Some people are born procrastinators. No matter how much time they’re given to complete a project, they always run right down to the deadline, creating stress for themselves and for those who are depending on the finished product.
July 15 – tax day for 2020 – is right around the corner, and procrastinators everywhere are now scrambling to get their tax documents to their accountants. If your accountant is a good one, he or she is probably already booked up and won’t be able to get your taxes done by the July 15 deadline. However, that doesn’t mean you’re off the hook. Your accountant can easily file an extension for you that buys you the time you (and your accountant) need to get your taxes filed and do a thorough job on them.
Filing an extension gives you more time in which to file your tax return. If you’re unable to get your taxes filed by the July 15 deadline, filing an extension gives you until October 15, 2020, to get them done. However, be aware that filing an extension does not extend the date by which you have to pay. Taxes owed to the IRS are still due on July 15, so if you’re filing an extension, you’ll need to estimate the amount of tax owed and send that payment on or before July 15.
The IRS has resources to help individual taxpayers file an extension here. Businesses should contact an accountant for help in filing an extension.
Many businesses are struggling because of the COVID-19 pandemic. If you can’t afford to pay your taxes by July 15, you need to make a payment arrangement with the IRS. You’ll still be subject to interest and late-payment penalties, but they’ll be less if you have an installment agreement in place. The most important thing to keep in mind is that paying something is always better than paying nothing at all.
Adams Accounting Solutions specializes in tax preparation for both small businesses and individuals. If you need help filing an extension before July 15, give us a call. We can also help with setting up a tax payment plan with the IRS. Don’t put off doing your taxes any longer. Give us a call today at 913-888-9100 to schedule an appointment.
Many homeowners don’t consider the tax impacts of selling a home prior to the sale. They’re often more concerned about getting a good price for the home, making a profit, and ending up with enough money to buy the new home they have their eye on. And this is all good until it’s time to do the taxes. That’s when most people learn about the capital gains tax – what it is and why they may have to pay it. And that’s not a pleasant surprise.
A capital gain is what happens when you sell an asset for more than you originally paid for it. The IRS assesses taxes on this additional amount because they consider it a source of income. A capital gains tax can apply not only to homes but to investments such as stocks or bonds and other tangible assets such as cars, boats, etc.
There are two types of capital gains that the IRS is concerned with:
Most homes fall into the long-term capital gains category.
The IRS allows taxpayers to exclude certain capital gains from taxes if they meet the specified criteria. Here’s how it works.
If you’ve lived in the house as your principal residence for two of the past five years prior to the sale, you’re eligible for an exemption of up to $250,000 in capital gains if you’re single or $500,000 in capital gains if you’re married filing jointly. The two years do not have to be consecutive, but the home does have to be your primary residence for those two years.
If you’ve owned the property for less than two years, the capital gains tax exemption probably doesn’t apply, and you’ll have to pay taxes on the money you make on the sale over and above the original purchase price. There are other ways to get part of your profit to be considered tax-free, however. These include a change in employment status, change in health status, military deployment, and others. Talk to your accountant if you have questions about your status.
Another note: The exemption on capital gains does not apply to rental properties. If you intend to sell a rental property and want to minimize the tax implications of the sale, you need to convert the property to your primary residence for two years first. Then you can sell it and take advantage of the capital gains tax exemption.
If you’re contemplating the sale of a property, contact Adams Accounting Solutions first to talk through the tax ramifications – before you move forward with the sale. We can help you determine the best course of action and help you get the most from the sale of your home. Give us a call at 913-888-9100 for more information or to schedule an appointment.
Although no one is comfortable with the COVID-19 pandemic that we’ve all been experiencing, procrastinators everywhere breathed a collective sigh of relief when the IRS extended the federal tax deadline from April 15 to July 15 this year. Business owners now have more time to get their records together and get them to their accountants. Many taxpayers will hold off on filing their taxes until the very last minute, midnight on July 15.
However, there are several benefits to filing your taxes now instead of waiting until the last minute.
Businesses that wait until the last minute to file taxes this year may be missing out on some benefits. Some are obvious, and some not as much so. But give these points some consideration before you make the final decision.
This is one of the obvious ones and the most significant. Why wait any longer to get money back than you have to? The sooner you file, the closer you’ll be to your refund. According to statistics from the IRS, about 72% of tax filers received a refund last year, averaging around $3,000. Given the current economic climate for most small businesses, having these funds sooner than later could give your financial situation a substantial and much-needed boost.
Many small businesses hold off on the tax preparation process because they assume they’ll owe the IRS money. But often, by the time they take into account any tax deductions and tax credits that they’re eligible for, they end up getting a refund instead. This is always a pleasant surprise. If you’re a procrastinator, you won’t know the real score until you get your tax documents together and get them to your accountant.
