What are Payroll Tax Audits?Posted on February 9th, 2019
Business owners spend many hours filling out payroll tax paperwork for the federal government. If paperwork is not done properly, owners and managers can be held personally responsible. The IRS has policies for filing tax cases against owners and managers when income taxes are not withheld and promptly sent to the IRS.
Know Your Responsibilities
The IRS identifies small businesses as the largest source of uncollected taxes, so much focus is placed on the accuracy of payroll taxes. There are significant penalties that can be assessed against you for a failure to file, a failure to deposit, or a failure to pay. Some of these penalties can be lofty and only increase over time with added interest if an agreement is not reached early in the process.
It can be considered a crime to not file your payroll taxes. Additionally, any business owner who borrows against their payroll taxes is violating federal law, as the money collected from an employee’s paycheck doesn’t technically belong to the company.
Problematic payroll tax filings can result in the business owner being personally liable. In some instances, a past due amount owed can result in the IRS putting you out of business, permanently, or until the debt is settled. When you enlist the help of qualified tax and accounting professionals, they can help you and your team find an amicable solution that satisfies your obligation to the IRS, allowing you to hold onto your company’s finances, as well as your own.
IRS Compliance is Key
Insufficient documentation can trigger an investigation, but each business is judged individually and held to different standards. If a business does not demonstrate a “willfulness” to comply, the IRS may assume that they are intentionally evading tax payments. If the IRS feels it is being misled, they may seek to enforce greater penalties.
Individuals who are technically in authority over tax payments, but do not have that as part of the duties in their job description, still will be held responsible by the IRS. Business owners, officers, and managers can be penalized for mistakes made by bookkeepers, whether they were done intentionally or not.
Be Prepared for a Payroll Audit
If the IRS has requested to audit your payroll taxes, a business owner who has kept organized records will be able to provide the necessary documents to resolve any discrepancies with ease. IRS workers inspect the following documents to determine liability when penalties are being charged:
- Articles of Incorporation
- Copies of Cancelled Checks to Creditors
- Interviews with each person using form 4180. You may be asked of your responsibilities, money allocated for payroll taxes.
It’s important to understand how your payroll works when the IRS wants to audit your records. Many companies run into trouble in how they designate independent contractors versus salaried employees. Independent contractors help with the budget since they aren’t receiving paid time off, health benefits, or other perks that some ventures offer when signing on as an employee. Company owners who incorrectly account for this can be subject to penalties for the incorrect designation. A qualified accounting team can assist you with these determinations, and help determine how to amend any misclassifications.
Call BMH Accounting for Payroll Tax Advice
Having a qualified accounting team to help your business manage its payroll taxes may prevent an audit which can financially cripple a business. Give BMH Accounting a call in Boynton Beach for professional help to keep the IRS at a safe distance.
Business Valuations in Boynton BeachPosted on December 7th, 2018
Wise investors know that they should conduct an independent analysis on the value of their business. Estimates must not be clouded by emotions, instead financial professionals should perform objective analyses of relevant data so you receive an accurate and fair valuation. Relying on buyer opinions or marketplace estimates cut short your profits when growing a business or planning to sell it.
Relevant Date for Accurate Valuation Service
With relevant data that impacts the actual worth of an enterprise, accounting professionals assure a maximum return on your investments. Sometimes hidden and overlooked assets can be discovered during the process that impact your company’s value.
There are several factors that are inspected to determine the value of your company:
- Inventory of Assets – This can be used to generate revenue for small businesses. Larger businesses may use inventories to further their investments.
- Comparisons – Knowing the selling price of similar companies can provide valuable insight.
- Liquidation Value – This can be helpful for those looking for a quick sell.
- Income Capitalization – This can give a good prediction of potential future profits based on historical data.
- Income Multiple – This process uses the seller’s net income or owner benefit amount to calculate an income multiple, which can be used to negotiate price.
Valuations are Useful for Other Assets
Valuations can also be conducted on other assets. For example, Estate Tax Discount Appraisals ensure that major tax cuts are not deducted so both the beneficiary and the estate owner benefit. Divorce Financial Service valuations provide clear accounts of assets and income so the right amount of spousal support is allotted.
