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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

Summer is the Perfect Time to Do Tax Planning for Now and 2023

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The summer is a good time to take a break. Head to the beach. Take a few weeks off. All of that is good and healthy.

However, summer is also a great time to do some minimal tax planning. It won’t take a lot of time to do it and you can still enjoy your summer. Trust us, you can take a few substantial steps now that will help you later.

So, before you pack the cooler and swimsuits, let’s do a few things:

  1. Retirement planning: You can still make plans by allowing for employer contributions to be made until the extended due date of the return. One way to do it is by making the maximum allowable contribution to your retirement plan. This year, 401(k) and 403(b) have a $20,500 contribution limit. There is also a $6,500 contribution for taxpayers who reach age 50 by 12/31/22. 
  2. Real Estate holdings: The DMV area has a hot real estate market. So §1031 can be used by rolling proceeds from a sale into the like-kind property within a timeframe. (It is specific and must be followed to the letter.)
  3. Capital gains: You may want to defer the tax liability with an Opportunity Zone investment. This is reinvesting capital gains in an Opportunity Zone within a 180-day window. Then defer the tax on the original gain until December 31, 2026. Opportunity Zone investments can be held for ten years as they will not be taxed by the IRS. 
  4. Depreciation: Depreciation, for business owners, need not be determined when the asset (business property) is used. Bonus depreciation is already automatic. “Out of bonus” depreciation can be claimed for each asset class. Attach a statement to the timely-filed tax return and then depreciate the asset over its life. 
  5. Required Minimum Distributions: Your brokerage can pay your RMD directly to the charity you designate. A qualified charitable distribution (QCD) is not recognized as income. It keeps your adjusted gross income lower, and it may even reduce Medicare premiums. You can still make the standard deduction but remember that you can only claim a total of $100,000 per tax year.
  6. Donor-advised funds: You are allowed to take a tax deduction in the year that cash or other assets are transferred to a DAF. They can be invested until you recommend the DAF distribute the funds to all of the charities you support. You are not taxed on interest, gains, and dividends generated by investments made by the DAF. It’s a great way to accomplish tax planning goals. You can also claim a deduction for the fair market value of the donated assets and not have to pay capital gains tax on the appreciation.

These are just a few of the ways you can plan for your 2022 tax returns and beyond. Be sure to consult the IRS, your tax advisor, or your accountant. ***

AK Burton, PC, knows the current tax laws and how to work with the IRS. 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 on tax preparation, visit the IRS website. 

tax preparation

Tax Advisor: What If You Missed the Deadline on Your 2021 Tax Returns?

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As we write this blog today, April 18-Tax Day 2022, has passed. The deadline to file for most US citizens is over. 

You read this and say, “I missed the deadline. Now, what do I do?” 

The good news is that if you missed filing on April 18, then you have options. All is not lost and no, there won’t be any black helicopters landing in your backyard. You can still file, so all is not lost.

In fact, here are some steps you can take that will resolve your tax filing deadline miss situation:

  1. If you owe money on your 2021 tax return and have not filed an extension: You should file your tax return as soon as possible. The IRS hands down two penalties if you owe: failure-to-file and a late payment penalty. Failure-to-file penalty applies when your return is late. It is five percent (5%) of your unpaid tax bill for each month or partial month your return is late. It maximizes to twenty-five percent (25%). The late payment penalty is 0.5% of your unpaid tax bill for each month or partial month your return is late, up to a total of 25%. The bottom line is that the quicker you get your tax returns filed after the deadline and pay your bill, after being late, the smaller the penalty you will have to pay. However, if you are unable to pay your tax bill in full, you can request the IRS to put you on an installment plan. It doesn’t erase your late penalties, but it will protect you from the IRS garnishing your wages. Just keep in mind, that the longer it takes for you to file your return, the greater the late payment penalty.
  2. If you don’t owe money for your 2021 tax returns: You may be due a refund from last year’s returns, but you missed the April 18 deadline, anyway. Believe it or not: You’re safe. You will not be penalized. You will have to wait longer to receive your tax refunds, though. Nevertheless, file your tax returns soon so you can get your money back.
  3. Missed deadline unknowingly: That’s okay, too. Just submit your return as soon as you can. Next year, if it looks like you may be filing your tax returns late again, ask for a tax extension by the filing deadline. *** You then have six more months to file your return. If you request the extension and still don’t get your return completed by the deadline, a late payment penalty will apply to any unpaid taxes from the current tax year. You won’t be charged with the aforementioned failure-to-file penalty as long as that extension request is made on time. And you don’t even have to give a reason to be granted an extension. The IRS doesn’t ask why you need more time to file. 

