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Quickbooks

Tax Season Made Easy: How QuickBooks Services Can Simplify Your Business Tax Preparation

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As tax season approaches in January 2024, businesses are gearing up for the annual task of organizing financial records, ensuring compliance with tax regulations, and preparing for filing. This process can be daunting and time-consuming. However, with the right tools and services, tax preparation can be streamlined and stress-free. 

QuickBooks, a popular accounting software, offers a range of services that can simplify your business tax preparation. *** The following are ways of leveraging QuickBooks that can make tax season a breeze for your business.

  1. Seamless recordkeeping. One of the primary challenges during tax season is gathering and organizing financial records. QuickBooks acts as a centralized platform for all your financial transactions, providing a seamless recordkeeping system. With features for expense tracking, income categorization, and automatic transaction updates, QuickBooks ensures that your financial data is organized and easily accessible when needed for tax preparation.
  2. Automated data entry. Manually entering data is not only time-consuming but also prone to errors. QuickBooks automates the data entry process, minimizing the risk of mistakes and ensuring accuracy in your financial records. This not only saves time but also provides a reliable foundation for your tax filings.
  3. Real-time financial reporting. QuickBooks offers real-time financial reporting, allowing you to generate up-to-the-minute financial statements. This feature is particularly beneficial during tax season when accurate and current financial information is crucial. With QuickBooks, you can quickly generate profit and loss statements, balance sheets, and other reports needed for tax filings.
  4. Simplified expense tracking. Tracking business expenses is a critical aspect of tax preparation. QuickBooks simplifies expense tracking by allowing you to categorize and tag expenses as they occur. Whether it’s a business meal, office supplies, or travel expenses, QuickBooks makes it easy to track and report deductible expenses come tax season.
  5. Integration with financial institutions. QuickBooks can be seamlessly integrated with your business bank accounts and credit cards. This integration ensures that all financial transactions are automatically imported into the software, eliminating the need for manual data entry. This not only saves time but also reduces the likelihood of overlooking important transactions.
  6. Tax categories and deductions. QuickBooks comes equipped with predefined tax categories, making it easier to assign expenses to the correct deduction categories. This ensures that you take advantage of all eligible tax deductions, maximizing your potential tax savings. The software also allows you to customize categories to align with the specific needs of your business.
  7. Payroll management. QuickBooks simplifies payroll processing by automating calculations for taxes, deductions, and contributions. This reduces the risk of payroll errors and ensures that your business remains compliant with tax regulations.
  8. Easy invoicing and revenue tracking. QuickBooks facilitates easy invoicing and revenue tracking, allowing you to monitor income streams and reconcile revenue with your financial records. This functionality streamlines the process of determining your taxable income.
  9. Collaboration and accessibility. QuickBooks is designed for collaboration, allowing multiple users, including your accountant or tax professional, to access the system simultaneously. This collaborative approach ensures that everyone involved in the tax preparation process has access to the latest financial data, making the overall process more efficient and accurate.
  10. Preparation for quarterly estimates. For businesses that pay quarterly estimated taxes, QuickBooks simplifies the process of calculating and preparing these payments. The software can provide estimates based on your financial data, making it easier to plan and budget for quarterly tax obligations.
  11. Integration with tax software. QuickBooks can seamlessly integrate with popular tax preparation software, further streamlining the tax filing process. This integration allows for the direct transfer of financial data from QuickBooks to your tax software, reducing the need for manual data entry and minimizing the risk of errors.
  12. Regular updates for compliance. Tax laws and regulations are subject to change, and staying compliant requires businesses to stay informed. QuickBooks provides regular updates to ensure that the software complies with the latest tax regulations. This reduces the risk of non-compliance and potential penalties during tax season.

Tax season doesn’t have to be a source of stress for your business. By leveraging the capabilities of QuickBooks, you can simplify and streamline your tax preparation process. QuickBooks is one software that can help your business with keeping your books organized. Organized and accessible financial records help make tax season a seamless and efficient experience for your business.

