It might seem like a no-brainer to define just exactly what profit and loss are. But of course, these have definitions like everything else.  Profit can be called different things, for a start. It’s sometimes called net income or net earnings.  Businesses that sell products and services generate profit from the sales of those products or services and from controlling the attendant costs of running the business. Profit can also be referred to as Return on Investment, or ROI. While some definitions limit ROI to profit on investments in such securities as stocks or bonds, many companies use this term to refer to short-term and long-term business results. Profit is also sometimes called taxable income.

It’s the job of the accounting and finance professionals to assess the profits and losses of a company. They have to know what created both and what the results of both sides of the business equation are. They determine what the net worth of a company is. Net worth is the resulting dollar amount from deducting a company’s liabilities from its assets. In a privately held company, this is also called owner’s equity, since anything that’s left over after all the bills are paid, to put it simply, belongs to the owners. In a publicly held company, this profit is returned to the shareholders in the form of dividends. In other words, all liabilities have the first claim on any money the company makes. Anything that’s left over is profit. It’s not derived from one element or another. Net worth is determined after all the liabilities are deducted from all the assets, including cash and property. 

Showing a profit, or a positive figure on the balance sheet, is of course the aim of every business. It’s what our economy and society are built on. It doesn’t always work out that way. Economic trends and consumer behaviors change and it’s not always possible to predict these and what income they’ll have on a company’s performance.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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Independent CPA auditors are like referees in the financial reporting arena. The CPA comes in, does an audit of the business’s accounting system and methods and gives a report that is attached to the company’s financial statements. Publicly owned businesses are required to have their annual financial reports audited by independent CPA firms and any privately owned businesses have audits done as well because they know that an audit report will add credibility to their financial reports.

An auditor judges whether the business’s accounting methods are in accordance with generally accepted accounting principles (GAAP). Generally, everything is in place and the financial report is a reliable document. But at times an auditor will wave a yellow or red flag. Some indicators of potential trouble include when the business’s capability to continue normal operations is in doubt because of what are known as financial exigencies, which could mean a low cash balance, unpaid overdue liabilities, or major lawsuits that the business doesn’t have the cash to cover.

An auditor must exercise professional skepticism, meaning the auditor should challenge the accounting methods and reporting practices of the client in order to make sure that its financial statement conforms with accounting standards and are not misleading – in short, that the financial statement are fairly presented. Indeed, the words “fairly presented” are the exact words used in the auditor’s report.

A good auditor needs technical know-how, but also needs to know how to be tough on the accounting methods of the client. His job is to be the agent of the shareholders and other users of the business’s financial report. It’s incumbent on an auditor to strictly uphold GAAP, and not let any irregularities slide. 

There are a number of well-known companies that engaged in accounting fraud recently and that fraud was not discovered by the CPA auditors. Enron is one of these companies. In this case, the auditing firm, Arthur Anderson was found guilty of obstruction of justice because it destroyed audit evidence.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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A Certified Public Accountant, or CPA, can help you make sure that your small business accounting or individual taxes are accurate and complete.  Some businesses are small enough, such as home-based businesses, that a Certified Public Accountant is not needed for most accounting tasks.  However, there are times when a business or individual should use a Certified Public Accountant.

If you have a small business, and you have discovered that an error in your bookkeeping exists, it can often be difficult to locate where and when the error was made to correct the mistake.  A Certified Public Accountant has special training and education to find these errors through an external audit process.  It is vital that these errors be corrected because the books you use in your business are used to determine taxes and business decisions. 

These records also allow investors to see how well your business is doing so that you can get more backing to help your business grow.  A Certified Public Accountant can find and correct any errors in your bookkeeping, and help you organize your bookkeeping so that you or the Certified Public Accountant can easily generate financial statements and reports.  These financial statements and reports prepared by a Certified Public Accountant are the documents that most banks and investors want to see before making any financing decisions.

If you are starting up a home-based or small business, you should seek the guidance of a Certified Public Accountant.  The Certified Public Accountant can help you set up a double-entry method of accounting with a journal and ledger, as well as a chart of accounts to help you use these tools effectively in your business.  The Certified Public Accountant can also advise you as to what taxes you will be responsible for paying throughout the year.  Quarterly taxes are often required of businesses and self-employed individuals.  To avoid penalties, late fees, and a large tax bill at the end of the year, you should contact a Certified Public Accountant for this information.

