Friday, September 13, 2013

EMPLOYEES LIABLE FOR PAYROLL TAXES?


After finishing up an appointment at a client's office the other day, they mentioned to me that one of their employees had received an IRS notice in regards to a former employer that they worked for.  Immediately I knew that the notice was probably for payroll taxes that had not been paid.  The employee showed me the notice and sure enough that was what it was for. 

As I was talking with her it dawned on me that many employees are probably not aware of the risk that they are taking by being given check signing authority.  She had check signing authority at her former place of employment and the IRS was looking to see if they could collect from her the payroll taxes uncollected.  More than likely the IRS had already been trying unsuccessfully to contact her former employer in order to collect the taxes.  This employee's name was on several of the business checks written and that is why the IRS wanted to contact her.  The IRS will hold owners and responsible parties liable for the trust fund portion of payroll taxes that are not paid by a business.

What are the requirements for being held responsible for the trust fund payroll taxes?  The IRS says that there are two requirements for being liable:
  1. The person is "Responsible" - Had the duty to account for, collect, and pay over the trust fund taxes for the government, and
  2. The Responsible person "willfully" failed to collect or pay over trust fund taxes to the government.
Check signing authority is one of the factors the IRS and courts looks at when determining responsibility.  Now obviously the IRS and the courts will go more into detail than those two broad requirements mentioned above to determine whether an employee is held responsible for the payroll taxes, but we just want to point out the fact that many employees are not even aware of the risk they are taking on by being able to have check signing authority.  So if you are an employee with check signing authority and do payroll, beware.

As always, we would love to hear your feedback and experiences on topics we cover.  If you ever have any accounting or tax questions feel free to contact us.

Monday, February 4, 2013

FILING TAXES: DO IT YOURSELF OR HIRE A PROFESSIONAL?

Can't decide whether or not you should file your own taxes?


Tax season is definitely in high gear.  A typical question this time of year is whether or not someone should prepare their tax return on their own or hire a tax professional?  Even while I was typing this blog article, I got a call asking this very question. We are going to take a little time to give you our thoughts on this question and the other things that come up in that discussion.


Are you a business owner?
Are you a business owner or have a side business?  If you answered yes, then you definitely need a tax professional for your accounting and taxes.  There are just too many things that could be missed by doing your taxes yourself.  It could end up costing you a lot more than hiring a professional.


Don't own a business?
If you answered No to the "Are you a business owner?", then the answer is not as simple.  This will lead to other questions such as: Do you have rental property?  Do you have investments?  Do you itemize?  Do you have unreimbursed employee business expenses?  etc. There are so many variables that can be thrown into your return. 
I typically will let someone know that if they only have a W2 from their employment then really they can't go wrong filing their own return.  Whenever you start to itemize (use schedule A) and start to add the other things listed above is whenever your return goes from simple to getting more complex. With that the need for a tax professional goes up.  So a lot depends on the complexity of your return in whether or not you should hire a tax professional.

So what should you do?
If you fall into the second category above, then I would suggest you look into talking to a tax professional.  Most qualified and reputable tax professionals will offer a FREE consultation.  In that consultation, talk with them about whether or not you actually need a tax professional and what they would do differently about your return.  Also, make sure you find out about their qualifications.  Make sure that they are not just recently hired and "trained" for "seasonal help".  Make sure that they actually are a tax professional for a living all the time.  There is some truth to the TV commercial that is out where an individual runs into their "tax professional" working on their plumbing in their house.  If in your consultation the tax professional mentions several things they would change or do differently about your return ask them how much that would equate to in tax savings.  Then find out how much they are going to charge in order to prepare your return.  Don't forget to take into account your time by not having to prepare the return.

