What is the worst part of owing a business?

Three years ago I wrote, what is the worst part of owning a business?  If you guessed employees you would be wrong. According to the small business owners polled by the Service Corps of Retired Executives,  40 percent said bookkeeping and taxes are the worst part of owning a business.  It is still true.  

Want to save money on taxes?  Keep better records. Want to make more money, become more profitable?  Keep better records. Want to breeze through an IRS examination?  Keep better records.

We call it the very exciting world of record keeping for business.  Unfortunately us small business owners are doing it every day.  You know the things that your small business does. The production end. Recordkeeping is often put off or not completed at all. As most businesses grow, eventually the light bulb goes on, usually at tax time, and the realization that some record keeping needs to be done.  

What can you do?

In the old days we built our business on bookkeeping....an era before desktop computers and the internet. Nowadays the computer has revolutionized your small business record keeping.  Here are three options you can try to make things a little easier.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.

1.  Go online. Free advertiser supported online accounting software is available.  Probably the most popular free software online is Wave.

Here is a link to their website: https://www.waveapps.com/.

It is easy. Fairly comprehensive. Working with your tax guy is easy, too. Just invite us as a Guest Collaborator and we can both see your data, securely, in real time.  Perhaps the best part is the automatic download your bank account into your accounting records limiting the amount of data input you have to do. Advantages? It is free.  It is intuitive.  No need to change the way you are doing business today.  We like wave accounting so much we became a Wave accounting pro advisor.

2.  Consider a stand alone accounting software.  We recommend the Quickbooks clone Avanquest Bookkeeper.  This program offers more bang for the bucks than the 800 pound elephant Quickbooks.  It is $39.95.  What do you get for your money?  A fully functioning accounting software that includes credit card processing for no additional charge.  

3.  The ubiquitous Quickbooks.  It is expensive.  Requires yearly updates.  Currently the payroll update alone is $400.00.  Our payroll service is cheaper. And it seems that you are constantly bombarded with additional add-ons to buy.  However, the accounting community has embraced it as the defacto standard that our client’s are using to keep track of their records. We work every day with Quickbooks.

I know that there are other methods and systems.  I have always taken the position that what works for you works for me.  However, I suggest that you give the Wave accounting folks a try first and help you not miss all those deductions next year.

7 reasons the new tax law is good for real estate investors

My buddy Bruce Theobald shared this article with me.

It is worth reading.

However, you do have to click on this link to read the pdf version of the article.

Three things you should know about filing your taxes this year.

It is that time again.  Time to make our annual accounting to our Uncle Sam.  In other words filing your tax return.  

Here are three things that you should know about filing your tax return this year:

 

1. We are still operating basically under the old law.  That means that certain deductions will be returning for their final appearance.  Deductions such as personal exemptions, moving expenses, miscellaneous itemized deductions, and in reality the need to itemize deductions for most taxpayers will disappear after this year.  So our very popular list of overlooked deductions published for the last 20 plus years is now retiring.  What has not disappeared is the penalty for not having health insurance.  If you did not have health insurance in 2017 or do not have health insurance in 2018, you will be penalized.   For tax year 2017 the penalty is 2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child, up to a maximum of $2,085.  The repeal of the penalty does not apply until 2019.

 

2. Even though IRS is not accepting returns until ten days from now, if you have all the information you need to file your tax return, you should do it now. IRS processes refunds on a first come first basis. Early filers will get processed earlier and receive their refund sooner. The Motley Fool writes “there are several benefits to preparing your taxes ahead of schedule. If you're due a refund, you'll get your hands on that money sooner than you would by waiting until April. And on the flip side, if you end up owing money to the IRS, you'll have two-and-a-half months to figure out how to pay your tax bill. If you wait till April, you'll have fewer options if you find that you've underpaid your taxes.”  

 

One caveat about refunds and early filing. Again the Motley Fool writes “most refunds will be issued within 21 days of filing -- but some will be delayed. If you're expecting a refund this year, here's something positive to chew on: The IRS expects most refunds to go out within three weeks of when returns are submitted. That said, if you're claiming certain tax credits, you can bank on your refund getting delayed. Specifically, the IRS must withhold refunds for the Earned Income Tax Credit and the Additional Child Tax Credit until Feb. 15 due to high levels of fraud associated with both. If you're claiming one of these credits, expect your entire refund to be delayed -- even the portion not associated with the credit you're taking.”

