modern-bill-paying-dashboard

How many paper checks do you write per month?  15, 50, 100?  If so, then you’re not along.  Most US based businesses still rely on paper checks to pay bills, employees, and contractors, and it’s costing you hundreds of dollars!  Keep reading to find out how.

Moving Paper Costs Money

Processing checks isn’t that simple.  Think about all the work that goes into writing a check.  From getting an invoice, to entering it into your accounting system, to printing the check, and then finally mailing it.  That process takes time and multiple people touching it, which costs money!  And don’t even think about errors and mistakes that are made due to having so many people involved.

Beyong staff costs to make that workflow happen, how about paper and postage?  Now, you may say that a stamp doesn’t cost that much, but how about the other costs?

  • Stamps
  • Paper supplies
  • Staff time to process
  • Approvals

The cost for each busienss will be different based on how many checks you write and your process.  But, those costs up and I’m sure they’re substantial.

 

Use a Modern Solution to Save You Money

Like we said, “moving paper costs money”, so stop and integreat a modern service like Bill.com to help save you headaches and money!  Using a cloud-based system like Bill.com will help you do just this.  Recording, paying bills, approvals, documents storage, and syncing with your accounting system all from within one login is what makes Bill.com such a powerful and time saving tool.

This is how it works:

  • Scan, email or fax your bill into Bill.com
  • Process the bill and assign the vendor and expense account online using their easy to use dashboard
  • Gain necessary approvals
  • Schedule the payments to go out ACH or by check (yep Bill.com will handle printing and mailing the check for you)
  • Sync bills and payments happens automatically in the backround

That’s it–only 5 steps all from within one system!

 

Stop Bleeding Money and Make the Switch

 

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Switching to a new Accounts Payable system/workflow can be scary and daunting.  We can help!  We can help you find out if it makes sense for your organization, develop an implemenation plan, and even provide ongoing support.

Contact us for a free consulation and learn more about how much you can save by switching to a modern solution and by ditching the paper!

 

 

 

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How to Choose payroll service blog post

Whenever I mention payroll to business owners I see the telltale signs of them “checking out” mentally, and it’s not surprising!  With terms like FICA, Workers Comp, Unemployment and ObamaCare, it’s no wonder small businesses are confused and sometimes just downright disgusted by it.  In fact, we often tell clients that if they get one thing right in running their business, make sure you hire a competent payroll service!

We want to help you understand how to make the right choice in choosing a payroll service.  So let’s get into it!

Taxes

Penalties on payroll tax errors are some of the most stringent that the IRS will shell out.  So you need to get this right!  Payroll companies will work payroll taxes in one of two ways: impounding and you paying the taxes yourself.

Impounding means that the payroll company takes the taxes from your account, holds on to them, and then pays them on time to the IRS and state agencies.  Sure, they make money on holding onto your funds, but they also take full responsibility for making the payments on time.

Some providers make it pretty easy to pay the taxes yourself via ACH and electronic payments.  However, it’s up to you to press “Submit” and make them on time.

The Verdict:

Use payroll services that impound.  It’s easier to manage cash flow because the taxes are taken out right when you run payroll and the payroll company assumes the responsibility to make the payments on time.

Direct Deposit and Checks

This may seem like a pretty basic thing but did you know that you can save yourself some time and costs by ONLY offering direct deposit?  Direct Deposit is a great way to pay your employees because they get paid right into the accounts.  Checks can be used, but they also create a headache when it comes time to reconcile your bank account.  Payroll companies also charge to push that paper around.  Have employees that don’t have a bank account?  Give them a “Pay Card’ that has it’s own routing and account number and you can “load” it with their pay each pay period.

The Verdict:

Use a payroll service that focuses on direct deposit and you will most likely save money on monthly service fees, postage and mailing, and time when reconciling your bank account.

Integration with Other Apps

Do you use accounting or online scheduling software like Xero or Deputy?  Use a service that ingrates with them to eliminate data entry and make running payroll, easy.  If using online scheduling, within a few clicks you can approve timesheets and send them straight to payroll.  This alone can save you hours each pay period.

The Verdict:

Search out payroll services that are open that integrate with other apps that you use.  Who knows, you may even discover an app you can use for your business this way!

Advanced HR Features

Some businesses have 1-5 employees, some have 50.  And depending on how many you have, will determine how much help you’ll need managing them.

