Hughey's Debits & Credits: Bookkeeping. Payroll. Taxes.

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It’s the start of a new year and you are probably thinking your company’s tax bill is set in stone, however this blog will have you thinking twice. Yes, it’s true that majority of money-saving options can become a whole lot more limited after December 31, there is still a lot you can do to make the tax-filing season cheaper and easier.

There are many different tax strategies to choose from, some may assist in lowering your taxes by thousand. Others may help avoid penalties in government taxes or save you time when preparing your taxes. Overall these six tips will lower your stress this tax season.

Find the Right Tax Forms

You might not always find all the forms you need in your local library or post office. However, going online and finding the forms would cause a lot less stress. You are able to view and download a catalog via the Internal Revenue Service Web site or you can even have them mail you the forms.

The IRS will also provide a list of state government web sites that refers you to where you can pick up tax forms.

However, here at Hughey’s Debits and Credits we know it can be a little tricky sometimes, but we are always ready to help. Call us or drop by if you need help figuring out the right forms for you.

Make A Last Minute Estimated Tax Payment

Did you pay enough to the IRS during the year? If not, you could end with a pretty big tax bill. Not to mention the possibility of interest and penalties.

There could be multiple causes for this to happen to you. For example, you may have received a significant amount of money from selling stock or perhaps your paycheck withholdings are not balanced.

One of the IRS rules is you must pay 100% of last years’ tax liability or at least 90% of the current year or you will have to pay an underpayment penalty.

Luckily, if you make a payment by January 15, it is possible to get rid of any penalty for the fourth quarter, but remember you still will owe a penalty for previous quarters if you did not make any estimated payments before.

Contribute to Retirement Accounts

If have yet to begin or fund your retirement account for 2017, start by April 17,2018. April 17, 2018 is the deadline set for any contributions to a Roth IRA and traditional IRA, whether it is deductible or not.

Providing a tax-deductible contribution will assist in lowering your tax bill for this year. Along with the fact that your contributions will compound tax deferred.

To be eligible for the full annual IRA deduction in 2017, you must either:

  1. not be eligible to participate in a company retirement plan
  2. if you are eligible, you must have adjusted gross income of $62,000 or less for singles, or $99,000 or less for married couples filing jointly.
  3. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully-deductible, if your combined gross income does not exceed $186,000.

Do Not Forget About the Home Office Tax Deductions  

Some of the rules have changed allowing for a home office tax deduction. People who do not necessarily have a typical office can claim their home office as a deduction. The space must be specifically used for business purposes.

In the past many taxpayers tended to shy away from the home office deduction because it could be seen a red flag in an audit. If one legitimately qualifies for the deduction then there should not be any issues.

One of the most known, home office traps that used to scare taxpayers away is no longer in effect. In the past for example, if you used 10% of your home for a home office, 10% of the profit when you sold did not qualify as tax-free under the rules that let homeowners treat up to $250,000 of profit as tax-free income ($500,000 for married couples filing joint returns).

Since 10% of the house was an office instead of a home, the IRS said, 10% of the profit wasn’t tax-free. No longer does a home office put that rule on tax-free profit. You do, however, have to pay tax on any profit that results from depreciation claimed for the office after May 6, 1997. It’s taxed at a maximum rate of 25%.

File and Pay on Time

If you feel as if you can’t finish your return on time, make sure you file Form 4868 by April 17, 2018. Form 4868 gives you a six-month extension of the filing deadline until October 15, 2018. On the form, you need to make a reasonable estimate of your tax liability for 2017 and pay any balance due with your request.

Requesting an extension in a timely manner is essential if you end up owing tax to the IRS. If you file and pay late, the IRS can hit you with a late-filing penalty of 4.5 percent per month of the tax owed and a late-payment penalty of 0.5 percent a month of the tax due. The maximum late filing penalty is 22.5 percent and the late-payment penalty tops out at 25 percent. By filing Form 4868, you stop the clock running on the costly late-filing penalty.

Decide If You Need Help

Lastly, decide if you need help. Tax season can be confusing, difficult, and even time consuming. However, that what we at Hughey’s Debits and Credits specialize in. Hughey’s Debits and Credits can handle all your tax needs this season. We can take on the most complex of returns with ease. Let us be the ones to help. Feel free to call us or stop by and let us provide you with a stress-free tax season.

In many small business environments, the ending of the year is like a financial reckoning. There’s a certain uneasiness that comes right before the new year as many business owners scramble trying to determine if you’ve paid enough taxes throughout the year or if you’ll be slapped with a large tax bill in the Spring. In addition, determining whether you’ve met your financial goals and projecting how much revenue you can earn in the next year.

To put it simply, the end of the year can be overwhelming for small business owners.

For our new clients, we help ease that uncertainty with a road map and a checklist to help them chart the tasks for which they’re responsible to prepare for the year-end financial review. We also meet with you to assess their current financial situation, set goals, and map out a clear plan to achieve your goals. Then, we partner with you every step of the way to ensure these goals are reached.