 

3. Most tax forms are due to be mailed to you no later than January 31, 2018.  However, there are some exceptions.  Specifically forms K-1 and 1099 brokerage statements.  If you have a brokerage account, the due date to mail those 1099 forms to you is February 15, 2018.  Many clients have received multiple forms for the same tax year from their brokerage companies during last tax seasons.  These so called “amended” forms 1099 cost brokerage companies millions of dollars of IRS penalties.  I found out about the penalty assessment for amending form 1099, with no end in sight, this year at one of the tax workshops I attended. It is a real issue in our tax preparation world.  

 

If you have ownership interest in a partnership, or S corporation, or are a beneficiary of an estate or trust, you will be receiving a form K-1.  The due date to mail the form is the due date of the tax return for the entity.  In most cases it is March 15, 2018.  However, if the entity files for an automatic six month extension, you may not receive the form until September 15, 2018.  Not to worry.  We know what to do. By the way this year we have instituted a new policy to help clients  make sure that they have all the correct income documents before filing their tax return.  

 

As we face the largest change in tax laws in 31 years, I have only one thing to say…..Wow.  So much for the promise of a postcard tax return.  The new tax law is complicated. Very complicated.  It looks like your tax guys are going to be around for a while.  The new tax laws contains some very good things for small business owners and individual taxpayers. Getting to the tax savings just got a lot more complicated.

 

We will talking to you about the new tax laws all this year as we sort through the analysis and pass on things that will help you save money.  So stay tuned for the good stuff.  

 

2018 Tax Partners Tax Guide

Hot off the press, we have just published our 2018 Tax Guide.  It is chock full of help.  Including 72 overlooked tax deductions, our fee schedule, answers to commonly asked questions, and suggestions on how to get started.

Click this link to read the pdf version of 2018 Tax Guide.

What Does the Tax Reform Bill Mean for Low-Income Earners?

Aside from lowering the statutory corporate tax rate from 35% to 21%—perhaps the most well-known facet of the tax plan—this bill lowers several individual rates and makes key changes to the tax code that affect low-income earners.

The tax reform bill does not reduce the number of individual brackets, but it does lower the rates for five of the seven:

Old Tax Brackets

Single Filers		Tax		Filing Jointly		Tax
Over	But not over	%		Over	But not over	%
$0	$9,325	10%		$0	$18,650	10%
$9,325	$37,950	15%		$18,650	$75,900	15%
$37,950	$91,900	25%		$75,900	$153,100	25%
$91,900	$191,650	28%		$153,100	$233,350	28%
$191,650	$416,700	33%		$233,350	$416,700	33%
$416,700	$418,400	35%		$416,700	$470,700	35%
$418,400	–	39.6%		$470,700	–	39.6%

New Tax Brackets

Single Filers		Tax		Filing Jointly		Tax
Over	But not over	%		Over	But not over	%
$0	$9,525	10%		$0	$19,050	10%
$9,525	$38,700	12%		$19,050	$77,400	12%
$38,700	$82,500	22%		$77,400	$165,000	22%
$82,500	$157,500	24%		$165,000	$315,000	24%
$157,500	$200,000	32%		$315,000	$400,000	32%
$200,000	$500,000	35%		$400,000	$600,000	35%
$500,000	–	37%		$600,000	–	37%

Other Important Tax Changes

While personal exemptions are eliminated, the standard deduction is increased from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married filing joint filers. Another change that’s likely to impact low-income taxpayers is the adjustment to family tax credits.
The Child Tax Credit (CTC) is being doubled from $1,000 to $2,000, and the refundable portion will be increased from $1,100 to $1,400, which will likely result in lower-income families seeing CTC-related refund dollars.


Source Drake Taxing Subjects

TAX CUTS AND JOBS ACT – A LOOK AT SOME PROVISIONS:

Following are some of the provisions of the Tax Cuts and Jobs Act. For a complete report of the Conference Committee final tax provisions click here.