Any individual that is self-employed should seek out the services of a Certified Public Accountant when it is time for tax return preparation.  Tax laws change every year, and a Certified Public Accountant can help you make sure that you are receiving all of the deductions you have available as a self-employed individual.

Any individual with children, who is separated or newly divorced, or who may wish to itemize deductions based on mortgages, medical expenses, and charitable contributions should also seek out a Certified Public Accountant for assistance in income tax preparation.  This is because the tax laws are very complex, and change often.  If you make a mistake and claim a deduction that you could not legally claim, the IRS may audit your return and cause you to pay back the refund amount, with penalties.  Additionally, if you make a mistake and do not claim a deduction that you could legally claim, the IRS will not attempt to correct the mistake, causing you to receive a smaller refund.  Either way, you lose money.  The best way to avoid these and other errors is to have a Certified Public Accountant prepare your income tax return.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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Most audit reports on financial statements give the business a clean bill of health, or a clean opinion. At the other end of the spectrum, the auditor may state that the financial statements are misleading and should not be relied upon. This negative audit report is called an adverse opinion. That’s the big stick that auditors carry. They have the power to give a company’s financial statements an adverse opinion and no business wants that. The threat of an adverse opinion almost always motivates a business to give way to the auditor and change its accounting or disclosure in order to avoid getting the kiss of death of an adverse opinion. An adverse audit opinion says that the financial statements of the business are misleading. The SEC does not tolerate adverse opinions by auditors of public businesses; it would suspend trading in a company’s stock share if the company received an adverse opinion from its CPA auditor.

One modification to an auditor’s report is very serious – when the CPA firm says that it has substantial doubts about the capability of the business to continue as a going concern. A going concern is a business that has sufficient financial wherewithal and momentum to continue it normal operations into the foreseeable future and would be able to absorb a bad turn of events without having to default on its liabilities. A going concern does not face an imminent financial crisis or any pressing financial emergency. A business could be under some financial distress but overall still be judged a going concern. Unless there is evidence to the contrary, the CPA auditor assumes that the business is a going concern. If an auditor has serious concerns about whether the business is a going concern, these doubts are spelled out in the auditor’s report.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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Finding a good accountant does not always end up being a simple task. There are so many accountants that seem to appear every year, it is hard to know who to choose to put in charge of your finances. Finding an accountant is a very serious task that is never taken lightly, especially since it involves your business. Here are two simple steps of how to choose an accountant that you can trust with your business’s finances. 

The first thing you do to find a good accountant is to build a list of referrals from credible sources. To find resources for these referrals may seem like a daunting task at first, however, it is simpler to accomplish this goal than what you think. You can go to such resources such as your local bank, any type of financial planners that you may have, and you can even talk to your current insurance agent about people they know about to be your accountant. If you have any contacts or affiliations with other businesses, then you can ask them for accountant referrals as well. These are all trusted resources that can provide you with some good leads on who you can trust to be your accountant. Finding accountant candidates through trusted resources such as your business’s bank is one of the best ways to find an accountant.  Most professional referrals like this mean that the accountant has a good reputation. 

Once you have your accountant referrals, you then want to contact them and exchange information. Feel free to tell the accountant about your business as well as your accounting needs and expectations. While you give the accountant your information, also ask for theirs. Some key things you want to find out is if the accountant can handle a business in your industry and your size, as well as finding out all of the services they offer. Do not be afraid to look at their portfolio and get estimates for their services. Be sure you know what services the fees cover. You never want to select an accountant whose fees are too high for what you can afford. Make sure that you can maintain a good line of communication and determine if they are helpful and informative. The accountant who offers the most detail and takes the most time to not only tell you about the services they can offer you, but also listens to your concerns, is usually the type of accountant that you are looking for. 

After gathering all of the information about the accountants, then make the decision of who is the right accountant for you. Remember that you will be having a long business relationship with your accountant, so you want to select an accountant that you feel you can build a good rapport with as well as someone who will have you and your business’s best interest in mind.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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1. Avoid Late Filing Penalties

Late filing can result in substantial and continuing penalties. This is in addition to any interest that is due.

2. Receive Better Service from Your Accountant

The earlier you get your paperwork to your accountant, the sooner he can start preparing your tax returns. More importantly, there will be more opportunities to explore and implement tax saving strategies. On the other hand, if you file late, you tie your accountant’s hands. For example, he may hesitate to retain profit in your corporation if such profit will be subject to substantial penalties.