In our nearly a decade of providing these financial services to our clients, we realized there were some important tasks all small businesses and organizations should tackle at the end of each year. In that spirit, here are our top five things small businesses should do at the end of the year:

Ensure Your Financial Books in Order

For many small businesses, this is really difficult task while for others it’s an easy one. Whether you’re a solo entrepreneur with receipts stuffed in a shoe box or a small business owner who has a bookkeeper on your payroll, it is imperative to get this done first. You have to have clear understanding of how much money you’ve earned and the sources of those funds as well as how much you’ve spent and on what. Using an accounting system, such as QuickBooks, should help you make this transition a breeze.

 

Determine Financial Position

The next step on your small business year-end checklist is to determine where your business stands financially. To do this, we recommend examining the following three items:

 Review Current Financial Statements. 

By reviewing your current financial statements, you will be able to determine how well your business is doing and what steps you need to take to improve or grow.

Analyze Your Goals.

After examining how well your business is doing, it’s time to take a look at how it got there. Think about the goals you set for this current year and determine whether you’ve met them. Review your business plan and any other planning documents analyze this past year’s goals. Then, answer the question: Did your business accomplish what you set out to do? Why or why not?

Evaluate your current tax strategies.

Next, take a look at your current tax strategy. Are you paying taxes on a monthly or quarterly or yearly basis? What expenses are you deducting? Are you claiming too many write-offs or not enough? Is this approach working? Is it easy for you to maintain? We recommend speaking with bookkeeping, tax, or accounting professionals to get solid guidance about which tax strategy would be best for your business circumstances.

Need help finding a professional who can help? We know just the right people.

Prepare Your End-of-Year Tax Statements

This is important.

You need to be sure you have the right documents in order before you begin trying to prepare your year-end tax statements. For many businesses, having an accountant prepare their income tax returns is the most reasonable option. However, to get the job done right, your tax accountant or tax preparer will need to have the right tax records on hand ahead of time. Some common forms are income statementsbalance sheets, and cash flow statements. You can even use receipts, payment records, or other records that show how much money you’ve earned and how much you’ve spent.

Review Inventory

For those who sell products, conduct an inventory assessment and compare the results to your last inventory report. Make any necessary adjustments so that you have an accurate account of how much capital you have in your current inventory. Even if you don’t necessarily sell products, it can never hurt to take inventory of elements in your office, such as equipment, computers, office supplies, etc. Make a list of any broken equipment or equipment in need of repair.

Set Next Year’s Goals

Now that you’ve done all the basic financial assessments, you’re ready to do some business planning. This can be done in three easy steps:

 

Step 1: Set next year’s goals.

Step 2: Prepare an action plan.

Step 3: Start implementing your action plans.

Seems simple, right? Work with your accounting professional to set your goals and action plan and the necessary steps for the upcoming year. This is the time to be clear minded about how you can achieve your goals.

We hope this checklist was helpful to you.

Still need some support? Call us at 901-451-4240 to schedule a free discovery session.

Happy Planning!

Gavel (1)As a nonprofit organization, you have the option to take advantage of your state’s tax exemption status for sales taxes. This exemption will allow your organization to not have to pay sales taxes on purchases. This is a great way to save on the almost 10% sales tax here in Tennessee. However, are you or your staff guilty of tax evasion?

As an accountant, I am often making purchases for our nonprofit clients. I have copies of all the necessary documents in order to save our clients sales taxes. Your organization may have staff such as Program Managers or Executive Directors that has an exemption card with their name on it because of their frequent purchases for the organization.  Over the years, we have encountered countless times where staff members have been using the agency’s tax exemption card to save money on personal purchases. However, this is illegal and unethical to use the agency’s tax exemption card for personal use. The consequences could be years in prison and large fines for the State of Tennessee in addition to possibly losing some of your civil rights, such as the right vote or carry a firearm.  Contact your state’s sales tax division to determine your state’s consequences. Read more

Chicken LittleIn smaller nonprofit organizations, outsourced accounting functions are normal because of fund restrictions. Did you hire Chicken Little as your accountant? Keep reading to find out if you did.

A nonprofit organization decided it was time to outsource their accounting and fiscal duties. Once they chose their accountant, a system was created. The director, John, would deliver the organization’s documents monthly to the accountant’s office and in return the accountant would prepare financial statements. One day, John received a letter from the Internal Revenue Service (IRS) stating that the nonprofit had not paid payroll taxes in several quarters. John contacted his accountant immediately to ask about the letter. The accountant said not to worry about it and that he would take care of it. Soon after, an IRS agent arrived to the nonprofit organization’s office asking why the payroll taxes had not been paid. Again, John called the accountant. Once the accountant heard John say that the IRS was at the agency, the accountant became Chicken Little and declined to speak to the IRS on behalf of John’s organization. John later found out that the accountant had not looked at the agency’s documents in months! The documents were in boxes in a corner! Sadly, the organization had been paying the accountant for over 2 years for a job that was not being performed which cost them thousands of dollars in penalties and interest! Read more

Home Office 3Everyone wants a home office for tax purposes. With being able to write off portions of monthly expenses such as mortgage/rent, utilities, phone bills, security, and insurance, who wouldn’t want that? But is a home office right for your business?

