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business tax preparation

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.

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 (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

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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.

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 (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

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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.

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 (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

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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.

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 (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

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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.

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 (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

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Businesses Should Prepare for Tax Season Now

For those that own a business or are considered self-employed by the IRS – begin preparing for tax season now. There’s a mountain of documentation to collect. Waiting until the last minute can result in fines and other penalties.

Organize Documents

A substantial amount of tax reporting begins in January. There will be a variety of final documents that must be available when preparing a tax return. Preparation is especially important for small business owners and those considered by the IRS to be self-employed.

Prepare Early

Business owners can begin their returns as soon as they have the necessary documents. They can utilize personal tax software or use online filing sites, but the best solution is to hire a tax professional. Even though tax returns can be prepared early, the IRS won’t begin accepting them until a time the entity will announce.

Documentation

It’s far less stressful and more cost effective to have a tax professional do the work. The expert will need to understand the business and its financials. Individuals should be prepared with their employer ID number, along with receipts from sales and services, expenditures, and bank accounts, to name a few.

All of these documents and more are required for a tax professional to ensure a client is receiving all the deductions and credits to which they’re entitled, and to take advantage of any new state or federal tax laws. They can also ascertain if the business would benefit from itemizing expenses and calculate projected payroll taxes.

Extension

If necessary, a tax professional will be able to file for an extension, which gives business owners an additional 6 months of leeway to submit their tax return. An extension provides a grace period in which to file the return, but business owners will still have to pay any taxes that may be due on time.

An extension can be especially beneficial if any clarification is needed or if all of the essential documents aren’t immediately available. For those in some industries, there may be compliance and regulatory issues to consider.

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 Benefits of Charitable Donations

In 2021, each individual was allowed to deduct a maximum of $300 in charitable donations without itemizing deductions, provided they had receipts, and the contribution was made to a recognized charity. It’s important for individuals to know they can maximize their charitable giving through standard deduction amounts and itemized deductions.

Taxpayers can contribute money, time and a wide range of items to charitable organizations. Individuals should be aware that claiming non-cash contributions will raise red flags at the IRS and can trigger an audit. The IRS scrutinizes charitable contributions extremely closely.

Those that itemize deductions can usually deduct up to 50 percent of their adjusted gross income to lower their tax liability. Individuals can’t claim the time they spent volunteering, but they can deduct out-of-pocket expenses incurred while they volunteer.

Assets and Capital Gains

Every investor should perform portfolio rebalancing to ensure their strategies are working as they wish. As part of that process, individuals can make a charitable gift that will offset capital gains. When donating property or stocks, only 20 to 30 percent may be deducted.

Individuals will need to have held the assets for more than a year. They’re typically deducted at their fair market value, which can be up to 30 percent of adjusted gross income (AGI).

Stocks, bonds, mutual funds, and property are often overlooked opportunities for charitable giving that reduces taxes owed. Capital gains taxes are eliminated on those types of donations when they contributed directly to an organization. It can account for up to a 23 percent reduction in taxes.

Donor Advised Fund

A donor-advised fund is another way in which individuals can reduce their tax burden. It’s an account established for the sole purpose of making charitable contributions. It’s easy to create, highly flexible, and an effective strategy to reduce the tax liability.

IRA to Roth IRA

Converting from a traditional IRA to a Roth IRA comes with significant taxes. A charitable contribution can help in offsetting that cost.

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 Extension

What to Know About Filing an Extension

One of the biggest misconceptions about filing an extension on federal tax returns is that it means individuals don’t have to pay any amount owed on time. An extension gives people more time to file, but not more time to pay.

Individuals can file an extension on their federal taxes, but it has to be done before the last day for filing the taxes. An extension provides taxpayers with additional months to prepare and file their return for any reason. The IRS automatically grants a request for an extension, but the proper forms must be filed and the extension is valid until Oct. 15. The extension can be filed electronically.

Taxpayers are expected to pay the full amount they owe by the tax deadline, even if they file an extension. The IRS assesses a penalty for late payments, usually 0.5 percent per month of the balance that’s due, but failing to pay can increase that penalty to a maximum of 25 percent.

There are 3 primary reasons that individuals file an extension. The first is missing or inaccurate information. Many people find that they haven’t received a form they need in time to file.

The second most common reason for an extension is that a taxpayer will be out of town during tax season. Many people from northern states winter in the south, while others choose to vacation during spring break. If they anticipate a refund, they often file an extension.

