Category Archives: Husband and Wife Businesses

File Your Own Taxes?

7 Reasons Why You Should (and Shouldn’t) File Your Own Taxes

This article was printed back in 2013, but the same challenges and issues exist today with a few extras. April 18th is only 2 weeks away, so if you are undecided, and think you need some advice, give us a call at 619-589-8680. If you want to read this article in its original format, click here.

“Unless your income and filing status remain the same year after year, your tax situation is always changing. The question,“should I file my own taxes or hire a pro?” is a dilemma that should be revisited every year. As my hobbies and passions have grown over the years, I’ve needed more and more guidance to help file my income taxes. I eventually decided to build on to my accounting skills by taking two years of income tax classes to increase my knowledge.

You are probably in the same situation: As we get older, add more people to our lives and increase our business, we need to evaluate when/if we need tax advice.

WHEN IT’S BETTER TO FILE YOUR OWN TAXES: There are important factors to consider once you decide to file your own taxes. This is definitely not a decision you should make hastily. You can confidently file your own taxes if…

–You’re a numbers kind of person If you enjoy keeping track of all the numbers, transactions and receipts, then by all means you’re the best person for the job. You know the ins-and-outs of your situation the best and can accurately control everything.

–Your tax situation is simple or unchanged If you only have one job, don’t have any dependents and have no other investments or sources of income, you can easily file your taxes yourself. The IRS even offers free e-filing for taxpayers who have simple returns.

–You don’t own property or investments Once you acquire property, investments or retirement accounts, it can be difficult to stay up-to-date on everything. Each type comes with deductions and credits that can be very beneficial to your taxes. Having a professional to help in the case, is probably the best idea.

–You can understand tax laws If you can browse the IRS website, comprehend their tax jargon and stay up-to-date with changing tax laws, then go for it. Some of the forms and laws are simple and can be interpreted with a little research. [If you are not fluent in tax law and all the changes that have been affect returns, we strongly recommend you consult with a tax professional.]

WHEN IT’S BETTER TO HIRE A PROFESSIONAL: While I’m slightly partial to hiring a professional for help — being a tax consultant myself and the fact that I like having an expert in my corner — it’s really only necessary for certain people. Hire a CPA or tax professional if…

–You can’t get a handle on your money If doing the books and tracking the numbers just isn’t your forte, please hire someone to help. There is no reason to get yourself into trouble, or get in over your head. Hiring a tax preparer is like finding the right tool for the right job, the whole thing can be done correctly from the beginning and potentially save you a lot of money in the long run.

–You started a new business Starting a new business or hobby venture takes expert knowledge. You wouldn’t jump off a diving board without swimming lessons, so you shouldn’t try to do your business taxes without some guidance.

Tax experts can help you find lots of deductions and prevent you from getting into trouble. Those savings and peace of mind alone can pay for themselves.

–You got married, divorced or had a child If you got married/divorced, had another child or lost a spouse, you might need help finding the best filing status for that year. Some of them are easy but others, (like being a widow) have time-sensitive dates.

Also, as your children get older, tax credits and deductions might expire depending on their ages. If your child goes to college full-time, you can still claim them — and any education expenses — until they’re 24. Determining these situations accurately takes someone who is knowledgeable.

Benefits to doing your own taxes:
-It’s less expensive
-Takes less time
-You know all the details

Benefits to hiring someone:
-They stay updated on changing tax laws
-You get expert and experienced advice
-An extra set of eyes to catch mistakes
-They become your advocate
-Find little known tax deductions
-They give tax guidance throughout the year

The Bottom Line In the end, it’s completely up to you and what you’re most comfortable with. You can always find an expert to help and then phase them out if you don’t need the advice. But in the event you’re not able to keep up, having a trustworthy tax professional in your corner can make all the difference.”

If you want to read it in its original format, in the Huffington Post, click here.
Source: http://www.huffingtonpost.com/carrie-smith/tax-advice_b_2638785.html
A version of this post originally appeared onCareful Cents.

ABOUT US-TAXLAWS

We do more than just tax preparation. We are your best source for professional tax preparation and/or financial consulting services. We give clients a total solution that can include:

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services
Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts, Estate Planning   Bookkeeping   Payroll

Tax Tibits: Do I have to issue my landscaper and housekeeper a 1099?