Just like any other business decision, you should be aware of both the pros and cons before making your decision. Most of the time people only tell you this part of having a home office because it is a pro and everyone wants pros in business. Wouldn’t it be nice to have only pros in your business?

I will admit being able to write off portions of expenses that you will pay regardless is a tempting offer. With your home office being in your house, your commute to work is reduced significantly. Some joke to work in their pajamas which would reduce wardrobe time and office apparel expenses significantly. Both would reduce expenses for you. Wouldn’t that be a perk?!  Another pro is having everything nearby even when you are off work. The days of forgetting something at work would be over! The biggest pro is the flexibility! Modern technology has allowed the ability to be mobile. Often times all you need is a laptop, an internet connection, and a place to sit and you have a new location! Read more

Church CollectionIn smaller faith based organizations such as churches, there are usually more volunteers than paid workers. Consequently, there is high turnover in the treasurer position. After working with churches weekly, we have noticed three common mistakes that happen when trying to replace that person.

  1. Unqualified personnel – Most of the time, you just want the tasks to be completed. How hard could it be to collect money, count it, deposit and record it? So when someone volunteers or is volun-told (when someone else nominates you but you really didn’t have a choice) to become the new treasurer and is unqualified, things tend to get complicated. Instead of appointing the first person who volunteers, conduct simple background tests and provide proper training.
  2. No separation of duties – Indicative of being a small church, prior to becoming our client, the same person who opened the mail was allowed to make the deposits, pay the bills, and have full access to the bank account and debit/credit cards. This vulnerability created opportunities to do a lot of harm. Thankfully, no harm was done! Ensure that there are proper checkpoints and separation of duties to reduce the window of opportunity of theft and other illegalities.
  3. Too much trust – Here’s an example of too much trust that we witnessed upon being hired at a church. The secretary was in charge of purchasing supplies that the church needed. When items were needed, the secretary would tell the treasurer that a check was needed to buy the supplies. The treasurer would proceed to sign a blank check and provide it to the secretary. The secretary would endorse the check to herself and purchase supplies. The secretary was not required to bring a receipt after supplies were purchased. In addition, the treasurer did not reconcile the bank account monthly to see what was being spent. In every organization (yes even churches!), there should be fiscal policies in place to ensure that the accounting portion of the church does not go unattended.

Read more

Form 990You did it!  You’ve sent out your W-2s to employees and ready to relax, right? Not so fast!  Have you completed Form 990?  Not sure what that is? Keep reading.

Form 990 “Do I have to do this?”

Yes! Even though you aren’t required to file income tax returns, the IRS still wants to know about your organization. Form 990 gives the IRS access to information about your organization’s revenue and expenses, including program versus administrative expenses. All nonprofit organizations are required to submit a version of Form 990. It is also important to know that the year listed on the top right corner is the year that your fiscal year began not ended. For example, if you are reporting for July 1, 2014 – June 30, 2015, the Form 990 will say 2014. This is because the timeframe you are reporting begins in 2014. Read more

Time for ChangeThis is the time of the year for reflection and resolutions.  The beginning of a new year is a great time to make important changes and get a fresh start!  Have you taken a good look at your accounting practices lately?  So many people hit the gym this time of year, but what about your organization’s financial health?  You may need a fiscal health assessment.  It’s time to fix some common accounting mistakes NOW to start strong in 2016.

Top 3 mistakes we’re called in to fix at NonProfits:

We’re often hired to assist nonprofit organizations because of accounting mistakes within the organization.  Let’s shine a light on what we’ve learned from our experiences to help YOU avoid financial instability: Read more

W-2 Form
Have your employees started to ask “When will I receive my W-2?”

January is speeding by and you realize it’s nearly halfway through the month when that big question starts looming. Pretty soon, everyone will be seeking your immediate answer.  You may think to yourself “Didn’t we JUST ring in the new year?”  Yes, there’s one thing you can count on, everyone on your staff excited about an anticipated refund wants their W-2 FAST.

It’s time to get that important task off your plate and it’s best to start ASAP. Read more

personal vs businessAs an entrepreneur, you want to enjoy the flexibility of being your own boss and the unlimited possibilities of revenue.  You feel like you can conquer the world to make your dreams come true!  As finance professionals, and fellow entrepreneurs, we know it’s a leap of faith to start a business.  We share your entrepreneurial spirit, and want to see our business and NonProfit clients succeed.

We’re often asked for advice from business owners and we always suggest:

Setup good accounting practices to help you avoid pitfalls that startup companies sometimes struggle with.     Read more