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Year-End Tax Tips for 2019
Here are 10 things to consider as you weigh potential tax moves between now and the end of this year.
Set some time aside to plan
Effective planning requires that you have a good understanding of your current tax situation, as well as a reasonable estimate of how your circumstances might change next year. There’s a real opportunity for tax savings if you’ll be paying taxes at a lower rate in one year than in the other. However, the window for most tax-saving moves closes on December 31st, so don’t wait till the last minute.
Defer income to next year
Consider opportunities to defer income to 2020, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.
Accelerate deductions
You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2020) could make a difference on your 2019 return.
Factor in the AMT
If you’re subject to the alternative minimum tax (AMT), traditional year-end maneuvers such as deferring income and accelerating deductions can have a negative effect. Essentially a separate federal income tax system with its own rates and rules, the AMT, effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2019, prepaying 2020 state and local taxes probably won’t help your 2019 tax situation and could hurt your 2020 bottom line. Taking time to determine whether you may be subject to the AMT before you make any year-end moves could help you avoid a costly mistake.
Bump up withholding to cover a tax shortfall
If it looks as though you’re going to owe federal income tax for the year, especially if you think you may be subject to an estimated tax penalty, consider asking your employer (on Form W-4) to increase your withholding for the remainder of the year to cover the shortfall. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments. With all the recent tax changes, it may be especially important to review your withholding in 2019.
Maximize retirement savings
Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2019 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so by year-end.
Take any required distributions
Once your reach age 70 ½, you generally must start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (an exception may apply if you’re still working for the employer sponsoring the plan). Take any distributions by the date required – the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of any amount that you failed to distribute as required.
Weigh year-end investment moves
You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.
Beware the net investment income tax
Don’t’ forget to account for the 3.8% net investment income tax. This additional tax may apply to some or all of your net investment income if your modified adjusted gross income (AGI) exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).
Get help if you need it
There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional who is able to evaluate your situation and help you determine if any year-end moves make sense for you.
Need more help? Please contact or make an appointment with us here, we are here to help.
WHY DO I NEED A TAX CONSULTANT?
There are several reasons why it makes sense to hire a tax consultant. Even when it might represent an additional expense on our budget, the advantages are more. Firstly, they are experts in the matter, they have to stay updated with IRS tax code changes, and they could even help you get a higher tax return.
Tax Consultants Are the Pros
Tax advisers are accounting professionals who must obtain different certifications in order to provide guidance and consultation services. They must pass different annual regulatory tests to keep their licenses, too. This means tax consultants are more familiarized with the IRS Tax code, they know how the system works, and you might benefit from such knowledge.
Just like you would hire a professional contractor for your home improvements, or a professional doctor for your medical needs, you want should want to hire a professional tax adviser to take care of your tax duties.
Tax Consultants Are Updated with IRS Tax Code
The IRS Tax Code is over 2000 pages long, without including additional explanations and resources. Every year, there are different Tax Law changes and reforms. Tax consultants must keep up to date in regards to those modifications. This is particularly important if you’ve been doing your taxes yourself. There might have been updates you were not aware of until now.
If you worry about making a mistake when filing your taxes, tax consultants will give you the peace of mind you needed.
You Might Be Able To Get A Higher Tax Return
Getting back to what we mentioned before, tax consultants know how the system works, and this can benefit you. Since most consultants also provide financial advice, they can guide you year-round so you can make smarter monetary decisions. This, in turn, can ensure that, when the time is due, you get a higher tax return.
Hiring a tax consultant can have great benefits in the long run. Whether you want it for your business or for your personal expenses, choosing the right consultant for you will definitely show results.
4 Key Ways to Save Money for Your Business
Managing company finances can feel like a huge task. That’s why it’s sometimes a good idea to get back to the fundamentals. For example, the more your company saves, the more your company makes.
Simple, right?
But cutting costs isn’t always that easy. Every company has to navigate different types of expenses.
Where can you save money, and where should you leave things as they are?
You’re ready to save money for your business. Read on and discover 4 surefire ways to cut company costs and improve your bottom line.
1. Cut Unnecessary Types of Expenses
What kind of incentives are you dishing out for your employees? If things are getting tight, it may be time to re-examine that luxury coffee machine in the kitchen. Nobody likes their perks being taken away, but it’s better than having to downsize the company and let people go.
And it’s not just about incentives. Cut your power bill by hooking all electronics to power strips. At the end of the day, you can turn these off to avoid losing money to standby power.
Anytime you make a payment, ask yourself if the service is necessary. And if it is, ask yourself how you can find ways to cut costs.
Over time, these small changes can lead to big savings.
2. Negotiate Better Rates
Every business works with a variety of vendors, whether they’re selling office supplies or product materials. You should know that your rates are never set in stone. One of the best ways to cut company expenses is to head to the negotiation table.
You have more power than you might think. Many vendors are willing to lower their rates. For them, making less money is better than making no money.
Do your research beforehand to see what others are paying. Renegotiating doesn’t carry a large risk, but you don’t want to insult your vendors with a ridiculous request.
