Skip to main content Skip to search

News

How Retirement Contributions Affect your Taxes

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!

 

Contact Us Today

Read more

How COVID-19 will Affect your 2020 Tax Filing

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!

 

Contact Us Today

Read more

Advantages of Completing your Taxes Early

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!

 

Contact Us Today

Read more

7 Great Accounting Jobs Right out of College

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!

 

Contact Us Today

Read more

Tax Credits for Single Parents

Tax time can be extremely stressful, particularly for single parents that need every tax credit they can take. There are a number of ways that single parents can take advantage of credits on their federal income taxes to reduce the tax burden of which they may not be aware.

Head of Household

Claim head of household to receive a higher standard deduction. Individuals will also pay fewer taxes overall. Generally, the filer can claim this if they were single on the last day of the year, the child(ren) lived with them the majority of the year, and they provided more than 50 percent of the child’s financial support.

Earned Income Credit

This is one of the most often claimed credits by single parents and couples. It’s designed for working families of low- and moderate-income, even if they don’t owe taxes. However, the IRS is required to hold the entire amount of any refund until mid-February if they claim this.

Child Care Credit

A single parent is eligible for this credit if they paid someone to care for their child so they could work. The child and the one caring for them must meet certain requirements. The credit is available when children are cared for by a licensed childcare center. Parents that pay someone to care for a child in their own home may be subject to the “Nanny Tax” as an employer.

Child Tax Credit

The child tax credit shouldn’t be confused with the child care credit. Up to $2,000 can be deducted from tax liabilities for each child under the age of 17 on Dec. 31, provided the parent has earned at least $2,500. The amount that can be refunded begins to diminish once individuals reach the $200,000 mark for income.

Medical Expenses

Extensive medical expenses that exceed 7.5 percent of an individual’s adjusted gross income can be deducted. It will require an itemized return and itemized returns are more likely to be audited.

Adoptions

The federal government gives individuals a tax credit when they adopt a child. Adopting a spouse’s child doesn’t count for the credit.

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!

 

Contact Us Today

Read more
CPA Consultant Conway South Carolina

Top Qualities of a Good Accounting Firm

An accounting firm is a great way to relieve the stress of tax time and it’s a real time saver for individuals already pressed for time. Hiring the right firm may not be so easy, though. In today’s world, being “good with numbers” or the least expensive option isn’t enough. One little mistake in this field can have serious and expensive repercussions.

A good accounting firm does more than simply keep the books and file your taxes. It will be able to effectively communicate a wide range of business information and opportunities. The following are the top qualities that an accounting firm should exhibit.

Personalized Service

Each business is different and a superior accounting firm understands that. A full service tax firm will be able to help you develop tax strategies, create plans to meet financial goals, and help you manage your assets. Your accounting firm should meet with you several times a year, not just at tax time.

Experience and Education

The accounting firm should have experience in your particular industry. That means they’ll know your business and any applicable deadlines. Tax laws change frequently and without notice. An accounting firm will be cognizant of current tax laws and how they impact your business. The firm’s accountants will have extensive education and should have met the licensing requirements of a certified public accountant (CPA).

Accuracy and Detail

You’ll obviously want a firm that’s accurate, which means it will be detail oriented. The firm will prepare reports to keep you informed of your financial status, identify potential issues and suggest solutions, and provide guidance to reduce costs, enhance revenues, and maximize profitability.

Technology Literate

The days of accountants laboring with paper and pencil are long gone. An accounting firm should be utilizing state-of-the-art technology, advanced accounting software, and other technology-based tools.

Business Strategies

An accounting firm will be able to provide effective advice and strategies whether the business is a start-up or an established company of long standing. The firm will be able to provide you with the information you need to make sound and informed business decisions that helps your enterprise grow and evolve.

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!

 

Contact Us Today

Read more

Ways to Cut your Tax Bill

Everyone wants to cut their tax bill and reduce their taxes. There are ways to accomplish those goals of which you may not be aware. The following are just some of the ways that you can cut your tax bill.

401k

The IRS doesn’t tax contributions to an IRA, making them an ideal way to reduce taxable income. Up to $19, 500 can be placed in an IRA and people 50 and over can add an extra $6,500 to that amount.

Education

You can establish an educational savings fund and deduct your contributions on your federal tax return. Contributing to the state’s 529 prepaid tuition or educational savings plan may also be deductible on state taxes. Be aware that the gift tax may apply if it exceeds $15,000 to a single beneficiary.

FSA

A flexible spending account for medical and dental expenses can aid in lowering your tax bill. There’s a limit of $2,750 in contributions. If you have a dependent care FSA account for child care expenses, the IRS will exclude contributions of up to $5,000. It may also cover eldercare expenses. Check with a tax professional to be sure.

HSA

Contributing to a health savings account can be beneficial if you have a high-deductible insurance plan. The plan parameters change each year and not everyone may qualify for the deduction, but they also have investment potential. It’s not a good option for everyone, so check with a tax professional first.

IRAs

There are standard/traditional IRAs and Roth IRAs. You might be limited on how much you can contribute or unable to deduct contributions under certain circumstances, depending upon which type you have. It’s best to discuss the situation with a tax professional or accountant.

Tax Calculators

There are numerous types of tax calculators that can help you save. There are calculators to estimate your taxes and refund to more complex calculators for determining capital gain taxes. Knowing where you stand financially is an effective tool for managing your finances and reducing tax liability.