1099 and the law You are required to issue a 1099 to anyone you pay $600 or more in the course of your trade or business who is not incorporated.

Typical payments requiring a 1099 include services performed by independent contractors, such as gardeners and housekeepers for your business, as well as rents your business pays.

Received a Payment and Other Reporting Situations

Per the IRS, if, as part of your trade or business, you received any of the following types of payments, you will have to file a specific form.

Payment of mortgage interest (including points) or reimbursements of overpaid interest from individuals (1098)
Sale or exchange of real estate (1099-S)
You are a broker and you sold a covered security belonging to your customer (1099-B)
You are an issuer of a security taking a specified corporate action that affects the cost basis of the securities held by others (Form 8937)
You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)
You made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (1099-MISC)

Not Required to File Information Returns

You are not required to file information return(s) if any of the following situations apply:

You are not engaged in a trade or business.
You are engaged in a trade or business and
- the payment was made to another business that is incorporated, or
- the sum of all payments made to the person or unincorporated business is less than $600 in one tax year (unless the recipient is an attorney or law form, see specific instructions for 1099-MISC for further details).

If you need to issue a 1099, and haven’t, we can prepare the 1099 forms if you would like. Just contact us. We can be reached at 619-589-8680.

We do more than just tax preparation at US-TaxLaws.com. We are your best source for professional tax preparation and/or financial consulting services. We give clients a total solution that can include:

Tips to Help You Keep What You Earn in 2015

Many of our clients are in-home businesses. Entrepreneurs, start-ups, small businesses, child care providers, independent professionals, operators and so on. What makes US-TaxLaws.com different is we’re more than taxes. We’re about financial health. We help our clients make their tax dollars work for them. They’re going to have to pay taxes… the question is how much and why. Continue reading →

2015 SCORE Workshops in San Diego

Continuing Education for the entrepreneur, start-up and small business owner.

Note: Fees apply for most workshops.
Click on linked titles below for additional information and to register.
Access their calendar here.

Starting a Restaurant – January 20, 2015 FREE 9:00 a.m. – 12:00 p.m. PST
(Poway, CA)
This workshop is a MUST if you are serious about owning and operating your own restaurant! These essential aspects of a restaurant project will be discussed: Concept Planning…

Tax Considerations for Small Businesses – January 21, 2015 FREE 9:00 a.m. – 11:00 a.m. PST (Downtown San Diego, CA) See Parking Notes Below.
There are several types of taxes that businesses must pay during the calendar year. Understanding each one of these tax liabilities, being certain to meet the time requirements (and save penalty…

Advanced LinkedIn Marketing Hands On Laptop Training – January 21, 2015
6:00 p.m. – 8:30 p.m. PST (San Diego, CA)
This is an intensive hands on workshop designed for business owners that want to take their LinkedIn presence to the next level. It’s a packed agenda including: Advanced Networking…

Bing Ads for Small Businesses – January 23, 2015 FREE 8:30 a.m. – 10:00 a.m. PST
(Fashion Valley San Diego, CA)
Bing Ads is a robust collection of tools and information you can use to place advertisements on the web. Bing Ads can help you: Connect with customers who are engaged and likely to spend more…

Business Plan B: Setting Goals and Telling the World – January 24, 2015
9:00 a.m. – 12:00 p.m. PST (Kearny Mesa, CA)
Having identified your target market and competitive advantage in the first session, this workshop helps you develop a mission statement, preliminary goals and a marketing plan.

Notes on Parking in Downtown San Diego

The SBA/SCORE office is located across India St. from the America Plaza Trolley stop and one block away from the Santa Fe Depot Train and Trolley Station.
Parking is available in our building (entrance is on Columbia Street)
(Credit or Debit Only) $2.00 per/30 minutes – Maxium $24.00
Early Bird Special $12 (In by 9AM – Out by 6PM) – All prices subject to change without notice.
Additional parking is available in the area at indoor and outdoor lots – prices vary.
All metered street parking is limited to the time designated on the meter (usually 2 hours.) You must move your car after the time is up. You cannot add money to the meter to extend your parking time.
Allow extra driving time as construction around building may cause traffic delays.

