Don’t Fall Prey to Unscrupulous Marketers!
Do you have tax debt that’s weighing you down? If the answer is yes, you may be lured by fraudsters making promises to reduce your tax debt through the IRS Offer in Compromise (OIC) program. Beware and tread lightly when you think about contacting anyone on this topic.
We’ve all heard these aggressive commercials which are extremely misleading and trap taxpayers into paying steep fees, with none of the tax relief they promise. There’s no need to throw good money after bad. We’ve all heard, “If it sounds too good to be true, it probably is.”
OIC is Legit
Make no mistake, the OIC program is a very real program that the IRS has made available for qualifying taxpayers to settle a debt for less than the entire amount originally billed. It’s a viable option for people who simply cannot pay their full tax bill. To determine if a taxpayer is eligible, the IRS will consider the taxpayer’s specific set of circumstances, their income, and equity in their assets. This program is an agreement set up directly between the IRS and the taxpayer.
The IRS generally considers an OIC for taxpayers who meet the following criteria:
Posing As a Legitimate Solution
There actually are some companies who offer authentic services to help taxpayers file a request. However, there are several firms who engage in heavy marketing to make suspicious claims that they’ll settle the taxpayer’s debt at a steep discount. Their exorbitant fees leave taxpayers in no better situation, and taxpayers actually could have entered an OIC agreement directly with the IRS without any such “help.”
In fact, the IRS states that “OIC mills make a perennial appearance on the IRS’ annual Dirty Dozen list of scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more.”
Do I Qualify for an OIC?
Not sure if you’re eligible for an OIC agreement? Talk to the professionals at Adams Accounting Solutions. We can evaluate your situation and make recommendations on whether seeking an OIC with the IRS is a viable solution for you and your unique situation.
If we determine you’re not eligible, Adams Accounting Solutions can help you set up scheduled payments to the IRS over a period of time so you can ease your mind about tax debt and legally pay your bill over time.
We can recommend other options for payment if you do not qualify for an OIC. We can assist in arranging an installment agreement with the IRS which allows you to pay off a balance gradually. There are short-term plans available (for those owing less than $100,000) giving taxpayers 180 days. Long-term plans for taxpayers who owe less than $50,000 will give taxpayers up to 72 months to make gradual payments.
Even if tax debt is keeping you up at night, don’t fall for ads or mailers that can trick you into paying your hard-earned money for services that are fraudulent and yield you absolutely no relief. Take a deep breath, give us a call, and our friendly, reassuring staff can help you sort through this trying time and get you the legal and viable solutions you need.
Going back to school is an investment in your future, so congratulations on working towards your college degree, or helping a family member achieve this goal. Education expenses have grown to record highs and if you’re experiencing sticker shock, you’re not alone. Saving money by being aware of important tax implications will help you out financially as you embark on furthering your education. Whether you’re a full-time student or a working professional returning to campus, being aware of tax credits, deductions, and benefits can help you save money.
Tax Credits
There are two tax credits worth considering. An education tax credit will help you with the cost of your college expenses by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund.
Two education credits are available
1. American Opportunity Tax Credit (AOTC)
– Available to eligible students for the first four years of higher education.
– Covers up to $2,500 of the cost of tuition, fees, and course materials.
– The credit is 100% of the first $2,000 of qualified expenses and 25% of the next $2,000.
– 40% of the credit is refundable, meaning you can get up to $1,000 back even if you owe no tax.
2. Lifetime Learning Credit (LLC):
– Ideal for graduate students or those taking courses to improve job skills.
– Offers up to $2,000 per tax return for qualified education expenses.
– There is no limit on the number of years you can claim the credit.
There are several differences and some similarities between the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You can claim these two benefits on the same return but not for the same student or the same qualified expenses. Be certain to speak with us at Adams Accounting Solutions to ensure you have the proper forms for these credits, and that you are meeting all the IRS requirements.
Deductions
1. Tuition and Fees Deduction:
This deduction allows you to reduce your taxable income by up to $4,000 for qualified education expenses. So, what are qualified education expenses?
IRS.gov states that tuition, fees, books, computers, software, supplies, and other related expenses required by the educational institution are deductible. However, room and board are not deductible.
