by Blair Butters | Jul 24, 2023 | Auditing, Auditing, IRS, Tax Planning
Why Did the IRS Reject My Tax Return? The IRS may reject your tax return for many reasons, and while it can be a scary situation, it is often something that can be easily resolved. Today we will cover a few of the major reasons why your return may be rejected, how you will be notified, what you should do, and steps to prevent this situation from happening in the future. Why Your Return May Have Been Rejected If the IRS rejects your tax return, it is likely due to an error other than a simple math mistake. The IRS will typically correct math errors without rejecting a return. Outside of math errors, the IRS can reject your tax return for a number of reasons. Here are a few of the common ones: Inaccurate or Missing Information. Your name, date of birth, and/or Social Security number do not match what the IRS has on file. For example, if you changed your name after marriage, you need to update your name with the Social Security Administration for the IRS to know about your name change. Dependents Claimed on Multiple Returns. If you attempt to claim a dependent that has already been claimed on another return, yours will be rejected. For example, you and your ex-spouse both claimed the same child as a dependent on your returns. Your Return Was Already Accepted. Another return with your Social Security number and information was previously filed and accepted for that tax year. If this is the case, it could be a sign of fraud or identity theft. Incorrect PIN or Prior Year AGI....
by Blair Butters | Dec 27, 2022 | General Tax and Accounting Information, Tax Planning
It’s beginning to look a lot like … end-of-year project wrap-ups, holiday gatherings and celebrations, and time off to rest and reset for the new year. Before you log off, there are a few things to do as a small business owner to button up 2022 and prepare for your tax filing. Crossing these items off your list will bring peace of mind and give you more time to focus on those 2023 goals as soon as the ball drops. Here are four things you can do before the end of the year to make tax time less stressful: 1. Update your payroll records or hire out This is the time to verify all employee wages, benefits, and deductions. Be sure to double-check employment tax rates that tend to change annually. You or your payroll specialist should also make sure all paychecks, year-end bonuses, and payments have been recorded. 2. Gather or prepare financial documents for your accountant Year-End Balance Sheet: This statement includes assets, liabilities, and owner’s equity of your business. The Balance Sheet can help you determine if you may want to look at working on collecting receivables or paying down debt in the coming months. Year-End Income Statement: Here, you’ll see the comparison between earnings and spending throughout the year and will determine a company’s net income for the year. The sheet should have a clear list of revenue in one section and a list of expenses and losses in the other. Subtracting the expenses and losses from the revenue will show the net income. The Income Statement results can help you determine where to cut...
by Blair Butters | Oct 20, 2022 | General Tax and Accounting Information, Tax Planning
As the leaves begin to change and our focus shifts to Q4 goals, now is the perfect time to take a closer look at your business. Performing an end-of-summer business check-up can provide important insights into what you may want to change before the end of the year, or how to prepare for 2023. When reviewing the areas of your business that can determine its overall health, there are a few places you can dig deeper: Gather/Analyze Financial Statements Review your profit and loss statement, income and cash flow statements, and balance sheets so you can gain a better understanding of your company’s financial status. When you review your profit and loss (P&L) statement, you may also want to consider the following: If your business was profitable, determine if you have any needs for new equipment or upgrades, or improvements to property. Purchasing fixed assets and placing them in service prior to year-end may reduce your net income, which may reduce your tax liability. Bonus depreciation and Section 179 depreciation are tax incentives that allow you to claim a larger deprecation deduction in the year when a piece of equipment or certain improvements are placed in service. Talk with your accountant to see if bonus depreciation or Section 179 elective depreciation is available on potential equipment purchases or improvements. To take advantage of this incentive, we recommend speaking with your accountant now. In most years, those decisions could be made later in the year, but with supply chain issues in recent years you will need to make equipment purchase decisions earlier in the year so that your vendors...
by Blair Butters | Jul 22, 2022 | Accounting, General Tax and Accounting Information, Tax Planning
If you keep inventory in stock, it’s important to ensure that it’s accounted for properly. Inventory can affect your company in many ways, impacting cash flow, cost of goods sold, and your profit. Today, we’re diving into two popular inventory accounting methods and the ways you can value your inventory or assets. What is Inventory Accounting Inventory accounting values and accounts for changes in the inventory a company holds during a given period. It determines the value of assets during the three stages of production: raw goods, in-progress goods, and finished goods ready for sale. Each item in stock has a value recorded separately. In manufacturing processes, the value of an item can change depending on the stage of production. The sum total of all inventory item values is recorded as a company asset. The accounting method you choose has a direct impact on the cost of goods sold calculation for the accounting period, and on net income earned. Companies use cost of goods sold (COGS) to determine the direct cost of producing the goods sold without taking overhead costs into account, and generally includes only direct materials and labor costs. To calculate the cost of goods sold, add the beginning inventory and purchases, then deduct the ending inventory from that number in the following way: Cost of goods sold = beginning inventory + purchases – ending inventory. Accounting Methods The method businesses use to cost their inventory directly guides the income and inventory value they report on their financial statements. Two popular methods to compute the cost of goods sold and ending inventory for a period are First...
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...
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