3. Reduce Your Job Requirements
Experienced workers expect larger salaries. And that experience doesn’t always translate into additional profits for your company. When you’re filling a vacancy in your business, ask yourself if you really need an employee with five years of in-person training.
By hiring recent graduates, for example, you can afford to pay them much less. Although they’re lacking in real-world knowledge, they’ll have the education they need to fulfill the role. Just be sure you choose candidates who excel at learning on the job.
4. Use Low-Cost Advertising Methods
Traditional advertising is expensive. Whether you’re running a PPC campaign or buying space in relevant magazines, the costs add up quickly. The truth is most small businesses can’t afford the level of advertising necessary to see worthwhile results.
That’s why many are turning to more cost-effective advertising solutions. If you rely on your website to convert customers, then turn your attention to search engine optimization. By improving your site’s ranking, you’ll get more eyes on your business and thus more customers.
Even brick-and-mortar locations can benefit from inbound marketing, such as creating informative articles and YouTube videos.
Federal Tax Deadline Oct 15, 2019
Tomorrow is the federal tax extension deadline! Get your affairs in order today!
Call us for more info.
#taxtips #taxextension #taxsantaana #taxesorangecounty #taxescalifornia #accountingnews #taxnews
5 Useful Tax Tips for Ride-share Drivers to Keep in Mind
As freelance jobs become more and more popular, opting to work as a rideshare driver is a great self-employment alternative that many are choosing nowadays. The way we think about commuting has been forever altered thanks to the popularity of platforms like Uber and Lyft, with an increasing demand for rideshare services, which also opens more positions for drivers to take. However, rideshare drivers must be aware of the tax implications this self-employment option brings. Here are five useful tax tips that rideshare drivers should keep in mind when filing their income.
1.One of the most important steps every freelancer or self-employed worker should follow is to create a system to track their tax deductions. Whether we decide to use an expense-tracking spreadsheet or a mobile app, being consistent and documenting every single business relates expense is a must. This will help us record and identify every deductible expense we made during the year, and facilitate our income tax filing process.
2.Many freelancers and self-employed workers tend to struggle when keeping track of their personal expenses and business expenses. A great way to solve this issue is by having separate bank accounts, one for our personal expenses, and one to use exclusively for business expenses. This will not only help us manage our personal and commercial finances better but will help us keep track of our business expenses, too.
3.Something that many people tend to ignore for some reason is that there are plenty of apps available, both free and paid, that can help us when tracking expenses and deductions. Taking advantage of this reliable and effective tools to document the number of trips we have, how often we charge fuel, the time we’ve spent driving, and any car repair costs will make our filing process more accurate and easier than ever.
4.Now, as rideshare drivers, we should always remember that mileage tracking represents our biggest tax deduction. Therefore, we must be very careful and consistent when recording the miles we drive. Since the IRS requires a mileage log when filing such deduction, we shouldn’t take this lightly. Otherwise, we might not be eligible for this deduction, and this would have a significant impact on our income taxes without a doubt.
5.Lastly, rideshare drivers who work with apps like Uber and Lyft have access to a very resourceful tool, their driver dashboard. This is where drivers can find very useful information, including their annual income, some of the deductions they might be eligible for, as well as the commissions that the apps are taking out of they pay.
5 TAX RECORDKEEPING TRICKS FOR VEHICLE AND TRAVEL COSTS
One of the most tiring chores for a business is keeping all required records related to a vehicle and business travel. These records are needed for tax and financial purposes. For taxes, the law is very specific on the records you’re required to keep if you want to deduct your expenses. Anything you can do to save yourself and your staff time and effort without risking write-offs is welcome.
1. Use an app
If you use a personal vehicle for business, you usually need an odometer reading for each business trip to show the portion of vehicle usage for business. This means jotting down the odometer reading at the start and end of each trip to see a customer, go to the bank, or visit a vendor. But this can be automated for you if you use an app designed for vehicle recordkeeping. The GPS on your mobile device reads the exact travel distance for each trip, noting the time and date. You only have to add to this record the purpose of the trip. What’s more, you can find an app that ties into your other accounting system (QuickBooks has its own app) to further simplify tax return preparation.
You can also use an app to keep track of your travel expenses while away on business. Be sure to check on all of the required information needed to deduct these expenses in IRS Publication 463.
2. Rely on sampling
IRS regulations permit you to use a recordkeeping method called sampling. This means if you have adequate records for a part of the year, you can extrapolate the results for the full year. For example, if you keep good records for the first week of each month that show that 65% of the use of your pickup is for business purposes, and your invoices and bills show the same business pattern for the rest of each month, you can treat this partial record as proof of 65% business use for the entire year. Similarly, you can keep records for one full month as proof of the full year’s vehicle usage, as long as the month is representative of your driving pattern for the year.
3. Scan receipts
Instead of saving scraps of paper, hotel printouts, and other written evidence of costs related to business travel, just scan them into your mobile device. Make sure you have a scanner app on your device.
The challenge with scanning receipts is to have a system for organizing them so they can be readily retrieved if or when needed.
