The Inflation Reduction Act

Inflation Reduction Act Tax News

This information on The Inflation Reduction Act is shared from The Journal of Accountancy article, A deeper dive into the Inflation Reduction Act’s tax provisions

The budget reconciliation bill, P.L. 117-169, known as the Inflation Reduction Act, was signed into law on Aug. 16. It includes numerous tax provisions, including new corporate taxes. It also contains numerous clean-energy-related tax incentives and money for IRS enforcement and other initiatives.

Corporate Alternative Minimum Tax

The new corporate AMT is based on book income rather than taxable income. Specifically, it imposes a 15% tax on the excess of the corporation’s adjusted financial statement income over its corporate AMT foreign tax credit for the year.

Excise Tax on the Repurchase of Corporate Stock

The act introduces a new 1% excise tax on corporate stock repurchases (new Sec. 4501). Covered corporations must pay the tax on the fair market value (FMV) of any stock the corporation repurchases during the tax year.

Clean Energy Provisions for Individuals

The Sec. 25C nonbusiness energy property credit is extended through 2032 and is renamed the energy-efficient home improvement credit. The amount of the 25C credit is changed from a $500 maximum lifetime credit to a credit of up to $1,200 per year.

Clean Vehicle Credits

The act also removes the limitation on the number of vehicles eligible for the credit, so electric vehicles purchased from manufacturers that had formerly reached their cap will now be eligible for the $7,500 credit. It also imposes a new requirement that a percentage of critical minerals used in the car must have been extracted or processed in the United States or in a country with which the United States has a free trade agreement or recycled in North America.

Clean Energy Manufacturing

The act extends the Sec. 48C advanced energy project credit by making allocations for up to $10 billion more in awards for qualified investments, effective Jan. 1, 2023. To encourage the clean production of electricity, the act creates a new credit for the production of electricity at qualified facilities placed in service after Dec. 31, 2024, with a greenhouse gas emissions rate of zero.

Energy Provisions for Businesses

The Sec. 45 credit for electricity produced from certain renewable sources (including geothermal, solar, and wind facilities) is extended through 2024. Sec. 48 is also amended to provide an increase in the energy credit for qualified solar and wind facilities placed in service in connection with low-income communities. The act creates a zero-emission nuclear power production credit and introduces an alternative deduction under Sec. 179D for taxpayers that retrofit property to be more energy efficient.

Treating clean energy tax credits as payments

Under new Sec. 6417, eligible taxpayers can elect to treat a multitude of eligible energy credits as tax payments. These range from alternative fuel refueling property credits to clean electricity investment credits. Under new Sec. 6418, eligible taxpayers generally can transfer these credits (except the qualified commercial vehicle credit) in any tax year to another taxpayer.

To make sure you maximize your refund, consider having your taxes done by a professional tax expert who will know all the relevant tax laws for your situation.

Georgen Scarborough Associates provides tax preparation services. If you need help or advice filing your tax return and reaping the benefits of the latest tax laws, please contact one of our tax preparation experts today.

Why We Recommend QuickBooks for Small Business Owners

Why small business owners should use QuickBooks

Not using QuickBooks? You should be! QuickBooks is essential for small business owners. Here’s why we recommend that all small business owners use QuickBooks today.

It Helps With Sales Management

Cannot afford to hire a huge sales team? QuickBooks helps small businesses to efficiently monitor their sales. Whether you are starting or growing your company, you need to keep track of customer sales to track your income and expenses. With QuickBooks, you can see who owes you (your accounts receivable) and review sales reports that will help your business to keep track of your invoices without having to hire a big sales team. 

QuickBooks Tracks Business Expenses

Are your expenses exceeding your income? As a small business owner, you need to carefully keep track of your expenses to ensure you don’t land in debt. QuickBooks automatically does this by keeping track of your bills and expenses. You can also record transactions that you make to QuickBooks. It will not only help you to eliminate unnecessary expenses but it can also pay your bills in time for you.

You Can Gain Insights Into Your Business Performance

When you use QuickBooks to manage your income and expense, you get access to valuable financial reports. These reports are automatically updated as your business progresses. The info can help you to gain potential investors or even a line of credit for your small business which will help it to grow.

How To Begin Your QuickBooks Journey

Now that you know some of the benefits you can receive from QuickBooks, it’s time to get started. If you have staff on hand who already know how to navigate through QuickBooks, great. If you don’t, you may want to consider hiring a QuickBooks advisor such as the professionals from Georgen Scarborough who can train your staff and provide you with tips to take your small business to the next level.

