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Accountants In West Palm Beach

(561) 842-1304

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West Palm Beach, FL 33407

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8 IRS Audit RED FLAGS you MUST avoid when preparing your taxes

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8 IRS Audit RED FLAGS you MUST avoid when preparing your taxes
Filing an income tax report is like walking on egg shells, do not be swayed by audit baits that will send the IRS knocking straight on your door. While the agency is reportedly having cuts in their budget, which would likely translate to fewer audits, that does not mean they are letting their guard down. 

Now let’s walk through standard IRS tax filing errors and find out how you can steer away from committing the same mistakes.

1. Declare ALL of your income.

IRS does not rely on your honesty, according to the National Association of Enrolled Agents (NAEA), it uses an automated form-matching program that detects discrepancies between what you report and what is in their database.

Copies of form W-2 for the wages, as well as 1099s for interest, dividends and capital gains filed by independent contractors and freelancers,  are also sent to the IRS. Always reflect these figures on your federal tax return or any discrepancies will trigger correspondence audit.


2. Don’t declare losses for extended periods, unless you can prove it.

Nobody is running a business for charity. It is understandable that new ventures need to recover the operation costs for a year or so before beginning to generate projected profits, and the IRS acknowledges this, but over declaring losses for an extended period will often sound the alarm for an IRS audit.

IRS tax attorney Garrett Gregory of Addison, Texas said: “report losses for three or more years and the agency will start to suspect ‘hobby lost’ cases” he said: “often calls for field audits which are in-person and more onerous than a correspondence audit.”

Be ready and keep records of your business expenses, document everything to prove you have a real business.

“You want to prove that you ‘breathed it, ate it, slept it, and drank it,’” Gregory added.


3. Anything Weird – Explain it.

Anything that looks off and questionable is among the IRS first red flags. Be the best judge, anticipate which of the entries would likely call for extra clarification, and provide it.

NAEA said insufficient net income, for example, warrants explanation and would require disclosure statement detailing how you managed to pull yourself off, either through savings, loans or credit cards.


4. Home Office Deduction Triggers.

Never report deductions for both office and home rental. Typically, your office is in one place, if not then explain it.

NAEA suggests that if your rental expense is for a business storage unit or equipment, it should be labeled property as ‘storage rental’ or ‘equipment rental.’

 

5. Report ALL Sales Incurred.

Bear in mind, the IRS has complete access to all necessary files and has programs that ultimately leave you no room to hide, either intentional or not, don’t leave anything out.

When you sell your home, the title company will send the IRS a 1099-S form, recording the proceeds from the sale. Even if the capital gains on the sale fall below the tax-exempt limits, it is still recommended to report the information on your return.

The same applies to the sale of mutual funds. Enrolled Agent Stephen DeFilippis of Wheaton, III said: “that in particular cases like selling a mutual fund bought before 2011 outside of tax-advantaged retirement account and reinvesting this in another mutual fund, must be reported or the IRS will assume the total proceeds from the sale are all taxable gains.”


6. Include Your Overseas Money.

If you think the IRS audit cannot sniff this, you are wrong. Under the new Foreign Account Tax Compliance Act (FATCA) foreign institutions will soon be sending this information to the IRS like any other bank or brokerage would in the United States.

If you fail to declare this income, penalties and back taxes will soon be crawling on your back.

 

7. Watch out for Mortgage Interest Deductions.

DeFilipis said: “when you co-own a house with your spouse, the lender sends you and IRS Form 1098, which records your mortgage interest during the year. However, often, this record also shows the social security numbers, should the person die, and the surviving partner tries to claim the mortgage interest deduction, it is already flagged.”

These tax audit red flags may come in handy; the key is to go over this carefully and declare everything, or better yet hire professional accountants in West Palm Beach to do the job for you.

For more information, please contact us.

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An Accountant Can Help You and Your Small Business Prevent Bankruptcy

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An Accountant Can Help You and Your Small Business Prevent Bankruptcy Small business owners can often be heard saying that hiring an accountant is a waste of money. Accountant is just there just to fill out forms and keep the government happy by having you pay more taxes. However, bookkeeping services are more than that. You will save time and money if you hire the right accountant. 

 How an accountant can help prevent a small business owner’s bankruptcy?

 Taxes

Bookkeeping services should be aware of the latest tax rules and government legalities related to small business. In addition to that, a reliable accountant must be aware of significant tax breaks that may be available for small businesses.

 Saving you Time

Other small business owners may think that they can’t afford an accountant. But think about how long it would take you or one of your staff to do certain tax related tasks. Is it really a good use of your time or would you rather focus on other revenue generating tasks?

