Cloud Technology Has Business Advantages

Author: Keith Huggett

Any change in business operations should come with a careful analysis of how it will affect the company, both financially and culturally. This is particularly true for crucial financial functions like bookkeeping and accounting, as changes in these systems can have a larger impact. Switching to a new system is always daunting, but the benefits are often well worth the effort.

Consider the ways that cloud-based accounting can improve your business:

• Lower costs: Cloud-based systems are generally less expensive than purchasing accounting software, especially when you factor in lower IT costs, software and license renewals and time saved.
• Improved security: If you have all of your financial data stored on one desktop or laptop computer, you could be in for a devastating surprise if it is lost, stolen or damaged. Even with regular backups, key financial information could be compromised. With cloud-based accounting, all of your data is stored on remote servers, so even if hardware is damaged, your financial information is always protected.
• Flexible access: Cloud-based accounting systems give you the ability to access your information from anywhere, including your mobile device. It is also easy to add multiple users with customized permissions so key personnel can readily access the reports they need, when they need them, without waiting for another person to do it.
• Better business processes: Financial data entered into a cloud-based accounting system is automatically updated so that every user has access to the same information in real-time. This means less travel for your CPA, more accurate reporting and the ability to make faster decisions.
• More time: Improvements in efficiency will allow you and your employees to focus on more strategic efforts, rather than the mundane details of bookkeeping. Your IT staff will also have more time to dedicate to larger organizational issues.

If you are ready to make the switch to cloud-based accounting, let The Tax Office Inc. guide you through the process. We'll help you select the right package and set up your back office support system so you can free up more time to manage your business, not your bookkeeping. Contact us here for any cloud-based accounting questions.

Choosing Which Is Right For You

Author: Keith Huggett

With dozens of tax preparation software choices available choosing the best one for you can be difficult. By not knowing which program to use mistakes are often made. Mistakes you inevitable have to pay for.  These mistakes can be easily avoided by hiring a qualified tax professional to prepare your taxes for you.

In comparison to the cost of using a qualified tax professional, the cost of using tax software may seem like a "no-brainer."  The initial cost of tax software ranges from $10 to $120 to websites offering free services.  In contrast, the initial cost of professional tax services may start at around $100 and go up from there.  The low cost is one of the most attractive benefits of using software to prepare your own taxes.

Accountants and tax preparers charge more for their services.  They have access to more sophisticated tax software that automates the data entry and organization required resulting in fewer mistakes made.  Consumer tax software cannot be compared to the software available to professionals.

It is impossible to form a relationship with your tax software, unless of course it frustrates you to no end.  This is not so with a professional tax preparer.  As your tax preparer works with you, he or she will become familiar with your personal situation, your family, and/or your business.  This provides them with the ability to make suggestions or ask questions that consumer tax software cannot predict.  You also have the ability to contact your tax preparer throughout the year to answer any questions that may arise.

As your tax situation becomes more complex, the amount of time spent to file your taxes increases dramatically.  Qualified tax preparers stay up to date on changes to the tax code, making it far easier for them to complete research tasks than the non-professional.  Isn't your time better spent on growing your business?  By paying an initial higher price for your tax preparation will save you time, stress, and money in the future.

So which solution is best for you? I can only answer that it depends upon your financial situation.  If your taxes are very straight forward, it may benefit you to use a commercial tax software.  As your taxes become complex, hiring a qualified tax professional may be in your best interest.  The more complex your situation the more you are going to need the assistance of a tax professional.  Your goal should always be focused on not paying more than you are required to.

If you would like to discuss your tax situation, please contact us either by phone at 916-773-7053916-773-7053 or online.  The professionals at The Tax Office, Inc. are here to help you grow your business and lower you tax liability.

Be Aware Of What Scammers Are Up To

Author: Jenny Shilling

Every year the IRS posts their list of "Dirty Dozen" Tax Scams.  It's sad to say but the list doesn't change very much from year to year.  In order to avoid being a victim of scams this tax season, please remember that the IRS will ONLY contact you using the United States Postal Service.  They do not use email or the telephone to contact individuals about their tax returns.

At The Tax Office, Inc., we hope that you will find this list helpful in preventing tax scams.

1. Phone Scams – Criminals impersonate IRS agents and threaten taxpayers with arrest, deportation or license revocation in order to steal the taxpayers’ identity.

2. Phishing – Fake emails or websites are used to steal personal information. The email may attempt to gain access to your personal information. Koskinen emphasized that the IRS does not email taxpayers about a tax bill or refund.

3. Identity Theft – Criminals continue to steal Social Security numbers and attempt to e-File and obtain an early tax refund.

