributions were given. Various items and services were sold with the false promise that a donation would be made to the USO or other organizations helping members of the armed services or their families. Similar advertising abuses commonly occur in the wake of hurricanes, floods and other natural disasters.
  4. Some advertisements falsely imply the existence of a direct connection between the consumers’ purchase and the charity when, in fact, the charity was guaranteed a “flat” contribution regardless of the level of the resulting purchases.

Natural Disaster Appeal

When disaster strikes be very careful about your chartiy givings. The tragedy of a flood, massive fire, hurricane, earthquake, or another disaster always triggers an outpouring of public support and concern. During such crises, watch out for fraudulent appeals by some who see disasters as an opportunity to take advantage of American concern and generosity.

Examine your options instead of giving to the first charity from which you receive an appeal. There will be a variety of relief efforts responding to the diverse needs of disaster victims. Be wary of appeals that are long on emotion and short on what the charity will do to address the specific disaster.

Caution: Ask how much of your gift will be used for the crisis and how much will go towards other programs and to administrative and fund-raising costs. And find out what the charity intends to do with any excess contributions remaining after the crisis has ended.

Check with organizations before donating goods for overseas disaster relief. Most groups involved in overseas relief will not accept donated goods since purchasing goods overseas is often less expensive and more efficient. If a charity accepts donated items, ask about their arrangements for shipping and distribution.

Some charities change their program focus during a crisis in order to respond to the changing needs of disaster victims. Do not assume the charity will carry out the same activities throughout a crisis situation.

Police and Fire Fighter Affiliation

For charities claiming affiliation with Police and Firefighters, potential donors should be aware of the following points.

  • Many different types of police and firefighter organizations exist. Some are charities that operate educational or youth programs. Others are labor organizations, fraternities, or benevolent associations that provide benefits to members.
  • Your gift may not be deductible. Police and firefighter organizations can be tax exempt under different sections of the Internal Revenue Code. Only some of them are eligible to receive deductible charitable donations.
  • Do not make assumptions based on the name alone. The words “police” and “firefighter” in the organization’s name do not necessarily mean that representatives from your local and/or state police or fire departments are members. In fact, the organization may not have any police or firefighter members.

Caution:

  • Ask about any affiliations the group might have with other organizations. Some groups operate as a lodge or chapter of a larger organization. Others are independent associations of local, state, and/or federal law enforcement officers.
  • Do not believe promises that your donation will “give you special treatment” from your police or firefighters. If such suggestions of threats are used, contact your state attorney general’s office and your Better Business Bureau.
  • Ask how your contribution will be used and what programs and activities it will support. Do not hesitate to ask for written materials on the police or firefighter group’s programs and finances.
  • Groups offering legitimate help to your police, firefighters, and community will welcome your questions and encourage your interest.

Children Affiliated Charities

Not all sponsorship programs are alike. Sponsored donations usually benefit a project for an entire community (for example, medical care, education, food) and not the sponsored child exclusively. Some groups believe this is the most effective way to make significant and lasting changes in a child’s living conditions. Other organizations do give a certain amount of the contribution directly to the sponsored child. Before deciding to participate in a sponsorship program, you may want to consider the following:

  • Do you know how children are assisted (i.e., through a community development project operated by the charity or through an affiliated project that the group funds)?
  • Can you commit at least several years to a program in the form of financial assistance and letter-writing?
  • The child will not be your adopted child in any legal sense, and you will not be able to make any demands on him or her.
  • Do you agree with the overall philosophy of the organization (e.g., any religious focus a program might have)?

Tip: Contact other child sponsors to get a sense of their overall satisfaction with the organization.

Local or National Charity

While some organizations are a single entity under one name, others may be a network of local affiliates or chapters. If you give to a local chapter or affiliate, do not assume your donation will be spent locally. Nor should you assume that a chapter’s operations are fully controlled by the national office.

