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Posts Tagged ‘business’

Make an IRA Contribution Before Filing Taxes

March 1, 2015 Leave a comment

If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2014, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2014. Otherwise, the trustee may report the contribution as being for 2015 when they get your funds.

Generally, you can contribute up to $5,500 of your earnings for tax year 2014 (up to $6,500 if you are age 50 or older in 2014). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer’s pension plan.

Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

Each year, the IRS announces the cost of living adjustments and limitation for retirement savings plans.

Saving for retirement should be part of everyone’s financial plan and it’s important to review your retirement goals every year in order to maximize savings. If you need help with your retirement plans, give the office a call.

Saver’s Tax Credit Explained

January 18, 2014 Leave a comment

Low and moderate-income workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return.

Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply and helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. Taxpayers have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013.

Most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Note: Elective deferrals (contributions) must have been made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.

The saver’s credit can be claimed by:

  • Married couples filing jointly with incomes up to $60,000 in 2014;
  • Heads of Household with incomes up to $45,000 in 2014; and
  • Married individuals filing separately and singles with incomes up to $30,000 in 2014.

The saver’s credit can increase a taxpayer’s refund or reduce the tax owed. The maximum saver’s credit is $1,000 for single filers and $2,000 for married couples and is based on filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.

Other special rules that apply to the saver’s credit include the following:

  • Eligible taxpayers must be at least 18 years of age.
  • Anyone claimed as a dependent on someone else’s return cannot take the credit.
  • A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.

Year End Planning for Section 179 Deductions

December 17, 2013 Leave a comment

The IRS is making changes regarding the annual election under Section 179 of the Internal Revenue Code (the “Code”), often referred to as the “Section 179 election” or the “Code Section 179 election.” For 2013 tax returns, the allowable 179 expense election is $500,000. For 2014, the allowable 179 expense election will be reduced to $25,000. This represents a significant decrease in allowable 179 deduction available for you in 2014. This reduction should be taken into consideration for 2013 year-end planning and budgets for the subsequent 2014 year. Please consult your tax advisor regarding your specific situation and how you can plan accordingly.

Section 179 Overview

Generally, the cost of property placed in service in a trade or business can’t be deducted in the year it’s placed in service if the property will be useful beyond the year. Instead, the cost is “capitalized” and depreciation deductions are allowed for most property (other than land), but are spread out over a period of years. Capitalization delays the tax benefits of business expenditures. For example, you may spend $50,000 on a new computer system today, but must spread your depreciation deductions over several years. That’s why the election to take immediate deductions is valuable.

Hobby or Business? Read This

October 16, 2013 Leave a comment

Millions of Americans have hobbies such as sewing, woodworking, fishing, gardening, stamp and coin collecting, but when that hobby starts to turn a profit, it might just be considered a business by the IRS.

Definition of a Hobby vs. a Business

The IRS defines a hobby as an activity that is not pursued for profit. A business, on the other hand, is an activity that is carried out with the reasonable expectation of earning a profit.

The tax considerations are different for each activity so it’s important for taxpayers to determine whether an activity is engaged in for profit as a business or is just a hobby for personal enjoyment.

Of course, you must report and pay tax on income from almost all sources, including hobbies. But when it comes to deductions such as expenses and losses, the two activities differ in their tax implications.

Is Your Hobby Actually a Business?

If you’re not sure whether you’re running a business or simply enjoying a hobby, here are some of the factors you should consider:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Do you depend on income from the activity?
  • If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
  • Have you changed methods of operation to improve profitability?
  • Do you have the knowledge needed to carry on the activity as a successful business?
  • Have you made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Do you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is presumed to be for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training, or racing horses).

The IRS says that it looks at all facts when determining whether a hobby is for pleasure or business, but the profit test is the primary one. If the activity earned income in three out of the last five years, it is for profit. If the activity does not meet the profit test, the IRS will take an individualized look at the facts of your activity using the list of questions above to determine whether it’s a business or a hobby. (It should be noted that this list is not all-inclusive.)

Important Business Articles From Around the Web Today

September 11, 2013 Leave a comment
save your money and one day it'll return the favor

save your money and one day it’ll return the favor (Photo credit: • Brusselssprout_in_Manhattan • Eliane •)

If you are looking for some relevant business reading today, take a look at these articles:

How To Improve Your CashFlow – One Accounting Blog

New GMail Tabs Could Hinder Efforts to Reach Your Customers – AICPA Insights

 

The IRS and Big Data Gone Bad – CPA Trendlines

 

Ten Tips for Construction Business Owners – Reckenen Accountants and Consultants

 

Tracking Everything – Cloud Apps for Small Business – Common Cents

 

The Most Overlooked Leadership Skill – Peter Bregman, Harvard Business Review

 

Its More Important to be Kind Than Clever – Bill Taylor, Harvard Business Review

 

Sign up for important business news that affects you at http://www.cashaccountingcpa.com

 

 

 

 

 

Managing Your Tax Records After You File

September 10, 2013 Leave a comment
People filing tax forms in 1920

People filing tax forms in 1920 (Photo credit: Wikipedia)

Keeping good records after you file your taxes is a good idea, as
they will help you with documentation and substantiation if the IRS
selects your return for an audit. Here are five tips to keeping good
records.

