You ever watch a tax office like an H&R block or Jackson Hewitt this time of year? And you see hundreds of people filing their taxes so they can get that money quicker? I’ll admit I hate to see it. I always have believed they are getting robbed. Well it seems that I wasn’t the only one who felt that way. Click here to read why the IRS is trying to put the Kabash on this practice and notice what happened to the stock of Jackson Hewitt and H&R Block.
Some important reminders for taxes January 18, 2008
It’s the dead of winter which means it’s tax time. Most people can’t stand this time of year. It’s full of paperwork and accounting/tax questions that you don’t care to answer. The fear of owing Uncle Sam an ungodly amount of money is enough to drive you mad. It’s a good thing we are knee deep in NFL football playoffs to keep us sane.
If you are a small business owner, one of the things I would recommend is having a good accountant AND having a good bookkeeper in your office using QuickBooks to handle your accounting. I can assure you this makes your job a lot easier. A LOT! That can make your accountant so much happier because of the ease of use of QuickBooks. Of course, make sure you have a bookkeeper that is proficient enough to make good entries in QuickBooks so that the Accountant doesn’t have to pull their hair out to understand what you have done.
But at this time, let’s look at a few tax deductions that may help you as you save as much as possible.
1. Put money in a fund or retirement savings plan such as Small Business 401K, IRA, SIMPLE, SEP and Keogh. Check out the new small business 401k. Small businesses are entitled to a tax deduction such as a $500 tax break on this new 401K.
2. It may be a little late for this one but at the end of the year, you should have been spending money to buy those needed supplies that you have been waiting to get. If you see yourself having some taxable income in the future, try to get those supplies or computers you need. Under the IRS tax code section 179 small businesses, including those who are sole proprietors, are entitled to deduct $125,000.
3. Keep track of your mileage. The IRS increased the rate to 48.5 cent a mile for 2007. Make sure you have a good mileage log though. The Internal Revenue Service is not stupid. They want good records for your miles or they will disallow the deduction. The mileage increases to 50.5 cents a mile in 2008.
4. Here is a SWEET new law for 2007 that all homeowners need to be aware of. Mortgage Insurance Premiums - Some borrowers may be able to deduct mortgage insurance premiums paid on mortgages taken out or refinanced during 2007. A borrower who prepays premiums for later years may deduct only the premiums that relate to 2007, except for prepayments for guarantees made by the Department of Veterans Affairs or the Rural Housing Service. Only mortgage insurance contracts issued during 2007, 2008, 2009 or 2010 qualify for this new itemized deduction. Proceeds of the mortgage, secured by a first or second home, must be used exclusively to buy, build or improve these homes, or alternatively, to refinance a mortgage, secured by the home and used for these purposes. Home-equity loans used for other purposes are not eligible. The deduction for mortgage insurance premiums is phased out for taxpayers with adjusted gross incomes exceeding $100,000 ($50,000, if married filing separately). Claim this deduction on Schedule A, Line 13. Further details are in Publication 936.
Now the biggest fear of most small business owners is to have trouble with the Internal Revenue Service, and I can’t blame you. They can pretty do what they want so make your life easy with these 5 simple tips.
1. Keep all your receipts. You know I can’t understand why this is so difficult for people. I have a fail safe idea here. Take a shoe box and keep it in your truck. Label it January 2008 and stick every receipt you have in that box. Then when February 1, 2008 comes, grab another shoe box. Now, if you do this right, it will make your life easy. Think about it. Most purchases you have will come thru your work truck at some point. So why not keep the box there? If you have proof of your deductions, the IRS will be happy.
2. Report your income ALL of it! I had a guy come to me who drive a 2006 Lexus SUV, a BMW and a house on the lake. He had on his books that he made 30,000 a year. He mostly dealt with cash and felt that he could get away with it. NO. You see the Internal Revenue Service has access to all your accounts. Cash, Credit, and your assets. They can do a lifestyle audit and see that some things don’t add up. Don’t be dishonest. It’s not worth it. These penalties will be more costly than any tax you will pay and you will spend more time in jail then OJ and Michael Vick combined.
