Monday, December 30, 2013

Additional Medicare Tax

The additional Medicare tax may apply in 2013 for income amounts above certain thresholds.

Thursday, December 26, 2013

End of Year Tax Preparation - What Does Your CPA Need - Really?

It is that time of year again when you are ready to think about what you need to give to your bookkeeper or accountant. Here is a simple and easy to understand list of the paperwork and the reports that person needs to help them prepare your taxes as easily and 'pain free' as possible. No need to put things off this tax season.
Most accounting software programs are very much the same when it comes to running reports so you'll find the steps below similar for other programs too. The Secret to getting this done is in setting aside a half day to do it in. If you wait you pay extra for a "Rush" job, also known as a PIA fee by all bookkeepers and accountants alike. Yes, if you procrastinate then you are an entertaining and anonymous topic of conversation at lunch meetings!
End of Year Information To Prepare For Your Accountant:
1 - All 1099/1096, W-2, W-3 Information on you and your business
2 - December Previous year and January current year Bank Statements and reconciliation reports
3 - Petty Cash reconciliations
4 - Credit Card charges and End of Year Finance Charges
5 - List of Inventory and Assets
6 - Mileage
7 - Home business Use breakouts
8 - Payroll Reports from payroll company
9 - Quarterly reporting tax forms
10 - Draw and investment or payroll information on partners or shareholders
11 - End of Year Balance Sheet, Profit and Loss Statement and Trial Balance
To Retrieve These Reports From Your Accounting Software:
1 - Open company
2 - On menu across top
Click on: REPORTS
3 - On the reports menu
Click on: Company and Financial
4 - Pick the date range of "last fiscal year"
5 - On the reports menu
Click on: Company and Financial
6 - Pick the date range of "last fiscal year"
7 - On the reports menu
Click on: Company and Financial
8 - Pick the date range of "last fiscal year"
9 - On the reports menu
Click on: Accountant and taxes
10 - Pick the date range of "last fiscal year"
11 - On the reports menu
Click on: Employees and Payroll
12 - Pick the date range of "last fiscal year"
13 - "Run" and "Print" all these reports and make a copy for your file and your CPA
(This menu example was taken from the reports section of an accounting software program that is considered the 'industry standard" to most CPA professionals and bookkeepers).
Now you can make that appointment with your tax person and sit back and enjoy the stories you are about to hear from those people who will wait until the last minute to get their paperwork ready and who are slamming their heads against a wall trying to get their reports done. If you took my advice then about now, you may be asking yourself... where is that wine opener anyway!?

Article Source:

Friday, December 20, 2013

Why Hiring A Professional Tax Preparer Is A Good Idea

This article looks at the reasons why small and even bigger businesses must hire professional CPAs instead of using tax return software for filing returns. Many ordinary businessmen do not know the pitfalls that await them once they use software for filing the returns. Business owners and all other people responsible for filing business taxes must read this article to know the difference between the two ways of filing tax return.
Why to get assistance from a certified public accountant for filing tax returns?
Whether your business is located in Virginia or any other state of the US, you must ensure that its tax returns are filed year end. There are many advantages of hiring a professional CPA for tax preparation. Let us discuss these advantages.
Ever-changing tax law
Every year all the tax laws revise. It is very difficult for the software vendors to immediately incorporate all the changes in their software. However, certified public accountants can easily comply with the new additions. One reason why many small business owners do not try to file tax returns for themselves is change in tax laws. Therefore, the biggest advantage of getting your returns prepared by CPAs is accommodating of all new changes.
Double-checking for mistakes
Tax preparation is an error prone process. There are many different types of calculations involved and software can also commit mistakes. However, CPAs usually calculate tax by software but also check it manually for double verification. This further decreases the chances of errors in filing tax returns.
Tax refunds
Usually it is very difficult for the software to tell you whether you have any tax refunds to claim or not. But certified public accountants tell you right away if there are any tax refunds that you can claim on your tax.
Handling complexity
The tax returns can get very complicated at times. Ordinary business owners are not able to handle all the different adjustments that need to be made in filing a complete return. CPA professionals can handle even complicated tax matters without getting lost into the complexities.
Subjective judgement
Tax return software can only make calculations. It cannot give any opinion to the business owner or management about what to do. On the other hand, professional CPAs can help businesses minimize tax liabilities and given them practical advice beneficial for many future years.
Depend on qualified CPAs only
Small and medium sized business owners often tend to rely on just accountants. They do not look into the fact that their accountants are certified or not. There are many advantages of working with a qualified certified public accountant. An uncertified accountant will not be able to handle complex accounting matters. He will also fail to fully understand the various tax laws that need compliance during tax preparation.