If you have a large staff to manage, payroll companies like ADP have robust services beyond just running payroll that offers on-site HR reps that can come out “do your dirty work” for you, a.k.a.hire and fire.  They can also help you navigate the tricky waters of the ACA (ObamaCare) and provide employee handbooks, amongst other things.

If only a few employees, then a company like Gusto is often a good choice.  While they don’t provide robust HR services, they can offer very competitive rates on Workers Comp insurance, and make managing your employees pretty easy.

The Verdict:

Make a choice based on your payroll needs and employee size.

Pricing and Cost

This is what it boils down to right?  There are two methods that payroll services use to charge their fees: a flat fee per month, or fee per pay period.

Flat fee per month gives you a predictable cost each month.  Generally, there is a base cost and then a per-employee-per-month cost.  So as long as you know how many employees you’re paying, your fee is pretty predictable.  And, these companies don’t charge for anything extra like W-2’s and quarterly reports, as long as you are a subscriber.

Per-pay-period providers charge each time your run a payroll.  For most businesses, this is twice per month.  They will also charge additional fees for W-2’s and quarterly reports.  There are also other charges for mailing checks, etc., so make sure you have the payroll service spell our EVERY thing that is going to cost before you sign up.

The Verdict:

Use a service provider that charges a flat fee per month.  There is less confusion on fees and it’s generally cheaper each month.

Make it Happen!

As you can see, there’re lots to consider when choosing the right payroll service provider for you.  We can help you make that choice and get you in touch with the people to make things happen.   Have questions, leave a comment or reach out to us on our Get In Touch page and we’ll be happy to help you make the best decision for you and your business.

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receipts
If you’ve been in business for any amount of time, you’ve probably heard something about keeping your receipts.  And we’ve heard some good myths about when and when you don’t have to keep them.  We’re here to set the record straight and tell you exactly when you need to keep receipts.

First, let me explain that there are different suggested records for different types of transactions.  For example, what you keep to prove the purchase of inventory is different than gas for your car.  We’re going to explore two categories today: General, and Travel/Entertainment expenses. But there are many more that we’re not discussing today.

General Expenses

What are they?

General expenses are things like paper, utilities, cell phone, etc.  Those types of expenses must be be proved with a bank/credit card statement, receipt, or invoice that shows the date, amount, and busienss purpose.

How long should I keep records for?

Generally speaking, you’ll want to keep records for at least 3 years from when you claimed them on your tax return.  The good news is that you can keep them in paper form, or electronically.  We’re a big fan of using the mobile app for Xero to take a snapshot of the receipt, and recording the transaction right on the spot when it happens.  You can also use other systems like Evernote, Google Drive, Dropbox and Box to store your records.  If you choose to keep paper, then have a good file system organized by year and type of expense, at the very least.

 

Travel & Entertainment Expenses

What are they?

41131785-business-team-on-the-way-to-meetingsJust as it sounds, expenses you incur to travel, take clients out to lunch.  It also covers lodging, rental cars, transportation, and a host of other things.  See IRS Publication 463 that is referenced below for more things that qualify as travel and entertainment expenses.

 

 

How should I keep records and for how long?

The trick here is to have “adequate” records.  There are 4 main points that you must prove in order to have a deemed adequate expense in this category:

  1. Amount
  2. Time (for travel)
  3. Place or Description
  4. Business Purpose

What that basically means is that you must have a receipt, log book, or some kind of record that proves those 4 main points for each expenses you deduct.  Estimates don’t count.  The long and short of this is: that you keep all receipts/invoices for each expense in this category.  There are only a few exceptions, one of them being that if your expense in under $75 (except lodging), you can simply provide bank statements to prove you expense.  Of course there are more exceptions, but we don’t have time to go into them in this post.

And like above, you should keep these records for 3 years after you file the tax return for the year you’re taking the deduction in.

 

The IRS has some pretty elaborate articles and publications on this topic.  We referenced IRS Publication 463.  Feel free to check it out if you need to dive in a bit deeper.  Or, leave a comment and reach out to us and we can help you navigate the murky waters of business deductions.

 

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QuickBooks giving you a headache?  Or maybe you’d rather listen to nails on a chalkboard rather than do your accounting.  Either way, switching to Xero Accounting will set you on your journey to an easy, and even enjoyable way to get your accounting done.  Even if you are paying an accountant to do this for you, it will still require some input from you, the small business owner.  We’ve worked with lots of small businesses in converting from QuickBooks to Xero.  So we decided to post some useful tips on how to start, and carry out this process.

