Enjoy a Deduction Just for Getting Good Advice

More often than not, smart people who want to make smart choices with their money will choose to pay for expert financial advice and help. This payment might come in the form of investment management fees or financial planning fees, to name a couple.   

The good news, however, is that this is certainly not money spent in vain. First of all, as long as you’ve hired quality financial help, you’re likely to have better managed finances and investments, which should help your money to go further. Furthermore, many of these “money management” fees that you’ll pay are tax deductible.

In many cases, money management fees can be counted as miscellaneous itemized deductions, helping you to save on your tax return. The only stipulation is that you can only deduct to the extent that these fee exceed 2% of your adjusted gross income. As such, this may mean that you can’t deduct all of your money management fees, but really, being able to deduct something is always better than nothing!

If you don’t quality for a basic deduction as described above, don’t worry; you still have other options for saving big! If, for example, the fees you’ve paid are structured as a percentage of your assets, you can pay for fees out of the correlated account, which will likely be counted as a tax-free withdrawal. Of course, this can vary from one type of account to the next, but if your account qualifies for tax-free withdrawals, go for it!

Even if none of these options apply in your situation and with your specific fees, many accountants and other professionals know special loopholes and other legal ways to save you money or save you from spending any of your own money on money management fees, so definitely don’t hesitate to ask. After all, what’s the point of having a financial professional on your side if you can’t get advice when you need it!?

How to Boost the Size of Your Tax Refund

Would you like to increase the size of your income tax refund…or maybe just ensure that you get one in the first place? If so, you’ll be glad to know that there are several highly effective strategies that can help you to do just that!

Fewer Allowances = A Bigger Refund

If you’re looking to increase the size of your tax refund, then, when you fill out form W-4 for your employer, you will want to consider claiming fewer allowances. This is because, the more allowances you file, the less money you’ll see come income tax time.   

Of course, allowances do mean you get a larger paycheck throughout the year, but if you’d rather get a nice lump sum come income tax time, declaring fewer allowances is the way to go.

Go for the Earned Income Tax Credit (EITC)

One of the very best options out there for decreasing how much you owe in taxes and thereby increasing the chances of getting a sizable refund is the earned income tax credit. This credit is available to moderate to low-income individuals who:

·         -Have a social security number

·         -Are a U.S. citizen, a resident alien for at least a year, or a non-resident alien who is married to an American citizen or resident alien

·         -Are not a claimed dependent

·        - Have some type of income

You can file for this credit when you file your yearly taxes, but if you need help or have questions about it, be sure to ask an accountant or financial adviser for more information.

Consider a Change in Filing Status

Sometimes, people can easily fit into more than one tax filing status. If that’s you, it is a smart idea to go over your possible options to determine which one is the best fit for you and which one is going to benefit you the most.

There is a good chance that, if you haven’t chosen the right one, you may be getting less of a tax refund than you possibly could. To learn more about the different filing status options and to ensure you choose the very best one for you, speak with a financial professional.

As you can see, there are a great many things that you can do to increase your chances of getting a nice-size refund come tax time. Follow these tips and get professional tax assistance where needed, and you’re likely to enjoy a big, fat check this year!

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Tips for Reporting Vested Benefits

If you have a job, then there’s a very good chance that you have or at least have heard of “vested benefits.” These are, quite simply, benefits that you are promised but that aren’t quite yours yet- benefits that will become yours after you fulfill a certain requirement, such as staying employed by your employer for a certain amount of time. These vested benefits, however, can be a source of great confusion and concern to employees who are unsure how to report them on their taxes or if they have to report them at all. Fortunately, though, it’s not all that difficult to figure out how vested benefits work.

Understanding Vested Benefits     

First things first, you need to understand what exactly counts as vested benefits. Generally, any benefit that you WILL get but don’t have yet is a vested benefit. Most commonly, these benefits include things like:

·         Shares of stocks

·         Pension benefits

·         Stock options

·         Employer 401k contributions

·         Employer contributions to a retirement account or plan

Benefits may be “cliff vested,” which means you will get them in their entirety at a certain future date, or “graded vested,” which means you will get them in small increments over a pre-determined period of time.

No matter what type of vested benefit you get, the key to remember is that you’ll only need to pay taxes on it if the benefit you receive is taxable, and many of the benefits on the above list are not.  However, for those that are, such as stock shares, you’ll have to pay taxes on them even BEFORE you actually receive them, i.e. before they are fully vested.  For taxable cliff-vested benefits, you’ll need to report the full amount of the benefit as income when you reach the vesting date. For graded-vested benefits, you only have to report the amount in taxable benefits you actually received that year.

If you can keep these helpful tips in mind and always checkin with your accountant or other financial adviser on how benefits affect you and your taxes, you should have no problem enjoying your vested benefits…and making sure you pay on them as you’re supposed to!

