A link to another interesting article from Inc.com, showing how important accountants can be for your business.
http://www.inc.com/magazine/20090501/street-smarts-how-to-fix-cash-flow-problems.html
Wednesday, May 20, 2009
Tuesday, May 19, 2009
IRS Tax Statistics for 2008
During fiscal year 2008 the IRS collected a total of over $2.7 trillion in taxes, up 2% from fiscal year 2007 and it processed $428 billion in refunds. Almost half of all taxes collected are from individual income, followed by employment taxes and corporate income. The total number of tax returns filed increased by 6.3% to 250 million, out of which the most, almost 30 million, were filed in California.
Sunday, March 8, 2009
New Tax Provisions Under The American Recovery and Reinvestment Act of 2009
Some of the new tax provisions that will affect a number of people are:
- FIRST TIME HOMEBUYER CREDIT. The first time homebuyer credit is expanded to include purchases made after January 1, 2009 and before December 1, 2009. The maximum credit is $8,000 and can be claimed on the buyer's 2008 or 2009 federal tax return, using From 5405. Unlike the 2008 first time homebuyer credit of $7,500, the one for 2009 does not have to be repaid, as long as the buyer keeps the home as a main one for 36 months. The credit is phasing out for taxpayers whose adjusted gross income is more than $75,000 for individuals and $150,000 for joint filers.
- "MAKING WORK PAY" CREDIT. Provides a credit of up to $400 for individual filers and $800 for joint ones. The credit is phasing out for taxpayers whose adjusted gross income is more than $75,000 for individuals and $150,000 for joint filers. For taxpayers who receive a paycheck, the credit will be handled by their employers, by means of reducing the federal tax deduction from each paycheck. Those individuals should see an increase in their net pay. People who do not have taxes taken from their paychecks, can claim the credit on their 2009 federal tax return.
- SALES TAX DEDUCTION FOR VEHICLE PURCHASES. Provides a deduction for local sales, state and excise taxes paid on the purchase of a new vehicle after February 17, 2009. The deduction is limited for a purchase price of up to $49,500. The deduction is phasing out for taxpayers whose adjusted gross income is more than $125,000 for individuals and $250,000 for joint filers. For example, assuming a sales tax of 9%, those who purchased a car for $49,500 or more, will be able to deduct up to $4,455 on their tax return, provided that they meet the income test.
More information for other provisions and details of the American Recovery and Reinvestment Act of 2009 can be found here:
http://finance.senate.gov/press/Bpress/2009press/prb021209.pdf
Monday, February 2, 2009
The Importance of Having an Accountant
When offered our services, many small business owners don't realize the importance of hiring an accounting firm, and especially in today's economy they take the "do it yourself" approach. In most cases, this is a costly mistake resulting in businesses spending more on taxes, lost time for business owners performing clerical duties, lost documents, poor cash flow due to uncollected receivables among others. Here is an article from the Los Angeles Times addressing this issue.
From the Los Angeles Times
For small business, tax season requires complete ledgers and attention to changing rules
Blurry ledgers make filing returns harder. Laws are changing on federal, state levels.
Associated Press
February 2, 2009
Income tax filing season can be a trying time for small-business owners, even more so in a recession.
One of the biggest pitfalls owners are likely to encounter is a perennial one: poor record keeping that makes it hard for them not only to complete their returns but also to know where they stand financially. Another common problem is keeping up with changes in the tax laws, especially for state and local governments that are looking for ways to increase revenue.
Ask tax professionals what their clients struggle with, and haphazard books and ledgers is often the first answer. Many business owners don't know how much money they have on hand, how much they owe and what their clients owe them.
"You really need to control your books and understand what you're making," said Jeffrey Chazen, a certified public accountant with the Eisner accounting firm in New York.
Some business owners use their checkbooks and credit card bills as their records. But it's a problem when "they can't locate all their check registers or all of their bank statements," said Gregg Wind, a CPA with Wind Bremer Hockenberg in Los Angeles.
Others are even more disorganized, with boxes or piles of invoices, receipts and canceled checks that need to be sorted. CPAs ruefully refer to these people as "shoe box clients." These business owners risk missing important deductions and can end up overpaying the government. Or if the government questions a deduction, you could lose it if you don't have documentation.
The answer is to use a computer application to keep your books, one that interfaces with tax preparation software. But many owners don't use such programs because they don't have the time to input the information. Well, they can spend the time throughout the year keeping their books or spend even more time trying to figure things out before April 15.
The solution for many owners in this plight should be to get help, whether it's a bookkeeper to take care of ledgers and a tax professional to handle returns, or both. It may be too late for 2008, but it's still early in the new year and a good time to get organized.
Badly kept records are a particular problem for owners with home offices or who use cellphones and vehicles for both personal and business purposes. They need to keep good personal as well as business records.