AK Burton, PC specializes in preparing small business tax returns. Whether it’s tax planning, preparing tax returns, issuing financial statements, drafting a lender letter or whatever else your business needs, we can help you along the way. Call us at (301) 365-1974 for a consultation. 

We serve Bethesda, Rockville, and Montgomery County. MD area.

*** For more information visit the QuickBooks website.   

 

 

 

 

Tax Advice, tax preparation

Tax Advisor: Understanding Tax Implications of Remote Work

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Remote work, since the pandemic, has transformed the traditional office landscape. Thanks to technology, employees can now work from anywhere, blurring the lines between home and office. This new flexibility offers many benefits, but it also raises important questions about the tax implications of remote work. 

As remote work becomes more commonplace, both employees and employers need to understand the tax rules that apply to this evolving work arrangement. Here are some tax implications for you and your tax advisor to keep in mind:  

  1. State Income Tax Considerations. If you live and work in D.C., Northern Virginia, or Maryland, you may be subject to taxes in both locations. *** Here’s how it works:
  • Tax Home vs. Work Location: Your “tax home” is typically where you live, while your “work location” is where your employer’s office is located. If they are in the same state, there’s usually no issue. However, if you’re working remotely from a different state, you may need to file income tax returns in both states.
  • Reciprocity Agreements: Some neighboring states have reciprocity agreements that allow residents of one state to work in another without paying income tax to the work state. These agreements can simplify the tax situation for remote workers.
  1. Tracking remote work days. For tax purposes, it’s essential to keep accurate records of where you work. The number of days you work in different states can impact your tax liability. Some states have a “day counting” rule that triggers tax obligations if you work there for a certain number of days within a tax year.
  2. Deductions for home office expenses. The tax implications of remote work also extend to home office deductions. For tax year 2013, the IRS introduced a simplified home office deduction method, allowing eligible taxpayers to deduct $5 per square foot of their home office space, up to a maximum of 300 square feet. For those who qualify, this deduction can help offset some of the costs associated with remote work, such as internet, utilities, and office supplies. However, to be eligible, your home office must be used exclusively for work purposes, and you must meet specific criteria outlined by the IRS.
  3. State sales tax obligations. If you’re running a remote business from your home, you may also have to consider state sales tax obligations. Many states require businesses to collect and remit sales tax on sales made to customers within the state. If you’re conducting sales remotely, you’ll need to navigate the rules and regulations regarding sales tax in both your home state and any other state where you have customers.
  4. Employer considerations. Employers also face tax-related challenges with remote work arrangements. They must determine their tax obligations in the states where remote employees reside and work. Additionally, they may need to address payroll tax issues, unemployment insurance, and compliance with various state labor laws.
  5. Impact on tax credits and deductions. Remote work can affect eligibility for certain tax credits and deductions. For example, the Earned Income Tax Credit (EITC) and Child and Dependent Care Credit (CDCC) depend on factors like income and work-related expenses, which may change when working remotely. Similarly, retirement account contributions and deductions may be impacted by changes in income and work arrangements. 
  6. Seek professional guidance from a tax advisor. Navigating the tax implications of remote work can be complex, especially if you work in multiple states or have specific deductions and credits in mind. To ensure compliance and optimize your tax situation, seek the assistance of a qualified tax advisor. 

Remote work offers flexibility and convenience, but it also brings tax considerations. Understanding the tax implications of remote work is essential for employees and employers to avoid surprises come tax season. 

A.K. Burton, PC, has experienced accountants who can help you do your tax preparation and remote work. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area. 

*** For more information on marriage and taxes, visit the Tax News website. 

tax preparation

Tax Planning Advice for Major Life Changes

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We can never predict what life has for us. 

