The Financial Industry is always changing. That’s why we provide useful, relevant updates on topics affecting our clients and our community as they occur. Check this section regularly for financial and accounting news, as well as community events and reminders. You can also follow us live via updates on Twitter or Facebook.
We get a lot of questions regarding what we mean by "Financial Solutions." The simple answer is that we help our clients find solutions to their financial problems. We do not offer life insurance, retirement planning, or any other investment tools. (We do however work with some outstanding financial planners who do offer these services and would be happy to refer you to them.) Instead, by analyzing your business model, reviewing how and what you bill your customers, and tracking your expenses we can help to maximize your profits. Here are two examples.
Lost and found
A client was busy servicing her customers but didn't have any money in the bank. We reviewed her bank statements (something that she, like many people, didn't do) and produced a monthly expense analysis. We were able to identify that she was spending $500 a month for a storage facility that she had forgotten about and didn't even need. This saved her $6000 a year! We also found that she had $2500 in a forgotten bank account.
At a new business meeting, a prospective client insisted that she was billing 30 hours of her time weekly. We told her that was impossible. She politely disagreed but we stood our ground. It was clear that her actual earnings were only about half of what they would have been if she was billing 30 hours a week of her time, without even including billable hours from her staff.
We were hired in the summer of 2010 and as suspected our analysis showed that she was only billing about 35% of her time and almost none of her associates' time. For various projects she had provided clients with estimates and then billed accordingly without actually tracking billable hours. This not only minimized her earnings on current projects, but also minimized future earnings since she wasn't learning from previous projects and quoting the right fees going forward.
It wasn't feasible to start billing current clients 65% more in fees. But, by billing only one additional hour of time per project she increased her annual revenue by 10%!
This past January she was frustrated by the older projects which still weren't earning nearly what they would have if she had properly estimated her time. She was considering increasing her hourly rate but was concerned about client perception. By once again simply increasing billable hours on each project by one hour, she increased her annual revenue by another 10%.
As I've said before, tax laws are constantly changing and it's important to stay abreast of the changes to ensure that your tax returns are accurate and you pay as little in taxes as legally allowed. Below are some recent changes, some of which will affect your 2011 tax returns and others that will impact you and/or your business in 2012.
1. Schedule M: No Longer Required
In prior years (2009 and 2010), you were given a $400 credit per person. This was replaced in 2011 with the 2 percent payroll tax reduction that reduced the Social Security contribution for employees from 6.2 percent to 4.2 percent. For self-employed individuals, this means that your self-employment tax went down from 15.3 percent to 13.3 percent (up to $106,800). Schedule M is no longer part of your tax package.
2. Health Insurance Deduction:
If you are self-employed or a partner in a business, you can now deduct what you pay for health insurance for you and your family when calculating your self-employment income. This should lower both your taxable income and self-employment taxes.
3. New Reporting Requirements:
Stock Sales - Schedule D: Starting in 2011, your 1099-B (which is the form that you receive from your broker for stock sales) will include the cost basis. This will help taxpayers know their true cost basis and will save time during tax season. This means, however, that you can't embellish your cost basis and reduce your capital gains.
1099-K: This is a new form for those who have received payments via PayPal, Amazon or other electronic payment services. You will receive Form 1099-K if you earned over $20,000 a year or you were given more than 200 separate payments. If you sell a lot of things over Ebay, for instance, you may be subject to this and will receive a tax form that you haven't in the past.
4. MTA Tax:
Self-employed individuals (including partners and members):
For tax years beginning on or after January 1, 2012, you're not subject to the MCTMT if your net earnings from self-employment allocated to the MCTD are $50,000 or less for the tax year. (The threshold has increased from $10,000 to $50,000.)
Note: You're still required to file your annual return for tax year 2011 on April 30, 2012, if your net earnings exceeded $10,000 in 2011.
Beginning with the second quarter (4/1/12-6/30/12), if your payroll expense for the quarter is $312,500 or less, you're not subject to the MCTMT for that quarter.
If it exceeds $312,500, use the appropriate rate shown below.
Over $312,500 but not over $375,000
Over $375,000 but not over $437,500
Note: The payroll expense threshold for the first quarter remains $2,500 and the rate remains .34 percent. If your payroll expense exceeds $2,500 for January 1, 2012 through March 31, 2012, you're subject to the MCTMT and must file a first quarter return due April 30, 2012.