Many different types of relationships can exist between a charity’s national office and its chapters. Here are three possible relationships chapters:

  1. The national office performs certain functions, such as developing educational or fund-raising materials but does not supervise affiliates. In this case, the local chapters are incorporated separately from the national office and each applies for its own tax-exempt status from the IRS. Each local chapter’s programs and fund-raising is under the control of the chapter’s local board of directors. To support the national office, the local affiliates purchase materials produced by it or send it a small percentage of their locally collected funds.
  2. The organization’s national office and affiliates function as one centralized unit under the control of a national board of directors. All income and expenses are channeled through the national office. In this case, the chapters are not separate legal entities and have only limited authority, as stated in their charter agreements with the national office.
  3. Most national/chapter relationships fall somewhere between the two extremes in the preceding two paragraphs. In such a case, both the national office and the local affiliates share some level of authority. Local chapters may or may not be separately incorporated, but all have their own governing boards, some of which share control with the national office. The charity may have statewide affiliates that perform functions at the state level. With this structure, there is usually a fund sharing or dues formula between the local affiliates and the national office.

Caution: The bottom line for you is that, depending on the organization’s structure, the local affiliate may carry out different activities from those of the national office. It is important to inquire about this difference. In addition, donors may want to identify how much of a local affiliate’s contributions are spent on local programs.

Caution: When considering a donation to a local chapter, it is wise to check out the chapter separately.

Government and Non-Profit Agencies

When  Government and Non-Profit Agencies solicits donations beaware of the following:

  • Most state governments regulate charitable organizations. To obtain information on these regulations, which vary from state to state, contact the appropriate government agency (usually a division of the Attorney General or the Secretary of State).
  • Contact the appropriate state government agency to verify a charity’s registration and to obtain financial information on a soliciting charity.
  • Contact your local Better Business Bureau to find out whether a complaint has been lodged against a charity.

Advantages of a LLC

In continuation of our discussion on LLCs, Metro Accounting And Tax Services, CPA, presents this guide with the intent that small business owners will fully grasp the merits of forming LLCs. For this and all your accounting needs don’t hesitate to contact our office at 470-240-5143, our CPAs are ready to answer your questions and point you in the right direction.

Advantages of a LLC

A LLC is really the art of combining the best aspects of partnerships and corporations.

A Limited Liability Company, or LLC, is not a corporation, although it offers many of the same advantages. An LLC is best described as a combination of a corporation and a partnership. LLCs offer the limited liability of a corporation while allowing more flexibility in managing the business and organization.

An LLC does not pay any income tax itself. It’s a “flow through” entity that allows profits and losses to flow through to the tax returns of the individual members, avoiding the double taxation of C corporations.

While setting up an LLC can be more difficult than creating a partnership (or sole proprietorship), running one is significantly easier than running a corporation. Here are the main features of an LLC:

Limited Personal Liability

Like shareholders of a corporation, all LLC owners are protected from personal liability for business debts and claims. This means that if the business itself can’t pay a creditor — such as a supplier, a lender, or a landlord — the creditor cannot legally come after any LLC member’s house, car, or other personal possessions. Because only LLC assets are used to pay off business debts, LLC owners stand to lose only the money that they’ve invested in the LLC. This feature is often called “limited liability.”

While LLC owners enjoy limited personal liability for many of their business transactions, it is important to realize that this protection is not absolute.

LLC Taxes

Unlike a corporation, an LLC is not considered separate from its owners for tax purposes. Instead, it is what the IRS calls a “pass-through entity,” like a partnership or sole proprietorship. This means that business income passes through the business to the LLC members, who report their share of profits — or losses — on their individual income tax returns. Each LLC member must make quarterly estimated tax payments to the IRS.

While an LLC itself doesn’t pay taxes, co-owned LLCs must file Form 1065, an informational return, with the IRS each year. This form, the same one that a partnership files, sets out each LLC member’s share of the LLC’s profits (or losses), which the IRS reviews to make sure the LLC members are correctly reporting their income.

LLC Management

The owners of most small LLCs participate equally in the management of their business. This arrangement is called “member management.”

The alternative management structure — somewhat awkwardly called “manager management” — means that you designate one or more owners (or even an outsider) to take responsibility for managing the LLC. The non-managing owners (sometimes family members who have invested in the company) simply sit back and share in LLC profits. In a manager-managed LLC, only the named managers get to vote on management decisions and act as agents of the LLC.