2. Student Loan Interest Deduction
Happily, you can deduct your interest expenses on eligible student loans, with a $2,500 maximum. So, which loans are eligible?
According to IRS.gov, an eligible loan is a student loan you took out solely to pay qualified higher education expenses for you, your spouse, or your dependent.
The interest you can deduct includes both required and voluntarily prepaid interest payments. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year. The deduction is gradually reduced and eventually eliminated by phaseout when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status. This limit changes from year to year, so be sure to consult with us at Adams Accounting Solutions to understand the current law.
Additional Considerations
1. Scholarships and Grants:
– Scholarships and grants are generally tax-free if used for qualified education expenses such as tuition and fees.
– Any portion used for non-qualified expenses, like room and board, is taxable.
2. Employer Assistance Programs:
– Up to $5,250 of employer-provided educational assistance can be excluded from your taxable income.
– This applies to both undergraduate and graduate courses.
3. Education Savings Accounts (ESA) and 529 Plans:
– Contributions to an ESA or 529 Plan are not deductible, but earnings grow tax-free.
– Distributions are tax-free if used for qualified education expenses.
– Qualified expenses include tuition, fees, books, and even room and board.
Record Keeping and Filing
Don’t forget to maintain accurate records of your education-related expenses and any financial aid received. Forms needed include:
Form 1098-T: This form is provided by your educational institution, and details tuition payments received and billed.
Form 1098-E: This form is provided by your loan company, and it details interest you paid on student loans.
If this seems mind-boggling—it is. But don’t fret! The professionals at Adams Accounting Solutions are here for you. We’re just a phone call away. To help you with complex tax laws and changing rules, just contact our friendly professionals in the office to assist you in maximizing your benefits when it comes to college expenses, and to help ensure you’re complying with IRS rules.
Conclusion
Understanding the tax implications of returning to school can provide significant financial benefits. By utilizing available tax credits, deductions, and benefits, students, parents, and working professionals can ease the financial burden of further education. Stay informed, keep meticulous records, and consult with us at Adams Accounting Solutions to make the most of your educational investment.
Reference: https://www.irs.gov/credits-deductions/individuals/education-credits-aotc-llc
Deducting your vacation as a small business owner requires a careful balancing act between business and pleasure. The main stipulation to keep in mind is that any travel must be primarily for business and meticulously documented. Keep records, don’t take unnecessary risks with deductions, stay within IRS guidelines, and maintain a clear distinction between personal and business expenses to enjoy the benefits with peace of mind. Always consult with our professionals at Adams Accounting Solutions to ensure compliance with current IRS regulations and optimize your deductions with a clear conscience. We are here for you, and with due diligence, you can enjoy a break while responsibly leveraging tax benefits for your business.
Deduct Your Family Vacation? Yes, it is Possible!
You’re wondering, “is there a way I can deduct a business trip to Florida if I take my family along?” The answer is yes! If you’re a business owner and you travel to a desirable location for a conference or training, you absolutely can take the family or spouse/partner along and deduct part of your trip. The key is careful record-keeping and understanding IRS rules to be sure you’re on the up-and-up when it comes to tax laws. Following IRS rules isn’t that difficult, you just need to very carefully link your travel to legitimate business activities. The professionals at Adams Accounting Solutions have some helpful tips for staying within IRS guidelines:
Combine Business and Pleasure
Vacations can be deductible if they involve legitimate business purposes. For instance, attending a conference related to your business, meeting clients, or negotiating contracts may qualify. Document every business-related expense meticulously. Keep records of conference schedules, meeting agendas, and client meetings/communications.
The Number of Days Count
The IRS stipulates that the primary purpose of your trip should be business, not pleasure. The majority of the days should be business focused. Weekdays count as business days if they’re filled with business activities. Your travel day(s) in the car, train, bus, or airplane count as business travel day(s). Weekends, holidays, and other personal days are only considered business days if they fall between business activities with no substantial break in between.