There may be significant milestones and changes that can impact your finances. It may be marriage, a baby, buying a home, changing careers, or nearing retirement. These life changes all have their unique tax considerations. Proper tax planning during these times can help you navigate these transitions more smoothly and maximize your financial well-being. 

Here are some tax planning ideas for major life changes:

  1. Marriage. Marriage changes your tax situation. If you’re recently married or about to get married, consider the following:
    • Update Your Filing Status: Choose between filing jointly or separately. Filing jointly often provides more tax benefits due to lower tax rates and increased deductions. Calculate both scenarios to determine which is more advantageous.
    • Review Withholding: Update your W-4 with your employer to reflect your new marital status. This will ensure that your withholding accurately reflects your combined income and tax situation.
  2. Baby: The new member of your family is a life-altering event that also impacts your taxes:
    • Claiming Dependents: You can claim a child as a dependent, which could lead to valuable tax credits such as the Child Tax Credit and the Earned Income Tax Credit.
    • Childcare Expenses: If you’re returning to work and paying for childcare, you might be eligible for the Child and Dependent Care Credit, which can help offset some of these costs.
  3. Purchasing a Home: Becoming a homeowner has tax implications:
    • Mortgage Interest Deduction: Depending on your income & deductions you may be able to deduct mortgage interest paid on your primary and, in some cases, secondary residence, which can provide substantial tax savings.
    • Property Taxes: Property taxes are often deductible, so keep track of these payments for tax purposes.
    • Home Office Deduction: If you use a portion of your home exclusively for business purposes (not applicable if you are compensated by W2), you might be eligible for a home office deduction.
  4. Changing Careers: Transitioning to a new job or career can lead to changes in your tax situation:
    • Job Search Expenses: Some job-related expenses, such as resume preparation and travel for interviews, might be deductible if they exceed a certain threshold.
  5. Approaching Retirement: As you near retirement, strategic tax planning can help you make the most of your savings:
    • Social Security Timing: The timing of when you start receiving Social Security benefits can impact the taxes you owe on those benefits. Be aware of the potential tax consequences.
    • Required Minimum Distributions (RMDs) for 2023: Once you reach the age of 73 (or 70½ if you were born before July 1, 1949), you’ll need to start taking RMDs from your retirement accounts. Plan for the tax implications of these distributions.
  6. Estate Planning: This is a critical aspect of your financial journey that affects your loved ones:
    • Gift and Estate Taxes: If you plan to gift substantial assets or have a sizable estate, understanding the gift and estate tax thresholds and exemptions is important for tax-efficient transfers.
  7. Divorce: Divorce can have significant financial and tax ramifications:
    • Alimony and Child Support: Understand the tax treatment of alimony (taxable to the recipient, deductible by the payer if the divorce was finalized by the end of 2018) and child support (non-taxable).
    • Property Division: The division of property during divorce can have tax consequences. Consult with professionals to ensure equitable and tax-efficient outcomes.

You should seek advice from a tax professional or financial advisor. They can guide you based on your specific circumstances and help you make informed decisions that align with your long-term financial goals. Tax laws can change, so staying informed and proactive is key to optimizing your financial situation during every stage of your life. 

A.K. Burton, PC, has experienced accountants who can help you do your tax and estate planning for now and the future changes in your life. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** For more information on marriage and taxes, visit the Tax Policy Center website.  

 

 

Tax Advice, tax preparation

Tax Planning: How to Do Estimated Tax Payments

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Tax planning is an essential aspect of managing your personal or business finances. 

One key element of tax planning is ensuring that you meet your tax obligations throughout the year. For individuals and businesses that don’t have taxes withheld from their income, estimated tax payments are important to staying compliant with the tax laws. 

Here are five ways to make your estimated tax payments.