SCORE is a Resource Partner of the U.S. Small Business Administration

SCORE services are provided without regard to race, color, religion, gender, sexual orientation, national origin, age, disability, genetic information, marital status, amnesty, or status as a covered veteran in accordance with applicable federal, state and local laws. Persons with disabilities may request reasonable special accommodations with a two week advance notice. Contact: Jill Andrews, 550 West C Street, Suite 550, San Diego, CA 92101 or (619) 727-4885. The material in this email is based on work supported by the U.S. Small Business Administration under cooperative agreement #SBAHQ12 S-0001. Any opinions, findings and conclusions or recommendations expressed in this email are provided by SCORE and do not necessarily reflect the views of the SBA.

To find a SCORE Chapter near you visit: www.score.org or web search SCORE with your city or state.

Click here to find an SBA District Office near you.

Reminders For This Tax Season

Have you set up your appointment to have taxes done?

The following are large items that are already set in law that you can count on (literally and figuratively) for this tax season. Don’t forget about income limitations and phase outs.

Child Credits.

For each qualifying child under age 17 knocks up to $1,000 from your tax bill.

College Education.

Two big credits are available. The American Opportunity Credit can reduce your tax bill by up to $2,500 per eligible student or up to $2,000 through the Lifetime Learning Credit.

0% Capital Gains Rate.

This capital gains rate is available to all taxpayers in the 10% and 15% tax brackets. Married taxpayers qualify for the 0% rate if their taxable income is $73,800 or less, for single taxpayers $36,900 or less, and head of household is $49,400. To see the 2015 Tax Brackets.

Tax Free Gains on Home Sales.

Married couples can exclude up to $500,000 from their gain from their income from the sale of their home, for single taxpayers the maximum exclusion is $250,000. Ownership and occupancy rules apply.

Energy Saving Credits.

You can claim a credit for up to 30% of the cost of buying and installing solar panels, solar water heaters, geothermal heat pumps and small wind energy systems.

Looking Forward to 2015 Tax Benefits

In 2015, Various Tax Benefits Increase Due to Inflation Adjustments

For tax year 2015, the Internal Revenue Service announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments. Continue reading →

ACA & The Individual Shared Responsibility Payment

**Did you hear about The Individual Shared Responsibility?**

Beginning in 2014, the individual shared responsibility provision of the Affordable Care Act requires each individual to:

Maintain a minimum level of health care coverage – known as minimum essential coverage, or
Qualify for an exemption, or
Make an individual shared responsibility payment when filing their federal income tax returns.

Minimum essential coverage generally includes government-sponsored programs, employer-provided health coverage, and coverage purchased in the individual market, including the Health Insurance Marketplace. Most people already have health insurance coverage that qualifies as minimum essential coverage, and therefore will not need to make a payment if they maintain their qualified coverage. However, for each month that you or a member of your family is without minimum essential coverage and does not qualify for an exemption, you will need to make an individual shared responsibility payment.

If you and your dependents had minimum essential coverage for each month of 2014, you will check a box indicating that when you file your 2014 federal income tax return. If you qualify for an exemption, you will attach a form to your tax return to claim that exemption. If you are required to make the individual shared responsibility payment, you will calculate your payment and make the payment with your return.

If you choose to make an individual shared responsibility payment instead of maintaining minimum essential coverage, this means you will not have health insurance coverage to help pay for medical expenses.

In general, the individual shared responsibility payment for 2014 is the greater of:

One percent of your household income above the income filing threshold for your tax filing status, or
A flat dollar amount of $95 per adult and $47.50 per child (under age 18) in your family, but no more than $285 per family.

The individual shared responsibility payment is also capped at the cost of the national average premium for bronze level health plans available through the Marketplace that would cover everyone in your family who does not have minimum essential coverage and does not qualify for an exemption – for example, $12,240 for a family of five. However this maximum fee will only impact the small number of high-income taxpayers who choose to go without health insurance. The payment amount is based on each individual’s personal circumstances, and information about figuring the payment can be found on our ‘Calculating the Payment’ page on IRS.gov/aca.

Example of Payment Calculation

Eduardo and Julia are married and have two children under age 18. No family member has minimum essential coverage for any month during 2014, and no family member qualifies for an exemption. For 2014, their household income is $70,000 and their tax return filing threshold amount is $20,300.