Hopefully all of the above will get you pointed in the right direction of whether or not you should or should not prepare your own return.  Another question that we get when asked about this topic is what do you think of using online tax software in preparing your own return?  Those online software packages are great and ask the right questions and can be very effective given the person preparing the return understands the implications of every question. Also, that they answer the questions correctly.  If you have a business then there are all kinds of tax planning strategies that the online software will not ask you.  I have seen people do great preparing their own returns with the online software and I have also seen people leave money on the table.  Take advantage of talking to a tax professional and finding out what is best for you and your situation.  If you have any questions or would like a Free consultation, feel free to contact us.
If you know someone that could benefit from this article please share it with them.

The video version of this blog can be found on Video: Should you prepare your own taxe?

Wednesday, October 31, 2012

RECONCILE YOUR BANK ACCOUNTS: BUSINESS & PERSONAL

Are you keeping a close eye on your money?

It is very easy for everyone to get busy with their life and forget to keep a close eye on their bank accounts.  I have heard and seen people that will not even look at their bank statements.  Did you know it is very important for businesses and individuals to reconcile their bank accounts?  There are all kinds of software out there to easily keep up with your budget and reconciling your bank accounts.  Have you ever thought about why it is important to reconcile your business & personal bank accounts besides having proper accounting records?  Here are a few reasons why:
  1. Hidden Bank Fees - At minimum looking at your bank accounts you can discover hidden bank fees.  Recently, I was working on a business client financials and upon looking at one of their statements I noticed that the bank they were using not only charged them their normal monthly fee but also charged them an $80 "account analysis fee".  This happened on a couple of their multiple accounts on the same month.
  2. Catching Fraud or Mistakes - You will want to make sure that things clear the way that you wrote a check for or charged.  Unfortunately there are lots of cases of fraud out there.  By reconciling your accounts you can catch it in time to make sure that you can get your money back or that you actually see that it occurred.  Those not reconciling their accounts, but just glancing at their bank accounts would not catch mistakes/fraud that can add up over time.
  3. Accurate Account Of What Is In Account - By reconciling your accounts, you are able to accurately see what you have in your account.  I have seen people that will write a bunch of checks and not pay attention to the checks written.  They simply call the bank or look at their bank account to see what their balance is.  This doesn't take into account any outstanding checks that have not cleared yet etc.  This can result in bounced checks and ultimately more bank fees.
  4. Budget - In order to stay on a budget, you have to reconcile your accounts.  You have to account for everything to see where it is you are "over spending" or where you can save more for things like retirement, purchases, or emergency fund.  Staying on budget is important for all of those reasons as well as staying and getting out of debt.
Hopefully this is just another reminder to keep your accounts, both personal and business, reconciled.  If not, we hope that you will make it a goal to start today to get on track with your budgeting and reconciling.  If you have any questions feel free to Contact Us.

If you found this article helpful, please share it.  Also, leave us a comment on how reconciling has helped you and your business out in the areas above.


Tuesday, October 23, 2012

2012 PREPARATION OF 1099'S

Are you purchasing your 1099 forms?

If you prepare your own 1099's every year, then you are probably purchasing the forms at the local office supply store.  Did you know that if you only have a handful of 1099's that you don't need to purchase a whole pack of 1099 forms?  You can actually go to the IRS and order the 1099 forms as well as other forms for FREE Here.  Simply go to that link and enter the quantity of the forms you want and put in your address.  The IRS will mail those forms to you for free.  The 1099 forms that the IRS sends you will have recipient copies attached to the red copies.  Here are some tips for ordering and using the IRS 1099 forms.
  1. Order your forms well in advance of the tax filing season.  Our suggestion would be to order them now through December 2012.  This will save on any delays.
  2. Go through your QuickBooks or financials prior to ordering to get a feel for the number of 1099's you may need to order.  Order a few more than what you need in order to account for errors etc.
  3. Even though the ordering of these 1099's is mostly to save money for those with only a few or those doing them by hand, you can actually use the forms the IRS sends to print the 1099's out of your QuickBooks files.  You will want to tear off the perforated side on the left in order for this to print properly.  You will want to test out on 1 or 2 to make sure you have it set up on your printer properly.  So like in #2 above order extras.
I have heard people frustrated about only needing 1-2 1099's to issue and about having to go and purchase a whole pack of 1099's at the store.  We can help you with that or you can go and get the forms for free at the above link from the IRS.  Hopefully this will save you some money and some frustration.  Please let us know if you need help with your 1099 preparation, have questions about 1099's, or need anything.  Feel free to Contact Us.