4. Return Preparer Fraud – Unscrupulous return preparers may be involved in refund fraud or identity theft.

5. Offshore Tax Avoidance – It is unlawful to hide money and income offshore. The IRS Offshore Voluntary Disclosure Program (OVDP) may help you get your taxes in order.

6. Inflated Refund Claims – Do not sign a blank return or have your tax return prepared by someone who bases their fees on a percentage of your refund.

7. Fake Charity – There are individuals who claim to represent a charitable organization and solicit donations. You should check to be sure that your gifts go to legitimate charities that qualify for a deduction.

8. Fake Documents – Some individuals attempt to hide income by filing a false Form 1099 or other documents. A taxpayer is responsible for paying his or her tax, regardless of who prepares the return.

9. Abusive Tax Shelters – There are complex tax avoidance schemes that sound “too good to be true.” You should seek advice of a qualified advisor before using any aggressive tax strategy.

10. Inventing Income to Claim Credits – Some taxpayers have claimed increased income in an effort to qualify for the earned income tax credit.

11. Fuel Tax Credits – The fuel tax credit for off-highway business use, such as farming, can be used to apply for an improper tax refund.

12. Frivolous Tax Arguments – Various promoters have urged taxpayers to make unreasonable and outlandish claims. These claims have regularly been held invalid by the courts and tax protesters have suffered substantial penalties.

If you believe you have been contacted by someone perpetuating a scam, you should report it to the IRS. 

To report promoters of these scheme types or any other types you are aware of that are not listed here, please send a completed referral form, along with any promotional materials to the Lead Development Center:

Mail:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405

Fax: (877) 477-9135

Are All Your T's Crossed?

Author: Keith Huggett

If you are starting a business, you know that you have a lot to do. You have to develop a product, create a marketing plan, build a staff and handle all of the administrative issues of setting up a business. While you are doing all of this, you need to figure out how to pay for everything. The federal government's Small Business Administration can help you find money and bonding, letting you focus on the rest of your business.

The SBA's Guaranteed Loan Program gives your start-up access to money. While the SBA does not directly lend money to people starting a business, it provides guarantees to help protect lenders against the risk that you will not pay back your business loan. If you take out a loan that qualifies for an SBA guarantee, it will usually offer better rates and terms than non-guaranteed business debt.

The SBA can also help you get venture capital through its Small Business Investment Company program. The SBA provides money at favorable rates to SBICs in various communities. Those investment funds then provide debt and equity financing to small businesses like yours. As you know, venture capital involves diluting your ownership in your company, but it usually does not carry the payments that debt financing requires.

Finally, the SBA can help you with one more challenge that you will likely face: getting a surety bond. Surety bonds are a form of insurance that protects your clients against the risk that you will not meet your obligations to them. If you don't, for instance, finish a job for a client, the surety bonding company will compensate him or her. Many companies require their contractors to carry surety bonds. To make it less expensive and safer for companies to insure you, the SBA's Surety Bond Guarantee program provides partial guarantees under which the SBA bears some of the cost that your bonder incurs when they pay off.

The professionals at The Tax Office Inc. have experience dealing with SBA programs. Contact us to learn how they and the SBA can help you with starting a business.

Keep This, Not That—Which Documents Should You File and Which Should You Shred After Tax Season?

 Author: Jenny Shilling

If there’s one time of the year that may inspire you to finally come up with a filing system for all of your bank statements, receipts and other important documents, it’s tax season. Not only will keeping your documents organized make it easier and less stressful for you to find what you need on a daily basis (and when you are getting ready to have your taxes prepared), it will also ensure that if something happens to you, your loved ones will be able to quickly find essential information about your finances and other relevant items.  

 One of the major challenges that many people encounter when they start going through their documents is knowing what they should keep and for how long. The following list from Consumer Reports may help you determine what to keep and what to toss (remember to shred all sensitive documents before you put them in the recycling bin or trash) once tax season is over:

 Documents to keep for a year or less

• Bank records: Keep deposit and ATM receipts until you reconcile them with your monthly statements. File your monthly checking and savings account statements. After you do your taxes, file any statements needed to prove deductions with your tax records; the rest can be shredded.
• Credit-card bills: Shred them after you've checked and paid them, unless you need a bill to support a deduction you'll be taking on your taxes, such as for a charitable donation (in which case you'll need to file the bill with your current-year tax records).
• Current-year tax records: Keeping your records organized can save you headaches and money at tax time. Place documents you'll need for your next return in a file.
• Insurance policies: Keep policies that you renew each year, such as those for your home, apartment, or car, until you get new policies, then shred the old ones.
• Investment statements: You can shred your monthly and quarterly statements from brokerage, 401(k), IRA, Keogh, and other investment accounts as new ones arrive. But hold on to annual statements until you sell the investments.
• Pay stubs: Keep the calendar year's records until you reconcile them with your annual W-2 form, then shred them.
• Receipts: If you're not doing anything with your receipts—like tracking your spending, itemizing tax deductions, or using them to return purchases—you don’t need to keep them.

