Financial Services for Businesses and Individuals

Select Page

Newsletter

Winter 2017 Newsletter

Publish Date: 01-15-2017

3 Can't Miss Tax Deductions For Self-Employed People

If you’re a self-employed individual, you may be wondering what tax deductions apply to you. Being self-employed also means that you may have a lot of expenses to handle for yourself and your business. It’s important to understand and leverage the deductions associated with these expenses as a self-employed individual.

Here are 3 tax deductions for self-employed people that you cannot miss:

1. Self-Employment Tax Deduction

While employed individuals' wages are subject to FICA (Federal Insurance Contribution Taxes) taxes, including Social Security and Medicare, self-employed people are subject to the corresponding SECA (Self-Employment Contributions Act) taxes. However, the difference between the two is that while FICA taxes are shared by both the employer and the employee, both portions of the SECA taxes are handled by the self-employed individual.

The good news is that self-employed individuals can claim the portion of the self-employment tax equivalent to what an employer would pay as a deduction.

2. Self-Employed Health Insurance Deduction

As a self-employed individual, you may be able to deduct your health insurance costs, provided you have reported a net profit on your taxes and your business has an insurance plan under it. You may also be able to deduct the costs of your employees’ health premiums as applicable.

Keep in mind that this doesn’t prevent you from claiming your other medical costs, granted you itemize your expenses.

3. Retirement Savings Deductions

As long as you contribute to a Simplified Employee Pension (SEP) plan, qualified plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, you may be able to deduct applicable retirement contributions. You can also deduct retirement plan contributions you make for your employees.

There are a number of rules and limits that apply to retirement savings deductions, so make sure to research these or seek advice on them.

Overall, if your expenses as a self-employed individual are for business use, and are also ordinary and necessary, they may be eligible for a tax deduction.


3 Effects of the New Revenue Recognition Standards You Should Know

The recent changes to revenue recognition accounting (ASC 606) have the potential to impact every aspect of businesses relating to revenue. This affects a company’s financial results and debt compliance, all the way to executive compensation.

Many organizations have already started implementing these new standards, which are turning out to be more complex and time-consuming than expected. Among the many areas affected by this change, here are the main areas to take into account:

1. IT Systems: According the new revenue recognition standards, some data that may not currently be required to be collected or aggregated will now be required. Among these, are contract start and end dates, as well as material rights as performance obligations.

This will create a need for system modifications, which in turn will need to be designed, developed and tested. Such system changes will require adequate preparation and updates both in the short and long-term.

2. Legal contracts: Per the new revenue recognition standards, there’s an assumption that customer contracts should contain elements such as enforcement, pricing and provisions for termination.

As such, companies’ legal departments may need to adjust and implement its typical contract terms. They will also need to revise existing contracts to determine any negative impact on revenue as a result of the new standards’ application.

3. Compensation: The timing effects of the new revenue recognition standards can have a significant impact on executive bonuses, sales commissions or any other form of compensation. In order to address this, companies may have to re-design their compensation programs.

Overall, many companies will face the challenges that come with the new revenue standards. The most important is to get started on the path of this new standard’s implementation sooner than later.


3 Tax-Smart Ways to Withdraw from a 529 Plan

A great way to save for college is by investing in a 529 plan. It provides you with tax-free investment growth as well as applicable withdrawals for qualified expenses. However, getting money out of a 529 plan doesn’t come without challenges.

Here are a few tips to follow when taking money out of a 529 plan:

1. Mind your calendar

While you can take money out of a 529 plan at any time during the year, you must remember that any amount of money you withdraw must be equal to or less than the college expenses incurred during the year. As a result, you may want to schedule your withdrawals accordingly.

You also may want to keep in mind that you could be slapped with a 10% penalty plus income taxes on a portion or all of the excess you withdraw in a given year.

2. Include financial aid funds

Financial aid, such as grants or scholarships, reduce the amount of your qualified higher education expenses. Taking these into account will help you make less needless withdrawals. In case you didn’t take these into account and withdrew too much from your 529 plan, you may consider use the excess funds for tuition prepayment or other educational expenses.

3. Take advantage of tax credits

Similarly, educational tax credits and deductions could also help you reduce what you withdraw out of your 529 plan. If you qualify for the American Opportunity Credit, for instance, you may be able to save up to $2,500 on your tax bill. As a result, you may want to limit the tuition amount you pay out of your 529 plan.

Other ways to maximize your 529 Plan withdrawals include coordinating with other family members who have set up similar plans for the same recipient, as well as making the withdrawal checks payable to the recipient.


3 Things to Know About the Equifax Data Breach

Earlier this year, Equifax reported some news that had almost half of the country, or about 143 million people, concerned about their financial security. The reported data breach news meant that the affected people may have had their personal and financial information compromised.

According to Equifax’s report of this massive cybersecurity breach, the data accessed may have included people’s birth dates, Social Security numbers and names. Credit card numbers, as well as license numbers, may also have been included in the breach.

Here’s what you need to know about how this cybersecurity threat affects you and your taxes:

1. You may not have been directly affected

If you haven’t already, you may want to verify that you have been affected. You can visit www.equifaxsecurity2017.com to check if you have been impacted. If you have, you may be able to sign up for identity theft protection as well as for credit monitoring. You may also call Equifax directly at 1.866.447.7559.

2. You are protected by the IRS

While it may be upsetting that your personal and financial information may have been fraudulently accessed and/or used, the IRS provides ways to exercise caution with our financial information. The IRS website lists frequent scams used by cyber thieves to steal your identity. In case of cyber theft, there are also policies in place to use IRS support to remedy these.

3. Remember to always protect your information

Massive cybersecurity breaches of information such as the recent Equifax one also remind us to constantly protect our information. While the IRS as well as legitimate tax organizations and professionals strive to provide us with privacy and security when it comes to our information, we still have to keep our eyes open. Make sure to keep abreast of the most common ID theft scams, and to frequently check your personal and financial records to ensure their accuracy and protection.

Overall, the Equifax data breach was an unfortunate occurrence for those affected. However, it brings attention to the threat posed by lack of cyber security and monitoring of our personal and financial information. For more information, contact the IRS or an accounting and tax profession.