The IRS allows owners of home businesses to deduct a portion of expenses, including mortgage interest, repairs, utilities and insurance, and unless taxpayers have invoices and receipts, they can't compute the deductions accurately. Similarly, you can deduct a portion of what you pay out on cars, cellphones and other items with dual purposes, but you need to keep track of when a car, for example, is driven on personal errands or to meetings with clients. At this point, after the year has ended, it's hard to reconstruct that information.
Another problem for many owners is keeping up with all the changes in the tax laws -- and not just at the federal level. Many states have laws that differ from the Internal Revenue Code, and owners need to be aware of them.
Leon Dutkiewicz, a CPA with Margolis & Co. in Bala Cynwyd, Pa., noted that some states treat depreciation of assets differently from the federal government. That means two separate calculations for each item being depreciated. Another complication is for companies that do business in different states -- for example, a small retail chain. Chances are they have different tax laws, which again means separate calculations.
"Trying to keep current on federal tax law changes and state tax law changes where you do business and every locality, it becomes extremely difficult," Dutkiewicz said. "It's forever in flux at all levels."
The easiest way to keep up with those changes is to have a good tax professional who follows the tax laws. There are federal changes for 2008 that owners need to be aware of. Wind noted, for example, that if partnerships choose to get filing extensions past the April 15 deadline, they have to file their returns by Sept. 15, not Oct. 15 as in the past.
Many more changes are likely for the 2009 tax year with the government expected to have an economic stimulus plan in place, and many states are also likely to revise their own tax codes.
From the Los Angeles Times
For small business, tax season requires complete ledgers and attention to changing rules
Blurry ledgers make filing returns harder. Laws are changing on federal, state levels.
Associated Press
February 2, 2009
Income tax filing season can be a trying time for small-business owners, even more so in a recession.
One of the biggest pitfalls owners are likely to encounter is a perennial one: poor record keeping that makes it hard for them not only to complete their returns but also to know where they stand financially. Another common problem is keeping up with changes in the tax laws, especially for state and local governments that are looking for ways to increase revenue.
Ask tax professionals what their clients struggle with, and haphazard books and ledgers is often the first answer. Many business owners don't know how much money they have on hand, how much they owe and what their clients owe them.
"You really need to control your books and understand what you're making," said Jeffrey Chazen, a certified public accountant with the Eisner accounting firm in New York.
Some business owners use their checkbooks and credit card bills as their records. But it's a problem when "they can't locate all their check registers or all of their bank statements," said Gregg Wind, a CPA with Wind Bremer Hockenberg in Los Angeles.
Others are even more disorganized, with boxes or piles of invoices, receipts and canceled checks that need to be sorted. CPAs ruefully refer to these people as "shoe box clients." These business owners risk missing important deductions and can end up overpaying the government. Or if the government questions a deduction, you could lose it if you don't have documentation.
The answer is to use a computer application to keep your books, one that interfaces with tax preparation software. But many owners don't use such programs because they don't have the time to input the information. Well, they can spend the time throughout the year keeping their books or spend even more time trying to figure things out before April 15.
The solution for many owners in this plight should be to get help, whether it's a bookkeeper to take care of ledgers and a tax professional to handle returns, or both. It may be too late for 2008, but it's still early in the new year and a good time to get organized.
Badly kept records are a particular problem for owners with home offices or who use cellphones and vehicles for both personal and business purposes. They need to keep good personal as well as business records.
The IRS allows owners of home businesses to deduct a portion of expenses, including mortgage interest, repairs, utilities and insurance, and unless taxpayers have invoices and receipts, they can't compute the deductions accurately. Similarly, you can deduct a portion of what you pay out on cars, cellphones and other items with dual purposes, but you need to keep track of when a car, for example, is driven on personal errands or to meetings with clients. At this point, after the year has ended, it's hard to reconstruct that information.
Another problem for many owners is keeping up with all the changes in the tax laws -- and not just at the federal level. Many states have laws that differ from the Internal Revenue Code, and owners need to be aware of them.
Leon Dutkiewicz, a CPA with Margolis & Co. in Bala Cynwyd, Pa., noted that some states treat depreciation of assets differently from the federal government. That means two separate calculations for each item being depreciated. Another complication is for companies that do business in different states -- for example, a small retail chain. Chances are they have different tax laws, which again means separate calculations.
"Trying to keep current on federal tax law changes and state tax law changes where you do business and every locality, it becomes extremely difficult," Dutkiewicz said. "It's forever in flux at all levels."
The easiest way to keep up with those changes is to have a good tax professional who follows the tax laws. There are federal changes for 2008 that owners need to be aware of. Wind noted, for example, that if partnerships choose to get filing extensions past the April 15 deadline, they have to file their returns by Sept. 15, not Oct. 15 as in the past.
