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Bookkeeping Tip #3 – Don’t Wait Until Year End to Talk to Your Accountant

Bookkeeping Tip #3 – Don’t Wait Until Year End to Talk to Your Accountant

Make it a point to be in contact with your accountant regularly, not just at the end of the year. Doing so will make sure that any bookkeeping issue will be caught in time and will be easier to work out. Even though accounting software can enable practically anyone to monitor their business financials, having a good accountant as an advisor is valuable as they are able to give you sound opinions beyond setting up an accounting system. Your accountant should be able to help you with setting up your business from the start – creating an effective business structure, obtaining necessary permits and licenses (if required), setting up payroll, and even filing taxes.

IRS Offers Options to Help Taxpayers Who Can’t Pay

IRS Offers Options to Help Taxpayers Who Can’t Pay

If you owe the IRS but you can’t pay in full, there are options.

The agency is anticipating many taxpayers being impacted by the tax overhaul.

If you have to pay more than you expect, the IRS offers options such as paying in installments or delaying the collection.

Taxpayers that owe taxes can choose one of the payment options listed below:

  • Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option, and an agreement can usually be set up in a matter of minutes. Online applications to establish tax payment plans, like online payment agreements and installment agreements, are available Monday – Friday, 6 a.m. to 12:30 a.m.; Saturday, 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight. All times are Eastern time.
  • Installment Agreement — Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Even taxpayers who don’t qualify for a payment agreement may still pay by installment. Certain fees apply.
  • Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.
  • Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.

For more information give us a call.

Powerball jackpot went up to $625 million. Here’s the tax bite if you win

Powerball jackpot went up to $625 million. Here’s the tax bite if you win

With no one hitting all six winning numbers in Powerball’s Wednesday night drawing, the top prize has climbed to $625 million, making it the seventh-biggest jackpot in U.S. lottery history.

And while players daydream about what they’d do with a windfall of that size, they should remember that they wouldn’t really end up with the advertised amount.

Whether the winner takes their prize as an annuity spread out over three decades or as an immediate reduced lump sum, lottery officials are required to withhold 24 percent for federal taxes.

However, the top federal tax rate of 37 percent means the winner would owe a lot more at tax time. And there also typically are state taxes due as well.

“The big impact on winnings is taxes,” said certified financial planner Dan Routh, a wealth advisor at Exencial Wealth Advisors in Oklahoma City. “If you win, just realize how big the tax bill can be and make sure you’re ready to handle it.”

With the odds stacked against players hitting the jackpot — your chance is about 1 in 292 million — the Powerball jackpot has been growing since late December.

For Saturday night’s drawing, the cash option — which most winners go with — is $380.6 million. The 24 percent federal withholding would reduce that amount by $91.3 million.

Assuming the winner had no reduction to their taxable income — such as large charitable contributions made from their winnings — another 13 percent, or $49.5 million, would be due to the IRS ($140.8 million in all).

That would leave the winner with $239.8 million before state taxes. That levy ranges from zero to more than 8 percent, depending on where the ticket was purchased and where the winner lives. In other words, the winner could end up paying more than 45 percent in taxes.

Given the sheer size of the jackpot, experts say it’s important that the eventual winner assemble a team of experienced professionals to help navigate the windfall: an attorney, a tax advisor and a financial advisor.

“There’s a big responsibility that goes with having such a large some of money,” Routh said. “It would be important to surround yourself with a quality team that’s working in your best interest.”

So the question is, if you win, what would you do?

3 Common Tax Mistakes to Avoid

3 Common Tax Mistakes to Avoid

3 Common Mistakes To Avoid

We’ve all heard the quote by Benjamin Franklin “In this world nothing can be said to be certain, except death and taxes”. Yet despite April 15th being on the calendar every single year, and March 15th for business, millions of people find themselves on the IRS hit list for failing to comply with a few basic things.

Whether it’s the “I’m too busy right now, I’ll get to it next week” excuse, or just feeling overwhelmed with all the paperwork, it’s not uncommon for taxpayers to find themselves in hot water with the Internal Revenue Service.

31 million people are not withholding enough for taxes, according to this CNBC report, and this could lead to a lot of them owing the IRS more than what they think. In addition, here are 3 common mistakes people make that often lead to getting a nastygram from the IRS.

1) Overlooking Income or Inaccurately Reporting Income

We all want to limit our tax liabilities but manipulating your income in an attempt to hide money is not a winning strategy. This can easily land you in heaps of tax trouble, so it’s important to accurately report your income.

Tax Mistakes
Tax Avoidance vs. Tax Evasion
Tax avoidance are the legal things you do to avoid paying more taxes than necessary. Where it can get you in trouble is if you’re evading the tax authorities either by doing something, like filing a tax return after falsifying your income or deductions to get a favorable tax bill, or by not doing something you’re supposed to, such as not reporting all your income or not filing a return.

Michael Cohen, Donald Trump’s former lawyer was recently sentenced to 36 months in prison, in part for 5 counts of tax evasion. He failed to report $4 million in income from his taxi fleets in New York and Chicago, $30,000 in profit for the sale of a Birkin Handbag he arranged, $100,000 profit from selling a property, and $200,000 in consulting fees.

