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6 Ways to Make the New Tax Bill Work for You…

December 18, 2017
18 Dec 2017

At the end of every year, millions of Americans can make strategic moves to shave a few bucks off their April tax bill. Right now, millions more should be able to get into the act, with Congressional Republicans poised to pass a 503-page law that fundamentally restructures the U.S. tax code.

If the bill passes, new tax rates and countless other provisions would go into effect on Jan. 1. Most of the old rules though would still apply in the last two weeks of 2017—and that gives individuals a shrinking window of time to employ strategies that would lower their taxes for next year’s tax season. (While the legislation would take effect in the new year, it won’t be reflected in your tax forms until the 2019 tax season).

So, here are suggestions from accountants, financial planners, and other tax experts on how to make the most of this opportunity. Keep in mind that the best advice depends specifically on how you’re going to be affected by the tax bill. While most Americans would get a tax cut in the short term, some taxpayers could see higher tax bills in 2018. “No individual is average,” Suzanne Shier, a tax strategist at Northern Trust Corp., reminds us. “An average is a composite of multiple individuals.”

If your taxes are set to spike in 2018, many of these strategies won’t work as well. But if you’re part of the majority who will see an initial tax benefit from the law, there could be big benefits for acting soon.

1. Give to Charity

A typical piece of end-of-the-year advice is to increase your potential deductions before Jan. 1. Deductions claimed for things you did this year will lower tax bills due the following April. Wait until January, and you’ll need to cool your heels for more than a year to get the benefit of deductions claimed.

This year, beefing up your charitable giving could be even more effective. If your tax rate is falling in 2018, your deductions are more valuable if claimed against this year’s income. Giving to charity, a tax deduction that’s preserved under the tax bill, is an effective way to boost your 2017 deductions on short notice.

And even if your tax rate is going up next year under the new bill, you may still want to make a bunch of charitable donations in 2017. Most deductions, including the charitable one, can only be claimed if you itemize your tax return. The bill would sharply limit the number of taxpayers who would benefit from itemizing: First it raises the standard deduction from $6,350 to $12,000 for single people, and $12,700 to $24,000 for married couples. Second, it limits other deductions—most famously for state and local taxes—so it’s harder for taxpayers to reach the threshold where itemizing makes sense.

So, you might want to think about making several years of charitable donations this month if you can afford it, said Philip “Rusty” Ross, a financial adviser at Exencial Wealth Advisors based in Oklahoma City. If you’re not sure where to donate, you can open a donor-advised fund and decide later where your money will go. But move fast—there are only two weeks left in December.

2. Defer Income

Another traditional recommendation for this time of year is to defer income. While salaried workers generally can’t choose when they get paid, business owners can often delay registering income until the following year, lowering their April tax bill in the process. Investors can also control their taxable income—and thus lower capital gains tax bills—by selling losing stocks or waiting to sell winning stocks until 2018. In most years, deferring income merely delays the taxes you will have to pay eventually. But, if you expect your tax rate to fall next year, deferring income into 2018 could actually save you money. (There’s also some good news for equity investors when it comes to the FIFO rule.)

3. Pay Your Taxes—If You Can

As we noted, the tax bill would limit how much state and local taxes (or SALT) individuals can deduct, to no more than $10,000 of a combination of property taxes and either income or sales taxes. The move by the Republican-controlled Congress was criticized by Democrats as an effort to make citizens of high-tax blue states pay for benefits to corporations and citizens of low-tax red states. As a result, advisers had been planning to instruct clients targeted by this provision to find ways to maximize their SALT deduction in 2017, by pre-paying next year’s taxes as much as allowed and deducting them under the old rules. But the final compromise bill, unveiled Friday by Republicans in the Senate and House, explicitly closes this loophole with respect to income taxes. Any 2018 state and local income taxes paid ahead of time would nevertheless need to be counted on next year’s taxes, according to the bill. However, taxpayers could still pre-pay property taxes due in 2018, and deduct them under the old rules. Additionally, any taxes due for 2017—or any late taxes from previous years—could still be deducted on a tax return due this April.

4. Employee Expenses

Current tax law allows employees to deduct unreimbursed expenses related to their jobs as long as they’re more than 2 percent of income. The tax bill ends these itemized deductions after the end of this year. So, workers should think about whether they can pay —and get the receipts—for as many of these expenses as possible this month, said Kathy Pickering, executive director of the Tax Institute at H&R Block in Kansas City, Missouri. Examples of unreimbursed expenses for employees might include tools and supplies, occupational taxes, work uniforms, union dues, and expenses for work-related travel. Self-employed people and business owners would still be able to deduct expenses under the new tax bill.