Step 1: Clean up your QuickBooks company file

Ok, so if you’re not an accountant, and you’ve been doing your own bookkeeping, chances are that you’ve made some “boo boo’s” in your books.  QuickBooks is a very forgiving program.  Meaning that it allows you enough freedom to hang your self…so to speak!   DON’T WORRY…Even if your QuickBooks is a mess, you can still get useful information out of it and get it in shape to transfer to the easiest online accounting tool: Xero Accounting.

Here’s what to do:

Clean up your contacts, vendors, and other lists.  Go through and merge, or archive the ones you don’t need.  Whittle your  customer and vendor lists down to only what you use now.

Next, go through your chart of accounts and do the same thing.  Make sure your chart of accounts is up to date, accurate, and that there aren’t too many accounts that you’re not using.

Lastly, make sure all your transactions are entered into QuickBooks BEFORE  you get the file converted.  Whether that’s bank transactions, credit card transactions, or whatever else, just make sure they’re all in there.  If you want the “extra credit”, reconcile your transactions with the “bank reconciliation” feature.  This is not absolutely necessary, but will make future steps a bit easier.

Once you have done these things, go to Step 2 blog post (coming soon).  If you need help along the way, just reach out to us and we’ll be  happy to help!

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Part of the reason for QuickBooks’ success is its exceptional flexibility. By allowing users to turn features and preferences on and off, the same software can be used by a wide variety of business types and sizes.

In some cases, the default settings that QuickBooks supplies will work fine for your company. This is not necessarily true in the case of purchase orders, since the whole inventory procurement process is so complex, and users can have such a diverse range of needs.


Figure 1: QuickBooks 2013’s default Create Purchase Orders screen. You can see that formatting options are available when you click the Formatting tab. 

So before you order your first widget, make sure that your purchase order form is designed to accommodate all of the information you want to record and track, with no unnecessary data fields to confuse staff.

Working with Templates

There aren’t many program preferences to check. If you can open a purchase order, you’re set. If not, go to Edit | Preferences | Items & Inventory and be sure that the box next toInventory and purchase orders are active is checked.

What you want to find first is the Additional Customization screen for the Custom Purchase Order Template. This is easily accessed from the Create Purchase Orderscreen itself in QuickBooks 2013, but if you’re using an earlier edition, go to Lists | Templates | Custom Purchase Order Template. Double-click on it to open the Basic Customization page. Here, you can add a logo, change fonts and colors, etc. But go ahead and click on the Additional Customization button at the bottom of the screen. This window opens:


Figure 2: The left pane of the Additional Customization window contains additional fields that you might want on your purchase orders, like Ship Via and Terms

(Tip: If you want to design multiple purchase order templates, click Manage Templates on the Basic Customization screen, then Copy on the Manage Templates page. Rename the form and make your modifications. This version will always be available as an option when you create purchase orders.)

Making It Yours

Each of this window’s four tabs opens a new screen that gives you customization control over a different element of the purchase order form: the top, bottom and midsection, and printing options. You simply check the boxes next to the fields that you want to add to the current form (be sure to check both columns if you want the fields to appear both onscreen and in your printed versions; sometimes, one is not an option) and uncheck any you want to delete.

In the right pane of this window, a dynamic preview changes to reflect each addition or deletion. And when you’ve finished altering the set of fields, you can see an actual print preview. Close that and keep clicking OK until you get back to the Templates window.

This simplicity and ease carries over into the more cosmetic elements of your purchase order. Make sure the template you want to redesign is highlighted and click Templates | Create Form Design. QuickBooks walks you through the process of adding a logo and background, colors and fonts, and a grid style, and it lets you apply this same theme automatically to all of your forms. (You can modify your design similarly on the Basic Customization page, minus the wizard-like approach and the background options.)

Simple but Complicated

One more comment about the QuickBooks 2013 purchase order screen. Beyond making your formatting options available in the “ribbon,” it also moves you through purchasing to the receiving process. With the appropriate purchase order open, click Create Item Receipts in the ribbon. This window opens, with the correct vendor name selected. When you click in the Item field, this small window appears:


Figure 3: Click Yes here and select the correct PO, and QuickBooks fills in the data. If you check the Bill Received box, the Enter Bills window opens. 

QuickBooks’ purchasing and receiving tools makes your inventory-tracking job easier, but you still need to understand the workflow. We encourage you to let us work with you as you begin managing inventory – or to contact us if you’re tangled up in what can be a very challenging element of QuickBooks.