3. Avoid Criminal Charges

Of course, if you don’t file tax returns at all for a few years, you may also face charges of tax evasion.

4. Prevent Bankruptcy

Generally speaking, persons who don’t file tax returns on a timely basis also lack adequate records for managing their business. Since they don’t keep their bookkeeping and accounting up-to-date, they only think they know how they’re doing and how they stand financially. This, of course, is a recipe for financial disaster.

5. Enjoy Better Relations with Tax Authorities

Late filers also receive the unwanted attention of the taxation departments. Non-compliance can result in audits, aggressive collection action and legal proceedings. In addition, if you ever do have extenuating circumstances that might call for some leniency or extraordinary consideration on the part of the tax department, you are more likely to receive it if you have a flawless history of co-operation and compliance.

6. Obtain Financing

You’ll have difficulty obtaining financing if you can’t provide your financial institution with current income information. Assessment Notices from taxation authorities give banks more assurance that the income claims you make are true. As well, if you haven’t filed your current income tax returns, what hidden tax liabilities exist? What is the state of your record-keeping? How do you run your business without adequate financial information? Your bank may hesitate to loan you money or refinance under these circumstances.

7. Reduce Stress and Worry

Many people who are late filing their tax returns feel guilty about it. At the back of their minds, they worry about taxation authorities contacting them, audits, asset seizures, criminal prosecution, penalties and interest, and so on. Some of these worries can become magnified beyond what the actual situation warrants. Save yourself unnecessary stress by filing your income tax returns on time.

By following these simple steps, you can have confidence in finding an accountant who will work hard to help you direct your company into a positive direction for financial growth and expansion.  

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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The COVID-19 pandemic underscored the need to save for retirement and highlighted how many individuals are living paycheck to paycheck. Many individuals were unable to continue their contributions, while others were forced to withdraw funds due to pandemic-related situations. The following are some of the ways in which retirement contributions will affect your taxes.

Filing Status

Navigating tax-deductible amounts can be highly complicated and depends on your filing status, age, and the type of retirement plan you have. The best option to ensure accuracy on your income tax return is to seek the services of a professional accountant or tax preparer that will be knowledgeable in the tax laws governing multiple types of retirement accounts.

Roth IRA

Contributions to a Roth IRA are not deductible. You’ll pay the full amount of taxes on any money placed in the account. The trade-off is that you won’t pay taxes on contributions or investment returns after you retire and begin drawing money from the account.

Traditional IRA

Contributions to a traditional IRA reduces taxable income in direct proportion to the amount contributed. There’s a limit of $6,000 that can be contributed to the retirement plan. However, if you’re aged 50 or over, you can contribute up to $7,000.

Retirement & the CARES Act

The CARES Act in response to the COVID-19 pandemic added some changes to retirement funds and how they’ll affect your tax liability. The Act removed the 10 percent penalty on withdrawals if you’re under 59.5 years old. The tax liability can be spread over three years and an amended tax return can help regain money paid on the distribution if you’re paying back the account.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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The COVID-19 pandemic already affected the way you filed your taxes for last year by extending the deadline from April 15 to July 15. The virus will continue to impact the way you file your taxes in 2021 and the CARES Act introduces some circumstances for which people may not be prepared.

Some of those changes can be beneficial, while others may result in a nasty surprise. Be prepared for an additional push to e-file if you don’t already. It takes longer for the IRS to process paper returns. E-filing will help protect against identity theft and you’ll get your refund quicker.

Change in Tax Liability

Loss of jobs, unemployment benefits, or increased hours for essential workers will result in significant income differences over previous years. You can easily find yourself in an entirely new tax bracket.

Charitable Deductions

Even if you don’t itemize deductions, the CARES Act enables anyone to claim a charitable deduction up to a maximum of $300. You’ll need to provide records for any charitable deduction you claim.

Mortgages

Relief was provided for home mortgage holders due to the pandemic. The result was that many individuals paid less in interest, meaning there will be a smaller amount of mortgage interest to deduct. Unfortunately, if your mortgage debt was cancelled due to a foreclosure, the cancelled amount may be considered taxable income if you don’t qualify for an exception to exclude the cancelled debt.

