Don't Miss Out on These Deductions!

Author: Keith Huggett

Small business owners are usually busy running their businesses and don't have a lot of time to spend worrying about tax strategy. If you're like a lot of do-it-yourself small business owners, you're probably forgetting to take some of these five, often-missed tax deductions:

1. Start-up expenses: The first money you spend on your business is also your first deduction. The IRS lets you write off up to $5,000 in start-up expenses in your first year and lets you amortize anything over that amount over a period of 15 years. The IRS defines start-up expenses relatively liberally and lets you write off not just your DBA filing or the legal costs for your articles of incorporation, but also the cost of market surveys, advertising to announce your business and the like.
2. Education: Money that you spend on education that is directly related to your business can be tax deductible. While you are safe writing off money you spend on legally required continuing education, other work-related training can also be a tax deduction.
3. Depreciation on Home Offices. While home office tax deductions are generally red flags for IRS audits, a legitimate home office deduction can be valuable. When you write off your home office, remember to also deduct depreciation on the portion of your home you use as an office.
4. Cell phones: Your cell phone expenses are deductible. If you split your cell phone between personal and business uses, just write off the proportionate share for your business use.
5. Loss carryback and carryforwards: If your tax deductions add up to so much that your business ends up with a loss, don't worry. The IRS will let you either carry the loss back and apply it to previous profits, or carry it forward for use against future profits.

Keeping track of all your write-offs can be challenging. Also, IRS rules for such things as depreciation, employee credits and loss carryovers frequently change. Contact the tax professionals at The Tax Office, Inc. because they keep track of changing tax deductions and other IRS requirements, and they can help you minimize your taxes.

Business Plans Necessary In Early Stages of Operation

Author: Keith Huggett

Business plans are frequently created in the start-up stages of a company, then ignored after it is up and running. Your business plan should serve as a guideline for all of your business activities, whether you are in your first year or your tenth.

While the early months and years are often dedicated to setting up operations, finding new customers and marketing your products and services, there is still important work to be done after all the excitement dies down. You can use your business plan to help you make smart financial decisions that will allow your company to grow. Imagine how a well formed plan can help you make the following decisions:

• Buy or lease - Whether it is property, vehicles or office equipment, having a strong understanding of the financial health and direction of your company can help you decide whether to make these types of investments, or to save your cash for other business needs.
• Tax planning - Have you implemented the best retirement plan strategy? Does your company donate to charities? Do you take advantage of all the tax credits and tax-free benefits available? Smart tax planning can save your business a lot of money in the long run.
• Change of entity - The decisions you make now concerning your business structure can affect your tax liability in the future. Perhaps switching from a C Corporation to an S Corporation would make better financial sense for you and your shareholders.
• Hiring - Can you afford to hire new full- or part-time employees? Have you factored in all of the costs associated with a new hire?
• Investors - It's not only start-ups that require capital. Having a solid plan will make your business more appealing to investors, and may also make it easier for you to obtain a bank loan, if necessary. 
• Selling - A sale is a common exit strategy, and sometimes even the ultimate goal.

The Tax Office can help you with the financial planning portion of your business plan. Contact us today to schedule a meeting. You never know what your business plan might be missing until you ask an expert.

Steps You Can Take To Protect Yourself & Your Business

Author: Keith Huggett

Identity theft occurs when someone takes personal information, like a name, or Social Security number, or other information, without your permission, to commit fraud or other illegal activity.  Government document identity theft is the most common form of identity theft.  Normally, a person's Social Security number is stolen and used to file a tax return to claim a fraudulent refund.  When the legitimate taxpayer files his or her return, the IRS rejects it.  The taxpayer is then forced to correct the situation and repair his identity, which in most cases takes an enormous amount of time and effort by the taxpayer.

As a business owner, identity theft is a bit different.  While the tax return may still be fraudulently filed, other issues may remain hidden until the business receives a notices from a government agency regarding unpaid employment taxes, erroneously claimed tax credit, unreported merchant payment card income and more.