  1. Determine if you need to make estimated tax payments. Individuals and businesses that expect to owe $1,000 or more in taxes after subtracting any withholding and refundable credits can make estimated tax payments. This applies to self-employed individuals, freelancers, independent contractors, and business owners whose income is not subject to withholding.
  2. Calculate your estimated tax liability. Estimate your income and deductions for the current tax year. Consider factors such as self-employment income, investment income, and any other sources of taxable income. Deductible expenses and credits should also be taken into account. You can use last year’s tax return as a starting point and adjust for any significant changes.
  3. Determine a payment schedule. For most individuals, estimated tax payments are due quarterly. The payment due dates are typically April 15, June 15, September 15, and January 15 of the following year. However, if any of these dates fall on a weekend or a holiday, the deadline is shifted to the next business day.
  4. Calculate each payment. Divide your estimated tax liability by the number of payment periods to calculate the amount of each estimated tax payment. For example, if you have four payment periods, divide your estimated tax liability by four to determine the amount for each payment. It’s important to note that estimated tax payments are based on a pay-as-you-go system, so it’s ideal to make equal payments throughout the year to avoid penalties and interest.
  5. Submit your payment. The most convenient method is to make an electronic payment through the IRS Electronic Federal Tax Payment System (EFTPS). *** This allows you to make secure online payments directly from your bank account. You can also pay by phone using the EFTPS Voice Response System or by mail using Form 1040-ES and a check or money order payable to the United States Treasury. Be sure to include the payment voucher from Form 1040-ES with your payment.
  6. Keep track of your payments. Maintain a record of the dates, amounts, and payment methods used for each payment. This documentation will be useful when filing your annual tax return, as you will need to report your estimated tax payments accurately.
  7. Review and adjust as needed. Regularly review your estimated tax payments and reassess your tax situation. If your income or deductions change significantly, you may need to adjust your estimated tax payments accordingly. It’s better to make adjustments as you go rather than underpaying and potentially incurring penalties at the end of the year.

Estimated tax payments are an important aspect of tax planning for individuals and businesses with income not subject to withholding. By following these steps, you can make your estimated tax payments on time to avoid penalties. Consider consulting a tax preparer or utilizing tax software to ensure accuracy and to receive guidance tailored to your specific tax situation.

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you do your tax planning and file your tax returns and represent you to the IRS. We do individual and business tax returns. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** For more information on making estimated tax payments, visit the EFTPS page on the IRS website. 

Tax Advice, tax preparation

Tax Planning: What You Need to Do If You Can’t Pay Your Tax Bill

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Everyone who likes to file their tax returns, raise your hand! That’s what we thought. 

Filing taxes is massively stressful even if you have prepared. It’s even worse if you are unable to pay your tax bill. Know that you’re not alone, and there are tax planning strategies you can take now if you cannot pay the tax balance that is due.  

The following are practical tax planning strategies when you can’t pay your tax bill:

  1. File your tax return on time. Even if you cannot pay it all, file your tax return by the deadline. Failing to file can result in penalties and additional fees, which will only add to your financial burden. Filing on time means that you avoid complications and show your willingness to fulfill your tax obligations.
  2. Review your tax bill. Carefully review your tax bill. Make sure it’s accurate. Mistakes happen. Regardless, make sure you file as you don’t want to pay more than you owe. Double-check all calculations and cross-reference the information provided with your records. If you see discrepancies, contact the IRS or state tax authorities promptly to resolve the issue.
  3. Explore payment options. The IRS and your state’s tax authorities know that  everyone cannot pay their tax bill in full immediately. So, they offer several payment options to accommodate different financial situations. Those options include:
    a. Installment Agreement: You can request an installment agreement that allows you to pay your tax debt in monthly installments. The IRS or your state tax agency will work with you to determine a reasonable payment plan based on your income and expenses.
    b. Offer in Compromise: You may be eligible for a compromise offer that allows you to settle your tax debt for less than the full amount owed. This option is only available if you can prove that paying the full amount would cause significant financial hardship.
    c. Temporarily Delay Payment: If you’re experiencing a temporary financial hardship, you may be able to request a temporary delay in payment until your situation improves. During this time, penalties and interest will continue to accrue, but it can provide you with some breathing room to get back on your feet.
  4. Communicate with the Tax Authorities: Start communication with the tax authorities is vital when you’re unable to pay your tax bill. Contact the appropriate agency as soon as possible to discuss your situation and explore available options. Ignoring the issue will only lead to more severe consequences, such as liens or wage garnishments. 
  5. Consult a Tax Professional: Navigating the complex world of taxes can be challenging, especially when you’re facing financial difficulties. Seeking guidance from a qualified tax professional, such as a tax attorney or a certified public accountant (CPA), can provide you with valuable insights and help you make informed decisions. They can analyze your situation, explore all possible options, and negotiate on your behalf with the tax authorities.
  6. Adjust Withholdings: If you are unable to pay your tax bill this year, review your withholdings and adjust them. By increasing your withholdings, you’re paying a more accurate amount throughout the year, reducing a significant tax bill next time. Consult with a tax preparation professional to determine the optimal withholding amount based on your financial circumstances.

