Tax Tips for Small Business OwnersPosted on June 18th, 2018
Every year, investigative tax notices are mailed to small business owners. While these are not always official audits, they raise a red flag, and proprietors should know how to prevent and address these inquiries in turn.
This list addresses the best tax practices for small businesses to keep them abreast of tax changes and trends, and away from IRS scrutiny.
List of top 15 Best Tax Practice Tips for Entrepreneurs
1. Maintain thorough and separate records of employees and contractors.
2. If you set up any location based business, even temporarily, keep records of all expenditures and educate yourself on the local tax laws.
3. Use a tax software accounting system – this can help you develop appropriate reports at tax time and can alert you of changing tax rules.
4. If you hire a tax accountant make sure they have experience with taxes as they relate to your specific business.
5. Keep records—including serial numbers and detailed receipts—for all business equipment, office machines, and vehicles.
6. Don’t use funds that are earmarked for taxes as a means to tide your business over in hard times. This will result in a worse financial crunch come tax time and if you can’t pay, you risk the loss of your tax ID.
7. Educate yourself on the correct way to estimate your taxes – This may be overwhelming and a tax professional is highly recommended for small business owners.
8. Determine an appropriate fiscal year so that you can plan better for tax time: A fiscal year refers to an accounting year that does not end on December 31.
9. Tax records should be kept for a minimum of three years – unless related to property and depreciation. In that case, tax records should be kept for three years past the time ownership ends.
10. Keep detailed records on business vehicles’ usage – both on the job and off.
11. When operating on foreign soil and dealing with other currencies and tax laws, be sure your tax professional is vigilant in obeying the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FATCA.
12. Work with your tax professional to determine whether you should operate as a partnership, an S corporation, an LLC, or a sole proprietorship.
13. Become familiar with your requirements in regards to the Affordable Care Act.
14. If you are not able to pay taxes owed to the IRS, or another tax agency, contact your tax professional right away. There are appropriate steps that can be taken and ignoring it only makes it worse.
15. If you are paid in cash – that payment is taxable. The IRS has sophisticated technology to track spending habits and bank accounts to build their case.
Let the experts handle your taxes for you. It is usually a mistake for a business owner to complete their own taxes, and doing so can distract you from making your company a success.
Things to keep in mind when hiring a new AccountantPosted on April 4th, 2018
- How much TIME is working with you going to SAVE me?
- How much MONEY will I MAKE or SAVE by working with you?
- How much MONEY have I ALREADY LOST by not working with you?
- What EMOTIONAL ANXIETY will be overcome if I work with you?
Painful issues affecting Construction CEO mindset!Posted on April 4th, 2018
- You spend 10-15 hrs per month trying to determine profitability on preferred clients.
- You have too much staff, and can’t afford to hire more.
- Your margins are 15% and they should be 40%.
- You don’t have the data to negotiate higher fees on jobs.
- You have a problem with turnover because your team is overworked.
- You feel like you’re working so hard and everyone is getting paid except for you.
- Your clients are underserved, and word is getting out.
- You don’t know how to quote jobs properly.
- The idea of growing scares you; you don’t think you have enough margin to sustain the risk.
- You know you should fire 10% of clients each year, but don’t know which ones.
- Your current accountant just inputs numbers and doesn’t think.
- You don’t know the margins you make on each job.
SOUND FAMILIAR? There is a solution in 2018!
LEARN MORE: www.accountaxusainc.com
Deduction for Construction Industry; ARE YOU ELIGIBLE?Posted on April 4th, 2018
IRS Section 199: Deduction for the Construction Industry, ARE YOU ELIGIBLE?
If you qualify for IRS Section 199 (aka “domestic manufacturing deduction”), your construction business may be eligible to deduct as much as 9% of taxable income resulting from qualifying construction activities; qualifying activities include construction or renovation of residential, commercial, some infrastructure projects and companies that perform architectural & engineering services in the US. For businesses in the 35% tax bracket in 2017, that deduction can amount to a tax cut of more than 3%. The deduction is allowed for both the regular tax and the alternative minimum tax for individuals, C corporations, to partners and the owners of S corporations, Estates, Trusts and their beneficiaries; not to partnerships or the S corporations themselves.
Once you determine your eligibility and you have maneuvered the complicated set of rules it is vital to keep track of:
- Cost of gods sold that are allocable to DPGR (domestic production gross receipts)
- Deductions, expenses or losses that are directly allocable to those receipts is critical to determine which receipts qualify due to the complex calculations
If you think you qualify, immediately consult with your tax advisor. The multifaceted nature of the Section 199 deduction presents numerous hazards for taxpayers, and in many cases, taxpayers fail to obtain the full benefit to which they are entitled. If you have any questions on Section 199 and/or any other construction topic, please do not hesitate to contact us at www.accountaxusainc.com
New York State Tuition FREE ProgramPosted on April 4th, 2018
New York State Tuition FREE Degree Program (aka the Excelsior Scholarship)
The program is designed to make college affordable for NYS residents
To be eligible the student MUST:
- Have been a NYS resident for 12 consecutive months prior to starting the program
- Attend a 2-yr or 4-yr SUNY or CUNY program
- Complete 30 credits per calendar year (including January & Summer sessions) with at least 12 credits per term; credits MUST make progress towards the degree
- Maintain good academic standard (standards may differ between schools)
- Remain on track to graduate in the time frames originally established for the program
- Live & work in NYS for an equal amount of time as they were in the program
- Student’s family household MUST have a Federal AGI below $100,000 to qualify for 2017-2018. For the 2018-2019 year, the AGI limit increases to $110,000 and in the 2019-2020 the limit caps at $125,000
IF THE STUDENT FAILS TO CONTINUE TO LIVE & WORK IN NEW YORK AFTER GRADUATION, THE BENEFITS RECEIVED CONVERT TO AN INTEREST FREE LOAN..!
