Tax talk dominated much of the end of 2017, and no matter how one feels about the final legislation that passed, it is now a reality. It seems fitting that this came at the end of a calendar year, when the nostalgic yearning to look back claims a strong hold on us all.

In a calendar year, tax reform went from a (clearly naïve) thought that a tax return would be done on the back of a postcard, to largely talking about the ACA and health care provisions of the tax world, to finally turning into a much more complete, and still complicated, package.

Just how this all turns out and what it means to you may not be fully understood and felt until we hit early 2019, for the new rules will not affect the 2017 tax returns that we shortly will begin preparing. So although it is a bit rarer at this time of year, we are looking ahead, too.

With it still being the holiday season, I do not want to take the time now to go through some of the stuff that changes under the new bill. I am sure that we will have plenty of opportunities to go through that deeper stuff over the next 18 months or so.

With it still being the holiday season, though, I did want to take this chance to express gratitude that we have been able to track this and take the trip together. If it were not for my clients, I would not get to make a career from this world, which I still love even during the maddening times.

In fact, it is during those maddening times when I feel that gratitude the most. For yes, this is not always an easy path, and it is littered with many numbers (some huge), and multiple pages of tax law that take a lot of time and effort to correctly parse and use to the best advantage.

Seeing how this all works out for your situation will take some time, but we look forward to helping you along that path, and are thankful for the opportunity to do so. Here then is a simple wish for 2018 to bring health and prosperity for everyone as we make the journey.

As promised last week, get ready for business talk! Come on, you know it’s your favorite part of the holiday season.

In that previous blog, I wrote about how the state of our economy is causing more and more individuals to act like a business. At some point, though, it ends up making more sense to become an actual business. So this time I wanted to talk about the different forms a business can take. Each of these come with different tax considerations (which is too in-depth, and most likely too boring, to fully go into here), so that is something we should talk about if you are thinking about setting up a new venture.

First, there is being a sole proprietor. This is when you are in business for yourself, but have not actually incorporated your business.

Then, there is a partnership, which is exactly like it sounds. This is a group where everyone involved contributes something to the business. This can be money, property, labor, skills, etc., with the key being that everyone expects to share in the profits and losses of the business. The partners are not employees, but the profits or losses from the venture are passed through onto their tax returns.

A corporation is what one tends to think when thinking of larger businesses. In this case, shareholders exchange money and/or property for stock in the corporation. The corporation then realizes net income or loss, pays taxes, and distributes profit to its shareholders.

S corporations are corporations that pass their income, losses, deductions, and credits through to their shareholders. Those shareholders report this on individual tax returns, and pay individual income tax rates on it.

Finally, a limited liability corporation is a business structure that has slightly different rules depending on what state it is in. Owners in an LLC are called “members,” and this can include anywhere from one owner to many. Within there, the LLC can be treated as a corporation, partnership, or as a part of the owner’s tax return by the IRS.

If that sounds like it can be a little all over the place, that’s because it can, but there are great benefits of forming an LLC.  The biggest of these is that it separates one’s personal assets from that of a business, making one not personally responsible for the debts and liabilities of the business.

In fact, all of these forms have benefits when used in the correct situations. Of course, that also means that there are drawbacks when not correctly used for a specific situation. This can also be intimidating because it is something that many do not even know they have to think about until it is time to think about it. When done correctly, though, it helps protect your interests and can put you in the best spot to have the biggest initial advantage when it comes to paying taxes. So when I said last week that it is good to sometimes think like a business, it is also good to sometimes become a business. And if you need some guidance with that, do not hesitate to reach out to us. 

As we jet through December, some people will start to gather information in preparation for filing their taxes next year. I don’t mean to say that this is something everyone needs to do, though. For example, if the only income you receive all year is from a regular job that will send you a W2 next month, that is going to handle a lot of numbers we have to fill in come filing time. More and more, however, that situation is covering less and less people.

Of course that one-W2 situation would never cover businesses (and I’ll return to them more next week), but many individuals are becoming more like a business in our current economy as they earn money in ways other than just through a paycheck, These extra bits of income can include a side business, freelance work, or even participating in the sharing economy. It is those people, who come with a slightly more complicated tax picture, to whom I want to speak to this week.

The society we live in makes it easy to become one of these people as the internet offers simple ways to make more money. Websites such as Fiverr and Upwork provide an arena for people to bring their skills to those who need them, making connections that could be impossible outside of the digital world. Many of these transactions are carried out for a nominal amount, but that still counts as income.

Possibly more prevalent are those getting money through the sharing economy. This ranges from Uber drivers to those offering up their home, or even exclusive properties, on Airbnb. So even if you have not technically made yourself a business, it is possible that you have been getting some money in a way that means you should start thinking like a business.

The first thing I want to make you aware of in these situations is the self-employment tax. I could spin off into too many paragraphs about how this works, but will try to keep it simple. This boils down to the government ensuring you still contribute to social security and Medicare out of income earned through self-employment. This is something that many are unaware of until they have to pay it.

On the other side, though, many types of self-employment will also come with expenses that become tax deductible when they are incurred by doing this type of business. Just what is an allowable deduction (or how much of it is deductible) will vary depending on what it is you are doing, but chances are really good that there is something you can deduct.

And there we loop back around to where it can pay to be conscientious and think about these things before it is time to file your taxes. Thinking like a business will only result in better numbers at the end of the process, and the best businesses stay on top of things. So please be aware that we are open for planning meetings now to help you get the most out of this and all coming years.

Tax reform has moved closer to becoming fact, so there is at least a middling chance that there could be big changes coming before the end of the year that may affect how much we owe in taxes when it comes to file them in early 2018.

Now just what those changes may be is still far from certain, and may not be completely clear until we get down to putting pen to paper (or fingers to keyboard) and actually entering information into tax forms.

Even in this time of uncertainty, though, one should not hide from taxes, or throw up our hands and decide that there is nothing we can do. As always, there are advantages to handling these things straight-on, and tackling them as early as possible.

And yes, that can mean starting now. So here are my top five reasons to start preparing for tax season now:

1.      Choice of appointment time.

All the procrastination that happens come tax time means that we get VERY busy in April as everyone tries to finish up in days what they had months to do. I like to think that we do a good job of accommodating everyone, but that means you may need to take an appointment time that’s not ideal. I assure you, however, that many of those ideal times are open in January and February.

2.      Staring early equals more time

And let’s be honest, the vast majority of us do not keep a folder through the year where we can slide in pertinent tax documents that we have gone over and collated chronologically. A little mindfulness now means there less chance that you’ll forget about something you need in the future.

3.      More time equals more opportunity

Also, when the time crunch is not on, you have more of a chance to gather information that you may not have even known would help you. One of my favorite things during tax season is making people aware of deductions they did not know about. But when it’s April 15^th, tracking down a receipt to save yourself $20 pales in comparison to just getting things filed on time.  If it’s February 15^th, though, going home and spending the 15 minutes it may take to get some another documents  turns out to be a much more manageable proposition. And when it only takes five minutes, most of us are okay with working at a $240 an hour clip, right?

4.      Decrease your stress

We’ve all waited into April at some point to do our taxes, right? We also all spent the weeks before that thinking of how we should get moving, how we’re going to spend the weekend getting everything together, and then feeling the stress build as it doesn’t happen, right? Why not make yourself a promise now to not feel that pressure this year.

5.      Moves can still be made

And this is because you don’t even have to wait until the calendar changes to start this work. I’m not going to pretend that there is some secret magic move that we can do in these final weeks to remove your tax bill or even decrease it by 50 percent. We can, however, do some smaller things like making charitable donations or putting money into retirement funds that could decrease your final bill. 