“House Hopping” and How to Do it the Right Way

There is nothing more exciting than buying a new home. Of course, if you already own a home, typically you’ll want to sell that one first before you make any offers. Don’t worry too much, though, it’s a “seller’s market” right now because property inventory is quite low. Plus, if you can follow some basic financial tips, you can typically sell your old home and get a nicer, newer one with no stress or hassle!     

Tip #1: Make A Contingency Offer

First of all, consider making a contingency offer when you are looking at potential new homes. That simply means that any offer that you make will be contingent on someone buying your home.That way, you won’t get roped into something you can’t afford on the off chance that your home doesn’t sell as quickly as you might hope.

Most sellers will gladly accept a contingency offer as long as you can demonstrate that there is a very good chance that your home will sell quickly.

Tip #2: Consider a Bridge Loan

Another thing you may want to think about is trying a bridge loan. This can be especially useful if you’re eager to get into a new home quickly but are still working on selling your old one. These loans are simply short-term loans that use your old home as collateral. This will give you money that you can use to purchase your new home, and then, when your old home sells, you can quickly and easily pay off the bridge loan.

Of course, this option will only work if you have enough equity built up in your old home and if you are otherwise able to qualify for a loan. If you can meet those qualifications, though, and if you can swing two mortgage payments for a short time, you should be all set!

Tip #3: Don’t Forget Deductions

Finally, no matter what route you choose to get out of your old home and into a new one, don’t forget about the many deductions that exist for people in your situation.You can get a deduction for interest paid on your mortgage, interest on loans for the purchase of your new home, on property taxes, and more. If you’re making this literal move, talk to a financial adviser to learn about any and all deductions you can qualify for to help enable your dream to come true while still sticking to a budget.

As you can see, it’s very possible…and even easier than you might have thought…to get out of your home and into a new one, especially if you can follow these simple tips.

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Tax Tips for Gig Workers

Are you someone who makes money “on the side” or “under the table?” In other words, do you earn or supplement your income with simple gigs? These days, with so many money-making sites and services, such as Uber and Elance, it’s quite easy to make money doing small gigs. However, you need to understand that, if you make above a certain amount, you may qualify as an independent contractor and thus need to file special tax forms and meet other obligations.

Record Everything!

To start off with, if you do earn money through gigs, then you need to make sure that you are keeping clear and detailed records of who you earn money from and how much. That way, you can determine, preferably with the help of a knowledgeable accountant, what your tax obligations are and how to best meet them.

It can often be helpful, in addition to keeping detailed records, to maintain a separate bank account just for your “gig money,” as well as any relevant spending you do. This can help you to maintain a detailed and easy to access record of gig-related spending and earning.

Deduct Where You Can

While paying taxes on your gig money may not be fun, there are some upsides to being a “gig worker.” If you do your gigs from home, for example, and you have a home office that you use exclusively for gig work, you can get a nice tax deduction. Other deductions exist for the self-employed as well, so be sure to discuss your deduction options with your accountant or financial adviser.

Working gigs, whether you do it full-time or part-time, is a great way to make money, but it can turn into a big hassle if you don’t know how to properly manage your finances and taxes, so remember to seek professional help as needed so that you can benefit as much as possible from your gig working.

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Simple Strategies for Lowering Your Taxes

Taxes are a necessary and inescapable part of life. Just because you HAVE to pay them, however, doesn’t necessarily mean that you have to pay through the nose. In fact,  it’s always smart to try and find ways to save money on your taxes, and fortunately, finding these money-saving options really isn’t all that hard, at least not if you know and follow some simple tips and strategies.

Take Advantage of the Earned Income Tax Credit

One option you have, depending on how much income you bring home, is to take advantage of the earned income tax credit (EITC), if you’re eligible. This tax allows those who qualify, typically lower-income individuals, to pay less in taxes and to enjoy a nice little tax credit that can sometimes be worth thousands of dollars.  Research this credit to see if you qualify, and, if so, take advantage of it right away!

Consider Buying a Home

If you’ve been thinking about taking the plunge and buying a house, go ahead and go for it! You’ll likely end up paying less in taxes than you would by renting. The reason for that is that you can  

deduct both mortgage interest and property taxes, which can lead to some big savings come tax time.

Make Some Contributions

Finally, consider making contributions to either a health savings account (HSA) or a flexible savings account (FSA). Any contributions you make won’t be taxed, which means lower tax bills and a nice, constantly growing savings that you can use as needed.

As you can see, there are many ways to pay less on your taxes each year. Research these and other options to see what your best choices are, and also talk with your accountant about the best ways to lower your tax bill. With a little effort, you can cut your tax costs in half (or more!), so it’s definitely worth the time and effort.

