What are My Tax Obligations

Many individuals dream of owning their own business, but don’t fully understand what their tax liabilities are depending on the type of enterprise they’re operating. Knowing your tax liabilities is essential for growth and profitability. Your accountant will play an integral role in every facet of your business.

Federal Taxes

Depending on the size and scope of your operation, you may need to pay quarterly taxes and meet specific reporting deadlines. Those conducting a side hustle or working in the gig economy can often report their income on their personal tax return to the IRS.

State and Local Taxes

Your business structure and the city within which you operate will dictate which taxes you’ll have to pay. Florida is a tax-friendly state. Corporations are subject to a 5.5 percent income tax. Sole proprietorships, limited liability corporations (LLCs), and S corporations are exempt from paying state taxes.

Employment Taxes

Florida business owners will be responsible for paying federal and state employment taxes if they have employees. You’ll be required to pay a payroll tax and report wages, tips and other forms of compensation paid to an employee. There are special forms for doing so. You’ll typically be responsible for workers’ compensation insurance, unemployment insurance taxes, and temporary disability insurance. You’ll be required to report taxes that have been withheld from employee paychecks.

Why You Need an Accountant

The Florida tax code is a highly complex and complicated set of regulations. It can drive business owners to distraction trying to decipher the code, but an accountant is cognizant of all the intricacies. He or she can provide expert guidance on ways to reduce your federal, state and city tax liabilities.

An accountant will advise you of your tax responsibilities and be able to file at the appropriate time on the correct forms. The professionals help you work toward your individual goals, minimize costs, and maximize your profitability.

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Tax, Tax Deductions
posted by Mark Battalini
July 30, 2023

How to Reduce Your Taxes

People can lower their federal and state tax obligation through credits and deductions. Credits typically produce a more favorable result, as they lower the taxes owed. However, in combination with deductions, they provide a way to reduce your taxable income and reduce your total tax bill.

Tax Credits

There are a number of tax credits available to individuals that reduce overall income and can put you in a different tax bracket, meaning your income is taxed at a lower rate They include the earned income credit, child tax credit, child and dependent care credit, and American Opportunity tax credit. These and others reduce the amount you owe the federal government and work to lower your income.

Retirement Savings

Income set aside for retirement purposes and company-sponsored 401(k) accounts can lower your taxable income. They include traditional IRAs, Roth IRAs, and 401(k) plans.

Health Savings Account

People contributing to an HSA for health care expenses can use those funds to lower their taxable income, as they’re made with pre-tax income.

529 Plans

As an educational savings plan, earnings and distributions aren’t subject to taxes – providing the funds are used for qualified educational costs. They’re not deductible on federal taxes, but can lower the state tax burden. Be aware that rules vary by state. Pre-paid tuition plans are another option for qualified institutions.

Charitable Contributions

Those who volunteer at a qualified non-profit organization can deduct travel expenses associated with volunteering. Cash and non-cash contributions can also be deducted – be sure to keep a receipt. Claiming a charitable contribution will lower income and tax burden, but itemization of deductions is required and there are limits on how much can be deducted.

Depreciation and Business Expenses

For those that operate a home business or farm, for example, a portion of equipment or machinery can be deducted as depreciation. A percentage of a home used exclusively for conducting business can also be deducted.

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Tax, Tax Preparation
posted by Mark Battalini
July 30, 2023

How to Protect Yourself from Overpaying Tax

Everyone dreads tax time, as evidenced by the number of people that wait until the last minute to file. Waiting until the deadline can be a costly mistake for individual filers and those that operate a home or small business. There’s an increased risk of mistakes, missing a deadline, and you may not catch deductions and credits for which you’re entitled.

Get Organized

You need to start thinking of tax time long before you’re ready to file. That means keeping and organizing receipts. Keep bills and receipts in folders according to type. If nothing else, at least keep them in a box. It will be a mess for you or a tax preparer to decipher, but worth it. If you utilize the services of a tax professional, you’ll typically have been sending them your receipts, which makes the process easier.

Know Your Obligations

There are plenty of resources online that provide all the information you’ll need for your individual circumstances to file local, state and federal taxes. Bear in mind that you could be audited at any time.

