Financial accounting and financial statements are a vital part of a company’s operations. They enable management to make current and future decisions on the basis of accurate data. Properly kept and presented financial records allow companies and outside parties to get a complete picture of the organization’s financial health. Financial statements inform decision-making in the following ways.
QuickBooks is an extremely useful tool, and makes it easier than ever for businesses to stay on top of their finances. However, not all businesses use this tool effectively. A QuickBooks advisor is often necessary to help you make the most of this powerful software.
There are a lot of factors affecting the federal tax outlook for 2021-2022: a global pandemic and recession; business closures and job losses; both houses of Congress controlled by the Democrats; and a significant policy shift in the Executive Branch. We can expect some major changes in tax laws, which will affect the finances of all Americans in one way or another.
While Congress and the Biden White House are still in the process of ironing out the details, some general trends are emerging, which will likely characterize the operations of the federal tax system for at least the next four years. Without spending too much time on the details of the laws and regulations, let’s consider what you need to do to lower your tax bill in light of the new fiscal outlook.
Make the most of the standard deductions
While some of the deduction guidelines and limits are set to change, your approach should remain the same: always strive to get the maximum benefit. If your total itemizable deductions are close to your standard deduction amount, consider accelerating any charitable deductions in the current year to exceed the standard deduction. In this way, you will be making payments that will lower this year’s tax bill.
Be mindful of the Biden administration’s proposed changes
President Biden will be introducing a number of changes to the tax laws that are set to favor lower-income earners while placing heavier obligations on the wealthy. Those who earn in excess of $400,000 per year will have to pay more in taxes. Tax breaks on real estate and inheritances will fall away, and more stringent limits will be placed on itemized deductions.
Individuals and families in lower to middle-income brackets will receive a few additional tax breaks. Speak to a certified public accountant about how these will affect your situation and how you can adjust to accommodate the changes, and either soften their impact or make the most of the potential benefits.
A certified public accountant can help you navigate the changes to tax laws, manage your gains and losses and get the most of the deductions and benefits while maintaining 100% compliance with shifting regulations. Contact Georgen Scarborough to see we can assist you with your federal tax outlook for 2021 and 2022.
None of us gets out of filing our taxes and dealing with the IRS – it’s one of life’s certainties. Taxes can be complicated and intimidating, so here are five expert personal tax tips to make them a little easier to manage.
1. Never ignore the IRS
People who ignore the IRS do so at their peril. If you don’t file or pay your taxes, or do either of these after the stipulated deadlines, you could face hefty penalties and the IRS can seize assets. If you receive any communication from the IRS, pointing out any errors or missed deadlines, respond immediately. The worst thing you can do is ignore it.
2. “Bunch” your deductions
To ensure you can take the maximum deductions applicable in a particular year, you can “bunch” them together. What this means is that you time your deductible expenses into the same calendar year. You can achieve this by moving forward certain deductions from the current year into the next, assuming that you meet the thresholds for the current year.
3. Max out your retirement plan contributions
Whatever you are paying into your 401k or other tax-deferred retirement scheme, do your best to increase your payments if you can. The money you pay into these accounts reduces your tax liability. You won’t have to pay taxes on it until you withdraw it. This excellent saving incentive is also a great way to lower your tax bill.
4. Be careful of tax scams
If you start getting phone calls or emails claiming to be from the IRS or the U.S. Treasury, do not respond to them. It is quite common for scammers to try these tactics as tax season approaches. Be careful not to fall into their trap. Don’t worry though; it’s pretty easy once you know that the two government institutions will never contact you in this way; they will only reach out to you by mail when necessary.
5. Get the help of a certified public accountant
Tax laws and procedures seem to get more complicated by the year. Even if you successfully manage to file your own taxes, you may very well not be getting the full benefits of the various deductions and tax breaks that might be available to you. Get the help of a professional when it comes to filing your taxes. It takes the burden off your shoulders, ensures that it gets done correctly, and may help you get more money back into your pocket.
Most businesses are happy to let their in-house accountants run their financial affairs alone. However, a CPA can help you optimize your business and tax matters with a level of professional service that your accountant may not necessarily be able to deliver. Most importantly, the services of a CPA could potentially save you a lot of money.