Property Tax Exemptions Worth Knowing About

It’s no secret that property taxes can get pretty high, and, while you can’t escape paying them altogether, there definitely are things that you can do to cut down on your property taxes. In fact, there are quite a few credits, deductions, and exemptions that you may qualify for. We’ll cover a few of the basics here, but remember, you should always be able to go to your accountant and/or tax adviser to learn more about available discounts and how to take advantage of them.  

Veteran Assistance

First things first, are you a veteran? If so, then there are probably several different property tax related credits, deductions, and/or exemptions that you can qualify for. However, these do vary from state to state, so, where you live will play a big role in which of these you can receive. Ask your tax adviser to point you in the right direction!

Aid for Senior Citizens

Veterans aren’t the only ones who can get a break on their taxes! Senior citizens are another group that is often eligible for discounts, especially in the case of senior citizens who are over 65 and fall into a lower income bracket. Again, these discounts do vary from one state to the next, so check with your tax adviser. It’s definitely worth the effort because some discounts are so good they can keep you out of foreclosure.

A Hand for Farmers

Finally, even farmers can get a little credit...literally. Land that is deemed “agriculturally productive” qualifies for property tax breaks in most states, especially Florida, which is very liberal when it comes to handing out this credit. Other states, however, have more stringent requirements, but, no matter where you live, this credit and all the others are worth looking into. In fact, you should really ask your tax adviser to help you uncover and make the most of every possible discount you may be eligible for!

Saving for Retirement can Equal a Lower Tax Bill

Saving for retirement is something that everyone should do, for their own sake. If you need an extra little push to get started on your retirement savings- and remember it’s never too late to start- or to up your savings, then you should know that saving for retirement can actually lower your tax bill!

Contribute to Your 401(k)

To start out with, if you don’t already have a 401(k) through your workplace and one is available, take advantage of it immediately! Otherwise, you are missing out on easy and even free money that could be put toward your retirement.

Then, when possible, put the maximum amount allowed in your 401(k). If you’re lucky, this could even put you into a lower and, thus, lower-taxed income bracket, but either way,  since contributions to your 401(k) are tax-deductible, you’ll lower the amount of taxed income you have and, thus, how much you have to pay.

Plus, of course, you actually WILL be saving for retirement in the process, which is always a good thing.

Contribute to Your SEP-IRA

Working for yourself absolutely does not mean that you can’t save for the future while also saving in the present. If you own your own business or are otherwise self-employed, you can usually open an SEP-IRA and then contribute to it tax-free, thus lowering your taxable income, even without the help of a standard employer.

These are just a couple of options you have for saving for retirement while also giving yourself a nice little tax break. If you want to discover more ways to lower your tax bill and plan for your future, be sure to talk with your accountant about your options.

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Does Your Business Owe Taxes?

Being a business owner is hard work even under the best of circumstances. When things go wrong, however, and when you find yourself owing taxes, things get even harder. In fact, many businesses crumple under the pressure; one of the most common approaches, if you can even call it that, is just to ignore the problem and to hope it goes away. Newsflash: it doesn’t! Ignoring owed taxes just makes the issue worse and more urgent.

There are many other “wrong” things you can do as well, things that could land your business in more trouble than it is already in. Thus, when you learn that your business owes taxes, it is extremely important that you know what NOT to do.

DON’T Throw All Your Money Away

To begin with, don’t make the mistake of emptying all of your accounts and, in short, everything that you have in an attempt to take care of your little (or not so little) tax problem. Sure, paying off a large chunk of what you owe can help, but unless you can pay the full amount all in one go, which isn’t likely, you are just setting yourself up for disaster.  

Making a large payment, even if it takes everything you have, might make the IRS think you’re made of money, which will make it even more demanding when it comes to collecting on the rest of what you owe, which could flat out ruin you and leave you and your business penniless. Even worse yet, it could make the IRS wonder where you got all that cash, triggering an audit and a deep investigation into your business on-goings that you are likely unprepared for.

A much better solution is to, with the help of a knowledgeable tax adviser, work out a reasonable, consistent payment plan with the IRS to settle what you owe in a long-term agreement. Not only will this help you to avoid the problems and scrutiny described above, but it will also help you to keep your finances in check and to avoid going destitute while paying off the IRS.

DON’T Parlay Over Full Responsibility

As mentioned, it is smart to find a tax adviser/ financial adviser who can help you to work through your difficult tax situation. The key thing there, however, is to find someone who can HELP you, not someone who will take over everything for you and leave you out of the loop.

No matter what may transpire in the course of owing and paying back taxes, it is still important that you maintain control over your business. After all, it is just that- YOUR business. If you do hand over full responsibility, you could end up with a business that is unrecognizable. Most people who take full control are going to work in the immediate best interest of your business, not in its long-term best interest, so you could come back to a business that, while its taxes may be paid, is in serious shambles.

It’s best to stay involved and in the loop. Look for an adviser that will carefully explain to you what each decision means, both now and in the long-run, and that will help you to make the best possible choices for your business overall.