Wednesday, September 26, 2012

CHARITABLE CONTRIBUTIONS: DONATING YOUR TIME OR SERVICES

Have you donated your time and services to Charity?

I like hearing from people that enjoy giving to charity. Whether it is monetary or whether it is volunteering, giving to others not only brings a smile to the recipient, but it also warms the heart of those giving.  In a previous blog, we have talked about getting the most out of your contributions, but today we want to deal with the donation of time and services.   The question about the deductibility of donating ones time and services is a popular question.  Just the other day I was helping one of my business clients set up a non-profit organization and this topic came up.  So can you deduct your time and services?

The answer is yes and no.  Don't you just love that?  The actual services and time is not deductible because the income on those services and time has never been picked up as income.  This goes back to that most taxpayers are cash basis taxpayers.  This means that they only pick up the income when it is received.  When you donate your time and services you can't deduct the "going rate" for your services as you have not picked that up as income.  So what part can you deduct of your time and services donated to a charitable organization?
  1. Any expenses occurred while performing those services.  For example, a dentist donates a teeth cleaning to a local charity.  The dentist has to pay the employees to do the teeth cleaning on that service.  So the employees pay will be deducted.  There will be supplies and materials used in the cleaning service so those will be expensed as well.
  2. Mileage you drive for a charitable organization.  (current mileage rate for charity is 14 cents/mile)
It is always great to hear stories of those giving back to their community.  If you have any questions feel free to Contact us.

Wednesday, September 19, 2012

2012 YEAR-END TAX PLANNING IDEAS

Will tax cuts will be extended?

Year-end Tax Planning is important every year, but 2012 is even more important with a lot of tax cuts set to expire at the end of the year.  Will the tax cuts set to expire be extended?  That would require a crystal ball at this point.  However, for proper planning as we approach year-end tax planning time, we need to go on things that we know for certain.  The certain thing is that a lot of the tax cuts will expire this year and we need to plan accordingly.  We will briefly go over several areas this year that taxpayers might want to discuss with their tax professional.
  1. Capitalize On Expiring Long-Term Capital Gains Rates - Currently the Long-Term Capital Gain rates are maxed out at 15%.  Taxpayers in the 10-15% income tax brackets can capitalize by selling some stock that they currently have Long-Term Gains on and take advantage of 0% tax on those.  All other individuals can take advantage of the 15% maximum Capital Gains rates that are set to go up in 2013.
  2. Qualified Dividends - Taxpayers that own businesses that were formerly C-Corporations and are now S-Corporations will want to look to see if they have prior C-Corp earnings in their retained earnings.  (Also known as E&P)  If they have prior C-Corp earnings they will want to look at taking those as dividends and capitalize on the low qualified dividend rates.  Currently the qualified dividend rates are treated like the Long-Term Capital Gain rates.
  3. Roth IRA Conversions - Taxpayers thinking about converting their Roth IRA's to regular IRA's might want to consider doing this before year-end.  With tax rates set to go up next year, this year would be a good year if one is going to eventually do this or is thinking about doing this.
  4. Gift Tax & Estate Planning - We have talked about basic gift tax facts in a previous blog.  There is the normal $13,000 that can be given per year that will continue on past 2012, however the big annual exclusion of $5.1 million is set to go away at the end of the year (going down to $1 million next year).  So it might be wise to do some estate planning before year-end for wealthy individuals wanting to lower their estate value.
  5. Accelerate Income In 2012 - Most of the time when we are looking at tax planning we are wanting to defer income into the next year.  With income tax rates set to go up, 2012 would be an ideal year to do a nice mix of accelerating income and deferring some income.  Some examples of this would be a company doing their billing a little earlier in December than normal and paying expenses in January as opposed to December.  A healthy mix of the two (accelerating and deferring income) will need to be looked at on a taxpayer by taxpayer basis as each situation will be different.
These are a few areas that are of importance for 2012 year-end tax planning with tax cuts set to expire.  Don't forget to setup your tax planning meeting this year to take advantage of things you can do before year-end.  Saving on your taxes helps individuals and businesses both to pay off debt and build up an emergency fund.  Let us know if we can help you in any way, feel free to contact us.  We would love to help you with all of these tax planning tips as well as many others.

