How Should You File?

As the personal tax deadline approaches, those that are self-employed, independent contractors and entrepreneurs are weighing their options when it comes to filing this year.  I have reintroduced personal tax filing to my services as I've seen tax preparation costs go up and quality go down.  I'm offering these services as inexpensively as possible, without inflating my cost but then offering a discount, for a straightforward, valuable service.

If you're still wondering whether or not hiring a tax professional is the best options for you, here are 3 reasons, from an article on Business.com on why it may be the way to go.

Someone to speak with. Perhaps the biggest benefit of hiring a professional is that you get to interact with a real person. While DIY tax software may be able to suggest certain deductions and exemptions, there’s only so much a computer algorithm can do. An accountant has spent years in the industry and understands the complexities of the IRS code. As a result, they can suggest tax savings and help you develop strategies for saving the most.

Better software. The tax software you purchase for personal use is certainly efficient and accurate, but it’s nothing compared to the software CPAs use. They regularly pay thousands of dollars for their technology, which means it comes packed with extra capabilities and resources. This reduces the risk of error and makes the process more thorough.

Less risk. “There are so many things that can go wrong,” says Mike Ryan, director of the Twin Cities Small Business Development Center in Minneapolis, when asked about the DIY approach to tax filing. All it takes is one misstep and you could tip the IRS off to bigger issues. However, when you use an accountant, you’re able to mitigate that risk. There’s a much smaller chance that you’ll be audited when you use a professional.

To Read the entire article "Accountant or Do It Yourself: How Should Entrepreneurs File Taxes?" by Anna Johansson.

Tax Extensions!

April 15 is fast approaching and some might not be ready to file yet.  Fear not, anyone can apply for an extension. Yes, even you.  There are a three things to know first before filing for an extension. 

1.  Form 4868 is what you need to file in lieu of your Federal Income Tax Return.  You can file it by mail or electronically, as long as it’s in by April 15 you will have an automatic 6-month extension to file.

2.  Remember that this form is just an extension to file, not pay taxes due.  You must have an estimate of the amount you owe and send it when filing for an extension to avoid any late fees or penalties.  Any underpayment of taxes not paid by April 15 is subject to late fees and interest.

3.  The purpose of this form isn’t just to procrastinate until October.  The time is meant to allow for complete and accurate filing without assessing a late filing penalty.  The extra time granted is usually used to seek professional advice about your financial situation.

There are many benefits to requesting an extension to file your income taxes.  It’s a great way to avoid the busy rush of tax season and your tax professional will more likely have time after mid-April.  The most important thing to remember is that it’s an extension of time to file your return, not to pay taxes due.   

5 Tax Deductions for Millennials

With so many of my clients and friends being what is considered "Millennials" this article seems extremely relevant to my network of contacts. Doing your taxes can be a daunting task so it is important to take advantage of any breaks that you can! 

Five Tax Deductions You Probably Could Be Claiming if You Are One of These "Millenials"

By: Hunter Slaton

Doing your taxes is already a pretty arcane process, and that’s before you factor in deductions, exemptions, write-offs, and more. What even is a deduction, anyway? I don’t know. But the highly skilled Certified Public Accountants behind new tax app Taxfyle, the world’s first on-demand CPA marketplace, do. Here are five tax deductions that younger people in particular may be missing.*

But first, a quick lesson: A tax deduction is anything that reduces your total taxable income. Everyone is eligible to claim a standard deduction (for singles, it’s $6,300 for 2015, aka the tax year everyone’s about to pay) or to itemize — but the latter is only worth doing if your itemized deductions add up to more than $6,300, which for young people they probably won’t.

Thanks to CPAs Victor Aldin and Steve de la Fe — both of whom are signed up and ready to help you out on Taxfyle — for providing the following expert info.

Moving Expenses for Your First Job

If your first job is at least 50 miles from your old home, you can deduct the cost of travel and moving your stuff to your new spot. There’s a lot of expenses you can claim on this, and Victor says he’s “never seen a maximum” dollar amount. If you drive, you can deduct 23 cents a mile, other transportation expenses (i.e. parking and tolls), hotel nights, and moving-company fees. The only catch is, if your new company reimburses you for any of the above, you can’t claim it.

Health Savings Account

If you deposit money directly from your paycheck into a Health Savings Account, or HSA (which you can use as a pre-tax way to pay for medical expenses), you can deduct that full amount from your 1040 tax form at the end of the year. It doesn’t matter if you spend all of the money, either — but keep in mind that if you spend the money on anything other than health care, you’ll have to pay a penalty.

Simplified Employee Pension (SEP) Plan or Traditional IRA

It’s never too early to start thinking about retirement, even if you’re relatively fresh out of college and freelancing or working for yourself. An SEP is a pension plan for self-employed people, and whatever pre-tax money you put into it over the course of the year (up to the max allowable amount of 20% net employment earnings, or $52K, whichever comes first) is 100% deductible. Or, if you contribute to a traditional IRA (not Roth, as that’s post-tax), you can deduct contributions of up to $5,500 per year.