5. Pay for Your Move

Under the proposed law, you’ll no longer be allowed to deduct work-related moving expenses after the new year (unless you’re in the military). Of course it might be difficult to schedule a cross-country move on such short notice, but, “if you did move, make sure you clear up any moving-related expenses by Dec. 31,” said Fordham University accounting and taxation professor Stanley Veliotis. And if your destination happens to be a low-tax red state, maybe thank Santa Claus for your good luck.

6. Hire a Tax Preparer

After Jan. 1, individual taxpayers will no longer be able to deduct tax preparation fees. Any payments to accountants or tax software companies made this year, however, should still be deductible on tax returns filed in April. So, you might want to buy a tax software package now, or try to get an appointment with your CPA before the end of the year. Keep in mind that, like unreimbursed employee expenses, tax prep fees are deductions that only make sense if you itemize and if total miscellaneous deductions exceed 2 percent of your income.

Article Source: Bloomberg News

Visalia Chamber of Commerce launches new Entrepreneur Program

September 29, 2017
29 Sep 2017

The Visalia Chamber of Commerce recently launched a new program called “Emmerge”, an entrepreneurial program created to provide new and future business owners a hands on learning experience.  Participants of the program will learn essential entrepreneurial skills.  They will be guided through the process of starting a business from the initial business plan stage to launching the business.  “Entrepreneurs bring new ideas, generate tax revenue and provide jobs for the local community,” stated Gail Zurek, president/CEO of the Visalia Chamber of Commerce.

 

The program will assist new business owners by connecting them with local business resources, provide one on one instructors, and will provide a mentor for each participant.  The program will consist of 12 classes, all of which will focus on different areas of business including: accounting, business law, marketing, zoning, ordinances, human resources, public relations, insurance, taxes, and sales training.  Industry experts will provide class instruction and provide real world relevant experience and expertise to participants.

 

To participate in the Emerge program, participants must complete an application, interview, attend orientation and be 18 years or older. Tuition for the Emerge program is $350. The deadline to submit applications is Nov. 17, 2017.  People can attend individual classes for $50 if there is a particular area of business that they are interested in in learning about.

Applications and other materials can be found at www.visaliachamber.org/emerge or by calling the Visalia Chamber of Commerce at 559-734-5876

When to know it’s time to hire your first employee?

August 10, 2017
10 Aug 2017

Perhaps the most important staffing decision is to know when to hire your first employee. This decision needs to be guided by your goals.

If you want to build a business, then it is important to hire someone early on so you could start. If you want to make a living and go where the wind blows, then it is likely you would wait until you had more work than you could handle by yourself. Hiring your first employee is harrowing and scary and needs a bold decision.

If you are in a partnership, then two people make the decision, and I know that is much easier than if you are a sole practitioner. Hiring anyone will make your costs jump, so you have to not only have work for them, but you need to cover the new expense.

There are three types of staff you can hire—an accountant, paraprofessional and administrative person. Its best to hire someone if you have enough work to keep them busy half their time. This will relieve you of about a quarter to a third of your workload since they would not be as effective as you when they first start. After a couple of months they should be able to work as effectively as you were and you will have been relieved of half your work, plus the new work you will assign to them as new business is generated.

The costs will be eventually offset somewhat since your position will be elevated in the eyes of your clients and you can increase fees by mentioning that you now have another mouth to feed. It is human nature for a client to feel that since whatever they pay you goes directly into your pocket (while ignoring your office and professional overhead) it should be as low as they can get it to be. However, once an employee is on board the client will understand that you have overhead and your relationship will change—to your benefit. This won’t occur immediately but will evolve as you request fee increases and adjustments.

Another benefit of hiring that first employee is the need to systematize your processes, be more organized, and you will have more time to spend meeting, consulting and thinking about doing more for your clients, and marketing and asking for referrals. You will also now have a business instead of a one-person practice.

Article Source:  Accounting Today
Written by: Edward Mendlowitz, CPA

Would you be better off hiring an Accountant?

July 25, 2017
25 Jul 2017

When are the tax savings that an expert can make for you worth the cost of paying for their expertise? Sam Dunn helps you decide

Blurring figures? Check. Glazed eyes? Check. Hot prickling sensation on the back of your neck in the early hours? Check. Hmm, you must be self-employed and crunching your own numbers.

So what’s the cure? Many people choose to throw money at the problem and hire an accountant – and, in fact, a good accountant will almost certainly recoup the cost of the work they do for you in the efficiencies they make in your financial affairs.

