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business tax preparation

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.

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 deductions

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.

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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Top 7 Small Business Tax Tips

Here are seven ways for owners of small businesses to save money on their taxes.

 

  1. Incorporate Yourself: If you`re still a proprietor or partner of a business, it`s time to incorporate yourself. Not only will you limit your liability, but you may enjoy lower tax rates on small business income and other tax advantages as well. 

 

  1. Be Home Based: If possible, continue (or switch to) being a home based business. Not only will you keep your overhead down, but you will be able to write-off (or deduct) the business use of your home.

 

  1. Income Split: Pay reasonable wages to your spouse and children. In this way, you can legally divert income taxed at your higher rate to your family members that are in a lower tax bracket.

 

  1. Rearrange Your Affairs For Maximum Tax Savings: Can you make some changes to turn your hobby into a moneymaking business? Can you use that extra room in your house as a home office for your business? Can you arrange to use your car more for business purposes? Can you arrange for more of your entertainment expenses to be business-related? 

 

  1. Document Your Expenses Well: Do you document your expenses well so that they would survive a tax audit? Have you kept a mileage log so that you can prove the percentage of business use you claim for your vehicle? Have you kept receipts for all your entertainment expenses and listed the business purpose on the back of each receipt?

 

  1. Be Punctual: File all returns and pay all taxes due (income, payroll, sales, et cetera) on time. This way, you avoid expensive late filing (and payment) penalties and interest. 

 

  1. Develop a Tax Planning Mindset: Some people only worry about their taxes during tax season. However, you will save a fortune in taxes, legally, if you make tax planning your year-round concern. Do you make business and personal purchases, investments, and other expenditures with tax savings 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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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!

 

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Keeping your Business up to Date with Tax Laws

Tax laws change quickly and often with very little warning. It can seem like an impossibility to keep track of all the changes and utilize them to your business advantage. You have three choices when preparing your taxes – do them yourself, use tax preparation software, or have a professional do them.

No matter which option you choose, changes in tax laws will ultimately affect your business in some way. It’s much better to engage the services of a professional accountant than be surprised at tax time. It’s an accountant’s business to know about changes, inform clients, and help them develop a strategy to minimize tax liability.

Your business will need to remain legally compliant with all state laws – which will depend on where you live – along with federal tax laws. There will be different requirements, depending upon your business structure and you’ll need to ensure all certificates, licenses, and permits are current.

As a small business owner, you’ll be subject to a variety of different taxes unless you’re in a partnership – in which case you’ll be required to file an information return. You’ll be required to pay self-employment taxes and employment taxes on employees. Sole proprietors, S corporation shareholders, and partners will pay estimated taxes and you’ll need to have withheld a sufficient amount to meet tax liabilities.

There are also excise taxes, which can often seem very vague but cut across multiple industries. You’ll be liable for these if you operate certain types of businesses, sell specific products, offer certain types of services, or use specific types of equipment, facilities or products. Some classic examples are alcohol, fuel and tobacco, but the list is extensive.

Of special interest for business owners are changes for net operating losses, first-year depreciation, pass-throughs that include sole proprietorships, S corporations, and LLCs, and those that have significant operations overseas. Many individuals outsource their marketing and other functions when applicable through the gig economy and accounting for that can be a headache for you and the person that provided the services.

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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Accounting Experts can Save your Business Money

Business owners mistakenly believe they’re saving money by attending to their accounting task themselves. What they’re actually doing is taking time away from their families and other business tasks such as planning for future growth. Hiring an accounting firm to care for your finances saves time, money, and enables you to focus on other priorities.

Business Planning

Professional accounting firms work with businesses at all stages of development – from startups to long-established endeavors. They have a wealth of experience they can utilize to help you advance your business to the next stage in its evolution and provide guidance on managing monetary growth. They can also assist if you need to make changes in its structure.

Informed Decisions

Your accountant will be able to advise you on multiple issues to help you make better informed decisions about your business. They can advise you on a variety of topics ranging from strategies to provide the best return on your investment to endeavors that are risky for your business.

Streamlining

A professional accountant can streamline your books, establish better bookkeeping practices, and “find” money you never even knew you had. You’ll know exactly where your money is going, how much, and discover ways to save your business money. A professional can also assist with strategic spending and saving money with vendors and others with which you regularly conduct business.