Please share with anyone you know that might benefit from this article.

Wednesday, August 29, 2012

MAPS ARE IMPORTANT: PROPER ACCOUNTING CAN HELP

Is your accounting set up to provide you and your business with a road map?


I enjoy going for a run.  Running not only helps me get my exercise, but it also helps me relax, think about things, become more productive, and also come up with new blog posts.  After completing a shorter run the other day, I decided I wanted to jog a little more on a trail I had not been on.  This trail was more of a mountain biking and hiking trail.  At the start of the trail there was a map that I briefly glanced at. I thought the trail would come out into another trail I had been on before.  That was a mistake as I ended up 2 miles out into the woods before another map that I then actually paid attention to.  Upon looking at the new map, I noticed that I was at the farthest corner of the park and that if I kept going it was another 1.5 miles that would circle back to where I currently was.  With that I knew I needed to go back the 2 miles I had already come to get out. 

So as I was running back out of the woods it dawned on me that a lot of businesses operate in this same manner of not paying attention to maps.  Their accounting and bookkeeping is put on the back burner and not kept up with.  They only pay attention to the accounting and financials whenever tax time rolls around.  However, properly setup and maintained accounting can be a road map for you and your business.   A business that doesn't keep up with their accounting on a regular basis is like looking at a map 2 miles into your run and seeing that you could have done something different a while back for your budget, planning, and taxes.  In order for your business planning, tax planning, and budgeting to be effective you need to be proactive about your accounting.

One of the arguments that business owners will make is that they don't have time to keep up with the accounting.  Hiring the right accounting & tax professional can ultimately save you more than the fees you pay for the services.  In order for your tax professional to not only prepare your tax returns, but to give you some proper business and tax planning you will need to keep up your accounting up-to-date.  Make sure you are paying attention to your business road map so that you and your business can be successful.  If you have any questions about our services or about this article we would love to help you out.  Feel free to contact us.

If this article has been helpful to you or if you know someone that could benefit from it please share it.

Thursday, August 23, 2012

CHOOSING THE RIGHT TAX PROFESSIONAL


Choosing the right tax professional is a very important decision.  There are all kinds of tax professionals out there ranging from Certified Public Accountants (CPA), Enrolled Agents (EA), and Registered Tax Return Preparers.  One should approach hiring the right tax professional very seriously and with a game plan to ask the right questions.  They should treat the hiring of a tax professional just like a business owner trying to hire the right employee.  The right tax professional can help you and your business accurately file and save on your taxes.  So how does one go about choosing the right tax professional?
  1. Continuing Professional Education (CPE) - Ask about whether or not they are up-to-date on their CPE?  Ask how much of their CPE is devoted to tax?  You want a tax professional that is focusing the majority of their CPE on tax related items and continually keeping up with all the ever changing laws. You don't want someone that is just relying on their tax software to handle everything. You want someone that "knows their stuff" and asks you questions to keep you continually saving money on your taxes.
  2. Experience - Ask them how long they have been in the tax profession?  Also, you will want to ask them whether or not they have had or currently have clients like yourself.  For example, if you own a restaurant business, see if they have other restaurant clients.  You want to make sure that they are familiar with everything related to your specific business and individual needs.
  3. References - It's not a bad idea to ask them for references or to look around to see what testimonials you can find on their website and on the internet.  Hearing from past and current clients is a great way to get a third party perspective in your interview process.
  4. Personality - You will find out during the interview process whether or not your personalities go together or not.  It is important that they do, because communication with your tax professional is key to making sure you have an effective tax plan.  Your tax professional should be a trusted advisor to you and your business.  You want someone that looks out for your best interest and genuinely cares about helping their clients.
  5. Communication - Find out how accessible your tax professional is.  Find out how well they communicate with their clients.  Try calling them or emailing them to see how quickly they respond.  I have found that in my initial consultations with new clients that lack of communication from their prior tax professional is way up there on the list of reasons why clients are unhappy with their tax professional.  Just as mentioned in #4 above, communication is key to making sure you have an effective tax plan.
Don't forget that having the right tax professional can help you and your business keep up-to-date on your filings and save you on your taxes.  The right tax professional is a good asset to you and your business.  If you have any questions feel free to contact us at 770-856-1309 or email us at info@joshuawilsoncpa.com.  We would love to help you and your business out.