 Saving you Money

Let’s assume that time is not an issue for you. Perhaps you bought a computer program that will do all the accounting for you. Just completing the tax forms is one thing. However, completing them in a way that only an accountant can do will save you the most money. Accountants will help you take advantage of all legal ways to minimize your tax bill.

 Business Advice

A reliable bookkeeping service has a great amount of experience in the small business industry. They can provide suggestions based on their experience to help keep your business afloat. Furthermore, they can also calculate and predict financial reports based on your business moves and decisions. Finding a reliable bookkeeping service is essential to your success as a small business owner.

 The question to ask yourself is not, can you afford to hire an accountant. The real question is, can you afford not to hire an accountant? To learn more about how one of our friendly and reliable accountants can help your business, please contact us now for free consultation.

 

Resources:

Chih-Fong Tsa. Feature selection in bankruptcy prediction

Narayan Vaish. Book-keeping and Accounts

M.Jambunthan. Book-keeping and Principles of Commerce

Newton, Grant. Bankruptcy and Insolvency Accounting, Practice and Procedure. 2009

Turner, Leslie. Accounting Information Systems: Controls and Processes. 2008

 

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A Basic Tax Guide for Freelancers

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IRS tax return, tax services, tax accounting

Independent contractors or freelancers are solely responsible for filing their Income Tax returns as well as ensuring that the Internal Revenue Service (IRS) receives the right information, regardless of the amount you earn. This is a serious matter, and you have to handle accordingly.

If you are a newbie, here’s some old hand advice on how you can effectively manage your tax account.

1. Keep Your Own Record.

As an independent player, you will be issued a Form 1099 at the end of the year, keep your record using spreadsheets, or better yet get small business accounting software like QuickBooks to make it easier to track.

Bear in mind the expert advice, that relying solely on 1099s to tell you how much money you have earned is too risky. Some clients miss payments and make mistakes in calculations, filing your record is the smartest way to avoid errors.

2. Don’t Attempt to Hide Anything.

Trying to make cuts on Freelancers Taxes is a no-no. Everybody sends copies of his or her 1099 to the IRS, so if you drop one out, the IRS system will undoubtedly detect the discrepancy. Although we know some clients do fail in record keeping, it is too risky, always be on the safe side.

3. Use Separate Business Accounts.

To quickly glean through independent contractors’ tax deductions, especially the newbies, simplify your records by starting off with a separate business bank account. This way, all of your personal spending will not get mixed up, and having different bank statements for your business makes it easier to backup the information on your tax return.

4. Expect Mandatory Self-Employment Tax.

On top of the regular income tax rate, independent contractors should expect mandatory self-employment tax designed to cover social security and Medicare concerns that would normally be withheld by a traditional employer.

5. Identify Your Deductible Expenses.

When it comes to IRS rules on deductions, it must be both reasonable and necessary.  Take for example the equipment you need and travel expenses; as long as they are incurred as an indirect result of your freelance work.

One good thing with independent contractors’ tax deductions is it be can used to save for the future. Consult with a financial planner or a retirement specialist to find out how you can fund your retirement without the 401k or pension benefits a regular job might provide. There are many options: IRAs, Roth IRAs, investments, etc.

Get Professional Help.

Filing your taxes can be a daunting experience, especially if you have not been keeping records, there’s a lot to look into, and management is an entirely different thing to accounting. Why not get some professional help from The Balance Sheet Accountants? They not only take charge of your tax concerns but can help you analyze your financial standing with the tools that they use and experience they bring to your company.

Call us at (561) 842-1304 for more information on how we can help.

 

2017 Standard Mileage Rates for Business, Medical and Moving Announced

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The Internal Revenue Service issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

What You Should Know About Small Business Loans

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What You Should Know About Small Business Loans

Small Business significantly contribute to the economic development of the United States. In addition to their business challenges, they often run into issues acquiring loans. According to research, the failure rate of small businesses is very high and lack of finance is the major cause of it.

  • R. Dickenson reported in “Business Failure Rate,” American Journal of Small Business that about 33 percent of small businesses discontinue within their first year of operation.
  • About 67 percent of small businesses fail within their first five years of operation.
  • G. Nadu reported in “Profiles of Survivors and Non-survivors of New Business Starts” that better financing would improve the success rate of small businesses.
  • The success of a small business is directly proportional to the availability of adequate finance.

 How Do Small Business Loans Work?

Lenders consider the following things before approving small business loan:

  • Credit scores above 650-700 is fine, but doesn’t guarantee a loan. 700-800 is the recommended minimum score.
  • Personal debt payments should not be more than 33 percent of gross monthly income.
  • Businesses that have been operational for more than two 2 years and have good reputation can often get unsecured working capital lines and term loans.
  • A rating of your company is critical to measure industry risk-based on the government standard industrial classification codes.
  • The better the cash flow, the brighter the chance of getting a loan as it supports your ability to repay the loan.