For help with using QuickBooks, be sure to contact our team today!

How Adding a 401(k) Can Improve Your Business

How adding a 401(k) can improve your business

A 401(k) plan has a lot of benefits for businesses. It is important to employees but it can also help you to retain and attract new talent. We discuss why adding a 401(k) plan is the right move for your business.

Benefits of Adding a 401(k) Retirement Plan To Your Business

Retirement benefits can help to improve your business outlook. Here are some ways it achieves this goal:

  • It helps your business to recruit the best talent

It can be tough to find the right candidates for your business. When candidates and potential staff are considering your business, they don’t just look at the salary on offer, but they also consider retirement benefits to be important to them. Adding a 401(k) plan can help your business hire and retain the best staff to help your company grow.

  • Lower tax for employees and employers

When business owners and employees contribute their salary to a 401(k) plan, their income is reduced, which puts them in a lower tax bracket. The result is they both pay a lower tax liability at the end of the financial year. 

  • Lower tax deductions for businesses

A 401(k) plan contribution by an employer may qualify as a business expense, which automatically makes them tax-deductible. Small businesses can especially benefit from 401(k) accounts as any matching or profit-sharing contributions are tax-deductible, giving them a much-needed saving on business tax.

How to add a 401(k) plan to improve your business?

Business tax can be a significantly large portion of a business’s expense. Small businesses and start-ups can benefit the most from taking advantage of a 401(k) plan for tax deductions. Larger benefits can increase productivity and employee loyalty to their business by providing them with retirement benefits. 

To add a 401(k) plan, you need to hire a financial accountant or bookkeeper who will help you with payroll services and retirement benefits. An accountant can help you with tax preparation and deductions that come from the 401(k) plan.

If you’re looking for a professional accountant to assist you with your 401(k) plan tax deductions, give us a call today!

5 Ways Your Non-Profit Can Save Money

Tax preparation for non-profit businesses

Is your non-profit organization experiencing cash-flow problems? Tax preparation is one way you can save money. Find out other ways to save money here.

  • Reuse and recycle material

Some non-profits require materials daily. These include t-shirts and posters for fundraising events. Although necessary, creating new material all the time can add up to costs in the long run. Save money by reusing and recycling material where possible. Ask staff to reuse dry clean t-shirts, table cloths, and covers and reuse posters where possible to save cash.

  • Recruit volunteers

Volunteers are a great option when you’re short-staffed. A lot of people want to help out non-profits that mean something to them and will be happy to do so without a paycheck. Make sure you provide them with reasons to join your non-profit, such as showing them how they will be helping others. You can also offer unpaid internships to younger members and provide them with a letter of completion at the end of the year to help them enter the workforce.

  • Try to go paperless

The cost of ink, paper, and even pens can start to add up. Apart from saving the environment, going paperless will reduce a lot of costs. Try investing in digital solutions and filing systems such as QuickBooks which make sorting documents easier and will save you money in the long term. Quickbooks is easy to learn but if you need a QuickBooks advisor, Georgen Scarborough can help out.

Did you know you can save money by hiring a professional such as an accountant to handle your taxes? It may seem tempting to do it yourself but an accountant can find you tax breaks you didn’t even know you had with a non-profit organization. Apart from that, they can also help you to reduce unnecessary expenses and provide you with tax advice.

Georgen Scarborough has professional tax accountants who can help you with your taxes, accounting, and finance. 

Give us a call today for tax preparation for your non-profit organization!

How to Avoid a Tax Audit

1-Nobody wants to be audited

Nobody wants to be audited. Thankfully there are ways to avoid a tax audit. Read on for ways to keep your business in the good books with the IRS. 

Avoid Accounting Errors 

A simple accounting error can turn into an audit if you aren’t careful. Make sure your calculations are correct. Avoid mathematical errors by hiring a professional accountant to help you out and double-check your numbers. 

Always Sign your Tax Returns 

A lot of people surprisingly forget to sign their tax returns. A failure to sign your returns will raise flags for the IRS. They might wonder why you did not sign and what you are hiding from them.

Don’t Underreport your Income 

Leaving out a sale from an asset or side income might be tempting but it can get you in trouble. If you get caught not reporting income, you can be forced to pay back taxes for it, which includes interest on your income tax. You can’t just get caught through your audit but you risk getting caught if someone who paid you for a product or service is audited and they link the cash back to you.