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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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One of the biggest hurdles you’ll face in running your own business is staying on top of your numerous obligations to federal, state, and local tax agencies. Tax codes seem to be in a constant state of flux making the Internal Revenue Code barely understandable to most people.

The old legal saying that “ignorance of the law is no excuse” is perhaps most often applied in tax settings and it is safe to assume that a tax auditor presenting an assessment of additional taxes, penalties, and interest will not look kindly on an “I didn’t know I was required to do that” claim. On the flip side, it is surprising how many small businesses actually overpay their taxes, neglecting to take deductions they’re legally entitled to that can help them lower their tax bill.

Preparing your taxes and strategizing as to how to keep more of your hard-earned dollars in your pocket becomes increasingly difficult with each passing year. Your best course of action to save time, frustration, money, and an auditor knocking on your door, is to have a professional accountant handle your taxes.

Tax professionals have years of experience with tax preparation, religiously attend tax seminars, read scores of journals, magazines, and monthly tax tips, among other things, to correctly interpret the changing tax code.

When it comes to tax planning for small businesses, the complexity of tax law generates a lot of folklore and misinformation that also leads to costly mistakes. With that in mind, here is a look at some of the more common small business tax misperceptions.

1. All Start-Up Costs Are Immediately Deductible

Business start-up costs refer to expenses incurred before you actually begin operating your business. Business start-up costs include both start up and organizational costs and vary depending on the type of business. Examples of these types of costs include advertising, travel, surveys, and training. These start up and organizational costs are generally called capital expenditures.

Costs for a particular asset (such as machinery or office equipment) are recovered through depreciation or Section 179 expensing. When you start a business, you can elect to deduct or amortize certain business start-up costs.

For tax years beginning in 2010, you can elect to deduct up to $10,000 of business start-up costs paid or incurred after 2009. The $10,000 deduction is reduced (but not below zero) by the amount such start-up costs exceed $60,000. Any remaining costs must be amortized.

2. Overpaying The IRS Makes You “Audit Proof”

The IRS doesn’t care if you pay the right amount of taxes or overpay your taxes. They do care if you pay less than you owe and you can’t substantiate your deductions. Even if you overpay in one area, the IRS will still hit you with interest and penalties if you underpay in another. It is never a good idea to knowingly or unknowingly overpay the IRS. The best way to “Audit Proof” yourself is to properly document your expenses and make sure you are getting good advice from your tax accountant.

3. Being incorporated enables you to take more deductions.

Self-employed individuals (sole proprietors and S Corps) qualify for many of the same deductions that incorporated businesses do, and for many small businesses, being incorporated is an unnecessary expense and burden. Start-ups can spend thousands of dollars in legal and accounting fees to set up a corporation, only to discover soon thereafter that they need to change their name or move the company in a different direction. In addition, plenty of small business owners who incorporate don’t make money for the first few years and find themselves saddled with minimum corporate tax payments and no income.

4. The home office deduction is a red flag for an audit.

While it used to be a red flag, this is no longer true–as long as you keep excellent records that satisfy IRS requirements. Because of the proliferation of home offices, tax officials cannot possibly audit all tax returns containing the home office deduction. In other words, there is no need to fear an audit just because you take the home office deduction. A high deduction-to-income ratio however, may raise a red flag and lead to an audit.

5. If you don’t take the home office deduction, business expenses are not deductible.

You are still eligible to take deductions for business supplies, business-related phone bills, travel expenses, printing, wages paid to employees or contract workers, depreciation of equipment used for your business, and other expenses related to running a home-based business, whether or not you take the home office deduction.

6. Requesting an extension on your taxes is an extension to pay taxes.

Extensions enable you to extend your filing date only. Penalties and interest begin accruing from the date your taxes are due.

7. Part-time business owners cannot set up self-employed pensions.

If you start up a company while you have a salaried position complete with a 401K plan, you can still set up a SEP-IRA for your business and take the deduction.

A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records and understanding how the tax system works is beneficial to any business owner, whether you run a small to medium sized business or are a sole proprietor.

And, even if you delegate the tax preparation to someone else, you are still liable for the accuracy of your tax returns. If you have any questions, don’t hesitate to give us a call today. We’re here to assist you.

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Whether you’re self-employed or an employee, if you use a car for business, you get the benefit of tax deductions.

There are two choices for claiming deductions:

  1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers’ salaries, and depreciation.
  2. Use the standard mileage deduction in 2013 and simply multiply 56.5 cents by the number of business miles traveled during the year. Your actual parking fees and tolls are deducted separately under this method. (In 2012 the standard rate for business miles driven was 55.5 cents.)