Article Source:

Tuesday, December 17, 2013

6 Tax Tips for Small Business Owners

No one welcomes tax time. Small business owners especially are besieged by a mountain of paperwork. But this is a good time to start looking at your strategies for this year and begin strategies for next year that will save you a lot of time and effort. Here are six tax tips every business owner should be aware of.
1. Keep good records and record as you go - Hopefully you've been saving your receipts throughout the year because you will need those receipts if you do get audited. Unfortunately many small business owners get into the habit of tossing their receipts in a box, and then they have to go through that box and itemize them when tax time rolls around. However if you keep your records as you go, tax time becomes a breeze because you'll have an instant record of how much you spent on what.
2. Know when it's time to outsource your tax preparation. Many business owners put off doing their taxes because they just don't have the time to do it. Others dread the arduous task of trying to figure out which numbers go where on the forms. It's probably better to outsource your taxes to someone who knows all the tax laws. Who knows how many tax deductions you might be missing? Only a tax professional stays up to date with changes in tax laws so that you can minimize the impact taxes have on your business.
3. If you do get audited, don't worry, just call a professional. Being audited isn't fun, but if you have a professional helping you, then it isn't so bad. Just keep good records and call for help if you do get audited. You should also remember that being audited doesn't necessarily mean you did anything wrong.
4. Ask your tax professional which accounting software is best to use if you're keeping your own books. Some tax professionals use a certain type of software, like Quickbooks, that is available to small business owners. By using the software they use, all you have to do is send them your electronic file when tax time comes.
5. If you use part of your home as an office, make sure that you include all direct and indirect expenses. This means homeowners association fees, repairs, maintenance, homeowners insurance, rent, interest on your mortgage, property taxes, and more. Ask your tax professional to give you a checklist of things to include.
6. Report the interest from your business bank accounts on Schedule B rather than Schedule C. This is because the interest isn't subject to the self-employment tax. On the other hand, if you are either a shareholder of a sub-S corporation or belong to a partnership, then you'll see your interest go to your Schedule K-1, although it will still be reported on Schedule B.

Article Source:

Friday, December 13, 2013

What Holiday Spending Is Tax Deductible?

Helping out people in need is a great way to spend any day. It's especially great during the holidays when need can often be most apparent. The advantages to charitable giving are numerous, but one great perk to giving this year is the fact that some charitable gifts are tax-deductible and can provide some modicum of tax relief.
In order to claim the deduction you must ensure that you understand all the rules. Charitable contributions can reduce your overall tax burden this year, and you are doing so while performing a greater good. However, when it comes to tax law, you must be aware of the rules and procedures.
Here are a few tips to help you get the most out of your holiday buck:
  • When claiming charitable deductions, you must itemize first. You must report any itemized deductions on the Schedule A federal form 1040 lines 16-19.
  • Only the donations you make to qualified charities are deductible. To see whether a certain organization is qualified or not, ask to see their IRS letter stating they are recognized as a qualified charity. You can also search online through IRS Publication 78. Remember that temples, mosques, churches and synagogues are considered by the IRS to be de facto charities and are therefore eligible to receive donations.
  • Cash deductions, no matter the amount, has to be substantiated by bank records (via credit card receipt or canceled check) or in writing by the charity. The writing should include the amount, organization and the date they received the donation.
  • Any cash deductions which cannot be substantiated, like cash donations without receipts or donations made to individuals directly rather than to a qualified charity, will be disallowed. This includes paying for Christmas presents or being an anonymous donor. This doesn't mean you cannot do these types of random acts of kindness. It just means that you are not able to claim the deduction.
  • If your paycheck has funds taken out for charity, make sure that you keep your pay stubs, your W-2 or any other documents that are furnished by the employer that shows the amount withheld.
  • For non-cash item donations, the general rule is that a person can take deductions for the overall fair market value concerning those items - what that item would sell for. Be very specific when you are documenting your donations, noting each description and condition.
  • Donation rules for vehicles (including airplanes and boats) are slightly different. Rather than using fair market value, you are limited to gross proceeds from the sale if the value is $500 or more. Refer to form 1098-C and attach it when you send in your tax return.
Now that the holidays are right around the corner, charitable giving is needed more than ever. If you decide to give to charity, make sure you receive a little something back. For more tax relief help, contact your tax advisor.