Exceptions to Limited Liability

While LLC owners enjoy limited personal liability for many of their business transactions, it is important to realize that this protection is not absolute. This drawback is not unique to LLCs, however — the same exceptions apply to corporations. An LLC owner can be held personally liable if he or she:

  • personally, and directly injures someone
  • personally, guarantees a bank loan or a business debt on which the LLC defaults
  • fails to deposit taxes withheld from employees’ wages
  • intentionally does something fraudulent, illegal, or clearly wrong-headed that causes harm to the company or to someone else, or
  • treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity.

This last exception is the most important. In some circumstances, a court might say that the LLC doesn’t really exist and find that its owners are really doing business as individuals, who are personally liable for their acts. To keep this from happening, make sure you and your co-owners:

  • Act fairly and legally. Do not conceal or misrepresent material facts or the state of your finances to vendors, creditors, or other outsiders.
  • Fund your LLC adequately. Invest enough cash into the business so that your LLC can meet foreseeable expenses and liabilities.
  • Keep LLC and personal business separate. Get a federal employer identification number, open up a business-only checking account, and keep your personal finances out of your LLC accounting books.
  • Create an operating agreement. Having a formal written operating agreement lends credibility to your LLC’s separate existence.

A good liability insurance policy can shield your personal assets when limited liability protection does not. For instance, if you are a massage therapist and you accidentally injure a client’s back; your liability insurance policy should cover you. Insurance can also protect your personal assets in the event that your limited liability status is ignored by a court.

In addition to protecting your personal assets in such situations, insurance can protect your corporate assets from lawsuits and claims. Be aware, however, that commercial insurance usually does not protect personal or corporate assets from unpaid business debts, whether or not they’re personally guaranteed.

Should I Form an LLC ?

You should consider forming a LLC (limited liability company) if you are concerned about personal exposure to lawsuits arising from your business. A LLC generally limits the liability of the company to its assets and protects the owner from being personally liable for any excess debts that the company’s assest fail to cover.  For example, if you decide to open a store-front business that deals directly with the public, you may worry that your commercial liability insurance won’t fully protect your personal assets from potential slip-and-fall lawsuits or claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better because it instantly gives you personal protection against these and other potential claims against your business.

Not all businesses can operate as LLCs, however. Businesses in the banking, trust, and insurance industry, for example, are typically prohibited from forming LLCs.

LLC or a S-corporation, which is the better choice?

While the S-corporation’s special tax status eliminates double taxation, it lacks the flexibility of an LLC in allocating income to the owners.

An LLC may offer several classes of membership interests while an S-corporation may only have one class of stock.

Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S-corporation is limited to no more than 100 shareholders. Also, S-corporations cannot be owned by C-corporations, other S-corporations, many trusts, LLCs, partnerships, or nonresident aliens. Also, LLCs are allowed to have subsidiaries without restriction.

Is an operating agreement needed?

An LLC operating agreement allows you to structure your financial and working relationships with your co-owners in a way that suits your business. In your operating agreement, you and your co-owners establish each owner’s percentage of ownership in the LLC, his or her share of profits (or losses), his or her rights and responsibilities, and what will happen to the business if one of you leaves.

Although most states’ LLC laws don’t require a written operating agreement, you shouldn’t consider starting business without one. Here’s why an operating agreement is necessary:

  • It helps to ensure that courts will respect your personal liability protection by showing that you have been conscientious about organizing your LLC.
  • It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
  • It helps to avert misunderstandings between the owners over finances and management.
  • It keeps your LLC from being governed by the default rules in your state’s LLC laws, which might not be to your benefit.

Are LLCs required to hold meetings?

Although a corporation’s failure to hold shareholder or director meetings may subject the corporation to alter ego liability, this is not the case for LLCs in many states. In California for example, an LLC’s failure to hold meetings of members or managers is not usually considered grounds for imposing the alter ego doctrine where the LLC’s Articles of Organization or Operating Agreement do not expressly require such meetings.

