Showing posts from 2018

The Government Shutdown and the IRS

        The current shutdown of the Federal government has essentially frozen certain departments. In some cases, employees just go home, others work with no pay, and others are continuing to work with pay. The IRS has planned for this situation at the end of 2018, and still has some functions that are still active.           At this point, no extensions have been issued . Any petitions or appeals must be filed by their assigned deadline. If a Taxpayer has an established payment plan with the IRS, they must continue those payments.           Tax Season is still expected to begin in January, with some refunds being issued starting in mid-February. However, if the Government Shutdown continues past December 31, the issuing of refunds and the processing of forms will typically be suspended. Essentially, the plans for the start of 2019 would be pushed back. The IRS would move to conserve as much as possible, while still trying to function as a government agency. We will see how t

How to Withhold Income Tax... For Now

         As we have discussed in previous posts, the new version of Form W-4 will not go into effect until 2020 at the earliest . When the draft was proposed, it created much uncertainty and with time those privacy concerns will be addressed. In the meantime, withholding cannot continue the same as it has been. The form may be similar, but the law has changed.           The IRS guidance in the area does take into consideration the changes made by the Tax Cuts and Jobs Act . There is an allowance to consider Qualified Business Income ( QBI ) as a deduction for those who meet the requirements found in Section 199A . To not get surprised by a withholding error that may cost a large amount of money, it is good to speak to a Qualified Tax Professional in order to make the necessary adjustments in your paycheck.

Keeping up with the Speed of Change: What the Future Holds

         There has been much discussion and debate over this past year. We have all done our best to get an understanding of what the future of taxes will look like. In January, the theories will end, and the tax filings will begin. However, this is only the start of the changes in store. Let’s consider the example of tax brackets and rates.           A year ago, we wrote a post that covered the topic of tax brackets and rates. There are 7 rates that range from 10% - 37%. The brackets will change depending on the filing status. This information was understood at the end of 2017. There are new tax brackets that have been released, but they will apply to when filing taxes in the year 2020. There are aspects of the Tax Cuts and Jobs Act that will change year by year .           For Taxpayers who are not planning any big changes, all that is needed is to keep an eye on the progressive nature of the tax bracket. The difference will be seen. For everyone else, the time to prepare is no

The Tax Cuts and Jobs Act: Big Changes

          The topic that has received the most attention on our blog has been The Tax Cuts and Jobs Act. This is more than justified considering its wide scope, and the changes it has made to the tax code. With so many adjustments, we are going to highlight a few areas that might be of special interest.           Divorce. Going forward, those who pay alimony and have a divorce decree dated after December 31, 2018 will no longer be able to deduct the payment. The former spouse who receives the payments must now pay taxes on that income.           State and Local Taxes. Many taxpayers in the past would itemize their return and deduct their SALT from Federal Tax responsibilities. Now that it only possible up to $10,000.           Qualified Business Income. This would be business income that can be called “pass through” income and used to lower the Federal Tax responsibility for a business. This feature, while promoted widely, is very limited in availability. There are incom

What is Section 199A?

At this point it is well known that the Tax Cuts and Jobs Act reduced the top tax rates. It also made provision for up to 20% of Qualified Business Income to be deducted from a Taxpayer’s income tax liability. What is less well known is that the criteria to reach this threshold is found in Section 199A of the Internal Revenue Code, a specific area of the TCJA .          Since there are rules that govern the subject of Qualified Business Income, this means that not everyone can claim it . It also means that this is not a completely straightforward, cut and dry area of Tax Reform. Certain requirements of businesses and individuals need to be met.  If you have not done so already, please consult a Qualified Tax Professional to see if this provision will impact you in any way.

Growing Your Retirement in 2019

Thanks to an IRS announcement, retirement accounts will be able to grow at a much faster rate in 2019. For the first time since 2013, the limit on annual contributions will go up on traditional and Roth IRA’s by $500 each. This is being done to reflect changes in inflation, but it will have big consequences for 2019.           These adjustments can lead to a Taxpayer adding up to $19,000 a year to their Government Thrift Savings plan. When it comes to IRA’s this change creates the ability to save an extra $1,000 every year. This can potentially lead to a lot of extra money gaining interest, all tax free. Now is as good a time as any to start retirement savings and take advantage of this opportunity, which will only benefit you in the end.