Credits and Deductions

Whether you’re an individual filing your taxes, operate a home business or a gig worker, there are numerous tax credits and potential deductions for which you may qualify. They can reduce your taxable income, the taxes you pay, and could place you in a tax bracket where you’ll be taxed at a lower rate.

Tax Software

Completing your taxes can be much easier with tax software. You’ll still need to keep track of your receipts, but tax software can make it easier to track expenditures and income.

Professional Expertise

A tax professional is well worth the money, especially for those with a home or small business. The professionals use software that’s highly specialized and sophisticated. They’re also cognizant of the constantly changing tax laws and can provide strategies for saving.

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Tax, Tax Preparation
posted by Mark Battalini
July 30, 2023

What’s the Most Popular Write Offs for Tax Purposes

Everyone wants to find ways to lower their tax burden each year. There are some everyday write offs that many individuals are eligible to take on their federal income tax and they don’t even know it. A tax write off is a deduction that taxpayers can use to reduce the amount of taxes they owe. Not everyone qualifies for each write off, but the following are some of the most popular.

Vehicles and Mileage

People that use their own vehicle as part of their job can deduct the milage on their vehicle used strictly for work. It applies to people such as delivery drivers, reporters, and gig workers.

Mortgage Interest

Homeowners can deduct the interest paid on their home mortgage. Space used for a home office can’t be counted and deductions must be itemized.

Home Office

More people are operating a home business and a percentage of the space used for business can be deducted if the area is used exclusively for business purposes.

Student Loan Interest

The interest paid on a student loan is deductible for yourself, a spouse, or a dependent child. You can deduct up to $2,500 worth of interest, whether from a private or federal loan.

Charitable Donations

Cash and non-cash items donated to a qualifying charitable organization can be deducted if you itemize deductions. Volunteers can deduct the mileage they drive to the organization. Taxpayers that claim the standard deduction can no longer take the charitable contribution write off.

Medical and Dental Expenses

Any expenses greater than 7.5 percent of your adjusted gross income can be deducted – provided you itemize deductions.

State and Local Taxes

State and local income taxes paid can be claimed on your federal tax return, up to $10,000.

IRA and Retirement Contributions

To take this, you need to have had earned income from work. The amount that can be written off depends on age.

Health Savings Accounts

Setting aside money to cover medical expenses is a good idea. The amount you can set aside depends on age.

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Tax
posted by Mark Battalini
June 30, 2023

How Can I Reduce My Company’s Taxable Income?

No business owner wants to pay more in taxes than necessary, but many are losing out on ways to reduce their tax burden without even knowing it. The following are just some of the ways that small business owners can reduce their company’s taxable income.

Health Insurance

The cost of health insurance isn’t cheap, but it can help small business owners reduce their company’s taxes. The IRS allows a deduction for people that are self-employed and pay for their own health insurance. That includes premiums for medical, dental, vision, and even long-term care coverage. The coverage extends to spouses and children age 26 and younger covered under the policy. This is especially important for people that are gig workers, independent contractors and freelancers, all of whom are considered a small business by the IRS.

Retirement Savings

If you have no employees, you can establish a single participant 401(k), also known as a SOLO 401(k). You might also be eligible to deduct your contribution to an employee retirement plan. Other options include the Self-Employed Individual Retirement Account, also known as a SEP IRA, Roth IRA and traditional IRAs. There’s also a Saver’s Credit for which you may be eligible due to your retirement contributions.

Qualified Business Income Deduction

Also known as the Section 199A deduction, you may be eligible for it if you claim your business income on your personal income tax return. It’s available for sole proprietorships, partnerships, LLCs, and S corporations.

Home Office and Depreciation

Operating a business out of your home can net you deductions in a variety of ways. It’s possible to deduct a portion of your home dedicated to the business, internet service, business phone, office supplies, and similar bills that are necessary for the operation of the business. You can also deduct depreciation of your office equipment and assets essential for conducting business.