When you do anything in a rush, it’s common to get a little sloppy. Tax returns are no exception. When it comes to doing your taxes, the last thing you want to do is rush through them, and then find out you’ve missed something important. This error may cost you not only the time it takes to revise the tax return, but money as well, if the omission results in penalties of some kind. Get your taxes done now while there’s still plenty of time to do them correctly and avoid costly mistakes.
At Adams Accounting Solutions, we understand that getting your taxes done isn’t your favorite thing to do. But we do want you to get them done so that you get all the benefits of filing early. We specialize in accounting for small businesses, and we’ll get your taxes prepared and filed for you as quickly as possible. Give us a call for more information or to schedule an appointment.
The coronavirus pandemic is providing the opportunity for workers to contemplate their current business and income situation. Many people have either lost jobs or are experiencing extreme changes in their daily work lives. These changes are forcing them to think about whether they’re happy and fulfilled doing what they do for a living. The answer, for some, is no. These are the people searching for other options, the ones who may be thinking about starting their own business.
But is this a good time to start a new business? It turns out that the answer may be yes. According to an article in Forbes magazine, Uber, Slack, Square, WhatsApp, and Instagram were all started on the back end of the last recession. Times of crisis often present new opportunities as consumer needs evolve outside the status quo. Those who spot these evolving needs and take action to fill them are the ones who may be successful transitioning into small business ownership.
There are a few things to keep in mind, though, when starting a new business, especially in the middle of a pandemic. Consider these scenarios.
Before starting a business, make sure you know your market potential. The current market probably won’t last. Here’s an example: Many consumers are buying groceries online because they don’t feel comfortable going to grocery stores. That doesn’t mean it’s a good time to launch a grocery delivery business. It’s likely that once this pandemic passes, most people will go back to shopping in grocery stores.
If you’re looking for a temporary or part-time business, then satisfying the immediate needs of consumers may be the right choice. But if you’re planning for the long-term, make sure your product or service will transition through the pandemic and remain relevant once the world returns to its new normal.
Something else to keep in mind is that as companies resume operations and people get comfortable going back out on the streets, many will do things differently than in the past. Smaller restaurants may decide to stick with only drive-thru and carry-out options, saving money by operating with a smaller staff. Businesses may realize they no longer need high-priced office space because their employees worked from home responsibly and productively during the crisis. Think through your business model and make sure it will make sense in the new world.
This pandemic may have shown you just how shaky your financial position is. Many workers have been furloughed or let go, proving that no matter how secure you think your employment situation is, it can always change. Regardless of your current income situation, you may still be able to start a new business. There are financial options available to help fledgling entrepreneurs get off to a solid start. The Small Business Administration offers many resources and is a great place to start when you’re ready to get serious about your new enterprise.
One task that’s best handled sooner than later when starting a new business is setting up accounting practices. Adams Accounting Solutions specializes in helping small businesses get started on the right foot. It’s much easier to track income and expenses if there’s a system already in place. We’ll help with that, and we’ll answer any other questions about starting a new business. Give us a call at 913-888-9100.
You’re probably aware that the federal government is handing out money in the form of an Economic Impact Payment (EIP). You may even have received yours by now. That’s the good news. For many, though, this “free” money poses a risk. Swindlers are opportunists, and where there’s money, there’s the chance for a scam. That means some recipients of the EIP may unwittingly pass off their funds to a fraudster if they don’t know what to watch for.
The EIP is part of the government’s CARES Act. The intent is to provide financial relief for eligible individuals who have been impacted by the COVID-19 pandemic. This includes all U.S. citizens and U.S. resident aliens who have a work-eligible Social Security number and meet the income eligibility requirements as noted on the IRS website at irs.gov. In most instances, these funds will be direct-deposited into the taxpayer’s bank account on record at the IRS.
For some, however, that’s not an option. Individuals who have typically received a tax refund in the form of a check will also receive the EIP in check form. And here’s where the trouble starts.
Scammers are always looking for ways to get unsuspecting individuals to hand over their money. Or their personal information, at a minimum. They may do this through a phone call requesting that the check be signed over to them. They may also contact these people by email and try to get them to “verify” their tax filing information, informing them that they won’t get their money until they’ve taken this step. In reality, these hucksters are searching for personal information that can later be used to file a false tax return in an identity theft scheme.
Keep these points in mind to protect yourself from scammers.