Tuesday, August 7, 2012

LIFE INSURANCE

Have you reviewed your life insurance policy recently?

Not too long ago, I had a client that sent me copies of both spouses' life insurance policies along with their tax documents.  Even though the life insurance documents were not needed to prepare their tax return I couldn't resist looking them over. Not only do I like to save my clients on their taxes, but I love to help clients save anywhere financially that I can.  After looking over their policy, here are the two negative things that I found about their policies:
  1. Both spouses had a "Cash Value" life insurance policy.
  2. Combined they were paying about $200/month more than equivalent term life policies.
I cringed when I saw both of the above facts.  The sad thing is that there are so many people out there in the same boat.  The "Cash Value" plans are sold and pushed as an investment and life insurance all in one.  After talking to the clients about the matter, I discussed the following things with them:
  1. Get rid of the "Cash Value" life insurance policy.***
  2. Purchase term life insurance on both.
  3. Take the cash value out.
  4. Use the cash value and extra savings each month to knock out debt.
Most people ask about the tax consequences of taking the cash value out of their policy.  The only taxable income will be any gains the account has made. In this client's case they were told none would be taxable. Typically this is the case or very little gain in comparison to the premiums put in.  Now isn't that interesting, since the biggest selling point of "Cash Value" policies is that you pay the higher premiums for it to be a "great investment".  Also, when you die, the only thing that your beneficiaries will receive is the face value of the insurance policy and the "Cash Value" is kept by the insurance company.

Please review your life insurance policies from time to time.  Make sure that you have the right plans for you and your family.  If you have a "Cash Value" policy, you should definitely consider getting a term policy and using the savings for debt and investing.  Even though we don't sell insurance, we would be happy to answer any questions that you might have.  Feel free to contact us.

***Make sure you have an approved term policy in place before terminating your "Cash Value" policy.

Wednesday, July 25, 2012

CREDIT CARD CHARGES: WHEN ARE THEY EXPENSED?

Ever wonder when credit card charges are deducted?


Here recently, I have been asked by several people about when credit card charges are expensed.  Business owners that know they are a cash basis taxpayer get confused on when to deduct their business expenses paid with their credit card.  The question that gets asked is do I deduct the expense when the charge takes place or whenever I pay the credit card bill?  This makes the most impact at year end and they want to know which year they will be deducting the expense.  The answer is that credit card transactions are treated as being expensed at the time of the charge.  So the expense takes place at the time of the transaction and the subsequent payment is just the reduction of the debt.

Here is a quick example:
John of ABC Inc. goes to Best Buy and purchases a new laptop on 12-29-11 with his business credit card.  He typically pays off his credit card each month and pays it on 01-12-12.  The expense for the laptop is taken in 2011 because of credit card charges being considered paid/expensed at the time of the charge.

You want to make sure that you are expensing your credit card charges when they occur and not when you have paid the credit card bill.  I have seen business owners be misinformed about this and end up having to pay taxes earlier than they should have due to expensing it in the wrong year.

Feel free to contact us with any questions you may have about your accounting, business, or taxes.