Seasonal Jobs, and How They Change the Bottom Line

This is the time of year when many businesses are hiring seasonal employees, or simply increasing the hours for staff already on the payroll. Because of these changes, some may not realize how this influx of income can affect their overall tax responsibility. When getting a new job, no matter how long you are working there, a Form W-4 must always be completed. This form details the amount an employer should keep from an employee’s paycheck. Thanks to recent IRS guidance, we know that it will not be changed by the Tax Cuts and Jobs Act until 2020 at the earliest.          When it comes to a job that involves tips, it is a good practice to keep a log of the amount, and date of the tip. All tip income must be reported and keeping good records makes the tax return process that much easier. Sometimes, the amount made from a seasonal job will not be high enough to end up owing income tax. Often it is students and other young people who are getting their first jobs at this time, so this

Will Cooperation Be Helpful?

        You may be surprised to find out that the IRS, and state income tax agencies, do not communicate very well with each other. This has been true for many years. However, a recent review has shown that this has led to almost $300 million in taxes going unpaid. When there is confusion, certain individuals can slip through the cracks.           The IRS response to this problem is the State Audit Program. This program creates a way for state agencies and the IRS to share information and make sure that tax laws are followed. In theory, this would be a great way to stop tax cheats and make sure everyone paid their fair share. In reality, this program is voluntary, and it takes a lot of work for government organizations to work together and share. While this program is being streamlined, the state and Federal governments are getting closer to being able to work together and enforce tax law.

The Tax Cuts and Jobs Act: Withholding Form W-4 Update

          A few months ago, the IRS debuted a draft of what the Form W-4 would look like next year. You can read our post discussing it here . The key point is that it was a draft . The IRS expected to make changes before putting it into use and wanted to hear feedback on the adjustments. Apparently, there was a great deal of response. So much so, that this new form will not be used until 2020 at the earliest .           The feedback led the IRS to take a hard look at what they were trying to do, and decided to use a temporary Form W-4 for 2019 in its place. The plan is to create the new Form reflecting changes made by the TCJA by 2020. They need more time to give appropriate guidance on how to handle withholding. This is more evidence that clearly shows how fluid the Tax law situation is, and the nothing can be taken for granted.

The Tax Cuts and Jobs Act: Business Expense Update

        One of the more surprising aspects of the Tax Cuts and Jobs Act was the removal of tax deductions for meals and entertainment. It basically eliminated any deductions related to expenses from recreational activities with clients or prospective clients. This concerned a great number of people. Aside from the businesses who made use of this opportunity to reduce their tax liability, there were other businesses that provided the entertainment, amusement, and recreation. For example, sports teams that sell luxury boxes for their games were unsure if they were going to see a steep decline in sales. This is a source of revenue that the teams keep, and do not share with their leagues. However, after a few months, the IRS has issued some guidance on this issue. Taxpayers can continue to deduct 50% of the cost of meals, if they are not considered lavish. In the last 2 months of the year, we can expect a great deal of regulations and clarifications to be released. These refinement

The Tax Cuts and Jobs Act: Divorce Agreements

     It’s not an overstatement to say that the Tax Cuts and Jobs Act is going to affect just about every area of life. When it goes into effect next year, there will be many changes we all will have to get used to. One drastic change will be regarding divorce agreements. Currently, alimony can be deducted by the payor, and is taxed as income for the payee. Starting in January 2019, that will no longer be the case.      This will create a benefit for one person in the divorce proceedings. However, another concern will be the dividing of assets. When considering the valuation of business interests, the old ways of making those calculations are over! Many of these businesses are now considered “pass-through entities”. This means more cash will be going through them for tax purposes and modern accounting methods must be applied to adjust to the times we are living in.       The more we investigate the TCJA , the more we can appreciate how monumental the law is. The way divorces w

The Tax Cuts and Jobs Act: Qualifying for Business Deductions

        The Tax Cuts and Jobs Act is known for its lowering of certain tax rates. That fact is made clear in its name. However, some of these benefits are not as easy to take advantage of. That is why there is a provision called Section 199A. This has been added to allow as may businesses as possible to have a sizable deduction of “qualified business income”. What type of income is this? How do you know that the “reputation or skill” of your business will allow you to qualify? Recent IRS guidance has shed some light on this topic.           The reputation and skill clause will only be used to describe a unique set of business circumstances. For example, if a business or taxpayer was receiving income from the use of a name, image, or appearance fee. This will apply to actors, singers, and others in the performing arts industry. This same guidance has stated that brokerage services, including real estate and insurance, will not be defined in this way.           At this point, t

Is the Right to Representation Under Attack?

