How Do I File for an Extension?

federal tax return

From individuals and families to non-profits and government contractors, tax season seems to appear faster and faster each year. An extension of time to file gives you more time to prepare your federal tax return.

Although you may request up to an additional six months to file your individual income tax return, this does not grant you any extension of time to pay your taxes. It is also essential that you apply for an extension no later than the regular due date of your return.

Here are three ways you can request an extension:

1. E-file Your Extension Request 

Regardless of your income, individual tax filers can submit their Extension Request with the assistance of a tax professional who uses e-filing. Keep the electronic acknowledgement that the IRS has accepted your filing for your records.

2. Make a Payment and Get an Extension

Another way to get an extension is to pay all or part of your estimated income tax due and indicate that the payment is for an extension. Use IRS Direct Pay, EFTPS: The Electronic Federal Tax Payment System, or your credit or debit card. The confirmation number you receive for your records means that you do not have to fill out a separate extension form.

At Georgen Scarborough Associates, PC we have never wavered from our commitment to give each client the personal attention they deserve. For more information on how to apply for a tax return extension, please contact us today. Our tax preparation experts are ready to assist you with tax returns for individuals and small businesses.

Tax Laws That Can Save You Thousands

Tax regulations

Tax laws are continually changing, and it’s essential to be aware of all the new regulations, so you file your income taxes correctly and efficiently. By taking advantage of all new tax laws, you can potentially save thousands of dollars on your next tax return. Here are three of the recent income tax changes for the 2020 tax year that will affect many American taxpayers when they file their next return.

Recovery Rebate Credits 

The first round of stimulus payments ($1,200 single, $2,400 for couples), along with the second round ($600 per person) are tax free. These Recovery Rebate payments will not add to your 2020 taxable income. As these payments were technically advanced payments, you will have to calculate the amount you should have received. If you are owed more, you can get the difference back in the form of a refund, or a lower tax bill. Best of all, if you were overpaid, you will not need to repay the difference!

Sick and Family Leave Credits for Self-Employed

The new Families First Coronavirus Response Act has tax relief for self-employed people who couldn’t work due to coronavirus. Self-employed people might qualify for tax credits if they were unable to work for a reason that would have allowed them to claim coronavirus-related sick or family leave had they been an employee.

Boost Your Retirement Savings 

For those saving for retirement, the IRS has increased the employee contribution limit for 401(k), 403(b), and most 457 plans to $19,500, from $19,000 in 2019. For those over 50, the catch-up contribution limit has been raised to $6,500, from $6,000 in 2019.

Not being aware of changes in income tax laws could have you leaving thousands of dollars on the table. 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.

At Georgen Scarborough Associates, PC, we provide various accounting and tax services to people in Virginia, Maryland, and District of Columbia (DC). We provide tax preparation services for individuals, families, estates and trusts as well as other accounting services. If you need help or advice filing your tax return, please contact one of our tax preparation experts today.

Tax Tips for First-Timers

tax filing tips

Whether you have just reached adulthood, or are a new resident in America, the first time you file your income tax return can be a daunting experience. Here are some tips to help you through the process.

Do I even need to file a tax return? 

It’s possible that if your income is below a certain amount, you will not need to file an income tax return. However, if you want to claim any refundable tax credits, or get a refund for any income tax withheld from your paycheck, you must file a tax return.

Make sure you have all your tax documents 

Before you start, make sure you have all your tax documents ready. These can include:

  • W-2 (Wage and Tax Statement)
  • 1099 (Income other than employment income)
  • Educational expenses
  • Supporting documents such as receipts

What forms you need will depend on your individual circumstances, so think about things that could impact taxes like any change in your job, selling stocks or other investments, opening retirement accounts, or medical expenses.

Remember all your side income

If you have earned income from freelancing work like rideshare driving or deliveries, don’t forget to report that income on your tax return. You can often deduct expenses related to your work like maintenance costs to your car, insurance, supplies etc.