There are few things I can think of that have grown in popularity as quickly as Cyber Monday. Well, there was the rise of internet culture … hmm, maybe there’s a connection there or something. It may be no coincidence then that this week is also National Tax Security Week and Thursday, November 30 is Computer Security Day.

Contrary to how this may sound, I am not coming in this week with tales of doom and gloom as I try to push you away from joining the virtual world or shopping online. After all, it takes zero argument to convince me that taking advantage of Cyber Monday deals makes much more sense, and is much less maddening, than waiting in lines before the sun rises on Black Friday. I’m clearly not alone in this, as this past Monday set a record mark for online shopping.

I do, however, think that there are certain easy, common-sense acts that we can all take to help ensure that we stay safe while enjoying the conveniences this new technological world has brought us. This is an arena where we can talk about one of those things that the IRS does well, and that is stay on top of security issues and pass along good advice when it comes to the subject. They do, after all, handle a rather large amount of critical information.

So if this is something that interests you, visit their tax tips web page this week as they, er, celebrate Tax Security Week.

For those who don’t care that much, or remain too weighed down by Thanksgiving leftovers to put that much effort into extra clicks, I wanted to highlight a few of the tips that are on the simpler side, but that some may not know, and everyone could benefit from a reminder.

So when it comes to online shopping, pay attention to where you are shopping. Use retailers that you trust, or do a quick Google search to research one if using it for the first time. And even when using a retailer that you do trust, give an extra look at your browser. Many sites exist to look like the popular sites you enjoy, but exist solely to gather information from you. An extra peek at the URL bar ensures that the website address is the site that you believe you are on. Also give an extra look to the beginning of the address. Sites that start with an “https” are usually secure. Any sites that do not carry that “s” at the end are ones you want to avoid when it comes to transactions.

And finally, be careful about info into a site if you are using an unprotected Wi-Fi network. If you can access a public hotspot, that means anyone else can also use that hotspot and that makes it much easier for those who want to track what is happening through those connections. Chances are waiting until you get somewhere more secure is going to be easier to deal with than what you will have to do if someone nabs your personal info.

So don’t so fearful as to keep yourself from enjoying what technology brings us, but a little vigilance is always worth the effort.

There are moments when I still cannot quite believe it is already November. We are rapidly moving toward the holiday season, and soon thereafter we can start to celebrate the tax season.

Granted, no one else really celebrates that, and I don’t fault anyone who completely hides from it. Heck, even those who expect a refund enjoy the endpoint, but are not huge fans of the paperwork and reporting before that money hits the bank. And clearly, those who will have to pay to satisfy their tax obligation look toward it even less.

The fact that no one looks forward to it means that many do not think about taxes until they have to.  Unfortunately, this avoidance of the subject could mean that the eventual tax hit is worse than it needs to be. A little more mindfulness, and a little more planning, helps one keep a tax bill as low as possible. At this point, though, there are less than two months left in the year, meaning one’s options are getting more limited, but it’s not too late to still make a difference.

So to start, if you are worried about how things may look come next year, please don’t hesitate to contact us and make an appointment for planning purposes. We can look at some numbers, make some estimates, and do what we can to prepare you for filing season.

For those who aren’t worried, though, and just want to start putting the picture together, the IRS has some tools you can use to do that. A good place to start for all is Form 1040-ES, which you can use to figure out what you should be making in estimated tax payments, and then carry through and pay some, as well. This could be an especially important piece for self-employed individuals, who not only have to pay their income tax, but the self-employment tax.

For those who receive a regular paycheck, though, you may want to visit the IRS’s withholding calculator There you can find out if you’re withholding enough from your paychecks to have your tax bill taken care of.  And if it’s not (or if you find out you’re getting much more taken out of your check than you need), you can fill out a new Form W-4, submit it to the appropriate payroll people at your job and have the proper adjustments made.

Such actions may be (or I suppose, should be) more prevalent than in past years, for as more people start to participate in the sharing economy, there will be more people receiving income that is not being taxed. It could serve you well to start addressing that before actually filling out a tax return.

Overall, if you were happy with how things turned out when you filed taxes last year and nothing significant has happened to change your personal or financial pictures, you can let these things go and all should remain pretty similar when the calendar turns and it is time to file again. I know there are some of you, however, who were not happy, absorbed the blow, and then forgot about it. So why not make things a little easier on yourself this time while you still can?

When Donald Trump was elected almost a year ago now, there were immediate questions about how that could affect the upcoming tax season. That turned out to be all for naught, as we learned that nothing happens that quickly. Then the questions turned to how his handling of health insurance would affect taxes. And well, we’re still not sure about all those answers. And now we are even more focused on what a more extensive tax reform package could mean, but we have hit November without a clear picture there, too.

And now with guilty pleas and indictments affecting associates of the president, who knows where anything is going to end up.

I can’t remember a time when so many things in so many different areas felt so much in flux.  So often in this space I like to write and offer some direction, or at least some tips to point you in possible directions about difficult issues. This time, though, I feel like all I can do is shrug.

This doesn’t mean that all is bad, though. Many economic indicators are good, consumer spending is growing, and the stock market is strong. Even if we don’t know all the answers on where things are going, we do not appear to be on the verge of any collapse.

Sometimes, though, it feels like we may be perched on a precipice, but I think that comes from the divide between sides where middle ground no longer seems tenable. This dynamic has been happening for nearly two decades, and now that we have probably the most polarizing president in history, it has only been exacerbated.

So yes, I am mostly shrugging this week about any specific issue, but I wanted to take the chance to speak up about the political divide.

First, it doesn’t matter what side of any debate you are on. It does, however, matter that you have thought out your position. Don’t blindly follow anyone. These debates are over important issues and chances are really good that their outcome will affect you. So look into them, make your choices, take your stand, but do it with knowledge.

Second, once you have done that, don’t be afraid to speak up. It is okay to share what you believe and it is a good thing (at a base level) that social media has given so many people a voice who did not have one before. But remember to do it with tact and to do it with respect. These are beliefs and outlooks we are talking about, so there is no one final answer.

So finally, have these debates with respect and an open mind. You don’t have to change everyone’s mind, and you won’t, but that does not make them evil. In turn, they also don’t have to change your mind. We should, however, always be open to having our minds changed. Granted, in some cases it may take a lot to accomplish it, but be open enough to listen to others and allow it as possibility.

For only then can we ever rediscover compromise. 

Between hurricanes, health care and tax reform, too many of my recent blogs have felt at best confusing and at worst depressing. Granted, as someone who works in taxes I am used to not always being a bearer of good news, but this has felt excessive. So today I am going to try to turn the tide a bit and speak of one of the positive times in which I do get to be involved.

One of those happy times comes when someone gets to adopt a child, for I then get to bring the news that it comes with a tax credit. Granted, this is a very small piece when weighed against the importance of the whole situation, but it is one of those instances where if the tax help exists, you should take advantage of it.

Unfortunately, and not surprisingly, this credit isn’t simple, and complicated enough that I could not hope to explain every bit of it in depth in this small amount of space. So to introduce it, I will let the IRS speak for itself. It states that, “tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. The credit is nonrefundable, which means it's limited to your tax liability for the year. However, any credit in excess of your tax liability may be carried forward for up to five years. The maximum amount (dollar limit) for 2016 is $13,460 per child.”

And if any of that doesn’t make sense to you, well it’s the IRS so that’s not surprising, and I promise we will work through it if you are in a situation to utilize it.

