audit-proof-your-business-with-evernote

 

Going through an IRS Audit can be a big deal if you’re not prepared.  But with today’s technology, we’re going to show you an easy way to make sure you have all the documentation you need to prove your business expenses.  I’m not saying that all audits are the same, but most of the ones we’ve helped clients through ask for substantiation, or proof, of certain expenses that you’re claiming on your tax return.  If you can’t provide adequate records and prove the business purpose, then the IRS could disallow those expenses—and you don’t want that!

 

Use Technology

We spend lots of time vetting out new technologies to find the ones that work well, and the ones that don’t.  Part of this process is actually using the apps, and analyzing a few things: 1. How easy is it to use and 2. Does it work well with a general small business work process?  Our favorite app for retaining information is Evernote.  If you’ve never heard of Evernote (that would be surprising), we recommend checking them out on the web.  We’re going to show how to use Evernote to audit-proof your business.

 

Introduction to Evernote

Evernote is a like a central hub for all data you want to put into it.  For me, I use it like an external hard drive for my brain!  The power of Evernote lies within it being accessible on every device you own, easy to get information into it, and easy to find the information later when you need it.  For the purpose of this post, we’re going to cover:

  • Using your mobile device to scan receipts
  • Organizing into Notebooks
  • Using tags
  • Using other services to connect to Evernote

 

Overview

To audit proof your business you need to track key elements about your expenses.

  • Date you purchased
  • Amount
  • Who you purchased from
  • Business purpose

Most of the time a receipt covers all that quite nicely.  The only thing you should add is Business Purpose (which we’re going to show you).  You should also keep bank/credit statements, and even cleared checks.

 

Using Evernote to Achieve Audit Protection Bliss

At the very basic level, Evernote is structured as Notebooks and Notes that live within those Notebooks.  You can also use Tags to help you organize and search easier.

Keep Receipts

Step 1: Create a Notebook called Receipts

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Step 2: Use the mobile app to snap scans of your receipts as you make purchases

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Notice that the Notebooks is “Receipts” and we’re using a tag called “office supplies” so that we can easily search for office supplies.  Also, you’ll notice we put the business purpose as the name of the note.  You can do this on your computer, or on your mobile device.

Step 3: Do the same process for every receipt you get.  Evernote will become your repository for all your receipts.  You can easily search for your receipts by tag if you want to see all of your Office Supply receipts.

Keep Bank Statements

After using Evernote you’re going to find more useful ways to use it in your everyday life.  One key feature is being able to keep and store attachments in notes.  Now, downloading your bank statements and putting them in Evernote is not that hard, but it’s also not that convenient.  Remember we said that one of the key features to apps we use is convenience?

The solution to this is to use an Evernote Marketplace app called File This.  File This is simply an app that will automatically retrieve your bank, credit card, utility statements, and put them where you tell it.  While it will export directly to popular cloud-based file sharing apps like Google Drive & Dropbox, you can also connect it to Evernote.

Once you have it File This connected to Evernote, your bank statements will automatically appear in the designated Notebook within Evernote.  File This is pretty robust and even has a free version for you to get started on.

 

Start Scanning!

Scanning your receipts and storing bank statements within Evernote will start you down the path of preparedness if the IRS decides to “knock on your door”.  Of course, in order for this system to work you have to be committed and adopt it as a workflow/system you use in your day to day life.  We use this system, we have clients using this system, and we can tell you that with a bit of discipline, it works!

Want to learn more about Evernote?  I’m an Evernote Certified Consultant so drop us a line and we’ll help you figure which version is best for you, and discuss how you can use it in your business.

Here are some useful links where you can sign up for free trials:

Evernote Basic

Evernote Plus

Evernote Premium

Evernote Business

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16261450-three-road-signs-pointing-to-spending-saving-and-budget-to-symbolize-budgeting-and-savings-in-your-p

Whether you’re budgeting for your business, organization, or a department you’re in charge of, it can be a daunting task!  But believe it or not, the nuts of bolts of how to create, manage, and execute a budget is the easy part.  Most often, the challenge is to train ourselves how to treat the funds we have stewardship over.

Traditional Budgeting, Right or Wrong?