If you are unable to pay your tax bill it can be overwhelming, but you can take steps to resolve it. By filing your tax return on time, reviewing your bill for accuracy, exploring payment options, communicating with tax authorities, seeking professional guidance, and adjusting your withholdings, you can navigate this challenging scenario. We recommend hiring an accountant or a tax professional to help you with your tax returns or to represent you to the IRS or state tax department.

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you do your tax planning and file your tax returns and represent you to the IRS. We do individual and business tax returns. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** You can find out about tax payments and other tax information on the IRS website.

Small Business Accounting, tax preparation

Tax Planning: Little-Known Expenses That are Tax-Deductible

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Tax returns are done for most US citizens. There are still millions of Americans and their accountants who are still working on their 2022 tax returns. ***

There are many deductions that filers forget or don’t even know are eligible. Billions of dollars are paid out by taxpayers that could have been saved. Your tax advisor is aware of these tax deductions as they are required to be updated on all new tax laws.

Here are some little-known expenses for your tax planning that may be tax-deductible:

1. Job Search Expenses: If you’re searching for a job in your current field, you may be able to deduct certain job search expenses, such as transportation costs, resume preparation, and employment agency fees. These deductions may be available even if you don’t get the job.
2. Professional Development Expenses: If you’re looking to improve your skills or education in your current field, you may be able to deduct the expenses associated with professional development courses, seminars, and conferences.
3. Jury paid. Most employers will pay employees’ salaries while they are serving on a jury but ask that they turn over their jury fees to the company. This income has to be reported as taxable income. If you gave that income to your employer, you could deduct the amount, so you aren’t taxed on that money.
4. Moving Expenses for Work: If you move for work-related reasons, you may be able to deduct certain moving expenses, such as transportation costs, storage expenses, and lodging costs. The distance between your new home and your new job must meet certain requirements, and there are other eligibility criteria to consider. If you’re an active-duty military member who is relocating, you can deduct these expenses as long as the government doesn’t reimburse you. The move must be permanent and ordered by the military. The deductions include gas, lodging, moving trucks, and shipping your cars and pets.
5. Home Office Expenses: If you work from home, you may be able to deduct certain home office expenses, such as utilities, internet expenses, and office equipment. The space must be used regularly and exclusively for work purposes to qualify for the deduction.
6. Investment Expenses: If you have investments, you may be able to deduct certain investment expenses, such as advisory fees, custodial fees, and other expenses related to managing your investments. If you have any mutual fund and stock dividends, they are automatically reinvested in extra shares, each reinvestment increases your tax basis in the stock refund or mutual fund. This reduces the amount of taxable capital when you sell your shares. 7. 7. Reinvested dividends which you subtract from the proceeds of sale to determine your gain means you will overpay your taxes.
8. State tax paid. If you owed taxes when you filed your 2021 state tax return in 2022, then you can include that amount with your state tax itemized deduction on your 2022 return. You may also include your state income taxes withheld from your paychecks or paid with quarterly estimated payments. Limited to a maximum of $10,000 per year.