 Below are a few things to keep in mind when applying for a small business loan:

  1. Lenders give loans to those whom they know and trust. Build a relationship with them and let them know about your company before asking for a loan.
  2. Decide why you need a loan. Is it for genuine reasons, like financing some equipment for your business, or real estate for an office?  Or are your reasons trivial, such as trying to finance ongoing losses or purchasing unnecessary business assets? Keep in mind that lenders like veritable reasons with concrete terms.
  3. Amount of Money Needed. Underestimating the money required leads to problems due to lack of working capital, while overestimation makes lenders doubt your credibility. Be sure to make a reasonable estimate supported by calculated monetary projections.
  4. Typical documents required for a small business loan are: 
  • Personal Background: previous addresses, names used, criminal record, educational background.
  • Resumes: evidence of management or business experience.
  • Sound Business Plan: this is a critical document that should underline a complete set of projected financial statements, including profit and loss, in addition to cash flow and a balance sheet.
  • Personal Credit Report: obtain one from all three major consumer credit rating agencies.
  • Business Credit Report if you are already in business.
  • Income Tax Returns: be sure to include the previous 3 years.
  • Financial statements for owners who have more than a 20 percent stake in business.
  • Collateral for loans involving higher risk factors for default.

Legal Documents: include business licenses, articles of incorporation, and copies of contracts you have with any third parties, etc.

  •  Small Business Loan Requirements

  • Maxine Taylor, the power behind the accounting company, The Balance Sheet, Inc. puts forward her views on the topic:  

    Small Business Loan

  • “While I am not an advocate going of debt, sometimes it becomes necessary for small businesses.  Loans should be for growth, adding new services, not for operating.  If you need a loan for day to day operations, then you need to revisit your business plan and pricing.”
  • Her firm (https://www.taxaccountingbookkeeping.com) has helped business owners in and around West Palm Beach, Florida for over 20 years. The goal: to help these businesses grow strong and clean of financial issues.

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3 Important Tax Announcements for the Upcoming 2016 Season

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Tax Season Starts January 23

The IRS has announced that tax season will officially begin on January 23, 2017. After you receive the early January release of Drake Tax Software, you’ll be able to transmit returns to Drake and we will hold them “in queue” until the IRS begins accepting returns.

Refunds for Returns with EITC or ACTC Delayed

The PATH Act of 2015 requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until February 15. The IRS must hold the entire refund — even the portion not associated with the EITC and ACTC — until at least February 15. The IRS cautions that these refunds likely won’t arrive in bank accounts or debit cards until the week of February 27 –- if there are no processing issues with the tax return and the taxpayer chose direct deposit.

Filing Deadline is April 18

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017. This date is due to April 15 falling on a Saturday and the following Monday being Emancipation Day, a legal holiday in the District of Columbia.

New Due Date for Form 1099-MISC Box 7 Use

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According to the 2016 General Instructions for Certain Information Returns:

  • New Due Date for Forms 1099-MISC Using Box 7 — January 31, 2017 is now the due date for filing Forms 1099-MISC when reporting nonemployee compensation payments in box 7. Otherwise, file on paper by February 28, 2017, or file electronically by March 31, 2017. (The due dates for furnishing payee statements remain the same.)
  • Electronic Filers must use the FIRE System. The IRS has included a “First Time Filers Quick Reference Guide” in Publication 1220 (page 2).
  • Extensions — A 30-day extension must be requested by the due date of the return. Under certain hardship conditions, an additional 30-day extension can be requested. For more information, go to https://www.irs.gov/pub/irs-pdf/i1099gi.pdf (page 6).

More detailed information is available at https://www.irs.gov/pub/irs-pdf/p1220.pdf.

IRS Announces New Due Date, Filing Extensions, & Penalties for Form W-2

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According to the 2016 General Instructions for Forms W-2 and W-3 published by the IRS:

  • New Due Date for Forms W-2 — January 31, 2017 is now the due date for filing 2016 Forms W-2 and W-3 with the SSA, whether filing using paper forms or electronically. (Forms W-2AS, W-2CM, W-2GU, W-2VI, and W-3SS are also included.)
  • Extensions Not Automatic — Extensions of time to file Form W-2 with the SSA are no longer automatic. For filings due on or after January 1, 2017, one 30-day extension may be requested. However, the IRS will only grant the extension in extraordinary circumstances or catastrophe.
  • Higher Penalty Amounts — Higher penalty amounts apply to returns required to be filed after December 31, 2015 and are indexed for inflation.

More detailed information is available at https://www.irs.gov/pub/irs-pdf/iw2w3.pdf.