Claim all your relevant deductions and credits 

Deductions and credits can lower the amount of tax you owe or increase your refund, but you must file and claim them to take advantage of these. Common deductions for first-time filers include:

  • Education credits
  • Student loan interest deductions
  • Home office deductions for self-employed people

Choose how to file 

There are many ways to submit your income tax return. You can go old-fashioned and file by paper through the post office, but if you want your refund quickly, you should consider filing online or having your taxes done by a tax preparation service.

At Georgen Scarborough Associates, PC, we provide various accounting and tax services to people in Virginia, Maryland, and District of Columbia (DC). We provide tax preparation services for individuals, families, estates and trusts, and other accounting services. If you need help or advice filing your tax return, please contact one of our tax preparation experts today.

How using a CPA can save you money

CPA

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. 

Georgen Scarborough CPAs is based in Vienna, Virginia. Contact us for more information on how we can help you save money.

Top 5 small business tax tips

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.

Georgen Scarborough CPAs is based in Vienna, Virginia. For more small business tax tips and professional help filing your taxes, contact us

How the CARES Act affects Charitable Donations and Their Tax Implications

Charitable donations

2020 has been a tough year and COVID-19 has affected all individuals. Earlier this year the US government stepped in with the passing of the Coronavirus Aid, Relief & Economic Security (CARES) Act. The aim of the Act was to stabilize the US economy and offer relief to businesses and individuals adversely affected by the Coronavirus. The Act includes a provision that encourages taxpayers to increase their charitable giving during the pandemic.  How does the CARES Act affect charitable donations and tax implications for you? We have all the info you need!

Charitable Donations and Tax 

Standard deductions 

If you take the standard deduction in 2020, you can deduct up to $300 of charitable contributions to an eligible organization of your choice. Below are the standard deductions for 2020:

  • Single: $12,400
  • Head of household: $18,650
  • Married jointly filing: $24,800
  • Married filing separately: $12,400

For those who are over 65 and/or blind, this amount can increase by $1,300 per taxpayer. 

Itemized deductions

For itemized deductions, the adjusted gross income (AGI) for cash contributions was increased with the CARES act and affects individual donors. The limit has been increased from 60% to 100% for 2020 only. This means that any cash contributions you make can be deducted up to 100% of your AGI. 

Corporate giving 

The AGI limit for corporate donors was increased from 10%, meaning that corporations can now deduct up to 25% of taxable income for 2020 only. 

Conditions to qualify for tax benefits 

To qualify as a tax deduction, corporate taxpayers and individuals need to follow the guidelines below: 

Conditions that do not qualify include:

  • Property contributions
  • Marketable securities
  • Real assets
  • Corporate foundations
  • Private non-operating foundations
  • Family foundations
  • Charitable contributions made into a donor-advised fund

Do not forget, to qualify for the latest deduction limits of 100% for itemizing individual taxpayers and 25% for corporations, all charitable contributions must be made during 2020. Our team of expert accountants at Georgen Scarborough serves individuals, corporate businesses, and families with charitable donations and their tax implications. 

If you are focused on your charitable goals, we hope our guide helps you understand how the CARES Act affects charitable donation. 

Reasons to Choose Georgen Scarborough

Georgen Scarborough Associates takes the time to help you achieve your personalized financial goals. Some of the services we offer include:

  • Electronic filing (e-filing) for all tax returns
  • Income tax planning
  • Estimated tax preparation
  • Equipment depreciation, pension, 401K, and other tax services

For more information on government and tax implications, contact us today!

Best Practices for Tax Preparation for Small Business

Small business tax

It is not easy to run a small business! You have to ensure that you follow all regulations as well as satisfy all small business tax requirements. This can be particularly stressing during tax season and at the end of the financial year. Good business practice is important to manage and grow your business. Good practices can lead to more income if you want to sell your business in the long term or if you need to secure financial assistance. We have a checklist to ensure your tax preparation for your small business goes smoothly.  

