Start Planning Now for Next Year’s Taxes

You may be tempted to forget about your taxes once you’ve filed your tax return, but did you know that if you start your tax planning now, you may be able to avoid a tax surprise when you file next year?

That’s right. Now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are five tips to give you a leg up on next year’s taxes:

1. Take action when life changes occur. Some life events such as a change in marital status or the birth of a child can change the amount of tax you pay. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Call if you need help filling out the form.

2. Report changes in circumstances to the Health Insurance Marketplace. If you enroll in insurance coverage through the Health Insurance Marketplace in 2016, you should report changes in circumstances to the Marketplace when they happen. Reporting events such as changes in your income or family size helps you avoid getting too much or too little financial assistance in advance.

3. Keep records safe. Print and keep a copy of your 2015 tax return and supporting records together in a safe place. This includes W-2 Forms, Forms 1099, bank records and records of your family’s health care insurance coverage. If you ever need your tax return or records, it will be easier for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid for college. You should use your tax return as a guide when you do your taxes next year.

4. Stay organized. Make tax time easier on everyone by having your family place tax records in the same place during the year. That way you won’t have to search for misplaced records when you file your return next year.

5. Consider itemizing. You may be able to lower your taxes if you itemize deductions instead of taking the standard deduction. Owning a home, paying medical expenses and qualified donations to charity could mean more tax savings. A list of deductions is found in the instructions for Schedule A, Itemized Deductions. As always, if you have any questions please call.

Ready to save money on your taxes?

Planning now can pay off with savings at tax time next year. Call today and get a jump start on next year’s taxes.

The Best Financial Tool for Business Owners

What if there were a tool that helped you create crystal-clear plans, provided you with continual feedback about how well your plan was working, and that told you exactly what’s working and what isn’t?

Well, there is such a tool. It’s called the Budget vs. Actual Report and it’s exactly what you need to be able to consistently make smart business decisions to keep your business on track for success.

Clarifying Your Plan

The clearer you are about your business goals, the more likely you are to achieve them. Creating a budget forces you to examine the details of your goals, as well as how even a single business decision affects all other aspects of your company’s operations.

Example: Let’s say that you want to grow your sales by 15 percent this year. Does that mean you need to hire another salesperson? When will the business start to see new sales from this person? Do you need to set up an office for them? New phone line? Buy them a computer? Do you need to do more advertising? How much more will you spend? When will you see the return on your advertising expenditure?

Navigating the Ship

Once you clarify your goals, then you start making business decisions to help you reach your desired outcome. Some of those decisions will be great and give you better than expected results, but others might not.

This is when the Budget vs. Actual Report becomes an effective management tool. When you compare your budgeted sales and expenses to your actual results, you see exactly how far off you might be with regard to your budget, goals, and plans.

Sometimes you need to adjust your plan (budget) and sometimes you need to focus more attention to areas of your business that are not performing as well as you planned. Either way, you are gleaning valuable insights into your business.

It’s like sailing a boat. You may be off-course most of the time, but having a clear goal and making many adjustments helps you reach your destination.

Just Do It

We often know what we need to do but don’t take the necessary action. It may seem like a huge hassle to create a budget and then create a Budget vs. Actual Report every month, but as with any new skill, it does get easier.

Turn your dreams into reality. Give the office a call and let a tax and accounting professional guide you through the budgeting process.

Tax Compliance Issues for Non-Profits

Whether you’ve just started a nonprofit, recently submitted your organization’s first Form 990, or are the executive director, it’s important not to lose sight of your obligations under federal and state tax laws. From annual filing and reporting requirements to taxes on business income and payroll compliance, here’s a quick look at what nonprofits need to know about tax compliance.

Annual Filing and Reporting Requirements: Form 990

Once you’ve applied for and received tax-exempt status under (Section 501(c)(3) and filed Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, and received your exemption letter from the IRS, your organization is officially a nonprofit, and is exempt from federal income tax under section 501(c)(3). Tax exempt status refers to exemption from federal income tax on income related to the organization’s mission, as well as the ability to receive tax-deductible contributions from donors.

The next step is to comply with annual filing and reporting requirements, specifically, Form 990, Return of Organization Exempt from Income Tax.

Generally, tax-exempt organizations are required to file annual returns. If an organization does not file a required return or files late, the IRS may assess penalties. In addition, if an organization does not file as required for three consecutive years, it automatically loses its tax-exempt status.

Note: Certain organizations such as churches (including church-affiliated organizations and schools operated by a religious order) as well as organizations affiliated with a governmental unit are not required to file Form 990. Refer to your IRS exemption letter if you’re not sure.

There are four different Forms 990; which form an organization must file generally depends on its gross receipts. Forms 990-EZ or 990 are used for organizations with gross receipts of less than $200,000 and with total assets of less than $500,000. Form 990 is used for nonprofits with gross receipts greater than or equal to $200,000 or total assets greater than or equal to $500,000.

When gross receipts are less than or equal to $50,000, certain small organizations may file an annual electronic notice, the Form 990-N (e-Postcard); however, organizations eligible to file the e-Postcard may choose to file a full return. Private foundations file Form 990-PF regardless of financial status.

Form 990 is submitted to the IRS five and a half months after the end of an organization’s calendar year. For example, for nonprofits whose calendar year ends on December 31st, the initial return due date for Form 990 is May 15. If a due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

Extended due dates of three and six months are available for Forms 990; however, for Form 990-N the due date is the “initial return due date,” e.g. May 15 and extended due dates do not apply.

NOTE: Unlike individual tax returns filed with the IRS, which may be postmarked on April 15, Forms 990 must be received (not postmarked) by the IRS before the May 15 due date.

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Selling Your Business

There are many reasons to sell a business. Maybe you’re in ill health or ready to retire. Or you’re tired of working all the time and now that the business is profitable you’re ready to cash in. Whatever the reason, selling a small to medium sized business is a complex venture and many business owners are not aware of the tax consequences.

If you’re thinking about selling your business the first step is to consult a competent tax professional. You will need to make sure your financials in order, obtain an accurate business valuation to determine how much your business is worth (and what the listing price might be), and develop a tax planning strategy to minimizes capital gains and other taxes in order to maximize your profits from the sale.

Accurate Financial Statements

The importance of preparing your business financials before listing your business for sale cannot be overstated. Whether you use a business broker or word of mouth, rest assured that potential buyers will scrutinize every aspect of your business. Not being able to quickly produce financial statements, current and prior years’ balance sheets, profit and loss statements, tax returns, equipment lists, product inventories, and property appraisals and lease agreements may lead to loss of the sale. Read more

What to do if you get a letter from the IRS

Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from the IRS here’s what to do:

Don’t panic. You can usually deal with a notice simply by responding to it. Most IRS notices are about federal tax returns or tax accounts.

Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.

Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.

If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.

For most notices, there is no need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call. If you need assistance understanding an IRS Notice or letter, don’t hesitate to call the office.

Always keep copies of any notices you receive with your tax records.

Be alert for tax scams. The IRS sends letters and notices by mail and does NOT contact people by email or social media to ask for personal or financial information. If you owe tax, please call to find out what your options are.