4 Business Tax Tips to Legally Minimize Your LiabilitiesPosted on August 27th, 2019
Paying taxes is unavoidable. Most savvy business men and women, however, find ways to lower their tax liabilities by wisely planning their financial expenses and using methods to either defer or legally reduce their liability.
There are a few ethical strategies you can use to minimize the liabilities of your taxes. Here are a few examples of how you can reduce your income, lower your tax bracket, and minimize your tax bill.
- Increasing retirement contributions is one of the easiest and most cost-effective ways to save money. Tax-deferred retirement accounts such as 401(K)s or 403(B)s allow you to contribute pretax dollars of up to $18,500 in 2018, and after the age of 50, you can contribute an additional $6,000. These provide a dollar for dollar reduction to total taxable income and greatly decrease your liabilities.
- Make contributions to traditional IRAs instead if you do not have an employer-sponsored IRAs allow up to a $5,500 contribution with an additional $1,000 allowed for those over 50 years of age. Keep in mind that this deduction is not eligible to single or head of household individuals and phases out with a modified adjusted income of $61,000 and eliminated at a maximum adjusted gross income of $71,000. For those filing jointly, the deduction phases out at $98,000 and is eliminated at $118,000.
- Make monetary or household item contributions to non-profit organizations or the donation of your choice. This allows you to donate money to causes and people you care about and save money on your taxes. Items worth more than $250 require a receipt to be a valid deduction, and there is a limit to donations that are above 20 percent of your adjusted gross income. You can also shift income to a donation by gifting them up to $15,000 per year without paying taxes, and you can give to as many donations as you would like.
- Contribute to a health savings account and a flexible spending account. HSA and FSA contributions are deductible, and the money used is tax and penalty free regardless of your age. This can allow you to receive medical care without having to pay additional taxes. With HSAs, the money not used can be invested and treated as a retirement account similar to a 401K.
Learn More Tax Tips from Dynamic Accounting Services
To learn more about how you can legitimately lower your tax bill, contact our firm today. We can help you make the most of every dollar and avoid paying unnecessary taxes.
Tips for Personal Finance PlanningPosted on July 26th, 2019
Approaching your finances with a plan helps you use money as a tool to build a comfortable future and achieve your personal and financial goals of security and enjoyment.
If you’re looking for ways to improve your financial status, you’ll first want to start with a plan. Here are a few valuable tips that can help you stay on track towards a profitable future:
- Take time to reflect on purchases to avoid impulse buying. Critically analyze whether you need the item more than you need to save and invest your money for the future. The 300 dollars spent on a jacket could be collecting interest and giving you a greater return than a jacket that may be out of style in no time.
- View a budget as a vehicle that gives you the freedom to reach your goals for big-ticket expenses like a vacation, house, car, or comfortable retirement. You may not be able to go out to dinner every week, but if your budget goes well, you could spend next summer in Tuscany or Disney World.
- Use the 50/20/30 budget plan. 50 percent of your income should go to the necessities like food, rent/house payment, utilities, and transportation. 20 percent should go to a fund that either gives you several months’ worth of salary, goes towards retirement or savings, or pays off any debts. 30 percent of your salary can go towards non-discretionary spendings like entertainment, vacation, and gifts.
- Prepare for your retirement. One of the best gifts you can give your kids is remaining independent during your golden years. Retirement is full of unexpected expenses in healthcare, inflation, and market fluctuations. The earlier you begin to save for retirement the more compounded interest you have to enjoy and live comfortably.
- Don’t be penny smart and dollar stupid. Money should be placed where its wealth can grow most rapidly, which means reducing your high-costing debts, like credit cards and student loans, and wisely investing your money for the future. If you focus on building wealth, you can be both wealthy and debt free.
- Maintain excellent credit. Even one late payment can significantly affect your credit score. Check your credit report regularly to make certain you are not a target of identity theft. Your credit rating can also be boosted when you utilize far less than the limits of your credit. Also, do not destroy old credit cards unless there is a high annual fee. Your credit score considers the average age of your credit accounts.
Call Dynamic Accounting Services to Receive Sound Advice on Personal Finance Planning
For more sound financial advice, consult with our professional team today. We can help you plan for a future that provides the lifestyle you deserve.
Which Business Structure Works Best for Your Company?Posted on May 31st, 2019
Farrah Gray once said, “Build your own dreams, or someone else will hire you to build theirs.” Entrepreneurs epitomize this quote and commit themselves to achieve their goals with a level of dedication, independence, and sacrifice seen in very few individuals.