Increase Your Knowledge for Wise Business Decisions
Thoroughly and accurately collecting valuation data helps businesses know their options for future growth and what deals are worthy of acceptance. It can also alert them to risky investments that have a growing debt or an ineffective management style that may need to be overhauled.
BMH Accounting in Boynton Beach for Excellent Financial Assistance
Contact our dedicated team of accounting professionals at BMH Accounting today for a wide range of valuation services. We provide trusted financial services to business owners throughout Boynton Beach, Boca Raton and Lake Worth.
Helpful Deduction Tips for Small Business OwnersPosted on November 18th, 2018
Small business owners benefit greatly from maximizing credits and deductions. Deductible expenses help entrepreneurs with the costs of operating a business, effectively lowering their tax obligation and allowing them to utilize those savings for bettering their company’s operations.
Below are a few examples of how a small business owner can take advantage of certain deduction opportunities when filing a tax return.
Start Early: Prep for Tax Season Year-Round
Come tax time, some businesses are unprepared and require the assistance of an enrolled agent or CPA to help them gather the appropriate documentation. Unfortunately for some, these records may have been lost over the course of the year.
Start each tax year with the intention set forth to succeed. Keep detailed records year-round and face tax time calm and ready. Monthly visits with your tax professional can help you keep organized and focused on a successful tax season. Waiting to wrangle your taxes until the deadline nears can lead to costing you money rather than saving it.
Save Every Receipt
Keeping organized records of your transactions makes qualifying your expenses simple and straightforward. Save your receipts for all expenses related to your business.
Vehicle expenses, for example, include gasoline, maintenance, parking, and tolls. Maximize your potential by comparing your actual mileage rate to the IRS standard mileage rate. File at whatever rate would save you the most money.
Aspects like utility expenses, rent, furniture, and equipment are all deductible if proven to be a business expense. Save your receipts and transaction copies whenever possible. Keep them organized by section and save when it comes time to file.
Did you know that employee benefit programs and many retirement programs are tax deductible? Even self-employed LLC owners can deduct contributions to their own qualified retirement plan. These can be claimed as personal deductions on a 1040 form.
Employee salaries and wages are tax deductible as well, however, payments to LLC members are not considered wages.
When deducting substantiated business-related meals, the government will cover half the cost. Save receipts and claim these expenses on your taxes.
Call BMH Accounting for Tax Assistance
The skilled accountants at BMH Accounting can help you succeed at tax time. Give us a call to schedule a consultation. We look forward to hearing from you! We proudly assist clients in Boynton Beach, Lake Worth, and Boca Raton.
Should I Choose a Roth or Traditional IRA?Posted on November 4th, 2018
Do you have questions about which type of Individual Retirement Account (IRA) is right for you? When deciding between a traditional IRA and a Roth IRA, consider factors to such as tax incentives, age restrictions, and income restrictions before making your decision. Tax Incentives One of the main differences between the traditional IRA and the Roth IRA is the tax incentives provided by each. When deciding which is right for you, focus on what tax bracket you plan to be in when you retire, and if that bracket will be higher or lower than the one you’re in now.
- Traditional IRAs – A traditional IRA is the best choice for you if you believe your tax rate will be lower in retirement than it is right now. With traditional IRAs, you are not taxed when you contribute money to your account. Taxes are paid when you withdraw the funds.
- Roth IRAs – Roth IRAs are the best choice for you if you believe your tax rate will be higher in retirement than it is now. When you contribute to a Roth IRA, you pay taxes on the funds as you put them in. You will not have to pay taxes on funds when you’re able to withdraw.
- Age Restrictions
In addition to considering tax incentives when choosing between a traditional IRA and a Roth IRA, it is important to keep in mind that with a traditional IRA, there are age restrictions for contributions.
- Traditional IRAs – Anyone younger than 70 ½ with earned income can contribute to a traditional IRA.
- Roth IRAs – Roth IRAs don’t have age restrictions.
- Traditional IRAs – You can contribute to a traditional IRA regardless of how much money you make. However, the amount of money you contribute can’t exceed the amount of income you earned that year.