 Documents to keep for at least a year

• Investment purchase confirmations: You will need these to establish your cost basis and holding period when you sell investments. If this information appears on your annual statements, you can keep those instead of quarterly or monthly statements. Store the records until you sell the investments, at which time you should move the back-up records into that year's tax-return file.
• Personal federal and state tax returns and their supporting records: These documents must be kept for at least seven years. Remember, your returns can be audited by the IRS up to three years after the date you filed the return. If you fail to report more than 25 percent of your gross income, the government has six years to collect the tax or start legal proceedings—and you can be audited at any time if the IRS suspects you of fraud.

• Loan documents: Keep closing documents for mortgage, vehicle, student, and other loans in a safe-deposit box. You can dispose of them after the loan is paid off.

 Documents to archive for seven years

•  Tax records: If they are more than seven years old, tax records can be stored—or even better scanned—for your records.

 Documents to keep indefinitely

• Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept in a safe-deposit box.

• Permanent life insurance: Policies that have a cash value or investment component—keep documents and a list of the companies that issued them and their phone numbers in your safe-deposit box. If you have a term life policy, hold the documents until the term is over, then toss them.
• Pension-plan: Documents from your current and former employers and estate-planning documents including wills, trusts, and powers of attorney should also be stored in your safe-deposit box.

 If you’ve already instituted a filing system for your key documents, kudos to you. If you haven’t, now is the perfect time to do so. If you have any questions about which financial records you need to keep or which ones you can safely dispose of, please let us know, we are happy to help.

Types of Tax Credits that can Reduce your Tax Bill

Author: Jenny Shilling

Tax credits can make a significant effect on your Federal income taxes. A tax credit is a dollar-for-dollar credit. If you qualify for a $500 tax credit, $500 will be taken off your tax bill. In comparison, a tax deduction only reduces your tax bill by the percentage of your marginal tax bracket. There are two types of tax credits available, refundable and non-refundable. Most tax credits fall into the latter category.

Refundable Tax Credits

These credits are treated the same as a tax payment. A refundable credit is subtracted from the amount of taxes you owe after deductions. These credits can reduce your tax liability. If the total tax liability is below a zero amount, the difference will be returned to you as a tax refund.  If you happen to already be receiving a tax refund, this amount will be added to it.

Examples of refundable tax credits:

• Additional Child Tax Credit
• Earned Income Tax Credit
• Health Coverage Tax Credit
• Small Business Health Care Tax Credit

Non-Refundable Tax Credits

These tax credits are subtracted from your tax bill up to the amount you owe. A non-refundable tax credit cannot reduce your bill past a zero balance.

Examples of non-refundable tax credits:

• Adoption Tax Credit
• Child Tax Credit
• Foreign Tax Credit
• Mortgage Interest Tax Credit

Partially Refundable Tax Credits

There are some credits that fall into both categories. The American Opportunity Tax Credit is a partially refundable credit. If this credit reduces your liability past zero, you can receive up to 40% (up to $1000) as a refund.

Because tax law changes from year to year it is important to do research and planning prior to filing your tax return. Hiring a qualified tax professional will ease your burden as they are trained in the yearly modifications.  If you have any questions regarding your taxes, credits, or deductions please contact us. The Tax Deadline is rapidly approaching and our specialists are available to provide the answers you need.

Keeping Track from Donations to Taxes

Author: Keith Huggett

While nonprofits are not in business to make a profit, careful bookkeeping must be done. Often donors who make contributions want to know how and where their money is being used. If there is any sign of financial irregularities, donors may choose to donate to a different organization.

Tax Exempt Status & Receiving Donations

Have the proper forms been filed to attain tax exempt status? As with all things tax related, the requirements differ from state to state. Because the IRS only allows charitable donations to IRS designated tax exempt organizations you can see why this is a critical step. In most states, before you can accept donations, you will have to file Articles of Incorporation and appoint a Board of Directors to oversee the organization.

Tracking Donation and Recording Expenses

Having a solid accounting system in place to record donations and expenses is a must because donors require receipts in order to claim their deductions at tax time. Expenses should fall into two categories: program expenses and administrative expenses. Your program expenses are those expenditures made to support the organization's mission.  Administrative expenses are those that are made in order to run the non-profit organization, overhead and fundraising.

Tax Returns

Most charities file IRS Form 990, the return for tax exempt organizations. If the total amount of donations is less than $50,000, IRS Form 990N may be filed instead.

