by Domainguy | May 26, 2016 | Uncategorized
Welcome to Alvarez Tax Service LLC. We are thrilled to join the social media world and to provide you with upcoming events and exciting tax news!!!
by Domainguy | May 4, 2021 | Bookkeeping
Trend #1: Remote work, but with options
For most of 2020, remote work wasn’t a choice. Due to mandates throughout most of the country, many firms didn’t have in-office employees for months on end. Even when these mandates are gone, however, companies allowing employees freedom with regards to when and how often they come to the office will remain. Companies like Twitter and Dropbox are moving to a “virtual first” workforce, proving that the need to go remote has demonstrated benefits for employers and team members alike.
Trend #2: Tech to keep us connected
The need to move people out of office forced firms to reckon with tech in new ways. You’ve likely experienced a case of Zoom fatigue this year but as much as you may be hoping otherwise, don’t bank on videoconferencing becoming a thing of the past anytime soon. Cloud-based apps like Zoom and Teams were many firm’s lifeblood during the pandemic. The value of those apps, and cloud-based platforms in general, won’t decrease in the coming years.
Trend #3: Wellness as part of work
As the professional and personal spheres of our lives grew more intertwined last year, many companies doubled down on providing support to their team members that goes beyond the strictly work-related. The simple fact is that what’s going on in our lives affects what goes on in our jobs. To help make sure those two things are in harmony for the people at your firm, take the time to consider wellness as part of your firm values.
There are countless ways to be mindful of your team members’ inner lives. From enforcing no-meeting days to providing subscriptions to apps like Headspace and Calm, it’s wise to offer services and create policies that allow team members freedom, flexibility, and the sense that they’re cared for. No matter what viruses are in the air, after all, taking care of your employees will always be a wise investment.
Who knows what else the rest of 2021 will have in store for us but after what we’ve been through, we should all be more than capable of rolling with the punches.
by Domainguy | Apr 12, 2021 | Tax Facts
A tax credit is a dollar-for-dollar reduction of the income tax you owe.
Tax credits reduce the amount of income tax you owe to the federal and state governments. Credits are generally designed to encourage or reward certain types of behavior that are considered beneficial to the economy, the environment or to further any other purpose the government deems important. In most cases, credits cover expenses you pay during the year and have requirements you must satisfy before you can claim them.
How tax credits work
A tax credit is a dollar-for-dollar reduction of the income tax you owe. For example, if you owe $1,000 in federal taxes but are eligible for a $1,000 tax credit, your net liability drops to zero. Some credits, such as the earned income credit, are refundable, which means that you still receive the full amount of the credit even if the credit exceeds your entire tax bill. Therefore, if your total tax is $400 and claim a $1,000 earned income credit, you will receive a $600 refund.
Types of tax credits
There is an array of tax credits available to all types of taxpayers covering a wide range of expenses and situations. As incentive for taxpayers to protect the environment, the federal government offers a credit for the cost of purchasing solar panels for use in your home.
To help families wanting to adopt a child, the federal adoption credit can reduce your tax bill to offset some of the costs you incur that are necessary to adopt a child. Other credits cover the expense of child and dependent care as well as education credits.
Comparing credits to deductions
Tax credits generally save you more in taxes than deductions. Deductions only reduce the amount of your income that is subject to tax, whereas, credits directly reduce your total tax. To illustrate, suppose your taxable income is $50,000 and you have $10,000 in deductions, which reduces your taxable income to $40,000. If that $10,000 would have been taxed at a rate of 25 percent, then the deduction saves you $2,500 in tax. If the $10,000 was a tax credit instead of a deduction, your tax savings is $10,000 rather than $2,500.
State tax credits
Many states that impose an income tax on residents often times offer tax credits. For example, if you live in California, you may qualify for a renter’s credit if you pay rent for your housing, your income is below a certain amount, and you meet other state requirements. Many states also offer tax credits similar to the federal credits. For example, many states and the District of Columbia offer credits that mirror the federal earned income credit.
by Domainguy | Mar 26, 2021 | Tax News
The Internal Revenue Service said it’s pushing the tax-filing deadline from April 15 2021 to May 17 2021.