These are just a few examples of little-known expenses that may be tax-deductible. However, there are many other deductions and credits available that can help reduce your tax bill. It’s important to do your tax planning with a qualified tax advisor to ensure that you are taking advantage of all the deductions and credits that you’re eligible for while also complying with all applicable tax laws and regulations.

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you plan your tax, file your tax returns, and represent you to the IRS. We do individual and business tax returns. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** You can find these deductions and other tax information on the IRS website.

Quickbooks, Small Business Accounting

How to Organize Your Small Business Accounting Using QuickBooks Services

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Tax Season ended at midnight on Tuesday, April 18, 2023. Tax Day is such a stressful time for citizens, businesses, and accountants. This year was no different though. When the numbers come out, there will probably be an increase in filing extensions by people and businesses.

Now that the smoke has cleared, business owners may want to consider using our QuickBooks services to do their accounting and tax preparation. QuickBooks is an accounting software developed by Intuit. QuickBooks is mainly for small and medium-sized businesses. The cloud-based software can accept business payments, manage and pay bills, and do payroll.

QuickBooks can be used to organize your small business accounting. Here are some steps to get started:

  1. Set up your company: Start by setting up your company in QuickBooks. This includes entering your company information, such as your business name, address, and tax ID number.
  2. Add your bank and credit card accounts: Connect your bank and credit card accounts to QuickBooks. This will allow you to automatically import transactions into QuickBooks, making it easier to keep track of your finances.
  3. Categorize your transactions: Once you have imported your transactions into QuickBooks, you will need to categorize them. This involves assigning each transaction to the appropriate account, such as income or expenses.
  4. Set up your chart of accounts: Your chart of accounts is a list of all the accounts you use in your business. This includes income accounts, expense accounts, and asset accounts. Setting up your chart of accounts is an important step in organizing your accounting.
  5. Create invoices and track payments: QuickBooks allows you to create and send invoices to your customers. You can also use QuickBooks to track payments and send reminders for overdue payments.
  6. Run financial reports: QuickBooks offers a variety of financial reports, such as profit and loss statements and balance sheets. These reports can help you understand the financial health of your business and make informed decisions.
  7. Get professional help: If you’re not familiar with accounting or QuickBooks, consider hiring a professional to help you get started. A certified accountant can help you set up QuickBooks and maintain your accounting records, so you can focus on running your business.

QuickBooks guides and assists you to organize your small business accounting. Using QuickBooks can save you time and help you make informed financial decisions for your business. Millions of business owners use QuickBooks as a daily part of their accounting. 

It takes time to learn and integrate into your business. However, with training and experience, many small and medium-sized business owners have come to depend on it. If you are considering QuickBooks to do your accounting, consult an accountant to get started. 

AK Burton, PC offers QuickBooks services for our clients. We can train you in QuickBooks and help you use it to run your business. Call us at (301) 365-1974 for a consultation. 

We serve Bethesda, Rockville, and Montgomery County. MD area.

*** For more information visit the QuickBooks website.   

 

Tax Advice, tax preparation

Why is My Tax Refund Smaller This Year?

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If you have been getting the same refund on your tax return every year for many years, this year may be a major disappointment for you.

Tax refunds will be smaller this year for millions of Americans. It’s sad but true. We have to return to the Covid pandemic in 2021 when the federal government gave out stimulus checks. While Americans were getting $1,500 per household member, Congress was working behind the scenes to rewrite the US Tax Code and eliminate many deductions.

But, as with everything else tax-related, it can be complicated. Let’s look at several reasons why your tax refund check may be smaller this year.