Many more changes are likely for the 2009 tax year with the government expected to have an economic stimulus plan in place, and many states are also likely to revise their own tax codes.
Tuesday, January 13, 2009
Choosing a Tax Preparer
For those who will hire a tax professional to prepare and file their tax returns, be careful when selecting one. Here are some things to keep in mind.
- Make sure your tax preparer is licensed to prepare taxes.
- Avoid prepares who guarantee you a refund.
- Avoid prepares who base their fee as a percentage of your refund.
- Do not sign any blank forms.
- Make sure you preparer will give you a copy of your tax return.
Keep in mind that even if you have a professional prepare and file your tax returns, you are still legally liable for what is filed. Be sure to check and re-check everything before you sign your tax return and ask a lot of questions if something is not clear.
Thursday, January 8, 2009
Tax Preparation Checklist
With the start of this year's tax season, we advise our tax preparation clients to organize their records early, so we have enough time to carelully review everything, before filing.
We especially encourage all new clients to go over the following checklist before scheduling an appointment.
TAX PREPARATION CHECKLIST
Please use the following checklist to help us in preparation of your tax return. Not all questions or categories will apply to you. Select those that do apply to you and make sure you have the requested information available.
Personal Information
Names
· Yours:
· Your Spouse’s:
· Your Dependents:
Social Security Numbers
· Yours:
· Your Spouse’s:
· Your Dependents:
Advance Child Tax Credit Payment
· Copy of the IRS notice announcing the amount of your payment
Childcare Costs
· Cancelled checks or invoices
· Childcare provider’s name, address and Social Security or Tax ID number
Education Costs
· Tuition amount for post high school education
· Form 1098-T
Income Tax Information
Income From Jobs
· Forms W-2
Investment Income
· Form 1099-INT (Interest Income)
· Form 1099-DIV (Divident Income)
· Form 1099-B (Sale of stocks or bonds)
· Schedule K-1 from investments in partnerships
· Schedule K-1 from investments in S Corporations
· Income from foreign investments
· Income from stock option exercises and sales (stock option agreement, statement and 1099-B)
Income from State and Local Income Tax Refunds
· Form 1099-G
Alimony Received
Business or Farming Income
· Accounting records for your business
· Bank Statements
Business or Farming Income (continued)
· Invoices for major purchases of machinery, equipment or furniture
· Logs of vehicle mileage usage
· Inventory records
· Home office
1. Square footage of your home office area
2. Total square footage of your home
3. Total rent paid or total mortgage interest paid
4. Property Tax payments
5. Home insurance payments
6. Utility bills
IRA / Pension Distributions
· Form 1099-R (payments from retirement plans)
· Contribution records
· Account summary of your retirement account
Rental Property Income
· Profit and loss statement
· Rental Income paid to you
· Mortgage interest paid Form 1098
· Property Tax payments
· Prior years losses
Unemployment Income
· Form 1099-G
Social Security Benefits
· Form SSA-1099
Imcome From Sales of Property (if the property was sold in year 2007)
· Sales proceeds: Bill of sale, escrow statement, closing statement, etc.
· Cost of the property sold
· Improvements made to the property
· Name address and Social Security number of the buyer
Miscellaneous Income
· Jury duty pay records
· Form W-2G (Gambling winnings)
· Prizes or awards received
· Director’s fees received
Adjustments
IRA Contributions
· Year end summary of your account
Student Loan Interest
· Form 1098-E
Medical Savings Account Contributions
· Account statement
Moving Expenses (Job Related)
· Invoices from moving companies
Self-Employed Health Insurance
· Insurance premium bills
Self-Employed Pension Plans
· Year end account summary
Alimony Paid
· Cancelled checks
Educator Expenses
· Expenses paid for classroom supplies
Itemized Tax Deductions
Interest You Paid
· Home mortgage interest on Form 1098
Charitable donations
· Bills, receipts or cancelled checks
· Estimated value of property given
Casualty and Theft Losses
· Description of property damaged or stolen
· Cost of property (receipts, bills or cancelled checks)
· Insurance payments received
Job Related Expenses
· Reimbursements from your employeer
· Union dues
· Gifts to clients
· Supplies
· Property purchased
· Uniform expenses
· Seminar fees
· Professional subscriptions
· Travel expenses
· Job search expenses
· Job related educational expenses
Other Tax Deductions
· Tax Return preparation fees
Medical and Dental Expenses
· Medical Bills
Taxes
· State and Local Income Taxes Paid
· Real Estate Taxes
· Personal Property Taxes
Information on household employees
· Wages paid during 2007
· Names and Social Security numbers
Tax Payments
· Quarterly estimated tax payments
Energy-saving Purchases
· Bill of sale for a hybrid automobile purchased in 2007
· Receipts of energy-saving improvements to your home
We especially encourage all new clients to go over the following checklist before scheduling an appointment.