3 Easy Tips to Save on Small Business Income Taxes

For many, if not most small business owners, tax time is also a stressful time. The main reason for this is that many small business owners wait until the last minute to tackle their taxes. Additionally, small business owners may not be familiar enough with the tax code to understand and accurately apply the appropriate deductions for their businesses. If you’re a small business owner, you may be in the same predicament.

Here are 3 tips to save on your small business income taxes this year:

1. Capitalize on your Home Office Deductions

If you’re working from home, you may be able to capitalize on home office deductions. However, you must be aware of the different methods to calculate this deduction accurately. Both the simplified and the regular method allow you to deduct the home office use portion of your house. Since these methods vary in terms of requirements and complexity, getting familiar with these can help you calculate your home office deduction accurately.

2. Leverage business’ entertainment expenses

As long as business is discussed as part of your entertainment events, you may be able to deduct up to 50% of these. In order to claim a deduction related to your business entertainment expense, the IRS requires that you provide accurate and appropriate documentation.

However, you also want to make sure that these expenses are applicable, and that they are not too lavish. If you’re not sure how to gauge these, apply the same judgment as you would to your personal expenses.

3. Achieve big savings through automobile deductions

If your business uses vehicles as part of its operations, you may be able to take tax deductions for miles driven. Keep in mind that mileage deduction rates are updated every year. For 2017, the applicable mileage rates amount to 53.5 cents per mile for business purposes, 14 cents per mile for charitable purposes, and 17 cents per mile for moving or medical purposes. In order to take advantage of these deductions, make sure to keep an accurate log of miles traveled.

Taking advantage of these deductions can help you save significantly on your small business income taxes. To get more information, you may want to consult with a professional accounting service.


5 items you may not be paying taxes on, but really should

Taxes are complicated, that's a fact. In general, we know that we should pay taxes on income we earn. However, what is much less clear is the fact that there is a variety of other earnings that we should be paying taxes on, but don't often realize.

Here are few of those items you may not be paying taxes on, but really should:

Have you ever incurred debt that your lender ended up forgiving? If that's the case, then this forgiven debt may actually constitute income, taxable income that is. One example this would apply to, are student loans forgiven through an income-driven repayment plan, in which instance the forgiven balance will be taxed by the IRS.

The only exception to this rule consists of loans discharged through Public Service Loan Forgiveness, as well as Teacher Loan Forgiveness and bankruptcy debt.

If you've received free items from certain companies, these may actually represent taxable income. If these free items were obtained in exchange for goods and services, it's considered bartering by the IRS, thus making its value taxable.

For instance, if you're offered free samples in exchange for a review, you may be taxed on the value of these samples.

If you regularly sell items on eBay, your income is taxable. This applies if you've earned more than $20,000 in sales each year. In this case, you'll be issued a 1099-K by Paypal listing your yearly earnings. You will also have to report this income when you file taxes for the year.

However, you don't necessarily have to meet this sales threshold in order to incur taxes on eBay. If you happen to buy merchandise to re-sell on eBay, the IRS would consider that you're running a business and as such your profits will be taxed as income.

While you may think that Fantasy Football is nothing more than a fun activity that occasionally takes over your office, think again. It actually happens to be a $3.6 billion industry which may have interesting tax implications for its participants.

According to the IRS, winnings from hobbies, prizes and gamblings must be reported. If these are actually in excess of $600, you should be receiving a 1099-MISC form from your host or league. In any case, you need to report your winnings regardless. However, keep in mind that you may be able to deduct your costs and report only the net profits from playing.

GoFundMe is a crowdfunding site which has grown increasingly popular over the years. However, its tax implications can be more complicated than you think. While donations made through the site are considered by GoFundMe as personal gifts, and as such not taxable, there are exceptions.

So before creating a GoFundMe campaign, whether it's on yours or someone else's behalf, make sure to consult a tax professional about how you can best structure the donations you may receive.


7 bookkeeping tips to make tax time easier

Whether you're a seasoned entrepreneur or just starting your small business, you may have already realized that bookkeeping is a necessary part of running your business. The process of keeping full, accurate and up-to-date business records may not rank as high as other business activities. However, it's one of the most successful businesses' secret to making the most out of tax season.

Keeping your business records in tip-top shape not only helps you input the right amount of business revenue and expenses. It also helps you side-step and avoid MAJOR tax penalties, in addition to saving you time, energy and stress! It also helps to meet applicable quarterly sales tax, as well as federal and state payroll tax obligations. Besides, if the IRS or state tax authorities ever decides to audit your company, having accurate bookkeeping means you'll not only be ready, but that you'll also pass the test.

Here are 7 bookkeeping tips to make tax time much easier to handle:

1. Planning is key!

The best way to be ready for any upcoming business expenditure is to plan ahead. In the same way that you would plan for equipment, inventory or maintenance expenses, you have to plan for annual taxes. This could be as easy as setting us money aside on a monthly or quarterly basis to cover taxes.

2. Schedule your time

Bookkeeping can be a tedious task, and you may be tempted to leave it to the end of the year. Instead try and schedule some time on a weekly or monthly basis to update your books. Stick to a more or less strict schedule to stay current with your finances.

3. Don't mix business and personal!

Keep in mind that business expenses are tax-deductible. As such, make sure to separate your personal from your business expenses to make it easier on yourself. If you happen to use your business accounts or credit cards for personal expenses, remember to track both sets of expenses as accurately as possible.

4. Have a system to track your business expenses

Using a credit or debit card to track your expenses can be a great way to ensure costs incurred are true business expenses. Keep this in mind when you're tempted to use cash, which can be challenging to track over time.

5. Invest in Great Software

It's important to invest in reliable bookkeeping software that can save you significant time and help you input expenses and cash flow more accurately. You can use accounting software for everything from tracking invoices and budget hours, to customizing invoices. There are countless options for bookkeeping software out there, which also may be customized for the industry of your choice.

6. Check your invoices!

It can be easy to lose track of your invoices over time. So make sure to keep track of them by running customized reports through your accounting or bookkeeping software, and determine which ones still need to be followed up on.