One of the most important decisions an entrepreneur must make when getting started is selecting a business structure that best suits their needs. This important choice determines how you run operational duties, pay your taxes, and protect your assets. Each option balances legal protections and benefits differently, so understanding their distinctions is important.
The following are a list of the most common business structures:
Sole proprietorships are one of the simplest and least expensive entities. Even if you have already sold goods or services, you can create this model by default. It is not a legal entity and personal assets are not distinguished from business obligations, so taxation responsibilities fall on the owner.
With this option, you are responsible and personally liable for all debts and losses accrued by the business. You are placing your personal assets at risk should your venture fail, allowing creditors to garnish your income. Securing bank loans can be difficult with this structure. Sole proprietorships are good for starting up a business, but they do not provide long-term solutions to business plans.
Limited Liability Companies or LLCs provide the liability protection of corporations while serving as a “pass-through” company, which requires business owners of LLCs to manage their business taxes on their personal tax return. With LLCs, your own assets are protected and there is no limitation on the number of members in the company.
S corporations are also known as subchapter or small business corporations. They are privy to a tax code that encourages their growth and creation and avoids double taxation. Shareholders are not personally responsible for business debts, reaching a maximum of up to 75 members, all of whom must be U.S. citizens. S corporations allow you to pay yourself a salary and receive dividends while reducing your social security and Medicare taxes. Your corporation must file a business tax form, and this does not allow for the pass though taxation of a sole business owner.
C corporations are formed by shareholders and managed by a governing board of directors elected by the shareholders. The Board of Directors selects officers who manage the day to day activities of the corporation. The board composes bylaws for the corporation, which are written protocols on the way the corporations will be governed.
C corporations have unlimited numbers of shareholders and ownership is easily transferred through the sale of stock. They are ideal for entrepreneurs planning to raise a large amount of money from venture capitalists.
Let Dynamic Accounting Services Help You Select an Ideal Business Structure
If you would like counseling and advice from a trusted leader in finance, contact our office today. We can review the unique needs of your enterprise and help you come up with an ideal structure for your business entity. Call today!
5 Tips to Avoid IRS AuditsPosted on March 29th, 2019
Less than one percent of Americans get audited by the IRS. Still, it is a lot better to fulfill your tax obligations up front instead of accruing debts and penalties down the road. Here are five tips to keep in mind that can help you stay IRS compliant and avoid an audit:
- Be honest about your income. Some IRS audits are left to chance; however, the IRS employs specific filters that comb through data and generate red flags on individuals who show inconsistency. They have extensive information on the median average wage of particular jobs. If your figures are out of proportion with others in the same industry, you may trigger an IRS audit.
- Keep proof of your deductions and credits. The IRS uses a computer program called Discriminate Income Function, or DIF, to compare your deductions against those of others in a similar income bracket. You should still boldly claim all the deductions entitled to you but be sure you have the documentation to back them up. Carefully read the instructions on tax forms or consult with a tax professional to avoid raising red flags with the IRS.
For example, the Earned Income Tax Credit is entitled to low income working families. The IRS cracks down on fraudulent claims. Recent statistics indicate that 40 percent of those audited claimed an EITC credit. Those claiming this subsidy had their tax returns withheld until after February 15th so that the IRS could verify incomes and eligibility.
- Be meticulous with your figures. Make sure your numbers are accurate and use a calculator to double and triple check You want your figures to be exact, so don’t round them off to the nearest ten or hundred. The IRS may become suspicious, as it is obvious such figures do not consistently represent real data.
- The IRS also uses an automated system that spots calculations that don’t match up. Your W-2s and 1099s must match your tax returns, and tax ID numbers must match the information other taxpayers are reporting about you. Make sure to gather all your income reports, and bank and investment statements before starting your tax return.
- Know how and when to file your taxes. Those who file later are less likely to be audited as the IRS selects audits on most returns by the latest extension deadline of October 15th. The IRS also maintains that filing returns electronically can “dramatically reduce errors” lowering the odds of an audit. The error rate for paper returns is 21 percent, whereas the rate for returns filed electronically is 0.5 percent.