         For many, one of the key parts of the Taxpayer Bill of Rights is found in right #9, The Right to Representation . This provision allows for a taxpayer to choose an individual to represent them in dealings before the IRS. This fills a critical need, especially since many will only seek help after they have an issue with the IRS. However, it seems that proposed changes are going to make it much more difficult to provide care in this area.           The IRS has proposed some troubling new changes to the Transcript system. When a Taxpayer has an issue with the IRS and does not have their own Qualified Tax Professional, they will likely look for one. In that case, the Tax Professional will need to see the documents in question, to provide the best care for their client. Unless their client has kept immaculate records, copies know as transcripts, will need to be requested from the IRS. This is a standard procedure.           Now under the new rules, which could take effect

The Tax Cuts and Jobs Act: Changing Corporation Status

        The Tax Cuts and Job Act has made people in all areas of life stop and evaluate their financial situation. This is especially true of small business owners. This shake-up of the tax code has led to some potential opportunities. You may be familiar with the new 21% top tax rate for business and “pass-through entities” that can qualify for a 20% deduction on income going through the business. But do you know how those businesses can qualify for these benefits?          There are specific guidelines to meet, and it often involves changing incorporation status. The IRS has just released new guidelines which have adjusted this process. Now is the time to take an honest look at your business to see if it would be the right choice for you. At Anthony Sykes & Company , we will give you a free consultation to help you make the best decisions for your business.

The Tax Cuts and Jobs Act: What it Means for Retirement

      When the IRS makes a change, they try to tell Taxpayers about it, so the adjustment is made easier. The Tax Cuts and Jobs Act is a huge change, and they have been slowly letting all of us know about how things will look moving forward. January 1 is just around the corner! Most of us would think Tax Reform applies to those still in the workforce. It certainly does, but it will have a great impact on those who have retired and are living off their pension, Social Security, or an annuity.        Simply put, they need to make sure they are withholding enough tax from their retirement income. If not, these older Taxpayers will be in for a shock. Sending in estimated payments, 4 times each year, is recommended to make sure everything stays balanced. Each source of income has unique rules to follow, so it is strongly encouraged for those in this situation to seek the help of a Qualified Tax Professional. They can help navigate this new area of tax law and avoid errors which lead to

The Expansion of Business Identity Theft

          The plague of business identity theft has been a growing problem for many years. While the IRS has taken steps to keep fraudulent Business Returns from being processed , criminals are always adapting their methods.           The filters put in place last year flagged over 20,000 returns that had suspicious activity. This kept over $2.2 Billion in “refunds” from being paid out. Sadly, this is still not enough. It seems that the new guidelines are not catching everything. During the same period last year, about $200 Million was paid out by the IRS in Business Tax Refunds using Employer Identification Numbers (EIN) that should not have been processed. Some funds are even being accidentally released when the accounts have been locked.           The IRS does its best, but it cannot be relied on for everything. As Taxpayers and Business Owners, we must do our part in protecting ourselves. All businesses must protect their EIN as best they can. It can be used to start cr

The Gifts That Keep on Giving

         Now that school is back in session, it’s a clear sign that summer is coming to an end. In many places, it’s time to expect a clear change of weather. It can also be the time for parents to prepare for some serious tax savings when it comes to expenses related to their children. With a little organization now, the benefits can be felt in the future.           Most of us are familiar with the Childhood Tax Credit , which can be claimed for children under the age of 17. The TCJA has affected this slightly, but it continues to be a source of joy for parents. However, there are other situations that can become tax benefits, which often occur during the summer months.           If the children are sent to a day camp, or have a nanny for the school break, those costs might be able to be written off by the parents. This is where good record keeping is critical. The caregiver for your children would basically need to be paid like an employee, including using the appropriate forms a

