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Category Archives: Small Business Accounting

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.   

 

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 
Small Business Accounting, tax preparation

Extended business tax deadline 1065, 1120S: What information do you send your tax preparer?

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If you are reading this, chances are you are a business owner, who filed an extension, getting ready to file, but you need guidance on what to do next.

Also, you may be worried because the extension deadline is approaching, and want to be prepared.

You’ve come to the right place. 

With the extension deadline quickly approaching, it’s best to file our return as soon as possible.

The original deadline passed (March 15, 2022) for partnerships, S corporations, or LLCs taxed as partnerships. If you filed an automatic six-month extension, your deadline is September 15, 2022.

When you do meet with your tax preparer, here’s a list of items to get you started as to what you need to bring:

If you have it:

  • a copy of your books (for example accountant’s copy of QuickBooks)
  • applicable spreadsheets

Income documents including:

  • Receipts from sales and services (example: forms 1099-k, 1099)
  • Accounts receivable records
  • Business checking/savings accounts interest (forms 1099-INT)
  • Investment income documents (including form 1099-DIV)
  • Additional income (including rental income, tax credits, etc.)

Forms related to Costs of Goods Sold (if applicable)

Expenses documents include:

  • Advertising
  • Phones (landline, fax, or cell phones related to business)
  • Computer & internet expenses
  • Transportation and travel expenses (include taxi fares, tax, tips, food, gas, and all expenses incurred to facilitate any business trips)
  • Commission and fees
  • Labor expenses paid to subcontractors and independent contractors
  • Depreciation
    • Cost and first date of business use of assets
    • Any records for using assets for personal activities
    • Documentation of prior year depreciation
    • Sales price and disposition date of any assets sold
  • Intangible assets (copyrights, etc.)
  • Business insurances
  • Interest expense (can include mortgage, business loan, or any investment expense)
  • Professional fees (lawyers, accountants, consultants, tax preparers, etc.)
  • Office supplies expenses
  • Rent expenses (if applicable)
  • In-home Office expenses (if applicable)
  • Payroll including wages, benefits, and other employee expenses
  • Repairs, maintenance of office facility, etc.
  • Total mileage 
  • Business mileage
  • Estimated taxes paid
  • Other business-related expenses

Every business is different, so it’s best to contact a tax preparer to know if there are any items not listed you may need.

Of course, if you don’t file by the extended deadline, there is a Failure to File penalty. The basic penalty is 5% of the unpaid taxes for each month a filing is late. The maximum penalty is 25%. If the return is more than 60 days late, the minimum penalty is the lesser of $435 or 100% https://cpa-maryland.com/services/tax-preparation/of the tax required to be shown on the return.

Late filings can also be charged interest. Visit the IRS website to get an exact calculation https://www.irs.gov/payments/interest. 

Be prepared. File today.

AK Burton, PC serves small businesses with all of their tax needs. Our experienced tax preparers can file your business and personal tax returns and represent you to the IRS. Call us at (301) 365-1974 for a consultation. 

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

Sources:

https://www.irs.gov/payments/failure-to-file-penalty 

https://www.blockadvisors.com/tax-preparation-checklist/ 

https://www.irs.gov/payments/interest 

https://turbotax.intuit.com/tax-tips/tax-planning-and-checklists/important-tax-deadlines-dates/L7Rn92V1d 

Small Business Accounting

Small Business Accounting: What is the Difference Between a Contractor and an Employee?

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Many people have chosen to leave their job and become self-employed. They now work remotely from their home.  

This is a popular trend in today’s economy. It’s exciting but there are tax implications, of course, that should be considered. 

If you are planning to start your own small business, you need to know the difference between a contractor and an employee. Let’s start with definitions: 

  1. Employee: On the company payroll and receives wages and benefits in exchange for doing their job correctly.
  2. Contractor: An autonomous, independent worker who does not receive health insurance and paid time off. 