1. Normally, tax records should be kept for three years.

2. Some documents, such as records relating to a home purchase or
sale, stock transactions, IRAs, and business or rental property, should
be kept longer.

3. In most cases, the IRS does not require you to keep records in any
special manner. Generally speaking, however, you should keep any and
all documents that may have an impact on your federal tax return.

4. Records you should keep include bills, credit card and other
receipts, invoices, mileage logs, canceled, imaged or substitute checks,
proofs of payment, and any other records to support deductions or
credits you claim on your return.

See more at http://www.cashaccountingcpa.com

 

Tax Tip – How About Those Business Meals?

August 31, 2013 Leave a comment

What about business meals?

Meals are generally 50% deductible.  But some meals may be 100% deductible.  So from an accounting standpoint make sure to segregate these expenses.

Generally, meals that are 50% deductible include:
– Meals with clients, customers and vendors.
– Meals with employees
– Meals with partners, shareholders and directors
– Meals during business travel
– Meals while attending a business seminar or convention

Meals that are 100% deductible?

– Meals for the business holiday party or social

– Meals that will be reimbursed and  separately itemized on an invoice to a client

– If you are in a partnership or a shareholder-employee in a regular C or S corporation, and you have to work overtime, your company can, on occasion, provide you with meal money for dinner. The cost of this “fringe benefit” is 100% deductible for your company under Section 132 of the Internal Revenue Code and you don’t have to pay personal income tax on the value of the meal.

– Your company can pay directly for the meal or can instead, provide you with dinner money. But, in order for this to work, the amount of money you receive for your meal must be reasonable. If the IRS decides that the amount of money you received from your employer was unreasonable, the entire amount will be considered taxable personal income and will not be deductible.

Good ideas to keep in mind this year http://www.cashaccountingcpa.com

 

Tax Tips – Business Gifts and Home Computers

August 30, 2013 Leave a comment
Pile of gorgeous gifts

Pile of gorgeous gifts (Photo credit: Wikipedia)

Here are a couple of additional tips that might fit your situation as a small business person.
Business Gifts — When you prepare your income tax return, don’t overlook the deductible benefit of business gifts during the holidays or at any other time of the year. Whether you are a rank-and-file employee, a self-employed individual, or even a shareholder-employee in your own corporation, you can deduct the cost of gifts made to clients and other business associates as a business expense. The law limits your maximum deduction to $25 in value for each recipient for which the gift was purchased with cash.

Home Computer — If you purchased a computer and use it for work-related purposes, you may be able to deduct the cost as long as you meet certain requirements: your computer must be used for convenience and as a condition of your employment, for instance if you telecommute two days a week and work in the office the other three days.  If you are self-employed, another deduction you can take advantage of even if you don’t claim the home office deduction, is the Section 179 expense election, which allows you to write off new equipment in the year it was purchased as long as it is used for business more than 50 percent of the time.

 

See more tips and guides at http://www.cashaccountingcpa.com

 

Small Business – Additional Notes on Getting a Loan

August 27, 2013 Leave a comment
English: Cash Money Store for short term loans...

English: Cash Money Store for short term loans on Yonge St., Toronto downtown, ON, Canada (Photo credit: Wikipedia)

It is often said that small business people have a difficult time borrowing money, but this is not necessarily true. Banks make money by lending money; however, the inexperience of many small business owners in financial matters often prompts banks to deny loan requests.

Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: “High Risk!” To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it, and how you will pay it back. You must be able to convince your lender that you are a good credit risk.

Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term. A short-term loan generally have has a maturity of up one year. These include working-capital loans, accounts-receivable loans and lines of credit. Long-term loans have maturates greater than one year but usually less than seven years. Real estate and equipment loans may have maturates of up to 25 years. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.

– See more at www. cashaccountingcpa.com

Small Business – Essentials to Remember When Seeking a Loan

August 26, 2013 Leave a comment
Loans

Loans (Photo credit: zingbot)

If you are considering a loan to help finance your small business, you should keep a few essentials in mind.

When reviewing a loan request, the bank official is primarily concerned about repayment. To help determine this ability, many loan officers will order a copy of your business credit report from a credit-reporting agency.

Using the credit report and the information you have provided, the lending officer will consider the following issues:

  • Have you invested savings or personal equity in your business totaling at least 25 percent to 50 percent of the loan you are requesting? Remember, a lender or investor will not finance 100 percent of your business.
  • Do you have a sound record of credit-worthiness as indicated by your credit report, work history and letters of recommendation? This is very important.
  • Do you have sufficient experience and training to operate a successful business?
  • Have you prepared a loan proposal and business plan that demonstrate your understanding of and commitment to the success of the business?
  • Does the business have sufficient cash flow to make the monthly payments on the amount of the loan request?

See more at Cash Accounting & Business Services

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