Exceptions to Limited Liability

While LLC owners enjoy limited personal liability for many of their business transactions, it is important to realize that this protection is not absolute. This drawback is not unique to LLCs, however — the same exceptions apply to corporations. An LLC owner can be held personally liable if he or she:

  • personally and directly injures someone
  • personally guarantees a bank loan or a business debt on which the LLC defaults
  • fails to deposit taxes withheld from employees’ wages
  • intentionally does something fraudulent, illegal, or clearly wrong-headed that causes harm to the company or to someone else, or
  • treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity.

In some circumstances, a court might say that the LLC doesn’t really exist and find that its owners are really doing business as individuals, who are personally liable for their acts. This is called “Piercing Of The Veil“.  To keep this from happening, make sure you and your co-owners:

  • Act fairly and legally. Do not conceal or misrepresent material facts or the state of your finances to vendors, creditors, or other outsiders.
  • Fund your LLC adequately. Invest enough cash into the business so that your LLC can meet foreseeable expenses and liabilities.
  • Keep LLC and personal business separate. Get a federal employer identification number, open up a business-only checking account, and keep your personal finances out of your LLC accounting books.
  • Create an operating agreement. Having a formal written operating agreement lends credibility to your LLC’s separate existence.

A good liability insurance policy can shield your personal assets when limited liability protection does not. For instance, if you are a massage therapist and you accidentally injure a client’s back; your liability insurance policy should cover you. Insurance can also protect your personal assets in the event that your limited liability status is ignored by a court.

In addition to protecting your personal assets in such situations, insurance can protect your corporate assets from lawsuits and claims. Be aware, however, that commercial insurance usually does not protect personal or corporate assets from unpaid business debts, whether or not they’re personally guaranteed.

Are You In Financial Distress?

If like thousands of other persons, you are having trouble paying your debts, it is important to take action. Doing nothing can lead to much larger problems in the future–and even bigger debts, such as the loss of assets such as your house, and a bad credit record. This Financial Guide suggests how you can get started on the road to financial freedom by reducing your debts and exercise better manage your hard-earned money.

How can you tell when you have too much debt? What if bill collectors are not calling yet, but you are having difficulty paying monthly bills? The following are tell-tale signs that you need to look closely at your situation and take action.

  • Have you run several credit cards up to the limit?
  • Do you frequently make only the minimum monthly payments on your credit cards?
  • Do you apply for almost any credit card you are offered without checking out the terms?
  • Have you used the cash advance feature from one card to pay the minimum payment on another?
  • Do you use cash advances (or use a credit card) for living expenses such as food, rent, or utilities?
  • Are you unaware of what your total debt is?
  • Are you unaware of how long it would take you to pay off all your current debts (excluding mortgages and cars) at the rate you are paying?

If you find any of these statements apply to you, you may need to learn more about managing debt before you try to reestablish credit.

Let’s Get Started

Here are some specific steps you can take if you are in financial trouble:

1. Review each debt. Make sure that the debt creditors claim you owe is really what you owe and that the amount is correct. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or, in cases of serious creditor abuse, your state Attorney General.

2. Contact your creditors. Let your creditors know that you are having difficulty making your payments. Tell them why you are having trouble–perhaps it is because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.

If you own an automobile, most automobile financing agreements permit your creditor to repossess your car any time you are in default, with no advance notice. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.

3. Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and healthcare) and optional expenses (such as entertainment and vacation travel). Stick to the plan.

It is recommended that you try self-budgeting before taking more extreme measures.

4. Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation or using a car sharing service rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Leave your credit cards at home. Pay for all purchases in cash or use a debit card instead of a credit card.

5. Pay down debts using savings. Withdrawing savings from low-interest accounts to settle high-rate loans or credit card debt usually makes sense.

If you own more than one automobile selling off one might not be a bad idea as such sale will not only provide you with needed cash but it will also reduce your insurance and other maintenance expenses.

6. Find out if you are eligible for social services. Government assistance includes unemployment compensation, Temporary Assistance for Needy Families (TANF) formerly Aid to Families with Dependent Children (AFDC), food stamps, now known as Supplemental Nutrition Assistance Program (SNAP), low-income energy assistance, Medicaid, and Social Security (including disability). Other resources may be available from churches and community groups.