Tax Penalties

An accounting professional will be cognizant of all the current tax laws to save you money and avoid errors or omissions that lead to tax penalties. The firm’s professionals will know your business and meet all applicable deadlines, while minimizing taxes and maximizing benefits for greater profitability.

Exit Strategies

There will come a time when you decide to retire and an accounting firm can help you define the best time to exit or what you may need to do before selling the business.

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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Automobile Tax Expenses

The powers that be have historically written sections into the tax code promoting business activities. One of the traditional write-offs has always been the expenses associated with using a vehicle for business purposes.

 

The simplest automobile tax expense situation is one in which a vehicle is used entirely for business. For example, if you have a van used for a delivery service and nothing personal, all expenses associated with the van can be written off. This is known as the exclusive use situation. For many small businesses, however, a vehicle will be used for both personal and business reasons.

 

Where you use a vehicle for both personal and business reasons, you can only deduct the automobile expenses associated with the business use. Keep in mind that driving to and from work is not considered business mileage while driving from an office to meet a client is considered business mileage.

 

There are two methods for determining deductible automobile tax expenses. The first is a simple calculation known as the standard mileage deduction. The second is the actual expenses method. You can choose whichever deduction provides you with the biggest deduction unless you lease the car. With a lease, you must use the standard mileage deduction.

 

The standard mileage rate deduction is a calculation wherein you multiply your total business mileage for the year by a figure provided by the IRS. For the first eight months of 2005, the figure provided by the IRS is 40.5 cents per mile. For the last four months of 2005, the figure has been bumped up to 48.5 cents to reflect high gas prices.

 

The actual cost expense option is exactly what it sounds like. It is the actual cost associated with using the vehicle for tax purposes for a particular tax year. Automobile tax expenses will include gas, tires, repairs, oil changes, registration costs, licensing, insurance and so on. In many cases, the actual expense deduction will end up being larger than the standard mileage deduction.

 

Regardless of the method you choose, you must document the automobile tax expenses. This means keeping a mileage book and receipts of anything you intend to deduct.

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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Preparing for tax audit

Why it’s a Good Idea to Hire a CPA

CPAs, or Certified Public Accountants, can help you in your individual or business accounting and tax preparation in many ways.  With the laws surrounding accountancy such as generally accepted accounting practices for businesses, and tax laws that change every year for individuals, hiring a CPA to perform your accounting services needs is the best way to ensure that your accounting is error free in case of IRS or other audit.

Having a CPA prepare your business or individual income tax return is a great way to avoid errors, not to mention the prying eyes of the IRS and an audit.  A CPA must undergo continuing education as accounting and tax laws change from year to year.  Therefore, only a CPA can ensure that your tax return is completely accurate.  Not only is accuracy important to the IRS and in case of an audit, but it is important to your immediate financial future as well.  Because a CPA has intimate knowledge of tax laws and available exemptions, a CPA can make sure you get the largest refund possible.

In the case that you are chosen for audit by the IRS, your best bet to come through the audit cleanly is to have a CPA by your side.  A CPA is as familiar with tax law as the IRS representative performing the audit.  Because of this, the CPA can negotiate a lower penalty, help you avoid penalties, and help you claim the deductions you deserve.  You should contact a CPA as soon as you have received an audit notice from the IRS, because the CPA can help you prepare for your audit and gather the necessary information.  Then, the CPA can walk into the audit interview by your side, completely in charge and confident of the outcome of your audit.

If you own a small business, a CPA can also help you determine what business taxes are required by your local, state, and federal government.  In addition, the CPA can help you set up a double entry accounting system that includes a journal and ledger.  The CPA can also help you to set up a standard chart of accounts for use with your ledger.  All of these tools will help you stay organized and ready for tax time and any possible audits.  The CPA can also use the information from these tools to create financial statements for your business, which will then help you to make business decisions, make comparisons with competitors, discover industry and company financial trends, and prepare financial reports and business plans for purposes of investors and bank loans.

Whatever the financial service required, a CPA is your best bet.  With a CPA, you have the security of a licensed, monitored professional along with the peace of mind that all of your accounting is accurate and ready for any possible

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

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