- Roth IRAs – For some high-income earners, Roth IRAs are out of the question. To contribute to a Roth IRA, single tax filers must have a modified gross income of less than $135,000 (in 2018). Married couples filing jointly must have modified AGIs of less than $199,000 (in 2018) to be able to contribute to a Roth IRA. The amount you contribute to a Roth IRA can’t exceed the amount of income tax you earned that year.
- Traditional IRAs – Traditional IRAs require you to start withdrawing funds at age 70 ½, even if you don’t need the money.
- Roth IRAs – Roth IRAs don’t require withdrawals during the owner’s lifetime, which means that you can let your Roth IRA continue to grow throughout your life (tax-free) if you don’t need the money. To avoid incurring a tax payment, Roth IRAs require that the first contribution be made at least five years before the first withdrawal.
- Traditional IRAs – Contributing to a traditional IRA lowers your adjusted gross income for that year, which can help you qualify for other tax incentives such as the child tax credit or the student loan interest deduction.
- Roth IRAs – Roth contributions (but not earnings) can be withdrawn penalty and tax free at any time. Even before age 59 ½.
How Tax Planning Helps Motivate Business GrowthPosted on November 2nd, 2018
Taxes are a fact of life, especially in the world of business. Whether big or small, corporation or LLC, every business must pay their taxes, or risk a less-than-pleasant visit from the IRS.
Growth is also a major factor in running a business. The vast majority of companies continually grow and expand in order to stay competitive. However, these aspects impact each other in ways that are sometimes unexpected, especially for entrepreneurs who are just getting started.
Let’s take a look at some of the ways that proper tax planning can foster a business’ growth.
Saving Money for the Future
Tax planning, when you boil it down, is all about the art of reaching tax efficiency. Tax efficiency means achieving a balance on your tax return using deductibles, credits, and other methods to minimize your liabilities to federal and state revenue agencies.
In the end, the goal is simple: pay only what you owe in taxes. It seems simple, but there’s a lot that goes into the process. Between thoroughly analyzing your income, payroll, and other assets, it is possible to develop a plan of action that can save you significant amounts on your taxes.
The money you save and the deeper understanding of taxes and finances that you gain throughout this process is invaluable as a business owner, and it is these very things that will help your company grow.
Business, for the most part, is about maximizing profits and minimizing cost, and proper tax planning gives entrepreneurs the tools they need to navigate the complexities and new challenges associated with expansion.
Growth and Taxes Aren’t a One-Time Thing
The biggest mistake business owners make is assuming that taxes only happen once a year, and that growth means rapid, one-time expansions. Both of these ideologies are categorically false.
As the owner of your business, you are responsible for your withholdings and tax payments, as well as those of your employees. It’s important, then, that you be able to accurately track those numbers and estimate your quarterly tax payments and pay them, as well as make charitable donations and claim the right deductions.
Similarly, business growth isn’t a singular goal, but an ongoing process. Whether it be an expansion in your product line, a new production method that saves you and your customers money, or just moving into a bigger property, growth is a variety of things both big and small that improve your business.
Get the Help You Need to Succeed at BMH Accounting!
The world of taxes and tax planning can be confusing and complicated for many people, and as a business owner, you already wear your fair share of hats. At BMH Accounting, we understand that, and seek to help all of our clients in Boynton Beach, Lake Worth, and Boca Raton alleviate their tax burden and achieve their goals.
If you’re interested in learning more, don’t hesitate to contact our firm to schedule a consultation.
The Advantages of Outsourced Accounting for Small Business OwnersPosted on October 19th, 2018
Nobody ever said running a business was easy. It takes passion, dedication, and hard work – and that’s just for your day-to-day operations. Then comes the financial side of the business: bookkeeping, accounting, taxes, etc. These are vital functions that keep your business healthy and financially strong.
However, the truth is that many business owners, while proficient enough to get by, simply aren’t accounting experts. Furthermore, nobody should expect them to be.
Entrepreneurs start businesses because they have a passion and drive for something they love, not for a fondness of math. That’s why accounting is one of the world’s oldest professions. Business owners have been paying accountants to handle their finances as far back as 3300 B.C.
So, what are the advantages of outsourcing your company’s accounting to a financial professional?
As a business owner, you have a lot on your plate. Outsourcing your accounting processes to an accountant alleviates you of extra work that is better left to an expert.