Ensure your financial records are up-to-date 

It’s important to ensure all of your financial  records are kept up-to-date so that you reduce stress on yourself and your staff at the end of the financial year. Ask for regular reports and statements of all activity that occurs in your business. These include all tasks and their due dates, financial statements which include profit and loss statements and balance sheets. These financial statements will also help the quality of your business by helping you evaluate where your business needs improvement so that you implement the necessary changes. 

Monitor your payroll

It doesn’t matter what system you use for payroll, as long as it is done correctly and timely, preferably by a professional. You need to ensure that your payroll is up-to-date as the IRS requires filings every quarter. It also gives your business a good credit record which is advantageous to you in the long term with potential investors or banks. 

Properly classify your business 

Is your small business a Limited Liability Company (LLC), Corporation or Sole Proprietorship? Each classification has different regulations and tax requirements. Ensuring that your business falls under the correct category, and is classified by this, can save your business from paying extra on taxes. A good accountant can help you out with classifying your business and saving you the money you deserve. 

Sort out any personal affairs 

This is where the importance of adequate record keeping matters the most! Make sure any personal affairs are taken care of and that you are not leaving out deductions before filing for taxes. This will help you to avoid putting yourself at risk for an audit at the end of the financial year. It may be difficult for you or your staff to keep track of deductions throughout the year, especially if you have falling behind. This stresses the importance of an accountant to help you track your finances and to make your business life so much simpler. 

Hire the best accountant 

When it comes down to your small business tax preparation, you need to be sure that your forms are accurately filled. An expert accountant can help you to track your income and expenditure throughout the year so that your small business is prepared when tax season arrives. This reduces stress and time on you and your staff, as well as fulfilling your business’s statutory requirements. A good accountant should be one that specifically listens to you and your business needs, makes use of the best accounting software and has expert knowledge on the latest regulatory tax requirements. 

Georgen Scarborough Associates makes your small business tax preparation easier 

Good business practice ensures that your small business is a success and that everything runs smoothly when it comes to tax season, without legal implications. You are going to need a professional accountant to guarantee your business is a success and that your tax preparation is promptly taken care of. 

Our expert accountants at Georgen Scarborough Associates give each client the personal attention they deserve by providing quality service. We provide tax preparation for small businesses, help with your financial statements and audits, payroll services and analysis for your business. There is nothing we can’t handle! 

Using the latest technology and best accounting software for your small business tax, we can keep track of your financial position, properly classify your business and balance your accounts. This will help your small business to save money, prevent any legal issues from arising, and evaluate any weak points in your small business that needs improving. We do not just help you with your accounts, we help you to grow a legacy! 

For more information on tax preparation and practices for small business, contact us today! 

Guide to non-profit accounting

non-profit accounting

When you started your non-profit organization your zeal for ‘the cause’ may have outweighed the headaches associated with administrative and bookkeeping tasks that are crucial for your organization to function optimally. Many executive directors and board members are not trained accountants and may not know where to begin with sorting out their finances and budgets. Non-profit accounting is also very different from for-profit accounting, but if you set the following 6 basic structures in place, it will be a great start to running your non-profit accounting system successfully.

6 basics for non-profit accounting

  • Find a good non-profit accounting/bookkeeping solution
  • Get an accounting solution that can do fund accounting 
  • Find a method to create and analyze financial statements
  • You will need a way to record in-kind donations 
  • Open a separate bank account for your non-profit
  • Start with bank reconciliation and set up some budgets

Bookkeeping for non-profits

You will need to appoint a treasurer or financial officer to keep track of your organization’s financial records. Your treasurer will need a good bookkeeping system and invest in some non-profit friendly accounting software. Here at Georgen Scarborough we use Quickbooks Non-Profit Edition. This will make your treasurers’ life that much easier in keeping track of your organization’s finances.