If you can follow these simple tips and stay involved in the process, you can avoid turning your situation into something bad and ultimately come out on top.

Do You have a Tax Liability?

Many Americans live in fear of having “tax liability,” but the funny thing about that is that most Americans don’t truly know what that term means. They know, from their accountants and general talk, that it is a bad thing, but most of them cannot accurately define it.

In short, “tax liability” means owing money to the Internal Revenue Service (IRS) at the end of the tax year, and, while that’s certainly not a good thing, it’s not nearly as scary or, to put it bluntly,

nearly as big of a deal as most people make it out to be. In fact, a great many people and businesses regularly have tax liability at the end of the tax year.

The good news is that it is possible to reduce the likelihood of tax liability with the help of a knowledgeable financial adviser through finding and taking good advantage of available deductions, signing up for credits, and more. Plus, if you do have tax liability, there are ways to get around it, or, at the very least, to pay it off with ease. The key is to, first of all, not panic when you hear the term “tax liability,” and to, secondly, understand the ins and outs of tax liability and what you can do about it if it occurs and to prevent it from happening in the first place.

Claim Deductions Like Crazy

As mentioned, one of the best ways to deal with tax liability is to keep it from happening in the first place, and, also as mentioned, one of the easiest ways to do that is by claiming any and all available deductions for which you are eligible.

Even when you think you have filed for all possible deductions, if you are still coming up with liabilities, it is time to contact a professional accountant and/or tax adviser. These professionals know the ins and outs of every single tax law and deduction there is, and, those they don’t know, they can easily look up.

They know how to pull totally legally “tricks and tips” to help you obtain more deductions than you ever thought possible, so if, on your own, your deductions are coming up short, these are the people to turn to.

Give From the Heart (And Benefit the Pocket)

Another easy way to reduce your tax liability is to be a giving person; in other words, by making tax deductible donations to legitimate charities, you can reduce your tax liability. This is great because, not only can you help others, but you can help yourself as well.

Again, though, professional help is smart since you need to know how to donate, what to donate, and in what amounts in order to reduce your liability legally without raising suspicion and making yourself more likely to be audited.

As you can see, there are things you can do to reduce tax liability and to prevent it as well, but none of this is easy to do without professional help, so, if you don’t already have a trustworthy tax adviser, there is no better time than the present to find one.

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Tips for Filing an Amended Tax Return

Despite your very best efforts, you may, at some point in your life, end up filing a tax return that is incorrect in some way. This could simply be due to the fact that you were rushing to meet the impending tax deadline and made a mathematical error. Or, maybe you had a dishonest accountant or inaccurate software. Whatever the reason, if you made some serious error, like under reporting your income or forgetting to file for credits you deserved, or even a more minor one, don’t panic! The IRS knows that people make mistakes, and it has policies in place to allow for amended tax returns.

Whatever you do, don’t just avoid amending a wrongful tax return because you think it will be too stressful or too difficult; take the necessary steps now to amend your tax returns and set things right. If you don’t, you could miss out on great benefits, or, even worse yet, find yourself in legal and/or financial trouble or even facing an audit.   

Form Fitting

As mentioned, the IRS is quite used to people making (and amending) errors on their tax returns. In fact, it is so used to it that it has a specific and simple form you can fill out if you have made an error and need to fix it.

You can fill out Form 1040X to amend any errors as long as you initially filed one of the following very common tax return forms:

l  Form 1040

l  Form 1040A

l  Form 1040EZ

l  Form 1040EX-T

l  Form 1040NR

l  Form1040NR-EZ

If your originally filed form is not on the above list, you can still amend your taxes; it just may be a bit more complex of a process, so, if the form that you originally filed is not listed above, contact a tax adviser for help and information on how to amend your return. Most people, however, will simply be able to fill out the specialized amended form.

Pre-Filled Information

When you do have to file an amended form, the IRS does you a major favor by presenting you with a pre-filled form (at least if you go through the re-filing process online, which is recommended).

This form will contain all of the information you originally filed, which means that you won’t have to re-enter all of that tedious stuff, like your social security number, name, and address. Thanks to the pre-filling feature, you can simply go back through the form, find the spot or spots where you made a mistake, correct them quickly, and be on your way. What could be simpler? To get this nice benefit, however, make sure you are doing your filing and/or refiling online.

Provide Documentation

In addition to filing and/or refiling online, make sure that you have any necessary documentation of the changes you are making and, even more importantly, WHY you are making those changes available.

Providing this documentation will allow the IRS to quickly and easily see your error, to fix your form/status, and to move on, without opening you up to an audit or other issues.

If you do not have documentation, are not sure what documentation would entail, or have any other questions or “special circumstances,” just contact a qualified accountant in your area to make the amendment process even quicker and easier to go through.