Many entrepreneurs report that they put in up to 60 hours per week or more, often working six and seven-day weeks. Not only can this put enormous strain on your personal life, but it also puts you at risk of burning yourself out over time.
By trusting a professional with your business’ finances, you not only have more time to focus on your business, you have more time to focus on yourself.
While some entrepreneurs might think that hiring an accountant is an unnecessary expense, these financial professionals are capable of looking at your books and accounts and isolating problem areas.
In some cases, the money they save you can more than make up for the cost of outsourcing the work in the first place.
Whether big or small, companies must constantly grow and adapt to stay competitive. For growth to happen, it is crucial that your business have financial strength and stability, as well as a concrete plan for that growth.
When you outsource your accounting needs to accounting professionals, they can apply their experience and expertise to identify and resolve any discrepancies or extraneous spending. A benefit of this is that, as a result, your business gradually increases in efficiency, giving you a better understanding of your venture’s financial processes and needs.
This knowledge gives you the tools you need to make more informed decisions and develop more detailed plans for the future.
Find Out More from BMH Accounting
BMH Accounting of Boynton Beach, offers small business accounting as one of our many services, and we proudly help business owners in our town, as well as the surrounding communities of Lake Worth and Boca Raton.
Contact our office to schedule a consultation and find out more about how we can help you succeed!
How to make the most of your 401(k)Posted on July 31st, 2018
If investing in your future is something that rests entirely on your shoulders, know that there are options. If you have employer-sponsored plans like 401(k)s, it’s imperative to that you properly optimize that plan to its fullest. But saving for retirement is a process, and its best to understand your avenues even if you’re just starting out. So here are some tips on how to start preparing for retirement.
– Consider maximizing your contribution which is matched by your employer in the 401(k) program at your company. In some cases, you could get a 50 percent return on your investment. By having the money taken directly out of your paycheck, you have an easier time-saving money without really thinking about it. If you match your contribution and had a direct deposit set up to add more, you will be on a good path towards affording retirement.
– Consider opening a Roth IRA or Roth 401(k) account with an investment firm. There are tax differences between the two, so it is important to discuss the pay taxes now vs. late discussion with an advisor or tax accountant
– Look into a myRA – A singular investment option by use of U.S. Treasury retirement savings bond. This is a great option for those who do not have a 401(k) account at work but have dispensable income. The myRA is convenient in that it accept smaller contributions, with low-balance fees and a higher interest rate than a savings account. Contribute your next tax refund, payroll deduction, or a deposit from a checking or savings account. You have options in size, just know with this plan that once you save $15,000, the money must be rolled into a private Roth IRA.
Start saving and keep saving! Whether you’re saving for retirement or for another goal – don’t give up. If you’re just starting to save, start small and try to increase the amount each month, know your options as you get into more opportunities to save more money for that end goal.
5 Budgeting Tips to Save CashPosted on May 26th, 2018
Saving money is a difficult commitment to make, but it provides benefits in the long run. Life throws unpredictable events at us, and preparing our budgets to account for accidents or emergencies grants peace of mind. Saving is also one way to hold off on wanton spending that drains accounts rapidly. The following tips to save money can inspire balance in your daily financial habits.
Stick to a 30 Percent or Less Rule
It’s hard to save money without setting up a cap on your spending. When payday rolls around and there are new products or items grabbing our attention, it’s incredibly difficult. We recommend setting a limit of 30 percent of your paycheck to spend on entertainment and leisure. This reserves 70 percent use for essentials. Use 30 percent as a starting point and decrease the limit to save even more money as you become more confident in your saving strategy.
Establish Financial Goals
Nothing helps curtail personal spending and establish a direction more than creating a strategy. By writing down financial goals, such as paying off your car by a certain date, you lay a foundation for future success. Knowing where your money flows is liberating and strengthens resolve in saying no to frivolous purchases.
Manage Personal Cash Flow Daily
Dedicating one minute a day to looking over your bank account makes you aware of where you spend the most. This also promotes comfortability in managing one’s finances. Get cash out daily or weekly to keep to a specific spending amount, which is a research-proven technique that keeps your cash account stable. When swiping cards is the go-to, the convenience causes individuals to spend much more.