I did, however, want to spend some time going through what qualified expenses are for this credit, because how much money one can spend before an adoption is finalized can be quite large. So first of all, these include all reasonable and necessary fees paid for the adoption itself, as well as court costs and attorney fees incurred during the process. Beyond that, though, traveling expenses during the experience count, and this includes food and lodging while away from home.

Another key point is that these expenses count even before an eligible child has been identified. This means that what one pays at the outset of adoption efforts, such as home studies, are qualified expenses. Also, as another point of definition, an eligible child is an individual under the age of 18, or a person incapable of self-care.

There are some limitations, though. First of all, there is a income limit based on your modified adjusted gross income. So it is possible to have enough income that this credit is eliminated. Also, qualified expenses do not include expenses one pays to adopt the child of a taxpayer’s spouse.

Regardless, this credit still applies to a great number of adoptions. It’s a little extra financial bright spot following the brighter spot of an actual adoption. So if you are someone who is eligible for this, please contact us, for we would love the chance to further help celebrate those positive times. It feels like we all could use it. 

Now that wildfires have been added to the list of disasters for which some tax relief measures have been granted, our ability to feel safe keeps being chipped away at. As these situations come at us with alarming regularity, they have caused many stories and tips (including from me) to be put out there in the hopes of helping people prepare for such events. What if it’s already too late, though?

It is that situation that prompted the IRS to release some tips for those who need to reconstruct records after a disaster. I think they’re worth mentioning here, for not only is it good advice and guidance for those who are in the unfortunate situation of needing to immediately heed it, but it also gives some ideas on how you might want to handle recordkeeping to try to mitigate the pain, hassle, and heartache that disaster may cause.

For overall, the more organized you were beforehand (while hopefully seeing the need to keep those organized records in more than one place), the easier it will to put things together afterward.

But if you need to still create a list of lost inventory, contacting suppliers for past invoices can help you start to document goods that you purchased. This won’t necessarily allow you to arrive at any final numbers, but will provide a baseline of information to work with.

Those numbers can work hand in hand with income, too, some of which can be found from old tax documentation. This includes federal, state, and local returns, but if you’re a business, don’t stop there,, for you should also be able to acquire sales tax reports and payroll tax documentation.

All this can start to give you numbers, but one could be most interested in trying to document the loss of property. Much of that may not be recorded in any of the above documents, especially for types of property that you have had for years, and frankly, those can often be some of the more valuable pieces you own.

The best thing to do in that situation is have photos or videos of the property. It is good practice to keep such evidence for insurance documentation, but even if you did not take that step in a proscribed and clinical way, the IRS offers the interesting idea of checking your mobile phone and other cameras for anything that could have been captured on photos or videos that you have there.

Barring that, though, business owners should still sketch out the interior and exterior of their locations, nothing where equipment and inventory was located. For the outside of buildings, note as many things as possible as landmarks, include parking areas, and include anything damaged in the incident.

These are just small tips, but at least they offer some guidance for those who could be in situations where they feel helpless. To keep yourself from becoming helpless in the future, though, think of those steps you could take now to ease the pain of future disasters. There’s no way to make such things easy, but simple steps will feel much bigger when you’re in a situation that makes you glad they were taken.

Now that the shock of what Hurricanes Harvey and Irma did to our country has begun to fade, it can be too easy for those unaffected to go on with their lives without paying any more attention to those directly affected. So first let this be a slight push to not completely forget about those who are still battling, and if your situation has changed since the storms struck and you can now afford to give help, please do.  And those are only the disasters I mentioned in this space previously, for we also should not forget those in Puerto Rico still trying to rebuild after Maria’s wrath.

What all this tells us is that the impact of huge storms like these does not end when the storms move out. Returning to normal cannot be done with the flick of a wand when your house may no longer be a suitable or safe dwelling. And although I wrote earlier of some of the special tax rules being put in effect for those in disaster areas, I want to also note that many of those people can also take advantage of the casualty loss tax deduction.

This was not included as one of the special measures being undertaken by the IRS, for it is something always in place. It may be one of the deductions not always known about, however, for many rely on their insurance to reimburse them for any damage, destruction, or property loss occurring from unexpected events. And it is true that this this deduction does not cover things for which you were reimbursed by insurance. What about when insurance does not cover everything, though? Well at that point, at least you can have some of that hurt mitigated with tax help.

To cover the very basics of this rule, casualty losses occur from “sudden, unexpected, or unusual” events. This means that anything not occurring through normal wear and tear or progressive deterioration could possibly be reported as a loss on your taxes. Think of it this way, if you need a new roof because it’s been a number of years since it was replaced, that does not count, but if you need a new roof because a tornado damaged your home, then it does count.

When this happens to your personal property, the amount of your casualty loss is the lesser of the adjusted basis of your property or the decrease in fair market value of your property as the result of the casualty.

Now at this point the insurance reimbursement comes into play, for you must adjust the casualty loss by the amount of that reimbursement, but if you can document that you still had a loss following that, then it can still be reported as an itemized deduction.

And as a side note, the same general rules apply to any losses you may have from theft.

Such losses are generally deductible in the year that they occur, so you don’t want to sit on making claims and getting everything in order when it comes to these events. There are also some rules around the deduction that make it not the easiest deduction to navigate, but as always, please be sure to reach out to us if you need any assistance doing so. 

In the last week, the ideas behind President Trump’s tax reform plan finally started to become known. And it is natural for everyone to read the details and think about how it will affect their situation. No matter what answer you came up with, though, don’t start thinking that it means anything definite. Just remember the back-and-forth battle with health care that has occurred since Trump took office as an example of how difficult turning thought into action can be.

And since that is still so much up in the air, there is no reason for me to delve into the nuts and bolts of what is being proposed. Just know that we will remain on top of it so that you can trust your tax returns are in capable hands when any changes come.

I do, however, want to talk about the idea of how what is being proposed is being framed in terms of making taxes easier to understand and the tax code less complicated. But when so many pieces are involved, isn’t it bound to be a little complicated? Taxes are a huge way that a giant country of hundreds of millions of people is funded. And politics aside, most of those people want the government to have some level of power, and with that comes a cost. There will never be an end to the debate of how much power should be used and in what areas, but it will end up being expensive no matter what.

And because of that, there is no way this will end with a system that is simple enough that everyone can take care of their taxes on the back of an envelope. That’s a dream that will take bigger changes than simply how a tax bill is calculated.

Taxes are difficult, and no one wants to really think about how much we pay for them. It feels like money that we rightfully earned is being taken from us. But remember that they do go to fund many things that mostly everyone wants the government to do, so it’s not that bad.

At the same time, though, everyone should feel entitled to use the tax system – however the government determines it stands at the time- to their greatest advantage and keep the most money that you can in your own pocket. It’s legal and been determined you deserve it after all, right? So because of that, and because this system is going to be complicated no matter what, it’s good to have a professional by your side.

It is impossible to ignore the proliferation of do-it-yourself tax products that are out there now. Do you really want to teach yourself how to handle things that can be this difficult, though? No one wants a fly-by-night heart surgeon, because he works with a complicated system. Now your tax return may not be as immediately dire, but it should still be placed in capable hands.

So remember our hands are here for you, today, and through whatever the future holds. 

We are now officially into fall, even if many of us already left summer mode behind once Labor Day passed. For most, this means a little more buckling down at work before the holiday season comes and gives us a new excuse to take some extra time off work. It also means we are exiting the high time of the year for weddings.

And sure, these are beautiful occasions when people declare their love for one another in front of the people who mean something in their lives … but it also comes with some financial and tax considerations, and that’s where I come in. Maybe that’s why I am not invited to too many weddings, but this semi-killjoy attitude still comes with information that the recently married should know. Even those who are not yet married may want to pay attention, for when it comes to tax purposes, even if you do not get married until December 31, you are considered married for the year when it comes to tax purposes.