Suggestions for Easier Tax Compliance for Small Business

If you’re a small business owner, then you probably already know all too well how difficult tax compliance can be. Once you think you’ve got the rules figured out, they change, and if you make a mistake, then you’re likely to be burdened by hefty fines and penalties. To make matters worse, small businesses typically don’t have the resources to leave all of the “figuring it out” up to professionals. 

The really unfortunate thing about all of this is the fact that tax compliance doesn’t have to be nearly as hard as the IRS makes it. On the positive side, though, the IRS does realize that its compliance rules have some issues, as do a lot of other important people. That’s why, recently, a hearing was held by the U.S. Senate Committee on Small Business and Entrepreneurship, and together, the members of the committee came up with some potential (and hopefully soon-to-be-implemented!) strategies for simplifying compliance for small businesses.

Proposed Solution #1: A Simpler Tax Code

It makes sense that, if simpler compliance is the goal, a simpler tax code is necessary. Experts are hoping for a scaling back of the current massive tax code, which contains more than 74,000 pages.

Financial experts have suggested many changes that could lead to an easier-to-understand, less threatening code, but some of the main proposed changes include:

l  Fewer industry categories

l  A reduction in overall tax rates, brought on by a scaling back of unique tax breaks

l  Fewer distinctions within categories

l  Rules that vary based on business type and size

As it stands, many feel that the current tax code favors large corporations and leaves small businesses in the dust; however, these changes, if enacted, could change all that for the better.

Proposed Solution #2: Allow Cash-Method Accounting for More Businesses

Many businesses regard cash-method accounting as much simpler and easier to understand than accrual method accounting. Unfortunately, though, businesses that make more than $5 million in yearly revenue are required to use the more complex method, which requires them to report expenses as they are incurred, not as they are paid for.

If a new proposal is approved, however, any business with $10 million in revenue or less would be able to use the easier cash method, which allows them to simply log and count earnings as they receive them.

This would open the door for many more businesses to enjoy easier compliance and easier, more accurate accounting in general.

Proposed Solution #3: Take the Section 179 Expensing Limit from Temporary to Permanent

Section 179 has been around for quite some time, and its basic purpose is that it allows businesses to write off all of some expenses, up to the yearly limit, instead of having to depreciate them as time goes by.

The current limit is $500,000, but that’s not yet permanent, though many want it to be. If these people have their way, the limit would stay at that nice $500,000, giving tax relief to business owners everywhere and also keeping them from having to play the “guessing game” about what the limit will be each year.

There is no guarantee that these proposed solutions will actually happen, but it’s nice to know that work and thought is being put in to make compliance easier for small businesses. Now, business owners just have to cross their fingers and hope that the people in charge listen to this great advice.

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Claiming Business Expenses the Right Way

When you own a business, no matter how big or how small, you are going to incur some expenses along the way. The IRS defines true business expenses as any costs that are “ordinary and necessary” in the operation of the business.   

It is important that you keep track of any and all business expenses you encounter throughout the year. Then, when tax time rolls around, you can look through your expenses, sort out the ones that can be claimed, and save yourself quite a bit of money.

Hiring a good, reliable accountant to sort through your business expense lists can be worthwhile and can make the process go a lot more quickly and easily. Either way, though, it is important that you understand the basics of claiming business expenses and that you know a few tips and shortcuts that can help you along the way.

Tip #1: Document Anything and Everything

First things first, you need to be documenting every single business expense that you incur throughout the year. Documenting doesn’t just mean writing down the expense either; no, it means maintaining some kind of proof of the expense, just in case you ever go through an audit or are asked to back up your claims.

The easiest way to properly document your expenses is by keeping receipts for purchases made. You can do this the old-fashioned way by actually keeping physical receipts and putting them in a filing cabinet or other storage space. Or, you can invest in a cloud-based system that allows you to scan in receipts and keep them on file virtually.

In addition to keeping receipts, don’t forget to maintain logs for business travel if applicable, and make sure your employees are doing the same.

Tip #2: Value Accuracy Above All Else

Another very important thing to keep in mind is to ensure that all of your calculations are completely accurate before you submit your deductions to the IRS. Not doing so can greatly increase the chances that you’ll be audited, which can be a real hassle. Plus, you could miss deadlines and face fines and fees due to inaccurate reporting.

Back deductions up with worksheets when applicable and make sure you are up to date on any changes that the IRS has made for the current tax year, such as being aware of the latest mileage rates.

Your best bet is always to have a professional accountant do the checking for you, but if you’re doing your taxes alone, check and double-check everything!

Tip #3: Don’t Forget to Differentiate

Finally, make sure that all of your business expenses are being categorized appropriately. Not doing so is basically asking for an audit!

Keep true business expenses, as defined and explained above, separate from other things like capital expenses and personal expenses. And, before you just assume something counts as a business expense, double check the tax law or ask your financial adviser.