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Tax, Tax Preparation
posted by Mark Battalini
April 27, 2023

A Personal Checklist for Tax Day

Tax day is a highly stressful event for many people, prompting them to procrastinate as long as
possible. Waiting to file yearly taxes can result in mistakes, missed deadlines and financial
penalties. Armed with a personal checklist, individuals will have the documentation they need,
filing will be easier, and tax day will be far less stressful.
Keep a Folder
Create a physical folder and place all documentation inside as the information arrives. Many
individuals use home accounting software and print-outs of pertinent information can make
filling out tax forms much easier.
Personal Information
The IRS wants very specific information about individuals. To fulfill those requirements, the
following information is required if applicable.
 Social Security numbers and birthdates for all filers and dependents
 Statement of earnings from all employment
 Social Security received
 Pension income received
 Earning information from side hustles or the gig economy
 Unemployment benefits
 Investment income
 State and local refunds
 Alimony paid or received
 Business or farming income
 Property taxes paid
 Home office expenses
 Any miscellaneous income from sources such as gambling
Adjustments
There are several ways to reduce tax liability and the amount owed. Some of those include:
 Student loan interest
 Education expenses
 Health Savings Account
 IRA contributions
 Self-employment health insurance expenses
Credits
Tax credits also help people lower their tax burden. Individuals will need documentation of:

 Child care expenses
 Adoption costs
 Home mortgage interest paid
 Charitable donations
 Insurance reimbursements
 Work expenses such as uniforms and union dues
 Medical-related expenses
 Energy credits
Taxes Already Paid
These can include personal property taxes, real estate taxes, and fees for vehicle licensing,
along with state and local taxes.
Miscellaneous Information
Individuals will need information about their bank accounts – both foreign and domestic – and
bank routing numbers. The IRS will need to know what account from which to deduct any taxes
owed or to deposit a refund.

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Tax
posted by Mark Battalini
January 29, 2023

How to Find a Copy of a Lost W-2

A W-2 is essential for filing taxes, but in the frenzy to collect all the necessary documentation needed to file each year, the form can easily become lost. It’s not uncommon for the forms to get lost in the mail. It’s a very good reason why individuals should have a filing system and not wait until the last minute to file their federal tax return.

Contact the Employer

If the employer has already mailed a W-2 to an employee, the individual can contact their employer, human resources, or the person in charge of payroll to get a duplicate. It’s typically the easiest and fastest way to obtain a duplicate copy. The form may be mailed, but a copy may be able to be immediately supplied.

Online Access

In some instances, employers utilize systems that will allow an individual to access their own information, see their W-2 online, and download a duplicate copy. Employees may be required to contact their employer or the payroll service to get access. If all attempts to obtain a duplicate W-2 from an employer has failed to produce results, it’s time to contact the IRS.

IRS Website

Businesses must also file tax returns. That includes information about employees and their earnings. If the employer has already provided that information to the IRS, individuals may be able to obtain a transcript of the data. Individuals will need to visit the official IRS website, click on “Get Your Tax Record,” and complete the required IRS form online.

Be prepared to answer questions. In addition to the individual’s contact information and employment dates, they’ll have to provide an estimate of their wages and taxes withheld. Employer contact information will also be required.

Alternative Form

Individuals will still be required to file their federal income taxes on time and pay any amount they owe. The IRS has a “Substitute for Form W-2 Wage and Tax Statement” that can be filed. If a W-2 is received after the person has already filed their taxes and the information is different, an emended tax return must be filed.

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Tax
posted by Mark Battalini
January 1, 2023

When Teens Need to File Their Own Tax Returns

Teens work a variety of jobs for extra money, they may be employed in the family business, or have unearned income from interest or dividends. In 2022, any child that earned $1,150 or more in unearned income is required to file a return. Tax laws surrounding teens, their income, and the type of income are complex. If in doubt, it’s best to hire a tax professional.

Earned Income

Anyone earning $12,550 or more is required to file a federal tax return and that includes teens. A minor that earns $400 or more in wages or tips working full- or part-time must file a tax return. Even if the teen isn’t required to file a return, it’s a good idea to do so if the employer withheld federal income tax from earnings.

Dependents

However, there are some important elements attached to the question of teen tax returns. It will depend on if the teen is 19 or younger, age 24 and a student, or permanently disabled. Another consideration is if the parent provided 50 percent or more of their support and how many months of the year the teen lived with their parent. If any of those situations apply, the teen may still qualify as a dependent.

