Category Archives: Taxes

Tax Considerations for Self-Employed Consultants: Auto Expenses and More

Mary Kay, Lia Sophia, Silpada, 5Linx, Pampered Chef – to name a few…. These are just a handful of the self-employed consultants in the work world. Many of them are sole proprietors who have little to no understanding of the tax implications associated with it, the tax deductions available to them, or what they need to do to file taxes.

It is extremely important not to co-mingle deductible expenses with personal expenses. Opening a bank account for the business will help keep the expenses separate. This should be one of the first things on the list of “to-do’s” when beginning a business. A special tax treatment applies to start-up expenses-expenses incurred prior to opening the business. Therefore, these receipts must be kept separate from the receipts for general operating expenses.

One type of deduction that helps to reduce the overall tax liability is the auto expense deduction. Auto expenses are deductible either by using the standard mileage rate or actual expenses. The standard mileage rate is the easier method as you simply multiply the current rate ($.555 for 2012) by the total number miles. When using the standard mileage rate, a mileage log will need to be presented in the event of an audit to substantiate the deduction. The actual expense method requires you to keep detailed records reflecting the actual cost of related expenses such as gas, oil, insurance, repairs, maintenance, licenses, car washes and depreciation. If you use a vehicle for both business and personal purposes, the expenses will have to be divided proportionately.

While most business owners are aware of the deduction for meals and entertainment, they must be careful to keep accurate records when claiming deductions for these expenses. The records should contain the date of the meal or event, the name of the person they met with and the topic of conversation when possible. Meals that are consumed during the everyday course of business are not deductible. However, generally 50% of the cost of meals consumed when traveling for business purposes can be used to reduce taxable income.

The IRS allows a home-based business deduction for self-employed taxpayers if they meet certain requirements. The home must be used regularly and exclusively for business. When taking advantage of the home-based business deductions, a percentage of other expenses pertaining to the home are deductible as well. The amount of deductible expenses is subject to specific limitations and ordering provisions. Please consult a tax professional for guidance.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely upon this information as your sole source of authority. Please seek professional advice for all tax situations. Tax professionals are experts who keep current on tax law changes. They can save you time and offer insight on how to use the tax breaks available to you.

CPA, ABA, CFP – Which Credentials Matter?

Image result for taxesWhen choosing a professional to help you file your income taxes – whether you are an individual or are running a small business – choosing the tax accountant with the right credentials is key. Flipping through the phone book or browsing through online business listings, you’ll likely encounter a veritable alphabet soup of acronyms such as CPA, CFA, CFP, CMA, ABA and others. In fact, there are upwards of 46 different acronyms that relate to certifications in accounting, finance and business. Of these accountant credentials, you’re most likely to retain a CPA, ABA or CFP. Here’s what each means:

Certified Public Accountants (CPA)

CPAs are most well known for preparing taxes, but they can also advise you on how to structure your small business and setup a bookkeeping system as well as help you plan for retirement, college and organizing your estate. CPAs must undergo rigorous testing and continuing education to maintain their licenses. This means accountants who are CPAs are highly qualified with up-to-date knowledge of the latest tax laws in their local area. That means a CPA operating in Seattle or Bellevue is required to be well-versed in both federal tax law and Washington state tax law.

Accredited Business Accountant (ABA)

An ABA is an accountant who has undergone additional training and has passed the Accreditation Council for Accountancy and Taxation (ACAT) exam. This is a voluntary accreditation and is meant to signify that this accountant specializes in accounting services for individuals and small- to medium-sized businesses.

Certified Financial Planner (CFP)

A CFP can help you with your investment goals. CFPs are a good choice if you are planning for the future, as they can offer a broad range of financial advice. So,which financial professional should you choose? That all depends. Are you looking to file your individual income taxes? Are you starting a small business? Or are you trying to build a reliable investment portfolio for the next 30 years? Different professionals serve different needs.

The best way to determine whether a financial advisor is a good fit for your needs is to schedule an interview or consultation. Many accounting firms have multiple specialties that work in conjunction to serve your needs. For example, some CPA firms also offer business consulting for small businesses and can help you set up a QuickBooks accounting system or provide advice on how to incorporate your independently owned business. So, take your time and interview at least three different accountants before deciding which one works best for you.

 

Save

The Importance of Business Tax Accounting

Image result for taxesTax accounting is one of the most important domains in the areas of finance. It is really important that the businesses in order to maintain a smooth functioning of their finances keep a sufficient knowledge about the various tax accounting methods that can choose from depending upon the nature and the size of their businesses. It is quite but natural that the businesses that are run in order to earn profits are under obligation to pay the taxes to the government. There are several methods of paying taxes that can be used in order to reduce your taxes.

In general the taxes fall into two categories:

a) The cash method of taxing

b) The accrual method of taxing

It is the decision of the company or the business that decides the tax accounting method that it needs to adopt that is in compliance with the nature and size of its business. For instance if the company is a small business then in order to be in compliance with the federal tax authorities, it is always advisable that the owner choose cash tax accounting method.

The business tax accounting method that is used by the organization can be changed by the taxpayer. In such a case the tax payer needs to have the consent of the secretary of the treasury.

Advantages of using the tax accounting methods are:

1) The company shows goodwill as far as legal compliance is concerned

2) Assists in the faster decision making by having a clear picture of the finances of the company

3) It also helps in maintaining a clear and an accurate budget that gives a correct idea of the profits as well as losses of the company

4) It also helps in maintaining a better record keeping by getting rid of the unnecessary details as well as information.

The business tax accounting can go a long way in determining the future of the company. Well maintained records can really be the boon to the company as that would always show the clear picture of the company’s standing as far as the finances are concerned. Also at the time of filing the taxes, a well maintained record can go a long way in saving money while filing tax returns.

 

Save

Managing Small Business Taxes for Startups With High Profits

When your profits are high as a small business, you might feel some pride and a boost in confidence. You are doing what you want to do and you are doing it well. The only issue here is that things might get a bit more complicated. Taxes for a small business with high profits might seem unmanageable, especially if you do not know how to deal with this type of situation. Taxes for small business situations like this should go to the professionals. A small business consultant, a bookkeeper, can handle this far more effectively than you might be able to. This means better results and fewer risks moving forward.

Bookkeeping for small business taxes and profits is the smart choice when you are making a lot of money. When your profits are high for a business of your size, you should have a bookkeeper helping you. The higher the profits are, the more complicated this can get. It is sometimes more complicated than you can manage. If you try to take it on yourself, you might make mistakes or you might forget something. Any issues with your taxes could hurt your business in the end. A bookkeeper is capable of managing this with lowered risks overall.

On top of better quality results, you also have a specialist handling something that requires a large amount of time and work. Taxes for small business startups are not simple, especially when you have found a lot of success. When you have an entire business to manage and a lot of people going to you, you do not want to spend what little time you have to yourself managing the taxes. Bookkeeping for small business taxes will handle this work so that you can focus on the rest of the business. You will get the work you expect without having to put in any of the time or an effort yourself.

A small business consultant can work with your taxes and on a level just right for your business. This is a specialist in the field who focuses only on bookkeeping. You will not have to worry about difficulties with managing your taxes or issues with the quality of the work. Everything meets your standards and the expectations of the government for taxes. You can continue to work on your business while trusting that the taxes receive the care and work that they demand. It is the best solution.