If you are now a “contractor” or self-employed, note the following: 

  1. A contractor is compensated by form1099-NEC. Form 1099-NEC, Nonemployee Compensation, is a form that solely reports nonemployee compensation. Form 1099-NEC is not a replacement for Form 1099-MISC. Form 1099-NEC is only replacing the use of Form 1099-MISC for reporting independent contractor payments.
  2. A self-employed contractor needs to pay the Self-employment (SE) Tax. The SE tax consists of Social Security and Medicare taxes for individuals who work for themselves. This tax is both Social Security and Medicare taxes for individuals who work for themselves. The tax rate is 15.3% and consists of 12.4% for social security and 2.9% for Medicare. 
  3. Retirement: There are five self-employed retirement plans: Traditional or Roth IRA, Solo 401(k), SEP-IRA, SIMPLE IRA, or Defined benefit plan. Working for yourself, you need to set up your retirement plan. Interested in potential tax implications as to which plan suits your needs best?  – contact your tax advisor. 
  4. Health insurance: Self-employed individuals must choose their health insurance plan. It could be Blue Cross, HMO, PPO, Signa, United Health Care, or any one of many options. *** 
  5. Estimated tax payments: This is a method used to pay income tax and is not subject to withholding. This income includes income from self-employment, interest, dividends, rents, and alimony. Self-employed individuals who do not have taxes withheld from other taxable income should make estimated tax payments. Other income may include unemployment compensation and the taxable part of Social Security benefits. 

Individuals who are employed by a business or organization typically have the following:

  1. Compensated by Form W2. As an employee, your wages and your share of Medicare and social security tax are reported on your W2.
  2. Retirement: Businesses may offer a retirement plan such as a 401(K) and/or Roth for employed individuals. Employers may even match the employee contribution up to a certain percentage (depending on the plan set up by the employer). 
  3. Medical insurance: The most common employee benefit is medical or health coverage. It covers medical appointments, checkups, ER visits, basic medical procedures, and surgical procedures.
  4. Prescription benefits: Lower co-pays for medicines and no-cost prescriptions are included. There is a list of the available medications with tiered pricing for prescription drugs.
  5. Life Insurance: Usually it is group-term life insurance. The employer extends life insurance coverage to all staff members and is in effect for a set period. It lasts for the time that the employee works for their employer. It costs less than individual insurance policies. 

In addition, there are many more benefits that can be included in a company employment package such as paid time off, paid sick leave, paid vacation time, extended leave, family leave, disability, and worker’s compensation.    

AK Burton, PC can help define what becoming an independent contractor means to you and the steps needed to set yourself up for successful tax preparation. Our experienced tax preparers can file your business and personal tax returns and represent you to the IRS. Call us at (301) 365-1974 for a consultation. 

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

*** For more information, visit the IRS website. 

Quickbooks, Small Business Accounting

Five QuickBooks Small Business Hacks You Need to Know

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Small business accounting and bookkeeping is a necessary part of the business. The software has made small business accounting and bookkeeping easier and more convenient. Affordably-priced software ranging from Wave Accounting to Xeno help business owners easily run billing, payroll, invoicing, and inventory.

There is a wide range of small business accounting software. As a small business owner who doesn’t even have time to spare for accounting and bookkeeping, how do you decide which software is best for your company? One potential software is Quickbooks Online. It’s a cloud-based accounting solution where records are kept online, protected by security, easily accessible, and regularly updated. *** 

If you are considering Quickbooks Online for your business or are using it now, here are some highlights of features that you should know:

  1. Connect your bank account(s) to it: Quickbooks Online allows you to connect your bank account once and it will then download all your bank transactions from the last 90 days. Additionally, it lets you connect multiple checking accounts, savings accounts, and credit cards. It will also auto-suggest categories and functions. The algorithms are quite amazing. 
  2. Don’t have to back up your data: As QuickBooks Online is all web-based, you keep all the data in the cloud. All information you store on QuickBooks Online is stored in the cloud. Data can be accessed at any time from your laptops and devices. 
  3. Invoice clients in CBO: Quickbooks Online can do all client invoicing. Gone are paper billing and sealing envelopes. It lets you design invoices with your business brand on it. Invoices can be automated and it will mark invoices that have been paid. Recurring invoices can be sent out, too, thorough the automated invoicing function. 
  4. User Interface Is Intuitive: QuickBooks was created for the non-savvy, non-accountant business owner or employee. So, it is much easier to use based on the easy interface. It has a brief and easily-understood tutorial. This five-minute guide shows users how to import and categorize transactions. A menu shows how to navigate between the Banking, Reports, Sales and Expenses functions. Reviewers consistently complement the design as it is not all pushed into a small space.
  5. Many users can use it at the same time: Quickbooks Online has several packages which allows multiple users to have full access and use of the data. Additionally, if you want to save money, the username and password can be shared with other employees. However, if there is restricted data, such as payroll, it can be protected and accessed only approved individuals. 

These are just a few of the features available with Quickbooks Online. As with any small business accounting software you choose, the software might be designed to be simple and easy to navigate but somehow a wrench gets thrown into the books!

If this happens, the staff at A.K. Burton, PC is here to help. We specialize in small business tax preparation and provide a wide range of services to our clients including getting that wrench out of your books. If you need help straightening out your QuickBooks online, please call us at (301) 365-1974 for a consultation. Our office is open! We serve Bethesda, Rockville, and Montgomery County. MD area.

*** For more information about Quickbooks Online, visit their website.

Small Business Accounting, tax preparation

Business Tax Preparation Tips: Why You Should Do Estimated Tax Payments Now!

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By the time you read this, Tax Day 2021 is over. Millions of Americans have filed their tax returns to the Internal Revenue Service and to the state or to the District where they live. 

For many people, Tax Day meant they wrote large checks or filed extensions so they could pay off the 2020 tax bill. It was a very difficult and stressful day for millions of filers. 

You can save yourself a lot of pain, stress and fees by doing one thing differently: Make estimated tax payments as soon as possible! 

Estimated Tax Payments *** are for those whose federal and/or state withholding is under withheld during the year. Estimated tax payments are used to fill in the gap in withholding and proactively pay your predicted tax liability for the current year as you earn the money. Paying quarterly estimated payments is a strategy to avoid having to pay a huge bill on tax day along with penalty and interest that may be charged by the IRS or the state. Payments are made incrementally, on the following quarterly tax dates:

Payment Period                         Due Date 

January 1 to March 31 April 15
 April 1 to May 31  June 15
 June 1 to Aug. 31  Sept. 15
September 1 to December 31  Jan. 15 of the following year
2021 Estimated Tax Payments Schedule

Traditionally estimated payments are made quarterly. Had a big tax bill this year and want to avoid it next year with similar earnings predicted for this year? Have your accountant or bookkeeper calculate estimated payments. At A.K. Burton PC, we calculate estimated payments for our clients regularly. Has your income changed significantly this year? Contact your accountant and have them recalculate your estimates.

How do you pay your estimated payments? Methods of payment include scheduling an online payment or by check. If you’re interested in paying your estimated payments online: find the correct links by going to your state’s department of taxation’s website or to the IRS website and have them withdraw the funds.  Don’t have the full amount to send in that your accountant recommended? Send in the amount you can. 

A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. At this time we are not providing in-person services because of the pandemic. We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** You can find out more about Estimated Tax Payments at the IRS website.   