Steps for Individuals

• File Tax Returns Early - Identity thieves generally file early in the season. The earlier taxpayers file, the less likely an identity thief can assume their identity and file first.
• Protect Social Security Numbers - Don't carry your social security card outside of your house in a purse or wallet that could be lost or stolen. You should not give out your SSN unless absolutely necessary. If required, challenge the requirement.
• Internet Passwords - You should use a complex password and change it frequently.  Using your child's name, favorite pet, date of birth, or anniversary is asking for trouble.
• Install Firewalls and Anti-virus Protections - Utilizing anti-virus software can protect your computer from mal-ware and viruses used to damage your computer and steal your personal information.
• USPS Service - Don't trust your mailbox! Make that extra stop at the post office to drop off your mail.  If you are going on vacation, have the postal service hold your mail.
• Shredding Documents - Your trash can is not a safe place to throw away documents...unless you shred them first.  An identity thief is not above searching through your trash. It's a gold mine of information. Shred everything!
• Check your Credit Score - Be sure to check your credit.

Steps for Businesses

• Account Monitoring - Monitor accounts on a daily basis. Enroll in e-mail alerts to be immediately notified of any change in account name, address, or other information.
• Safeguard a Dissolved Business - Businesses that have closed are particularly susceptible to business identity theft.  Businesses that fail to undergo the formal dissolution progress, terminating all of the corporate authority, make it easy for identity thieves to easily reinstate charters and then use that former business's entity to conduct tax fraud and other schemes.
• Bank Protection - Review your banks' policies and recommendations regarding fraud protection.
• Safeguarding Documents & Identification Information - Protect your EIN by giving them out only when required.
• Password Protection - Change your passwords frequently and use complex passwords.

While all of this may seem like common sense, identity theft happens every single day.  Identity theft has grown by more than 542% from 2011 through 2013. It is estimated that 1 in 14 people across the United States fell victim to Identity Theft in 2012 above the age of 16, affecting approximately 16.6 million people.  2/3 of those people experienced some kind of financial loss.  Over $24.7 billion dollars was lost to identity thieves in 2012 alone.

Assistance with repairing your identity is available if you have become a victim of identity theft.  If you believe you are at risk of identity theft due to lost or stolen personal information, you should immediately contact the IRS so the agency can take action to secure your tax account. If you have received a notice from the IRS, call the phone number on the notice. You may also call the IRS’s Identity Protection Specialized Unit at 800-908-4490800-908-4490 FREE.

The specialists at the Tax Office Inc., are available to answer any questions you may have on the tax ramifications of identity theft.  Contact us if you think you may have been a victim of either business or individual taxpayer identity theft. We may have just the information you need.

Tax Planning Begins with Form W4

Author: Keith Huggett

When you are filling out your form W4 - Employee's Withholding Allowance Certificate, tax planning may or may note be the first thought in your mind. Usually it's about whether or not you'll be receiving a refund in April. While getting that refund is always nice, your goal should be to break even.

When you being employment you will be setting up your inital withholdings on your Form W4. It is important to review your W4 annually as your situation can change from year to year.  There are many different circumstances that can cause you to change your withholdings:

• Getting married or divorced
• Having children
• Buying or selling a home
• Changes in your contributions to your retirement or education savings accounts
• Changes in your employment

Figuring our just how much to withhold can sometimes be as complicated as preparing a tax return.  Your tax preparer may offer a service called a "W4 review", where he or she will go over your W4 with you, suggesting where you might make changes.  This can result in adjustments to your withholdings or estimated tax payments, depending upon your situation.  A W4 review is just the first step on the road to planning for your future.

From there, your tax preparer can plan ahead for the next tax year by creating a projected tax return. After figuring out your projected tax liability, simply use the withholding calculator provided by the IRS or your tax preparer's suggestions for your withholdings.  Your W4 form can be changed as needed.

Should you have any questions on W-4s, withholding,  or any other tax topic, our specialists at the Tax Office, Inc. are here to provide you with the answers. You can contact us, or ask us a question on our Facebook page.

 

This Online Tax Tool May Save You Headaches Down the Line

Author: Keith Huggett

If you have paid an independent contractor more than $600 for services during 2013, you need to send out a 1099-MISC form by January 31, 2014.  That same 1099-MISC form will need to be filed with the IRS by February 28, 2014.  If you are filing electronically the date is extended until March 31, 2014.  In order to fill out this form, you need to have specific information about your independent contractor, such as the business name, tax id number, and business address.  This information is easily obtained by requesting that the contractor fill out a W-9 form for you. Now that you have this information you have the ability to check the information against what the IRS has by using their Taxpayer Idendtification Number Online Matching tool before sending out your 1099s.

In order to use this tool, you need to register to use the IRS e-services, select a username, password and PIN. Then you can register to use TIN Matching from the suite of e-service products available. The TIN matching services allow “authorized payers” the opportunity to match 1099 payee information against IRS records prior to filing information returns.