Article Source:

Tuesday, December 10, 2013

Maximizing Your Return - Year End Tax Planning

Surprise parties are fun. Tax surprises are not which is why year end tax planning is so important. The complexity of year end tax planning is affected by changes in your life such as; a change in marital status, having a child, significant change in income and many others. Taking time at the end of the year to review income other than regular wages like dividends and other investment income ensures that you will have adequate funds available to cover any tax liability.
By discovering potential liabilities before the end of the year you will have the opportunity to take steps to offset some them. For example, cleaning out a closet for charitable giving or prepaying daycare expenses for the coming year are two ways to potentially offset liabilities. Year end planning affords the opportunity to make or increase traditional IRA contributions as well.
Another way to offset all or a portion of a tax bill is the opportunity to defer income until the New Year. The advantage of deferring income, salary, and bonuses until after the first of the year is that the tax implications of that income will not be fully felt for more than a year to come. This strategy provides an opportunity to save for the taxes associated with that income.
Contact your CPA or accountant today so you will have plenty of time to review your tax situation. A meeting with your tax professional before the end of the also provides the opportunity to become familiar with tax law changes that may have an affect on the upcoming year.

Article Source:

Saturday, December 7, 2013

What Does Year-End Mean?

The year-end for a business refers to the fiscal year-end but it also relates to what needs to be done at that time.
As the fiscal year-end is usually a 12-month period the business as been operating, it can be shorter if it is the first year the company is in business; sometimes this is necessary for tax planning purposes.
Note that fiscal year-end is does NOT always coincide with the calendar year-end. It can be from July of this year to August of the next year, as long as it is a 12 month period.
In any event, at that time the business needs to be prepared to ensure their business financial records are final and complete.
In order for business taxes to be accurately calculated there needs to be:
  • proper finalizing of business transactions in the bookkeeping records
  • accounting for everything related to the business finances in a proper manner
  • ensuring reconciliations are accurate and complete
  • anything else that is needed assess corporate or business taxes.
The Bookkeeper's Essential Role
The end of the year of any business can be a very busy and hectic time. There are preparations to be made for the proper filing of the company taxes that will only be correct if the bookkeeping records throughout the year have been properly maintained and perfectly organized.
Most businesses will hire an outside tax accountant to handle their end-of-year tax filings in order to ensure it is calculated and filed in accordance with the latest income tax laws.
A good tax accountant will be current on all matters relating to business tax and will be able to obtain the most tax savings possible for the business.
Although bookkeepers are well trained professionals with a good understanding of the company's financial transactions, the expertise of taxation should fall with a professional that is exterior to the company. However, the bookkeeper is uniquely positioned to assist with the year-end and working with the tax accountant is instrumental in making sure this process runs smoothly.
Frontline Role of the Bookkeeper
At the close of the year, the bookkeeper needs to provide certain information for the tax accountant.
Usually, the tax accountant will provide a list of the information they need to properly assess the business taxes and facilitate tax planning.
Being aware of what the tax accountant requires in advance is helpful to the bookkeeper in being proactive and anticipating what information should be collected and assembled.
It also for the betterment of the business if the bookkeeper is well versed with these requirements and is familiar with the process of the filings that are being prepared.

Article Source:

Wednesday, December 4, 2013