Deductible Expenses
Certain expenses can be deducted for the business owner if they are directly related to business activities. If your spouse or family accompanies you; their expenses are, of course, NOT deductible. The only exception would be if the family members are employees of the business, and the trip is for a bona fide business purpose, such as continuing education, or client meetings. Again, documentation for each businessperson is key.
-Travel fare for business owner (or employees): airfare, trains, gasoline, and car rentals to get to the business destination. The good news is that while you cannot deduct your entire family’s airfare, if you drive, and everyone is traveling in the same car, the gasoline or rental car expense will cover everyone’s travel, whether there is one person in the car, or five.
-Lodging: Hotels or other accommodations – but only for the duration of business-related activities. If your conference ends Friday and you stay through the weekend, your hotel is obviously not deductible past the conference end date. If your entire family of five is staying in the same hotel room, the lodging is included as a deduction because the room rate is normally the same for one person or five people. If you want the kids in a separate hotel room and they’re not employees, you’re out of luck on deducting their lodging!
-Meals: Usually 50% of business-related meals can be deducted for the business traveler(s). Taking the entire family of five out for breakfast, won’t fly–only the business travelers get to deduct 50% of that meal, just use common sense!
-Transportation: Taxis, Uber, ride-shares, or other transportation linked to business purposes. If everyone fits in the same taxi, Uber, or ride share, you’re able to deduct the expense because it’s normally the same for one person as it is for five. An exception might be a bus fare where each person needs their own ticket. Just be sensible on this!
Document, Document, Document!
Everything must be documented. The IRS has been known to scrutinize deductions related to travel (especially to resorts or popular vacation spots), but if you ensure you’re keeping detailed records of your business trip, you’ll be fine. Save or digitize receipts, maintain a journal of your activities, and verify meetings with detailed emails, meeting agendas, business cards of those individuals involved, or any other record relating to your business purpose. This documentation can substantiate your business purpose and protect you in case of an audit. Many apps or accounting software solutions are available to help you track your professional expenses which will greatly simplify the process. No one wants to carry around a huge envelope of crinkled receipts. Take advantage of technology and use apps or software designed to track professional expenses to simplify your life! Seek guidance from the Adams Accounting Solutions staff when in doubt.
Avoid Red Flags
Not surprisingly, the IRS watches for red flags that may signal abuse, and trips to popular vacation destinations can seem suspicious unless clearly justified. Keep meticulous receipts when you’re traveling to Orlando, Vegas, New Orleans, or any destinations known for tourism. Offering clear evidence of your business engagements while on the trip greatly helps alleviate these concerns. Buying a princess crown for your 7-year-old daughter at Walt Disney World might raise a red flag, so you needn’t keep that receipt for tax purposes. No reason to push the limits!
Travel for Employees
If you’re covering travel expenses for employees, the same strict IRS rules apply. Only expenses directly linked to business activities can be deducted. The same requirements for documentation and primary business purpose hold. Remember, business travel for employees must be considered ordinary and necessary under IRS guidelines, not lavish or extravagant, so a pedicure or spa treatment at the hotel shouldn’t be something you consider deducting.
Education/Training Travel
Travel for continuing education that enhances your business skills or knowledge is definitely tax deductible. For example, if you travel to attend a workshop or earn a certification relevant to your field of business, those expenses are deductible, provided they meet IRS criteria for business relevance, just be sure to keep receipts, licenses or certificates earned, and dates spent in the workshop.
Careful Balancing Act
Deducting your vacation as a small business owner requires a careful balancing act between business and pleasure. The main stipulation to keep in mind is that any travel must be primarily for business and meticulously documented. Keep records, don’t take unnecessary risks with deductions, stay within IRS guidelines, and maintain a clear distinction between personal and business expenses to enjoy the benefits with peace of mind. Always consult with our professionals at Adams Accounting Solutions to ensure compliance with current IRS regulations and optimize your deductions with a clear conscience. We are here for you, and with due diligence, you can enjoy a break while responsibly leveraging tax benefits for your business.
You’re eagerly awaiting that refund from the IRS, and it seems like it’s taking too long. If your money hasn’t shown up within three to four weeks, here are some simple steps you can take to investigate what the holdup might be, whether it might be a scam, and if you should seek the help of a tax professional.