Filing taxes is stressful, and filing business expenses, though it will pay off in the long run, is too. That’s why you should keep these helpful tips in mind as you go through this arduous but worthwhile process.

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Tax Changes You Should Know About

Tax laws are known for changing quite frequently. In fact, there are changes almost every tax year, and 2016 is definitely no different. While there were many changes this year, some are definitely bigger and more likely to affect average people than others. Here, we’ve outlined some of the more major changes that you should be aware of.  

  

A Permanent Business Break: Section 179

As of 2016, under section 179, businesses can get a break on up to $500,000 worth of equipment that they’ve purchased for their businesses- pretty impressive, right?

Up until now, Congress has had to approve this break and its limit, but, as of this year, it’s permanent, so if you own a business, you can bet on this break for good!

                                     

Big Penalties for Not Offering Affordable Health Insurance

While, as of this year, businesses can benefit under Section 179, they may also end up suffering some serious consequences if they don’t offer affordable health insurance to their employees. Health insurance is now a required offering from businesses with fifty or more full-time employees.

Businesses that don’t obey the law could end up paying tens of thousands of dollars in fines! Penalties can be assessed when one of your employees get a tax credit for health insurance marketplace coverage or ends up spending a large chunk of his household income on health insurance because your business doesn’t offer it.

Don’t take these kinds of chances. Brush up on the new laws taking effect this year and then make sure you’re abiding by them fully.

Business Mileage Rates Plummet

If you drive a vehicle for work, then you probably already know that you can deduct mileage costs using the standard mileage rate set in place by the IRS. This is a great way to end up saving a surprising amount of money over time.

This year, however, business drivers and travelers won’t save quite as much. Unfortunately, the new tax laws have reduced the standard business mileage rate to fifty-four cents per mile, instead of last year’s 57.5 cents per mile.

The R&D Tax Credit: Now Permanent

The IRS-offered tax credit for research and development isn’t temporary anymore! It’s now a permanent offering, and it’s available to more businesses as well. From this year forward, companies that have been in business for fewer than five years and that bring in less than $5 million in revenue can use up to $250,000 worth of the credit. That’s good news for a great many businesses that have taken advantage of the credit in the past and for new ones that are just getting started and could use an extra boost of help!

Tax laws will probably never stay 100% the same from one year to the next, but as long as you stay on top of the changes, like these presented here, you should always come out on top!

Small Business Accounting Struggles

Nobody ever said that running a small business is easy. Not only do you have to ensure that you’re earning a profit and deal with troublesome clients, but you also have to handle all of your business accounting matters. And, unless you’re an accounting expert or you’ve got one on staff- which, by the way, you should really think about doing- chances are that managing money isn’t exactly your forte.    

Fortunately, though, some accounting struggles are more common than others, and, because they’re so common, there are some easy, proven, virtually foolproof ways to remedy them.

Remembering Who Owes What

When you imagined running your business, you probably imagined sending invoices, having people pay them, and then rolling in dough. Unfortunately, as you probably now know all too well, it’s rarely that simple. There are people who don’t pay, people who pay late, or people who don’t pay in full. Thus, if you’re not keeping careful track of who has paid (or hasn’t paid) what, you’ll end up very confused and unsure of who owes you money and how much, which could lead to lost or forgotten funds, the last thing any business needs!

Having and relying on a simple Accounts Receivables ledger can really help with this. Use this ledger to separate customers by name and account number (if applicable), and to keep track of who has been invoiced, any payments made, and any balance owed. You can do this with nothing more than a basic spreadsheet, but it will really make all the difference in keeping track of everyone’s accounts and of what you’re owed.

Keeping Track of Receipts

Another thing you’ll need to keep careful track of is receipts. The IRS requires you to keep many receipts, sometimes for up to two years or more depending on circumstances. Make sure you are aware of what receipts the IRS may request from you and that you are properly storing them and classifying them.

You can do this the old fashioned way by keeping receipts in a filing cabinet that you’ve segregated by date and/or category , or you can simply scan receipts and file them away online if you want to avoid clutter. Either way, developing a simple system for easily accessing the receipts you need is definitely the way to go.

Making Revenues and Expenses Match

Finally, know that there is a major difference between just recording financial data and actually being able to understand it!

When you mark down an expense, for example, indicate clearly what the expense was for and what, if any, revenue that expense was related to. This will help you to understand what spending is truly necessary and what spending needs to or should be cut down on.

Having clear, written policies about how different revenues and expenses relate can make this information even easier to understand and more comprehensive for you and others whom you employee.

If you can follow these simple tips, you’ll be able to easily overcome a lot of common accounting woes.

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The Secret Power of Tax Credits

If you own a small business that’s had good success, you may feel ready to take it to the next level and expand. However, feeling ready and actually being ready are two totally different things; if you don’t have the money to grow your business, it can feel impossible to make expansion happen or like it will take years and years.   