Keeping Up With the Speed of Change: Non-Profit Taxation

     At times, it seems that the only constant in life is change. This can be magnified if we hold onto wrong ideas, or do not recognize the shift to what the future will hold. When the Tax Cuts and Jobs Act was passed, it was a major event in the world of taxation. Now we all need to take time to understand how it will change things.      Along with the 21% corporate tax, the TCJA will now apply the same tax on nonprofits when it comes to employee benefits. Having a nonprofit pay taxes is nothing new . However, this provision looks to affect churches as well, which would be unprecedented. The tax is really directed at benefits the employees receive. What benefits are subject to taxation and who will pay?      That is unclear because the IRS has not yet given any direction on this subject. This could mean that certain groups will have to file tax forms for the first time. The move forward must be tempered with some patience, as the IRS will have the final say as to how these laws

Small Business Guidance: A Tax Levy

When it comes to collecting tax debt, the IRS has a variety of options to use. Certain ones can only be used when proper criteria have been met. That is the case when it comes to a levy. Employers must be aware of this because there can be situations when they are contacted by the IRS.           If a levy comes against an employee, vendor, or customer you must quickly turn over the property that has been named. These levies are continuous, and the IRS will give notification when it will end. When it comes to a levy on wages, you will still pay your employee what is not covered by the levy. Following these rules as a business owner will keep the person subject to the levy from having more penalties added to them. If this situation comes up, promptly cooperate with the IRS requests. It will help the other person or entity.

How Tax Reform Has Changed the Tax Levy

         When it comes to collecting tax debt, the IRS has a variety of options to use. Certain ones can only be used when proper criteria have been met. That is the case when it comes to a levy. This can only be applied after a tax debt has been made known to a Taxpayer or business, they refuse to pay, and a notice of a levy has been provided to them.           The Tax Cut and Jobs Act has now extended the time for filing a claim and take civil action to stop a wrongful levy. That time has increased from 9 months to 2 years. This ability is not available to the one subject to the levy. A wrongful levy claim can only be made by someone who feels the property belongs to them (not the Taxpayer in debt), or that they have a claim greater than the IRS. When it comes to situations like this, it is often best to consult a Qualified Tax Professional to get the best guidance on how to move forward

What is a Tax Levy?

         When it comes to collecting tax debt, the IRS has a variety of options to use. Certain ones can only be used when proper criteria have been met. That is the case when it comes to a levy. A levy is the taking of property to make sure a tax debt is paid. This option can only be used if (1) a Tax bill has been sent, (2) the Tax bill has not been paid, and (3) a levy notice has been sent informing the taxpayer of the process that will take place. It must inform them at least 30 days before that happens.         A levy can involve individuals when it comes to the IRS seizing property they hold like their house or car. It can also involve business owners. The IRS has a wide view when it comes to property. It has consistently held that wages and bank accounts are property and can also be levied. This would involve notices being sent to them as well. However, the Tax Cuts and Jobs Act passed last year has made some adjustments in how the IRS can levy property. It is worth

How the IRS Values Cryptocurrencies

          Cryptocurrencies, such as Bitcoin, have had special IRS rules made for them over the past 4 years. They basically state that these types of digital holdings are not viewed as currency, they are property . That means in the event there is ever an exchange, that occasion will be taxable .           However, there is another pressing issue that comes up because of the decentralized nature of digital currencies. Are virtual currencies subject to foreign financial reporting requirements? They very well might be. This is an area where a Taxpayer needs to do their own research. They must find out if their currency is on an exchange or a virtual wallet. Taxpayers who choose to venture into this field must know what they have signed up for, and what responsibilities they have. If they don’t, then the IRS might surprise them with some sobering facts.

The new Form W-4?

       As the year continues there are more drafts of tax forms being released by the IRS. As a result of the Tax Cuts and Jobs Act, the most extensive change to the tax code in 30 years, many forms are being redesigned and will have a new look for the 2018 filing season. At this point there is nothing official, but these previews give us an idea of what practical impact tax reform will bring.           At first glance, it looks like Form W-4 will be simpler. It reflects the focus that has now been placed on tax credits and different kinds of financial contributions. Many are difficult to forecast at the beginning of the year. Many Taxpayers are unsure of what tax credits they may qualify for. At this point, the only way to give accurate responses in these areas is to fill out up to 11 separate worksheets.           These along with other massive changes will more than likely change some responsibilities between Taxpayers and Employers. As it stands now, Employers will nee

What is a Tax Lien?