If you’ve ever worked for large corporations, institutions, or organizations, the attitude is usually “use what’s been allotted to you, or lose it!”  That attitude is reactive in nature because you base the budget off of what happened in the past.  So, you may ask, what’s wrong with that?  The short answer maybe nothing at all.  But if you work for a cash sensitive business where funds are closely monitored, either due to cash flow, or the nature of the funds is more custodial in nature (tithes in churches), this is generally the wrong approach to budgeting.  Chances are if you’re reading this, that you fall under that categorization.

The Proactive Approach

Zero-based Budgeting (ZBB) is a term that has become popular in recent years, and is truly the proactive approach to budgeting.  Instead of basing budget amounts and expenditures on what happened in the past, it requires those who are designing the budget to ask “what do we need for this year or program?”.  So instead of using last year’s performance, you effectively wipe the slate clean and ONLY plan for what your expectations are coming up.

For example, let’s say you are budgeting for your kids extra-curricular activities for the upcoming year.  Last year your kids played soccer, with a total cost of $300 for the year.  This year, you decide your kids don’t have what it takes to be the star player, so you put them in Karate, for a total annual cost of $1200.  Now, let’s budget!

Under the traditional method, you would use history to create your new budget so we have $300 in the budget.  I bet you can already see the problem!  Now, because you used a traditional budget, before you make it half of the year, you are already over budget.

Under the ZBB method, you think ahead: “I know my kids played soccer for $300, but I know they want to try karate and that’s going to cost $1200″.  So you budget for $1200.  Viola! You just created a budget and it looks like you’re going to stick to it!

Conclusion

You can see the difference in the budgeting methods used in the example above.  It’s up to you to think about your budget from a “Zero-based” point of reference so that you can use your funds proactively.  It may be hard, and take some cognitive training, but in the end, it will be worth it when your are using hard-earned funds, to their maximum potential to achieve your goals.

If you have questions, please comment below, or “Contact Us” and we’ll be happy to help!

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Health Care Reform is here!  We’ve invited a special guest to discuss what to expect.  The rest of this post is written by John Heaton of JMH Insurance Solutions.  This is a MUST read for any small business, especially if you are in California!

 

It is finally here.  We are three weeks into open enrollment.  The Affordable Care Act has definitely seen its detractors but it has survived up to this point.  No matter what happens in Washington D.C., the exchange in California is here to stay (that is, at least for 2014).

So after 3 weeks what have we learned?

  • While it has had it’s issues, Covered California has been the most ready exchange in the country
  • The federal exchange has been a train wreck
  • Pricing is higher, but not as much as expected
  • Qualifying for a tax subsidy seems to be a moving target

And finally:

  • Most people still don’t know much about the Affordable Care Act and the mere topic scares them to death

For those of you who are still in the dark about “ObamaCare”, you are not alone.  Here is a quick rundown …

Covered California is the new state run exchange that serves as a market place to shop for and purchase health insurance.  On the exchange you can see the different carriers, plans, and if you qualify for premium assistance.  I was asked the other day, “Do I have to buy on the exchange?” The answer is no.  You will be able to purchase health insurance on or off the exchange.  As a matter of fact, the only reason to purchase on the exchange is if you want to qualify for a premium subsidy or a tax credit if you are a business owner.

Here a couple of highlights about the new health care law:

  • All plans starting in 2014 are guaranteed issue (meaning no one can get decline insurance coverage)
  • Everyone will be required to have health insurance or face a penalty
  • Businesses with 50 or more employees must offer health insurance (the enforcement of this has been pushed back to 2015)
  • All health insurance plans will have minimum essential coverage

As the short history of this legislation has shown, I anticipate more changes to the program in the next few months as we get closer to the actual roll-out of coverage Jan.1, 2014.

 

November 7th we will be hosting a special webinar dedicated to explaining what health care reform means to the small business.  Stay tuned for more info on how to sign up!

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15756731-you-are-getting-audited-mail-illustration-design-over-white Today, I received a news alert from the IRS.  I thought I would share as it’s chalked full of useful information.

Here are some tips from the IRS on tax recordkeeping.

• You should keep copies of your filed tax returns as part of your tax records. They can help you prepare future tax returns. You’ll also need them if you need to file an amended return. 