Don’t Underestimate your Deductions

Another temptation would be to deduct tax from a home office. Although some items are reasonable, don’t overestimate your expenses. Deducting a high amount for your rent for example should signal a red flag. Only deduct what you use for your business.

Don’t Fail to Hire a Professional 

It is best to hire a professional to assist you with your financial statements and audits to ensure that you are calculating your tax correctly. 

Avoid a tax audit by hiring the professionals at Georgen Scarborough – give us a call today!

How Summer Jobs Help Teens

Hiring a teen for a summer job can help them to gain valuable skills. Here’s how summer jobs help teens, as well as how we can help you with tax preparation for teens. 

Why include teens in job programs and internships?

1.  It teaches teens responsibility 

Some teens do not yet realize the hard work needed to become successful. Helping them to enter the workplace and introducing them to corporate life will teach them how to earn their money and the responsibilities that come with having a job. They will learn how to accept feedback and the value of teamwork, among other responsibilities.

2.  A summer job teaches valuable skills

Teens can learn valuable skills such as good ethics and time management through summer jobs. These lessons are important as they enter adulthood and learn to be responsible working adults. 

3. Build teens’ self-esteem 

Teens are growing up in a digital age where they tend to compare themselves to others on social media. Their self-esteem can take a dive but with a job, they can grow their confidence and feel better about their achievements in life. 

4. Jobs provide independence 

A summer job is a good way for teens to gain independence from their parents. Earning their own money will help them to save up for college or eventually start their own business. They will also learn to be tax-abiding citizens. 

How can we help you with tax preparation for summer jobs?

If you are hiring teens even for summer jobs, or your teen is looking for a summer job, you will need to check the tax implications. At Georgen Scarborough, we help families and businesses with their tax preparation, payroll services, and financial audits. We can help you to sort out your tax documents and help your business with payroll for teens. 

For more information on our tax preparation and accounting services, call us today!

Tax Considerations When Forming a Business Entity

1-tax considerations wehn choosing a business entity

Tax preparations can be complicated. The type of tax you pay will depend on the type of business entity you have. If you need to know whether you are on the right track or if you plan on changing your business structure, this guide will help you out. 

Tax Considerations According to a Business Entity 

Regardless of whether you own a sole proprietorship or a limited liability company, you are going to need to pay tax, but will you have to file for tax as an individual or business entity? You might decide to change your business based on tax implications, or your financial status. Before you decide, here are some tax considerations for each business type.  

  • Sole proprietorship 

A sole proprietorship owned-business is probably the least complicated when it comes to filing taxes. According to the IRS, you would not be taxed as a business entity but rather as a business owner. What this means is your business assets and liabilities belong to you and you will have to pay individual taxes on these. 

  • General partnership 

A partnership operates similarly to a sole proprietorship. It is also not taxable as a business entity. All the owners will legally have the responsibility to pay tax on their terms. Income tax is paid according to the partner’s tax rates and not a partnership income tax. 

  • Limited liability company 

Limited liability companies (LLCs) are treated as partnerships, unless it elects to be treated as a corporation. LLCs’ tax considerations work according to the personal tax returns of the owners. All income and loss and tax due are paid by individuals. 

  • C corporations

Corporations can be complicated and costly in comparison with LLCs and partnerships. A regular corporation or C corporation has to pay corporate income tax that is taxed at the corporate level. They are also subject to potential double taxation. Double taxation occurs on taxable dividends, i.e., the profits of the business that are distributed to owners. What this implies is that the Corporation will have to pay tax on its profits and the individual shareholders will pay tax on the dividends they receive. Let’s not forget that you also need to pay taxes if you receive a salary from the Corporation.

  • S corporation 

S corporations are a little less complicated as the IRS treats them as a pass-through entity for tax purposes. Shareholders will pay tax on the income of the business as individuals.

Tax preparation can be overwhelming for any business entity but at Georgen Scarborough, we handle all your tax considerations, financial statements, and audits. From your estate and trust tax preparation to LLC tax preparation, we can ensure that your business’s taxes and accounting are taken care of. 

For professional tax preparation, you can trust, give our team of experts a call today!

How to Determine your Estimated Taxes for 2023

How to determine your estimated taxes

Sole proprietors, partners, and S corporation shareholders should make estimated tax payments if they expect to owe $1,000 or more when their return is filed. However, many people are uncertain how to go about figuring out their estimated taxes for a given year, let alone paying them. Here is a simple guide to determining your estimated taxes for 2023.

