Sunday, March 30, 2014

Small Business Tax Tips to Maximize Your Tax Return

As millions of small business owners get ready to file their taxes, they will be searching for exemptions that might be possible for their business. Luckily, there are many exemptions and credits that owners can take advantage of. By writing off certain expenses, a business owner can significantly reduce their tax burden and put the extra money towards growing their enterprise.

First off, you must understand the difference between a credit and a write off. A credit is a dollar for dollar deduction from your taxable income. An exemption will qualify for only a percentage. Following is some useful small business tax tips that you can apply to help you maximize your tax refund.

Auto repairs and mileage (1:20) --
Anyone in business has expenses relating to using a car. Unless your job is done from 100% cyberspace, you have to leave the house to meet with clients, network and pick up supplies. If your job is significantly sales oriented, this mileage can really add up. You can use a standard rate of 55.5 cents per business driven mile. That is not all though. If you use a newer vehicle, you can write off the additional depreciation related to your business expenses. Of course, if you use the car for both business and pleasure, you are only allowed to write off business miles.

New business exemption (2:28) --
If you are a starting up a small business you are allowed to deduct up to $5000 for the first year that you are in business. This deduction is for things like supplies, utilities and repairs. This is for start ups only and only applies to the first year of your new business. You can either take the $5000 in a lump deduction, or you must deduct it in equal amounts over a period of 5 years.

Bad Debts (3:39) --
If a customer stiffs you over a certain amount, you can claim it as bad debt and write it off. This bad debt deduction is only for products and is not for services.

Interest (3:53) --
Most businesses do not start up without a little bit of financing. If you have a loan or credit card that you use, the interest on loans are completely tax deductible. Keep all your receipts in the event you get audited, so you can prove the charges were business related.

Advertising and Promotions (4:54) --
Of course, this means big things like commercials, but it also means small things like business cards and stationary. If the item is used to promote your business, then it is tax deductible. The expenses of networking, like attending conferences and taking clients out to lunch are also deductible. If you are doing it to grow your business, then it is a deductible expense.

If you started a new business and are getting ready to file your small business tax, your best bet is to talk to a CPA. There are virtually thousands of credits and exemptions that can be claimed for a new business. A CPA will be familiar with those credits and exemptions, so they will be able to maximize your refund. In addition, they will be able to tell you if certain things aren't allowed, of if your claiming expenses that are too high, and they will help you avoid the headache of an audit.

Thursday, March 27, 2014

Received a Letter from the IRS?

The IRS sends letters to many taxpayers throughout the year. Watch this video to find out what to do if a letter arrives in your mailbox.

Tuesday, March 18, 2014

Tax Deductions - What Can I Deduct On My Taxes?

This is a question I'm sure we have all asked at one point or another. As a matter of fact I used to ask that same question every stink' in time tax season came around. But you know what? I've finally answered it. So, without further a due a give you, tax deductions for the money saver!
What Can I Deduct?
Business Expenses - If you're a small business owner, self-employed, or even a private contractor, these deductions can be super powerful.
1. The first thing you need to do is deduct your transportation costs. Let's use an example to explain this. Let's say that I'm a cable repairman and on average I drive at least 50 miles a day. Well, guess what? You get to deduct your gasoline expenses as a tax deduction. And not only that, but you can also deduct the expenses incurred for your vehicle's maintenance.
2. Another powerful tax deduction is that of deducting your office supplies and equipment. This includes pencils, pens, paper, log books, filing cabinets, computers, printers, ink, and yes even tools. So, if you're a "cable repairman" that means things like wire stripers, electrical type, signal meters, screwdrivers, etc.
Home Owners - These deductions can offer major relief for most Americans.
1. I know this is going to seem like an obvious tax deduction, but you'd be surprised to know that some people forget to take advantage of it. And that is to deduct the interest on your home mortgage.
2. Here's one that's unique. You can receive a tax deduction for improvements that are made to your home. Things like adding vinyl siding, certain landscape improvements, or even security systems. But remember, these improvements have to add value to your home.
College Students - These will make you really happy.
1. This tax deduction called the "Life Learning Tax Credit," is available to all students who are taking at least one class from an accredited school. Students who qualify can receive credit for 20% of the first $10,000 they spend on educational expenses. The maximum amount one can receive is $2,000.
NOTE: Eligibility requires that single filers must have an adjusted gross income of less than $52,000 and joint filers must make less than $105,000.
2. In most states students can receive tax deductions for their semester and/or yearly tuition. So, if you love to learn this can be a very helpful deduction.