- Small businesses are easy IRS targets, especially those that handle a lot of cash such as bars and restaurants. The temptation to under-report income is huge. According to a 2016 IRS estimate, there is roughly an annual $458 billion-dollar gap between what Americans pay in taxes versus what they owe. With enormous deficits, there is pressure on the IRS to collect taxes owed to them. The IRS has specific questions that reveal inaccuracies, so it is always best to be truthful and keep detailed records.
Your Tax Returns are Accurate and Safe with Dynamic Accounting Services
To receive professional help filing your taxes, contact our office today. We ensure accuracy and keep you compliant with IRS obligations so that you can rest easy come tax season.
Should I Outsource My Accounting?Posted on January 25th, 2019
Many of us feel like there are not enough hours in the day to meet the expanding needs that accompany business growth. An increasing workload can begin to feel like a curse instead of good fortune. When operational duties swallow up too much of your time, you may also end up neglecting core functions that are pivotal to the success of your business.
Outsourced Accountants Can Relieve You of Many Responsibilities
Why not free-up valuable time and avoid the expense of a full-time bookkeeper by outsourcing your accounting services? This can place your business in a winning situation for optimal growth and efficiency. Here are a few of the services outsourcing provides that can save you time:
- Accounts Payable and Receivable
- Payroll Processing
- Bank Reconciliations
- General Ledger Maintenance
- Financial Statement Reporting
- Sales Tax Reporting
- Payroll Tax Reporting
- Income Tax Preparation
Outsourced Accountants are Industry Experts
Outsourcing gives you experienced bookkeeping and accounting service without the heavy price tag of a full-time employee.
Accountants are licensed professionals who are well versed in the needs of diverse businesses, both large and small. They have valuable insights into the unique needs of your industry that keep you competitive and maximize your profits.
Trust Licensed Professionals with Your Company’s Intimate Data
Knowing the intimate inner workings of your company are in the trusted hands of licensed professionals also provides you with security and peace of mind. Accurate records keep you compliant with state and IRS tax obligations and prevent errors that can lead to costly fines, IRS scrutiny, and even audits.
Outsourcing Can Safeguard Your Financial Health
Small businesses are especially vulnerable to fraud and embezzlement and an expert dedicated to your records keeps a keen eye on your financial statements. A qualified professional also eliminates the risk of data loss and corruption due to computer malfunctions. Data encryption, firewalls, and round the clock back-ups protect your records.
Dynamic Accounting Services for Trusted, Accurate Service
Give our office a call to learn more about how outsourcing your accounting needs can save you valuable time and money. We can shoulder the operational responsibilities of your business, so you can put your creative energy into growing your business. Call us today!
New Tax Laws and How They Affect BusinessesPosted on November 30th, 2018
2018 marks the year of a sweeping new tax reform called the Tax Cuts and Jobs Bill. This change will affect both individuals and business owners and was designed to provide relief to typical middle-class families. Professional accounting assistance can help many understand how these changes benefit individuals and small and large businesses.
Implications of the 2018 Tax Reform
The provisions of this new bill have broad implications for everything from tax schedules to standard deductions and health savings accounts. The maximum tax rate has decreased, and the number of tax brackets was reduced from 14 to two. Here are just a few of the changes:
- Elimination of the Investment Tax Credit.
- Unemployment income is now completely taxable
- A list of Social Security numbers of dependents is required on personal returns to prevent tax fraud.
- Dividend exclusions have been repealed
- A limitation on deductions for of IRA contributions
How the Tax Cuts and Jobs Act Affects Small Businesses
Owners of small businesses can see the biggest change with a tax break on 20 percent of their income. The government is hoping this creates more breathing room for small companies to hire new employees and invest in their expansion. The reform is intended to stimulate the economy and provide incentive for business growth.
Small companies are known as pass-through businesses because they “pass through” expenses and revenues onto the owner’s tax return at individual rates. Pass-through companies comprise about 95 percent of U.S. businesses.
Corporate Tax Relief
The biggest difference this bill creates is the reduction of the corporate tax rate from 35 to 21 percent. The goal is to establish the United States as a tax haven for large corporations and encourage domestic economic growth. The hope is that many companies headquartered outside of the US will relocate back home to increase their profitability.
This will hopefully make the U.S. more competitive in the global economy and prevent companies from moving overseas. U.S. companies that conduct business abroad will also not be taxed on their offshore profits.
Stay Up-To-Date in the New Tax Cuts and Jobs Bill
Dynamic Accounting Services can provide the advice you need to take advantage of the new tax laws. Give us a call today!