First, marriage often comes with a change in name, and it is important to report this change to the Social Security Administration. The name on your tax return must match what is on record with the SSA. And sure, dealing with a Social Security comes with a level of joy that may only be rivaled by a trip to the DMV, but it is worth it to not run into issues come tax time. Along the same lines, if you have changed your address, send the IRS a change of address form, too.

Next, married couples will face a decision on whether they want to file their tax returns jointly or separately.  Filing jointly is usually the better way to go, but everyone’s situation is different, so it is worth looking into to make sure you are selecting the most beneficial status. 

Once you figure out how you will file, it is a good idea to run some rough calculations and get an estimate for how much tax you will owe by the end of the year. Once you know that number, it could be worth considering changing your withholding. If your new combined income means will owe a little more, you can start having that withheld from your paycheck and not face a big bill early next year. If your new situation means you can expect a bigger refund, though, changing your withholding can allow you to bring home more money each week in your paycheck, and that is usually a welcome thing with that aforementioned holiday season coming up.

Finally, when you look up issues concerning marriage, the IRS includes their near-constant reminder to watch out for scams. There are legitimate things to think about when it comes to your finances when newly married, and there are legitimate people who can help you with that. If someone contacts you claiming that your new status comes with some new payments you have to make, though, that is  less legitimate. Remember to follow your gut instinct if something sounds fishy, and do not hesitate to investigate it.

After all, it’s that gut instinct that led you to the marrying your partner in the first place, no? Those guts can know some things.

A few weeks ago I wrote about the importance of recordkeeping and how it eases a lot of the burden and frustration come tax time. I addressed it as more of an issue with one’s personal taxes, though. This time, however, although I wish I didn’t have to say it, I have also seen all too many cases when businesses were much too lax with the records they keep. This can present an even bigger problem than with one’s personal records, for if you cannot document business expenses, you are potentially losing legitimate deductions on your taxes and costing yourself money.

So in this vein, I first want to state that keeping bank and credit card statements is not enough. Sure, this proves that you spent some money, but does not prove what you spent it on or why you needed it. Now this doesn’t mean throw away your statements, though, for they are key in a three-pronged approach for the documentation you want to keep to legitimize your expenses.

You see, those statements may not prove what you spent money on, but they do prove that money was spent on something. This is still key to prove that you paid the money and aren’t trying to pass off something a friend or family member paid for (or making something up completely) as an expense you paid for.

Beyond that, though, you need to keep the receipts you receive when you spent that money. That will show what the money actually went to.  Don’t just stuff them in your pocket, though, and forget about them for six months, for you will want to be able to remember why the money was spent. This may not be so difficult if you’re, let’s say, a contractor who bought some supplies at Home Depot; those will not be too difficult to track back to the job you were working on at the time. But if you are at a lunch meeting with a business associate, exactly who you were with and what you were discussing is not going to be so evident from the receipt itself. Just jotting down some notes to that effect on that receipt when you get it can help this issue.

The third piece of documentation you will want to hold onto are any invoices you receive. With that, you can further justify some of the money that came out and is shown on those bank statements, and show exactly what it paid for. If you are able to have all three of these pieces of documentation for one expense, it gives you all the necessary backup to prove that you spent what you said you spent and what you spent it on.

Even with that, though, this does not automatically make a business expense. Please remember that just because you have a business does not mean that every expense you ever have is for your business. The groceries for your family still are just groceries for your family. This is the reason that I always recommend having a separate business banking account, as it can automatically help alleviate the confusion between what is or is not a business expense.

Finally, I know that none of this is fun; it is the part of running a business that is a drain and feels like you are not doing the things that you wanted to do when you started the enterprise. You want to make sure that that enterprise is running at peak ability, though, and part of that is keeping control of your records.

I almost cannot believe that I am writing about such things again after just discussing some of the ramifications of Hurricane Harvey last week. Since then, though, Hurricane Irma arrived to carve its own path of destruction.

I do not want to go into the same levels of discussion that I did last week, but just let it be known that my heart continues to hurt for those who have been affected, but still sends out good hopes and well wishes for those whose lives have been affected.

I do want to say, though, that much like with Hurricane Harvey, the IRS is offering similar help to those newly affected, and have set up a website, located here, with all the pertinent information. Please pass that along to anyone you know who could benefit from having that knowledge.

In the midst of all these unfortunate events, though, we continue to see stories about those who do what they can to help others in need. Combine that with our remembrances of 9/11 this week, and we can be a little heartened by what we can endure, and what others will do to help us in that quest.

And since I have to tie this into something financial or tax-related in some way, I will take a little time now to give a reminder that what makes for a charitable tax deduction is not simply monetary donations, but can include expenses incurred while working for a charity.

So first off, remember that all of these deductions to be valid must involve a qualified charity. Granted, most of them are, but it never hurts to check, especially when starting a relationship with a new group, and ensure that the organization is legitimate. It is important to note that for a charitable contribution to be deductible, it must be made to such a group as an entity, and not earmarked to be set aside for a specific person or family.

Second, if you do substantial charity work for such a group and travel for it, many of those expenses can be deducted if you have not already been reimbursed for them. One thing many do not realize is that this can even include working with local organizations. If you use your car at a time for the express purpose of helping that charity, then you can even use a standard mileage rate in claiming a deduction. This will probably be easier than keeping track of exact expenses, but you will still want to keep a reliable record of this type of travel as you go, noting your mileage.

And of course, this can include longer and farther trips, too. A slight warning here, though, that the trip must involve a genuine and substantial duty to the charity and cannot be deducted if a significant portion of it was for recreation or vacation. If a trip does qualify, though, then such as expenses as air, rail and bus transportation, lodging costs, meals and certain transportation costs while at your destination become deductible.

It is a wonderful thing that there are people who give so much of themselves and their time to such noble pursuits, and it is also wonderful that they get these little bonuses for the good work that they 

This is a different type of blog than I usually write, and I am thankful for that. Sometimes, though, unavoidable tragedies happen, and they have to be mentioned. Unfortunately, one of those times is happening now, and will be happening for a while, as the areas affected by Hurricane Harvey move through their recovery phase.

These times shock us with trying images as we see levels of devastation that defy imagination. At the same time, though, they also bring us inspiring images. We get to see the levels of human will that can be reached when a community bands together to help each other and return their lives to as close to normal as possible. We also get to see the level of human compassion reached when those from afar do what they can to achieve the same lofty goals.

So before going through many of the implications of this, I first just urge everyone to donate to the cause if you can. I know that many of the times I write about giving to charities, it is in relation to how it affects your tax picture, but moments like this are reminders of the human reality behind it. Good is done by giving to others who find themselves in need. Sometimes we only think of these things as numbers, but it is so much more than that.

At the same time, though, the IRS has put out a notice to be wary of those putting together scams and only pretending to be gathering money for the cause. There are plenty of obviously reputable charities doing good works, though, so please don’t be that wary. Just remember that if something feels fishy, it probably is. But all those other groups out there who don’t feel fishy, the charities that you we see doing great things, they are worthy of our attention.

​Let it also be known that the IRS has announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of the storm and their families. I don’t want to get into the minutiae of it here, but know that more information on this, and much of the other information in this blog, can be found at the IRS Hurricane Harvey Information center located online here. There is also a program where employees can forgo vacation, sick, or personal leave time in exchange for their employers making donations to charitable organizations working to help those affected by the disaster.