1. Use the “Where’s My Refund” feature on IRS.gov. It’s relatively painless, you just need your Social Security Number, filing status, and the dollar amount of the refund you’re due.
2. Review your tax return to be sure there are not any errors, such as a misspelling of your name, transposing numbers in your social security number, or mis-typing your bank account number or routing number. Errors such as this are easy to make, and they can wind up delaying your refund for months.
3. Check your mailbox. Any correspondence from the IRS should be opened immediately. You could have received a communication from the IRS alerting you of an issue with your return. The letter will state what you need to do to resolve it. If you don’t understand it, consult with us at Adams Accounting Solutions. We see these types of letters and notices constantly, and we can quickly identify what the communication means to you.
4. Get in touch with the IRS. If using the online “Where’s My Refund” feature isn’t helping you figure it out, you can call the IRS directly at 1 800 829 1040. Yes, you’ll have to wait on hold before you speak to someone, so be prepared to spend some time on the phone.
5. Better yet, turn it over to Adams Accounting Solutions. Sometimes you cannot unravel such a situation on your own, and the experts at Adams Accounting Solutions can help you decipher any IRS communications or notices, send in corrections in the event you have made an error, and provide overall advice on your specific situation
6. Could You Have Been Scammed?
With scams on the rise, it’s natural to think you might be the target of some sort of a rip off. Here’s what to watch for:
If you’re tired of waiting on your tax return, you don’t have to tackle it on your own. Give us a call at Adams Accounting Solutions. We can help you resolve a missing return by double checking the information that was submitted and get in touch with the IRS to quickly amend your return if necessary and ease your mind about where it is hiding.
Tax law changes….for 2020?
Just when you think you’ve got all your 2023 tax information all neatly buttoned up to pass off to your CPA, the House passed “The Tax Relief for American Families and Workers Act of 2024” by a 357 to 70 vote.
This occurred on January 31, 2024. Not exactly ideal timing since tax filing season for 2024 began on January 29. And as we all know, we’ve got until the April 15 deadline to submit our tax returns.
What Does This Wide-Ranging Change Mean for You & Your Business?
And guess what? These extensions can be applied to your former tax return(s) because the bill is retroactive in some cases all the way back to 2020!
Best Laid Plans
“Well, that’s what I get for planning ahead,” you say to yourself. Sometimes the best laid plans just don’t end up the way you intended. And, while Congress is of the mindset that this passage will provide relief and certainty to taxpaying individuals, the hassles associated with such a change which affects the 2023 tax year and earlier is noteworthy when it comes to the documentation and scrutiny of your records for 2023, and retroactive to 2020 potentially.
Yes, individuals, financial advisors and CPAs will be scrambling to dig into applicable records to take advantage of these changes for individuals and businesses alike.
Individual Taxpayers
For individuals, these retroactive tax extensions might require adjustments to tax liabilities, itemized deductions, and tax credits within the 2023 tax year and prior.
Small Businesses
For companies and LLCs, these recently passed retroactive tax extensions have far-reaching consequences for your financial reporting, cash flow management and strategic planning.
Whether you’re an individual taxpayer, or a small business, or both, get ready to roll up your sleeves, because as a taxpayer, you must carefully weed through these complexities because your tax obligations might be reduced (or elevated). If corrections are needed, planning for retirement, approaches to investments, and decisions regarding any charitable contributions can change drastically.
Is Procrastination in Your DNA?
Maybe your mind isn’t in the mood to absorb all this complex new info, or perhaps you’re too busy at work, or possibly you’re in the middle of a big project. There are all sorts of excuses we can make for putting this change on the back burner, but there’s no doubt this bill is extremely broad, and while waiting until the last minute to address how it affects you and/or your business is tempting, it’s really not in your best interest.
Adams Accounting Solutions are friendly experts who will team up with you to stay within the legal and ethical boundaries required by this last-minute decision passed by congress. As well, CPAs at Adams Accounting Solutions will watch out for what’s on the horizon as far as your tax strategies, and financial decisions. Ensure you’re compliant with applicable laws and regulations by giving us a call at 913-888-9100.