• Corporate Tax Rate:  the Conference Committee settled on a corporate tax rate of 21%, considerably lower than the current maximum rate of 35%. The rate would take effect in 2018.
• Individual Tax Rates:  the highest rate would drop from the current 39.6% to 37%, however, they retained the seven tax brackets.
• Higher standard deduction but personal exemption eliminated: the bill would double the standard deduction from $6,350 (single) and $12,799 (joint) to $12,000 and $24,000 which is expected to lower the number of taxpayers who itemize. At the same time, the bill would eliminate the personal exemption, but some credits were also increased.
• State and local taxes: taxpayers would be able to deduct up to $10,000 of all taxes combined for state and local taxes, real estate taxes, and income and sales taxes.
• Mortgages indebtedness: interest can be deducted on loans up to $750,000.
• Resolution on pass-through entities: owners of pass-through entities such as S corporations and partnerships would be able to apply a 20% deduction to their business income, with limits starting at around $157,000 for single taxpayers and $315.000 for joint returns.
• Alternative minimum tax: the AMT was rescinded for businesses but remains for individuals. However, it would apply affect fewer taxpayers.
• Estate tax: the exclusion amount has been doubled to approximately $11 million but is scheduled to sunset in 2026.
• Child tax credit: the legislation increases the child tax credit to $2,000 per child (up from $1,000) and raised the phase out amounts. The refundable portion of the credit was raised from $1,100 to $1,400.
• Medical expense deduction: for 2017 and 2018 the threshold would drop back to 7.5% of AGI, increasing back to 10% in 2019 (yes, this provision is retroactive to 1/1/2017).
• Affordable Care Act: the bill rescinds the individual mandate for insurance
• Credits preserved include: Child and Dependent Care Credit and the Adoption Credit.
• Student Loan Interest: has been retained which had been eliminated under prior proposals.

It took a hurricane, but the IRS actually gives us some practical helpful advice.

Latest IRS Tax Tip is actually pretty informative and practical for a change.  Go figure. 

Taxpayers who are victims of a disaster might need to reconstruct records to prove their loss. Doing this may be essential for tax purposes, getting federal assistance, or insurance reimbursement.
Here are 12 things taxpayers can do to help reconstruct their records after a disaster:

• Taxpayers can get free tax return transcripts by using the Get Transcript tool on IRS.gov, or use their smartphone with the IRS2Go mobile phone app. They can also call 800-908-9946 to order them by phone.
• To establish the extent of the damage, taxpayers should take photographs or videos as soon after the disaster as possible.
• Taxpayers can contact the title company, escrow company, or bank that handled the purchase of their home to get copies of appropriate documents.
• Home owners should review their insurance policy as the policy usually lists the value of a building to establish a base figure for replacement.
• Taxpayers who made improvements to their home should contact the contractors who did the work to see if records are available. If possible, the home owner should get statements from the contractors to verify the work and cost. They can also get written accounts from friends and relatives who saw the house before and after any improvements.
• For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, the taxpayer can contact the attorney who handled the trust.
• When no other records are available, taxpayers can check the county assessor’s office for old records that might address the value of the property.
• There are several resources that can help someone determine the current fair-market value of most cars on the road. These resources are all available online and at most libraries:
• Kelley’s Blue Book
• National Automobile Dealers Association
• Edmunds
• Taxpayers can look on their mobile phone for pictures that show the damaged property before the disaster.
• Taxpayers can support the valuation of property with photographs, videos, canceled checks, receipts, or other evidence.
• If they bought items using a credit card or debit card, they should contact their credit card company or bank for past statements.
• If a taxpayer doesn’t have photographs or videos of their property, a simple method to help them remember what items they lost is to sketch pictures of each room that was impacted.

More Information:

• Publication 547, Casualties, Disasters, and Thefts
• Publication 584, Casualty, Disaster, and Theft Loss Workbook
• Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook
• Publication 2194, Disaster Resource Guide for Individuals and Businesses
• Federal Emergency Management Agency
• Small Business Administration
• Disasterassistance.gov