I think there are a couple of other highlights from the tax realm that are worth noting. First is that those affected get some tax relief in how long they have to file certain individual and business tax returns, as well as in making certain tax payments. This includes an additional filing extension for individual taxpayers with valid extensions that run out on October 16 and businesses who were to have filed on September 15.

Also, the IRS has waived a diesel fuel penalty for the entire state of Texas.

Granted, all this is far down on the list of importance for those who have had their life upended by something totally out of their control. But in those times, hopefully enough pieces of light can come together to start making life bright again.

It is inevitable that technology will continue to move forward, giving us access to more information and allowing us to do more things by ourselves than ever before. This will affect everyone, though in many different ways. Personally, my profession has seen a shift with more people preparing their own taxes with the proliferation of do-it-yourself tax software.

Of course, it is both not surprising and a bit self-serving for me to say that I don’t think this is the greatest strategy for people to employ. It may also be a bit hypocritical, for I’m sure there are some (former?) travel agents who would tell me that I do not find the best deals when I book my own trips on the internet. Still, there is a recent story that shows the potential dangers of tackling the tax code alone.

This case concerns an insurance consultant who used software to prepare his returns. The IRS believed he claimed too many deductions. This led to the consultant saying he had evidence to prove some, while blaming his tax software for “luring him” into claiming others.

Now if you are actually interested in the details of the case, feel free to read the linked article from taxadviser.com.  In this space, however, I want to look at it from a larger view.

First, I don’t question that tax software is made by designers with good intentions. They do not want to produce a product that leads to people filing incorrect or fraudulent tax returns, for they would not remain in business long with that tactic.

Also, I think that this software can help many people with simple financial situations quickly and easily file a legal return. If your financial picture is not complicated, there are an easy series of questions that could be asked to fill out the necessary forms and have it be a less painful process than actually reading over the actual IRS forms and instructions by yourself and going at it completely alone.

As this article shows, however, not everyone has such an easy tax picture. And if you are not 100 percent sure on any question the software asks or on any deduction you’re claiming … well … let’s just note that the case in question involved a claim of a net operating loss of $185,673 that the IRS disallowed all but $142 of. That’s the type of mistake that can haunt someone for years. Now I don’t know if there was any willful, or at least optimistic, reading of what the tax software said, but this is not the type of mistake any credible tax preparer would have allowed.

I don’t think that the only danger in tax software is the possible claiming of deductions to which you are not entitled In fact, I think the biggest danger when filing a return is such a manner is that you will miss deductions for which you legally qualify. You see, no matter what questions the computer asks, it cannot understand your situation in the same way as another person, someone who can better understand you as an individual, and not just as some answers on a flowchart.

Either way, allow this to be a cautionary tale, even if self-serving

I know that I am one of the few people out there who actually doesn’t mind (and maybe even enjoys?) looking ahead to the next tax season, but I know that I am not the only person who could benefit from thinking about it.

Just think about how every tax season feels, with that persistent feeling of how much of a pain it is to gather all the necessary paperwork. Now I certainly understand that there are a number of forms you will not have for months, but there are some things that you can start gathering now, you know, before you toss some pertinent receipts in your next cleaning binge. I cannot possibly overemphasize the importance of good recordkeeping. Any tax audit can be a hassle, and most likely comes with some fear, but if you kept good records, retained all necessary documentation, and have your return prepared by someone trustworthy (you know someone like that, don’t you?), then you can simply prove that what you reported is correct, and soon forget that it ever felt like an issue.

Tax issues and audits become real frightening, however, when those things aren’t in order. I mean, you can convince yourself (and any tax software) that you handled everything correctly, but you are not going to be able to convince an IRS agent that your interpretation of the rules trumps the government’s view. Furthermore, even if you did have a correct understanding of how the numbers work, they can be thrown out if you cannot prove where your numbers came from. And if your numbers get thrown out, chances are that it will result in a higher tax bill.

So if you know that you do not have everything ordered in a way that will lessen your stress come tax time, this is the time to start doing so.  If you have a pile of receipts hanging around in an envelope somewhere, start going through them so you know you have the ones you need. Or if you haven’t been keeping them, and you know you should, well you at least still have about four months to start doing so. And if you’re not sure what to keep, keep anything you have a question about. You will always be happy to have saved too much than to have kept too little.

There is then the idea of what to do with the records you are keeping, though. Maybe you are keeping everything you should, but do not have any sort of bookkeeping system in place, and know that things would be easier if you already had concrete numbers to work with at the end of the year. Well, again, there are four months to set that up, which is more than enough time to get a system in place that will remove that stress.

Finally, many people have had changes in life or changes in income that will alter your tax picture. When that happens, it is worth taking the time to be sure you understand what that will mean to your final numbers so that you can plan for it.

All of this comes back to planning and diligence, two areas that we pride ourselves in specializing in. So if you need any help with these, please don’t hesitate to contact us … while there is still time to make it really meaningful.

Do you ever find that as soon as you start thinking about something, you see it everywhere? You know, like how there never seems to be only one shark attack at a time? Well, empirical data says this isn’t true and is just a type of confirmation bias, but it still just happened to me.

It was just last week that I wrote about some cash-flow issues that affect all businesses. In that blog, I said that one reason for that happening was not getting paid on time (or as quickly as would be ideal) by customers. Well, since that time, I also read a recent article on cpapracticeadvisor.com that spoke to that issue.  When this type of coincidence happens, I think it is worth paying attention to, so I wanted to spend this week’s space looking at a few of the things brought up in that article.

The first thing I wanted to point out was how key communicating with customers is when it comes to solving these issues. Sometimes there is going to be a genuine dispute at the heart of why you aren’t getting paid. It is best to handle this as soon as possible if you want to get any of the money owed you. At other times, it may just be being overlooked or forgotten about. Here again, a plan for continued communication will help you get paid.

Something worth pointing out apart from that area, though, is invoicing as soon as work is complete. There is nothing wrong with charging for services or goods that have already been provided, so there is no need to wait on this task. The article also makes a salient point that the sooner you invoice the easier it is for the client to connect it to the job done. From a psychological point of view, it then serves you best to make that request for payment when your project is fresher in the customer’s mind.

It might also be worth thinking about the ways that you allow your customers to pay. Are you only accepting checks that they have to mail to you? Well, that’s going to take longer to get paid by its nature. But if you have some sort of payment portal where they can pay you electronically, be it through ACH, write transfers, electronic check, debit card, credit card … well, the more options provided, the easier it becomes for someone to get you your payment.

Also, if you are in a business that works on larger projects, it could be worth thinking about implementing some sort of installment plan. This may not work for everyone, or be something that ever business wants to do, but it’s possible that getting some amount of money for, let’s say, three months, would be more beneficial to you than waiting the same amount of time for the lump sum. (And of course, it is possible to add a convenience fee onto such an arrangement).

More than these actual nuts-and-bolts pieces when it comes to collecting, though, I would say that there is a more important part to making sure you get paid – the work you do. Providing quality goods and services are the best way to make sure you get your money. Everyone is willing to pay for something we find valuable. 

When it comes to owning a business, how well it is running does not always depend on a year-end profit and loss statement. For even if you finish the year making a profit (and even assuming that you paid yourself what you wanted to be paid), there could have been many difficult times throughout the year, and those are very likely attached to cash flow.

Trust me, I do tax returns, so I fully understand the ebb and flow of how much cash is coming into a business.

I wanted to take this week to go over some issues concerning this subject. Over last tax season, I saw many businesses who were just breaking even, but with some adjustments or a change in mindset, improvements could start to be made.

First, if you are in a business like mine with unavoidable seasonal swings, be aware of this. In that situation, you cannot run your business as if every month is going to be like the best month, and you cannot run your business as if every month is going to be like the worst month. Instead, you must have control enough over your financial numbers to know when and how much you can spend – and in a way that will help your business grow.

