by Blair Butters | Mar 15, 2022 | Auditing, General Tax and Accounting Information, IRS, Tax Planning
The word “audit” will make any business owner tense, especially when discussing or going through a tax audit from the IRS. However, there are strategies that taxpayers can use to help navigate an audit. In this blog, we’ll break down the auditing process so that you understand what an audit is, why you may be audited, what happens, and what to expect during an IRS audit if you’re facing one in the coming year. Let’s start with the basics. An audit is a review of your tax forms and financial documents. Its purpose is to double-check that you’ve properly filed your taxes and abided by tax laws. Audits do not happen every year. For example, only 0.4% of individual income tax returns were audited in 2019. The IRS selects randomly, through a computer screening, or when other related examinations have shown issues (such as the tax returns of a business partner or investor). Those issues can be as simple as a typo or mathematical error on a form, or as serious as failing to disclose taxable income or neglecting to report cryptocurrency transactions. (Using an accountant to file your tax returns can decrease your chances of simple computing errors.) The IRS will only notify you by mail if you are selected for an audit. A legitimate IRS audit will be conducted by mail or through an in-person interview at an IRS office, at your home or place of business, or at your accountant’s office. They will never call, text, or email. Any of the aforementioned communication methods are not legitimate, so if someone reaches out via these methods, do...
by Blair Butters | Feb 15, 2022 | General Tax and Accounting Information, Payroll, Tax Planning
Payroll is one of the most important functions of your business, but it can be a daunting task to take on as a small business owner. Compliance with regulations, technology upgrades, and the detailed reporting requirements to Federal and state agencies is a lot for one person to perform, which is why many small businesses choose to outsource their payroll-related activities and reporting requirements to a third-party provider. Today, we’re covering four ways outsourcing your payroll can benefit your business. Frees up your time and resources. Payroll requires a lot of time, energy, and attention to detail. As a business owner, your time is better spent on the core tasks of the business rather than compiling hourly and salaried payroll information, calculating withholding deductions, generating reports, preparing checks or check stubs, filing related tax forms, and paying the amounts due. Outsourcing payroll gives you back your time so you can focus on growing your business. Reduces costs. By outsourcing payroll tasks, you can ensure they are managed seamlessly and in the most cost-efficient manner. You do not have to hire an employee to process your payroll and you can spend your time making your business more profitable instead of dealing with the details of payroll processing and reporting. If you’re curious about our payroll rates, please reach out to us and one of our experts will be happy to assist. Lowers risks. Many business owners struggle with complicated and often changing, payroll reporting requirements. At DMA, our team is well-versed and always up-to-date on payroll regulations and compliance mandates. Our goal is to help you avoid penalties for...
by Blair Butters | Dec 14, 2021 | General Tax and Accounting Information
As the year comes to an end, we can look forward to schedules filled with holiday parties, time off to spend with loved ones, and finding ways to circle back on projects in the new year. One project that will be especially important for small business owners is preparing for tax season. Some of the tasks take time but developing good habits regarding your taxes can potentially save you some cash. Many tax planning moves that can help lower your taxes owed may need to be made before the end of the current year. With this in mind, we’ve outlined a few end of year tax tips that you can do to prepare for the tax year ahead. Review deductions, including the home-office deduction. The COVID pandemic caused many to embrace the work-from-home life, and for sole proprietors, single-member LLC business owners, and gig workers, the home office deduction could mean saving hundreds of dollars (or more). If you’re unsure, check with a tax professional to see if you qualify and what information is needed to claim the deduction. Catch up on the previous quarter’s financials and prepare bookkeeping ahead of tax time. You may be able to better plan for the final quarter by taking a look at the first 3 quarters of the year or last year’s fourth quarter. Taking the extra time to update your books before signing off for the holidays will also make the preparations feel easier in the new year and help determine if you need to adjust your fourth quarter 2021 estimated tax payment. For cash basis taxpayers, be proactive with your...