Did you complete your year with a sense that you need to begin the new one with a better routine and/or sense of organization? If so, you’re not alone, especially when it comes to organizing your home or office space. January is the perfect time to adopt new habits.
New Year/New Routine
The new year brings with it a fresh start, and many folks set goals in their personal life for everything from losing weight, keeping the house tidier, or traveling more. It’s also a good time to set goals for your business or personal office space and make it healthier, tidier, and more efficient.
Schedule Weekly Reviews
If you’re running a small business, or have a “side gig,” it’s important to review your books and income coming in and going out at least one time per week. If you only examine your books periodically, mishandling of your business earnings and expenses can easily be missed. With scheduled weekly reviews if something out of the ordinary surfaces, you can investigate the issue promptly and correct it in a timely manner.
Trust a Tax Professional
For most of us, it’s impossible to stay informed about ever-changing tax laws. First of all, it’s practically a full-time job. In addition, it can be pretty boring! Partnering with a reputable accounting firm such as Adams Accounting Solutions will help ensure you effectively leverage applicable tax deductions and credits for which you or your business might qualify, and their staff members stay abreast of all tax laws that can affect your personal life, or your company’s financial success.
Your Tax Professional Relies on You and Your Record Keeping
Make no mistake, your tax professional can only be as helpful as you allow them to be. Taking a big box full of receipts and documents to your CPA at tax time with no organization is a huge mistake. Who wants to pay an accountant’s hourly fee to simply sort your stuff before they can get to work on the real nitty gritty of income tax preparation? Stay organized, and label files to keep info easily retrievable.
Home Office Organization is Critical
When it comes to paperwork, whether it pertains to your personal life or your small business, your home office space is a vital landing spot for your paperwork. Yes, paperwork is greatly minimized now that many of us pay bills online, store files on our computer, or digitize receipts rather than keeping hard copies. Nonetheless, there are still stragglers that need to be organized and sifted through, and at year end there are lots of important tax-related documents that will surface. Even digital files can become cluttered on your laptop or desktop if not cleaned out. Why take up space on your computer with old and outdated files you no longer need?
Declutter in January
January is the perfect time to get rid of excess clutter, paper, digital files, and anything you no longer need. How big is your “I’ll get to It later” pile of paper that has mounted? How many unnecessary documents did you keep such as coupons, mailings, or printed documents you meant to read? Chances are lots of the papers in this pile are no longer even relevant to your life and can be pitched.
We’ve all saved that flyer about an event that sounds fun or interesting, and when the flyer surfaces again, the event has long since passed. Sort through and shred or pitch such items on a regular basis rather than letting the pile build up. Better yet, ask yourself whether you will REALLY go back and read it, buy tickets to it, or visit the restaurant or store to take advantage of it.
Seriously, don’t even save unnecessary papers, and your life will be easier and less cluttered. You can also think about snapping a photo with your phone, but beware, just like papers, photos can build up and clutter your phone, so be judicious when you decide to save something in the “I’ll get to it later” category.
Keep Frequently Used Files or Items Within Easy Reach
After minimizing the clutter, you can get to work giving your office space a fresh start. One of the most important rules of thumb is to place the items you use the most within easy reach. Consider file drawers in your desk or credenza, or separate bins organized by month, topic, or client (if you’re running a business). Whichever system works for you will help you categorize any needed paperwork all year long when you need to reference something, or when it’s time to file your federal and state income tax return.
Where to Store Tax Documents
When tax documents start surfacing, select a specific drawer, bin, shelf, or folder for them. Wherever you decide to keep these items, be sure you (and anyone in your home or office) know the “home location” for all such items. These are documents such as property tax receipts, W-2s, 1099 forms, year-end utility bills, the most recent investment dividend summaries, and large expenses such as medical bills or home/business improvements that might be tax deductible. Be sure these are all filed in whatever designated “home location” you choose. Pulling information for your tax professional will be immeasurably easier. Also consider, whether you make any cash or non-cash charitable contributions? Be sure to keep these in the same “home location” so you can easily tally them up for your CPA.
Adams Accounting Solutions can partner with you get your tax returns filed with ease. The staff are easy to work with and provide a useful “tax organizer questionnaire” that serves as a checklist as you gather all the necessary documentation, so nothing is missed.
