Tax Advantages of an HSA

A Health Savings Account (HSA) is an often-overlooked strategy that has tax advantages. An HSA allows individuals to set aside money on a pre-tax basis to pay for qualifying medical expenses. The savings account can be used to pay for insurance copayments and other expenses that can save money on overall healthcare costs.

It’s important to remember that employer contributions will also figure toward those amounts. Individuals that contribute more than the allowable amount will incur a 6 percent tax. However, not everyone can take advantage of an HSA.

The HSA funds can be utilized at any time, but funds can only be contributed if individuals have a high deductible health plan – such as those available through the Health Insurance Marketplace. In 2022, individuals can contribute up to $3,650 and up to $7,300 for families. The funds also roll over from year to year if they’re not spent. HSAs have the potential to earn interest or other benefits that aren’t taxable.

Contributions

Contributions are tax free. They can be made through a pre-tax payroll deduction and isn’t counted as income so it can’t be taxed. Self-employed people can make pre-tax contributions and it won’t count as taxable income.

Interest

An HSA is a savings account and it will earn interest like any other savings account. The good news is that interest earned won’t be deemed as taxable income.

Withdrawals

Withdrawing funds to pay for allowable medical expenses can be done without penalty. An added bonus is that the HSA will perform like a traditional IRA once an individual turns 65 years old. Funds can then be withdrawn for any reason, not just for medical care and costs. However, individuals will be taxed on the money if they do. Anyone that’s enrolled in Medicare won’t be able to contribute to the HSA any longer. The good news is that any unused money that rolled over for all those years will still be there to pay for medical expenses tax free.

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Tax
posted by Mark Battalini
August 8, 2021

Does my Teen Need to File Taxes?

Filing income taxes can be difficult enough with the constant changes to IRS rules. The situation becomes significantly more difficult when a teen and their income are involved. You’ll need to have a variety of information at your fingertips. The IRS sets dollar amount limits and whether or not your teen will have to file a tax return will depend on their total income was from all sources.

Income Levels

Unlike adults, there’s more flexibility when a child is filing, but that can also make it more complicated. If your child has income above the level set by the IRS, he/she won’t need to file. However, when a child has both earned and unearned income, the two will have to be added together to determine their filing status.

Financial Support

You can claim your child if you provide more than 50 percent of their financial support, they live with you more than half the year, and they’re under the age of 19 during the entire year. You can claim them up to the age of 24 if they’re a full-time student, even if they live outside your home due to their education.

Wages and Salary

The type of income your child has will also affect their filing status. Dependent children that have earned income of more than $12,400 (as of 2020) through wages and salaries must file. They may also owe income taxes. A child’s standard deduction can’t exceed the larger of $1,100 or their earned income plus $350. The maximum is $12,400.

Investment Income

A child’s investment income is treated differently. It’s considered unearned income when acquired through dividend or interest payments, for example. If all the child’s money was unearned income, you can include it on your return and combine it with your income. However, doing so has the potential of elevating you to a higher tax bracket.

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Salary
posted by Mark Battalini
August 7, 2021

Financial Steps to Take After you get a Raise

A raise represents a welcome addition to your income, but it can also come with some pitfalls. You may be tempted celebrate by splurging on something you or the family have wanted. While a small purchase may be in order, it’s important to remember that the money will be doled out across multiple pay periods. You also won’t receive the entire $5,000 since taxes will take a percentage of each dollar.

Take Home Pay

Take stock of your current financial situation and figure out how many dollars more you’ll be taking home each pay period. You may also have to make adjustments to your withholdings your IRS W-4 form. Claiming too much in withholdings will net a large refund at the end of the year, but it can also bring unwelcome attention from the IRS. Claiming too little in withholdings can leave you owing a significant amount of money to the IRS that you’re ill-equipped to pay.