Lastly, people run out of time. Filing federal taxes can be stressful, leading to procrastination. Despite taxes being due on or near the same date every year, some individuals lose track of time, simply get busy, or find themselves dealing with a major life event.

For those that don’t have the money to pay their tax bill in full, the IRS offers some payment plans. Individuals will still have to pay their tax bill, along with any applicable penalties and interest, but at a lower rate. Installment agreements are also available, in which individuals pay a set amount each month. The IRS advises individuals pay their tax burden with a credit card or take out a loan to save money.

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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small business tax

Can You Get Tax Help for Free?

There are dozens of reasons why you need assistance with your taxes, especially if you’re doing them yourself. If you’re one of the millions that prepare their own taxes online, the services offer help in the form of popup windows, but those can be even more confusing and you may want to speak with a real person that’s knowledgeable about your particular circumstances.

You should bear in mind that the IRS was overwhelmed with calls in 2020 and again in 2021. People waited for hours on the phone to have their questions answered. That situation is likely to continue in 2022 and beyond.

Volunteer Income Tax Assistance (VITA)

VITA can be found online. You enter your zip code and the distance within which you want to find a volunteer. If you don’t find someone within your search criteria, keep expanding the distance. The online search will provide you with the name of the agency, it’s location and directions for contacting it. VITA help is available at a variety of locations ranging from colleges to community centers.

Tax Counseling for the Elderly (TCE)

To qualify for TCE, you must meet certain criteria. You’ll need to be a senior citizen, disabled, earn moderate or less income, or not be able to speak English very well.

IRS Taxpayer Assistance Center

These are IRS offices where you can search for a location where you can make an appointment to speak with an IRS representative. However, these sites can be 50 miles or more away from your location.

Taxpayer Advocate Center

The service is an independent organization within the IRS. It can be a good resource for those with a financial hardship due to a tax situation, levy or lien.

AARP Foundation Tax-Aide Program

Operated by the AARP for over 50 years, its focus is on those age 50 and older with a low to moderate income, though technically they offer help to any taxpayer.

MilTax Program

This is for current military personnel, a spouse or dependent child of someone in the military, or those who have served in the past. The organization offers help over the phone 24/7 and appointments can also be scheduled for MilTAX at a VITA office.

Local Services

Each year libraries and community centers in almost every town offers services provided by volunteers to help individuals with their tax-related questions. Some offer tax preparation seminars and workshops.

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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difference between llc and inc

The Difference Between LLC and INC

Many people are confused about how to list their business. Many think that one type provides more protection from lawsuits, when in fact, both offer protection against liability for business obligations.

LLC stands for limited liability company and Inc. is an indication that a business is a corporation. The difference between LLC and Inc. is the way in which each is owned, managed and taxed, along with reporting requirements and record-keeping methods.

Ownership

Owners of an LLC are called members instead of shareholders. Each member holds a specific percentage of the company called a membership interest. If an LLC wants to transfer shares/percentages, it’s more difficult. In some states, unless otherwise specified, if an LLC member leaves the organization, the LLC must be dissolved.

In contrast, a corporation issues shares of its stock to owners that are called shareholders. Transferring stock is a relatively simple process. If a stockholder leaves or sells their stock, it typically has little impact on the corporation’s future operations.

Taxation

The taxation structure in an LLC is flexible. If a single person owns the LLC, they’re taxed as a sole proprietorship. LLCs owned by multiple members are taxed as a partnership. An LLC can be taxed as a C or S corporation. The difference is that a C represents a business entity and the S is a tax classification used to protect assets from double taxation. Profits can be claimed on the owner’s individual tax return.

Corporations are taxed as C corporations by default, pay income taxes on corporate profits, and shareholders pay tax on dividends they receive. If the corporation chooses to be classified as a C corporation, stockholders avoid being double taxed and the corporation doesn’t pay corporate income taxes – providing it meets specific requirements.

Management

LLCs can be managed by its members or a managerial group. A corporation has a board of directors that makes rules, policies, and oversees the way its run. Officers manage day-to-day affairs and shareholders typically aren’t involved in the day-to-day operations.

Records and Reporting

An LLC has less formal record keeping requirements than corporations. They may be required to adhere to a standard of minimal record keeping and the entity doesn’t have to file annal reports. Corporations are required to hold an annual shareholder’s meeting and provide notice of the meeting. Minutes of the meeting must be kept and corporations may be required to file annal reports.

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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