When new products appear on the market, whether a new gadget or guilty pleasure, it important to hold back the impulse to buy it. Impulsive shopping tends to influence purchasing habits and tricks us into buying items we don’t need.
Pay off Larger Debts First
When paying off credit card debt or loans, it’s beneficial to chip away at a loan with a higher interest rate. If you wait to pay, amounts owed increases exponentially. Although paying off smaller amounts of debt with smaller interest rates seems more manageable, they won’t cost as much as high-interest debt. By hedging larger loans and limiting the traction their high-interest gains, the debt is more manageable over time.
Reducing Tax Liabilities for High Income EarnersPosted on February 7th, 2018
Preparing for end-of-the-year taxes can be daunting, but understanding good tax-planning practices can help to increase your chances of receiving higher returns on your investments. Income from investments can be one of the best places to look when searching for places to cut costs and increase your revenue. Creating a proactive tax-plan can prevent you from paying thousands of dollars in unnecessary taxes.
While high-income taxpayers are required to pay the most income tax, there are a few practices these individuals can engage in to lower the amount they pay at the end of the year.
Purchasing stock for at least one year prevents you from paying additional costs from unnecessary taxes. Allowing your stock to become eligible for long-term treatment helps to reduce the amount you pay in taxes. Failing to hold stock for at least a year causes you to pay short-term capital gains on investments rather than just the 15 to 20 percent of normal capital gains tax, in short paying more.
Regular reviews of your taxable assets makes sure you’re aware of all the areas that may be costing you extra money. Routine checks develop good practices and habits that help to reduce what you pay.
Reduce the amount of taxable interest, which means reducing the amount of money stored in low-profit areas. Banks give their clients close to nothing, while clients are still required to pay at least half of that interest in taxes. Utilizing high-profitable places to store your money will not only increase your dividends but also reduce the amount of taxes you pay.
Give away assets, that is, giving or donating assets to charities and family members using appreciated stock, may reduce the amount of taxable income you own. Neither party associated in the exchange is required to pay capital-gains taxes when the stock is transferred. Additionally, family members may qualify for a different tax bracket that are lower than your costs, in turn reducing the overall amount of gains lost through the process. Since the New Year is just around the corner, it’s best to engage in proper tax-planning practices to best increase your chances for reducing the amount of money you pay and increase the amount of profit you actually keep.
Do You Need to Fill out Schedules C & EPosted on November 1st, 2017
Even though we are barely beginning the holiday season, it is already time to start preparing for April 15th. You most likely are focusing on filling out the 1040 and related forms, the general information the IRS asks for. However, what if you rent out a guest room to a tenant, or you make decent money through gardening work on the weekends? If so, income from these might not simply be written down on a box within the 1040. Instead, you might have to fill out a Schedule C or Schedule E.
Schedule C is a form that reports income for any self-employed individual. If you are the sole proprietor of your business (even if it is a single-member LLC) or an independent contractor, you need to fill this form out. Sadly, since you won’t have a boss that writes your own checks, you don’t have the opportunity to have taxes taken out for you; you have to pay the full taxes of your income. That being said, claiming any and all genuine business expenses on your Schedule C will reduce the amount of income that is taxable. Make sure that you gather as many receipts for your business expenses as you can.
Schedule E is the form for certain types of supplemental income: income from rental properties you own, any royalties you earn, and income reported on a Schedule K-1 (from partnerships or S corporations) are some of the more common examples. If, however, income from multiple rental properties is your primary form of income, you may have to use a Schedule C for your sole proprietorship instead. In addition to income, a Schedule E is also used to report business losses (paying for an apartment’s carpet replacement, for example) and helps prevent you from paying too much in taxes. This only applies to “at risk” situations, which is not necessarily the same thing as the total money lost.
When it comes to taxes, honesty is always the best policy; if you run your own business or rent a room to someone, and that income is at least the minimum taxable amount, you will need to fill out a Schedule C or E, respectively. Filling out these forms do not necessarily mean that you will be paying too much in taxes, nor does that mean that you won’t be able to make up for these taxes either. If you see yourself filling out either Schedule, feel free to contact your trusted tax preparer or accountant to discuss these forms. When tax day comes, being prepared for Schedules C and E can save you time and, possibly, money.