7. Invest in a Professional!

While you may be to handle a number of bookkeeping tasks yourself, in some areas you may have to invest in a pro! Whether you hire an accountant to handle your taxes or payroll, or a financial advisor to give you the best tips on your industry, investing in a professional can reap great rewards for you and your business.


4 Ways to Write Off Charitable Contributions

If you’ve made any charitable contributions this year, these can be deducted, regardless of the form they may have taken. There are actually various ways you can deduct these. Here are four ways to write off your good deeds this year:

1. Monetary Contributions.

Have you donated cash or made a cash-equivalent donation to a qualified charitable organization? You may actually be able to deduct the full amount of your donation. However, keep in mind that the limit for all annual charitable contributions is 50% of your Adjusted Gross Income (AGI), and that any excess may be carried over for 5 years.

The caveat here is that there are strict record-keeping rules when it comes to monetary contributions. For any donation of $250 or more, you’re required to obtain a written agreement from the qualified charitable organization.

2. Volunteer Services.

If you've volunteered your services to a qualified charitable organization, you can write off any related out-of-pocket expenses. Examples include lodging, travel, special clothing, and supplies. However, if any travel expenses are used for vacation purposes, these cannot be deducted.

3. Property Gifts.

If you donated property you own, such as artwork or securities, you may be able to deduct its fair value at the date of donation. This is ONLY if the property in question would have qualified for a long-term capital gain if sold, which also means you would have held it for longer than a year.

Note that the current annual deduction for property gifts is limited to 30% of your Adjusted Gross Income (AGI). Also remember that for any property gifts over $5,000, an independent appraisal is required.

4. Quid Pro Quo Contributions

What if you made a donation and received a benefit in exchange for it? In this case, your actual deduction may be reduced. For these types of charitable contributions in excess of $75, you must obtain an estimate of the services received and the amount over the value of the benefits provided. Please note that you can only deduct the difference between the two.

Overall, contributing to a charity is not only rewarding, but it can also prove to be extremely beneficial tax-wise.


4 Tips to Deduct Interest Expense In Your Favor

When you think of all the interest expense you may have had to pay in the course of the year, you may also want to think of its benefits. In this case, we’re talking about the tax benefits. Indeed, there are various ways in which you can deduct interest expense on your tax return to get the most benefits in your favor.

Here are 4 tips to deduct interest expense in a way that benefits you this year:

1. Mind your Mortgage Interest Deduction!

Have you taken out a mortgage for the home you live in? You can actually deduct the interest you’ve been paying on that mortgage. The same applies if you’ve refinanced or taken out a second mortgage, as you may also be able to deduct the interest applicable to those loans as well. However, if you’ve taken cash out from refinancing your mortgage and have not used this money to improve, build or buy your home, you may have to consider it home equity debt.

In the case you may have a second home, the interest on it is also deductible. However, you may want to keep in mind that in some cases, deductions on your second property are limited.

2. Deduct your home office expenses!

Have you taken a home office deduction? In this case, you may be able to include a portion of your home mortgage expenses as well.

However, this deduction may not reap the best benefits for you. Taking these expenses as business expenses may actually be more beneficial to you!

3. Interest expense related to your business expenses is also deductible!

Any interest expense related to a business loan or credit card used in the context of your business activity is also deductible. However, remember that in general, you may benefit more from deducting your actual business expenses rather than the associated business interest, as the latter would reduce your Adjusted Gross Income (AGI) and income.

4. Don’t forget your investment interest!

Have you borrowed money to invest in a particular venture or pursuit? You may be able to claim the related interest as a deduction.

The only caveat is that you cannot deduct more investment interest expense than the actual net investment income you’ve accumulated during the year. In case of any excess, you’re allowed to carry it forward to another year.

Keep in mind that if a portion of the borrowed money is for personal reasons, the debt must be divided between personal and investment.


How to start investing in tax planning as a small business

Small business owners have a lot on their hands and minds in terms of running their businesses. However, one area that should be treated as a priority all year long and is unfortunately often overlook is tax planning. Too many small business owners delay even thinking about their taxes until year-end, or even worse, right before the tax deadline.

While small businesses should not base each and every one of their decisions solely on tax considerations, they should nevertheless consider the tax implications of their financial decisions regularly. This goes hand-in-hand with investing in your tax planning activities all throughout the year.

If you’re considering starting to invest in tax planning as a small business, here are some tips to get you started:

- Invest in a Tax Professional

As committed as you may be to your tax planning activities, there are just certain areas that are too technical and may push you to make costly mistakes. Instead, consider starting with a tax professional who can help you identify the right type of business structure, as well as the most beneficial expenses and related deductions applying to your particular situation. While you may not have to have a tax professional on hand at all times, investing in one to set up a foundation for your tax planning activities may be a good way to set yourself up for success.

- Invest in a Reliable Accounting Software

There’s nothing like unstructured and missing bookkeeping records to ruin your tax planning from the start. So think about investing in a reliable accounting software to help you keep track of your expenses and income on a regular basis. Consider asking for advice as to which software is better suited to your business type and structure.

- Invest your time consistently in tax planning

Last but not least, committing your time, energy and resources to tax planning activities all year long can help turn tax time into a successful experience! Instead of pushing tax planning to year-end, or whenever you get to it for that matter, schedule strict slots of time exclusively devoted to tax planning. Whether it’s once a week, or once a month, make sure to keep your tax planning as consistent as possible to keep an accurate record of your business data all year.


Are You A Small Business Owner? Here are the tax forms you should be filing this year

If you're a small business owner, especially if you're new in business, you may be wondering which tax forms to file this year. For a small business that's not a corporation, there are three major types to consider along with their corresponding tax forms:

If your business type is not registered with the state, then a sole proprietorship is the default. This means that the sole proprietorship pays income taxes through the owner's personal return. In this case, Schedule C (Profit or Loss for a Small Business) is used.

If your business type is a partnership, then it must consist of several partners and be registered with the state. In this case, an information tax return on Form 1065 is filed. As for individual partners, each one receives a Schedule K-1 reflecting their share of the partnership's losses and profits.