Address Debt

If you have credit card debt or a car loan, use the extra money each pay period to pay it down. It’s especially important if you have high-interest credit cards or long-term debt. It will also work to increase or maintain your credit rating.

Emergency Fund

A raise is a great way to build on an existing emergency fund or start one. You’ll have the needed funds if there’s a job loss, unexpected medical bills, or a major appliance needs to be replaced. Keep the money in a separate savings account so you won’t be tempted to spend it. Financial advisors recommend having enough money in an emergency fund to cover living expenses for 3 to 6 months.

Retirement Fund

It’s never too early to think about retirement. Contributing even 1 percent of your raise to retirement can make a big difference. Consider making it an automatic deduction from your pay check. If your employer matches your contributions, definitely take advantage of it.

Treat Yourself

It’s okay to set aside a little money to treat yourself or the family and enjoy your success. It’s your reward for hard work. Just keep it small and don’t go overboard. A treat doesn’t have to cost a fortune to be appreciated and savored.

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Tax
posted by Mark Battalini
August 6, 2021

Side Hustle Taxes

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Tax
posted by Mark Battalini
August 5, 2021

How To Use Accounting Software To Organize Your Tax Records

Keeping track of your tax records does not need to mean an overflowing file cabinet. Plenty of free online resources will help keep even the most chaotic offline tax records well organized. Finding out which records should be kept and where is just half the battle. Storing them properly takes discipline, without which you will be left with an over-loaded shoebox full of receipts.

There are many different ways that you can store and organize your records; some work better than others for different people. In the case of individual tax returns, it is easier to use accounting software to manage the accounting side of things; you simply record when you make a purchase, when you make a payment or write in a check. It would be much more time consuming, however, if you want to organize your receipts and other documents.

One of the first steps in keeping up with your records is to have a system in place for storing all of the receipts that come into your business. If you are using a single computer for all of your document filing and accounting needs, then you can easily install and use one of the free accounting software programs available online. You can then print out each receipt and store it in your receipt folder. If you have more than one location for your receipt and bookkeeping needs, you can use labels or tags to organize the documents as you see fit.

If you use accounting software to organize your tax records, you may also want to purchase a receipt scanner. With this tool, you can scan every receipt that comes into your office. These scanners are usually used by accountants and other individuals who have a lot of paperwork to process. There are even models available that can be mounted on the wall so you can scan everything that comes into your office. There are even some models available that will allow you to print out everything that is scanned. The benefit of using these products is that you will be able to save money by eliminating the cost of purchasing ink and paper.

In addition to using an accounting software product to organize tax records, you can also take advantage of available online resources. One of the best options available is the ability to use an online filing program. These types of programs will allow you to electronically file your income tax documents so that you can avoid the extra time and money spent filing by hand. When you file electronically, you can usually do it from any location with an Internet connection. This will allow you to access your files from any computer with an Internet connection. This option is often times very helpful if you have a home office because you can easily conduct your tax records there.

The tax records that you maintain should be organized so that you can easily retrieve them when you need them. There are a variety of ways that you can organize these documents. If you want to save time while filing your tax returns, consider buying an accounting software product that will help you organize your tax records. If you are unsure about how to organize your tax records, then you can hire a certified public accountant to help you. There are many advantages to keeping your tax records in order and using a tax software product that helps you organize your information.

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Tax
posted by Mark Battalini
August 4, 2021

Tax Liability – A Simple Tax Strategy

Knowing how to minimize your tax liabilities can help you avoid having to pay too much in taxes or using up too much of the tax season. Ways to minimize tax liabilities for your business include: Using an accountant or CPA. A certified public accountant will help you create a comprehensive year-end tax strategy, which can be used to reduce both your taxable income and your taxes. Accountants will also help you with tax-deductible expenses such as those related to buying equipment, selling assets, or increasing your tax deductible business expenses.