So, you see, it isn’t “Doomsday” after all. You do have options. Just be sure to act quickly to save yourself money and stress. 

AK Burton, PC, knows the current tax laws and how to work with the IRS. 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.

*** If you’d like more information on IRS Tax Return extensions, visit the IRS website.  

Tax Advice

Business Tax: Planning During the Pandemic

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As we write this blog, unfortunately, the whole CVOID-19 pandemic is still with us and maybe for a while, though we are hopeful it ends soon. 

Here at AK Burton PC, we are working with our clients to create tax plans tailored to their unique situation. Now, during the uncertainty that the pandemic has caused; it is important to answer the questions business clients have now and plan for their future. Here are a few examples of some business tax planning strategies: 

  1. Depreciate idle business equipment (idle asset): The pandemic has caused a lot of business equipment to become idle. The business owner needs to show that they plan to use them again as soon as the business returns to full operations. It is known as the “idle asset” rule. If the equipment is abandoned or disposed of then the rule is no longer in effect.
  2. Automatic changes in accounting method: A business owner can make accounting changes right up to the due date of the tax return. Such changes may include: changing the treatment of prepaid expenses, accrued compensation, advanced payments received, reviewing the class lives used for depreciation, and reviewing the application of the uniform capitalization rules on inventory.
  3. Transfer-pricing arrangements: Due to the pandemic, businesses have lost thousands or millions in sales. This has decreased cash flow. So, now customs declarations or adjustments must be revised. Thus, the transfer-pricing for goods may not be relevant due to the three-month (or longer) cessation of business due to the COVID-19 pandemic which did not provide U.S. multinational companies a way to shift tax burdens between jurisdictions. (As we always say, consult with your professional and licensed tax planning consultant.) 
  4. Review business receivables to see if there are any write-offs: A “bad debt deduction” is only allowed for debts that are worthless during the tax year that the deduction is taken. The true worthlessness of the debt and the fact that is was taken during the tax year must be determined.
  5. Inventory values: Lower-of-cost-or-market (LCM) inventory valuation may bring inventory write-downs before the inventory is sold. (See your accountant about regulations.) All inventory items must be considered separately so correct values can be determined. (A percentage write-down is allowed for accounting.) 
  6. Verify that there is adequate stock and debt basis for S Corps/Partnerships: Coronavirus Aid, Relief, and Economic Security (CARES) Act may result in increased deductions and taxes paid for potential refunds. Relief provisions come from a partnership or S corporation and the partner/shareholder must have an adequate tax basis for any deduction or loss that comes from the entity to benefit in the current year from these favorable provisions. if an additional basis needs to be created by making additional capital contributions or loans before the end of the year.

These are just a few examples that may apply to your 2020 business tax planning strategy. While COVID-19 has made tax planning even more challenging, you and your accountant can still work within the guidelines to maximize the benefit of tax planning for your business. 

A.K. Burton, PC, has experienced tax advisors who can help you with your 2020 COVID-19 business tax planning. Call us at (301) 365-1974 for a consultation. Our office is open! We serve the Bethesda, Rockville, and Montgomery County. MD area.        