If you hate accounting functions for your small business and it seems like you never have enough time to completes these types of tasks, consider outsourcing this work to Adams Accounting Solutions. Their employees are experts in tax law and can prepare 1099s or W-2s for any employees in your business. As well, Adams Accounting Solutions will maximize any applicable deductions. Maybe you never thought about keeping a mileage log for volunteer work you have done, or claiming sunscreen as a business expense if your job requires you to work outdoors. These are just a few ideas the professionals at Adams Accounting Services can help you address.
Call today or set up an appointment to explore your options.
Freelancers and consultants have it made, right? They have control of their own schedule, working from home — or anywhere else — and working only when they feel like it. They’re fully autonomous, deciding when to work and when to play. As long as they meet client deadlines, they’re good. That lifestyle is one that many people who punch a time clock (real or theoretical) envy.
But there are aspects of self-employment that aren’t so rosy. Self-employed workers have to purchase their own medical insurance. They have to manage the operational aspects of their business along with doing the work. And they have to set aside enough money to pay taxes when it’s time.
No one takes federal or state tax withholdings from a freelancer’s paycheck. That means they have to guess what they’ll earn each year and estimate their tax liability. The easiest way to manage all this is with the help of a trusted accountant who can review past years’ earnings and provide an estimate of what they’ll earn and owe for the current year. Their accountant can also set them up with estimated tax payment vouchers to help them stay on track.
Estimated taxes are something self-employed workers often aren’t that familiar with. Many look at them more as a suggestion rather than a requirement. But the reality is that the IRS expects workers to pay taxes throughout the year as money is earned. That’s why employers take money out of employees’ paychecks each pay period. That money goes to the IRS and is then reconciled at tax time the following year.
If you’re self-employed, you need to know that the IRS expects you to pay as you go, too, and that’s where estimated tax payments come into play. Estimated tax payments are made quarterly, which can be a good thing. They help you stay ahead of your tax liability and avoid a big bill at tax time. However, many freelancers, contractors, and new business owners have a hard time making estimated tax payments.
Here’s why it’s so important to keep on top of this. The IRS penalizes you for not making estimated tax payments. The penalty is calculated quarterly based on the interest rate set by the Federal Reserve. That means the penalty fluctuates from quarter to quarter and year to year. In recent years, we’ve enjoyed low interest rates that have spurred people to purchase new homes, cars, and other big-ticket items. Now, however, the landscape has changed.
With interest rates going up, the penalty for not making estimated tax payments rose to 8% on October 1, 2023. That’s a considerable increase over the low of 3% in early 2021 when interest rates hovered near zero. If interest rates continue to rise, so will the penalty for not making estimated tax payments. Industry experts expect freelancers and contract workers to be the hardest hit by this increase.
If you’re self-employed, make sure you’re keeping up with your estimated tax payments, which are due for the current tax year on April 15 (1st quarter), June 15 (2nd quarter), September 15 (3rd quarter) and January 15 of the following year (4th quarter). Your accountant can help you estimate your annual tax liability and figure out how much your estimated tax payments should be to avoid being assessed a penalty.
The professionals at Adams Accounting Solutions specialize in helping self-employed workers with all tax-related issues, including estimated tax payments. We’re here to help, whether you’re preparing your taxes or just have a tax-related question. Give us a call to schedule a consultation today. Let’s make sure you’re not hit with a hefty penalty for not paying your estimated taxes this year!
No matter how organized you think you are, it always seems like the end of the year sneaks up on you. Before you know it, it’s time to close out the books and get your tax documents in order. But what exactly does that mean?
Adams Accounting Solutions specializes in small business tax preparation in Johnson County and the Kansas City metro area. Our clients often ask when is the best time to start planning for tax day. We always recommend starting early because, despite the best intentions, life gets in the way. Projects fall apart, new employees come on board, customers who owe you money go out of business…the list of distractions is endless. Starting early on essential tasks like closing out the year and preparing for tax day ensures everything gets done on time — no matter what emergency pops up.