“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” IRS Commissioner Charles Rettig said in a statement Wednesday.
The May 17 deadline is the deadline to pay any taxes owed, and it is the deadline to submit a return. People can still get an extension to Oct. 15, but that’s only more time to send in a return and does not afford more time to pay taxes.
One caveat to IRS announcement
There is one caveat, however. The IRS notes the extended deadline only pertains to federal income tax payments. It doesn’t affect a state’s income tax deadline.
by Domainguy | Mar 11, 2021 | Tax Facts, Uncategorized
Throughout history there have been many strange, unusual, and weird taxes. Many of them were implemented to raise additional revenue, while the purpose of others was to promote social change. Here are some of the strangest ones:
Ancient Taxes from Around the World
- In Ancient Egypt, cooking oil was taxed, and on top of that, people had to buy their taxed cooking oil from the Pharaoh’s monopoly, and were prohibited from reusing previously purchased oil.
- In 1705, Russian Emperor Peter the Great placed a tax on beards, hoping to force men to adopt the clean-shaven look that was common in Western Europe.
- The French had a salt tax called the gabelle, which angered many and was one of the contributing factors to the French Revolution.
- In 1885 Canada created the Chinese Head Tax, which taxed the entry of Chinese immigrants into Canada. The tax lasted until 1923 when a law was passed banning Chinese people from entering Canada altogether with a few exceptions.
by Domainguy | Feb 18, 2021 | Bookkeeping
With 2020 finally behind us, it’s time to create new habits for 2021. Have you thought about your bookkeeping habits from last year? Did they serve their purpose and help your business grow, or could you stand to adopt better habits in 2021?
Here are a few ways you can improve your bookkeeping habits in 2021 and beyond.
Create a Business Plan
Whether you’re a brand new business owner or a seasoned entrepreneur, it’s essential to have a business plan. If you haven’t already done so, the start of a new year can be a great time to create one.
It doesn’t have to be long or complicated, but it should provide an operational guideline for your business. You’ll be required to have a business plan when you apply for grants, loans, and other capital opportunities. You may need to apply for funds to help your business grow or even to keep it viable if the pandemic continues through the year.
Don’t Forget to Pay Yourself
Cash flow challenges can happen to any business, and it’s become more prominent as the pandemic lingers on. A recent survey by lending platform Kabbage found that about a quarter of small business owners who responded went up to six months without paying themselves.
Regardless of the reason for this, it’s important to pay yourself, whether the business is booming or struggling. You wouldn’t expect your employees to work for free, and you shouldn’t either.
An essential aspect of bookkeeping is keeping track of cash flow, inventory, taxes, and compensation. If you find yourself spending hours on these tasks, it might surprise you that hiring a professional can not only save you time but find the money you can now use to pay yourself.
Make a Plan to Tackle Your Debts
For many businesses, debt is a necessary means to building your company. As a business owner, you wear many hats, which can cause essential aspects like debt management to fall by the wayside.
One way to stay on top of your debts is to automate them. Setting reminders and auto-pay can ensure you’re paying on time with little effort on your part.
If your business requires more capital to keep running, consider an SBA loan rather than maxing out credit cards or other high-interest options. It can be hard to determine the best way to incur more debt and handle existing debts without potentially harming your business.
Work with a Professional
Unless your business is bookkeeping or accounting, it can be worth hiring a professional to keep track of your business expenses and help you craft a winning strategy.