Unearned Income

A teen that qualifies as a dependent and has unearned income of more than $1,100 must file a return. However, if the teen only had unearned income, parents may be able to include that income on their own tax return. The disadvantage is that it might propel parents into a higher tax bracket.

Earned & Unearned

Teens that have both earned and unearned income, will need to file their own return if they have more than $1,100 of unearned income, over $12,550 in earned income, or if the combined total is the larger of $1,100 or earned income of up to $12,200 plus $350.

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Tax
posted by Mark Battalini
November 20, 2022

Who Uses Irrevocable Trusts

An irrevocable trust isn’t something that most people consider. The average individual won’t have any need for such an arrangement, nor would they want one. It commits assets forever, can never be changed, and once the trust is established individuals have no control over it at all – it’s managed by a trustee.

The trust has 3 involved parties. The first is the creator of the trust. The second is the trustee. The third is the beneficiary of the trust. There are only 3 reasons that an individual should establish an irrevocable trust.

Minimize Estate Taxes

This is an opportunity for the wealthy to purchase life insurance that can be used to help them avoid paying probate fees and estate taxes when they die. It can also provide an individual with a steady stream of tax-free income for a set amount of time, with any remaining funds going to a charity of their choice.

Government Program Eligibility

An irrevocable trust is particularly beneficial for the disabled. Individuals receiving Medicaid or Supplemental Security Income have very specific limits on the money and assets a person has. Exceeding those limits means they lose government benefits. An irrevocable trust isn’t counted as income or assets, allowing an individual to continue receiving benefits from government programs.

Protect Assets From Creditors

Individuals that owe significant amounts of money or those that are at risk of frequent lawsuits can obtain protection through an irrevocable trust. That includes medical professional, lawyers, accountants, and public servants, to name a few.

The Disadvantages

An irrevocable trust doesn’t isn’t a good option unless an individual has a very sizeable estate. There’s also no guarantee that a court won’t be able to claim some of those assets if a judge thinks the individual may have anticipated a lawsuit. Many states require that a trust own funds for at least two years before they’re considered protected. The trusts can also represent considerable cost, since it will require the serves of an accountant.

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0 comments
Tax
posted by Mark Battalini
November 20, 2022

Will Estate Planning Ensure Financial Security for Loved Ones?

Estate planning is an essential element of preparing for the future. It addresses issues ranging from end-of-life care to who inherits assets. It also helps individuals minimize the tax burden of inheritors. Estate planning is appropriate at any age, for singles and those with life partners. It’s especially critical for those that have children. It’s never too late to create a comprehensive plan to ensure the financial security of loved ones.

Financial assets and circumstances change over time and so do the needs of individuals. An effective estate planner will help clients create a plan that provides flexibility as their assets grow and family circumstances evolve. Estate planning allows individuals to dictate what will be done with their assets.

An estate plan accomplishes multiple goals. Without an estate plan, the court system will make decisions for an individual and they can be far different than what the owner intended.

Guardianship

Prioritize the guardianship of minor children during estate planning. The guardian must be a trusted person who will give precedence to the children and their needs. It’s a good idea to designate a second guardian if the first is unable to carry out their responsibilities.

Will

Estate planning includes making a will that clearly states who inherits assets and names an executor to ensure those instructions are carried out when an individual dies. Beneficiaries will be of primary importance. A will also confers power of attorney to a specific individual, states end-of-life care, can establish a trust, and make provisions for the funds to pay for a funeral, final expenses and taxes.

Estate planning is a crucial element for every individual, even those with modest estates. Individuals work a lifetime to accrue assets and care for their loved ones. Estate planning ensures their financial wellbeing and that assets are distributed in the manner the manner the client desire.

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Archives for Tax

What are My Tax Obligations

How to Reduce Your Taxes

How to Protect Yourself from Overpaying Tax

What’s the Most Popular Write Offs for Tax Purposes

How Can I Reduce My Company’s Taxable Income?

A Personal Checklist for Tax Day

How to Find a Copy of a Lost W-2

When Teens Need to File Their Own Tax Returns

Who Uses Irrevocable Trusts

Will Estate Planning Ensure Financial Security for Loved Ones?