Posted by adminjian on February 27, 2017 · Leave a Comment
Filing Taxes
It’s tax season, and if you’re like most small business owners, you are probably beginning to feel overwhelmed just thinking about all the things you did in 2016 that you may or may not have recorded.
Despite how overwhelming it may feel there are tips which you can utilize to help alleviate the stress which often follows tax season. Here are some ways you can make filing easier for your CPA.
Compile and organize all your records
While it can be easier said than done, make sure you organize and compile all your records. If you are tech savvy, keeping a digital record of your expenses can make your accountant’s job easier. If you’re not so tech savvy, make sure you keep all your files in organized folders in order to ensure that they are easy for your CPA to navigate.
Report all of your income
If you learn how to report all of your income, you will never have to worry about how to protect hidden income. If for some reason you’re not completely sure if you should report it, report it. It’s better that you over report than under report.
Make sure your deductions are correct
Aside from forgetting about any additional income you may be bringing in, more filers do not include all of the deductions to which they are entitled. This could include office supplies, computers, hardware, business trips, out of home client meetings, and others. If you’re not sure if something qualifies for a deduction, don’t be afraid to ask.
Know the difference between tax deductions and tax credits
While tax deductions and tax credits are similar, they are not identical. Tax deductions lower your taxable income, and tax credits help subtract against your tax liability.
Knowing your filing status
Your filing status will determine the rate at which your income is taxed. Knowing your filing status before you file is important because your status affects everything else about your tax situation.
What other tips do you think have been important to keep in mind in order to help your CPA file your tax returns? Leave your comments below.
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Posted by adminjian on February 23, 2017 · Leave a Comment
Choosing a Capable Accountant
Choosing an accountant can be as simple as posting a job on Craigslist and hoping the right person replies back. It can also be as simple as posting to Indeed and receiving hundreds of resumes for one open role. Choosing the right accountant, however, is usually a much more involved and daunting task. Here are just a few tips on how to choose the right accountant.
Choose a certified accountant
Hiring a certified accountant may not seem like a big deal at first, but it actually is. Ensuring that your accountant is certified nationwide to adequately help you and your business not only helps increase the level of trust that you have with your accountant but it also ensures that your accountant is not just taking you on as a “test run” client. Selecting a certified accountant shows that the person you’re working with takes their credibility seriously.
Seek accountants who have relevant experience
If you have a start-up company, you may not want to hire an accountant who works with non-profits. Make sure when hiring an accountant that you hire someone who has experience with your particular industry. An accountant with relevant experience will be better able to meet your needs.
Talk to your business associates
If you are a business owner who is often surrounded by other business owners, chances are high they too have had to hire an accountant; and while their accountant may not be able to work with your company, their accountant may know another great accountant who may be more suitable for you. One of the best ways to identify good candidates is through word-of-mouth.
Tap into social media
Social media is a powerful resource. It can be used to give people new jobs, fire people from their jobs, identify new resources and plenty of other things too. You need to be using social media to your advantage. If you’re looking to hire a new accountant, put out an ad on your social media pages. You never know who may come across your social media. There’s a chance the best possible candidate may be someone who is already connected to you in some way via your social media circle.
What tips do you have for choosing the right accountant? Leave your comments below.
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Posted by adminjian on February 21, 2017 · Leave a Comment
Budgeting Your Refund
Every business owner and individual looks forward to tax season, especially if tax season presents an opportunity for your business to get a tax refund. Because it usually falls outside of one’s ordinary budget, tax refund money is often spent on frivolous things without much premeditation. This is definitely a habit worth breaking, especially for business owners.
An accountant can definitely help you budget your refund so that you are put in the best possible financial situation. Here are four specific ways your accountant can help you do this.
An Accountant Can Show You How to Tuck Away Your Refund in Savings
While your accountant doesn’t have any official say over your money, they can offer friendly suggestions that may help you better budget your tax refund. One of the best ways your accountant can help you budget your tax refund is simply by encouraging you to tuck away your tax refund into your savings account.
An Accountant Can Effectively Help You Pay Down Credit Card Debt
Your credit card debt is a serious issue. A good accountant knows exactly what debt you have and how long you have to pay it off. When attempting to budget your tax refund, one of the greatest investments you can make is paying off any outstanding business debt you have. While many people may disagree with this advice, it’s important to remember that your tax refund is literally money you didn’t have in the bank so why not use that money to improve your debt problems.
An Accountant Can Teach You How to Build on or Start an Emergency Fund
Emergencies happen for all of us, and they happen even more frequently for business owners. Building or starting an emergency fund with your tax refund could literally save your business should it ever have to deal with a crisis. Being over-prepared is always better than being under-prepared.