You may only think about your accountant as tax season approaches, but you can benefit from their expertise year-round. Think of your accountant and bookkeeper as part of your team or a business advisor. They can keep you on track, ensure your meeting your goals, and spot potential issues before they become a problem.
by Domainguy | Feb 4, 2021 | Tax News
Here are some deductions and credits you might be able to claim on your 2020 tax return:
1. Charitable Deductions
If you like to give like no one else, we have some great news! In an effort to encourage more charitable giving, the CARES Act allows you to deduct up to 100% of their adjusted gross income (AGI), which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize their deductions.3
What if you’re taking the standard deduction? Well, the CARES Act added a new “above-the-line” deduction that will help you write off up to $300 of charitable contributions you made in cash.4
2. Medical Deductions
If you spent a lot of time in the hospital or found yourself with some hefty medical bills last year, you might be able to find at least some tax relief.
You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken.5 For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in 2020. But you have to itemize your deductions in order to write off those expenses on your tax return.
3. Business Deductions
If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use a part of your home to conduct business.6
But if you’re one of the millions of workers who were sent home to work remotely, you won’t be able to claim the home office deduction since it’s reserved for self-employed individuals only. Sorry!
4. Earned Income Tax Credit
The EITC is a refundable credit designed to help out low- and middle-income workers (workers earning up to $56,844 during the 2020 tax year might be eligible).7 Depending on your income, your filing status and how many children you have, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes. But here’s a crazy stat: About one out of five taxpayers who are eligible either don’t claim the benefit on their taxes or don’t file a tax return at all.8 Don’t let that be you!
5. Child Tax Credit
Got kids? Families can claim up to $2,000 per qualified child with this tax credit (the income limits for this credit are $200,000 for single parents and $400,000 for married couples). And since this is a refundable credit, your family can receive up to $1,400 per child as a refund.9
And there are plenty of other deductions and credits that might be up for grabs depending on your situation! If you don’t want to miss out on any tax savings, you’ll want to work with a tax advisor who can make sure you’re not leaving any deductions or credits on the table.
by Domainguy | Jan 22, 2021 | Tax News
The Internal Revenue Service announced that the nation’s tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.
The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.
This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.
To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.
“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”
Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.
Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.
The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where’s My Refund for their personalized refund date.
Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.
by Domainguy | Dec 23, 2020 | Bookkeeping
3 Reasons Why You Should Hire a Bookkeeper for Your Small Business
Starting a business of your own is, naturally, a source of immense pride and satisfaction. Knowing that you actively run a business of your own is a deeply satisfying experience, and something that is sure to leave you with a greater level of self-belief and happiness, however you do need to find time to organice your books or find someone to do this for you, so here are the 3 reasons that you should think about hiring a bookkeeper for your small business.
1. You Don’t Have Time to Do it Yourself
No matter how hard we try to extend it, a day will always contain 24 hours. If a petition ever went around, asking for the day to go to 30 hours, I’d be the first to sign it. Until then, there are just so many things we can accomplish each day. If you are trying to juggle sales, marketing, shipping, and bookkeeping at once, something is going to suffer.
There is nothing more important to an entrepreneur (especially when they are the only employee) than effective time management. Spending 5 hours doing a bank reconciliation that would take a bookkeeper 30 minutes just doesn’t make sense. Sure, it’s an extra cost each month, but how many more sales could you have made in those 5 hours? Which scenario is really costing you more money?
2. You’re Not an Expert in Bookkeeping
I’m sure most of you wouldn’t attempt your own dentistry in order to save some money. If debits and credits are as confusing to you as differentials and tie rods (I think those are car parts) are to me, you could be doing yourself more harm than good. At best, you’re not getting an accurate picture of where your business is at.
At worst, you will be getting a call from the IRS, etc. that include words like “audit” and “jail time”. The costs I’ve seen people spend on late fees, interest, and penalties are breathtaking. Once again, is doing it yourself really saving you money?
3. The Process Leaves You Feeling Less Than Enthused
On a less serious note, bookkeeping is really boring (for almost everyone). I’ll bet most of you would much rather be selling, or reaching out to new clients than printing out trial balances and income statements.
I know you want to have that data available to you, but wouldn’t you rather just have it show up like a gift every month. Although business isn’t supposed to be all fun and games, filling your days with tasks you hate makes it hard to get motivated. Don’t worry, you’ll still have angry customers, shipping delays and software bugs to drive you crazy.