  1. The American Rescue Plan passed at the start of the pandemic in March 2021, gave some financial relief to millions of families. It increased the 2021 child tax credit from $2,000 to $3,000 per child, 17 years old and younger. It also added $600 for children under six years old. Because of this, many Americans will not like the smaller check they receive this year. These child tax credits may reduce an individual’s refund. They may have received too much of an advance credit and do not qualify when filing their tax return making their refund much smaller than in 2021.
  2. Unemployment assistance. In 2020, the federal government waived federal taxes on all unemployment income. For the 2021 tax year, however, that is no longer the case. Unemployment assistance during 2021 is categorized as taxable income. Millions of Americans were still collecting unemployment benefits into 2022. Because of this benefit, many will see lower refunds this year. When someone receives unemployment assistance, they can have their taxes withheld. Many millions of recipients did not have any money withheld; thus, they have to pay those taxes back making their tax refund much smaller. To claim unemployment income on a tax return, they would have received a 1099-G form from the state or District unemployment agency. This form has instructions on how to complete this form.
  3. Student loan debt. As the pandemic lockdown went into effect, the U.S. Department of Education froze public student loan payments and temporarily stopped interest from accruing on student loans. It may have helped many students struggling to pay their loans. However, the $2,500 above-the-line deduction was worthless during the freeze. That means that now they have more taxable income, so their tax refund (if any) will be much lower.

So, when filing your 2022 tax returns this year, your deductions may be complicated and potentially incorrect, meaning you may pay even more or less than you should. We would advise that you hire a professional tax advisor or accountant for your tax preparation so that you can maximize your refund. You may also consult the IRS website for more information on a tax refund schedule. ***

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you file your tax returns and represent you to the IRS. We do individual and business tax returns. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** Visit the IRS website for more information about tax refunds.

Tax Advice, tax preparation

Tax Preparation: 2022 Laws That May Affect Your Tax Returns

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Every year brings a panoply of new tax laws, passed by the United States Congress. Some of these laws are easy to implement. However, some other new tax laws can be complicated. In any case, it can make tax preparation for most people even more difficult as most people don’t keep track of the laws.  

Accountants spend many hours studying the latest tax laws. We even attend webinars and conventions to learn more about these laws. It’s always a challenge! Some new tax laws make us scratch our heads while others seem to be commonsensical.  

Here are several notable new tax laws to keep in mind when doing your tax preparation: 

  1. Charitable Tax Credit increase. The America Rescue Plan deduction returns to the nonrefundable status of $2,000 per qualifying child and is limited to dependents under the age of 16.
  2. More charitable deduction changes. During COVID-19, taxpayers could take an above-the-line charitable donation tax deduction, meaning they are claiming the standard deduction and an additional deduction for a charitable donation. Single filers may deduct up to $300. Married couples filing jointly may deduct up to $600. 
  3. New reporting requirement for third-party settlement organizations. This deals with Paypal, Venmo, Cash App, and other third-party payment companies. TPSOs were required to file a Form 1099-K if customers processed 200 or more transactions and received a minimum of $20,000 or more in payments. This law deletes the transaction requirement and requires Form 1099-K for any account holder who receives at least $600 in payments for goods and services. Recently, the IRS delayed implementing the new law until 2023. Though not mandatory for 2022, you may get a Form 1099-K as these third-party payment companies prepare for the upcoming change.
  4. Child and Dependent Care Credit Decrease. These are deductions for qualified childcare services so that you can work, you can receive a childcare credit for some or all expenses. The IRS did reduce the child and dependent care credit cap in 2022. It decreased from a maximum of $8,000 in 2021 to a maximum of $2,100 in 2022. 
  5. Employer-sponsored retirement contributions increased. The contribution limit for elective deferrals to 401(k), 403(b), most 457 plans, and the Thrift Savings Plan increased to $20,500 for 2022. The total amount that can be contributed to a plan by you and your employer combined increased to $61,500. The catch-up contribution for taxpayers aged 50 and older stayed at $6,500.
  6. Clean Vehicle Credit eligibility change. If you bought a new electric vehicle after August 16, 2022, it had to have had a final assembly in North America to get the $7,500 credit. This requirement was added as part of the Inflation Reduction Act of 2021.