An Accountant Can Help You Make Extra Business Payments
Do you have an office space? Equipment you are renting or renting to own? Get ahead of those payments while you still have a chance by making extra payments with your tax refund. Not only will it give you an additional cushion for the next couple of months to relax on, it will also give you a chance to experience freedom from paying bills.
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Posted by adminjian on February 16, 2017 · Leave a Comment
CPA or Tax Software
It’s tax season, and if you’re trying to save every single dime in your pocket you are probably leaning toward the taking the cheapest route to filing taxes. One of the easiest and cheapest ways to file your taxes is by using a tax software program such as Turbo Tax. Though Turbo Tax can be a great way to file taxes, it’s important to note that there are numerous reasons why you should consider passing on Turbo Tax and instead hire a CPA.
Here are a few of these reasons:
- A CPA can represent you in an audit and Turbo Tax (or any other tax software) cannot
- A CPA can help you find ways to save money on your taxes
- A CPA can help you itemize even more deductions than any tax software program can
- A CPA can ask questions in order to get additional information about you and your tax history
- A CPA can help you correct any errors you make when filing your taxes
- A CPA can help you get an even bigger tax refund by asking you questions that Turbo Tax wouldn’t know how to ask
While these are not all the reasons why hiring a CPA is better than using tax software, it is a great start. What should be noted is that hiring a CPA brings a personal touch to your tax filing, and while working digitally may seem efficient, it’s not always effective, especially as it relates to your financial needs.
Ultimately, during tax season, whether or not you hire a CPA vs. using tax software is solely up to you and your business.
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Posted by adminjian on February 14, 2017 · Leave a Comment
Hiring a CPA
When hiring a CPA, it is important that you know exactly what you’re getting into before you allow a CPA to step in and begin to run your company’s finances. Oftentimes people make the mistake of simply hiring the first CPA they can come into contact with before taking the time to carefully determine whether that particular CPA is right for their business.
Before your company takes on the huge responsibility of hiring a CPA here are just a few questions you can ask along the way:
Do You Have Experience Working With Small Businesses In My Industry?
While this may seem like a no brainer, it’s important to always ask CPAs about the experiences they have with small businesses in your industry. Asking this question will not only give you insight on how well the CPA works but it will also show if they have enough expertise to handle you as a client.
What Types of Accounting Services Do You Offer?
One size doesn’t have to fit all when it comes to accounting services and in most cases it doesn’t. Being clear on what types of accounting services your CPA offers could save you not only time but money. If the CPA you are interviewing doesn’t offer the services you need, you may need to search for someone else to hire.
How Much Do You Charge?
Every CPA doesn’t charge the same amount and so you may want to check that you can actually afford the CPA you are thinking about hiring. Before you turn down a CPA because of a high price, ask your CPA how much they charge hourly, via a proposal or via a structured rate. You may not be able to hire them hourly but you may be able to afford one of their a la carte services if you ask.
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Posted by Burien CPA on October 25, 2013 · Leave a Comment
Since you now are engaged in renting property to obtain revenue, it is essential for you to make sure that certain fees and professional services are correctly set up and documented for tax considerations. In this article, we are going to identify these fundamental expenses.
Insurance
Insurance payments are pre-paid before the given length of time. Illustration: You obtained insurance coverage on the rental property in March 2012 for $1200. April 2012 to March 31, 2013 would be the coverage duration of this insurance policy. Be aware that in this example, the present tax year is exceeded by the policy coverage time period. Therefore you will need to allot only current year relevant monthly premiums in relation to the current year taxes,and report the remainder for the next year. This would mean $900 (9 months April to Dec 2012) or $100 per month of eligible rental property utilization could be your tax deductible insurance premium.
Personal and business clients can often find a mark down rate if their insurance company is able to bundle their insurance premium packages. Only the company rental property pertinent portion will be deductible. The individual and non business utilization could be tax deductible on your individual income tax return. Finally, Title Insurance isn’t applicable as an expense and has to be included in the Cost Basis of the rental property.
Cleaning and Maintenance
The day to day maintenance of the rental property is a deductible expense granted it is for commonly used areas and day to day cleanliness. Even so, the expenses are only allowable when they are not on personal use days, but they are on allowable leasing times. To make sure that the rental property is in good shape and running order, you can do what a number of other property owners do, and hire a local hired company to keep up with the rental property. These types of services will provide a variety of expert services such as standard maintenance, dusting furniture, washing windows, and cleaning appliances. Major structural improvements and modifications are not deductible, so will have to be included in the property’s Cost Basis.
Repairs
There are often tasks which do not require major renovation of the structure of the property such as repainting or machine repair. Depending on the rental duration, you are able to write off such required and normal expenses.