W4s

Your W4s tells your employer how much to deduct from your check each week. If you had to pay in a sizable amount last year, increase your withholdings. The opposite is true if you got a large refund the previous year. You can change the withholdings on your W4 any time you want.

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!

 

Contact Us Today

Read more

Why Tax Filing Status Matters

Federal tax returns are never fun to complete. Their complex and convoluted nature causes serious stress and even fear in those trying to do their own taxes – even with online tax services. Getting as much of a refund as possible while reducing tax liability is the goal and it begins with the question of filing status.

Filing status is extremely important as it affects the filer’s tax bracket and the amount they’ll owe. Filing status also determines how much – if any – refund that will be received and the deductions and credits for which individuals are eligible. The more deductions and credits for which an individual or family qualifies, the less their tax liability will be. Individuals can file as:

  • Single
  • Head of Household
  • Qualifying Widow(er) with Dependent Child
  • Married Filing Jointly
  • Married Filing Separately

Single

Unmarried people on Dec. 31, those whose divorce was finalized before that date, and people that have never been married can claim this status. It can reduce tax liability for individuals with children, providing certain conditions are met.

Head of Household

Filing in this category lowers the tax rate and provides a higher standard deduction for single filers. As a head of household, individuals will need to have a higher income than a single filer before they owe income taxes.

Qualifying Widow(er) with Dependent Child

Men or women filing this way receive a higher standard deduction and lower tax rate. It can be taken for two years following the death of a spouse, provided they remain single. The filer must have a dependent child, stepchild, or adopted child and meet income, age, and support requirements. This category and married filing jointly offer the highest standard deduction. These filers may also qualify for tax breaks on investments.

Married Filing Jointly

Filers in this category can help couples qualify for a lower tax bracket, less tax liability, and may even net a refund. There are a number of credits and deductions that can be taken, especially with dependent children that aren’t available to single filers or married couples filing separate returns.

Married Filing Separately

This can be beneficial if one spouse earns significantly less money than the other. The individual making less may then be eligible to benefit from certain deductions of which the other spouse may not qualify.

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!

 

Contact Us Today

Read more

The Importance of Keeping Good Records

Every business owner knows the value of maintaining accurate records for tax purposes, but keeping good records also provides individuals with a measure of the health of their enterprise. It doesn’t matter if it’s a brick and mortar store or operated completely online through e-commerce, good record keeping is critical.

It’s recommended that individuals keep pertinent records for three years and that includes tax returns. Most business owners envision boxes and file cabinets full of paper documents and that can seem overwhelming. Welcoming the digital age and appropriate software programs into a business will eliminate the clutter and keep records immediately available should they be needed for any contingency.

Keeping good records provides business owners with the knowledge required to know if their endeavor is failing or flourishing. It also tells them which products are selling well, where their largest expenditures are, and any areas where changes may need to be made.

Business owners have a legal obligation to maintain full and accurate records about their enterprise. They’ll need those records if they’re audited by the Internal Revenue Service (IRS) or asked to explain any items on their tax returns.

Maintaining detailed records enables individuals to prove income, deductible expenses for tax purposes, and make projections about their tax liability. Those records will also be utilized to prepare a variety of financial statements and balance sheets that will be essential when working with banks and creditors.

Good record keeping allows business owners to ascertain where the majority of purchases are originating, along with the reliability of the vendors with which they regularly conduct business. The receipts provide a record of who pays promptly and who doesn’t.

All of those records provide a health check on the business, allowing owners to make critical decisions about issues such as expansions, new product lines, vendors, and employees. Keeping good records is the key to operating any business more efficiently, effectively, and profitably.

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!

 

Contact Us Today

Read more

Accounting Software can Save you Time

Time is your most valuable asset. Accounting software can save you time that can be invested back into the business or on pleasurable pursuits. The software provides greater accuracy and multiple record types that can be recalled at any time for any reason. Accounting software is equally applicable whether you’re operating a large corporation, small business, brick and mortar store, or online enterprise.

Even your accountant utilizes software to minimize the potential for errors and automate tasks. You’ll find that today’s options for accounting software is affordable, easy to use, and provides capabilities and functionalities of which you may not be aware. It’s ready to use straight out of the box and typically doesn’t require much in terms of setting it up.

One of the great things about accounting software is the ability to automate the repetitive tasks that take up your time. The software is able to automate invoicing, payment reminders, collections and budgeting, just to name a few. The software is also able to integrate with multiple departments.

Invoicing, statements and other documents can be created automatically and sent to clients electronically via email or printed out and faxed. The feature saves you a substantial amount of time and facilitates payment collection without the need to rely upon time-consuming Excel spreadsheets.

Most accounting software will allow you to automatically transfer and import data from spreadsheets into the program. If you offer credit accounts, the software can identify contact information for those that owe you money and provide a detailed account of the transaction. Financial reports can be prepared for yourself and you’ll have the option of being able to send them to other recipients as needed.

Today’s modern accounting software will have powerful analytics, the ability to create custom reports, and delve deep within your company’s structure to determine where any improvements or changes should be made. With accounting software, you’ll spend less time on repetitive tasks and have the tools to plan for your company’s health and future.

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!

 

Contact Us Today

Read more