From our office at Studio H in Cutchogue, NY, we submit our Top 10 Reasons to get your tax return Done in February:
10. You will finally stop wondering if you owe money or not.
9. If you do owe money, you can start saving now - you don't have to pay or file for months.
8. If you are getting a refund get it right away instead of giving Uncle Sam an interest free loan.
7. Your tax refund may pay for that Spring Break getaway you've been looking to book.
6. You may be able to take your Valentine somewhere other than White Castle.
5. With the debt ceiling increasing, the longer you wait the more likely you are to get an IOU from the government instead of a check.
4. If you still file using snail mail there won't be long lines at the post office.
3. You may have more money for March Madness pools.
2. Your tax return forms will still have that new tax return smell.
And the number one reason to get your Tax Return done in February...
1. Your accountant isn't haggard and running entirely on caffeine as he will be in April.
Yes, you have until April 17 ... and, yes, you can request an additional six months to submit your 2011 tax returns, but it's not going to change the inevitable - you need to file your tax returns. Get them done now...and reduce the stress in your life.
Welcome to 2012. I hope you had a great Christmas, Hanukkah, Festivus or whatever you celebrated. The New Year brings talk of resolutions, hope, and unfortunately, taxes. January has several deadlines. Here are some of the more important ones.
January 17: The fourth and final 2011 individual tax estimates are due on this day. This is also the first day that the IRS will begin accepting e-filed tax returns. Chances are you won't have all of your tax documents (W-2s, 1099s, 1098s, etc.) available yet, but if you do and are due monies back from the government, get your tax returns filed ASAP.
January 31: All W-2s, 1099s and 1098s are supposed to be filed. If you have employees, be sure to mail or email them to your employees by this date. The same applies to independent contractors - they are due 1099s by this date. And, if you collected interest from someone, 1098s are due.
January is also a great time to start gathering your tax records (aside from the ones being sent on or before January 31). This includes any bank statements, receipts for deductions or credits, and any other pertinent tax documents.
Lastly, once again in 2012, the tax deadline has been extended a few days due to Emancipation Day. Your 2011 tax returns (or extensions for all of the procrastinators out there) are due on April 17, 2012 due to the 15 falling on a Sunday and Emancipation Day falling on April 16.
"Happy" Tax Season everyone!
In this economic climate it's not unusual for people to relocate to take a new job or start a new business. If you are one of those people, Uncle Sammy just might want to give you a tax break. If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses. To qualify for the moving expense deduction you must satisfy two tests.
The first test is the "distance test." Your new job must be located at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.
The second test is the "time test". If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test including case of death, disability, and involuntary separation, among other things.
If you are a member of the armed forces and your move was due to a military order and permanent change of station, you do not have to satisfy the distance or time tests.
Speaking of moving, we're moving our offices to 28080 Main Road in Cutchogue (across the street from Karen's Deli). Unfortunately we do not qualify for the moving expense deduction! Please stop in and say hello and check out the latest in pocket protector fashion accessories.
Last week I wrote about how American Express is helping to promote small businesses. As I mentioned, this promotion also helps American Express so while I do support its intent, it isn't an entirely selfless promotion for Main Street. The 3/50 Project however, is an organization whose only mission is to "support independent, locally owned businesses by inspiring consumer loyalty to the storefronts that directly fund their communities".
Their concept is simple. Pick 3 local businesses and spend $50 at each business every month. As I wrote previously, for every $100 spent in locally owned, independent businesses $68 returns to the community, whereas only $43 stays here if you spend that at a national chain. And while online shopping is certainly convenient, that $100 spent online brings ZERO dollars back to our local community.
The 3/50 Project website has many resources for business owners such as in-store signage, flyers and more, as well as a free iPhone app for consumers that directs users to local mom and pop shops. Their current holiday promotion is "Keep the Cheer Here" encouraging the community to keep our dollars home. Shop at your independent, locally owned businesses and Occupy Main Street this holiday season...and throughout the year!
Their website can be found at www.the350Project.net
If you are a small business owner then you've probably heard of "Small Business Saturday," a promotion started by American Express to help support small businesses. Their Facebook page declares "First there was Black Friday, then Cyber Monday. Now, there's the 2nd annual Small Business Saturday, the day people support small businesses. Pledge to Shop SmallSM on Nov 26th. If millions of Americans shop small, it will be huge."