Small Business Accounting

Small Business Accounting Trends for 2021

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Thinking about improving your small business? How about improving your small business accounting? Here are some accounting trends for small businesses to consider: 

  1. Data Analytics: Small business accountants can track data and perform an analysis. These insights into data help business owners make better financial decisions and improve resource efficiency. 
  2. Cloud-based Accounting: Businesses can access their bookkeeping records anytime and anywhere on the cloud. The cloud system saves business time and effort as they can track all their sales, inventory, and expenses in real-time. 
  3. Outsourcing small business accounting needs: Just because the technology is out there, does not mean you have to use it or feel comfortable with it. Many small businesses are outsourcing to accounting firms, either in their location or even in another state. This option lets the business focus more on its daily operations. A.K. Burton, PC specializes in tax preparation for small businesses and their owners. 
  4. Using Social Media: Social media channels are essential in building brand loyalty, promoting accounting services and products, engaging with the public and clients, and educating followers on accounting procedures and trends. Social media management also sends visitors to the website which increases traffic and recruits new customers. Facebook, LinkedIn, and Instagram have become an invaluable part of marketing for 2021. 
  5. Website Content Management: Blogs, both written and video, are ways to educate and sell to the public. This also increases traffic to the website and is considered quality content by the major search engines. Publishing monthly blogs should be a staple of any marketing strategy.

Hopefully, these trends have inspired you to reconsider your small business accounting. A.K. Burton, PC, has experienced accountants who can assist you with your small business accounting. We specialize in tax preparation for small businesses and their owners. Call us at (301) 365-1974 or email info@cpa-maryland.com. A.K. Burton, PC serves the Bethesda, Rockville, and Montgomery County areas.

Small Business Accounting, Tax Advice, tax preparation

Five Tax-Planning Strategies to Try Before 12/31/2020

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It’s November. What comes to mind when you hear November? Holidays and turkey time? At my work, we are thinking about something a little different…tax planning! The tax year 2020 is drawing to a close. That means there’s still a good month left for tax planning. If you own a business, you still have time to make some crucial, time-saving, and money-saving tax planning decisions. The tax year 2020 has held some significant challenges navigating the COVID-19 pandemic. Tax planning is important; especially if your business has been significantly impacted by the pandemic. Contact your tax preparer to discuss some tax planning strategies. Next thing you know, the first quarter 2021 will be happening and it will be time to put that planning to good use.

Take the time to meet with your CPA and go over your books. Here are some tax-planning ideas to get the ball rolling:

  1. Claim quick disaster loss refunds. Businesses can claim specific losses attributable to a disaster on a prior-year tax return. This is meant to provide quicker refunds. The Trump COVID-19 disaster declaration designated all 50 states, the District of Columbia, and five territories as disaster areas. Almost every U.S. business is in the covered disaster area thus making it eligible for refunds, depending on the losses. A business may claim a COVID-19 related disaster loss occurring in 2020 on a 2019 amended return for a quicker refund. It may affect losses coming from many different circumstances, such as loss of inventory or supplies or office, plant, or store closures. The loss must actually be attributable to or caused by COVID-19.
  2. Payroll tax deductions. The CARES Act lets employers defer paying their 6.2% share of Social Security taxes for the rest of 2020. Half of it is due by Dec. 31, 2021. The second half is due by Dec. 31, 2022. Payroll taxes cannot be deducted until their share is paid. Some taxpayers may pay the taxes as late as 8½ months into 2021 but still, claim a deduction for 2020.
  3. Use above-the-line charitable deduction. In the past, there was no tax benefit for giving to charity unless you itemized deductions. The CARES Act, however, created an above-the-line deduction of up to $300 for cash contributions from taxpayers who don’t itemize. In order to take advantage of this provision, donate by 12/31/2020. 
  4. Make up a tax shortfall with increased withholding. COVID-19 caused cash-flow issues for many businesses this year. Your withholding and estimated taxes should align with what you actually expect to pay while you correct the cash flow issue. If you are in danger of being penalized for underpaying taxes, make it up through increased withholding on your salary or bonuses.
  5. Use low-interest rates and generous exemptions. Interest rates this year are historically low. Plus, lifetime gift and estate tax exemptions can still be utilized. COVID-19 is depressing many asset values but you can still use estate-planning strategies. The present gift and estate tax exemptions are scheduled to expire in a few years. 
  6. Claim AMT refunds. The Tax Cuts and Jobs Act (TCJA) repealed the corporate alternative minimum tax (AMT). Now, corporations may claim all their unused AMT credits in the tax years beginning in 2018, 2019, 2020, and 2021. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows corporations to claim credits in either 2018 or 2019. Companies have several options to file for quick refunds. They can file a tentative refund claim on Form 1139. It must be filed on 12/31/2020 to claim an AMT credit.