3. Do not play around with payroll taxes. If you collect payroll withholding from employees and you get behind this is quite serious. IRS doesn’t mess around here. If you want to see their ugly side, start gambling on 941 taxes. This isn’t your money. I have seen big businesses go down because they choose not to pay these. Instead they use that money for something else. Bad move. If you collect taxes for your employees, consider that money gone. Stick it in another account or have a payroll company do it.
4. Have a bank account for your business AND one for your personal. I can not reiterate how important this is. The Internal Revenue Service hates to see the two intermingled. Imagine if you buy something from Wal-Mart and you can’t find the receipt. Now, you only have one account. Do you think the IRS is going to give you that deduction? No sir. How do they know that Wal-Mart purchase is not for some Huggies or that new Spider Man DVD? Keep it separate guys. If they see you have taking the effort to separate the two, you have a much better fighting chance defending deductions.
5. Don’t be afraid to owe money. Ok. It’s April 10th and your tax person says you owe $7,000. Ok, yes that stinks. Yes, it’s probably Jack Daniels time. Yes, your heart did just skip a beat. However, all is not lost. You may not have the money right then nor will you come up with it by the deadline on the 15th but just call them up and make payments. They are willing and happy to do it. What they can not stand is when they have to look for you. You won’t return calls or answer the letters. Now, they just go and get the money from your account and take as much as they can. So, if you had 5,000 in the bank for some down payment on a house, car or 60 inch plasma, they will keep it and not refund it.
Now with this being said, make sure you get a good accountant to handle your taxes. They know the laws and they know how to save you money.
Annie owns a small charter boat company down in Charleston, South Carolina. She pretty much started the company of a whim and a prayer. She had no accountant or accounting software. She got with our company and now she has a system that is nearly flawless. She keeps her shoe box in her SUV and has QuickBooks running on her computer. But, one thing she does is has us review her books once a quarter to help her with a few issues that she has no clue on. It’s cheaper than having to pay monthly for her accounting, and it keeps more profit in her pocket.
Her company is now netting around $68,000 a year, and she is still sane. How does she do it? Annie says, “ I can’t tell you how much getting trained on QuickBooks has helped. I won’t say I am an expert but I know how to move around in it without being scared. And my accountant reviews my account remotely so I don’t have to take time out of my day to even bring it in their office. It’s wonderful!
There are plenty of people like Annie around the country, and maybe you can relate to the start up anxities of a business. We can help with any questions you may have. Feel free to email us here info@capitalconcepts.net
Here is an Unusual Tax Coupon for Tax Preparation January 14, 2008
If you have a BlackBerry Device, we will give you a break on there tax preparation fees. How is that for a coupon? So, bring it in to get your taxes done and get a break in your wallet.
How to Choose a Tax Preparer January 14, 2008
Taxpayers who pay someone to do their taxes should choose a preparer wisely. If you choose to use a paid tax preparer, it is important that you find a qualified tax professional. Taxpayers are ultimately responsible for everything on their return even when it’s prepared by someone else. Do you really understand that? That means once your signature is on it, you better know what’s on there.
The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS letters and friendly ”remember me” cards.
While most tax return preparers are professional and honest, taxpayers can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.
• Ask about service fees. Avoid preparers who claim they can obtain larger refunds than other preparers, or those who guarantee a refund or base fee on a percentage of the amount of the refund. That is ludicrous. There rests some shade and not the good kind.
• Plan Ahead. Choose a preparer you will be able to contact after the return is filed and one who will be responsive to your needs.Get an email address as well as numbers. Ask for cards.
• Get References. Ask questions and get references from clients who have used the tax professional before. Were they satisfied with the service received? Be careful though because some people could hate on a firm because they feel they should have gotten more money back and it really isnt the firm’s fault. So, ask for a good reason and if it’s not reasonable keep asking.
• Research. Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
We like these guys here at Capital Concepts. Give them a call and set up your tax appt now.