Estimating tax using Form 1040-ES

Most individuals use Form 1040-ES to determine their estimated taxes. It is a fairly simple calculation, provided you can provide all of the following:

  • Expected adjusted gross income
  • Deductions
  • Taxable income
  • Taxes
  • Credits

You can use your income, deductions, and credits for the prior year as a starting point, referring back to the federal tax return you previously filed.  Form 1040-ES includes a worksheet that you can use to figure out your taxes, based on these amounts. You need to estimate the amount of income you expect to receive for the coming year. If your estimated amounts are too high or too low, you can always complete another Form 1040-ES in the following quarter, adjusting the estimates you previously made. It is best to try to make your estimations as accurate as possible, however, in order to avoid penalties.

C-Corporations can follow a similar procedure, except that they use Form 1120-W. 

If you are not comfortable estimating your taxes and completing your Form 1040-ES, or if you run a business and would like to outsource your accounting and tax functions to qualified, certified accountants, contact Georgen Scarborough. We are a firm of CPA’s in Vienna, VA, and we will be happy to handle your estimated tax calculations.

How to Write a Financial Statement For a Non-Profit

How to write a financial statement for a non-profit

A financial statement for a non-profit is much more than just a collection of figures and accounting data. While the financial statement does indeed document a non-profit’s incoming and outgoing cash flows for a certain period, it actually does much more than that. It is, in fact, the key to a non-profit’s ability to conduct business successfully and sustainably. By recording the donations, grants and expenditures of the non-profit, a financial statement enables a non-profit to show its business dealings transparently, attract donors and ensure compliance with the relevant authorities. These statements are usually also required for tax purposes.

What goes into a financial statement?

To get a better understanding of the non-profit financial statement, let’s break it down into its four constituent parts and examine each separately. Each financial statement that is drawn up for a non-profit consists of the following:

  • Statement of Financial Position
  • Statement of Activities
  • Statement of Cash Flows
  • Statement of Functional Expenses

The Statement of Financial Position is a summary of the non-profit’s balance sheet at the end of a specific period—usually a particular financial year. It shows the organization’s assets minus its liabilities, reflected in the equation Assets = Liabilities + Net Assets. A non-profit’s assets are all the items or property that it owns or benefits from. Liabilities are what the organization owes. The net assets consist of the dollar value of the residual assets left over once liabilities are taken into account.

The Statement of Activities (income statement) reflects all the business activities conducted by the organization within the given period: all the incoming transactions versus the various expenses. The difference between these two is the change in net assets (net income) for the given period.

The Statement of Cash Flows records all of the movements of money into and out of the organization, providing explanations for all of the revenue and expenses reflected in the previous statements. A Statement of Cash Flows is divided into operating, investing, and financing activities.

The Statement of Functional Expenses shows expenses of each functional area of the organization, such as programs, fundraising, and management. This is most beneficial to non-profits because it enables them to show potential donors exactly how their money is being spent.

If you run a non-profit, you need accurate and thorough financial statements. It is always best to give this task to experienced certified public accountants. Georgen Scarborough is a firm of CPA’s in Vienna, VA. Contact us for more information.

The Tax Benefits of Homeownership

The Tax Benefits of Homeownership

There are many tax benefits that people who own homes can reap. One of the main tax benefits of homeownership is that they don’t have to count the rental value of their home as taxable income—also called imputed rent. This means that their home can be a source of income that is not taxed. Here are some more tax benefits that homeowners get:

Mortgage Interest Deduction.

Homeowners who itemize deductions can reduce their taxable income by deducting the interest they pay on a home mortgage. Taxpayers who don’t own homes don’t have this benefit. This tax break was further defined by the Tax Cuts and Jobs Act. 

Property Tax Deduction.

These homeowners can also reduce their taxable income when they deduct their property taxes, as this will effectively be a transfer of federal funds to jurisdictions that impose a property tax, which lets them raise property tax revenue at a lower cost to their constituents. 

Profits From Home Sales.

Generally speaking, when a taxpayer sells an asset, they must pay capital gains tax on any profits, but homeowners may exclude from taxable income up to $250,000 (or $500,000 for joint filers.) if they meet the criteria as follows:

  • They must have owned and occupied the home for 2 years of the preceding 5 years as a primary residence.
  • They may not have claimed the capital gains exclusion in the past two years for the sale of another home, with some exceptions.

These deductions and exclusions are generally worth more to taxpayers in higher tax brackets. Compared to homeowners in lower-income tax brackets, those with higher incomes face higher marginal tax rates and pay more property tax and mortgage interest. This means that they will most likely itemize their tax deductions on their tax returns.