Is your ITIN expired or about to expire?Posted on April 4th, 2018
Taxpayers who use an Individual Taxpayer Identification Number (ITIN) should check to see if their number expires this year. Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2017; ITINs with middle digits 70, 71, 72 or 80 will also expire at the end of the year. These taxpayers should renew their ITIN if they will have a filing requirement in 2018. Additionally, taxpayers whose ITINs have middle digits 78 or 79 that have expired should renew their ITIN if they will have a filing requirement. Other taxpayers with ITINs do not need to take any action.
What to do if your ITIN expires
If it does expire, and you need to file a return in 2018, you should submit an application now to renew your ITIN; this helps avoid tax refund and processing delays next year. The IRS issues ITINs to people who are not eligible for a Social Security number, but who need to file a tax return.
To renew an ITIN, a taxpayer must complete a Form W-7 and submit required documentation. There are three ways to submit this information. Taxpayers can:
1. Mail the package to the IRS address listed on the Form W-7 instructions. The IRS will review the documents and return them within 60 days.
2. Work with a Certified Acceptance Agent to help them renew their ITIN.
3. Make an appointment at an IRS Taxpayer Assistance Center.
Taxpayers with an ITIN that has the middle digits 70, 71, 72, 78, 79, or 80 do have the option to renew ITINs for their entire family at the same time. They can renew together even if family members have an ITIN with other middle digits. Family members include the tax filer, spouse, and any dependents claimed on the tax return.
7-Reasons why business owners switch AccountantsPosted on April 4th, 2018
1: Your Accountant is not actively thinking outside the box and/or finding practical solutions to save you tax.
2: They do not explain and/or are not willing to explain in simple layman’s’ term complicated accountancy terminology for your quick understanding.
3: Their practice does not specialize in your industry; don’t know your day-to-day operations.
4. They provide sub-standard service in comparison to what they are charging you; no VALUE.
5. They are still behind in their technology; some still using pencil and paper.
6. They are just playing calculator games and not offering real solutions to help you increase profit margins.
7. You don’t know what your fee will be until you receive their invoice.
7 quick points of the Proposed TAX PlanPosted on April 4th, 2018
The proposed Tax plan was unveiled earlier today, looks to make comprehensive changes in corporate and individual taxes.
- Huge tax cuts
- Limits to the mortgage interest deduction and bigger family tax credits.
- Limits on the mortgage interest deduction
- Allow state & local property taxes deduction up to $10,000
- Corporate tax rate reduced to 20%
- Create three new individual tax brackets 12%, 25%, 35% and keep the 39.6% for the big earners
- Increase child tax credit to $1,600
Why is record-keeping so important?Posted on April 4th, 2018
Well Well…Everyone in business must keep records, good record keeping is critical to the success of ANY business; good records will help you do the following:
- Monitor the progress of your business
- Prepare your financial statements
- Identify sources of your income
- Keep track of your deductible expenses
- Keep track of your basis in property
- Prepare your tax returns
- Support items reported on your tax returns
Monitor the progress of your business
You need good records to monitor the progress of your business plain and simple. Records can show whether your business is improving, which areas require more attention, which items are selling, or what changes you need to make to improve problem areas….you get the point. Good records can increase the likelihood of whether you stay in business.
Prepare your financial statements
You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets; these statements are the blueprint for your business. They can help you in dealing with your bank for capital financing, creditors and help you manage your business effectively.
- An income statement shows the income and expenses of the business for a given period of time.
- A balance sheet shows the assets, liabilities, and your equity in the business on a given date.
Identify sources of your income
You will receive money or property from many sources. Your records can and must identify the sources of your income. You need this information to separate business from nonbusiness receipts and taxable from nontaxable income.
Keep track of your deductible expenses
Unless you record them when they occur, you may forget expenses when you prepare your tax return.
Keep track of your basis in property
Your basis is the amount of your investment in property for tax purposes. You will use the basis to figure the gain or loss on the sale, exchange, or other disposition of property, as well as deductions for depreciation, amortization, depletion, and casualty losses.
Prepare your tax return
You need good records to prepare your tax returns (business and/or individual). These records must support the income from all sources, expenses, and credits you qualify. Generally, these are the same records you use to monitor your business and prepare your financial statement.
Support items reported on your tax returns
You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination and limit any type of anxiety that most people experience when dealing with IRS audits.
How to avoid problems with the IRSPosted on April 4th, 2018
A good recordkeeping system is a MUST and it can actually help you save money. Ask what kinds of records you should keep, ask how to create a custom recordkeeping system for your construction or specialty trade business and ask how you can get real-time financial reporting.
There are two forms of accounting used by the construction businesses – cash and accrual. The best method for your company depends on a variety of factors which include the nature of your business, its legal business structure, and whether or not you extend credit.
Taxpayers should file all required returns that are past due NOW to avoid additional penalties and interest; it’s never too late to file.
<p style=”\"margin:” 0in=”” 7.5pt;=”” background-image:=”” initial;=”” background-position:=”” background-size:=”” background-repeat:=”” background-attachment:=”” background-origin:=”” background-clip:=”” box-sizing:=”” border-box;\”=””>