Now, most Americans don’t mean to evade the IRS and under-report income. If you’re like most people, you might just forget to report that side-gig you have as income, or the cash payments you received. In any case, making a list of all the ways you made money that year and gathering supporting documents, as well consulting with your tax advisor, are some ways to prevent the common mistake of inaccurately reporting income.

2) Misunderstanding Extension Rules: Filing and Paying Late

By not filing your tax return timely you’ll be hit with the IRS’s 25% failure to file penalty.

Of all the mistakes people make when it comes to taxes, this one is the most common and often the most costly. Most people think that filing for a tax extension means they also get extra time to pay without any consequences. That’s just not true.

When you file for an extension you also get hit with penalties, interest, and other fees if you don’t pay in what you owe with the extension. This alone could cost you a strikingly large amount, especially if you’ve built a habit of always filing for an extension.

3) Pushing It With Your Expenses or Unrealistic Deductions

Commingling your business and your personal expenses, exaggerating deductions or writing off things you’re not supposed to can trigger loads of red flags and can cause an IRS audit. Writing off that vacation to Hawaii? The designer clothing you say you need for work? What about your mileage to and from your main place of work? All of these are no-no’s and have strict rules if you do deduct them.
Staying compliant by getting all of your un-filed tax returns filed and having a tax professional guide you is the fastest and easiest solution to staying out of tax trouble.  Contact us for more information.

What are some tax deadlines small  business owners should know for 2019

What are some tax deadlines small business owners should know for 2019

April 15, 2019 – Deadline to submit 2018 tax returns

Oct. 15, 2019 – Deadline to submit 2018 tax returns with extension.

April 15, 2019 – Deadline to file C-corporation taxes

Oct. 15, 2019 – Deadline to file C-corporation taxes with extension

March 15, 2019 – Deadline to file S-corporations and partnership taxes

Sept.16, 2019 – Deadline to file S-corporations and partnership taxes with extension

2019 Tax Season – 5 Important IRS Tips

2019 Tax Season – 5 Important IRS Tips

It’s January, with many taxpayers hopeful that new laws will result in bigger refunds. Yet with the government shutdown having hit at a particularly bad time for the Internal Revenue Service, it’s still not clear exactly when tax season will officially start.

But even if you can’t know for sure exactly when you’ll be able to file your return, it’s not too early to get ready for tax season — whenever it comes.

Here are the 5 IRS Tips for the 2019 Tax Season

1. Watch your withholding
Tax reform caused the amount of money withheld from paychecks to go down in 2018 for many taxpayers. That made their paychecks bigger, but it could result in smaller refund checks for many, and some might even end up owing tax when they file their returns.

The IRS has come up with a tool to assess whether your withholding is correct. If it’s not, you can make adjustments to your payroll withholding by filing a new Form W-4 with your employer. Or looking at estimated tax payments can prevent you from owing penalties and interest.

2. Predict what your refund will be — and when you’ll get it
The biggest motivator for many to file their returns is to get their refund. But tax reform will likely affect those refund amounts in many ways. Higher standard deductions, lower tax rates, and larger child tax credits could boost refunds, while the elimination of personal exemptions, limitations on certain itemized deductions, and the phase-out of various other tax benefits could reduce them.

One thing families should remember is that if you’re eligible for the earned income credit or the additional child tax credit, then your refund will be delayed at least until mid-February. Given the potential for delays to the beginning of tax season, it’s likely that even those who aren’t seeking those credits could have to wait at least that long to get money back from the IRS.

3. Look at these special rules for those without Social Security numbers
If you’re required to file taxes but don’t have a Social Security number and aren’t eligible to get one, then the IRS issues what it calls individual taxpayer identification numbers. These ITINs fill the same role as a Social Security number for tax purposes for certain nonresident aliens, as well as a set of resident aliens and dependents or spouses.

The critical thing about ITINs is that they expire. Therefore, the IRS urges those whose ITINs could expire before they file their returns to submit a renewal application now in order to avoid any future hassles.

4. Familiarize yourself with new tax forms
Millions of taxpayers will have to deal with a new tax form for the very first time during the 2019 tax season. Everyone will use a shortened version of Form 1040, which has been shortened to more closely resemble short-form returns like the 1040-EZ and 1040A. Yet the 1040 will also require new schedules that taxpayers will have to attach in certain circumstances. With the new forms available on the IRS website, it’s smart to get a head start by looking at them before starting your tax prep for the year.

5. Know where to get help
The IRS knows that tax reform will create a lot of confusion, but there’s help available. From online assistance to taxpayer assistance centers and the Volunteer Income Tax Assistance program, Americans can get the guidance they need to deal successfully with their tax returns in the coming months.

Be ready for tax season
Preparing your tax return might seem daunting this year, especially with all the changes that have occurred lately. But with the prospect of possible tax savings, you have a big incentive, and getting ready now will help you get off to a running start when tax season officially opens.

Need more help? Give us a call or setup an appointment, we would more than happy to serve you!