The tax specialists at The Tax Office, Inc. have the answers to your tax questions. Contact us now, for a free, no obligation tax consulation for your non-profit organization.

Be On the Lookout for Your Form 1099s

Author: Keith Huggett

It's that time again! Time to send and receive your IRS Form 1099s. Every year the requirements are modified for Form 1099-MISC. When you are a recipient of a 1099-MISC form the IRS also gets a copy that is linked to your tax return.  Keeping aware of your incoming 1099s can save you a lot of time, money, and hassle.

Watch Your Mail.

With 1099s being sent out during the month of January, now is the time to keep a close eye on your mailbox. Because these forms are linked to your social security number failure to report your 1099s can end up causing an audit.

Relocated Lately?

If you have moved recently, be certain to file a change of address with the IRS using Form 8822.
Also, be certain that you have notified all of your contacts with your change of address. A simple forwarding order at your post office can help you keep track of your incoming Form 1099s.

Check for Errors.

Don't just assume your incoming 1099s are correct. The general deadline for issuing a Form 1099-MISC is January 31.  You then have 30 days to file the forms with the IRS.  If you send the forms and file simultaneously, you may not catch any errors.  Use the time between in order to send corrections if necessary.  Also be sure to open your 1099s as soon as you receive them.

If you need further information regarding Form 1099-MISC, the tax specialists at The Tax Office, Inc., are here to help.  A free download of Forms 1099: The Good, The Bad, & The Ugly is available on our website.  Please contact us for a free, no obligation evaluation of your tax situation.

Avoid the Wrong IRS Determination

Author: Keith Huggett

In today's economy, many people are finding it difficult to survive with only one source of income. The business minded people often choose to start a business from something they love to do - putting a hobby to good use.  If this happens to be a choice you would like to explore, there are a few regulations you should know about.

What is a hobby business?

A hobby business is usually operated from home. Jewelry making, refinishing antiques, even quilting can be, and usually are, a hobby business.  Almost any hobby can be transformed into a "hobby business."

Proving that your hobby is a business...

Having a side (hobby) business allows you to deduct losses from this business activity on your tax return. The issue here is that these deductions can only be made for a bona fide business. If the IRS decides that your business is actually a hobby, you wll lose the ability to claim these deductions.

So how do your prove to the IRS that you are actually running a business? It's simple, at least on paper.  Your business must be out to gain a profit.  The IRS uses several different criteria for deciding if your business is operating to gain a profit.  The one they use the most is called a "3 out of 5" test.  If your business made a profit in any three of the last five years, you are obviously working to gain a profit.

There are additional ways to prove your business is not just a hobby.  Having professional business cards and stationery, well maintained books, and separate bank accounts are only a few.  It is also helpful, and usually required, that you have a business license from your city.

Running a business is a very time consuming, high energy, work in progress.  As a business owner you will find yourself wearing many different hats.  Our specialists at The Tax Office, Inc., have received training to assist business owners like you to help you grow your business.  Should you have any questions regarding determining if your business is a hobby, please contact us for a free, no obligation consultation.

New Identity Theft Targets Social Media

Author: Allyson Huggett

When you start your business you put a lot of time, money and energy into creating your business identity. Now, thanks to hackers and unscrupulous business owners, your branding, online reputation, and social idendity may be at risk.  This is especially true if your business uses online social media and review sites such as Yelp, Google, or Facebook.  Hackers today are creating chaos for business owners by posting erroneous or harmful content on these sites with the sole purpose in mind of damaging the businesses involved.

With social media a huge part of business marketing, having positive or negative comments and reviews can have a major impact on your business.  Consumers today rely on positive reviews when making decisions on where to take their business.  Having a negative review, even if it is a false review, can impact those decisions also.

As this type of business identity theft grows, it is imperative that your business keeps an "eye" on what is posted online. Listed below are a few ways to do this.

Consider using a reputation management service.

Reputation management has become it's own thriving business.  These companies take the time to monitor the most popular social media sites, correct inaccuracies in listing, and alert you to reviews both positive and negative.

Create a social presence.

If you haven't created social media accounts for your business now is the time to do so. Having these accounts in place prevents other people from creating accounts in your name. Keep control over what is being posted on your behalf.

Check your business listings.

With so many different options to list your business on, it is imperative that you know where your business shows up online.  Be certain that the listing is correct, with address, contact information, and hours of operation.  Be sure to search frequently to see if new listings have popped up.

Taking a pro-active approach to maintaining your online reputation is a must.  There are an abundance of online tools created for this purpose, such as Google Alerts.  With these tools you can be updated whenever your business name is mentioned online. While time consuming, your other options are limited.  Be aware of your social identity and act promptly when your business is listed, mentioned, or used in online posts. Should you have any questions, please contact the Tax Office, Inc.