It is important to be aware that these kinds of costs which are usually allowable against the earnings of the property, you mustn’t include the periods of time which are considered individual days of use. The only expenditures that are allowed are the ones that are associated with the authorized rental period, directly.
- You can obtain the documents defined within this information at the IRS’s webpage. If you’d like further information, view IRS Publication 527.
Woodinville CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
Posted by Burien CPA on October 17, 2013 · Leave a Comment
You may write off travel expenses if they are ordinary and necessary. If you are using your own motor vehicle to maintain and manage a property and/or collect rental payments from occupants, you may deduct these costs. As commuting to work is seen as a private cost, this is not permitted for tax deduction. Likewise, you may not deduct travel expenses related to making improvements on your property. This is normally recoverable using a cost recovery process such as depreciation.
Actual Expenses
Under this solution you may deduct all travel expenses tied directly to your property. All these costs needs to be documented and backed up by invoices in line with IRS Publication, 463 Chapter 5. A few software program apps can be bought by using iPod, Quick Books, Mint, and so on which will help you; nevertheless, you need to maintain physical reports to validate your deductions. This data should be claimed on either a Schedule C or Schedule E. If you own more than one property, the expenditures will have to be allotted to each individual residence where the expenses were incurred. Do not incorporate any kind of personal use or any other type of use apart from that specifically relevant to the property.
Mileage Method
You write off your actual distance traveled. You would utilize the existing standard mileage tax rate of $0.55.5 per mile traveled that tax year.
Using local transportation including Zip Cars, metro bus companies, and auto rentals must have an immediate relationship to the property, and you must have documentation to support that. If opting for public transit, it is recommended that you maintain a record of such expenses. It is a good idea to apply rental car and Zip Car expenses to a business account tied directly to your rental property.
- You can obtain the different documents outlined in this information on the IRS’s webpage. Check with IRS Publication 527 for additional information.
Woodinville CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
Posted by Burien CPA on October 9, 2013 · Leave a Comment
As a property manager, to fully account for and report your annual leasing profit to the IRS, you will need various Internal Revenue Service tax forms which you’ll find explained within this short article. As is discussed here, the tax forms considered necessary vary depending on the type of authorized company that is the owner of the rental (individual, partnership, corporation, or LLC). Look at the page called Best Rental Property Ownership, found in this Guide, for more relating to legal entity rental property ownership.
NOTE: You’ll find the documents outlined in the next paragraphs on the Internal Revenue Service’s webpage: http://www.irs.gov/Forms-&-Pubs. All of the required forms will likely be available in any tax preparation computer software, if you are using one.
Individual Ownership
Which includes shared rental property ownership with a spouse, tenancy in common, or joint tenancy with rights of survivorship.
Form 1040. Foremost, you’ll require Form 1040, the document used by all individual people. Your own net rental property earnings or deficit subjected to taxation will be found on line 17 of the first page of Form 1040. Please note that as a law abiding landlord with leasing income and expenses, you are not allowed to utilize the simplified Forms 1040A or 1040-EZ.
Schedule E. Schedule E is an addendum of Form 1040. Of its numerous usages, just the purpose of reporting rental property profits and expenditures is applicable to your needs. The one element of Schedule E you have to fill out is the section marked “Part I”. There are many relevant notes you should be aware of, for example: if reporting on a rental you jointly own with a partner, who isn’t your spouse, you only have to report the expenditures that you incurred plus the revenue that you earned. Try to remember, additionally, that you’ll have to allocate expenses between rental and non-rental usage if you are leasing a segment of your own private residence, or whenever you leased only for part of the year. For additional information, find Tax Deductible Rental Property Expenses, the article series that is with this Guide.
Form 4562. Form 4562 must be used to quantify depreciation of your property, which you’ll deduct on line 18 of Schedule E. For more advice, find the article titled, Depreciation Expenses for Rental Property, that is available in this Guide.
Partnership/Corporate Ownership
A general or limited partnership, or S corporation is included.
Form 1065/1120-S. For people with a collaboration, you need to fill out Form 1065, the tax form a collaboration utilizes to report everyone of its company activities. Form 1120-S is employed by an S corporation to report business activities. Schedule K, line 2 of Form 1065 or 1120-S is where your own total leasing financial loss or earnings are going to be reported (Such forms are incorporated with Schedule K).
Form 8825. Form 8825 is designed for partnerships and S corporations, yet functions similar to Schedule E. Schedule E and Form 8852 are in essence very similar. Always include complete sums of all earnings and expenditures accrued by the partnership or corporation (In the future, these are going to be divided among each investor or business partner).
Schedule K-1. The total rental property earnings or losses due to each investor or business partner is reported by this form, in accordance with the ownership interest of each investor or business partner. The information of the K-1 sent to every partner will have to be reported on their own Form 1040, Schedule E, Part II.