An authorized payer is one who has filed forms 1099-B, 1099-DIV, 1099-INT, 1099-MISC, 1099-OID or 1099-PATR with the IRS in at least one of the two past tax years.

Interactive TIN Matching will accept up to 25 payee TIN/Name combinations on-screen while Bulk TIN Matching will allow up to 100,000 payee TIN/Name combinations to be matched via a text file submission.  This service is free of charge at this time.  

When you submit your TIN/Name combinations you will get one of the following NUMERICAL results:

While this step is certainly not required, it may make things easier for you when it comes time to send out those 1099-MISC forms.  If you know ahead of time that the information you have is correct, there will be no worries come April 15th.  Should there be any erroneous information found, you now have time to obtain the correct information from your independent contractors so that no red flags are raised when your taxes are filed.

Should you have any questions regarding 1099s, your taxes, or filing requirements, the highly trained specialists at The Tax Office, Inc. are here to help you.  Contact us now.

 

 

Why Outsourcing Could Be the Better Option

Author: Keith Huggett

Are you still doing your own payroll activities in house? Why? Outsourcing your payroll makes it easier to run your business, saves you time and should save you money. Here are just a few reasons why:

• A third-party service can cut payroll checks and direct deposits for you from a separate account, hiding your business account number from your employees.
• Outsourced payroll services save you from the tedious process of actually doing the payroll. All that you will need to do is to transmit how many hours each employee worked and what rate to pay them.
• With a third party helping you, you do not have to worry about updating your payroll system for yearly updates in withholding tables.
• Using a service to outsource your payroll activities frees up you or your employee to work on more productive activities, helping to move your business forward. Imagine how much money you could save if the time you spend paying your employees was instead spent on rebidding vendor contracts for lower prices.
• You are likely to see a number of changes to tax law over the next few years, just as there have been over the past few years. All of these will affect how your calculate your payroll.
• Using an outside vendor for payroll activities gives you an additional layer of protection if there is an error and you face an audit. Many payroll companies will provide a guarantee of accuracy and take responsibility for any mistakes that they make.

If you would like to learn more about the many benefits of using a third-party payroll service, contact The Tax Office, Inc. Their staff of accounting and payroll professionals can help you decide if outsourcing is a better option for you and your business.

Tips to Consider for the New Year

Author: Keith Huggett 

How do you choose your payroll provider? To begin with you should start by knowing exactly what services you are going to need throughout the coming year.  Are you expanding your business? How many full-time, full-time equivalent, part-time or contract employees will you have on your payroll? How often will you be paying them? Will anyone be getting a bonus this year? Will you need human resources services? Will you be offering 401(k)s or other deductions? Sounds incredibly complicated doesn't it?

When it comes down to it, your payroll service should provide 3 basic services for you:

1. Pay your employees on time.
2. Pay your payroll taxes on time.
3. File your payroll tax forms on time.

Some additional services that your payroll service can provide for you, most likely at an additional cost include:

1. W2 forms
2. Direct deposit
3. Online pay stubs
4. Online time tracking

When you begin your search for a payroll service, conducting your interview is crucial. Here are some critical questions to consider before you make your final decision:

1. What is the turnaround rate?
2. If the payroll service makes a mistake, who is liable for it?
3. How long does it take to fix a mistake?
4. Are there additional charges for adding or modifying employee payroll?
5. Does the annual fee change after the first year?
6. How often are reports sent out?
7. Does the payroll service offer retirement plans?
8. Does the service integrate with your accounting software?
9. What back office software does the service use?
10. What are the hours of operation and the means of customer service?
11. Will you be assigned a service representative or will you be working with someone new each time you make contact?
12. How often will there be communications from the payroll service?

After deciding on a payroll company, you should set up a schedule determining when you will check in with the service and how often you will get their reports.  Keep watch on your bank statements and make certain there aren't any drastic changes once the payroll service begins.

The only way to be certain that you are happy with a payroll company is trial and error. You need to test the waters.  If you have any questions about payroll, the specialists at The Tax Office, Inc., would be happy to provide the answers. The Tax Office, Inc., is a full service tax, bookkeeping, payroll, and tax representation company.