Thankfully, there are small business incentives, such as state credits, federal credits, grants, and more that can make your dream a reality. The trick is just to find the right one for your specific needs and circumstances.

Tax Credits

There are many tax credits that exist to help businesses. Typically, these credits are available to businesses that meet very specific requirements and/or have very specific needs. Thus, it can take a little searching to determine which credits you can apply for.

One great example is the federal Work Opportunity Tax Credit. You can receive this credit for hiring specific “high risk” employees or others who have a lower chance of getting hired elsewhere, such as former felons or those who fall below a certain level on the poverty line. Typically, you can claim as much as $9,600 for each qualifying employee you hire, though there is a limit on the number you can hire and receive the credit for.

There are many credits that, like the Work Opportunity Tax Credit, you can easily become eligible for if you just make a few small changes, and more often than not, these changes are very worth the pay-off.

State Hiring Incentives

Another good way to get extra cash for growing your business is to take advantage of state hiring incentives. Incentives are typically offered based on how many jobs your company can create in your community or other ways in which it can help the community; the more jobs and opportunities you can create, the better.

When you help out and help better your community, everybody wins, and your business is the one that gets the big “thank you” in the end.

Grants

State and federal grants are also a good way to generate money for your business. If you plan on training your employees to do something new, or on offering some kind of new product or service that would help the community, you can typically find a relevant grant that will reimburse you for some or all of your related expenses or at least for specific costs.

You can learn about available grants and determine which ones could apply to you by contacting the United States Department of Labor’s Business Relations Group, as well as other grant-offering resources.

As you can see, there are a great many ways to help your business earn more money, or, at the very least, to cover some of its costs so that you can designate those funds to expansion. Many of these resources can also help your business to make a positive difference in the community; so really, these types of incentives are a powerful win-win option for everyone involved.

Cloud Accounting: Is It Worth the Risk?

Cloud accounting has become extremely common, which is not surprising given the popularity of online banking and other cloud-based systems.  For those not familiar with this term, “cloud” programs are simply programs or software used on a remote server. That means that information isn’t stored on a computer but, instead, on a separate account which is accessed by logging into a program.

While many people like the idea of not having to store a lot of space-consuming data and programs on their own computers, there are some concerns with cloud accounting, and the biggest one is the issue of security.

Because business owners do not have direct control over their information, meaning that it is not stored on their own server, they have to rely on the cloud program to have good security measures in place. And, while most do, there is always the fear of hacking, security breaches, and other problems.

While the fear over security issues is real, though often unfounded, most feel that the benefits of cloud accounting outweigh the risks. Some of the benefits include:

·         -Software is regularly and automatically updated without creating problems or extra tasks for users

·        - Data is backed up often and automatically

·         -Bank transactions can be fused with accounting programs for easier bookkeeping

·        - Information can be accessed from anywhere, anytime as long as the user has his or her login available

·         -Cloud accounting is much more affordable than standard software programs

With so many benefits, it’s really not wise to let fear keep you from giving cloud accounting a try.

The key is just to find a cloud accounting program that you know you can trust completely. Look for a cloud program that is regularly audited by the American Institute of Certified Public Accountants; this will ensure that the program is meeting all security regulations. Also try and choose a program that is recommended by your accountant or other experts in the field. As long as you choose wisely, there is no reason you can’t end up with a great, very secure cloud accounting program that will make your life so much easier.

Financial and Accounting Transparency

Being transparent with your business’s financial dealings can be difficult and stressful. However, it is extremely important and helpful to your business, its operations, and its overall reputation, especially if you are just getting started. Transparency doesn’t, of course, mean that you are willing to share all of your financial details with anyone and everyone, but it does and should mean that you are willing to share it with others in the company, as well as with potential investors.   

Being open and honest about your current corporate financial status, as well as your future plans related to that status can prove helpful with all of the following:

l  Attracting investors

l  Hiring good, future-minded employees

l  Bringing in clients

When you share your financial information with investors, you are showing them that you have nothing to hide, that you are not trying to scam or mislead them in any way. You are allowing them to come into your business with full knowledge of what they are getting into, and even if there are some faults, many investors will admire your honesty enough to give you a shot.

Likewise, employees want to know if they’re coming into a failing company or a bustling, busy one, and they deserve to know that. Sharing general information before hiring and more information after hiring also shows your employees that you trust them, and, in the same token, shows you which employees you can trust.

Finally, clients will be more willing to work or do business with honest companies who have nothing to hide. Yes, showing your financial situation, flaws and all, can be difficult, but it’s beneficial too, which makes it worthwhile.