The last business type for small business owners is a Limited Liability Company (LLC). If the LLC is made up of only one person, it's a single-member LLC and pays income taxes as a sole proprietorship. If it's composed of several members, it's a multiple-member LLC which is taxed as a partnership.

Please keep these considerations in mind as you file your tax forms as a small business owner this year.


Are you self-employed? Consider taking these 4 tax deductions.

If you're self-employed these days, you're in excellent company. Roughly 55 million Americans are as well… And when it comes to tax season and making the most out of your business expenses, there are many deductions you can take advantage of:

  • Your Home Office: All those equipment expenses you incur, not to mention the very space you use in your home to conduct your business operations, are all deductible. The IRS allows you to deduct part of your rent or mortgage associated with the space you use as your home office. Additionally, you're also allowed to write off a portion of your home utilities and insurance related to your home office.
  • Work Expenses: Various costs directly related to your business can also be deducted, including office equipment such as computers and printers, printing paper, business cards, and even ink and toner… Even expenses such as website hosting and domain name, or online payroll software costs, can be written off of your taxable income.
  • Software and Hardware: If you bought a desktop computer, tablet, or laptop for business use, it may very well be deductible. The same goes for software purchases or updates.
  • Education and Business Travel: Did you attend a conference or class during the year? Did you have to travel for it, and/or stay at a hotel or arrange an alternative accommodation? Keep in mind that business travel, as well as training and educational expenses, may be deductible. Don't forget to include car rentals, parking costs, shuttles, and taxis to your list of deductible expenses as well…
  • As a self-employed individual, you should take every opportunity to leverage your expenses and revenues to grow your business. Keep abreast of updates and changes in tax rules that can benefit your business in the long run.

Here are the standard mileage rates announced by the IRS for 2017

Do you use your vehicle as part of your business operations, or as part of moving residences? Do you drive your car around for medical or charitable purposes? If you answered yes to any of these questions, then you may be able to deduct your driving costs, according to pre-defined rates reviewed each year by the IRS.

For 2017, these deductions have actually been reduced as a result of a decrease in the cost of fuel. Regardless of the type of car you drive, here are the standard mileage rates for this year:

What if you are an employee reimbursed for mileage?

If your company uses the standard mileage allowance method to reimburse employees for business-related car expenses, then any reimbursement you get is not taxable. However, if you incur actual business mileage expenses exceeding what your employer provides as a reimbursement, then you're allowed to take a deduction for the difference. There are only two caveats to watch out for here: 1) you must be able to itemize your deductions, and 2) the business revenue must constitute more than 2% of your Adjusted Gross Income (AGI) threshold. Keep in mind that if your vehicle is a lease, you must have been deducting your mileage costs from the time you started using it in your business operations.

What if you use your vehicle for your business?

You can now take bonus depreciation on your car's first year of business through 2019, thanks to an IRS extension. This means you can deduct an extra $8,000 towards the first year's depreciation. However, the condition here is to deduct actual expenses rather than mileage.

Please note that these rules apply to vehicles weighing 6,000 pounds or less. If you drive a heavier sports utility vehicle (SUV), you're allowed to use the Section 179 expense deduction combined with the bonus depreciation discussed above.

  • For business miles driven, you can deduct 5 cents per mile (including a depreciation allocation of 25 cents per mile). This is down from $0.54 in 2016;
  • If you've used your vehicle for medical or moving purposes, you're allowed to deduct 17 cents per mile, or 2 cents less than in 2016;
  • For any use related to charitable organizations, you're allowed to deduct 14 cents per mile.

This is when you can expect your tax refund

It's that time of year again, tax season! After gathering all the documents you need to file your taxes, going through the back-and-forth of checking deductions and filing exemptions, you're finally ready to receive your tax refund. The question is” “When should you expect it?”

If you've used a professional such a Certified Public Accountant (CPA), or an Enrolled Agent (EA), ask them when you should expect your return. If you've already filed your return, you can go to the Internal Revenue Service's website's tool “ Where's My Refund?”

The IRS now also has an official app designed as the “IRS2Go” mobile app, which can help you check your refund status. You can also use this app to make a payment, sign up for tax tips, and even find free tax assistance.

Please note that the IRS started processing most returns on January 24. 2017. However, returns with the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will not be processed until February 15, 2017.


Wondering how the tax reform will affect you in 2017? Read More Here

It's no secret that with a Republican majority in the House and Senate, and Donald Trump as President, tax reform is looming nearer than ever. Trump's promise to bring the number of individual tax rates from seven to three is making us look at the very real possibility of tax increases for lower-income level individuals, and inversely, sizable tax cuts for higher-income individuals.

So what does this really mean for the rest of us?

In simpler terms, this would mean that the seven tax brackets we currently have would be brought down to three. This would result in the two highest rates of 39.6% and 35% being eliminated, in favor of a rate of 33%, which would benefit high-income taxpayers.

On the other hand, individuals in lower income tax brackets would also benefit in that the standard deductions will almost be doubled, as a result of the offset in marginal rates increase. This jump in the standard deduction amounts would then balance out the effects of this change.

But this isn't the only thing…Another significant part of Donald Trump's tax reform consists in a cap on itemized deductions. If your filing status is single, your itemized deductions would be limited to $100,000. If filing joint, then the limit would be $200,000.

However, before you start making drastic changes, please keep in mind that these measures are still highly uncertain and may take some time to implement.

Spring 2017 Newsletter

Publish Date: 05-01-2017

3 Can't Miss Tax Deductions For Self-Employed People

If you’re a self-employed individual, you may be wondering what tax deductions apply to you. Being self-employed also means that you may have a lot of expenses to handle for yourself and your business. It’s important to understand and leverage the deductions associated with these expenses as a self-employed individual.

Here are 3 tax deductions for self-employed people that you cannot miss:

1. Self-Employment Tax Deduction

While employed individuals' wages are subject to FICA (Federal Insurance Contribution Taxes) taxes, including Social Security and Medicare, self-employed people are subject to the corresponding SECA (Self-Employment Contributions Act) taxes. However, the difference between the two is that while FICA taxes are shared by both the employer and the employee, both portions of the SECA taxes are handled by the self-employed individual.