Create a Budget for Tax Liabilities Your budget should include a list of all your income, expenses, and assets. Divide income into your tax liability category in order of highest to lowest. Include your total annual expenses, including mortgage, insurance premiums, and property taxes. Add your investment earnings and include the total amount you pay to rent, repair or improve the house, and any other miscellaneous expenses. Do not include retirement contributions and interest income on retirement accounts or pensions.

Maximize your deductions When you are trying to minimize your tax bill, consider being audited by the government. Audits are designed to identify areas where business owners can make improvements to their business in order to minimize their tax liability. Some auditors will suggest that business owners meet with them before the audit to discuss their income taxes and assets.

Be sure to calculate a tax-free allowance If you don’t have enough taxable income to meet the asset limitation on your return, you may want to calculate a tax-free allowance. The tax-free allowance is the maximum amount of money that you can claim on your tax return for each taxable income class. For most people, the tax-free allowance is around 50% of their income. It is possible to increase this allowance over time, especially if you meet the eligibility requirements.

Estimate taxes payable annually One way to minimize your tax liabilities is to make an educated guess at how much you will owe. This method, though imperfect, will provide a ballpark figure for you. Many tax professionals will encourage you to make an annual estimate of taxes payable. Estimations are available from different sources such as the Internal Revenue Service, the Social Security Administration, and your own payroll processor. If you don’t have access to these sources of information, there are many websites that offer free tax planning advice and tools.

All these steps will help you reduce your tax liability. Be prepared when tax season comes and do your homework. Educate yourself about income tax liabilities and strategies that could reduce your tax liability. You can always adjust your estimated tax liability for the current year when tax season arrives.

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Tax
posted by Mark Battalini
June 12, 2021

Tax Laws for Real Estate and Inheritance Taxes

Estate taxes can be very burdensome and can result in undue stress on a family. A family faced with the prospect of having to pay estate taxes will have a greater risk of losing assets than they would have had they been aware of the laws in the state in which they lived. This situation is even more common where the deceased was a member of a large family. Estate taxes can often result in a family being forced to split assets amongst themselves, resulting in further financial hardships for the family.

Taxes are levied on many types of assets throughout the world, but estate taxes are unique because they are levied directly upon the beneficiaries of that asset. An estate tax is basically a tax paid on an inherited property or cash by an individual who receives money or other assets from someone who has passed away, whilst an estate tax merely is an annual tax on the entire value of an inherited asset, regardless of whether it is paid or not during the lifetime of the person claiming it. There are exceptions to these two types of taxes, but the majority of people will at least have to face them throughout their lifetimes.

The bulk of what can be termed as estate taxes are levied on people who inherit wealth or inherit property within their estate. Many times, there is no way to ensure that the assets have been properly titled (cashed in) so that the tax that is due cannot be levied on them, although in cases where this is the case, the heirs can claim exemptions against the amount of the tax owed on their inheritances.

Estate taxes are collected from the proceeds of the distribution of the estate, which can consist of any part of the assets of the deceased person that were not immediately consumed during the course of the decedent’s life. Commonly, the proceeds of the estate are levied as a gift tax, and this gift tax generally applies to the executor or administrator of the estate, even if they are not the claimant of the inheritance. While there is no way that one can avoid the gift tax, it is possible to reduce the size of the proceeds that are subject to this particular tax. These methods include making sure that there is an adequate Trustee, if there is more than one executor; paying the gift tax over a period of time rather than all at once; and setting up the trust to make payments directly to the IRS rather than a trustee.

Estate taxes are a necessary evil and are levied in order to pay the expenses that are incurred during the administration of an estate. Unfortunately, many people don’t realize that they are responsible for these taxes, and often feel that the estate is simply an investment opportunity that has been passed down to them without any obligation whatsoever. The reality is that if the proper steps aren’t taken to ensure that taxes are paid in a timely fashion then the estate can become subject to heavy penalty fines and legal action by the government. One of the most common strategies estate planners to use when working with clients that owe inheritance taxes is to seek out someone who is experienced in financial law and tax law in general. This individual will be able to advise and assist the client in the entire process of settling their tax obligations, from the collection of the assets to the disposition and distribution of those assets.