Limited Liability Company Ownership
You’ll be able to file just like you are an individual owner because, for tax purposes, a single-member LLC is a disregarded entity (look above). A multiple-member LLC may choose to be taxed as either a partnership or as an S corporation (look above).
Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
Filed under Landlord's Tax Guide · Tagged with 1120-S, Corporate Ownership, Form 1040, Form 1065, Form 4562, Form 8825, Individual Ownership, llc, Partnership Ownership, Schedule E, Schedule K-1
Posted by Burien CPA on May 13, 2013 · Leave a Comment
There are few tax deductions taken by business owners that are more feared than home office deductions. Some tax experts are convinced that claiming this deduction increases the chance of an audit, although the IRS is adamant that this isn’t the case. Either way, if you follow the rules, and maintain proper records, you should have no worries.
To claim this deduction you must be active (beyond depositing monthly checks). If you routinely spend a substantial amount of time maintaining and preparing properties, you will likely fit the term “active”.
If you meet the criteria for being an active rental property management the next requirement is that you must regularly use the office space exclusively for running your business as a rental property manager.
Additionally, you must meet one of the following requirements:
1. Your home office is used as your principle place of business.
2. There is no other fixed location where you perform administrative and management activities.
3. This office space also serves as meeting location for clients.
4. You use another structure on your property to conduct business.
After you have applied the threshold tests above and determined that the work area in your home does in fact qualify for the home office deduction, you have to look into what kind of expenses can be written off. There are direct and indirect types. Direct expenses only benefit the home office area of the home such as painting or cleaning. Indirect expenses benefit the entire home and must be apportioned out between the home office space and the rest of your house. Mortgage interest, insurance, property taxes and utilities are examples of indirect expenses. Square footage is the usual means of calculating the proportion of the home office in relation to the entire house to come up with a percentage. A 2,000 square foot home with a 200 square foot home office area would mean 10% of the indirect expenses could be deducted as part of the home office deduction. You can also depreciate the house structure (not the value of the land) in the same percentage over 40 years. However, this may complicate matters when you sell the house.
As you don’t want any trouble if you do get audited, you want to keep careful records to demonstrate that you were/are entitled to take the deduction and that the claim has been accurately reported. You should document the home office space by a diagram and/or photograph that supports your calculations. It is wise to use your home office address on company business cards and other forms of communication and to have business mail delivered to the home office address. You should maintain a log of client meetings and other time spent working there. Records to keep proving expenses include: property tax statements, utility bills, insurance premium notices, 1098 mortgage interest statements and receipts for other relevant home office expenses.
Home office deductions can get complicated. Please do not consider this to be reasonable solution to the informed counsel of seasoned Seatac CPA. But this should help you gain a basic understanding the requirements of successfully claiming home office deductions.
Renton Accountant +John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
Posted by Burien CPA on February 19, 2013 · Leave a Comment
There are several deductible expenses linked to owning a rental property. In this write up we will focus on expenses regarding professional fees, interest, and advertising, these are expenses you may deduct from gross rental income in order to calculate the net rental income.
Interest
If you’re renting a room in your home, or if it is a duplex and you’re occupying the other unit, you will need to pro rate the mortgage expense. (See the article titled Personal Use of Rental Property, included in this guide, for more on how to calculate personal use). Now if you are renting the property as its own living unit, you can deduct all of the mortgage interest you paid on Schedule E. Also, if you own only a part interest in the rental, you must multiply the total amount of mortgage interest paid on the property by your ownership interest. Be aware, however, that certain expenses you pay to obtain a mortgage (such as title/recording fees and commissions) are capitalized as part of your depreciable basis for the property, and are not expensed. See the article titled Depreciation Expenses for Rental Property, included in this Guide, for more on depreciation expense. Other types of interest may also be deductible, if you incurred the interest solely for the benefit of the rental property.
Advertising
Ads in the local newspaper or any paid online marketing for example are deductible expenses when promoting a rental property on the open market.
Professional fees
If you pay a lawyer to make a lease or start legal proceedings for you to evict a tenant, you can deduct these payments. You may also deduct the fees of a tax accountant for the preparation of the Schedule E of your return from the year prior. Be sure you pro rate the overall fee between the rest of your return versus the Schedule E portion of you return based on time spent. Any fees unrelated to the Schedule E appear on Schedule A as personal tax preparation expenses. Also any management fees or commissions to professional realty groups for managing the rental property are deductible as well.
Seattle Accountant +John Huddleston has written prolifically on accounting and other tax related topics concerning small business owners. He is a graduate of Washington State University and the University of Washington School of Law.
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