I completely understand the desire to do everything yourself. I’m equally stubborn, so the idea of admitting I can’t do something, and then paying someone else to do it usually ranks up there with root canals. At the end of the day, you need to make the most of your time, money, and expertise.
Bookkeeping is a very important aspect of your business. It can give you a very good picture of where you’ve been, which will help you make informed decisions on where to go next. If you don’t feel like you have the time, knowledge or desire to do it yourself. Looking for a Bookkeeper? Alvarez Tax Services Can Help!
by Domainguy | Dec 11, 2020 | Tax News
Watch Out For Gift Card Scam
Taxpayers should always be on the lookout for scams especially during the holidays. Crooks want to trick people in order to steal their personal information, scam them out of money, or talk them into engaging in questionable behavior with their taxes. Scam attempts can peak during tax season, but taxpayers need to remain vigilant all year.
Gift card scams are on the rise. In fact, there are many reports of taxpayers being asked to pay a fake tax bill through the purchase of gift cards.
Here’s how one scenario usually happens:
• Someone posing as an IRS agent calls the taxpayer and informs them their identity has been stolen.
• The fake agent says the taxpayer’s identify was used to open fake bank accounts.
• The caller tells the taxpayer to buy gift cards from various stores and await further instructions.
• The scammer then contacts the taxpayer again telling them to provide the gift cards’ access numbers.
Here’s how people can know if it is really the IRS calling. The IRS does not:
• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer.
• Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
• Demand that taxpayers pay taxes without the opportunity to question or appeal the amount they owe. All taxpayers should be aware of their rights.
• Threaten to bring in local police, immigration officers or other law-enforcement to have the taxpayer arrested for not paying.
• Revoke the taxpayer’s driver’s license, business licenses, or immigration status.
People who believe they’ve been targeted by a scammer should:
• Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their IRS Impersonation Scam Reporting web page. They can also call 800-366-4484.
• Report phone scams to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. They should add “IRS Telephone Scam” in the notes.
• Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at phishing@irs.gov. The sender can add “IRS Phone Scam” to the subject line.
by Domainguy | Nov 18, 2020 | Money Saving
Regardless of whether you just started your new side business or you’ve been operating for years, you’ll need to report the income on your 2020 tax return.
Some online services, including Uber, OnlyFans, DoorDash and Etsy, will issue you a Form 1099 in January, detailing the money you’ve earned in the prior year. A copy of this form goes to the IRS as well.
Here’s the catch: Not all services will give you this information. For instance, in order to receive a Form 1099-K, merchants on Etsy must have made at least $20,000 in sales via Etsy and they must have received at least 200 payments that year.
Even if you don’t get a 1099, you’re on the hook for accurately tracking and reporting income.
Here’s how to head off those first-year tax mishaps.
Set aside cash for taxes
Small business owners pay quarterly estimated taxes. The due dates are Jan. 15, April 15, June 15 and Sept. 15.
This can come as a surprise to new entrepreneurs who are accustomed to having income taxes withheld from each paycheck as employees.
Here’s another tax lesson: While employees share the burden of payroll taxes with their employer – 12.4% for Social Security and 2.9% for Medicare – self-employed people pay the entire amount themselves. It’s part of their quarterly payment to the taxman.
Watch your expenses
When it comes to deductibility of expenses, the IRS has a set of rules that determine whether a venture is a business or a hobby.
All income must be reported, but if you’re engaging in a hobby, you can’t deduct the expenses you paid to participate.
Nevertheless, track your costs and have them ready when it’s time to file your taxes.
Those breaks can include the home-office deduction, the mileage deduction, as well as expenses incurred when you bought materials and equipment necessary for your business.
Hire a professional
Invest in yourself. Hire an expert to walk you through year-end tax planning and get you on solid footing for 2021.
This tax year might prove to be a complicated one, given that taxpayers could be juggling a Form W-2 from their regular job, as well as multiple 1099s from unemployment and different sources of side-gig income.