A small corollary to this is that cash reserves are necessary. Sure, as a business you probably have access to some sort of credit, but the more you can access your own money that doesn’t require being paid back with interest, the sooner you get back to your starting position.

Although these may feel like smaller moves, being mindful of your receivables and payables can help ease cash flow issues. For the payables, putting off paying a bill can give you a slight cushion. Now I am not saying you should push anything past the due date, for this is likely to lead to other charges and only hurt the totals we are trying to improve. But it is possible that waiting two weeks until the bill’s due date could be beneficial.

On the other side, efforts must be made to see that your customers pay you in a timely manner. You may want to think about instituting some sort of reminder system if you don’t have one, or possibly even attach your own late fees to their bills if payment is not coming in on time. It is also possible to offer incentives for paying early.

Overall, it is likely that no one action is going to be enough to solve serious cash flow issues. And it is impossible to get a firm grasp on it as a whole without looking deeper into the actual numbers of your business. By being proactive, though, I am certain there are things you can be doing to improve the situation. If this is something you would be interested in delving into, please let us know. Putting in the time now to make positive changes will make much of your future time feel more positive.

As I write this on Monday, it appears that President Trump’s and the Senates Republicans’ attempts to repeal (and potentially replace) Obamacare have failed. By the time you read this, though, that may certainly change. For if there is one thing this story has taught us, it is that there is little one can count on during contentious political times.

Heck, it’s not like passing the Affordable Care Act was an easy thing even when the Democrats were in power during (slightly) less contentious times.

Getting into the political debate over the issue is not necessary or proper for this spot. If you want blogs that do that, you can find enough of them to keep you occupied until … well forever most likely as it is not likely this battle is end sanytime soon. From the moment Trump was elected, though, questions abounded as to how one’s tax picture would change if our country’s current health care plan went away.

Those questions were plentiful, and possible answers to those questions were probably more plentiful. Note though that they were only possible answers at the time and seem ever less likely to be possible the longer it takes for this saga to play out. It is impossible to say that prognostication plays no part in the financial world (the stock market is run by it in some way, after all), but it really should only go so far.

After all, if anyone made any significant changes because they were certain changes were coming in their company’s obligations concerning health insurance, they are hurting now as they roll back some numbers to what they were before any of this predicting began.

In here are many lessons …

First, work only from the numbers that are definite in your reporting. I have warned against fudging such things in an optimistic way before, for no matter how glass half-full you want to be, dealing with real numbers is what will allow you to get to the point where you can feel great because things are actually great.

Second, just as you have to work with real numbers, you have to work with real situations. If things happen in the political realm that suddenly improve your situation, celebrate that bonus when it happens. Counting on serendipity, however, is not sound financial advice.

Third, understand the timing of the political world. Things felt like they were going to completely change when Trump was elected, as it symbolized a great new world for some and a feared new world for others. Both sides, however, would now have to admit that whatever hopes or horrors they saw coming did not come to pass as quickly as felt possible at the moment. One must look to the future to be successful, but dealing with the present takes precedence.

Finally, try to keep your political views separate from your financial ones. You may wish that things were different than they are, but those wishes will not change your legal obligations. Be active in the political world if there is change you want to help enact, but concede that you must operate in the world as it now is.

There are so many twists and turns along the way in life that we can never really know how things are going to turn out, so let’s start by owning today.

I feel like I have written a lot about tax-related matters recently in these blogs, and I suppose that means the tax-season hangover must have abated and I can once again stomach looking forward to the beginning of the next one. I am not the only one who should be doing this, though, as everyone can benefit by spending some time considering what their tax picture will look like when it comes time to file again.

Granted, for many this is an exercise that can be done in under 15 seconds. If your life and financial situations are much the same as they were last year, and you are happy with the final numbers on your tax return, then there is no reason to make any significant changes before it comes time to complete the forms again.

For those who are in different situations, however, spending a little more time on this mental exercise can help prevent a surprise bill in seven to nine months. And remember that this does not only have to be a change in your job situation. If you get married, divorced, have a kid, start going to school, or have a kid beginning college, these could all come with tax considerations that may lead to a significant change in your taxes.

However, this is also something worth paying attention to if you expect your income to change significantly from prior years. Entering new tax brackets is certainly not a bad thing (it is a rare situation where one should feel bad about making more money), but something that warrants being aware of its implications. This can be especially true for those who are self-employed or otherwise acquire much of their income without taxes already being withheld.

Thankfully, the IRS has a pretty strong tool to help one estimate your tax bill with its withholding calculator that you can check out at https://apps.irs.gov/app/withholdingcalculator/. This will bring you through questions around both life events and income that will largely determine your tax picture. Knowing how much you have to pay now can help you prepare for the bill and prevent scrambling to come up with the money come April. And that preparation needs be no more intense than changing your withholding on your paycheck. To find out just how to do that, talk to whoever handles your payroll, but I promise that it is easier than you fear.

Beyond those concerns, it is not only those who can expect a larger tax bill that may want to pay attention to this area. If you are used to getting a large tax refund – and expect another – but are still paying out the same amount of tax money from your paycheck, maybe you want to adjust your withholding and keep more of that money. This may not end up being a huge amount, but it could serve you better in your bank account than the government’s.

No matter where you live on this spectrum, at least now you can’t say that I did not put out a warning about these issues before it is too late. And it may be the only one you get, for I swear that I do have other interests beyond taxes, even if it doesn’t always seem that way.  

It seems that there is an impulse to believe young people possess a measure of savvy lacking in those who are older. We also seem to believe that level of savvy decrease the older one gets. After all, senior citizens are the ones we worry most about falling victim to financial and tax scams, right?

Well, this article from Forbes.com says that it is actually millennials who are most likely to fall victim to such scams.

Just the headline of this article grabbed my surprised attention, but the numbers in the article blew me away even more. Almost 17 percent of millennials said that if a caller could verify the last four digits of a social security number, they would give away more personal information, as compared to 3.2 percent of Gen X-ers and two percent of Baby Boomers. It then shouldn’t be so surprising that millennials as a group feel they are less likely to be victims of identity theft.

In a way, this is a heartening statistic. People should grow up feeling safe and not afraid of the world, right? At the same time, though, we need to ensure that they also gain a sense of how to keep themselves safe.

That generation is growing up in a world where more is being shared as a general rule. Technology has made it easier to keep in contact with more people than ever before, and social media is leading to more being shared between those people than ever before.

There is much debate to be had in this area over what information is right to share, and with whom, but there are certain pieces that one must learn to keep private no matter what, Certain pieces of personal information can be used by scammers to negatively affect one financially, and the younger generations must be taught what information needs to be held close.

Ironically it seems that savvy that we credit the younger generation with can is often attached to technology, but it may be that same technology that is making them more susceptible to such scams.

Maybe the older generations need to keep in mind that there are things they do not know as well as younger generations, but there is also a wealth of knowledge they can pass on, and much of that comes from experience. After all, how much do children have to worry about handling finances? This is why just last week I wrote about making sure those holding summer jobs knew about the tax obligations of that work.

In fact, I recently read another article that says the millennial generation is financially timid. Now of course, this is a time in our country when many are feeling unsure and timid for a variety of reasons. But if we are going to carry through the ideas already uncovered here, doesn’t it stand to reason that one would be timid in areas where they don’t have a lot of a knowledge or confidence?

In conclusion, I think that financial issues are not something families always discuss, and this is understandable. First, they can often be a source of stress, and thus a less-than-enjoyable topic. Second, there rarely is much younger members of a family do that affects the situation. But let these stories be a slight warning that there is a measure of information that will only serve them well to have.