7. Try to consolidate your debts. There are a number of ways to pay off high-interest loans, such as credit cards, by getting a refinancing or consolidation loan, such as a second mortgage. However, be very wary of any loan consolidations or other refinancing that actually increase interest owed, or require payments of points or large fees.

8. Prepare a financial plan. A financial plan can alleviate financial worries about the future and ensure that you will meet your financial goals whether they relate to retirement, asset acquisition, education, or just vacations.

For your financial guidance let the Advisors at Metro Accounting And Tax Services, CPA be your partner in the process of getting your life back on track. Call us today @ 470-240-5143.

Passive Activity Lossess

As is often times the case, a passive activity is any business activity in which the tax payer is not an active participant, for example, real estate rental activity in which the owner is not actively engaged for a set amount of time per year.

Non-passive activities are businesses in which the taxpayer works on a regular, continuous, and substantial basis. In addition, passive income does not include salaries, portfolio, or investment income.

The passive activity loss rules are applied at the individual level but its impact extends to virtually every business or rental activity whether reported on Schedules C, F, or E, as well as to flow through income and losses from partnerships, S- Corporations, and trusts.

As a generally rule the law does not apply to regular C-Corporations but it does have limited application to closely held corporations. Passive activities can be categorized as either:

1)    Rental activity –  both equipment and real estate rentals

2)    Business activity – businesses in which there is not a material participation on a regular or continuous basis by the taxpayer

On a tax return, income can be categorized as being derived from either a passive or non-passive activity involvement. Passive activity income are those incomes derived without any material participation in the activity undertaken. In the case of a partnership, a limited partner’s income is considered passive as there is no material participation on his part.

The important point to note is that the level of participation is the key determining factor for the income categorization as passive as opposed to active income.

However, it is to be noted that rental activity is deemed a passive activity even if you materially participated in that activityunless you materially participated as a real estate professional. The rule applies to all individuals, estates and trusts, personal service corporations and even to closely held corporations. The rule is also applicable to owners of partnerships, s corporations and grantor trusts.

By definition your passive activity loss for the tax year is the excess of all passive activity deductions over all passive activity income. These losses are generally not allowed but there is a special allowance under which some or all of your passive activity loss may be allowed.

The CPAs at Metro Accounting And Tax Services will be happy to show how this is possible. Call the office today 470-240-5143.

Business Structure Guide

This business structure guide was developed by Metro Accounting and Tax Services, CPA, with a view of helping current and prospective business owners decide on the business structure that’s in-line with their business goals and the one that will provide the greatest tax benefit.

When going into business it is important to select the correct form of business structure you want to establish. This decision can have many life and tax related consequences if not done properly. The type of entity formed will determine among other things, which income tax form or forms you’ll have to file.

The most common types of business structures are: Sole Proprietorship, Partnership, Corporation, S Corporation and Limited Liability Company (LLC).

Sole Proprietorship

A sole proprietor is someone who owns an unincorporated business by himself or herself. A sole proprietor has unlimited liability for the debts of the company. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

A sole proprietor who is liable for:

1) Income tax generally uses form 1040, that is U.S Individual Tax Return and Schedule C (Form 1040) Profit or Loss from Business or Schedule C-EZ (Form 1040), Net Profit from Business.

2) Self-employment tax uses Schedule SE (Form 1040).

3) Estimated taxes files Form 1040-ES.

4) Social security and Medicare taxes and all income tax withholdings files Form 941, Employer’s Quarterly Federal Tax Return, Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees and Form 944 for the Employer’s Annual Federal Tax Return.

5) For providing information on Social security and Medicare tax withholdings, files Form W-2, wage and tax Statement prepared for employees and Form W-3, Transmittal of Wages and Tax Statements is provided to the Social Security Administration.

6) For Federal unemployment tax (FUTA), files Form 940, Employer’s Annual Federal Unemployment Tax Return.