American Opportunity Credit/Lifetime Learning Credit

These two credits actually reduce your tax bill, rather than your adjusted gross income. Both can slash up to $2,500 from what you owe. The former can be claimed by people getting undergraduate degrees, and the latter to anyone who’s enrolled in higher education. And that one doesn’t have to be degree-seeking, either: Technical schools and continuing education counts.

Student Loan Interest

If you’re paying down a student loan, keep an eye out for form 1098-E, which is mailed to you from your loan provider if you paid $600 or more in interest over the previous year. If you’re single and you make no more than $80K/year, you can deduct a maximum of $2,500 in student-loan interest from your taxable income. Keep in mind that if you paid less than $600 in interest, you won’t receive form 1098-E — but you can still claim the interest. Just call your loan provider to find out how much you paid.

These are only the big deductions you might be missing. If you want to learn (and save!) more, download the Taxfyle app, which provides you with access to the very best CPA talent who will work on your taxes 24/7 — and for cheaper.

All it takes are three easy steps:

1. Download the Taxfyle app.
2. Answer 10 yes or no questions and upload your W-2 or 1099 (if you have it; if not, you can skip this step).
3. Get an instant quote. If your assigned CPA needs any more info they will send you an in-app encrypted message.

That’s it! The process is super easy — and, if you refer a friend, you’ll get $10 off your return, and $5 off theirs. No need to stress any more about doing your taxes *or* missing deductions that could save you $$$.

Cash Is Key for Small Business!

A Secco Valentine

     There is a reason that Secco is one of my favorite clients...the WINE (duh!).  So, I'm here to say that there's no better way to spend your Valentine's Weekend than at Secco Wine Bar in Carytown. They're offering an amazing and affordable Prix-fixe dinner service throughout the entire weekend. The best part? No reservations necessary!  So why not spend the evening with your special someone enjoying relaxed but elegant dining and wine pairing at prices that won't make you paranoid about spilling anything!  To check out this event, see their Facebook Event Page.

4 Reasons DIY Bookkeeping Can End Up Costing You More

While many people only think of accountants at tax time, a big part of my job, more than preparing taxes, is bookkeeping for local businesses.  While finances are my number one priority, small business owners are very busy and tend to put it off for more urgent matters.  But unfortunately, around this time of year, finances are what becomes urgent and you have a year’s worth of book reconciliation to do.

Here is why the DIY route to bookkeeping will end up costing you money instead of saving it:

1.  Faulty bookkeeping will give you a faulty picture of your cash flow, which from all of my previous advice, you already know that cash-flow is the lifeblood of your small business!  Don’t obscure your financial viability.  Without accurate records, you won’t be able to tell how to fix a financial problem or even if there is one in the first place.  Dangerous!

2.  Overestimation or Underestimation of profits means that you’ll either pay more in taxes on income you didn’t actually receive, or you’ll raise the eyebrow of the IRS on cash you didn’t know you needed to report.  That includes reporting assets and expenses that can lead to a higher tax liability as well (i.e. depreciating assets).  Overlooking costs or misplacing receipts means you can’t write those expenses off, either.

3.  Payroll problems can arise if you have inaccurate records.  How do you know if you’re over or under compensating employees or their benefits with inaccurate bookkeeping?  Answer: you can’t.  An error that carries over to an employee’s W-2 from your own records causes tax problems for them as well.

4.  Who owes you what, what do you owe? When?  Unorganized invoicing means the longer it takes to get you paid.  It also means the longer it takes for you to send money you owe which leads to late fees and penalties.  Being backed up on your bills and incoming payments is a serious cash flow issue.

Ultimately, bookkeeping mistakes are extremely expensive and very time-consuming.    Hiring an expert like me to fix them will cost you a pretty penny I don’t mind saying.  However, hiring an accountant for regular bookkeeping can be a great decision.  It gives you the power to maximize your business decisions, like knowing when to make investments in equipment,  inventory or even more staff.  Accurate bookkeeping is what gives you, the small business owner, information on how best to run your business.

Self-Employment: Time is Money

     What do they say about knowledge, time and money? Time is money, power is knowledge.  This is a guiding principle for many of the small business owners I know and work for.  As such a hands-on entity and resource for your own growing business, you know the pressure of time and often can’t find enough of it in a day.  Which is why when it comes to tax time, many of you go into a frenzy.  Why?  Because you feel powerless because you don’t know what you should do or should’ve done to prepare for the inevitable April 15 deadline and you know you’ll lose money because you don’t have the time to research all of the credits and exemptions your business qualifies for.  

     Saving you thousands of dollars from the tax man is what I do for a living, which means your business has the best growth it possibly can.  By keeping you organized, I know the ins and outs of what you can qualify for, as well as advise you on the best times to make certain investments back into your company.  What’s the best part?  My fee can be a write-off for you.  I save you money by saving you time and I give you the power to navigate the tricky tax waters through my knowledge of all things tax-related. 

 To use industry lingo—  the bottom-line is, if you’re a small business owner, finding an accountant is one of the smartest business moves you can make this year!