But how much should an accountant cost? Basic book-keeping and sorting simple tax affairs shouldn’t set you back more than £200 or £300 a year, says Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants. However, if your affairs are more complicated, it can end up costing you four or five times that sum.

So should you go for it? First, if you’re hopeless with percentages, tax and money, it’s a no-brainer. Second, much depends on the amount of money flowing through your business, and how much accounting work you expect – or want – to do yourself.

If you’re a freelance designer, say, and earn £50,000 a year by working from home two days a week and then commuting to an office for the rest of the week for a different company, you might well feel you can manage by yourself by using a simple spreadsheet that keeps track of your work, invoices and payments. That in turn will make it fairly straightforward for you to fill in your tax return online yourself – and if you do it early enough, the taxman will calculate what you must pay for you.

However, if your business is any more complicated than this, it’s probably worth calling on the professionals. If you have several different sources of income, for instance, it might be worth investigating setting up a limited company and getting paid in dividends for tax purposes. You can of course do all this yourself, but it can involve an awful lot of legal administration.
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Similarly, if you need to register for VAT you’ll face having to make some quite complicated decisions – for example, you can choose to pay an “average” VAT flat rate. If you need staff, you’re in the realms of PAYE for your minions, as well as National Insurance.

This is really where you should be calling in an expert and delegating that donkey work. Says Roy-Chowdhury: “An accountant will be able to look at your working practices and be able to advise you on all these issues.”

You can easily spend upwards of £1,000 for this kind of advice and work. But the rewards can be worthwhile: you could set up that aforementioned limited company and pay yourself mostly in dividends, which will mean you have a lower tax bill. This in turn can help you to grow your turnover, employ more staff and develop your company – with all its attendant rewards.

Much of your decision on whether to hire an accountant will also hinge on your personal attitude towards administration – and interest in how the UK’s tax and legal system works. If you’ve got an appetite for the fine detail – such as establishing what expenses you can offset against your income – and are willing to put in the legwork, you can easily do it all yourself.

Others, however, might see this as a drudge involving receipts and wayward documents – and prefer to leave it in the hands of a paid specialist.

So be honest with yourself about this. First, just how complicated are your affairs? Are you doing the best for yourself in terms of knowing your way around the system? Do you hate admin or do you revel in it? Should you fire yourself and hire an accountant? … Only you know the answer to that question.

Article Source: The Guardian

What you need to know about this upcoming tax season…

January 18, 2017
18 Jan 2017

It’s a new year and time to put the last one to bed, which means filing your taxes.

The Internal Revenue Service says to expect a few changes when the nation’s individual income tax filing season opens on Jan. 23.

Here are some of the changes you should be aware of:

New Tax Due Date

Taxes are usually due on April 15, but this year that falls on a Saturday. And Emancipation Day, a holiday in Washington, D.C., will be observed on Monday, April 17.

So that pushes the nation’s deadline to file returns and pay any amount due to April 18.

You don’t have to wait until then to meet with a tax professional or start the process though.

Delayed Refunds

A new law may delay refunds for some low to moderate income taxpayers who file early.

The Protecting Americans from Tax Hikes Act, known as the PATH Act, requires the IRS to withhold refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit until mid-February. The change is designed to give the IRS more time to detect and prevent tax fraud.

The affected refunds will start being released on Feb. 15 but they may not arrive in bank accounts until the week of Feb. 27, as it will take more time for financial institutions to accept and deposit the refunds. The three-day holiday weekend involving President’s Day on Feb. 20 may also affect the timing of when funds are available.

The IRS said it still anticipates issuing more than nine out of 10 refunds in less than 21 days.

Those with questions can use the “Where’s My Refund?” tool on the ?on IRS.gov website and the IRS2Go phone app to find projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15.

New ID Numbers

The PATH Act also requires that certain individual taxpayer identification numbers, known as ITINs, be renewed.

Any ITIN that hasn’t been used on a tax return at least once in the past three years, as well as any ITIN with middle digits of 78 or 79, must be renewed before a return can be processed. Anyone filing a tax return with an expired ITIN could experience return processing and refund delays, as well as denial of some tax benefits until the number is renewed. An ITIN renewal application could take up to 11 weeks to process during tax filing season.

ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number.

Article Source: USA Today

Getting ready for Tax Season

January 10, 2017
10 Jan 2017

Mid-January means out with the Christmas tree and in with all the tax-related documents.

Tax season officially begins Jan. 23, the first day individuals can file their 2016 returns. Many of us won’t be filing that early, though, because we won’t receive income statements from our employers until the end of the month.

But it’s not too early to prepare for tax season, Internal Revenue Service spokesman Michael Devine said.