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Tuesday, March 11, 2014

Tax Refunds: How Do They Work?

The best part about filing your taxes is getting the tax refund check! Chances are, you have been paying your taxes directly, or your employer has been withholding tax dollars from your paychecks. Many individuals overpay on their taxes, so they quickly file their taxes to get their tax refunds and soon as possible.
How do tax refunds work?
Your employer withholds some of money from your paycheck, based on a formula and the information you provided on your W4 when you got hired. This withheld amount is applied towards your tax payment to the IRS.
Because the formula is only based on the allowances you showed on your W4 and of your paycheck, it doesn't take other factors of your life into consideration. For example, hospital expenses, tuition payments, and childcare expenses aren't considered.
When you file your taxes, you have the opportunity to claim these expenses as deductions. A deduction reduces your overall income. Therefore, you owe less in taxes and are qualified for tax refunds.
Because you pay taxes to both the federal government and to the state, you might receive two tax refunds. The amount will depend on how much you have overpaid throughout the year. To make sure you receive both tax refunds, you will have to file your taxes with both the federal government and the state government.
How do I get my tax refunds?
To get your tax refunds, you have to file your tax returns. You can do this on your own or by hiring a tax accountant or specialist. You must also make the deadline, which is usually in April, or file for an extension. You can find more information on these topics at the IRS website.
Most individuals opt to file taxes on their own to save from having to pay professional fees to tax specialists. Thanks to the Internet, almost anyone can easily file their taxes online! There are many software and program choices available online.
You will need your W2's or 1099's, and other documents to file your taxes. Once you have these documents, you can use online tax filing programs to plug in your information. Tax filing programs are easy to use, with clear instructions and instant help. The program will guide you through each step, and will even help you find deductions to maximize your deductions and refund checks!
Where do I get my tax refunds?
You will usually receive your tax refund checks in the mail within three weeks. When you file your taxes online, you can also choose to have your tax refunds directly deposited into your bank account. All you need is your bank account and routing numbers, which you can easily locate at the bottom of your personal check. When you choose the direct deposit option, you'll receive your check in half the time.
The most important thing to remember about tax refunds is that you have to file to receive them. So save all your receipts and documents for deductions, and get your tax returns in by April - your money is waiting!

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Saturday, March 8, 2014

Now That Tax Season Is Upon Us, Can I Lose My Income Tax Refund in a Bankruptcy Filing?