Partnership

A partnership is the business engagement of two or more persons with the goal of carrying on a trade or business with the intent to make a profit. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

A partnership must file an annual information return to report the income, deductions, gains, losses from its operations as it does not pay income tax. Instead, any gains or losses are “passes through” to the partners according to their profit sharing agreement.  Each partner includes his or her share of the partnership’s income or loss on his or her individual tax return.

Partners are not employees of the partnership, they are owners and they are not issued Form W-2. Instead a partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the required filling due date. The K-1 basically record the Partner’s share of profit or loss over the period.

A partnership or a partner may use the following forms for tax purposes depending of their individual situation:

1)    Annual tax return for the partnership uses Form 1065, U.S, Return of Partnership Income.

2)    For the filling of employment taxes, use Form 941, Employer’s Quarterly Federal Tax Return and Form 943, Employer’s Annual Federal Tax Return for Agricultural purposes.

Partners in a partnership may be required to file:

1)    Income Tax –  Form 1040, Individual Income Tax Return and Schedule E, Supplemental Income and Loss (Form 1040).

2)    Self-employment tax – Schedule SE (Form 1040)

3)    Estimated tax – 1040-ES, Estimated Tax for Individuals

Corporation

A Corporation is made up of shareholders. Prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions.

From an income tax perspective, a corporation is recognized as a separate taxpaying entity. The corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders. Shareholders are limited to their contributed capital for the liability of the company.

The profit of the corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any losses of the corporation.

Forms that might be required to be filled by the corporation includes:

1) For Income Tax – 1120, U.S. Corporation Income Tax Return

2) For Estimated Tax – 1120-W, Estimated Tax for Corporations

3) For Employment Taxes – 941, Employer’s Quarterly Federal Tax Return, or 943, Employer’s Annual Federal Tax Return for Agricultural Employees

4) Unemployment tax – 940, Employer’s Annual Federal Unemployment (FUTA) Tax return

S Corporation

It is important to note that a S Corporation is firstly another business structure that elects to be treated as a S Corporation for tax purposes. So, we might have a corporation that elects to be treated as a S corporation to avoid paying taxes twice. With the S corporation status, corporate income, losses, deductions, and credits are passed through to the shareholders for federal tax purposes. Shareholders of S corporation report the flow-through income and losses on their personal tax returns and are assess tax at their individual income tax rates.

This allows the S corporation to avoid double taxation on corporate income, that is at the corporate level and then at the dividend level. This is one of the advantages why corporations often times make the S election.

S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet the following requirements:

  • Be a domestic corporation
  • Have only allowable shareholders
    • May be individuals, certain trusts, and estates and
    • May not be partnerships, corporations or non-resident alien shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

The election to S status is done by the corporation submitting Form 2553, Election by a Small Business Corporation. This form must be signed by all the shareholders.

Forms that might be required to be filled by the S-corporation includes:

1) For Income Tax – 1120S, U.S. Corporation Income Tax Return, 1120s Sch. K-1

2) For Estimated Tax – 1120-W, Estimated Tax for Corporations and 8109

3) For Employment Taxes – 941, Employer’s Quarterly Federal Tax Return, or 943, Employer’s Annual Federal Tax Return for Agricultural Employees

4) Unemployment tax – 940, Employer’s Annual Federal Unemployment (FUTA) Tax return,

Forms that might be required to be filled by the S-corporation Shareholders.

1) For Income Tax – 1040 & Schedule E or other forms referenced on the K-1.

2) For Estimated Tax – 1040 ES

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is a business structure allowed by state statute. As of such, each state may use different regulations, and it is imperative that you check with the state in which you want to form your Limited Liability Company for their regulations.

Owners of a LLC are called members. Most states do not restrict ownership, and so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.

However, a few types of businesses generally cannot be LLCs. These includes banks and insurance companies. Again, please check your state’s requirements and the federal tax regulations before you proceed.

Classifications

The IRS will treat a LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”), depending on elections made by the LLC and the number of members it has.

A two-member domestic LLC is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation.

A LLC with only one member is treated as a disregarded entity as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation.