When it comes to collecting tax debt, the IRS has a variety of options to use. Certain ones can only be used when proper criteria have been met. That is the case when it comes to a lien. A lien is the Federal government’s claim against the property of a taxpayer who does not pay their tax debt. This is not a levy , where the property is seized by the IRS. In this case, the government is saying it has the right above anyone else, to the value of the property in order pay the tax debt. This declaration will apply to any current of future personal assets. This would apply to a business as well.         A lien is only issued if a tax debt is noted and bill sent asking for payment. If this notice is ignored, then a lien can be issued. This can be a devastating situation, but there are options. Visit our site here to see how we can help you.

A Preview of the New Form 1040

One of the main promises of the Tax Cuts and Jobs Act passed last year, was that filing tax would become simple. At the end of June 2018, a preview of a simplified form was released. We are all familiar with the Form 1040 and were in anticipation of what it might look like moving forward.           At a glance, it is clearly much smaller than it used to be. It seems to resemble the postcard comparison that was repeatedly made. However, as you look at the required information, it asks for the SSN of the Taxpayer. This is not a surprise, but it will require an envelope to mail and protect all your sensitive information. This draft is a combination of 3 Form 1040’s, but it also refers to several other Schedules for information. At this point, they have not simplified. At this point, some Taxpayers may need to fill out more to have what is needed for the new Form 1040 .           With all that said, this is just a preview. We can expect many more changes in the months ahea

A Security Warning for Tax Professionals

          The world we live in continues to change in a variety of ways. This constant change also applies to the way criminals try to steal sensitive information. In the newest wave of scam attempts, they are going after tax professionals directly.           In certain states, there have been reports of phishing emails that look like they are from state accounting or professional associations. In reality, they are only an attempt to gain usernames and passwords. This is just another step for cybercriminals to reach their ultimate goal of client data. These tactics change so often, it can be hard to keep up. With that said, there are certain patterns that we can train ourselves to recognize. This vigilance, in addition to basic security practices will help to keep us from falling prey to their tactics.

The Tax Cuts and Jobs Act: The Myths

       In the time before the Tax Cuts and Jobs Act (TCJA) was passed, many were unsure about what this major law would mean for them. It might be hard to believe, but it now has been in effect for 6 months. Now is a good time to discuss certain myths surrounding the TCJA. It’s better to know now than find out when it’s too late. Filing a tax return will be easy. The goal was never to make it easier to file a Tax Return. In fact, as a direct result of passing this law, the IRS has set aside around $300 million dollars for new training, forms, and to upgrade their systems. However, it has given a 20% tax break to certain businesses, which will be much appreciated by small business owners. Federal tax reform does not affect state taxes. In most cases, state income taxes are in some way based on the Federal tax code. Many Taxpayers are likely to see an increase in the state income taxes they are responsible to pay, even if they receive a tax break at the Federal level. Some sta

Small Business Guidance: Know Your Limitations

      It’s very hard to run a business. Most people feel that the first year in the life of a business is the most difficult. This is because there are a variety of new responsibilities and demands that are being placed on the owner as they start this venture. Here are a few tips to help minimize the stress for a new business owner.       Even if it seems like you have everything under control, have a team that you can trust to help you make wise choices. We can’t be everywhere at all times. This group should help you to focus on what is important . A business can’t be run as a hobby. They should also help you understand that just because you think it’s possible, doesn’t mean it’s realistic. The team of supporters you have should help you to know when you have spread yourself too thin. It’s OK to say “no” when it is necessary. It’s better to keep focus on the big picture, than get lost in a relatively small detail. These are all qualities that come with time, but have a positive

The Tax Cuts and Jobs Act: The States Response

        As more people begin to gain a real understanding about how the Tax Cuts and Jobs Act ( TCJA ) will affect their taxes, some are unhappy with the changes. As a result, certain states have taken action to get around some of the provisions laid out in the TCJA . One key issue that has come up is in the area of State and Local Tax ( SALT ) deductions. In states with a high income tax, Taxpayers were able to deduct that from their Federal income tax for the full amount. This ability is now limited to $10,000, but some states are responding with their own laws.                     A few states feel they have been impacted the most and three of them were first in line to write some very unique legislation. New Jersey signed their law on May 4. It gives cities in that state the ability to start their own charitable funds. Since limit for SALT deductions does not cover charitable donations, the plan is to donate to these municipal charities to be able to make up the difference