Budgets

A budget is vital to make sure that your non-profit is on the right track financially. Budgets usually cover one fiscal year and have 2 main categories: Expected income and expected expenses. Creating a budget is easy if you keep in mind the following 4 steps:

  • Set goals – assess what you want your non-profit to achieve in the year ahead
  • Develop doable estimates for how much money it will cost to realistically achieve these goals
  • Estimate your income sources for the year
  • Alter budget to align expectations with reality

Your non-profit friendly accounting software should ultimately allow you to track how your income and spending for the year align with your annual budget goals.

Whether you are a new non-profit organization or not, let Georgen Scarborough Associates take the headache out of administrative tasks. For more information on accounting services for your non-profit get in touch with accounting company George Scarborough Associates today.

How Financial Statements help you plan for 2021

financial statements

Creating financial statements can seem tedious and complicated, but preparing these documents is a vital part of planning for the year ahead. Financial statements make up a large part of the projections and planning for your business’s future and can give you strategic guidance on crucial changes to make to ensure sustained success. 

How financial statements can help you plan for the year ahead 

While you are preparing your financial statements, you will become more aware of the status of your business’ finances, the progress you are making towards your goals, and will give you a clear view of any issues you might face down the road. 

Financial status overview 

Keeping close tabs on the financial status of your business is a must. The financial statements offer a summary of your business’s financial position. They can provide you with the information you need to help you set goals and understand where you might need to change your budget. If you regularly work through your financial statements, you will pick up any issues at an early stage, and you can make small changes before the finances go off the rails. 

Relating business goals into specific business targets 

The financial status overview is a powerful tool to help you create specific targets that will drive your business strategy towards achieving the goals you have set out for any given year. The adage goes that failing to plan means planning to fail, and it holds true in a business context. 

Measured targets will help to keep your business on track and will provide employees with structured outcomes to work towards. By creating specific targets, you can practically set out a roadmap that will lead your business to its goals, instead of making decisions on the fly without proper planning to back up actions. Through specific targets, you will be able to create a sustainable pace for the business while leaving room for direction changes necessitated by external factors that influence the business strategy. 

Measuring progress

Your financial statements contribute to most planning and strategic decisions and can help you measure the progress within your set of goals. If you have carefully set out specific business targets, the progress measurement process will be easier to manage. The business’s financial statements can give you a higher-level overview of the progress, even if you do not measure specific targets. When comparing the financial statements across several years, you can track how the business is progressing towards its goals on a year-by-year basis, giving you valuable insights into the overall development of the company. 

Identifying potential issues 

When you study the financial statements for the previous years, you can compare the financial situation to your business forecast to see if you might run into problems relating to cash flow and inventory, among others. It is especially important to use your financial statements when planning the goals you want to achieve in the business to identify shortfalls and plan out budgets to cover the activities you plan to undertake for the following year. 

If you need assistance from our accounting service experts on your financial statements, taxes, and other financial planning activities, contact Georgen Scarborough Associates, PC, for more information. 

Four ways to improve your financial statements

Financial Statement

Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance, and liquidity of a company. The financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential.

How to enhance the usefulness of your financial statements

  1. Consider the format of your financial statements. This tiny detail can make a tremendous difference. Providing investors with easy-to-read financial information in the financial statements is essential to achieving your objective of capable, confident, and well-informed investors.
  2. Make sure to include an operating and non-operating presentation. It is important to consider the effects of both operating and non-operating components of the income statement. Due to the material nature of non-operating items, they are typically reported separately from operating items in a company’s financial statements.
  3. Review peer organizations’ financial statements for best practices. A review of other organizations’ financial statements is a great place to start when updating your own.
  4. Modify your footnotes. Financial statements are easier to read and understand when you identify what information is relevant to your investors, prioritize it appropriately, and present it in a clear and simple manner. In some cases, this includes additional information that is useful for investors and, in other cases, removing information that is immaterial.

Financial statements are intended to provide investors with information that is useful for making investment decisions. These statements need to be updated annually and should be prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP)

Contact Georgen Scarborough Associates today for information on how we can help you with your financial statements.