• You must keep records to support items reported on your tax return. You should keep basic records that relate to your federal tax return for at least three years. Basic records are documents that prove your income and expenses. This includes income information such as Forms W-2 and 1099. It also includes information that supports tax credits or deductionsyou claimed. This might include sales slips, credit card receipts and other proofs of payment, invoices, cancelled checks, bank statements and mileage logs.

• If you own a home or investment property, you should keep records of your purchases and other records related to those items. You should typically keep these records, including home improvements, at least three years after you have sold or disposed of the property.

• If you own a business, you should keep records that show total receipts, proof of purchases of business expenses and assets. These may include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices. Also include credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Electronic records can include databases, saved files, emails, instant messages, faxes and voice messages.

• If you own a business with employees, you should generally keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.

• The IRS doesn’t require any special method to keep records, but it’s a good idea to keep them organized and in one place. This will make it easier for you to prepare and file a complete and accurate return. You’ll also be better able to respond if there are questions about your tax return after you file.

 

What are you thoughts on these?  Do you have any questions?

Give us a call or shoot us an email if you have questions about any of these recordkeeping topics!



Although the 2012 tax season is officially over, tax scams unfortunately are not, which is why the IRS issues an annual “Dirty Dozen” list that includes common tax scams affecting taxpayers.

Taxpayers should be aware of these tax scams so they can protect themselves against claims that sound too good to be true, and because taxpayers who buy into illegal tax scams can end up facing significant penalties and interest and even criminal prosecution.

Here are the tax scams that made the IRS “Dirty Dozen” list this filing season:

1. Identity Theft. Tax fraud through the use of identity theft tops this year’s “Dirty Dozen” list. Combating identity theft and refund fraud is a top priority for the IRS. The IRS’s ID theft strategy focuses on prevention, detection and victim assistance. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft. This compares to $14 billion in 2011. Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should immediately contact the IRS so the agency can take action to secure their tax account. If you have received a notice from the IRS, call the phone number on the notice.

2. Phishing. Phishing typically involves an unsolicited email or a fake website that seems legitimate but lures victims into providing personal and financial information. Once scammers obtain that information, they can commit identity theft or financial theft. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. If you receive an unsolicited email that appears to be from the IRS, send it to phishing@irs.gov.

3. Return Preparer Fraud. Although most return preparers are reputable and provide good service, you should choose carefully when hiring someone to prepare your tax return. Only use a preparer who signs the return they prepare for you and enters their IRS Preparer Tax Identification Number (PTIN).

4. Hiding Income Offshore. One form of tax evasion is hiding income in offshore accounts. This includes using debit cards, credit cards or wire transfers to access those funds. While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements taxpayers need to fulfill. Failing to comply can lead to penalties or criminal prosecution.

5. “Free Money” from the IRS & Tax Scams Involving Social Security. Beware of scammers who prey on people with low income, the elderly and church members around the country. Scammers use flyers and ads with bogus promises of refunds that don’t exist. The schemes target people who have little or no income and normally don’t have to file a tax return. In some cases, a victim may be due a legitimate tax credit or refund but scammers fraudulently inflate income or use other false information to file a return to obtain a larger refund. By the time people find out the IRS has rejected their claim, the promoters are long gone.

6. Impersonation of Charitable Organizations. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. Taxpayers need to be sure they donate to recognized charities.

7. False/Inflated Income and Expenses. Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. In many cases the taxpayer ends up repaying the refund, including penalties and interest. In some cases the taxpayer faces criminal prosecution. In one particular scam, taxpayers file excessive claims for the fuel tax credit. Fraud involving the fuel tax credit is a frivolous claim and can result in a penalty of $5,000.

8. False Form 1099 Refund Claims. In this scam, the perpetrator files a fake information return, such as a Form 1099-OID, to justify a false refund claim.

9. Frivolous Arguments. Promoters of frivolous schemes advise taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These are false arguments that the courts have consistently thrown out. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

10. Falsely Claiming Zero Wages. Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, scammers use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to improperly reduce taxable income to zero. Filing this type of return can result in a $5,000 penalty.

11. Disguised Corporate Ownership. Scammers improperly use third parties form corporations that hide the true ownership of the business. They help dishonest individuals underreport income, claim fake deductions and avoid filing tax returns. They also facilitate money laundering and other financial crimes.