7 Key Items when Choosing a Trusted Tax Preparation Consulting Company in Florida

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Tax Preparation Consulting Company in Florida

Dealing with tax preparation is not for everyone. It is much easier to use a trusted tax preparation consulting company. Although there are tax preparation software tools and online services available, some situations (like owning your own business) are more complicated then these tools are really designed for. In these cases, one should choose a licensed professional.

An enrolled agent is a person who is officially allowed to do tax preparation consulting and to represent taxpayers before the Internal Revenue Service. To become an Enrolled Agent one has to complete a 3-part test which is centered on taxation and ethics. This type of expert can be trusted to professionally prepare your tax return.

How to Find the Right Tax Preparation Consulting Specialist?

Here is a check list what is important when choosing a tax preparer:

  1. Check to see if the preparer is authorized. According to the law all paid tax return preparers must have a Preparer Tax Identification Number (PTIN).
  2. Check out the history of your tax preparer. Always check if the preparer or the company has a questionable history with the Better Business Bureau. It is better to work with a trusted tax preparation consulting
  3. What are the service fees? The preparer’s fee should not be based on a percentage of your refund. Also, do not choose preparers who claim they could obtain larger refunds than their colleagues.
  4. Successful communication. This is an important factor when having your tax return made by someone else. You have to be able to contact the person who prepared your tax return even after it has been filed.
  5. Refuse to sign a blank return. If your tax preparer wants you to sign a blank tax form, never agree on this. And, look for someone else as this demonstrates a sketchy way of doing business.
  6. Review before signing. The professional tax preparer needs you review your tax return, before signing it. You should be able to ask questions if you have any.
  7. A signature and PTIN. The tax preparer has to sign the form and to fill in the preparer tax identification number. You should be given a copy of the return.

If you fall into a more complicated tax situation, use the services of an enrolled agent. Here at The Balance Sheet, we have served the greater Palm Beach area in Florida for years and our enrolled agents have the experience and expertise to do right by you. Contact us for more information.

Filed Under: Tax

The Top 3 Online Accounting Software Apps for Small Businesses 2016

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Online Accounting Software Apps for Small Businesses (2)Joyce Berryman, in Survey of the Literature, labels poor and careless financial management as the biggest cause of small business failure. Accounting software can be extremely helpful for small businesses, as it can organize and handle your finances.

How Online Accounting Software Beneficial for Small Businesses

  • Saves time with automated and fast processes.

  • Accurate and efficient because of its automatic calculations and centralized accounting data to work off of.

  • Enables better decision making through instant reporting and analysis to help you see the big picture. 

  • Helps you organize and keep meticulous records of financial data.

What Features are Offered in Excellent Accounting Software?

  • Many accounting applications can quickly create professional-looking invoices with your logo and branding.

  • Most provide appropriate billing solutions to easily manage cash flow.

  • Accounting software often has a built-in payroll system or has one available as an add-on, so you can pay your employees properly and on time, while also taking into consideration tax issues.

  • Many accounting suites will help you manage expenses and vendors Payments.

  • If you are traveling most of the time, opt for an accounting software package with incorporated mobile apps. It enables you to check financial matters wherever you are.

Top 3 Accounting Software Offerings for Small Businesses in 2016

Intuit QuickBooks Online is believed to be the best accounting software for small businesses. Intuit QuickBooks offers the most optimal, economical paid packages and services. The cheapest plan costs just $9.99 per month, but doesn’t compromise on key features that small businesses need to manage their finances. QuickBooks is very convenient to use and add new information to. Bank accounts and credit cards can be connected right from the dashboard.

  • Makes accounting efficient and less stressful by automating tasks.

  • Possesses all the features that accountant consider critical for small businesses.

Xero Accounting stands second in the best accounting software rankings. Popularly known as the “QuickBooks alternative,” Xero:

It is one of the easiest and most affordable accounting software;

  • Offers better returns for your money. For example, it starts at just $9 per month and includes features like 1099s, billing and expense reports, which cost extra on QuickBooks; and,

  • Provides a cost-effective payroll solution for $30 per month, while on QuickBooks it is around $75.

FreshBooks is the best mobile accounting app for small businesses. Freshbooks:

  • Is affordable and easy to use;

  • Easily creates professional-looking invoices;

  • Helps you track expenses from anywhere you work or travel to; and,

  • Supports several payment modes, such as PayPal, Stripe, and Authorize.Net.

Maxine Taylor, the power behind The Balance Sheet, Inc. has an odd passion for all things accounting. “I don’t advocate a non-accounting person processing the payroll,” she noted. “You are dealing with other people’s money and it has to be correct. And mistakes are not always the easiest to fix. Plus, there are reporting returns that go with payroll.”

Have questions about accounting for small businesses? Contact us – The Balance Sheet, Tax accounting bookkeeping company Florida.