Posts Tagged "Accounting"

Tax checklist for business startups

Posted on Mar 21, 2018

Starting your own business can be equal parts thrilling and intimidating. Complying with regulations and tax requirements definitely falls into the latter category. But, with some professional help, it doesn’t have to be that way. You can get started with this checklist of things you’ll need to consider. Are you a hobby or a business? This may seem basic to some people, but the first thing you’ll have to consider when starting out is whether you really are operating a business, or pursuing a hobby. A hobby can look like a business, but essentially it’s something you do for its own sake that may or may not turn a profit. A true business is generally run for the purpose of making money and has a reasonable expectation of turning a profit. The benefit of operating as a business is that you have more tax tools available to you, such as being able to deduct your losses. Pick your business structure. If you operate as a business, you’ll have to choose whether it will be taxed as a sole proprietorship, partnership, S corporation or C corporation. All entities except C corporations “pass through” their business income onto your personal tax return. The decision gets more complicated if you legally organize your business as a limited liability corporation (LLC). In this case you will need to choose your tax status as either a partnership or an S corporation. Each tax structure has its benefits and downsides – it’s best to discuss what is best for you. Apply for tax identification numbers. In most cases, your business will have to apply for an employer identification number (EIN) from both the federal and state governments. Select an accounting method. You’ll have to choose whether to use an accrual or cash accounting method. Generally speaking, the accrual method means your business revenue and expenses are recorded when they are billed. In the cash method, revenue and expenses are instead recorded when you are paid. There are federal rules regarding which option you may use. You will also have to choose whether to operate on a calendar year or fiscal year. Create a plan to track financials. Operating a business successfully requires continuous monitoring of your financial condition. This includes forecasting your financials and tracking actual performance against your projections. Too many businesses fail in the first couple of years because they fail to understand the importance of cash flow for startup operations. Don’t let this be you. Prepare for your tax requirements. Business owners generally will have to make quarterly estimated tax payments to the IRS. If you have employees, you’ll have to pay your share of their Social Security and Medicare taxes. You also have the obligation to withhold your employees’ share of taxes, Social Security and Medicare from their wages. Your personal income tax return can also get more complicated if you operate as one of the “pass-through” business structures. This is just a short list of some of the things you should be ready to discuss as you start your business. Knowing your way around these rules can make the difference between success and failure, but don’t be intimidated. Help is available so don’t hesitate to call if you have any questions. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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4 Business Year-End Tax Moves

Posted on Dec 12, 2017

Even though the end of 2017 is near, it is not too late to get your business into the best possible tax position for the new year. Here are some year-end tax moves to consider: Update the office. A fresh coat of paint and new office furnishings not only make your place of business more comfortable, they also provide another tax deduction. How you handle deducting these expenses will vary depending upon whether you own or lease your office space, so reach out for assistance if you have questions. Reward your staff. If you have sufficient cash flow, giving your staff a yearend bonus is a great way to let them know you appreciate them. It’s also tax deductible. Update your skills. Attend a workshop or conference to improve your professional skills. While there are some limitations, many travel, lodging and out-of-pocket expenses related to professional training are tax-deductible. Be nimble. Recent discussions in Congress could mean a dramatic change in taxes on business profits beginning in 2018. Stay abreast of these developments in case you need to make last-minute moves to shift profits from one year to the next to reduce your tax rate. There are a lot of nuances in the tax code affecting each of these end-of-year moves. Don’t hesitate to get in touch if you need...

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Get ready to save more in 2018

Posted on Dec 5, 2017

You can save more for retirement next year using tax-advantaged accounts, thanks to a boost in the maximum 401(k) contribution rate by the IRS. The maximum rate increases by $500 to $18,500, which is the first increase in three years. Those aged 50 or older can still contribute an additional $6,000 on top of that amount. This is good news, because a 401(k) is one of most potent tools in your retirement arsenal. It offers many benefits over other forms of saving, including: Tax-deferred growth. Pre-tax income of $18,500 invested over 30 years with 6 percent annual cumulative interest will grow to $111,901.92. That’s compared with $67,588.76 of the same amount of income invested after being taxed at the highest rate. While you’ll owe tax on 401(k) withdrawals after retirement, you may be able to manage your 401(k) withdrawals to fall into a lower income bracket. Roth option. You may opt to make your contributions to a 401(k) as a Roth investment, meaning you invest post-tax income, but you can withdraw from your Roth tax-free during retirement. A mix of traditional and Roth accounts will give you flexibility to manage your income tax rate during retirement. Company match. Many companies offer to match the first few percentage points of their employees contributions to a 401(k). Even if you can’t max out your contribution, you should try to invest up to your company’s match limit. Otherwise, you’re just leaving money on the table. While 401(k)s have great utility, they come with a few downsides. Any withdrawals made before age 59 1/2 are assessed a 10 percent penalty fee, in addition to being taxed as regular income during the year they are withdrawn. Any investments in 401(k)s also are limited to a few choices set by your employer’s retirement plan, so a limited number of conventional investment options in mutual funds is one of the trade-offs of using a...