12. Misuse of Trusts. There are legitimate uses of trusts in tax and estate planning. But some questionable transactions promise to reduce the amount of income that is subject to tax, offer deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits. They primarily help avoid taxes and hide assets from creditors, including the IRS.

If you think you’ve been scammed, call our office immediately.

 

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If you have income that is not subject to withholding you may need to pay estimated taxes to the IRS during the year. Whether you need to pay estimated taxes is dependent upon your financial circumstances, what you do for a living (if you’re self-employed for example), and the types of income you receive. Here are six tips that explain estimated taxes and how to pay them.

1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.

2. As a general rule, you must pay estimated taxes in 2013 if both of these statements apply:

1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and

2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2013 taxes or 100 percent of the tax on your 2012 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.

3. Sole Proprietors, Partners, and S Corporation shareholders generally have to make estimated tax payments if they expect to owe $1,000 or more in taxes when they file a return.

4. To figure estimated tax, include expected gross income, taxable income, taxes, deductions and credits for the year. You’ll want to be as accurate as possible to avoid penalties and don’t forget to consider changes in your situation and recent tax law changes.

5. For estimated tax purposes the year is divided into four payment periods or due dates. These dates are generally April 15, June 15, Sept. 15 and Jan. 15 of the next or following year.

6. The easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, but you can also figure your tax using Form 1040-ES, Estimated Tax for Individuals and pay any estimated taxes by check or money order using the Estimated Tax Payment Voucher, or by credit or debit card.

Give us a call today if you need help making estimated payments.

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If you employ someone to work for you around your house, it is important to consider the tax implications of this arrangement. While many people disregard the need to pay taxes on household employees, they do so at the risk of paying stiff tax penalties down the road.

As you will see, the rules for hiring household help are quite complex, even for a relatively minor employee, and a mistake can bring on a tax headache that most of us would prefer to avoid.

Who Is a Household Employee?

Commonly referred to as the “nanny tax”, these rules apply to you only if (1) you pay someone for household work and (2) that worker is your employee.

  1. Household work is work that is performed in or around your home by baby-sitters, nannies, health aides, private nurses, maids, caretakers, yard workers, and similar domestic workers.
  2. A household worker is your employee if you control not only what work is done, but how it is done.

    If the worker is your employee, it does not matter whether the work is full-time or part-time, or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

    If the worker controls how the work is done, the worker is not your employee, but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

    Also, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

Example: You pay Betty to baby-sit your child and do light housework four days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

Example: You pay John to care for your lawn. John also offers lawn care services to other homeowners in your neighborhood. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.

Can Your Employee Legally Work in the United States?

It is unlawful for you to knowingly hire or continue to employ a person who cannot legally work in the United States.

When you hire a household employee to work for you on a regular basis, he or she must complete USCIS Form I-9 Employment Eligibility Verification. It is your responsibility to verify that the employee is either a U.S. citizen or an alien who can legally work and then complete the employer part of the form. Keep the completed form for your records. Do not return the form to the U.S. Citizenship and Immigration Services (USCIS).

Tip: Two copies of Form I-9 are contained in the UCIS Employer Handbook. Visit the USCIS website or call 800-767-1833 to order the handbook, additional copies of the form, or to get more information, or give us a call.

Do You Need to Pay Employment Taxes?

If you have a household employee, you may need to withhold and pay Social Security and Medicare taxes, or you may need to pay federal unemployment tax, or both. Refer to this table for details:

If you…

Then you need to…

Will pay cash wages of $1,800 or more in 2013 to any one household employee.Do not count wages you pay to:

  • your spouse,
  • your child under age 21,
  • your parent, or
  • any employee under age 18 during 2012.
Withhold and pay Social Security and Medicare taxes.

  • The combined taxes are generally 15.3% of cash wages.
  • Your employee’s share is 7.65%.

(You can choose to pay the employee’s share yourself and not withhold it.)

  • Your share is 7.65%.
Have paid or will pay total cash wages of $1,000 or more in any calendar quarter of 2012 or 2013 to household employees.Do not count wages you pay to:

  • your spouse,
  • your child under age 21, or
  • your parent.
Pay federal unemployment tax.