There are a number of tax planning strategies that may be in the best interest of your business. In order to customize your tax planning strategy, we need to meet with you, analyze the data, and discuss. The tax planning process takes some time, so don’t wait until the last minute. Contact us today and consult one of our experienced tax advisors. 

A.K. Burton, PC, can assist small business clients with their taxes. We are familiar with the CARES Act and TCJA and can advise our clients on being proactive in their tax planning by the end of the year. Call us at (301) 365-1974 for a consultation. Our office is open! We serve Bethesda, Rockville, and Montgomery County. MD area.

*** You can find more information about TCJA at the IRS website. 

Small Business Accounting, tax preparation

Small Business Tax Preparation: The Five Biggest Mistakes People Make

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We have finally reached the fourth quarter of 2020.

2020 has been a year like no other, especially for small businesses. Tax deadline changes, COVID restrictions, added tax laws…it’s hard to keep up with it all.

AK Burton, PC specializes in helping our small business clients keep up with their taxes. Is October the time to think about taxes? Yes. Now is the time to get in touch with your CPA if you have had an abnormal business year and plan how to close out 2020.

As you and your accountant begin the tax taking a look at your small business taxes, keep in mind these five biggest mistakes people make in small business tax preparation:

  1. Misclassifying employees and independent contractors: Misidentifying a person as a contractor and not as an employee will lead to penalties and interest for non-payment of the employer share of employment taxes. The business must give every employee a W-2, and every contractor that was paid more than $600 gets a Form 1099-Misc.  
  1. Failure to pay “reasonable wages” to shareholders of an S-Corporation: The IRS states that for the 1120S income tax return that “Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.” The shareholder plays an active, day-to-day role in the business, so, they are an employee and have to be paid a market-based salary for that position.
  1. Missing valid deductions or overstating business expenses: If your business expenses exceed its income, you may get the unwanted attention of the IRS. All of your business expenses need to be considered. IRS rules are quite strict on home office expenses as whatever is used for business should not be used for any other purposes than business. The IRS is “generous” when it comes to some Schedule C expenses. Be sure to use the depreciation schedule that the IRS has for deducting business equipment, business vehicles, and buildings. ***
  1. Improperly mixing business and personal expenses: This is one of the most common business tax filing mistakes of all. Many business clients co-mingle their personal and business banking accounts. “Co-mingling” your personal and business checking accounts makes it hard to distinguish which expenses are tax-deductible. Please keep personal income and expenses out of business bank accounts.
  1. Failure to plan: Tax laws can be complex. Most business owners are too busy running their company to understand all of the tax law nuances. A CPA or tax attorney is experienced in these matters and can help the business properly manage their accounting and business processes. Tax advice can help businesses take advantage of their resources and avoid unwanted consequences that may unknowingly occur due to the complexity of the tax laws. If you are about to incur an unusual financial transaction such as a large asset purchase or sale that is not an ordinary part of your business activity, contact your CPA to discuss the tax implications of the transaction. There may be unforeseen and unexpected tax consequences.  

At A.K. Burton, PC, our specialty is assisting small business clients with their taxes. We are familiar with the tax laws and can advise our clients on being proactive in their tax planning for now and the future. Call us at (301) 365-1974 for a consultation. Our office is open! We serve Bethesda, Rockville, and Montgomery County. MD area.

*** You can find the IRS Depreciation Form 4562 here.