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6 must-dos when you donate to charity

Posted on Nov 15, 2017

Donations are a great way to give to a deserving charity, and they also give back in the form of a tax deduction. Unfortunately, charitable donations are under scrutiny by the IRS, and many donations without adequate documentation are being rejected. Here are six things you need to do to ensure your charitable donation will be tax-deductible: 1. Make sure your charity is eligible. Only donations to qualified charitable organizations registered with the IRS are tax-deductible. You can confirm an organization qualifies by calling the IRS at (877) 829-5500 or visiting the IRS website. 2. Itemize. You must itemize your deductions using Schedule A in order to take a deduction for a contribution. If you’re going to itemize your return to take advantage of charitable deductions, it also makes sense to look for other itemized deductions. These include state and local taxes, real estate taxes, home mortgage interest and eligible medical expenses over a certain threshold. 3. Get receipts. Get receipts for your deductible contributions. Receipts are not filed with your tax return but must be kept with your tax records. You must get the receipt at the time of the donation or the IRS may not allow the deduction. 4. Pay attention to the calendar. Contributions are deductible in the year they are made. To be deductible in 2017, contributions must be made by Dec. 31, although there is an exception. Contributions made by credit card are deductible even if you don’t pay off the charge until the following year, as long as the contribution is reported on your credit card statement by Dec. 31. Similarly, contribution checks written before Dec. 31 are deductible in the year written, even if the check is not cashed until the following year. 5. Take extra steps for noncash donations. You can make a contribution of clothing or items around the home you no longer use. If you decide to make one of these noncash contributions, it is up to you to determine the value of the contribution. However, many charities provide a donation value guide to help you determine the value of your contribution. Your donated items must be in good or better condition and you should receive a receipt from the charitable organization for your donations. If your noncash contributions are greater than $500, you must file a Form 8283 to provide additional information to the IRS about your contribution. For noncash donations greater than $5,000, you must also get an independent appraisal to certify the worth of the items. 6. Keep track of mileage. If you drive for charitable purposes, this mileage can be deductible as well. For example, miles driven to deliver meals to the elderly, to be a volunteer coach or to transport others to and from a charitable event, can be deducted at 14 cents per mile. A log of the mileage must be maintained to substantiate your charitable driving. Remember, charitable giving can be a valuable tax deduction – but only if you take the right...

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The Equifax breach and you: be proactive

Posted on Nov 8, 2017

Earlier this year, hackers were able to breach the security of Equifax, one of the three national credit reporting agencies. More than 143 million Americans – nearly half the entire country – were exposed to the attack, and may have had their personal information stolen (including names and birthdates, and Social Security and driver’s license numbers). Equifax is still determining exactly whose data has been exposed. While you wait to find out, it’s worth taking a few proactive steps to make sure your info isn’t misused by hackers. 1. Start checking. Visit Equifax’s website at www.equifaxsecurity2017.com and enter your last name and last six digits of your Social Security number. The site will tell you whether it’s likely or not your data has been exposed, and put you on a list to get more information. You can also sign up for a year’s worth of free credit monitoring. 2. Watch your statements. Start checking your credit card statements, and pay special attention to cards you don’t use often. The initial reports from the breach were that hackers may have been making charges on underused cards. 3. Check your credit reports. You can look for suspicious items on your reports,such as new accounts being opened in your name, at all three credit report agencies: Equifax, Experian and TransUnion. Free annual reports are available at www.annualcreditreport.com. You may want to stagger your use of the reports to one from each agency every four months. More frequent checks will cost you a small fee. 4. Freeze your credit. If you suspect you may become a victim of identity theft, you can place a credit freeze on your profile at each of the three credit reporting agencies. This stops new accounts from being opened in your name. Note that you’ll have to unfreeze your accounts if you want to apply for new loans or make your credit accessible for things such as job applications. 5. File your taxes early. One of the most common ways identity thieves use your information is to try to claim a tax refund with your data. This was the most common scam in 2016, according to the Better Business Bureau. If you file your tax return as early as possible, you shut down this opportunity for any would-be...

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