TAX PREPARATION CHECKLIST
Please use the following checklist to help us in preparation of your tax return. Not all questions or categories will apply to you. Select those that do apply to you and make sure you have the requested information available.
Personal Information
Names
· Yours:
· Your Spouse’s:
· Your Dependents:
Social Security Numbers
· Yours:
· Your Spouse’s:
· Your Dependents:
Advance Child Tax Credit Payment
· Copy of the IRS notice announcing the amount of your payment
Childcare Costs
· Cancelled checks or invoices
· Childcare provider’s name, address and Social Security or Tax ID number
Education Costs
· Tuition amount for post high school education
· Form 1098-T
Income Tax Information
Income From Jobs
· Forms W-2
Investment Income
· Form 1099-INT (Interest Income)
· Form 1099-DIV (Divident Income)
· Form 1099-B (Sale of stocks or bonds)
· Schedule K-1 from investments in partnerships
· Schedule K-1 from investments in S Corporations
· Income from foreign investments
· Income from stock option exercises and sales (stock option agreement, statement and 1099-B)
Income from State and Local Income Tax Refunds
· Form 1099-G
Alimony Received
Business or Farming Income
· Accounting records for your business
· Bank Statements
Business or Farming Income (continued)
· Invoices for major purchases of machinery, equipment or furniture
· Logs of vehicle mileage usage
· Inventory records
· Home office
1. Square footage of your home office area
2. Total square footage of your home
3. Total rent paid or total mortgage interest paid
4. Property Tax payments
5. Home insurance payments
6. Utility bills
IRA / Pension Distributions
· Form 1099-R (payments from retirement plans)
· Contribution records
· Account summary of your retirement account
Rental Property Income
· Profit and loss statement
· Rental Income paid to you
· Mortgage interest paid Form 1098
· Property Tax payments
· Prior years losses
Unemployment Income
· Form 1099-G
Social Security Benefits
· Form SSA-1099
Imcome From Sales of Property (if the property was sold in year 2007)
· Sales proceeds: Bill of sale, escrow statement, closing statement, etc.
· Cost of the property sold
· Improvements made to the property
· Name address and Social Security number of the buyer
Miscellaneous Income
· Jury duty pay records
· Form W-2G (Gambling winnings)
· Prizes or awards received
· Director’s fees received
Adjustments
IRA Contributions
· Year end summary of your account
Student Loan Interest
· Form 1098-E
Medical Savings Account Contributions
· Account statement
Moving Expenses (Job Related)
· Invoices from moving companies
Self-Employed Health Insurance
· Insurance premium bills
Self-Employed Pension Plans
· Year end account summary
Alimony Paid
· Cancelled checks
Educator Expenses
· Expenses paid for classroom supplies
Itemized Tax Deductions
Interest You Paid
· Home mortgage interest on Form 1098
Charitable donations
· Bills, receipts or cancelled checks
· Estimated value of property given
Casualty and Theft Losses
· Description of property damaged or stolen
· Cost of property (receipts, bills or cancelled checks)
· Insurance payments received
Job Related Expenses
· Reimbursements from your employeer
· Union dues
· Gifts to clients
· Supplies
· Property purchased
· Uniform expenses
· Seminar fees
· Professional subscriptions
· Travel expenses
· Job search expenses
· Job related educational expenses
Other Tax Deductions
· Tax Return preparation fees
Medical and Dental Expenses
· Medical Bills
Taxes
· State and Local Income Taxes Paid
· Real Estate Taxes
· Personal Property Taxes
Information on household employees
· Wages paid during 2007
· Names and Social Security numbers
Tax Payments
· Quarterly estimated tax payments
Energy-saving Purchases
· Bill of sale for a hybrid automobile purchased in 2007
· Receipts of energy-saving improvements to your home
Friday, December 12, 2008
Unemployment Compensation
With the record unemployment in the US, more and more people will receive unemployment compensation and benefits.
A couple of important facts. Unemployment compensation is taxable and should be included in the taxpayer's gross income. In some cases, a taxpayer may be required to make estimated quarterly tax payments based on the unepmloyment compensation received, or he / she may voluntarily choose to have taxes deducted from his / her unemployment compensation payments. This can be done with Form W-4G.
A couple of important facts. Unemployment compensation is taxable and should be included in the taxpayer's gross income. In some cases, a taxpayer may be required to make estimated quarterly tax payments based on the unepmloyment compensation received, or he / she may voluntarily choose to have taxes deducted from his / her unemployment compensation payments. This can be done with Form W-4G.
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