If someone contacts you about your EIP check and you’re wondering whether it’s legitimate, give the IRS a call and explain the situation. They have people working around the clock to bring scammers to justice. If you can’t get through to the IRS, call Adams Accounting Solutions for help in determining whether you’ve been approached by a scammer or not. It’s our job to help keep clients educated and safe when it comes to their financial health. You can reach us at 913-888-9100.
Updated Monday, April 27, 2020.
Many businesses throughout the world have been negatively impacted by the COVID-19 outbreak and the resulting rules and restrictions around social distancing. Regardless of the size of your business, it can be difficult to weather an unexpected and unprecedented storm such as this one. Fortunately, there are several government-sponsored programs in place now to help small business owners get through these trying times.
It can be challenging to sift through the media to figure out which program might work for you. Here’s a quick run-down of the new temporary relief programs offered by the Small Business Administration. These programs are designed to help small businesses retain workers, keep bills paid, and keep the business running during this time of closed doors and plunging revenues.
The SBA has several traditional funding programs available to encourage small business start-ups and to assist small business owners in the growth and development of their businesses. But with the establishment of the CARES Act, several new temporary programs have been established to help companies survive in the wake of COVID-19. These temporary programs include the following:
This loan program helps business owners keep their workforce employed during the COVID-19 crisis. Under this program, a business may apply for a loan through an existing SBA 7(a) lender. The SBA will forgive the loan if all employees stay on the payroll for eight weeks, and the loan money is used for payroll, rent, mortgage interest, or utilities.
As of Monday, April 27, 2020, the SBA is accepting new applications for this program again.
The SBA’s EIDL program offers up to $2M in low-interest-rate loans to businesses suffering catastrophic losses due to COVID-19. This program is administered on a state-by-state basis and is available in all states. However, new applications are not being accepted at this time due to funding appropriation limitations.
This EIDL advance program provides up to $10,000 of financial relief to businesses that are currently experiencing revenue challenges due to the COVID-19 situation. This loan does not have to be repaid. However, at the time of this writing, the SBA is not accepting new applications for this program based on funding limitations. Those who have already submitted an application for this program will continue to be processed on a first-come, first-served basis.
This loan allows small businesses that already have a relationship with an SBA Express Lender to access up to $25,000 in assistance quickly. This assistance can be used to help keep the business running in the face of revenue losses; it can also be used to bridge the gap when applying for an EIDL advance. This loan will be repaid in full or in part by the proceeds from the EIDL advance.
The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for six months. In addition, it will automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued before September 27, 2020. Also, current SBA-serviced Disaster (Home and Business) Loan holders will benefit from deferred payments through December 31, 2020, as long as their disaster loan was in regular servicing as of March 1, 2020.
This information will be updated as more information becomes available. In the meantime, before applying for any relief program, talk with a certified accountant for help in figuring out which program is the most beneficial for your business.
Adams Accounting Solutions can help guide you through the maze of SBA programs currently available and answer questions about the tax implications of these programs or other COVID-19-related issues. Give us a call at 913-888-9100.
By now, you’re probably aware of the extension of the tax filing deadline to July 15, 2020. It’s big news these days since it’s something the IRS has never done before. Let’s be clear about one thing here before we go any further. This isn’t the same kind of filing extension you’d use if you needed extra time to get your taxes done. This extension is automatic and applies to everyone. You do not need to do anything to qualify for it or take advantage of it.
For those of you who are breathing a sigh of relief, don’t be too hasty. If you make estimated tax payments throughout the year, this deadline extension will have interesting ramifications for you.
Typically your first-quarter estimated tax payment is due on April 15. Now, because of the filing extension, it will be due July 15. However, your second-quarter estimated tax payment is still June 15, meaning your “second” payment is due before the first one is. None of the other deadlines for estimated tax payments have been extended.
This presents a couple of issues.
This is going to get a little confusing. Working with an experienced accounting firm is one of the best ways to keep all this straight.
For those who are wondering, the answer is yes. You can still pay your taxes by April 15 and be done with the process. In fact, it’s a really good idea to do that because the chances are good that the IRS will be overburdened with tax returns coming in on July 15. There’s no reason to wait until that date to file if you have your documents in order.
If you’re expecting a refund, it’s especially important that you go ahead and file by April 15. You’ll get your refund much faster. And why would you want to wait any longer for that than necessary?
Here at Adams Accounting Solutions, we’re still open for business and are taking all the necessary precautions to keep our clients and ourselves safe and healthy. If you have questions about estimated tax payments, the tax filing deadline, or anything else tax-related, give us a call at 913-888-9100. We’ll answer your questions and help you sort out the confusion.
In an unprecedented move, the U.S. Treasury Secretary announced last week that the federal income tax filing deadline for 2019 has been extended to July 15, 2020. This extension gives all taxpayers and businesses additional time to file and make payments for 2019 without incurring interest or penalties.