It Really Matters What Your Status Is

        In the ever-changing business world, there is a new and growing area of the workforce. There are more job opportunities set up with the premise of being able to set you own schedule and fit that job into your life however you want to. This certainly has its appeal for many people. A key aspect of this equation for the business is that it would categorize people in these jobs as Independent Contractors. That time may be coming to an end.           In a ruling by the California Supreme Court, the classification standards to determine if a worker is an Independent Contractor or Employee have changed. The method used in this case is the same that is used in Massachusetts and New Jersey. The consequences of a Contractor becoming an employee are substantial. For a business, this means that they will have a greater Payroll Tax responsibility among other things. An individual will see that taxes are withheld when they are made an employee. This is just the beginning of the tax cha

One Way US Taxes Affect the World

        One aspect of US tax law deals with the subject of American citizens who have taxable income in other countries. This was directly addressed in 2010 by the Foreign Account Tax Compliance Act . The goal was to keep US Taxpayers from being able to hide money overseas. This is accomplished by making foreign banks responsible for reporting all accounts held in the name of US citizens to the IRS.           The United States has a citizenship-based tax system. This means that an American must pay US taxes on their income, no matter where they live. This is similar to the way US based corporations are taxed. However, there are many people who inherited this citizenship from a parent, or were born in the US and raised in another country but feel they have no real ties to this country. Their income is still subject to US taxation. For many of them, there are years of penalties and interest that have accumulated over a lifetime.           These fees can come from the IRS when they b

What Every Small Business Must Do

          There are some critical details that should be important to every Small Business Owner. No matter what industry the business may be a part of, there are necessary decisions that must be made. This certainly makes the case for using a qualified tax and accounting professional to assist with the bookkeeping. This will give peace of mind in a variety of ways.           Keep finances up to date. When there is an eye on the cash flow of the business, problems can be caught soon. This will make issues easier to fix instead of waiting until the end of the quarter or year. This will also allow for the business to make sure they are current with all of their tax obligations. When this is achieved, the multiple Tax Deadlines that are required for businesses will not arrive as a surprise.           With these essential tasks being cared for, a business owner can focus on how to grow their company. They will be able to decide on whether or not to hire new employees or contracto

April Article: Will there be an Audit?

         Now that Tax Season is over and you have filed your Tax Return or received an extension, it can seem to be a time to rest. However, some may be concerned about a potential audit in the future. That is never an enjoyable process, but let us take a closer look at what the odds actually are.           In reality, just over 0.5% of all individual Tax Returns are selected for an audit. Most people do not need to have a morbid fear of this occurring to them. But there are different factors that can change this percentage. For example, those who do not own a business, claim no Tax Credits, or make less than $200,000 have about 0.2% chance of getting an audit. These individual tax filers will have simple returns that are less likely to set off any IRS red flags. The opposite can also be true.           Areas of Tax Credit, business and rental income, along with the forms that go with them, call for a lot of attention to detail. When these situations occur there is the potential f

Small Business Guidance: For Cannabis Businesses

          In this series of articles detailing suggestions for businesses, there is one point that has become abundantly clear: running a business is hard. That difficultly is only increased when it has anything to do with cannabis. It’s legal in some states, being considered in others, but is still illegal at the Federal level. This is just one reason why these businesses have the odds stacked against them.           This underlying fact has led to a situation where Cannabis entrepreneurs do not have access to typical business options. Due to their Federal status, lenders and banks will not deal with them. Having a cash-only business is not necessarily bad, as long as meticulous records are kept. A business in this industry must be extra careful that there are no errors in its financial records. These firms may be well served by outsourcing their accounting and bookkeeping needs. In this way they can focus on marketing, and staying on top of changing regulations that allow them to

Small Business Guidance: For Retail Businesses

         Every business has a level of risk involved. That might seem to be an obvious statement, but it is a fact that must be considered for every business venture. The risk is also varied when it comes to different types of businesses. When it comes to retail, the risk is high because there is so much to consider with this type of business.           Considering the wide scope of the issues that all retailers face, this post will briefly discuss changing regulations and the role that taxation plays in this area. Generally speaking, the government wants legitimate businesses and their owners to succeed. The reason is that if a business does well, then they will pay taxes and the government will do well. It’s the perfect win-win scenario. However, in practice this can become complicated. Depending on the state, certain items are subject to State Sales Tax , while others are exempt or taxed at the Alternate Rate. These taxes must be carefully monitored just like Federal Taxes .