  • The tax is 0.6% of cash wages.
  • Wages over $7,000 a year per employee are not taxed.
  • You also may owe state unemployment tax.

If neither of these two contingencies applies, you do not need to pay any federal unemployment taxes. But you may still need to pay state unemployment taxes. (See below for more on this.)

You do not need to withhold federal income tax from your household employee’s wages. But if your employee asks you to withhold it, you can choose to do so.

Tip: If your household employee cares for your dependent who is under age 13 or your spouse or dependent who is not capable of self care, so that you can work, you may be able to take an income tax credit of up to 35% (or $1,050) of your expenses for each qualifying dependent. If you can take the credit, then you can include your share of the federal and state employment taxes you pay, as well as the employee’s wages, in your qualifying expenses.

State Unemployment Taxes

You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee. You should also find out whether you need to pay or collect other state employment taxes or carry workers’ compensation insurance.

Note: If you do not need to pay Social Security, Medicare, or federal unemployment tax and do not choose to withhold federal income tax, the rest of this article does not apply to you.

Social Security and Medicare Taxes

Social Security taxes pays for old-age, survivor, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.

Both you and your household employee may owe Social Security and Medicare taxes. Your share is 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax) of the employee’s Social Security and Medicare wages. Your employee’s share is 6.2% for Social Security tax and 1.45% for Medicare tax.

You are responsible for payment of your employee’s share of the taxes as well as your own. You can either withhold your employee’s share from the employee’s wages or pay it from your own funds. Note the limits in the table above.

Wages Not Counted

Do not count wages you pay to any of the following individuals as Social Security and Medicare wages:

    1. Your spouse.

 

    1. Your child who is under age 21.

 

    1. Your parent.

 

Note: However, you should count wages to your parent if both of the following apply: (a) your child lives with you and is either under age 18 or has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter, and (b) you are divorced and have not remarried, or you are a widow or widower, or you are married to and living with a person whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in a calendar quarter.

    1. An employee who is under age 18 at any time during the year.

 

Note: However, you should count these wages to an employee under 18 if providing household services is the employee’s principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

Also, if your employee’s Social Security and Medicare wages reach $113,700 in 2013 ($110,000 in 2012), then do not count any wages you pay that employee during the rest of the year as Social Security wages to figure Social Security tax. You should however, continue to count the employee’s cash wages as Medicare wages to figure Medicare tax. You figure federal income tax withholding on both cash and non-cash wages (based on their value), but do not count as wages any of the following items:

    • Meals provided at your home for your convenience.

 

    • Lodging provided at your home for your convenience and as a condition of employment.

 

    • Up to $240 a month in 2013 for transit passes that you give your employee or, in some cases, for cash reimbursement you make for the amount your employee pays to commute to your home by public transit. A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train.

 

    • Up to $240 a month in 2013 to reimburse your employee for the cost of parking at or near your home or at or near a location from which your employee commutes to your home.

 

As you can see, tax considerations for household employees are complex. Therefore, we highly recommend professional tax guidance in these complicated matters. This is definitely an area where it’s better to be safe than sorry, so if you have any questions at all, please contact us. We’re happy to assist you.

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What should you do if you already filed your federal tax return and then discover a mistake? First of all, don’t worry. In most cases all you have to do is file an amended tax return. But before you do that, here are 10 facts you should be aware of when filing an amended tax return.

1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended tax return. An amended return cannot be e-filed. You must file it on paper. Contact us if you need assistance or have any questions about Form 1040X.

2. Consider filing an amended tax return if there is a change in your filing status, income, deductions or credits.

3. In most cases, you do not need to file an amended return to correct math errors because the IRS automatically makes those changes for you. Also, do not file an amended return because you forgot to attach tax forms, such as W-2s or schedules. The IRS normally will send a request asking for those.

4. Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Be sure to enter the year of the return you are amending at the top of Form 1040X.

5. If you are amending more than one tax return, prepare a 1040X for each return and mail them to the IRS in separate envelopes. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.

6. If your changes involve the need for another schedule or form, you must attach that schedule or form to the amended return.

7. If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. Amended returns take up to 12 weeks to process. You may cash your original refund check while waiting for the additional refund.