When someone makes a decision to file bankruptcy, timing is everything. After the new year begins many people have buyer's remorse from their holiday spending frenzy and decide they need to file bankruptcy for their New Year's resolution. This happens just about every year after reality sets in and there just isn't enough money to make ends meet. What these people don't think about is tax season comes quickly after the new year and those that rely on their tax return as pennies from heaven will usually not think about it before filing bankruptcy. That's why it's a good idea to cover all bases and ask the question, can I lose my income tax refund and a bankruptcy filing?
The simple answer to that question is yes. That's why it's important to have a bankruptcy attorney help the individual file. A bankruptcy attorney will know when to time filing the petition to protect their income tax refund if necessary. Any income becomes part of the bankruptcy estate when filing for bankruptcy. In fact, the trustee will usually look back six months and monies received during this time will be considered income. Even worse, a big fat check from the government that is unprotected by bankruptcy exemption laws is fair game for the bankruptcy trustee to be used to pay back creditors. When filing Chapter 7, the bankruptcy attorney will look at all the cash, savings and any other assets that could be easily liquidated and protect those using bankruptcy exemption laws. Where there is a problem is when an individual doesn't think about an income tax refund that's on its way from the federal or state government and the bankruptcy trustee finds it. If the attorney has no knowledge of it, most likely it will be left unprotected and be gobbled up.
This is why it is really important to make sure that an individual has an attorney that they trust and feel comfortable sharing intimate financial details. Holding back is not an option. Trying to hide a credit card or some property on the side will only end up disastrous in a bankruptcy filing. In this highly technology driven world bankruptcy trustees have a lot of tools in their bag of tricks to get information on the individual that is filing bankruptcy. The last thing an individual wants to hear at the 341 meeting is that the trustee found some property or income that was not disclosed. The attorney will have egg on their face as well as the debtor and the digging will begin.
Just because someone is planning on getting money back on their taxes, doesn't mean they still shouldn't file bankruptcy if it's absolutely necessary. Most states allow for generous exemptions to protect a fair amount of property including a wild-card exemption that can be used for anything, including an income tax refund check. As the economy gets tighter, most people count on this annual refund as a sort of mad money or for the frugal, just a way to be a little more comfortable for a few months. The amount of these checks in the next few years will probably diminish as the Affordable Care Act comes into law. It will cost every American more money to help pay for healthcare leaving less to be returned at the end of the year. The bottom line is, if someone needs to file bankruptcy, then file. They should talk to a bankruptcy attorney and be totally honest about any possible windfalls that might be in their future so the attorney can plan accordingly and even hold off on filing the petition if necessary.

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Tuesday, March 4, 2014

Saturday, March 1, 2014

How to Survive Tax Season

Tax season is a trying time of year for anyone. For the small business owner, this season can seem truly overwhelming. Attempting to make headway in the mountains of forms, decide what needs to be filed, maximize deductions and ensure that everything is properly filled out present unique challenges. Many small business owners are also key employees, with no time to spare to dedicate to these extra tasks. If you own a small business, you may find yourself working on taxes late at night, slamming coffee and trying to keep your eyes focused. Fortunately, there is help. Provided here is the small business owner's guide on how to survive tax season.
Learn How To Survive Tax Season With Preparation
As with most things in life, tax season is much easier to survive when proper preparations have been made. The first step to success is to start earlier in the year and keep good books. Computerizing your bookkeeping is a major step towards proper preparation. Bookkeeping software such as QuickBooks allows you to input transactions as they happen rather than allowing your records to become incomplete. Combine your software with an excellent filing system to ensure that all receipts are at your fingertips. A virtual assistant company can help you get started.
Learn How To Survive Tax Season With Routine
The best software and filing systems in the world will not help if they are not properly utilized. The second step to success during tax season is to be disciplined. Develop a daily routine that includes managing your finances. Many business owners find that tacking on as little as 30 minutes per day for financial tasks makes recordkeeping flow. If you do not have the time to spare or are uncomfortable with numbers, consider outsourcing this work. You can contract a virtual assistant company for as many or as few hours as you need.
Learning These Skills Will Make Tax Time Easier
If you have followed the above steps, you will be ahead of the game at tax time. Nevertheless, do not allow yourself to procrastinate until the last minute. Getting started early will give you time to search carefully through your records and ensure that your paperwork is properly completed.
Consider hiring extra help during the tax season. Again, virtual assistants can help here, even just to help manage the regular workflow while you're working an accountant to navigate your taxes. Be kind to yourself. Expect tax season to be a trying time and do not take on too many new projects. Look out for your employees as well. Tax time is difficult for everyone. Although tax time is frustrating, there is no need to dread it. Prepare yourself well throughout the year and maintain discipline and you will be ready. Tax season might not be fun but with some discipline throughout the year, you can make it quick and painless.

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