How Long Should I Keep Records?

         Congratulations on making it through another Tax Season! We did it together. After going through all the records and receipts to put together a complete Tax Return, there are probably a lot of papers that have been put in files. A logical question to ask is: How long do I need to keep all these records? Since the Tax Return has been filed, can I throw the documents away? Every situation is different and State taxes are not treated the same as Federal, but in general you should hold on to them.           Tax records should be kept for at least 2-3 years. In the event of an audit, its scope usually goes back 3 years. Having the records on hand and ready to hand over will speed up the process. If a Taxpayer were to claim a loss from a bad debt deduction, that Tax Return should be kept at least 7 years. For those who do not file a Tax Return, their records should not be thrown away. These figures are just from the perspective of the IRS. If some records are related to prope

The Taxpayer Bill of Rights

          The United States Bill of Rights was written to protect the freedom of every citizen. In a similar way, the Taxpayer Bill of Rights is in place to protect the rights of all Taxpayers. Did you know that these 10 fundamental rights existed? Many do not. For our post today, we will examine just one of them.           The Right to Privacy comes in at #7 in the Taxpayer Bill of Rights. This means that every Taxpayer has the right to expect every IRS inquiry, audit, or other action will be lawful, and never be more invasive than necessary. This provides certain guarantees. The IRS cannot seize personal items like clothing or mail. During an audit, if it is determined that there is no unreported income, the IRS will not seek extra information about a Taxpayer’s lifestyle. If a Taxpayer makes an offer to settle the Tax Debt they owe, they do not need to submit financial documents.           These rights have been put in place for our protection. Knowing them and how they a

Tax Mistakes to Never Make

          A simple assumption can lead to big problems when it comes to taxes. Tax Law is quite complicated, so it pays to take a little time and review your forms before submitting them. Here are a few basic mistakes that can cost a lot down the road.           One very common and ultimately painful mistake (#1) is the idea that a Taxpayer should not file a Tax Return until they can pay taxes owed . This is never true. By making this choice, a Taxpayer will not only have to pay the taxes owed, but they will also have to pay the failure-to-file penalty. This is often a more expensive fine. There are always solutions to tax problems, but ignoring them will never lead to a good outcome.           Another mistake (#2) that can arise from a misconception, or not realizing how circumstances have changed, is the thought that married couples must always file jointly . When income changes from one year to the next or a dependent has left the nest, your situation has changed. It must

Small Business Guidance: For Construction Companies

Certain businesses have very unique needs, no matter their size. This is directly affected by the industry they are in. This is true of construction firms. Large or small, they have the same abilities and the same challenges. They each have to pay salaries, office expenses, insurance, and rent. The differences may seem appear in equipment and material costs. From the outside, it may seem that construction firms with 20-50 employees would take on only smaller jobs and not be in direct competition with large companies. This could not be further from the truth. With the state of technology, almost any small company can produce a finished product of quality. Here is where a problem can present itself. Due to a variety of factors, costs of raw materials have been rising. This can lead to a shortage of cash before payment. When there is more demand, all costs will rise.         One solution to lowering costs would be to take advantage of technology solutions that have simplified differe

Strange State Tax Laws

         With the changes going on at the Federal level, taxes can seem very confusing and challenging. While this is true, we must never forget that State taxes are completely separate. This fact can add stress for business owners in certain industries or lead consumers to feel that they are being cheated. In this post, we will take a brief look at some of the more unique taxes found in different states.           People can buy almost anything from a vending machine. However, in California consumers can buy fruit from vending machines for a 33% sales tax. It’s far more financially responsible to go to a store instead. In Illinois , there is a 6.25% sales tax on certain candy. The difference is based on whether the product has any flour in it. If the answer is “Yes”, then there is no added tax. Not only are blueberries a superfood, they are also a huge industry for the state of Maine . Since this state provides more blueberries than any other, it imposes a 1.5 cent tax on e

