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tax preparation

What is a Sole Proprietorship?

A sole proprietorship is the business or an individual who has decided not to carry his business as a separate legal entity, such as a corporation, partnership, or limited liability company. This kind of business is not a separate entity. Any time a person regularly provides services for a fee, sells things at a flea market or engage in any business activity whose primary purpose is to make a profit, that person is a sole proprietor. If they carry on business activity to make profit or income, the IRS requires that you file a separate Schedule C “Profit or Loss From a Business” with your annual individual income tax return. Schedule C summarizes your income and expenses from your sole proprietorship business.

 

As the sold proprietor of a business, you have unlimited liability, meaning that if your business can’t pay all its liabilities, the creditors to whom your business owes money can come after your personal assets. Many part-time entrepreneurs may not know this, but it’s an enormous financial risk. If they are sued or can’t pay their bills, they are personally liable for the business’s liabilities.

 

A sole proprietorship has no other owners to prepare financial statements for, but the proprietor should still prepare these statements to know how his business is doing. Banks usually require financial statements from sole proprietors who apply for loans. A partnership needs to maintain a separate capital or ownership account for each partner. The total profit of the firm is allocated into these capital accounts, as spelled out in the partnership agreement. Although sole proprietors don’t have separate invested capital from retained earnings like corporations do, they still need to keep these two separate accounts for owners’ equity – not only to track the business, but for the benefit of any future buyers of 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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Should I Itimize my Deductions?

When you finally decide it is time to prepare your taxes, the first question is whether you should itemize your deductions or take the standard deduction provided by the IRS.

Tax deductions are a very simple part of a theoretically simple tax reporting system. If you’ve ever prepared your own taxes, you know this simply isn’t true. Complicated tax forms can be a nightmare to fill out. Ever helpful, the IRS gives you an option of just taking a standard deduction instead of itemizing your deductions. So, what should you do?

The standard deduction is the easiest method because it requires no calculations or supporting documentation of any sort. You figure out your adjusted gross income and simply submit the amount for your classification. The amount differs based on whether you are filing as single, married, older than 65 or have kids.

Many people scoff at the mere idea of taking the standard deduction. As with all tax issues, deciding whether to take the standard deduction isn’t so easy. If you have a fairly simple financial life and don’t have many deductions, the standard deduction is almost always the best choice. For instance, if you make $45,000 as an employee of a company, rent a residence and don’t have any major medical bills or losses, the standard deduction is probably going to save you more money than itemizing. Unfortunately, you can never be sure until you take a stab at itemizing your deductions in a rough draft of a tax return.

Itemizing your deductions is exactly what it sounds like. You literally go through your records and categorize every possible deduction. These deductions are then subtracted from your adjusted gross income to get a final figure from which tax is determined using the tax tables. Itemizing is the way to go if you have significant tax deductions or tax credits in your financial life. For instance, you almost always want to itemize if you own a home as mortgage interest can be deducted. Generally, you want to itemize if you own a home, have significant medical bills, can claim a tax credit or suffered some type of major loss. Obviously, there are other situations where itemizing makes sense, but this gives you an idea of the situation.

If you have a simple financial situation, claiming the standard deduction may be the answer. If life is a bit more complicated, itemizing is probably going to save you more on your tax bill.

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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Electronic Tax Preparation Options

Just in time for tax season you will find yourself presented with this years editions of popular tax preparation programs that promise to make tax filing a breeze for the average person.  Which one is right for you and what are some of the most popular electronic tax filing solutions?  Read on as we discuss your tax preparation options and explore the popularity of electronic tax filing.

What to look for in choosing a tax preparation solution? Newcomers should look for software that takes a step by step approach throughout the digital tax preparation interview and one that presents interview topics that are easy to understand and answer.

One of the most useful features of tax preparation software is that it lets you play around with your figures and try out hypothetical situations.  Many of the top programs also come with importing features that allow the user to import data from other programs directly into the tax preparation software.

Because of their ability to do extensive calculations and other automated checks, electronic tax preparation and filing is reported to have only a small error rate of less than 1 percent.  In fact, using tax preparation software will almost always result in a more complete and more accurate tax return.

With the growing popularity of high-speed Internet connections and advances in Internet security, more and more tax preparation is being done online. Using online income tax preparation services has proven to be secure, easy and accurate.  With an explosion in online resources at your fingertips, the taxpayer can do a job equal to that of a professional.

Either way, it’s clear that electronic tax preparation has really taken off and become quite popular. Its because of these benefits that once again this year, taxpayers will be turning to tax software to help them prepare and file their taxes. Did you know that you can even prepare and e-file your taxes wherever and whenever you access the Internet?  The IRS Free File program, which is designed to help taxpayers file their taxes electronically, is best for those taxpayers who prepare their own taxes and still file paper returns.  It is also important to note that if you are filing taxes for prior years, you are not eligible to file electronically.

By doing taxes online, you are empowered to prepare and e-file your own income tax return.  And, like doing banking online, doing your taxes online is easy, fast, accurate, as well as very secure.  If you’re considering doing your taxes online, why not give it a try this year?  While it still isn’t a blast, doing your own taxes will give you a feeling of accomplishment.

Like most people, your likely dreading the task of doing your taxes that and maybe you would like to make it easier this year.  With some prior planning, you can make doing your taxes a lot less dreadful and can help avoid any unpleasant surprises.

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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Staying Off The IRS Radar With Proper tax Preparation

When it comnes to filing taxes most people do not look forward to filing their income tax returns as well as paying their tax obligations. As it is, there truly isn’t much to look forward to since it is a laborious process that can take weeks to finish. Some people also have the misfortune of raising the interest of the IRS. The problem is, a lot of these people’s mistakes are not deliberate and could’ve been avoided.

They just lack appropriate tax obligation prep work, as well as probably, rushed via the filing process.

Lack of prep work, as well as attention to detail, are the most typical mistakes of individuals who usually get flagged by the IRS.

Let’s face it. Even if audits are not criminal in nature, they are awkward and upsetting occasions individuals can do without.

Declaring exact tax returns and paying proper tax obligations are possible with the right prep work and a great running start. A good running start is very important in declaring due to the fact that taxpayers obtain more preparation to arrange and also prepare the necessary papers. Even if there are great deals of tax software programs offered, it is a smart idea to enable a substantial quantity of time in evaluating past returns, current returns applications, and tax regulations.

Tax obligation legislations are dynamic; they can be transformed or modified between the last tax period and the one coming up. There could be some crucial points in the changed plans that can impact your returns as well as deductions. Pleading ignorance of the new plans is not acceptable to the federal government and the IRS since everyone is assumed to understand the regulation. Taxpayers are suggested to evaluate their existing applications specifically if they have actually been investigated prior to. According to the Internal Revenue Service, taxpayers repeating audited mistakes are not uncommon. Speaking of blunders, “neglecting” additional earnings resources is the primary mistake the majority of people make. The IRS additionally contrasts assigned forms against reported income on the returns for the difference. Still, on the concern of difference as well as contrast, returns are checked for names as well as SS numbers so they should mirror those in the SS records. Wrongly issued forms must be returned and reported to the issuer for adjustments.

 

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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