Retirement Withdrawals

For those that had to dip into their retirement accounts to survive the pandemic, the CARES Act removed the 10 percent penalty, providing you’re under 59.5 years old. You can also spread the tax liability over three years. If you pay back the account, you can file an amended tax return to recoup the money you paid on the distribution.

Self-Employed

The IRS has moved some of the deadlines for estimated tax payments for those that are self-employed. You don’t have to wait until the deadline to pay if you have the money available, but it’s beneficial if you need a little extra time.

Stimulus Payments & Unemployment

If you received the $1,200 stimulus payment, it won’t be considered taxable income. However, unemployment benefits are still taxable and it can lead to a very unpleasant surprise for individuals that received the extra $600 per week unemployment benefits in addition to their regular benefits. The full amount of your unemployment benefits will be taxable at the federal level and in all but 15 states.

Student Loans

The CARES Act also provided temporary relief of student loan payments. If you paid less interest on your student loan, you’ll have less interest that can be deducted from your income taxes.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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Tax time is stressful, even if you’re going to receive a refund. The anxiety that accompanies filing yearly income taxes leads many to wait until the last minute to even begin gathering the records they need. There are actually a number of benefits to conquering the fear and filing your taxes early.

Quicker Refunds

Filing as soon as possible means you’re going to receive any refund faster. That’s especially true if you file electronically. There’s a significant difference in the time it takes to process a paper return than one that’s e-filed. Filing early also increases the accuracy of your return.

Extra Time to Pay

If you do owe money to the IRS, finding out early gives you extra time to pay them. You can submit your tax return early, but you don’t have to have the money to the IRS until the filing deadline in mid-April.

Information for Planning

If you have kids that will be attending college and they rely on your income to apply for financial aid, filing early gives you that crucial data. Tax return information is also utilized for other purposes such as financial pre-approval for purchasing a home.

Avoid Extensions and Interest

You may very well need the services of a tax professional to file your taxes if you wait until the deadline is near. The closer it is to the filing deadline, the more difficult it will be to schedule an appointment with a tax preparer.

You may also need to file an extension if you wait. Doing so will give you additional time to plan on how to pay the IRS what you owe. However, if the amount isn’t paid in full, the IRS can charge you interest and penalties until the balance is fully paid off.

Identity Theft

Scammers file billions in fraudulent tax returns every year, robbing people of the refunds to which they’re entitled. Filing early helps prevent someone from submitting a tax return in your name and getting your refund.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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Anyone going into the accounting field should know that there are abundant opportunities for employment straight out of college, with jobs available in the private and public sectors. Those that want to work with multiple clients can find satisfaction in public accounting. For those that prefer to work for a single company, private accounting may be a better choice.

Accounts Payable

A wide range of businesses, particularly in the healthcare field, employ accountants to perform collection calls on overdue accounts, send invoices, and resolve problems with clients in regard to their bills. It’s a rapidly expanding field with multiple opportunities.

Auditing

Auditing is more than just ensuring that the numbers add up. A wide array of companies employ accountants to look for sources of lost revenue. That can encompass identifying areas of duplicated effort or deficiencies in control mechanisms. Individuals may also be responsible for investigating consumer or vendor claims.

Bookkeeping

Accounts are essential personnel for any business endeavor. In addition to tracking and monitoring income, costs, and financial transactions, individuals will be responsible for providing clients with regular reports and updates about their financial status. They are often called upon to handle a company’s payroll. Don’t overlook the opportunities for accountants at schools, universities, and government entities.

Forensics

The job of a forensic accountant is to examine data, discover where money has gone missing, and how to recover it. As individuals advance in the field, they may also be called upon to testify in court cases as an expert witness and work with law enforcement personnel.

Information & Technology

This is ideal for individuals that are as enthusiastic about technology as they are numbers. There’s a myriad of accounting software from which individuals and companies can choose and accountants in this field will be responsible for helping clients select the best financial software for their needs.

Loans and Analysis

Believe it or not, many banks employ accountants as tellers, credit analysis specialists, and loan officers. Individuals often perform credit checks and financial pre-approvals for loans on homes, vehicles, and business equipment.

Tax Preparation

Preparing taxes is an essential service and many newly fledged accountants begin illustrious careers performing tax preparation. It’s also possible for accountants to acquire regular business clients through the contacts they make doing taxes.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

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