“Right now you need to think about your tax records, the documents you will be receiving that have to do with income, charitable contributions, things like that,” Devine said. “Put them all in one place, a secure place so you know where to go to find them.”

Filers should know there are a few changes for the upcoming tax season. The most significant one concerns people who do not have a Social Security number but are still required to file a return.

These filers are assigned an Individual Tax Identification Number, and recent tax law changes require some of these people to renew their ITIN, Devine said. They include those who haven’t used their number on a tax return since 2013 or were issued a number before 2013, or who have a number with the middle digits 78 or 79.

“If they haven’t applied for a renewal, they need to do so immediately by going onto the IRS website (www.irs.gov/itin),” Devine said. “If they wait until filing season starts, they might wait 11 weeks for their number to be valid.”

Another change might impact people who are filing electronically on their own and are using a software product for the first time. They will likely need to find their 2015 adjusted gross income amount, Devine said.

“They will need to know that amount to validate their tax return,” Devine said. “It’s no problem if you are using the same tax preparation software as last year because it will ask you to import the previous year’s information. But if you are using new software, you will need to find a 2016 return or go online (to www.irs.gov) and ask for a transcript.”

The least popular change for some filers is one involving those who claim the Earned Income Tax Credit or the Additional Child Tax Credit.

A new tax law change prohibits the IRS from releasing any EITC/ACTC refunds until Feb. 15 at the earliest, no matter how early filers send in their return.

“It gives us time to receive W-2 forms from employers and stop more cases of tax fraud,” Devine said. “It will delay refunds for some people. They probably won’t receive them until the end of February.”

One last change: The filing deadline is April 18 because the traditional April 15 deadline falls on a Saturday and the following Monday is Emancipation Day, a legal holiday in Washington, D.C.

Article Source: GoErie

How Entrepreneurs Should Use Their Accountants

December 8, 2016
08 Dec 2016

Being entrepreneurial doesn’t end at starting a business; it means constantly striving to perfect your business model and quickly and continually adapting to change.

While “big data” has become a buzz word and the ability to readily capture data to inform business decisions has significantly increased in recent years, overlooked in this data grab is the importance of financial data and accountants, specifically.

You may just think of your accountant when it’s time to file your taxes, but he or she actually holds the secret to how healthy your company is and what to do about it.

What the accountant has is a mass of financial data, and with the right amount of financial data, a good accountant can almost instantly identify a business’s strengths and weaknesses.

Are your costs of goods sold too high? Are your prices too low? Do you have a manager whose team is particularly productive?

Your accountant likely has the answers to all of these questions and the data to back them up.

Entrepreneurs tend to make decisions using their instincts. This is not necessarily a bad thing as being an entrepreneur requires a healthy amount of decisiveness and self-confidence. The problem with this mindset, however, is that we as business owners end up making decisions to serve our immediate needs, when we should be looking at the financial data first and making decisions based on that information.

The role of your CPA or accountant should not just be to prepare your taxes but to help you gather accurate data and make more informed decisions. Here are some practical ways to make sure this happens:

  1. Never receive financial data without a written explanation of the contents. Never just take data from your accountant and assume you will understand what it means. The best way to achieve this is to ask your accountant to include one-page executive summaries with all financial data you are presented. Nothing in finance is so complicated that it cannot be presented well in summary form, so one page should be more than enough.
  2. When talking to your accountant, always focus your conversation on how the numbers affect the bottom line (profit) and/or cash flow. Avoid what we used to call at the bank “elevator analysis”- incessantly talking about how this or that number moved up or down since last period. Relate everything to two of the only things that really count in a business- increasing profit and cash in the company.
  3. Know your company’s strategic objectives. Know its mission. Know its value statement. This sounds so obvious, but it often surprises me how many people think strategic objectives are divorced from financial objectives. Management of a company is a circle, where all functional points touch each other in some way. When discussing the company’s financial condition with your accountant, relate your conversation to these objectives. Numbers are not just numbers- they tell a story of how the company is moving towards or away from its strategic objectives. If we change from a major supplier to cut cost of goods and increase gross margins, talk about how this may affect the quality of delivery to clients. Your accountant can even help develop the objectives of the company, but he or she can only do this if you see his or her role and function as intertwined with overall objectives.

A smart entrepreneur doesn’t just consult his accountant at tax time. He or she knows the underlying reasons why your business is succeeding or failing and should be consulted a minimum of two times per year for non-tax-related consulting and advice.

That is, until your company gets big enough to warrant hiring a CFO, at which point, financial data should be at the root of every decision.

When I Grow Up, I want to be a Tax Accountant

December 8, 2016
08 Dec 2016

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