Using the household income formula: Subtract the tax return filing threshold amount for 2014 from the 2014 household income, then multiply the answer by one percent (0.01).
$70,000 – $20,300 = $49,700
One percent of $49,700 equals $497.00.
Using the flat dollar amount formula: Add $95 per adult for Eduardo and Julia to $47.50 per child – for their two children.
$95.00 + $95.00 + $47.50 + $47.50 = $285.00

Eduardo and Julia’s shared responsibility payment for the year for 2014 is $497. That’s because the household income formula amount of $497 is greater than flat dollar formula amount of $285, and it is less than the $9,792 annual national average premium for bronze level coverage for a family of four in 2014. More examples can be found on IRS.gov/aca.

More Information

Find out more about the tax-related provisions of the health care law at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

Source: IRS- HCTT-2014-18

Affordable Care Act – For Individuals

Affordable Care Act has provisions for individuals who need to purchase Health Care.

New IRS Publication Helps You Find out if You Qualify for a Health Coverage Exemption

Taxpayers who might qualify for an exemption from having qualifying health coverage and making a payment should review a new IRS publication for information about these exemptions. Publication 5172, Health Coverage Exemptions, which includes information about how you get an exemption, is available on IRS.gov/aca.

The Affordable Care Act calls for each individual to have qualifying health insurance coverage for each month of the year, have an exemption, or make an individual shared responsibility payment when filing his or her federal income tax return.

You may be exempt if you:

Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,
Have a gap in coverage for less than three consecutive months, or
Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group explicitly exempt from the requirement.

On IRS.gov/ACA, you can find a comprehensive list of the coverage exemptions.

How you get an exemption depends upon the type of exemption. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS when you file your income tax return, and others from either the Marketplace or the IRS.

Additional information about exemptions is available on the Individual Shared Responsibility Provision web page on IRS.gov. The page includes a link to a chart that shows the types of exemptions available and how to claim them. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.

Source: Issue Number: IRS-HC-TT-2014-19

Free Seminar for San Diego Restaurant Owners

Tips and Techniques to Improve Your Restaurant and Increase Your Profits

This event is presented by the U.S. Small Business Administration, the City Heights Business Association and other Business Associations in the Area.

WHEN: Thursday, November 13th—7:30 a.m. to 10:30 a.m.
WHERE: 4305 University Avenue, 6th Floor Conference Room, San Diego, CA 92105

You’ll Learn:
* How to Improve Your Operating Efficiency
* How to Control Costs
* How to Increase Profits
* How to Best Market Your Restaurant

To view announcement as web page:
http://content.govdelivery.com/accounts/USSBA/bulletins/d4d0c5

Presenters:

Sigmund Penn is a recognized expert in the food service industry and has helped over 120 restaurant chains and many individual-owned establishments improve the quality of their food and beverage services and update marketing techniques to fill their business with customers and increase their profits.Cyndi Darlington, of Darlington Marketing will provide you with great tips on cost effectively marketing your restaurant. Her company specializes in restaurant and hospitality industries.

Register Online at: http://events.sba.gov
Contact: Rosa Rodarte, 619-727-4877

Planning To Form An LLC or Corporation? Wait!

Entity creation has a cost!

If you are thinking of forming an LLC or corporation PLEASE call me before you do anything. Over 90% of the entities we see are dissolved within the first 4 years of existence. When creating an entity you will incur ongoing addition business expenses that may not be necessary. You can reach me at 619-589-8680.

Hobby Tax Trap or For Profit Business?

What would happen if the IRS re-classified your business as a hobby?

It can happen. The IRS defines a hobby as a revenue-generating activity that lacks a profit motive. But what does that mean to you?

Most start-ups and small businesses have good years and not-so-good years. There are those that will say that if your business continually functions in the red, maybe you really need to rethink your business strategy. The IRS, on the other hand, will be looking at whether your business is really a for-profit business or is actually a hobby and the deductions or losses you have taken. “The IRS will generally assume an activity is a business if it generates a profit 3 of 5 consecutive years…“.¹ If the business has a loss for 3 of 5 consecutive years, the IRS will take a closer look at what they consider the “facts and circumstances” to evaluate whether the activity is actually a hobby or qualifies as a for-profit business.