What to Share

While sharing, in general, is good, too much sharing is bad.You do not have to tell everybody everything; remember that. Choose to share details that give away enough information but not too much. Things that are worthwhile and okay to share include:

l  How many users/clients you have

l  Activity level of users/clients

l  Annual revenue

l  Current and future operations plans

l  Funding

l  Losses

That might seem like a lot of information to share, but remember, NOT sharing it, especially if you’re a startup, can lead to rumors, untruths, and fearfulness about dealing with your business, which is the last thing you want.

What NOT to Share

Remember, when it comes to sharing, there definitely is a such thing as “too much information.”

The basic rule is not to share anything extremely negative and/or unfixable at the current time. If you share something negative, make sure you also share a plan for how you intend to fix it. If you haven’t yet worked out a solution for a particular problem, it’s probably best not to share that issue until you do.

The Power of Feedback

One final positive of sharing information is that you will invite constructive criticism and feedback from others who have insight into what you may need to improve on. Sure, some of that criticism may be hard to take, but, just like financial transparency in general, it will benefit you and your business in the long run.

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How to Cut Tax Costs with Home Improvements

When most people make improvements to their homes, they’re doing it because they want a nicer, more comfortable home. In some cases, though, their home improvements end up benefiting not just them, but others as well. When that’s the case, these homeowners often qualify for some awesome deductions that can help them to save money and offset the costs of some of those improvements. Read on to learn about some great home improvements that could just earn you a tax break.  

Improved Energy Efficiency

If you’ve recently done something or are considering doing something to increase the energy efficiency of your home, you should know that the government approves While making your home more energy efficient can help your wallet, it can also help the environment, and the government likes to reward those who try and reduce their carbon footprints.

While there are many different tax credits related to energy efficiency, one of the best is the Residential Energy Efficiency Property Credit, which will give you a discount for installing solar panels, wind technology, geothermal units, or fuel-cell technology.

Check to see if your home improvement plans qualify, and, if so, make sure you take advantage of this great deduction.

New Water Heaters

Another home improvement that could earn you a tax credit is installing a new water heater. If that water heater is considered more energy efficient than your last model and/or meets certain other standards, there’s a good chance you’ll qualify.

Check with an accountant or with the appliance manufacturer to be sure, but definitely make use of this credit if you’re eligible; it’s worth it!

A New Roof

Finally, if you put a new and improved roof over your head, you’ll probably qualify for the Nonbusiness Energy Property Credit. In general, if the roof you install is designed to reduce a home’s heat gain, it’s good to go in terms of the credit.

As is the case with all of these credits, however, make sure you double-check before you file for the credit to avoid potential trouble or disappointment. As long as you’re careful, though, you can get some great home improvements and some great tax credits; talk about a winning combination!

Real Estate Decisions that Affect Your Taxes

People are often surprised to find that buying a home greatly affects their taxes. Some of the effects of becoming a homeowner, such as suddenly qualifying for new tax write-offs, can be positive. Others, such as tax liabilities, can be negative. However,  if you’re smart about your purchasing decision, you can buy a home and benefit greatly, instead of buying a home and regretting your decision come tax-time.   

For best results, hire a financial adviser who can help you to make the right decision about when and how to buy a home and what to do (and what NOT to do) after you’ve purchased one. At the very least, though, do your research on how different choices will affect your taxes, and make decisions that will benefit you both now and in the long-run. To help you out, we’ve looked into some common real estate decisions and how they are likely to impact your taxes.

The Reality of Refinancing

Many  people think that refinancing will help to solve all of their financial problems. They believe that if they can just pay a lower mortgage each month, they’ll get back on track or maybe even be able to pay off their home loan more quickly. And, while these things are sometimes true, there definitely can be some major drawbacks to refinancing.

To begin with, when you refinance your mortgage and pay less interest, you’ll lose that sizable mortgage interest deduction you’re probably getting…or that you SHOULD be taking advantage of.  If you’re not taking advantage of this option, doing so and seeing the results could cause you to think twice about refinancing.

The bottom line is that refinancing DOES work for some people, but it can have disadvantages, so make sure that you are considering all other options, as well as ALL the effects of refinancing, especially as they relate to your taxes, before you make this decision.

The Effects of Remodeling

You might not think that remodeling your home has anything to do with your taxes, but, in truth, it actually does! That’s because remodeling your home can increase your home’s value, which, if you sell your home, could mean that you actually make a profit on the sale.

If you don’t want to risk getting charged a capital gains tax, make sure you have proof of all the remodeling that you paid for. That way, you can include the amount spent on remodeling in the “purchase price” of your home and avoid getting taxed for the full amount for which you sell your newly improved home.

Also bear in mind that, depending on where you live, some remodeling projects, especially those that make a home more energy efficient, can qualify you for tax credits or other incentives, so definitely don’t miss out on these “bonuses” if they’re available to you.

As you can see, your home and the things you do with it can affect your taxes in many ways, some good and some bad. For best results, work with a tax professional to make real estate decisions so that you can get more of the “good” and less (or none!) of the bad.

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