The good news is that self-employed individuals can claim the portion of the self-employment tax equivalent to what an employer would pay as a deduction.

2. Self-Employed Health Insurance Deduction

As a self-employed individual, you may be able to deduct your health insurance costs, provided you have reported a net profit on your taxes and your business has an insurance plan under it. You may also be able to deduct the costs of your employees’ health premiums as applicable.

Keep in mind that this doesn’t prevent you from claiming your other medical costs, granted you itemize your expenses.

3. Retirement Savings Deductions

As long as you contribute to a Simplified Employee Pension (SEP) plan, qualified plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, you may be able to deduct applicable retirement contributions. You can also deduct retirement plan contributions you make for your employees.

There are a number of rules and limits that apply to retirement savings deductions, so make sure to research these or seek advice on them.

Overall, if your expenses as a self-employed individual are for business use, and are also ordinary and necessary, they may be eligible for a tax deduction.


3 Effects of the New Revenue Recognition Standards You Should Know

The recent changes to revenue recognition accounting (ASC 606) have the potential to impact every aspect of businesses relating to revenue. This affects a company’s financial results and debt compliance, all the way to executive compensation.

Many organizations have already started implementing these new standards, which are turning out to be more complex and time-consuming than expected. Among the many areas affected by this change, here are the main areas to take into account:

1. IT Systems: According the new revenue recognition standards, some data that may not currently be required to be collected or aggregated will now be required. Among these, are contract start and end dates, as well as material rights as performance obligations.

This will create a need for system modifications, which in turn will need to be designed, developed and tested. Such system changes will require adequate preparation and updates both in the short and long-term.

2. Legal contracts: Per the new revenue recognition standards, there’s an assumption that customer contracts should contain elements such as enforcement, pricing and provisions for termination.

As such, companies’ legal departments may need to adjust and implement its typical contract terms. They will also need to revise existing contracts to determine any negative impact on revenue as a result of the new standards’ application.

3. Compensation: The timing effects of the new revenue recognition standards can have a significant impact on executive bonuses, sales commissions or any other form of compensation. In order to address this, companies may have to re-design their compensation programs.

Overall, many companies will face the challenges that come with the new revenue standards. The most important is to get started on the path of this new standard’s implementation sooner than later.


3 Tax-Smart Ways to Withdraw from a 529 Plan

A great way to save for college is by investing in a 529 plan. It provides you with tax-free investment growth as well as applicable withdrawals for qualified expenses. However, getting money out of a 529 plan doesn’t come without challenges.

Here are a few tips to follow when taking money out of a 529 plan:

1. Mind your calendar

While you can take money out of a 529 plan at any time during the year, you must remember that any amount of money you withdraw must be equal to or less than the college expenses incurred during the year. As a result, you may want to schedule your withdrawals accordingly.

You also may want to keep in mind that you could be slapped with a 10% penalty plus income taxes on a portion or all of the excess you withdraw in a given year.

2. Include financial aid funds

Financial aid, such as grants or scholarships, reduce the amount of your qualified higher education expenses. Taking these into account will help you make less needless withdrawals. In case you didn’t take these into account and withdrew too much from your 529 plan, you may consider use the excess funds for tuition prepayment or other educational expenses.

3. Take advantage of tax credits

Similarly, educational tax credits and deductions could also help you reduce what you withdraw out of your 529 plan. If you qualify for the American Opportunity Credit, for instance, you may be able to save up to $2,500 on your tax bill. As a result, you may want to limit the tuition amount you pay out of your 529 plan.

Other ways to maximize your 529 Plan withdrawals include coordinating with other family members who have set up similar plans for the same recipient, as well as making the withdrawal checks payable to the recipient.


3 Things to Know About the Equifax Data Breach

Earlier this year, Equifax reported some news that had almost half of the country, or about 143 million people, concerned about their financial security. The reported data breach news meant that the affected people may have had their personal and financial information compromised.

According to Equifax’s report of this massive cybersecurity breach, the data accessed may have included people’s birth dates, Social Security numbers and names. Credit card numbers, as well as license numbers, may also have been included in the breach.

Here’s what you need to know about how this cybersecurity threat affects you and your taxes:

1. You may not have been directly affected

If you haven’t already, you may want to verify that you have been affected. You can visit www.equifaxsecurity2017.com to check if you have been impacted. If you have, you may be able to sign up for identity theft protection as well as for credit monitoring. You may also call Equifax directly at 1.866.447.7559.

2. You are protected by the IRS

While it may be upsetting that your personal and financial information may have been fraudulently accessed and/or used, the IRS provides ways to exercise caution with our financial information. The IRS website lists frequent scams used by cyber thieves to steal your identity. In case of cyber theft, there are also policies in place to use IRS support to remedy these.

3. Remember to always protect your information

Massive cybersecurity breaches of information such as the recent Equifax one also remind us to constantly protect our information. While the IRS as well as legitimate tax organizations and professionals strive to provide us with privacy and security when it comes to our information, we still have to keep our eyes open. Make sure to keep abreast of the most common ID theft scams, and to frequently check your personal and financial records to ensure their accuracy and protection.

Overall, the Equifax data breach was an unfortunate occurrence for those affected. However, it brings attention to the threat posed by lack of cyber security and monitoring of our personal and financial information. For more information, contact the IRS or an accounting and tax profession.


3 Easy Tips to Save on Small Business Income Taxes

For many, if not most small business owners, tax time is also a stressful time. The main reason for this is that many small business owners wait until the last minute to tackle their taxes. Additionally, small business owners may not be familiar enough with the tax code to understand and accurately apply the appropriate deductions for their businesses. If you’re a small business owner, you may be in the same predicament.

Here are 3 tips to save on your small business income taxes this year:

1. Capitalize on your Home Office Deductions

If you’re working from home, you may be able to capitalize on home office deductions. However, you must be aware of the different methods to calculate this deduction accurately. Both the simplified and the regular method allow you to deduct the home office use portion of your house. Since these methods vary in terms of requirements and complexity, getting familiar with these can help you calculate your home office deduction accurately.

2. Leverage business’ entertainment expenses

As long as business is discussed as part of your entertainment events, you may be able to deduct up to 50% of these. In order to claim a deduction related to your business entertainment expense, the IRS requires that you provide accurate and appropriate documentation.