Some of these tax law changes may affect your tax preparation for your 2022 tax returns. If you have questions, you can consult the IRS. We highly recommend that you consult your tax advisor or accountant for your tax preparation and filing.

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you get the ball rolling with year-end tax planning for your small business. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** For more information on IRS Tax Brackets visits the Tax Foundation website.  

Small Business Accounting, tax preparation

Small Business Tax Preparation: Now Is the Time to Do Your Year-End Tax Planning

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There are less than two months left in 2022. If you are a small business owner, it’s more than likely, you are looking forward to 2023. With the holiday season in full swing, it’s easy to want to wind down, but now may be the best time to plan for taxes in the new year. There are many ways to optimize your taxes, but one of the most impactful things you can do is to consider changing your business’s legal structure.

There are 5 main types of tax entities in the United States:

  1. Sole proprietorship
  2. Partnership
  3. Limited Liability Company
  4. C Corporation
  5. S Corporation

Depending on the stage your business is in, one structure may make more sense than the other.

The IRS defines a sole proprietor as someone who owns an unincorporated business by himself or herself.

A partnership is when two or more people engage in a trade or business where each contributes money, property, labor, or skill and shares in profits and losses.

A Limited Liability Corporation or LLC is a slightly more complex structure than a proprietorship and partnership. It protects members’ personal assets from the organization’s debts and liabilities.

A C Corporation has shareholders exchange money or property for ownership of the organization.

Lastly, an S corporation elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Each structure has its advantages and disadvantages. So, it’s important to consider the following when deciding to change your business structure:

If you are a sole proprietorship

    1. Benefits include:
      1. Pass-through entity status (passing income straight to the owners)
      2. Fewer reporting requirements
      3. No corporate business taxes
    2. Disadvantages include:
      1. Lack of protection for personal assets separate from business
      2. No perpetual existence (Owners, for legal and tax purposes, are directly linked to their business)

If you are a partnership

    1. Benefits include:
      1. Pass-through entity status
      2. No corporate business taxes
    2. Disadvantages are:
      1. Lack of protection for personal assets separate from the business
      2. No perpetual existence

If you are a Limited Liability Corporation

    1. Benefits include:
      1. Protection for personal assets separate from the business
      2. No corporate business taxes
      3. Flexibility to be taxed like a corporation, partnership, or sole proprietorship
    2. Disadvantages are:
      1. No perpetual existence
      2. Subject to state laws 

If you are a C Corporation:

    1. Benefits include:
      1. Protection for personal assets separate from the business
      2. Perpetual existence
    2. Disadvantages are:
      1. Double taxation (Taxes are paid for corporate income and an owner’s income)
      2. More reporting requirements

If you are an S Corporation

    1. Benefits include:
      1. Protection for personal assets separate from the business
      2. Pass-through entity status
      3. Perpetual existence
      4. No corporate business taxes
    2. Disadvantages are:
      1. Not available in all states
      2. Strict standards to qualify

Depending on your situation, it’s worth considering changing your business structure to maximize tax benefits.

While there are many other areas to ponder when doing year-end tax planning including estimating your net income, analyzing possible deductions for this and next year, and many more, determining whether to keep or change your business structure can make a significant difference.

Before making this decision, it’s best to consult an accountant for proper guidance.

A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you get the ball rolling with yearend tax planning for your small business. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

Sources:

  1. https://www.forbes.com/sites/davidrae/2022/11/03/7-smart-year-end-tax-planning-moves-for-small-business-owners/?sh=6b5bc47d47f3) 
  2. https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
  3. https://www.netsuite.com/portal/resource/articles/business-strategy/business-structure.shtml