by Blair Butters | Oct 26, 2021 | General Tax and Accounting Information, IRS, Tax Credits, Tax Planning
Now that the filing season for 2020 tax returns is over, it’s time to start thinking about next year’s tax return, which may look different from prior years because of the pandemic relief bills, tax law changes, updates, new rules, and annual inflation adjustments. The earlier you begin, the more you can potentially save, and to get a head start, we’re breaking down key tax changes to help you prepare for April 15. Check out this list of 6 tax changes so you can begin preparing today. Child tax credit For the tax year 2021, the child tax credit will be increased from $2,000 to $3,000 for children over age 5 and under age 18 and to $3,600 for children 5 and under. However, for those with modified adjusted gross income above $75,000 for individuals, $112,500 for heads-of-household, and $150,000 for married filing jointly, the credit is reduced gradually until the credit is $2,000 per dependent. The credit is further reduced for those with modified adjusted gross incomes of $400,000 for married filing jointly and $200,000 for all other filing statuses. The enhancement is that, generally, the credit is fully refundable and now includes children who are 17 years old. The credit is claimed on your tax return like in prior years. Another important change to note is that at least half of the credit is paid in advance with monthly installments that began in July and will end in December 2021. The other half of the credit is claimed on your 2021 tax return. You can opt out of the monthly payments using the tool at the IRS...
by Blair Butters | Apr 28, 2021 | General Tax and Accounting Information, IRS, Tax Planning
As we all know, the ancient Greek quote “change is the only constant” most certainly applies to your taxes, and this year has seen more changes to tax guidelines and requirements than in many other years. So, in today’s blog, we wanted to shine a light on some of the most common ones. Change in Charitable Donation Deductions for Non-Itemizers In 2020, the IRS allowed taxpayers who did not itemize deductions to deduct as much as $300 in cash contributions made to charity, for both filing single and jointly. In previous years, this deduction was only an option if you chose to itemize your deductions. However, the passing of The Coronavirus Aid, Relief, and Economic Security Act (The CARES Act) allowed non-itemizers a charitable deduction. These changes are set to apply through 2021 as well with the same $300 deduction for individuals and an increase to $600 if you file as a married couple. These particular changes were made in order to encourage taxpayers to donate to charitable causes throughout the pandemic. Higher Standard Deductions Standard deduction amounts for each filing status have also increased. In order to account for inflation, these numbers typically rise by $200-$300 each year regardless of circumstance. An increase in standard deduction amounts ultimately reduces the amount of income you are required to pay taxes on. Here are the tax brackets and the new deduction amounts for 2021. Married filing jointly: $25,100 – up $300 from 2020 Married individuals filing separately: $12,550 – up $150 Head of household: $18,800 – up $150 Single: $12,550 – up $150 Required Minimum Distributions...
by Blair Butters | Feb 24, 2021 | General Tax and Accounting Information, Tax Planning
A report by Gallup indicates that the number of people working from home has jumped from 28% in April 2020 to almost 46% in September 2020, showing a rising trend. So how does this affect your taxes? If you’re working from home as a W2 employee, unfortunately, you can’t take any deductions. However, for those reporting their business on Schedule C of their personal income tax return, usually sole proprietors or Single-Member LLCs, or gig economy workers – AKA someone who works on short-term contracts or freelance work as opposed to a permanent job – then there are a number of deductions you can claim. In this month’s blog, we walk you through some of the most common ones and how to calculate them. Your Home Office One of the first things you may be able to deduct is expenses related to your home office. A home office is a space in your house used regularly and exclusively for business purposes. So, for example, if your office is in a second bedroom which is regularly and exclusively used for business, then the room qualifies as a home office. If the room is also used as a spare bedroom when guests are visiting, or as a playroom for the kids, the room does not qualify as it fails to be exclusively used for business. You will need to know the square footage of your home office space and the square footage of your home. This ratio will determine the percentage of various home expenses that can be claimed as a home office deduction. Once you have this information, there are...
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