However, you also want to make sure that these expenses are applicable, and that they are not too lavish. If you’re not sure how to gauge these, apply the same judgment as you would to your personal expenses.

3. Achieve big savings through automobile deductions

If your business uses vehicles as part of its operations, you may be able to take tax deductions for miles driven. Keep in mind that mileage deduction rates are updated every year. For 2017, the applicable mileage rates amount to 53.5 cents per mile for business purposes, 14 cents per mile for charitable purposes, and 17 cents per mile for moving or medical purposes. In order to take advantage of these deductions, make sure to keep an accurate log of miles traveled.

Taking advantage of these deductions can help you save significantly on your small business income taxes. To get more information, you may want to consult with a professional accounting service.


5 items you may not be paying taxes on, but really should

Taxes are complicated, that's a fact. In general, we know that we should pay taxes on income we earn. However, what is much less clear is the fact that there is a variety of other earnings that we should be paying taxes on, but don't often realize.

Here are few of those items you may not be paying taxes on, but really should:

Have you ever incurred debt that your lender ended up forgiving? If that's the case, then this forgiven debt may actually constitute income, taxable income that is. One example this would apply to, are student loans forgiven through an income-driven repayment plan, in which instance the forgiven balance will be taxed by the IRS.

The only exception to this rule consists of loans discharged through Public Service Loan Forgiveness, as well as Teacher Loan Forgiveness and bankruptcy debt.

If you've received free items from certain companies, these may actually represent taxable income. If these free items were obtained in exchange for goods and services, it's considered bartering by the IRS, thus making its value taxable.

For instance, if you're offered free samples in exchange for a review, you may be taxed on the value of these samples.

If you regularly sell items on eBay, your income is taxable. This applies if you've earned more than $20,000 in sales each year. In this case, you'll be issued a 1099-K by Paypal listing your yearly earnings. You will also have to report this income when you file taxes for the year.

However, you don't necessarily have to meet this sales threshold in order to incur taxes on eBay. If you happen to buy merchandise to re-sell on eBay, the IRS would consider that you're running a business and as such your profits will be taxed as income.

While you may think that Fantasy Football is nothing more than a fun activity that occasionally takes over your office, think again. It actually happens to be a $3.6 billion industry which may have interesting tax implications for its participants.

According to the IRS, winnings from hobbies, prizes and gamblings must be reported. If these are actually in excess of $600, you should be receiving a 1099-MISC form from your host or league. In any case, you need to report your winnings regardless. However, keep in mind that you may be able to deduct your costs and report only the net profits from playing.

GoFundMe is a crowdfunding site which has grown increasingly popular over the years. However, its tax implications can be more complicated than you think. While donations made through the site are considered by GoFundMe as personal gifts, and as such not taxable, there are exceptions.

So before creating a GoFundMe campaign, whether it's on yours or someone else's behalf, make sure to consult a tax professional about how you can best structure the donations you may receive.


7 bookkeeping tips to make tax time easier

Whether you're a seasoned entrepreneur or just starting your small business, you may have already realized that bookkeeping is a necessary part of running your business. The process of keeping full, accurate and up-to-date business records may not rank as high as other business activities. However, it's one of the most successful businesses' secret to making the most out of tax season.

Keeping your business records in tip-top shape not only helps you input the right amount of business revenue and expenses. It also helps you side-step and avoid MAJOR tax penalties, in addition to saving you time, energy and stress! It also helps to meet applicable quarterly sales tax, as well as federal and state payroll tax obligations. Besides, if the IRS or state tax authorities ever decides to audit your company, having accurate bookkeeping means you'll not only be ready, but that you'll also pass the test.

Here are 7 bookkeeping tips to make tax time much easier to handle:

1. Planning is key!

The best way to be ready for any upcoming business expenditure is to plan ahead. In the same way that you would plan for equipment, inventory or maintenance expenses, you have to plan for annual taxes. This could be as easy as setting us money aside on a monthly or quarterly basis to cover taxes.

2. Schedule your time

Bookkeeping can be a tedious task, and you may be tempted to leave it to the end of the year. Instead try and schedule some time on a weekly or monthly basis to update your books. Stick to a more or less strict schedule to stay current with your finances.

3. Don't mix business and personal!

Keep in mind that business expenses are tax-deductible. As such, make sure to separate your personal from your business expenses to make it easier on yourself. If you happen to use your business accounts or credit cards for personal expenses, remember to track both sets of expenses as accurately as possible.

4. Have a system to track your business expenses

Using a credit or debit card to track your expenses can be a great way to ensure costs incurred are true business expenses. Keep this in mind when you're tempted to use cash, which can be challenging to track over time.

5. Invest in Great Software

It's important to invest in reliable bookkeeping software that can save you significant time and help you input expenses and cash flow more accurately. You can use accounting software for everything from tracking invoices and budget hours, to customizing invoices. There are countless options for bookkeeping software out there, which also may be customized for the industry of your choice.

6. Check your invoices!

It can be easy to lose track of your invoices over time. So make sure to keep track of them by running customized reports through your accounting or bookkeeping software, and determine which ones still need to be followed up on.

7. Invest in a Professional!

While you may be to handle a number of bookkeeping tasks yourself, in some areas you may have to invest in a pro! Whether you hire an accountant to handle your taxes or payroll, or a financial advisor to give you the best tips on your industry, investing in a professional can reap great rewards for you and your business.


4 Ways to Write Off Charitable Contributions

If you’ve made any charitable contributions this year, these can be deducted, regardless of the form they may have taken. There are actually various ways you can deduct these. Here are four ways to write off your good deeds this year:

1. Monetary Contributions.

Have you donated cash or made a cash-equivalent donation to a qualified charitable organization? You may actually be able to deduct the full amount of your donation. However, keep in mind that the limit for all annual charitable contributions is 50% of your Adjusted Gross Income (AGI), and that any excess may be carried over for 5 years.

The caveat here is that there are strict record-keeping rules when it comes to monetary contributions. For any donation of $250 or more, you’re required to obtain a written agreement from the qualified charitable organization.