4. Forget receipts
When you travel or are out and about in town on business, you don’t need to retain receipts if the cost of the expense is less than $75. For example, on an out-of-town business trip if you take a taxi from the airport to your hotel at a cost of $50, you don’t need a receipt (but must follow other recordkeeping rules for the expense).
But the $75 rule does not apply to lodging. So, if you stay at a Travel Lodge, you’re going to need a receipt regardless of the cost.
5. Rely on per diem rates
Instead of trying to substantiate lodging and meal costs while traveling away from your regular business location, you may be able to use a government-set daily rate:
GSA.gov has per diem rates. There is a basic rate fixed for the government’s fiscal year ending September 30, with higher rates for certain destinations.
IRS high-low substantiation rates: one rate for most locations within the continental U.S., but a higher one for travel to set locations. The rates also apply for the government’s fiscal year (those for FY 2019 are here ).
Note: Self-employed individuals can use per diem rates only for meals and incidental expenses (not for lodging).
Final thought
Work with your CPA or other tax advisor to make sure your recordkeeping practices for your business are in line with IRS requirements and financial reporting standards.
Money Saving Tip – September 2019
Tip: When making a purchase, first evaluate it on a cost per use basis. If it’s a toy or a gadget, consider how often you plan to use it before you buy it.
Wednesday Quote
Get inspired. A Wednesday Quote from Alvarez Tax Service
BOOKKEEPING TIPS THAT WILL MAKE YOU A BETTER BUSINESS OWNER – Tip #4
HIRE A PRO TO HELP YOU
While you can certainly do the day-to-day record keeping for your business, It’s highly encouraged you to entrust a professional for the final cut before sending over your information to the IRS.
This provides you with four key benefits:
- Ensures that your records are double checked by a numbers professional.
- Puts your mind at ease that you are running your business the way you should.
- Helps you in the long run by getting all the latest tax breaks, credits, and write-offs appropriate for your business. Tax laws are always changing, so it can be a lot to keep up with if you don’t hire a professional to help you.
- Makes you less susceptible to a tax audit. When the IRS views your tax returns and notes that it was filed by a professional, it will have a lesser chance of being flagged for an audit.
NOW THAT YOU KNOW JUST HOW SIMPLE IT CAN BE, HOW WILL THESE IDEAS HELP YOU IN YOUR BUSINESS?! LEAVE A COMMENT BELOW AND LET’S CHAT ABOUT IT!
#bookkeeping #accounting #finances #payroll #quickbooks #income #business #orangecountyca #santa ana #tustin #bookkeepingsantaana #bookkeepingoc
Bookkeeping Tip: Don’t Buy a Car Without Doing These Five Steps
1. Research, Research.
Sure, the commercials tell you what a car is offered for. They don’t tell you what you should really pay. Bring these items to the dealership to get the most bang for your buck:
- Printouts on the true market value of the car from Kelley Blue Book, and Edmunds.com
- All the information from the dealer’s website on rates, incentives, rebates, and special finance deals.
- All the information from the competition’s website on rates, incentives, rebates, and special finance deals.
- Information on your trade in vehicles title, loan, value, etc (if you have one).
- Information on you such as your credit score, banking info, and anything else that can help you get the dealer to give you competitive financing.
2. Check Out the Car
You probably know which vehicle on the lot is your preferred, but have a back up or two. Do a walk around when brought to the vehicle. Check for damage, dings, dents, etc. Your salesperson may ask for a credit check before the test drive. Tell them you are pre-approved, as this just adds time and effort to your purchase time. You will be asked for your driver’s license. Don’t be afraid to ask questions on the features of the car before getting in.
3. Test Drive Wisely
Follow these tips to get the most out of your test drive:
- Insist on test driving the car for at least 15 minutes.
- Don’t let the salesperson distract you if you are listening to the car or otherwise focused.
- Take a route that allows you to speed up, brake, take tight corners, and even rough street ways.
- You can test the radio for a few moments. Turn it off when satisfied. The noise can be distracting.
- Test all the instruments to see if they work.
4. Negotiate Like a Boss
Sales people will often as you to “make the opening bid.” Don’t fall for that. Ask for their best price up front. They will show you a document that outlines all the details on the car. Use your handouts from previous research to compare. Be prepared to walk away should the salesperson not meet or beat the prices. You may love the price and the car. Don’t buy until you’ve shopped at least two more times. Be sure to use this dealer’s numbers when visiting the next.
5. It’s Not Over Until You Sign
You have shopped around. You’ve found a car you like. You’re ready to sign. Now it’s time to face off with the dealer’s finance office. This person will attempt to sell you all types of extras from warranties to paint protection. Feel free to say no to these. They will push for the extended warranty, to which you should let them know you don’t intend to keep the car that long – even if you do. It is essential you ensure the numbers in the sales contract match the agreed-upon price you agreed to earlier. Get any needed repairs, upgrades, detailing, etc in writing before signing.
Congratulations: you are now ready for your new car! Come by and show us your new car.