Entity Classification Election

An LLC that does not want to accept its default federal tax classification, or that wishes to change its classification, uses Form 8832, Entity Classification Election, to elect how it will be classified for federal tax purposes. Generally, an election specifying an LLC’s classification cannot take effect more than 75 days prior to the date the election is filed, nor can it take effect later than 12 months after the date the election is filed. An LLC may be eligible for late election relief in certain circumstances.

Tax Penalties – How to avoid them.

This guide was developed by Metro Accounting And Tax Services, CPA to aid individuals and business owners avoid tax penalties via the payment of estimated taxes. It is said that there are two things that are unavoidable in life, that is death and taxes. Taxes must be paid as you earn or receive income during the year, this is done either through withholding or through estimated tax payments.

If there is a shortfall in the payment of your taxes, whether due to the fact that the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. Self-employed persons are also generally required to make estimated tax payments. Estimated tax payment covers income tax and other taxes such as self-employment tax and alternative minimum tax.

You may be assessed a tax penalty if you don’t pay enough tax through withholding or estimated tax payments. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Who Must Pay Estimated Tax

If you expect to owe taxes of $1,000 or more when your return is filed, you generally have to make estimated tax payments. This goes for Individuals, including sole proprietors, partners, and S corporation shareholders.

Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed. For the current year you may have to pay estimated taxes if the prior year tax was more than zero.

Who Does Not Have To Pay Estimated Tax

Wage and salary earners can avoid having to pay estimated taxes by asking their employer to withhold more tax from their earnings. This change is done via Form W4. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

  • You had no tax liability for the prior year – your total tax was zero or you didn’t have to file an income tax return.
  • You were a U.S. citizen or resident for the whole year
  • Your prior tax year covered a 12-month period

Figuring Your Estimated Tax

To figure your estimated tax, Form 1040-ES is used for individuals, including sole proprietors, partners, and S corporation shareholders.

Your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year are taken into consideration.

It may be helpful to use your income, deductions, and credits for the prior year as a starting point. You need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high in one quarter, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. Similarly, if you estimated your earnings too low in one quarter, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter. It is imperative that you estimate your income as accurately as you can to avoid penalties.

It is important to note that you must make adjustments both for changes in your own situation and for recent changes in the tax law.

Corporations generally use Form 1120-W to figure their estimated tax payments.

When To Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods. For each period payment can be made to the IRS online, by phone, or by mail.

Using the Electronic Federal Tax Payment System (EFTPS) is the easiest way for individuals as well as businesses to pay federal taxes. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using this system. It might be easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. as long as you’ve paid enough in by the end of the quarter. The EFTPS also allows you to view a history of your payments, so you know how much and when you made your estimated tax payments.

Corporations are required to use the Electronic Federal Tax Payment System for all estimated tax payments.

Penalty for Underpayment of Estimated Tax

You may have to pay a penalty if you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

However, if your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments.

The penalty may also be waived if:

  • The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
  • You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

For guidance with all your accounting and tax matters, don’t hesitate to call the office 470-240-5143. We’ll provide you with knowledgeable expert advice to help you make the right decision and avoid tax penalties.

All Thing Quick-Books Online

All Things QuickBooks Online

Posting Transactions

There are two types of transactions you’ll need to consider when using QuickBooks Online. These are posting and non-posting transactions. This accounting Guide developed by Metro Accounting and Tax Services, CPA, is designed to help QBO users understand the differences between both types of transactions. It is also important for QBO user to understand the difference between accrual and cash basis accounting, sales vs income recording and reporting. For more guidance on this and all things QBO, don’t hesitate to call the office at 470-240-5143.

Posting transactions record debits and credits to the general ledger. For example, an invoice prepared for a customer posts as a debit to accounts receivable and a credit to an income account. Posting transactions in QuickBooks Online related to Customer Sales include:

1.    Invoice

2.    Receive Payment

3.    Credit memo

4.    Sales receipt

5.    Refund

Non-Posting Transactions

Non-posting transactions on the other hand facilitate the business cycle by storing detailed information which may be used in a related posting transaction. They do not post a debit or credit to the general ledger.

For example, an estimate is a non-posting transaction; it stores detailed information ab