Why is this important? Because if the IRS determines that your business doesn’t have a solid profit motive, they will re-classify your business as a hobby, then your past returns will be reviewed and deductions will be re-evaluated. If they feel your *activity* is actually a hobby, they will add back the losses claimed by you that will result in back-taxes, penalties and interest.

So here are a few tips that you should consider in support of your for-profit business in the event you are ever reviewed by the IRS. You want to be able to substantiate your business, and therefore entitled to any business losses you have claimed. These practices include being properly licensed, have separate bank accounts and credit cards, payment of business taxes, good accounting and record keeping, appropriate insurance, a separate business phone line, log or business journal of time devoted to the business and documented actions taken to help make the activity profitable.²

¹ Brett Hersh, http://www.hbsbusiness.com
² Ibid.

Need help? We do more than just tax preparation at US-TaxLaws. We are your best source for professional tax preparation and/or financial consulting services that include:

How to Deduct Expenses at the NAFCC Conference in Orlando, Florida

January 29 Header for ChildCare Site

Follow IRS rules about business travel and deductions and enjoy the trip!

Are you planning to attend the National Association for Family Child Care Conference in Orlando, Florida on July 11-12, 2014? The program guide gives you all the details about workshops and seminars that will be taking place, including valuable business practices for record keeping and general business administration of your child care business.

WHAT’S EVEN BETTER – YOU HAVE DEDUCTIONS!

Want to read more? Click Here

Interest Rates Remain the Same for the First Quarter of 2014

For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Larger IRS

IR-2013-96, Dec. 9, 2013

WASHINGTON ― The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2014. The rates will be:

three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2013 to take effect Nov. 1, 2013, based on daily compounding.

Revenue Ruling 2013-25 announcing the quarterly rates will be published in Internal Revenue Bulletin 2013-52, dated Dec. 23, 2013.

Use of Home For Two or More Businesses ?

Did you know the same home office can be the principal place of business for two or more separate business activities?

According to Publication 587, Cat. No. 15154T : January 5, 2013 – yes it can be, but whether it qualifies as the principal place of business for two or more businesses is evaluated by a set of criteria:

The principal place of business for one or more of your trades or businesses,
As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses,
If your home office is a separate structure, in connection with one or more of your trades or businesses. Continue reading →

Taxes, Death… and Marriage?

Marriage – tax advantage? Maybe yes, maybe no.

Marriage can have a tax-rate advantage, but it depends on the incomes. Did you know you can actually save tax money if one spouse is making a lot less than the other? It’s true. The tax bill of the high-income earner can almost (if not totally) be cancelled out. Continue reading →

When To Take Retirement?

Retirement is one of the big questions Boomers are facing and keep these thoughts in mind when planning.

The Social Security payment a person receives depends on: Continue reading →

Retirement planning using IRAs

Using IRAs in tax planning during retirement

TAX: Because of the flexibility of IRA distributions, it’s easy to move income among years

By Richard Malamud, CPA, J.D., LL.M., and Tim Hilger, CPA

Those of us who are age 59½ and older and still working face some interesting decisions. After decades of hearing the mantra, “Defer, Defer, and then Defer” maybe it is time to change that to “Accelerate” — at least sometimes. It is the thing to do if you assume tax rates will not be going down and the future may bring us large capital gains or other income that could cause us to owe the new Medicare tax. Continue reading →

Are you making a mistake with your 1099 Contractors?

Do you know what factors the IRS looks at in determining Independent Contractor Status?

Actually, the IRS does not look specifically at any one factor, but one factor can be enough to cause the IRS to take a closer look. They may determine that a worker is an employee and not a contractor. What does that mean for you? That means if they determine that your contractor was an employee – you could face unexpected payroll taxes and penalties. That’s why we’re giving you tools to make sure you know the difference, and that you are taking care of business. Continue reading →

Bigger Income This Year? Call Me!

If you expect a jump in your income, we need to talk. Have you sold stock or property? Getting a big bonus (larger than in the past)? Had an unexpected windfall? I’ve used the word “jump” because if your income is usually high, we both know the numbers, and I make a point of keeping you up on the numbers. If, on the other hand, your numbers suddenly increase (larger than I normally see) then please let me know. Continue reading →