Double Checking Can Lead to Fewer Errors

Author: Keith Huggett

The IRS makes a lot of money on tax audits. In fact, one survey of IRS audit personnel who focus on corporate returns indicates that they generate more than $9,000 in revenue for every hour they spend reviewing returns. To ensure your tax return avoids attracting the scrutiny of audit-happy IRS employees, don't make these simple mistakes:

• Math errors: The IRS uses powerful computers to check your return, and if you make an error, you can expect a letter.
• Discrepancies with information returns: Believe it or not, the IRS used to accept your return without matching it to 1099s and other information returns. That isn't the case any more. Today, the IRS checks your return against every information return that carries your social security or employer identification number, and if they find a discrepancy, you will probably end up enduring an IRS audit. There is a lot of information available about 1099s and you may be under the impression that 1099s don't apply to you. Check it out just to be sure.
• Too many deductions: The IRS has a good sense of how many deductions a normal return for your income level and type of business will have. While they allow for some variation, if you claim too many deductions, they will flag your return for audit.
• Illegitimate home office deductions: Many of the people that claim home office deductions claim them illegitimately. Because of this, even if you are entitled to it, claiming it makes you a target for an IRS audit. Before filing for the deduction, make sure that you are really allowed to claim it. If you are, it's probably worth the risk, especially when you include the depreciation allowance against the value of your house.

The best way to keep your return mistake-free is to work with a tax professional. The experts at The Tax Office, Inc. can help you prepare an error-free return. They can also give you the confidence to claim every deduction you are entitled to without having an undue risk of IRS audit.

Always Follow the Rules...

Author: Keith Huggett

In addition to keeping track of receiving and sending out payroll tax statements, 1099-MISCs and other tax season paperwork, there is another 1099 form that you will have to watch out for: the 1099-K. The 1099-K form is an informational return that your payment processor may send you to detail the payments that they process for you. This additional reporting document adds complexity to your tax preparation and may increase your risk of an IRS audit.

Here are three issues that deserve your attention:

1. Not every business will receive a 1099-K form: Merchant providers will send you one if you do at least $600 in transactions per year. Third-party settlement organizations, the most common of which is PayPal, will send you one if you do at least $20,000 of business over a series of at least 200 transactions.
2. 1099-K forms reflect gross payments: When your payment provider sends you a 1099-K, it will reflect the gross payment that they send you before subtracting fees. If you are only accounting for net payments after the settlement company's fees, your tax returns will not match the 1099 and you will be at risk of an audit. 
3. You might get fewer 1099-MISC forms: Clients who were reporting transactions to you on a 1099-MISC form may not send you one this year. If they are paying you through a third-party settlement organization, they should not send you a 1099-MISC. Their payments will be included in aggregate with other entity's payments on the 1099-K form that you get from your payment provider. This is an IRS regulation to prevent payments from being double reported.

With all of the 1099 forms that your business both receives and sends out, tax filing is getting even more complicated. The Tax Office, Inc. has a full staff of accountants and bookkeepers who can help you make sense of every tax form that you receive. Please contact us to get started.

It's Almost That Time of Year Again...

Author: Keith Huggett

If you've received money from just about any source other than work, you'll probably be receiving a 1099 form this year. These forms are informational returns that let you and the IRS know how much money you received, and since the IRS gets a copy, they are major audit fodder. 

Here are three major red flags for which you should pay close attention. 

1. Write-offs - If your 1099s come from self-employment income and you file a Schedule C, your return is more likely to be audited. The IRS audits small business people because they expect to find overstated expenses. As such, you should be very careful to ensure that you can document all of your write-offs.
2. Ensure that every 1099 is reflected on your return - A few years ago, the IRS invested in new computer technology that automatically matched returns to 1099s. This technology makes it very easy for them to spot discrepancies and flag your return for an immediate audit. Reporting more gross income than comes in on 1099s will usually not be a problem, since the IRS knows that you might receive income from payers that don't send a 1099.
3. PayPal fee deductions - Third-party payment services like PayPal are now required to file 1099s for income that they send you. Because of this, you may not be receiving a 1099 from vendors that pay through PayPal. Where the problem occurs is if you've been recording your income after PayPal takes its fee. PayPal will report the income that they paid you before their fee, and you will need to subtract those fees as expenses. If you don't, your return won't match your 1099.

Whether or not you pay close attention to these considerations, the IRS will. Given the large number of different 1099s and their complexity, keeping them straight can be hard. The Tax Office, Inc., knows how to handle them, report them and protect you from an unpleasant and expensive audit. If you expect to be receiving a 1099 form this year, it's a great time to contact us and get started on your taxes. If you would be interested in learning more about 1099s in general there is an informational white paper available, entitled Form 1099-Misc, The Good, The Bad, & The Ugly.