8. If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties.

9. You can track the status of your amended tax return for the current year three weeks after you file. You can also check the status of amended returns for up to three prior years.

10. To use the “Where’s My Amended Return” tool on the IRS website, just enter your taxpayer identification number (usually your Social Security number), date of birth and zip code. If you have filed amended returns for more than one year, you can select each year individually to check the status of each.

Questions about amended returns? Give us a call today. We’ll take care of it so you don’t have to.

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Filing a past due return may not be as difficult as you think.

Taxpayers should file all tax returns that are due, regardless of whether full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan. It is important, however, to know that full payment of taxes upfront saves you money.

Here’s What to Do When Your Return Is Late

Gather Past Due Return Information

Gather return information and come see us. You should bring any and all information related to income and deductions for the tax years for which a return is required to be filed.

Payment Options – Ways to Make a Payment

There are several different ways to make a payment on your taxes. Payments can be made by credit card, electronic funds transfer, check, money order, cashier’s check, or cash.

Payment Options – For Those Who Can’t Pay in Full

Taxpayers unable to pay all taxes due on the bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be lessened. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise.

Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan.

 

    • A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.

 

 

    • A monthly payment plan or installment agreement gives a taxpayer more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. In terms of how to pay your tax bill, it is important to review all your options; the interest rate on a loan or credit card may be lower than the combination of penalties and interest imposed by the Internal Revenue Code. You should pay as much as possible before entering into an installment agreement.

 

 

    • A user fee will also be charged if the installment agreement is approved. The fee, normally $105, is reduced to $52 if taxpayers agree to make their monthly payments electronically through electronic funds withdrawal. The fee is $43 for eligible low-and-moderate-income taxpayers.

 

What Will Happen If You Don’t File Your Past Due Return or Contact the IRS

It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions.

If you haven’t filed a tax return yet, please contact us. We’re here to help!

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More than 52 percent of businesses today are home-based. Every day, people are striking out and achieving economic and creative independence by turning their skills into dollars. Garages, basements and attics are being transformed into the corporate headquarters of the newest entrepreneurs – home-based businesspeople.

And, with technological advances in smartphones, tablets, and iPads as well as a rising demand for “service-oriented” businesses, the opportunities seem to be endless.

Is a Home-Based Business Right for You?

Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take time to learn as much about the market for any product or service as you can. Before you invest any time, effort, and money take a few moments to answer the following questions:

  • Can you describe in detail the business you plan on establishing?
  • What will be your product or service?
  • Is there a demand for your product or service?
  • Can you identify the target market for your product or service?
  • Do you have the talent and expertise needed to compete successfully?

Before you dive head first into a home-based business, it’s essential that you know why you are doing it and how you will do it. To succeed, your business must be based on something greater than a desire to be your own boss: an honest assessment of your own personality, and understanding of what’s involved, and a lot of hard work. You have to be willing to plan ahead, and then make improvements and adjustments along the road. While there are no “best” or “right” reasons for starting a home-based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

  • Are you a self-starter?
  • Can you stick to business if you’re working at home?
  • Do you have the necessary self-discipline to maintain schedules?
  • Can you deal with the isolation of working from home?

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment; if at all possible, you should set up a separate office in your home. You must consider whether your home has the space for a business, and whether you can successfully run the business from your home.

Compliance with Laws and Regulations

A home-based business is subject to many of the same laws and regulations affecting other businesses and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.

Zoning

Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.

Restrictions on Certain Goods

Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.

Registration and Accounting Requirements

You may need the following:

  • Work certificate or a license from the state (your business’s name may also need to be registered with the state)
  • Sales tax number
  • Separate business telephone
  • Separate business bank account

If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.

Planning Techniques

Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Estimating Start-Up Costs

To estimate your start-up costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

Business experts say you should not expect a profit for the first eight to 10 months, so be sure to give yourself enough of a cushion if you need it.

Projecting Operating Expenses

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

Projecting Income

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points and cash-flow statements. Use your marketing research to estimate initial sales volume.

Determining Cash Flow

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

If you think a home-based business is in your future, then don’t hesitate to give us a call. We’ll set up your business and make sure you have the proper documentation system in place to satisfy the IRS.

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