We’ve compiled a list to help business owners close out the year and prepare for what’s coming in April. It’s not too early to dive in. There’s no time like the present!
The first step in getting organized is knowing where everything is. If you’re planning on having a CPA do your taxes for you — and we highly recommend that — it’s critical that all your financial documentation is in one place. You’ll need any document that shows how the business did this year: cash receipts, bank and credit card statements, balance sheets, statements from third-party payment processors like PayPal and Stripe (if applicable), sales records, and payroll information. If you have a bank loan, you’ll need information on that, too, including the current balance and the amount of interest you’ve paid on the loan this year.
Part of balancing the books at year-end is knowing how much money you owe others and how much others owe you. This is the time to start reviewing accounts payable and receivable with a fine-toothed comb. If you have bills outstanding, it may make sense to pay them now, but in some cases, it may not. It’s often beneficial to carry larger expenses into the following year. A quick discussion with your accountant will help determine which step is right for you.
Once you’ve reviewed your receivables, it’s time to get on the phone and start calling. You might be able to encourage a few of your debtors to pay up before the end of the year. The more money you can collect now, the more revenue you can put toward the bottom line.
Many entrepreneurs are guilty of putting off bank account reconciliations until the last minute. By then, a year’s worth of statements has piled up, and any problems that may have arisen during the year are much more challenging to sort out. If this sounds familiar, now is the time to dive into this project. Reconcile all bank accounts and review credit card statements to ensure there were no unauthorized or mistaken purchases. If you see something that looks fishy, you still have time to sort things out before taking your documents to your accountant early next year.
A good business practice to develop is to set goals at the beginning of each year. That way, at the end of the year, you have something to measure your success by. As you pull your financial documents together, you’ll begin to get a clearer picture of how your business is doing. If you’re not where you want to be, you can examine the reasons why. When you talk with your accountant next year, discuss your findings with them. They may be able to help you adjust your goals for next year.
At Adams Accounting Solutions, we understand how much work you’ve put into getting your business off the ground. We want to help you keep it running efficiently. Part of that is putting the tax guidelines to work for you, helping you realize potential tax deductions so you keep as much of your hard-earned money as possible.
If you’re ready to start on your year-end accounting close-out, give us a call to set up an appointment. We’ll go over everything with you and help you pave the road to financial success!
Today’s digital landscape creates opportunities for would-be business owners to spread their wings. Many people have discovered the satisfaction that comes with owning their own business. Working from home (or anywhere else) is nice, too. As long as you have an idea, a laptop, and an online retail presence on Etsy, eBay, Amazon, or any other digital marketplace, you’re ready to roll.
While many online business owners start their operations with the purpose of bringing in extra money — setting it aside for that new boat, the kids’ college funds, or a dream vacation — others sell items for fun or as a hobby. Either way, it’s considered a business, and there’s enough money coming in to justify the time spent.
The reality is that many of these e-commerce neophytes go into business with little to no knowledge of tax accounting, revenue reporting, or the scope of legal and financial responsibility that comes with running a business, especially one run solely online. And that can lead to trouble. The IRS will eventually come knocking, looking for its share of the wealth.
One aspect that often catches online sellers off guard is the 1099-K form. This document has a significant impact on how online businesses manage their finances and taxes. Here’s what every online business owner needs to know about 1099-K forms and their impact on the business.
The 1099-K form is a tax document used to report electronic payments received to the IRS. These payments include debit and credit card payments, automatic bank withdrawals, and payments received through third-party entities such as PayPal, Stripe, Venmo, or other merchant payment processors. These payment platforms are responsible for sending Form 1099-K to businesses if they meet specific criteria, including a certain threshold of payment volume.
Online sellers who’ve been in business for several years and have revenue of more than $20,000 are probably familiar with Form 1099-K. It’s been in use for several years, although it’s taken a while for business owners and third-party payment platforms to fully embrace it and understand how to follow the rules around revenue reporting via Form 1099-K. Newbies in the e-commerce world — those who are selling items for fun or as a hobby — may not be as familiar with it, which means they may be in for a surprise when they file their 2023 taxes.
