Archive for the ‘Business Tax Issues’ Category

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Five Year-End Tax Tips

Tuesday, December 20th, 2011

* Early this month check the amount of 2011 tax you have prepaid through withholding and quarterly estimates. If you’ve underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent your being charged underpayment penalties for 2011.

* Avoid the marriage penalty. If a wedding or divorce is in your plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes. Even though recent tax laws provided some relief from the marriage penalty, they did not eliminate it.

* Plan for losses. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

* Use this year’s annual gift tax exclusion. If you make annual gifts to family members or others, make sure you complete your gifts for 2011 by December 31.

* Squeeze in planned equipment purchases before December 31. Taxpayers must usually deduct the cost of business property over several years. A special election allows taxpayers to expense up to $500,000 of new and used property purchased and put into service in 2011. Also check into the 100% bonus depreciation allowance for new equipment purchases.

Property such as machinery, equipment, and furnishings qualify. Be careful with special rules that apply to automobiles and personal computers.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Bookkeeping, Business Tax Issues, Individual Tax Issues, Tax Updates | No Comments »

Employee theft happens more frequently than you hear or read about. It’s believed that only a small percentage of cases of employee dishonesty are reported and prosecuted. Read more.

Wednesday, November 9th, 2011

Employee theft happens more frequently than you hear or read about. It’s believed that only a small percentage of cases of employee dishonesty are reported and prosecuted. Too often, the employee is just dismissed and moves on to steal from someone else. In other cases, especially where financial controls are weak, the employee may steal small amounts for years without being detected.

There are many things you can do to spot employee theft in your business. Have an inquiring mind, ask lots of questions, and never accept answers that don’t make sense. Spend time each month monitoring your financial results. Look for inconsistencies, such as inventory declining in a slow sales month or excessive customer returns. Listen to customer complaints about late deliveries or missing items, and don’t accept “computer problems” as an excuse. If you know your business, you don’t have to be an accounting expert to sense when something is wrong.

You could also spot-check your accounting records by reviewing one category each month. For example, you might scan the check register to see just what payments are being made. Look for missing check numbers and ask to see any voided checks. Another month you might review the payroll log or look over the records of returned items. Look for multiple entries of similar items or suspicious customer names.

Finally, watch your employees for changes in behavior or spending that seems to be beyond their means. And beware of an employee who insists on doing all the detail work and never takes a vacation. It could be the sign of someone with something to hide.

For assistance with this or any business problem, contact our office.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

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Posted in Accounting, Bookkeeping, Business Tax Issues, General | No Comments »

Who should take advantage of the IRA charitable rollover?

Tuesday, October 18th, 2011

If you or someone in your family could qualify to make a charitable IRA rollover, should it be considered? Here are some of the situations in which this tax break could be beneficial.

* You have to take the RMD, but you don’t need the money and you don’t want to pay tax on the distribution.

* You want to give to charity, but you don’t itemize deductions so any contribution you make would not be tax-deductible.

* You do itemize deductions, but your charitable contribution deduction would be affected by the 50% / 30% of AGI limit.

* Having to include your RMD in income would result in the phasing out of other deductions and credits based on adjusted gross income.

The charitable IRA rollover is a powerful tool for tax planning. But remember, as it now stands, this provision will expire December 31, 2011. Give us a call if you would like to analyze whether this option makes tax sense for you or a family member.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Business Tax Issues, Individual Tax Issues, Tax Preparation | No Comments »

“Other” business expenses is the generic term you see on your tax form. Just what are the other expenses you can legitimately deduct? Read more.

Monday, July 25th, 2011

What “other” business expenses are deductible? The generic term you see on your tax form may leave you scratching your head. Just what other expenses can you legitimately deduct?

While there’s no hard and fast rule, examples include insurance premiums, legal and professional fees, supplies you use in your business, utilities, auto expenses, and the deduction for certain energy-efficient commercial building property.

Here’s a guide for less obvious items.

* Like all costs you incur in your business, “other” expenses must be ordinary and necessary in order to be deductible.  In tax law, “ordinary” means normal, usual, or customary in the context of your business.

For example, if you’re a commercial fisherman, boat insurance is an ordinary expense. Other business owners may have a harder time justifying a deduction for boat expenses.

* An expense is necessary if it is appropriate and helpful to the operation of your business.

* Some expenses are only partially deductible. For instance, the cost of meals and entertainment must have a direct business purpose before you can claim a deduction. Even then, your deduction is generally limited to 50% of your cost.

* Certain expenses are specifically identified as nondeductible. Personal, living, or family expenses fit into this category, as do fines, penalties, political contributions, commuting to and from your job, and most lobbying costs.

Contact us any time you have a question about the deductibility of a business expense. We’ll help you get the greatest tax benefit.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Bookkeeping, Business Tax Issues, DCAA Accounting | No Comments »

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