*** For more information on the forms and other IRS documents, click here.

Tax Advice

March 16 is Coming: Taxes for S Corps and Partnerships

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By the time you read this blog, Monday, March 16, 2020, will be even closer! No, this is isn’t “Mr. Obvious” talking here. It’s your business tax advisor sending you a notice to get on it to avoid IRS fees and penalties. 

Why is this date so important? If you own an S Corp or a Partnership, your taxes are due at that time. (Normally it is March 15 but that is a Sunday so it was moved to Monday.)  

Here are the business tax returns and their due dates: 

  1. S corporation returns must be filed on Form 1120S with Schedule K-1 for each member: March 16, 2020. 
  2. Partnership returns file a partnership tax return on Form 1065 with Schedule K-1 for each partner: March 16, 2020.
  3. Multiple-member LLC returns filing as partnerships file on Form 1065 for the partnership and give Schedule K-1 to each member: March 16, 2020.

So, be proactive and take action now. Here are six things you need to send to your tax advisor so they can file it on time for you:

  1. Year-end bank/credit card statements: Compile all of your bank and credit card statements. These should show all of your purchases and monthly statements.  
  2. Payroll tax reports: IRS Form 941 is used to report the federal income tax, Medicare and Social Security amounts you withheld from your employees’ paychecks. Also, report your portion of Medicare and Social Security on this form. Employers are responsible for making federal unemployment tax contributions. You will pay taxes on the first $7,000 earned by each employee. Employees are not allowed to contribute to your unemployment tax liability, so you cannot deduct the tax from their wages. It is filed on Form 940. 
  3. QuickBooks (or other copy of your books) copy if you have one: A copy of all your business bookkeeping. If it is Quickbooks, you send a copy of the bookkeeping records to your small business accountant.  
  4. Last year’s business return (new preparer only): If you have a new accountant, you need to include a copy of last year’s tax return. This will save, and your bookkeeper, a lot of time. You may be spared phone calls and emails from them as they can use it as a template for this year’s return.  
  5. Vehicle mileage (total & business): Submit all of your vehicle business mileage. Include business mileage and total mileage. (You may want to use an app to record all of your business mileage.)***   
  6. Details on large business purchases: Did you purchase a vehicle for your business? (truck, car, motorcycle, etc.) You may have purchased smartphones, copiers, printers, computers, cameras, etc. Any large business purchases need to be reported.   

You have enough time to get these records to your tax advisor for them to complete the forms and file them with the IRS. Please don’t delay. It will save you time, money and a phone call from the IRS, which nobody wants. 

A.K. Burton, PC, has experienced tax advisors who can advise, complete and file all of your business tax returns by March 16. Call us at (301) 365-1974 for a consultation. We serve the Bethesda, Rockville and Montgomery County. MD area.

***A list of business mileage apps can be found here. 

Accounting and Bookkeeping, Tax Advice

Tax Preparation 2020: No Time Like Now to Make next Year’s Returns Easier

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Tax Season 2019 is over.

Yay!! Taxes are filed! Time to party and enjoy life until next April, right?

Wrong.

Well, yes, you could procrastinate doing your tax preparation like millions of other Americans. Out of sight, out of mind. That works for some folks, but not for others. Often, that means delaying the inevitable. You hope that the mistakes you made on your returns will not be repeated next year.

tax returns AK Burton

There is a better way. Here at A.K. Burton, PC, we specialize in helping our clients tax plan. Even if it seems overwhelming and you don’t know where to start, we are here to help you. We can help prepare now, this year, to get your tax plan in order and get ahead of the game. Here are several ways you can prepare for next year’s tax return now:

  1. Plan your tax write-offs: You have old equipment (mowers, tractors, espresso-makers, computers, cars, etc.) that needs to be replaced. Now is the time to plan on purchasing that equipment to use in your business. However, before you purchase the new equipment that is high-dollar, check with your financial adviser on the tax benefits of the items.
  2. Set up estimated tax payments: When you filed your 2018 taxes this year, your accountant may have advised you to begin paying your estimated tax bill for 2019, now. Depending on your 2019 projected income and withholdings, your accountant may give you estimates for federal, state, and local taxes. Pay attention to your payment options.  For a federal estimated payment, you can register and pay online at www.EFTPS.gov or you may have the option of sending payments by direct mail. You may be advised to pay monthly or quarterly. Paying ahead and lessening your burden (or erasing it altogether) by April 15, 2020, is a guaranteed way to get ahead. If you need to generate estimated payments for 2019, AK Burton PC provides this service.
  3. Make changes to your withholding: If you had a child, got married, got divorced, adopted a child, purchased a home, or made other life changes, you may need to adjust your withholdings from your pay. If so, file a new W-4 with your employer. Many of our clients seek our advice on this topic. Choosing the wrong number of allowances can lead to an unwanted surprise when filing your taxes.
  4. Give more to your 401k: You may not be working all your life. You may have plans to retire one day. If so, then put more money into your company or private 401k account. You can contribute up to $19,000 each year now, excluding catch-up contributions. If you’re interested in maximizing your retirement and minimizing your tax liability, A.K. Burton, PC is here to help you.
  5. Re-examine your business structure: “Business as usual” is not always a smart strategy. Becoming an LLC, S or C Corporation may be an upgrade that you need. Check with your tax adviser for the designations which may benefit your tax strategy. At AK Burton, PC we take the time to understand our small business clients and maximize tax strategies such as restructuring.
  6. Stop procrastinating! Whether your business has just begun or has been around for several years, there are evolving tax strategies to consider. Stop procrastinating and make the changes now. It takes time, and you may have to make some adjustments. But in the long term, it will be worth it for you, your business, your clients, and your family.

Here at A.K. Burton, PC we specialize in tax planning and strategies. We provide the services that our clients need in an ever-evolving work and regulatory environment. It is our mission to use our expertise to help our clients achieve the best results possible for their unique circumstances.  Today is the day to begin that strategy. Contact one of our tax advisers at (301) 365-1974 or email us at info@cpa-maryland.com. We serve the Bethesda, MD and the Washington, D.C. area.

Tax Advice

Not too late to Plan: Year End Tax Planning

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Fall is a beautiful time of year. Holidays are around the corner and taxes are the last thing you want to think about. However, certain events can drastically change your tax liability. Now is the time to plan for these changes so that a large tax bill doesn’t sneak up on you.

Just like the leaves changing, things change during the year.A  job promotion, new job, retirement, adding a new family member, or maybe an inheritance are some examples of significant events that may impact your taxes.

tax advisor AK Burton

Here are a few reasons to contact us at A.K. Burton PC for tax planning services:

  1. A change in employment. Any change in your earnings should have you reaching out to our office to discuss the best course of action. For example: when hired, you fill out form W-4 to set your allowances. Do you want one, two, or what does allowances even mean? By discussing the matter with us, we analyze and make the best decision with you.
  2. Form of compensation. For example: a change in how your money is earned such as from an employee earning income that is reported on form W2 to an independent contractor being compensated by form 1099-MISC triggers a significant tax event. Contact our office to discuss the steps that you need to take as an independent contractor. One of those steps is making estimated tax payments based on your income.
  3. Retirement. If you’re looking at retiring it is essential to contact our office and discuss what the change in income will be and what steps you’ve taken so far in the process. There are many options concerning your retirement and tax liability. Be especially cognizant of required minimum distributions once you turn 70 ½ years old. These distributions are required and the withholding that has been set up in the past may not be enough to avoid a tax liability. Contact our office to plan ahead and work to avoid unnecessary surprises.
  4. Capital gains. A large gain from an investment may trigger a nasty surprise depending on your tax bracket and other income. Any significant change in investment income should be discussed with your tax adviser.
  5. Investment property. There are many taxable situations that occur when dealing with a rental property. Many tax rules are not understood by other professionals to the extent of our staff’s knowledge. Before making the decision to sell that condo you’re renting out; contact our office and double check what tax consequences may ensue. It only takes minutes to shoot us an email or give us a call. You’ll be happy you did.