Form 1099-K was implemented as part of the American Rescue Plan in 2011. Tax laws changed in 2021, and the threshold for receiving Form 1099-K was lowered to $600 from the previous $20,000 or 200 items. That difference drastically impacts smaller sellers, who will now have to report their online earnings as taxable revenue.
Form 1099-K isn’t one that’s filled out and submitted to the IRS. Rather, it’s sent to online business owners by the payment processor to notify them of the revenue they’ve received electronically through the payment platform. It’s a double-check to ensure that the company’s internal records reflect the same amount. The online revenue is then reported on Schedule C when taxes are prepared and filed.
If you have an online business on Etsy, Amazon, eBay, or another digital shopping platform, it’s wise to seek the guidance of a trusted CPA or tax preparer. A certified tax professional will help keep you out of trouble, providing valuable insights and ensuring that your business is compliant with all IRS regulations, including those around online revenue..
At Adams Accounting Solutions, we deal with this kind of issue every day. We’re experts in small business tax accounting, and we’re here for our clients when they need help, answers, or someone to hold their hand. Call today to schedule a consultation. We’ll help you figure out what to do with Form 1099-K — and all your other tax forms too!
It may seem early to broach this subject, but tax season will be here before we know it. As individuals and business owners wind down the current year and start organizing financial documents and gathering receipts, they’re confronted with the age-old question: Should they hire an accountant this time or try to do their taxes themselves?
It’s a conundrum. Small business owners often have more complex tax needs than individual taxpayers. For them, it makes sense to hire someone intimately familiar with the IRS tax code. While it sometimes hurts to pay a CPA to prepare and file your taxes, it’s often better than the alternative: missing something that might leave money on the table or result in you owing hundreds of dollars in interest, fees, or penalties.
Individual taxpayers also benefit from professional services. Accountants find ways to minimize tax liability by taking full advantage of the IRS tax code, listing as many deductions as possible for the best financial outcome. On the flip side, it could make sense to prepare your taxes yourself if your situation is fairly straightforward.
One option for those who want to prepare their taxes independently is IRS Free File, an alliance between the government and several private-sector tax preparation software providers. The program has been around since 2003. In spite of that, only 2% of taxpayers use it, according to industry specialists.
IRS Free File allows taxpayers to prepare and file their federal taxes at no charge through a portal on the IRS.gov website. Behind the web page interface is a bevy of tax providers offering free online tax preparation and filing services. The Free File program has restrictions and income thresholds attached to it, so it doesn’t work for everyone. But for those who qualify, it’s a viable option.
Two types of tax help can be obtained through IRS Free File:
When first implemented, IRS Free File only provided taxpayers with free filing services for federal tax returns. However, a change in the program’s reach now extends it into 22 states and Washington D.C., allowing residents to use the program to file state tax returns in addition to federal returns. According to irs.gov, Free File state partners charge a fee for the state filing unless otherwise noted. At the time of writing, Missouri is an eligible Free File state; Kansas is not. For an updated list of states participating in the Free File program, click here.
This brings us full circle. Just because you can file your taxes for free on your own, does that mean you should?
This is a question every taxpayer has to answer for themselves. Doing your taxes on your own is a viable option for individuals with straightforward tax situations. Many user-friendly software programs and online resources help make the process relatively simple. However, if you choose this option, you need to have a clear understanding of tax laws and regulations to ensure accuracy in your filing and avoid potential penalties or audits.
Conversely, enlisting the aid of a tax preparation specialist is advantageous if you have more complex investments, portfolios, or business interests. Tax professionals offer valuable insights you don’t get when working alone. They identify potential deductions and credits often overlooked and provide guidance on tax planning strategies to help you meet future financial goals. While this option costs more than doing your taxes on your own, the benefits greatly outweigh the cost.
If you’re on the fence about whether to get help preparing and filing your taxes this year or not, give us a call at Adams Accounting Solutions. We specialize in all aspects of tax preparation for individuals and small businesses. We can walk you through the pros and cons and help you make the best decision for your situation. Give us a call today!
Richard Adams is a graduate of Benedictine College in Atchison, Kansas, with dual majors in Accounting and Business Administration. He is also a graduate of Wentworth Military Academy in Lexington, Missouri.