March Article: How to Identify and Avoid a Tax Crime

     In the news, hardly a day goes by without hearing of or reading about a new type of Tax scam. They seem to get more deceptive as time goes by, and as a result it can be difficult to know if or when we have become a target of criminals. With that said, there are a few points that we can keep in mind that will indicate whether or not we are really dealing with the IRS, or just an impersonator. 1.    A Surprise Deposit in Your Bank Account. This is a new variation of a time tested trick. Fraudulent Tax Returns being filed with stolen identities is nothing new. The goal has always been to receive the Tax Refund before the IRS knew that a crime had taken place. The new aspect is that the Refund is being sent to the real Taxpayer, into their bank account. If you find yourself in this situation do not spend that money. Contact your bank, local police, the FBI, and the IRS. Inform them of the situation, as this is evidence of Identity Theft and bank fraud. Act quickly because this

Small Business Guidance: For Software Developers

    When choosing to start their own business, the owner’s personality will certainly play a role in the process. We all have our own innate strengths and weaknesses. These aspects of our personality will allow the business owner to meet and easily care for certain challenges that will come up. However, there will always be times when our limitations become clear and help is needed. When this happens, what is the best way to move forward?     Small businesses that specialize in Software Development can find themselves in this kind of situation. A group of less than 20 hardworking software developers can rival any big firm. They can work together quickly, on their own or in teams, to provide the tools their client’s needs. But, their main focus will always be creating software. In a Small Business there must be management, tracking of cash-flow from month-to-month, estimation of costs, and financial goals to reach for. Software Developers are usually true specialists and are able t

Can A Trust Really be Trusted?

     When thinking of a Trust, most people feel that it is a tool used only by the very rich. That can be true, but a Trust is also a very useful option for all no matter what your financial standing. There are a variety of Trusts that can be created for different reasons. The options can be a little overwhelming. Before making a decision, it is necessary to discuss with your Qualified Tax Professional what your goals are. When you clearly have in mind what you want the outcome to be, then it will become easier to make the right choice.       This post will give a brief overview of what Trusts are and how they work. In general, there are 2 types of trusts. A living trust is created while the person who created it is alive. It can be cancelled or changed while they are still living. A testamentary trust goes into effect when its creator dies. At that point it cannot be changed. The basic idea behind a trust is to put any assets (cash, property, stocks, business) into the hands o

The Tax Cuts and Jobs Act: What it has Removed

         So much has been made about what Tax Reform will change. For the most part, the focus has been on what it can add to the financial landscape for taxpayers and businesses. This is true. However, this sweeping change to Tax Law has also removed a variety of credits and deductions that many have come to view as normal. Let’s take a look at some of what is no longer available to use.           Business entertainment deductions have been a staple for many companies. When celebrating business relationships most firms enjoy going out for a good meal. In the past, up to 50% of those costs could be deducted from taxes. Now that number is 0. For those involved in some form of alimony payments, the one receiving could count it as income; the one paying could count it as tax-deductible. That will continue for most. However for those who are divorced after December 31, 2018 it will change. These payments will no longer be counted as income or allowed to be tax deductible.       

Small Business Guidance: For Architecture Firms

Every business has to take its own path to success. This course is often affected by the industry and simply the type of business it is. They are unique, and therefore cannot be treated the same. This is true of businesses in the field of architecture. This industry literally touches every aspect of daily living. However, when it comes to the area of finance, these firms must look at it in a different way in order to stay competitive. In order for small architectural firms to be able to compete with large businesses, they must focus on their craft. It is unreasonable to take away one of the employees from a renovation or new build design, to focus on taxes or cash flow. This is a recipe for disaster. If mistakes are made, fines and penalties can put the future of the company in doubt. Missing potential deductions will increase a burden and keep the company from reaching its full potential. For these reasons, small architectural firms benefit greatly from making use of the service

Small Business Guidance: For Trucking Owner-Operators

         Each business venture is special when you consider the challenges that can come up, and the decisions that need to be faced. There are many factors that must be considered. Getting a clear look at the type of business and industry will allow for the best perspective. Sometimes, there are there are industries that have consistent opportunities for growth. We will take a look and see how this is true of the Trucking industry.           The lifeblood of every economy is the ability to ship goods from one place to another. Trucking has been, and will continue to be, at the center of the US economy. Considering the current emphasis being put on domestic goods, the Trucking industry is poised to be at the center of a financial gold mine. This might make taking the risk and becoming an Owner-Operator in the Trucking field worthwhile. With that said, there is no substitute for experience. It might look like a great time to set out with own business, but taking some time to actual