2. Volunteer Services.

If you've volunteered your services to a qualified charitable organization, you can write off any related out-of-pocket expenses. Examples include lodging, travel, special clothing, and supplies. However, if any travel expenses are used for vacation purposes, these cannot be deducted.

3. Property Gifts.

If you donated property you own, such as artwork or securities, you may be able to deduct its fair value at the date of donation. This is ONLY if the property in question would have qualified for a long-term capital gain if sold, which also means you would have held it for longer than a year.

Note that the current annual deduction for property gifts is limited to 30% of your Adjusted Gross Income (AGI). Also remember that for any property gifts over $5,000, an independent appraisal is required.

4. Quid Pro Quo Contributions

What if you made a donation and received a benefit in exchange for it? In this case, your actual deduction may be reduced. For these types of charitable contributions in excess of $75, you must obtain an estimate of the services received and the amount over the value of the benefits provided. Please note that you can only deduct the difference between the two.

Overall, contributing to a charity is not only rewarding, but it can also prove to be extremely beneficial tax-wise.


4 Tips to Deduct Interest Expense In Your Favor

When you think of all the interest expense you may have had to pay in the course of the year, you may also want to think of its benefits. In this case, we’re talking about the tax benefits. Indeed, there are various ways in which you can deduct interest expense on your tax return to get the most benefits in your favor.

Here are 4 tips to deduct interest expense in a way that benefits you this year:

1. Mind your Mortgage Interest Deduction!

Have you taken out a mortgage for the home you live in? You can actually deduct the interest you’ve been paying on that mortgage. The same applies if you’ve refinanced or taken out a second mortgage, as you may also be able to deduct the interest applicable to those loans as well. However, if you’ve taken cash out from refinancing your mortgage and have not used this money to improve, build or buy your home, you may have to consider it home equity debt.

In the case you may have a second home, the interest on it is also deductible. However, you may want to keep in mind that in some cases, deductions on your second property are limited.

2. Deduct your home office expenses!

Have you taken a home office deduction? In this case, you may be able to include a portion of your home mortgage expenses as well.

However, this deduction may not reap the best benefits for you. Taking these expenses as business expenses may actually be more beneficial to you!

3. Interest expense related to your business expenses is also deductible!

Any interest expense related to a business loan or credit card used in the context of your business activity is also deductible. However, remember that in general, you may benefit more from deducting your actual business expenses rather than the associated business interest, as the latter would reduce your Adjusted Gross Income (AGI) and income.

4. Don’t forget your investment interest!

Have you borrowed money to invest in a particular venture or pursuit? You may be able to claim the related interest as a deduction.

The only caveat is that you cannot deduct more investment interest expense than the actual net investment income you’ve accumulated during the year. In case of any excess, you’re allowed to carry it forward to another year.

Keep in mind that if a portion of the borrowed money is for personal reasons, the debt must be divided between personal and investment.


How to start investing in tax planning as a small business

Small business owners have a lot on their hands and minds in terms of running their businesses. However, one area that should be treated as a priority all year long and is unfortunately often overlook is tax planning. Too many small business owners delay even thinking about their taxes until year-end, or even worse, right before the tax deadline.

While small businesses should not base each and every one of their decisions solely on tax considerations, they should nevertheless consider the tax implications of their financial decisions regularly. This goes hand-in-hand with investing in your tax planning activities all throughout the year.

If you’re considering starting to invest in tax planning as a small business, here are some tips to get you started:

- Invest in a Tax Professional

As committed as you may be to your tax planning activities, there are just certain areas that are too technical and may push you to make costly mistakes. Instead, consider starting with a tax professional who can help you identify the right type of business structure, as well as the most beneficial expenses and related deductions applying to your particular situation. While you may not have to have a tax professional on hand at all times, investing in one to set up a foundation for your tax planning activities may be a good way to set yourself up for success.

- Invest in a Reliable Accounting Software

There’s nothing like unstructured and missing bookkeeping records to ruin your tax planning from the start. So think about investing in a reliable accounting software to help you keep track of your expenses and income on a regular basis. Consider asking for advice as to which software is better suited to your business type and structure.

- Invest your time consistently in tax planning

Last but not least, committing your time, energy and resources to tax planning activities all year long can help turn tax time into a successful experience! Instead of pushing tax planning to year-end, or whenever you get to it for that matter, schedule strict slots of time exclusively devoted to tax planning. Whether it’s once a week, or once a month, make sure to keep your tax planning as consistent as possible to keep an accurate record of your business data all year.

Fall 2017 Newsletter

Publish Date: 11-02-2017

3 Can't Miss Tax Deductions For Self-Employed People

If you’re a self-employed individual, you may be wondering what tax deductions apply to you. Being self-employed also means that you may have a lot of expenses to handle for yourself and your business. It’s important to understand and leverage the deductions associated with these expenses as a self-employed individual.

Here are 3 tax deductions for self-employed people that you cannot miss:

1. Self-Employment Tax Deduction

While employed individuals' wages are subject to FICA (Federal Insurance Contribution Taxes) taxes, including Social Security and Medicare, self-employed people are subject to the corresponding SECA (Self-Employment Contributions Act) taxes. However, the difference between the two is that while FICA taxes are shared by both the employer and the employee, both portions of the SECA taxes are handled by the self-employed individual.

The good news is that self-employed individuals can claim the portion of the self-employment tax equivalent to what an employer would pay as a deduction.

2. Self-Employed Health Insurance Deduction

As a self-employed individual, you may be able to deduct your health insurance costs, provided you have reported a net profit on your taxes and your business has an insurance plan under it. You may also be able to deduct the costs of your employees’ health premiums as applicable.

Keep in mind that this doesn’t prevent you from claiming your other medical costs, granted you itemize your expenses.

3. Retirement Savings Deductions

As long as you contribute to a Simplified Employee Pension (SEP) plan, qualified plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, you may be able to deduct applicable retirement contributions. You can also deduct retirement plan contributions you make for your employees.

There are a number of rules and limits that apply to retirement savings deductions, so make sure to research these or seek advice on them.

Overall, if your expenses as a self-employed individual are for business use, and are also ordinary and necessary, they may be eligible for a tax deduction.