These are only some of the reasons to engage in year end tax planning with your tax advisor. Any significant change in your life should be discussed with your advisor as soon as possible. Year-end tax planning is a great way to wrap up the year and prepare for filing your taxes. At A.K. Burton, PC we specialize in year-end tax planning because it is a service our clients consistently rely on.

A.K. Burton, PC, which serves the Washington,D.C. and Bethesda, MD area, has experienced and licensed individual financial advisers who can help you with your year-end small business tax preparation. Contact us at (301) 365-1974 for more information or email us at info@cpa-maryland.com.

 

Accounting, Tax Advice

How to Choose the Best Tax Advisor

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It’s only mid-way through the fall but it’s not too early to be thinking about your tax returns for next year.

In fact, now is the time to be thinking about your personal and business tax returns especially if you have had issues in the past and want to do it right or better this time. Your tax records and tax filings are too important to be done just by anyone, including yourself, who is unfamiliar with tax laws, deadlines and forms. It could be a serious financial and legal mistake to do it on your own without any advice.

So as the holidays draw closer, begin the search for a tax advisor. Here are Five Things to Consider When Choosing a Tax Advisor:

  1. Relevant Industry Experience: No tax advisor can know everything about every industry. Make sure you are comfortable with the amount of experience the tax advisor has with your industry. Don’t be afraid to ask the advisor if he has other clients in your industry and how long he has been doing work for them. The accounting firm partners should be able to tell you if they have enough experience to handle your case. If not, ask them to send you to a firm that can do it.
  2. Five-year Minimum experience: The senior member should have at least five to ten years of experience in completing business tax returns. Also, better to find a larger accounting firm with a variety of tax advisors. This means that the accountants have had diverse experiences with a variety of industries.
  3. Certified Public Accountant (“CPA”) Designation: As a business owner, your tax advisor should be a CPA at a minimum.  You can also choose an Atty/CPA as your tax advisor.  An Atty/CPA is a dually designated individual who is both an Attorney and a CPA and is generally more knowledgeable than an advisor who is just a CPA.  Either way make sure you have one or the other.  As a business owner you cannot afford not to.
  4. Audit Representation: IRS audits are a fact of life. Even though IRS audits are down recently, you never know and cannot control whether they will audit you next. Even the most honest among us have had to go through the stress and endure the headache of having an IRS auditor reviewing our tax returns. It is, then, crucial for your tax advisor to agree to represent you during any and all audits. They can answer questions, find documents and, most importantly, advise you on any issues druing the audit. You do not want to go through an audit alone. Make sure your tax advisor is there every plodding step of the way.
  5. Fees and Fee Structure: Before you sign up with any tax advisor, find out what they charge for their services. Make sure that you are comfortable with how and what they charge. Being organized with your business records can help prevent your Accounting Bill from getting out of control.  Quicken, Quickbooks, Mint or other accounting programs can help maintain your records in reasonable workable shape. Any paper documents should be organized by type and date. Avoid the “shoebox style of organization” which forces advisors to spend hours (and your money) trying to put it all together. You will save a lot on time and fees (and bad will) by organizing your documents.
  6. Location: With the advent of the internet and the 21st century, your tax advisor does not have to be a few blocks down the road, though being local saves on expenses, especially if you are audited. They can be in another city or state. However, if you have multiple businesses that require a lot of attention from professionals, then you will probably be better served by having someone local who can drop by and advise you on a more frequent basis and keep abreast of your local issues as well.

Yes, it seems too early to be talking about tax advisors, but you may already be rethinking that after reading this blog. That’s good because the next quarterly filing is coming up in January. Don’t go it alone. Find a licensed and experienced tax advisor today.

A.K. Burton, PC has experienced and licensed tax advisors on staff. If you need more advice on business and individual tax planning, contact us at (301) 365-1974 for more information or email us at info@cpa-maryland.com.