One of the reasons why a business owner might avoid hiring a CPA is the cost involved with securing this service. The truth is that, while a CPA may increase your costs in upfront fees, they will also offset those fees to a large extent through the savings they are able to create for you.
The cost-saving benefits of CPAs
Having a professional tax practitioner on your side will offer you several benefits, including, but not limited to, the following:
- They can help reduce your tax liability.
- They can do your tax planning in an efficient and timely manner to avoid any surprises.
- They help you set up deferred savings programs to enable your business to maximize tax advantages.
- They can advise on changes and improvements to help you increase your business’s profitability.
The financial situation is constantly in flux, with both your business circumstances and the legal frameworks changing regularly. A simple mistake or failure to keep up with the changes can lead to problems with the IRS, possibly resulting in penalties, interest, even legal trouble. If you bring a certified public accountant onto your team, you can either avoid such issues or have the means to deal with them most efficiently and with the least possible damage when they do arise.
Every small business wants to find the best ways to reduce their tax liability and better conduct their affairs with the IRS. Also, in 2021, as many companies face reduced income due to the COVID-19 pandemic, business owners will be looking for ways to cut costs wherever possible. Here are five key small business tax tips to help you do so.
1. See if your business is eligible for different tax treatment
Many small businesses can deduct 20% of their qualified income in calculating their taxes. This deduction generally applies to pass-throughs (companies where the owners pay the taxes themselves). The Tax Cuts and Jobs Act of 2017 reduced C-corporations’ tax rate to a flat 21%. Your tax practitioner can advise you as to whether it is better to stay a pass-through business or make the transition to a C-corporation.
2. Increase your business savings plan – or get one started
Small businesses have the option of running a variety of retirement plans for their employees, such as 401k, Simple IRA and SEP IRA. The contributions the company makes to these funds are tax-deductible. If you already have one of these plans in place, it might pay off to increase your contributions. If you don’t have one, you should definitely get one going this year.
3. Invest in new equipment
If you buy new or used equipment and put it into service before the end of the tax year, you could be entitled to a federal tax deduction of up to $1.05 million. The cap on this expenditure is $2.62 million. If you spend on new equipment within those limits, you could claim back a considerable amount of money.
4. Contribute to charity
Charity contributions are a well-known method of reducing tax liability. You can usually deduct the equivalent of the fair market value of the assets you donate. Consult your certified public accountant to find the best way to make this method work for you.
5. Make the most of your losses
If, like many business owners, you have seen a significant reduction in income during 2020, you can use the provisions of the CARES Act to apply a net operating loss to income from the past five years for a potential immediate refund. Speak to a tax practitioner to see if this applies to you and how to make the claim.
Filing your taxes can be stressful, especially if your tax return is any more complex than a standard individual W-2. Getting a CPA to do your taxes, rather than doing it yourself, can save you a lot of hassle and possibly some money. Here are five reasons why you may want to hire a certified public account to take your tax filing burden off your shoulders.
1. You have a small business or additional income streams
If you run a small business, you may not be aware of the numerous tax write-offs you can claim to save you money. If you have a side hustle or are working in the gig economy with several income streams, your return becomes a lot more complicated, but a professional can help you complete it without too much fuss.
2. The IRS asks for specific information
Many people find it very stressful if the IRS reaches out to them to ask for substantiation of income or expenses or other documentation. If you get a professional tax practitioner on your side, you can eliminate this stress. They will know how to deal with the IRS and help you comply.
3. You’re self-directing your retirement
If you have other investments to fund your retirement, aside from your 401k, that’s called self-directing. Filing for personal investments such as cryptocurrency or real estate can get a little tricky for the layperson. That’s why you may need a CPA to do the filing for you.
4. You have a rental property
If you are earning income by charging rent on one or more of your properties, you should seek the advice of a tax practitioner to see where you can make deductions.
5. You want to send your children to college
If you are planning on filling out a Free Application for Federal Student Aid (FAFSA), you would do well to seek out the help of a CPA. Unwanted assets or income in your child’s name could adversely affect the application, even if it works from a tax planning perspective. Let a professional help to make the right adjustments in this regard.