It is very important that individuals that are liable for inheritance taxes properly learn about the laws regarding these types of taxes, and that they take every step necessary to minimize their impact on their heirs as much as possible. It is also very important for everyone to remember that if the IRS goes after you for inheritance taxes, they have the right to take your money immediately – even if you have already gone through the process of legally establishing the estate and transferring assets. This can be extremely frightening for many families and individuals who are responsible for huge sums of money that could be rightfully heading to your heirs. If you’re afraid of the IRS going after your assets, you need to learn everything you can about estate taxes so that you can properly protect yourself.

Benefits of a Payroll Service Provider

A payroll service provider helps small business owners streamline the process of collecting payroll taxes and filing federal and state reports. Payroll services experts provide support to help make sure compliance with federal and state regulations and requirements governing payroll and paychecks in any state. Get the systems and resources you need to properly hire and manage employees, as well as pay employees when you grow.

Make the most of your employee base. Most small business owners don’t expect to encounter payroll headaches right away. If you plan to provide employees with paper reports, such as your paychecks and federal tax reports, you will probably be surprised at the number of errors that can pop up over time. The time savings gained from payroll services can more than outweigh the cost of providing paper reports for each individual employee. With electronic reports, there is no need to print out paper copies of documents that have been downloaded.

Your payroll services company can provide reports that include both payables. In general, the reports will contain summary information, which includes gross pay, deductions, and net income, as well as specific details about each employee’s pay, assets, and deductions. The information provided should be consistent with the types that are listed in your employee manual. To make sure the information is correct, it’s a good idea to have a payroll services company verify the information.

Prepare your financial reports properly. Payroll reports are not filed with federal tax forms; instead, they must be filed with W-2 form documentation. For some, this may mean an entirely new filing procedure. For others, simply making sure their payroll numbers match what they filed in the last year can make the difference between success and failure.

You can also take care of a lot of your tax-related worries by making direct deposit. Many companies today offer automatic direct deposit, meaning they deposit the employee’s paycheck directly into their bank account every payday. This saves them time and eliminates the need to write out checks, which saves money. It also makes it easier to track all of the employees’ expenses. If you do not currently have an automatic direct deposit program, talk to your payroll services provider. They may be able to recommend an option that you have not considered.

Business Accounting For Small Businesses

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Tax, Tax Preparation
posted by Mark Battalini
June 12, 2021

Why Hire a CPA For Your Taxes?

What is the reason to hire a CPA to handle your business taxes? CPA’s are highly experienced accountants who have gained valuable experience in the business world. It is a very valuable tool for business owners to hire a CPA because a Certified Public Accountant (CPA) can negotiate with the IRS on your behalf to get you better tax benefits.

Hiring a CPA can save you money and hassle. A Certified Public Accountant (CPA) is trained and experienced in all aspects of small business accounting and tax laws. The Certified Public Accountant (CPA) is the person most qualified to interpret the complicated IRS instructions and other federal and state tax laws. They will be able to properly prepare your tax returns and advise you on the best option for taking advantage of every tax deduction available to you.

Small business owners can hire a CPA to handle their taxes due in April, July and October. Most accountants are already familiar with the complex procedures required to file an income tax return with the IRS. The IRS also requires small businesses to retain an accountant to manage their accounting and bookkeeping. Even if you do not currently use the CPA for your accounting needs it is still a wise decision to hire one to file your taxes for you.

One of the many benefits to business owners who fail to hire a CPA is the potential financial backlash from paying incorrect taxes. In 2021 the Internal Revenue Service audited more than 500 business owners for tax liability. The majority of these tax liability audits resulted in the taxpayer owing a penalty or interest amount. The majority of business owners were not even aware they had incurred taxes.

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