3 Effects of the New Revenue Recognition Standards You Should Know

The recent changes to revenue recognition accounting (ASC 606) have the potential to impact every aspect of businesses relating to revenue. This affects a company’s financial results and debt compliance, all the way to executive compensation.

Many organizations have already started implementing these new standards, which are turning out to be more complex and time-consuming than expected. Among the many areas affected by this change, here are the main areas to take into account:

1. IT Systems: According the new revenue recognition standards, some data that may not currently be required to be collected or aggregated will now be required. Among these, are contract start and end dates, as well as material rights as performance obligations.

This will create a need for system modifications, which in turn will need to be designed, developed and tested. Such system changes will require adequate preparation and updates both in the short and long-term.

2. Legal contracts: Per the new revenue recognition standards, there’s an assumption that customer contracts should contain elements such as enforcement, pricing and provisions for termination.

As such, companies’ legal departments may need to adjust and implement its typical contract terms. They will also need to revise existing contracts to determine any negative impact on revenue as a result of the new standards’ application.

3. Compensation: The timing effects of the new revenue recognition standards can have a significant impact on executive bonuses, sales commissions or any other form of compensation. In order to address this, companies may have to re-design their compensation programs.

Overall, many companies will face the challenges that come with the new revenue standards. The most important is to get started on the path of this new standard’s implementation sooner than later.


3 Tax-Smart Ways to Withdraw from a 529 Plan

A great way to save for college is by investing in a 529 plan. It provides you with tax-free investment growth as well as applicable withdrawals for qualified expenses. However, getting money out of a 529 plan doesn’t come without challenges.

Here are a few tips to follow when taking money out of a 529 plan:

1. Mind your calendar

While you can take money out of a 529 plan at any time during the year, you must remember that any amount of money you withdraw must be equal to or less than the college expenses incurred during the year. As a result, you may want to schedule your withdrawals accordingly.

You also may want to keep in mind that you could be slapped with a 10% penalty plus income taxes on a portion or all of the excess you withdraw in a given year.

2. Include financial aid funds

Financial aid, such as grants or scholarships, reduce the amount of your qualified higher education expenses. Taking these into account will help you make less needless withdrawals. In case you didn’t take these into account and withdrew too much from your 529 plan, you may consider use the excess funds for tuition prepayment or other educational expenses.

3. Take advantage of tax credits

Similarly, educational tax credits and deductions could also help you reduce what you withdraw out of your 529 plan. If you qualify for the American Opportunity Credit, for instance, you may be able to save up to $2,500 on your tax bill. As a result, you may want to limit the tuition amount you pay out of your 529 plan.

Other ways to maximize your 529 Plan withdrawals include coordinating with other family members who have set up similar plans for the same recipient, as well as making the withdrawal checks payable to the recipient.


3 Things to Know About the Equifax Data Breach

Earlier this year, Equifax reported some news that had almost half of the country, or about 143 million people, concerned about their financial security. The reported data breach news meant that the affected people may have had their personal and financial information compromised.

According to Equifax’s report of this massive cybersecurity breach, the data accessed may have included people’s birth dates, Social Security numbers and names. Credit card numbers, as well as license numbers, may also have been included in the breach.

Here’s what you need to know about how this cybersecurity threat affects you and your taxes:

1. You may not have been directly affected

If you haven’t already, you may want to verify that you have been affected. You can visit www.equifaxsecurity2017.com to check if you have been impacted. If you have, you may be able to sign up for identity theft protection as well as for credit monitoring. You may also call Equifax directly at 1.866.447.7559.

2. You are protected by the IRS

While it may be upsetting that your personal and financial information may have been fraudulently accessed and/or used, the IRS provides ways to exercise caution with our financial information. The IRS website lists frequent scams used by cyber thieves to steal your identity. In case of cyber theft, there are also policies in place to use IRS support to remedy these.

3. Remember to always protect your information

Massive cybersecurity breaches of information such as the recent Equifax one also remind us to constantly protect our information. While the IRS as well as legitimate tax organizations and professionals strive to provide us with privacy and security when it comes to our information, we still have to keep our eyes open. Make sure to keep abreast of the most common ID theft scams, and to frequently check your personal and financial records to ensure their accuracy and protection.

Overall, the Equifax data breach was an unfortunate occurrence for those affected. However, it brings attention to the threat posed by lack of cyber security and monitoring of our personal and financial information. For more information, contact the IRS or an accounting and tax profession.


3 Easy Tips to Save on Small Business Income Taxes

For many, if not most small business owners, tax time is also a stressful time. The main reason for this is that many small business owners wait until the last minute to tackle their taxes. Additionally, small business owners may not be familiar enough with the tax code to understand and accurately apply the appropriate deductions for their businesses. If you’re a small business owner, you may be in the same predicament.

Here are 3 tips to save on your small business income taxes this year:

1. Capitalize on your Home Office Deductions

If you’re working from home, you may be able to capitalize on home office deductions. However, you must be aware of the different methods to calculate this deduction accurately. Both the simplified and the regular method allow you to deduct the home office use portion of your house. Since these methods vary in terms of requirements and complexity, getting familiar with these can help you calculate your home office deduction accurately.

2. Leverage business’ entertainment expenses

As long as business is discussed as part of your entertainment events, you may be able to deduct up to 50% of these. In order to claim a deduction related to your business entertainment expense, the IRS requires that you provide accurate and appropriate documentation.

However, you also want to make sure that these expenses are applicable, and that they are not too lavish. If you’re not sure how to gauge these, apply the same judgment as you would to your personal expenses.

3. Achieve big savings through automobile deductions

If your business uses vehicles as part of its operations, you may be able to take tax deductions for miles driven. Keep in mind that mileage deduction rates are updated every year. For 2017, the applicable mileage rates amount to 53.5 cents per mile for business purposes, 14 cents per mile for charitable purposes, and 17 cents per mile for moving or medical purposes. In order to take advantage of these deductions, make sure to keep an accurate log of miles traveled.

Taking advantage of these deductions can help you save significantly on your small business income taxes. To get more information, you may want to consult with a professional accounting service.