Last week I wrote about the wonder of a summer holiday and how taking a break and thinking outside of normal work parameters can increase one’s overall happiness and translate to more productivity at work. That only referred to short mental breaks, though, for we cannot leave work completely behind in the summer.

In fact, there are some people who may do most of their work over the summer, as many students take on summer jobs to either earn extra money or save enough to get through the rest of the year. If you are in this position, or know someone who is, make that the tax implications of this work is understood.

For those who make the bulk of their income over these few warm months, they probably don’t have much to worry about when it comes to their tax burden, especially if they are working a regular job with a regular paycheck that  comes with a W-2 at the end of the year. Whatever they owe is likely covered through the withholding in their paycheck, and many can even expect a refund.

Of course, for those who have income of other sorts, this may not be the case, and answers about their taxes can be more difficult.  These answers get even trickier if one does not receive a regular paycheck and instead qualifies as self-employed. This is a growing situation across all age groups, as technology increasingly lets people work in different ways, but it seems to be even more prevalent amongst the youth who tend to be the most skilled in navigating that new world.

Now again, if one only works a few months and makes a nominal amount of money, your tax burden will be minimal.  But if you do make enough to owe some taxes at the end of the year, these people need to be extra cautious for none of that bill was already paid through paycheck withholding.

I would never claim that these youngsters present some of the tougher tax problems that come through my door. They do, however, present a different set of challenges, and some that are unfamiliar to many. What one pays for tuition, in student loan interest, or gets from ROTC pay are numbers that will end up affecting your tax picture.

And what about those who work in a job where they receive tips? Are they working on recording those correctly to make sure they can file a full tax return that will not come back to bite them in the future?

Again, the chances of these being large bills and giant problems are not huge. With a little knowledge and forethought, though, they can even be nonexistent. Also, there is probably no better time to start learning about the tax system than when it starts to affect you. So if there is anyone if your life in this position, don’t be afraid to have a little talk about this. And if you feel like you don’t know all the answers they need, don’t be afraid to reach out to someone who does.

It is one thing to say that no one ever wants to really have personal dealings with the IRS. Most of us send in our tax returns every year with the hope to never hear about them again. After all, if you do hear from the IRS after that point, it is not because they were so impressed with your organizational skills that they want to refund some more money.

If you do hear from the IRS, however, and are sure that your taxes were correctly handled, at least you won’t have to worry THAT much and can have confidence that things will be decided in your favor. There is still the aggravation of jumping through the hoops until it has been handled, though. Not only that, but with recent and seemingly ever-increasing funding cuts for the IRS, it is more difficult than ever to actually talk to an actual person at the IRS to get the situation handled.

One would then think that going to irs.gov would make sense as a way to personally find your way through their maze. After all, getting information from the same organization would actually cut down on the work they have to do if it is up to date and accurate, right? The IRS must love if someone does this to get information and makes its job easier, no?

Well, no.

I clearly have had many dealings with the IRS, and I can say that it is an EXTREMELY rare case when it happens smoothly. It is difficult to actually talk to someone, and even then it is no guarantee that the person you talk to will have the knowledge necessary to help move the process along. Even with that experience, though, I had to shake my head through this recent article by Forbes.com’s Robert W. Wood.

In that article, Wood states that there was a recent memo sent to the IRS Field Examination Area Directors telling them the FAQs and other items posted on IRS.gov are not legal authority unless they also appear in the Internal Revenue Bulletin. Now I can’t disagree with the idea that the IRS should have a collection of official rules and regulations, but why would it publicly print something, under its own name, that does not hold the weight of authority?

If you have any answer to this that makes sense, I would love to hear it for crafting one is completely evading me.

And even if you can come up with a real reason, this is unfair. It is not a policy that I am saying is being misused, but it is clearly one that could be misused. Any authority that says it has the real rules and its public statements do not necessarily follow them comes off as potentially tyrannical. Thankfully we have enough checks in this country that the IRS is not doing that, but just what can a taxpayer do to navigate their waters then?

First, and thankfully most of you reading this are already doing this, use a tax professional to handle your taxes. If you want to be sure that you are not going to have serious IRS problems, have someone serious on your side before submitting any information to the IRS. Second, continue using that professional help during any communication with the IRS. You may not know all the answers needed when it comes to handling IRS issues, but some people do.

I can’t claim that this is really fair, but I still pride myself on being more fair and open with my clients than apparently some other organizations.

It almost seems like a monthly rite of passage when the latest tax scam comes up that I have to cover in this spot. I almost can’t believe it sometimes, but as long as the IRS keeps putting out warnings, I feel it is my job to pass them along. At least with this latest one, it gives me the opportunity to highlight many of the things to look out for all at once.

First, the new scam starts with receiving a phone call claiming that you must make a payment through a prepaid debit card that is apparently linked to the Electronic Federal Tax Payment System (EFTPS). The system exists, and talking of it seems to lend credence to the scammer’s claim. The reality, though, is that it does not utilize this one magic mode of payment.

Second, there is a claim made that payment must be made immediately to avoid arrest. Although the process of working through a tax issue may never be fun, it is never that quick, and rarely that dire.

Also, the scam caller claims that there were previous attempts to contact the taxpayer via certified mail that were returned as undeliverable. Never pay heed to such words, for you should always assume that the first word you get from the IRS about any potential problem will come in writing.

Finally, the call comes with warnings to not contact a tax preparer, attorney, or local IRS office before making the payment. That’s because those are the people who could lead you to finding out that the whole thing is not legitimate.

Those are the four prongs of the latest attack, which has been reported across the country, but they all share some things in common.

Scam artists are out to play on fear. Each piece of this scam tries to build on the fear of reprisals while offering a way to make it end as quickly as possible.

If anyone, for any reason, ever asks for payment in a form of currency that can’t be traced, there is something illegitimate going on. Even if it is to purchase an opportunity that seems too be good to be true, remember it is because it is too good to be true.  And why would the IRS not accept a check or a wire from your bank account? I mean, wouldn’t that direct payment from a bank account be faster than adding another middle-man transaction?

And if the federal government is able to track you down by phone, apparently has your legal information on a tax return, why couldn’t it get a letter into your hands first?

Finally, why would someone not want you to be in contact with the very people who are most knowledgeable about what is supposedly going on? If it was legitimate, wouldn’t they want to involve those who can help things reach an endpoint?

Listen to those questions that come up in your mind, and if you ever fear you may be becoming a potential victim of fraud, do contact someone, for we can help.

When it comes to writing about the various parts of how to "financially run your business" in this space, the bit I talk about the least is probably payroll.  This is most likely because it is an area that seems almost of the “set it and forget it” variety.  Even if you pay hourly employees, once their payroll profile is correctly established, paying them is often a matter of plugging in the correct hours and letting a payroll service take care of the rest.

This might be illogical, though, for how little front-of-mind space payroll takes up is in opposition to how important it is to make sure that employees are paid. And one needs to realize how critical it is when people are not paid correctly.

In a recent article posted on cpapracticeadvisor.com, it was found that, “nearly half of American workers will seek new employment after just two payroll mistakes, such as being paid late or incorrectly.” This number seems high on first look, but why would people stick around if they are not being paid correctly? Even the employees who are most committed to a company’s vision and purpose are not ONLY working for that. On some level, everyone is working to be compensated, and for many that occupies the highest level.

After all, the same article says that only seven percent of employees will not report the error at all. So if people are not being paid correctly, that is a lot of angst and complaints that must be dealt with.