Can the IRS direct deposit my money to my Best Buy Account? January 11, 2008
What a great question? It’s funny how people have their refunds spent before they have them in hand but thats what Americans do. Buy now and pay later. Now, I have been getting a large amounts of advice, counsel and suggestions about what I should do with my refund. They span from savings to setting up IRAs, mutual funds, stocks and bonds. Duly noted guys thanks!
However, when I look at the NFL schedule this weekend and realize that New England and Jacksonville are going to be playing and San Deigo and Indy along with the NFC beasts and then I glance over to my 16 inch “television” (the picture on the left)that will show these games I get disgusted. Do you know how it feels when nobody wants to come to your house to watch the games? Peyton Manning would be hurt. I am at the point where they don’t even ask around me. They make the plans and give me a courtesy email on my BlackBerry so I can feel like part of the group. In actuality they look at me as the guy with the poverty level TV. You know what? They are right. My tv needs to be stepped up. Its not like I have not tried. Oh, I have had plans for a new TV for a long time but emergency purchases come up. The wife needs a hair cut (every flipping week). She needs her nails done. (Who pays $45 for that?) The car needs brakes. The kids need to eat. All of these so called “must haves” have deprived me of my new “nicotine” as it were. I walk into best buy and let me tell you something. I am not alone. You know how many guys have that invisible bracelet around their neck?
You may not be able to see it but I do. But they see mine too. And every time we come close to that 60 inch plasma (picture on the right above) or LCD I get shocked. My wife could be in India or South Korea and if my left foot gets within ten feet of the Television section of Best Buy I am done.
She has plans for the refund this year. She sat down and calculated that it should be around 2,500. She has it all planned out. A family trip to Disney World for a week. Guess again sugar lips. Unless my new televisions name is “Mickey Mouse” and we rename our house the Magic Kingdom, there will be no disney trip. I’ll get the disney channel for the kids. Heck, even on demand disney. But this is a must have for me. I need my man hood back. She took it when she turns on Emerill or Oprah and expects me to watch it with her. Ok, fine compromises we make in marriage but there is no compromise here. My way or the highway. The best buy this year is my 60 inch. US Treasury don’t fail me now. Instead of direct depositing it in my account can you do it to my Best Buy Account or gift card? If you don’t, my wife somehow will see it and I am doomed like the last 6 years. You take my taxes out every week. You scare us with letters. Oh, Mighty IRS please deposit it to my Best Buy account. PLEASE!!!!!!! Gotta go. Wifey lurks.
I need to hear from all who can understand where i am coming from. Comment please.
Where is my Refund? January 10, 2008
Yeah. This year there is gonna be a wait for the long anticipated refund. The delay is due to the Alternative Minimum Tax (AMT) legislation enacted in December. Read why here. Most tax filers will not be affected by the AMT legislation. The delays in processing and refunds will be experienced only by those who include any of the following five forms with their 2007 individual income tax return:
• Form 8863, Education Credits.
• Form 5695, Residential Energy Credits.
• Schedule 2 (Form 1040A), Child and Dependent Care Expenses for Form 1040A Filers.
• Form 8396, Mortgage Interest Credit.
• Form 8859, District of Columbia First-Time Homebuyer Credit
If you are filing using one of the five affected forms you won’t be able to send your return to the IRS for a few weeks until the IRS computers are reprogrammed for the late tax law change. The IRS expects to be ready for these returns by February 11.
Even if you are affected, you should remember that it is always a good idea to start working on your tax return sooner rather than later.
Filing electronically is the best option for everyone, including people impacted by the AMT changes. Whether or not your return claims an AMT related credit, filing electronically results in faster refunds and fewer errors. When you e-file combined with direct deposit you can expect your refund in as little as 10 days. Refunds from paper returns typically take four to six weeks.
Do you want your taxes prepared electronically? We can handle it for you no matter where you live. Click here for a free quote but please be prepared with information such as w-2s, 1099’s and any other pertinent tax information. If we prepare your taxes, we will e-file them for free. email us with questions at info@capitalconcepts.net.
Should You Itemize? January 10, 2008
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