This extension is precipitated by the current state of the COVID-19 outbreak and the government’s efforts to help lessen the economic impacts of the situation. The filing extension gives businesses and taxpayers the time they need to recover from the economic effects of the outbreak once the crisis has passed, and the economy has once again stabilized.
The extended deadline of July 15 applies to the following for the 2019 tax year:
Taxpayers may still file for a six-month extension to file returns if needed, but the extension must be in by July 15.
Yes. Both Kansas and Missouri have followed the federal government’s lead and have extended state tax filing and payment dates to July 15, 2020.
It’s always a good idea to file your taxes as early as possible. If you have your paperwork together and are ready to file your 2019 taxes by April 15, that’s still preferable. Filing early allows the IRS to spread out the processing of income tax returns, and if you’re due a refund, you may get it more quickly than if you wait until the July 15 deadline. Filing by April 15 (or sooner than July 15) also gets this task off your plate so you can focus on other things.
Adams Accounting Solutions is up-to-date on the latest tax filing changes at both the federal and state levels. If you have questions about filing your income taxes or need help doing so, give us a call at 913-888-9100.
For many small businesses, the thought of getting audited by the IRS is terrifying. The mere notion of having to sit down with an auditor and justify every single expenditure and account for every penny of revenue is exhausting – even if they’ve kept meticulous records.
Some businesses manage to go through life never having the “pleasure” of meeting IRS auditors. Maybe they know something you don’t.
There are several things that could trip an audit, and business owners would be wise to stay on top of these to help decrease their chances of getting audited. Here are a few red flags to be aware of.
If the IRS sees that you’ve reported net losses year over year for several years in a row, they’ll look twice at what you’re doing. Reporting net losses in more than two of the past five years is a red flag. Sole proprietors are at more of an audit risk here than other types of small businesses because sole proprietors often commingle business and personal funds. To reduce your risk of an audit, revisit both your income and your deductions. Make sure the deductions are reasonable and are supported by receipts or other documentation.
Any activity that draws the attention of the IRS increases your chance of being audited. Filing late certainly falls in this category. Make sure you file tax returns on time every year, even if that means you have to start the process on January 1.
Claiming 100% business use of a vehicle is another red flag. When deducting the business use of a vehicle, you must claim either the actual expense or the IRS standard mileage deduction (currently $0.58 per mile). Pay attention to where you’re driving and for what purpose, and document each trip carefully, including the date, the mileage, and the purpose of the trip.
Small business owners must pay themselves and their employees reasonable salaries for the work they perform. Salaries that seem out of line for the industry or the specific type of work being done may trigger an audit. This issue is often compounded when employers offer employees stock ownership in the company. Getting familiar with average salaries in your industry can help you avoid this red flag.
Small business owners should give some thought to the items they claim as business expenses. Too many deductions, or too many in any one category, may trigger the IRS’s curiosity. IRS guidance states that an expense must be “ordinary and necessary” to qualify as a deduction. Compare year-over-year deductions to make sure that everything is consistent. If you see something that jumps out, chances are good that the IRS will, too.
There are other red flags to watch out for besides the ones mentioned above. Small business owners have enough on their plates without having to take the time for an audit. If you need help getting your taxes together, give Adams Accounting Solutions a call. They’ll help you sort through your taxes and help you avoid the obvious red flags.
Back in November, we talked a little bit about using RMDs – required minimum distributions from your qualified retirement account – to decrease your tax liability by using them as charitable contributions. As of January 1, 2020, The SECURE Act went into effect, changing much that’s associated with RMDs. While The SECURE Act didn’t include any direct changes to the way charitable contributions from RMDs are handled, there are some impacts you need to know about.
Prior to January 1, 2020, qualified charitable contributions (QCDs) were allowed to IRA owners who were 70 ½ or older who wanted to donate up to $100,000 annually to a qualified non-profit organization. The donation went directly from the IRA account to the charitable organization. This donation then counted as fulfilling part of the annual RMD requirement for the owner of the IRA. The contribution was excluded from taxable income, reducing the account owner’s tax liability for that year.
The SECURE Act, which went into effect on January 1, 2020, changed the age at which RMDs must be withdrawn. The magic age is now 72, giving older workers more time to accumulate savings in their retirement accounts and allowing more time for their investments to grow before RMDs kick in. Here are the impacts you need to be aware of for 2020:
Taxes can be confusing, and for some, The SECURE Act has made them even more so. Adams Accounting is well-versed on all the changes associated with The SECURE Act. Call today with any questions you have about tax implications as a result of this new legislation.
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.