I also recently read an article on Forbes.com that caught my eye with the headline “Worst Taxes? Paying Someone Else’s.” Even as someone who spends a large amount of time thinking about and researching tax issues, I was not immediately sure what that could be referring to.

Well, it turns out that author Robert W. Wood looked at “responsible persons” who could be held liable if an employer did not pay all their payroll taxes. Now don’t freak out if you’re an employee who has no idea how your employee handles those responsibilities. First, reputable payroll providers withhold the money for those payments automatically so that they are paid with every payroll run. Second, “responsible persons” only includes officers, directors, and anyone who makes decisions about who to pay or can sign checks.

But yes, although this does not include most regular employees, it does allow for some people to be held responsible who may not have had any idea about the infractions. And then, although no one ever really wants to pay taxes, I do have to agree that paying those very much could be the worst kind.

What these two articles speak to overall is that payroll can be dangerous when handled wrong. And although it is not an area that tends to draw much attention, you do want to spend enough time on it to ensure that it is being handled correctly, and get the peace of mind that comes with that. So if you have any questions about how you are handling your payroll or the tax obligations that go with it, please let us help.  Also keep in mind that we provide full - turnkey- payroll service, so you know it will be handled correctly.

I know it is a mantra that comes up often, even from my own lips (or fingers in this case), but it is said/typed so often because it is true – if you earn money, chances are REALLY good that the IRS wants to know about it. Even with this being the case, tips sometimes seem to be in a gray area for many.

To follow the mantra, yes, if you’re receiving tips in your job, chances are REALLY good that the IRS wants to know about it.  If you want a little more clarity and direction on this issue, though, the IRS actually has an Interactive Tax Assistant on the internet that will bring you through a series of questions to get a better answer on if your tips are taxable.

In this time when more people are using electronic forms of payment instead of cash, many tips are already being reported as part of a worker’s pay and being taxed accordingly. When it comes to cash, however, things get trickier.

It is not that the form of payment will cause tips to be taxed differently, but the fact that employers can let those go into that gray area. There are plenty of times when if you accept a tip, your employer may never know about it, and quite possibly doesn’t want to know about it. In that situation, well, I cannot necessarily encourage it, but it a client wants to keep it unreported and not want to worry about it, I have to shrug and move on.

I do, however, want to offers some, well, tips on how one can think about and track their tips if this is an area where you want better, and possibly more legal, record keeping.

First, it is not just cash and credit transactions that count as tips. If you receive items such as tickets or passes as tips, the value of those would also count as additional wages, and very likely unreported income. For any of these unreported tips, you will want to fill out a Form 1137 with your tax return.

In that type of full reporting, it could include tips received as part of a sharing partnership with co-workers. This is a situation that may make you want to be extra cognizant about keeping track of your tips. If you have co-workers that are fully reporting what they receive, and you are not, that is a discrepancy that could stand out. In fact, this is something that if done as it should will even include names on IRS Publication 1244. On that sheet, one tracks daily tips through different forms, including what is paid out to other employees.

I do not often like to give such links to different forms and such in this space, because I know it is not that exciting and gets into the minutiae of taxes and record keeping that make many cringe. As the concept of a sharing economy grows, however, it is likely that more and more people will be receiving tips as part of their income, and it could be one of those areas not given enough attention when it comes to figuring out your tax responsibility.

Let this be a reminder then that you probably don’t want to just ignore the issue.

There have certainly been many times during my career when I have had people ask me about the “nanny tax.” Those people (not surprisingly) usually have nannies, and are aware that there are some tax responsibilities that come along with employing that person.

There have certainly been at least as many times in my career, though, when someone should have been asking me about this “nanny tax,” and were not. Those people (not surprisingly) did not have nannies, and were not aware of the responsibilities that come with having a household employee. Many of them, in fact, were not even aware that they technically had a household employee.

Although nannies are the occupation that have somehow been chosen to name and symbolize this issue, it essentially applies to anyone who works in your home to whom you pay more than $2,000 a year. Cooks, housekeepers, medical care givers, gardeners, and heck, even babysitters who don’t get the nanny tag could all fit under this umbrella.

So if you are reading this and realizing that there may be some legal and tax issues that you have not been properly addressing, please don’t hesitate to contact us and we can help make sure that you are meeting your obligations.

I wanted to spend a little more time here keying on the medical worker aspect of this, however. Many people who receive in-home care arrange it through a third party, meaning the caregiver is receiving their wages through an employer who is not the homeowner of where they work. If that is the case, there is no need to worry, for they already have an employer taking care of obligations on that end.

When a homeowner personally brings in someone, however, then they become the employer and as such have the tax obligations of any employer. Some believe that with the current, possibly in-flux state of medical insurance in our country that this could be a situation that grows in the coming years.

This may actually be the type of situation where it is most critical that one is aware of the “nanny tax,” even though these clearly are not nannies, and of other rules that could help ease one’s tax burden.

For example, a worker could qualify for a companionship exemption based on the type of care they provide, leading to possible exclusions from minimum wage and overtime rules. There are also sleep time exemptions for those who work certain extended hours if adequate sleeping facilities are provided, continuous sleep for at least five hours is possible, and the employee agrees to it in writing, so that those hours don’t count as working hours.

I realize that all of this may seem very vague, and that is by design.  I do not feel that this is the space to give any sort of specific instructions, recommendations, or advice, however, for so much of that is dependent on one’s personal situation. Instead, I just wanted to make you aware that such rules do exist and it is better to take care of them now than waiting for them to catch up with you.

And of course, as always, we would love the chance to help you figure out just how it applies in your personal situation. 

Last week I urged my business owner clients to ask themselves what they wanted to do next in their business and to think about the steps that could help move them toward that goal. It must have been contemplating that issue so much that got me to thinking about celebrity culture in a new way.

(Really, hold on, I think it will eventually make sense.)

It seems to me that almost everyone has at least one celebrity with whom they feel some connection. It also seems that those who make the deepest impression on the most lives are the ones who prove to have lasting careers that span time and, possibly more importantly, genre.

There is a reason that one-hit wonders and other flashes in the pan tend to become punchlines. They may inspire passion and quickly build huge fan bases, but if they never figure out what’s next, then those fans move on. I imagine that the reason many then become joke fodder is because we feel a bit taken in by something catchy or interesting, but then discover a lack of substance behind it.

I think this ties into the culture that grows around celebrity deaths. Of course, there is the curiosity factor just because these are people that we know about, but some of those deaths have impacts that many feel on a deeper level. I imagine we have all felt this at some time, and at times it may have even been unexpected.

So this past week I started to think of how all this was connected, and came to think that those whose deaths have the greatest effect are those we still wanted more from. We may not have known their answer to what was next for them, but we wanted to find out.

This is why there seems such power, and a bit of mystery, to the “27 Club,” a group of musicians who died at that age. It is a rather talented group that includes Jimi Hendrix, Janis Joplin, Jim Morrison, Kurt Cobain, and Amy Winehouse. They left behind a great body of work, but one can’t help but imagine what else they could have done.

Although this may seem a bit morbid, my thoughts did not end there, and I even thought one could find some inspiration in it.

For instead of thinking of what was taken away, spend some time thinking about performers who have inspired you in your life. Think of the ways that they had different works that touched you at different points, or maybe how the same work had enough depth to affect you in different ways at different points in your life. No matter who they are, or what they did, I would wager that you can see both evolution and depth in their work.

In there may be a little light into the key to success I was trying to hit upon last week. If these inspirations only ever did one thing, their appeal would have withered. Instead they did what they did well, but also built upon what they had done before. It would have been easy to sit on their laurels, but they kept moving and had answers to what they wanted to do next.

Here is to hoping you also have some of those answers.