Which Method Is Better?

For some taxpayers, using the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual cost method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to bypass certain limits and restrictions and is simpler– but it’s often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100% for business, or close to that percentage.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

How to Make Tax Time Easier

Keep careful records of your travel expenses and record your mileage in a logbook. If you don’t know the number of miles driven and the total amount you spent on the car, we won’t be able to determine which of the two options is more advantageous for you.

Furthermore, the tax law requires that you keep travel expense records and that you give information on your return showing business versus personal use. If you use the actual cost method for your auto deductions, you must keep receipts.

Tip: Consider using a separate credit card for business, to simplify your recordkeeping.

Tip: You can also deduct the interest you pay to finance a business-use car if you’re self-employed.

Note: Self-employed individuals and employees who use their cars for business can deduct auto expenses if they either (1) don’t get reimbursed, or (2) are reimbursed under an employer’s “non-accountable” reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other “miscellaneous itemized deductions”) exceed 2% of adjusted gross income.

We will help you determine the best deduction method for your business-use car. Let us know if you have any questions about which records you need to keep.

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Consumers should protect themselves against online identity theft and other scams that increase during–and after–the filing season. Such scams may appropriate the name, logo, or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing the communication is legitimate.

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams, referred to as phishing, is to trick you into revealing your personal and financial information. The scammers can then use your information — like your Social Security number, bank account or credit card numbers — to commit identity theft or steal your money.

Scams involving the impersonation of the IRS usually take the form of e-mails, tweets, or other online messages to consumers. Scammers may also use phones and faxes to reach intended victims. Some scammers set up phony Web sites.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as passwords and PIN numbers, from taxpayers.

Most Scams Impersonating the IRS are Identity Theft Schemes

In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information – such as passwords and Social Security, PIN, bank account and credit card numbers – that can be used to gain access to their bank, credit card, or other financial accounts.

Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.

How an Identity Theft Scam Works

Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as “Tax Refund,” “Inherited Funds,” or “IRS Notice.” Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires personal and financial information, which the scammer then uses to commit identity theft.

Alternatively, the clicked link may secretly download malware to the consumer’s computer. Malware is malicious code that can take over the computer’s hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.

Phony Web or Commercial Sites

In many IRS-impersonation scams, the scammer sends the consumer to a phony Web site that mimics the appearance of the genuine IRS Web site, IRS.gov. This allows the scammer to steer victims to phony interactive forms or applications that appear genuine but require the targeted victim to enter personal and financial information that will be used to commit identity theft.

The official Web site for the Internal Revenue Service is IRS.gov, and all IRS.gov Web page addresses begin with http://www.irs.gov/.

In addition to Web sites established by scammers, there are commercial Internet sites that often resemble the authentic IRS site or contain some form of the IRS name in the address but end with a .com, .net, .org, or other designation instead of .gov. These sites have no connection to the IRS. Consumers may unknowingly visit these sites when searching the Internet to retrieve tax forms, publications, and other information from the IRS.

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.

  • Refund Scam: This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase “last annual calculations of your fiscal activity.” To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not need to complete a special form to obtain their federal tax refund. Refunds are triggered by the tax return they submitted to the IRS.
  • Lottery winnings or cash consignment: These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they’ll receive millions of dollars in recovered funds, lottery winnings, or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.
  • Beneficial Owner Form: This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It’s based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother’s maiden name), and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware an e-mail scam that references underreported income and the recipient’s “tax statement,” since clicking on a link or opening an attachment is known to download malware onto the recipient’s computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

  • requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers, or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient;
  • dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey;
  • threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds;
  • gets the Internal Revenue Service or other federal agency names wrong;
  • uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers);
  • uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

  • Do not open any attachments to the e-mail, in case they contain malicious code that will infect your computer.
  • Do not click on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers, or PINs.
  • Do not respond to the email. Instead, visit the IRS website to use the “Where’s My Refund?” interactive tool to determine if you are really getting a refund.
  • Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, and then delete the e-mail from your inbox. Alternatively, you can visit the IRS website and click on “Report Phishing” at the bottom of the home page.
  • Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission website for guidance on what to do. The IRS is one of the sponsors of this site.

If you’ve received an email claiming to be from the IRS, call us to talk it over before taking any action. We don’t want you to fall victim to a scam.

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