Obviously Amex isn't doing this out of the kindness of their hearts. Since they receive a percentage of sales purchased using the Amex card, their efforts to drive up sales at local retailers also helps their bottom line. No offense to Amex but if you can, do try to pay with cash. The fees charged to business owners for accepting credit cards can be as high as 5% of sales. Regardless it's a great promotion for small businesses and an opportunity to be part of something BIG. It's basically free advertising... in addition to encouraging consumers to shop at small businesses there is also free advertising collateral that can be printed from their Facebook page. As an aside, there is also the opportunity to get $100 in free Facebook advertising if you sign up for the Amex Facebook App.
So don't spend all of your holiday budget at big retailers on Black Friday. Save some for small local businesses on Saturday. Remember, when you shop at a small, local retailer more money stays in your local economy, you spend less on gas, and you help your neighbors' businesses. Those who shop small with their Amex card will get a $25 credit on their Amex credit card statement, a nice little perk during the very expensive holiday season.
There's a big movement across our country encouraging us to "shop local" and I hear it a lot on the North Fork. I'm a big supporter of this and it's one of the reasons that I joined the boards of both the North Fork Chamber of Commerce and the North Fork Promotion Council.
Here are a few facts about shopping locally:
For every $100 spent at a locally owned business, $68 stays in the local economy compared to only $43 if spent at a national chain.
Locally owned businesses contribute significantly more to local charities and fundraisers than do big box retailers.
Local retailers and distributors carry a higher percentage of locally made goods. This creates more jobs, leaves more money in our community and even helps the environment (less need for transportation means less congestion and pollution!).
It's also important to note that "Shop Local" should not just be a mantra for retail brick and mortar shops but should include local service businesses too. For example, I recently heard that Greenport was updating their website and awarded the work to a web design company located up-Island. An organization that calls itself the "Business Improvement District" would have better served the community by giving the work to one of our many local designers and keeping the money on the North Fork.
Remember, investing in our local businesses is not just an investment in our neighbors but in all of us, and the long-term benefits will be significant. Buy local wine (and beer), shop at local farm stands and markets, buy your gifts at local shops, and use local service companies.
The Internal Revenue Service has further postponed certain deadlines for taxpayers affected by Hurricane Irene This includes taxpayers in Suffolk County.
Tax filing deadlines falling on or after August 26 and on or before October 31 have been postponed to October 31. This includes corporations and other businesses that previously obtained an extension until September 15 to file their 2010 returns, and individuals and businesses that received a similar extension until October 17. It also includes the estimated tax payment for the third quarter, normally due September 15.
This should be a major relief to all of the procrastinators out there. Use this extra time to properly gather your financial information...and ensure that you deduct everything that you are legally allowed to deduct. Don't pay Uncle Sam one penny more than you have to.
The dog days of summer are behind us, Labor Day weekend is over, and the kiddies are headed back to school. They have a fresh box of crayons, sharpened pencils, and new school shoes all set to go. You might not have a fresh box of crayons at the ready but it is still time to think ahead to next year.
Many of you now have tax filings due Sept. 22 (recently extended from Sept. 15 due to Mean Irene). All businesses who filed tax extensions on or before March 15 are now required to file their 2010 tax returns. Sept. 22 (extended from Sept. 15) is also when 2011 estimated tax payments are due. As a rule, you are required to pay a percentage of your prior year's tax liability OR a percentage of your current year's tax liability. Many taxpayers pay based on the prior year to avoid a conversation with their accountant. However, it's worth tolerating some pocket protector humor to take a look at the current year. You want to know if you're going to owe monies for taxes, or better yet if you owe less. Never give the government an interest free loan if you can keep it for yourself!
We've all been busy the past week making do without power by preparing meals (and in my case coffee) on the BBQ, throwing out perishables, raking leaves, dealing with fallen trees, broken windows, flooded basements and, most of all, trying to remember how on Earth we ever functioned without cable and internet.
So, what does this have to do with taxes? Actually plenty for anyone that experienced any serious damage from Mean Irene. The IRS allows deductions for a casualty or loss relating to your home, household items or vehicles. The loss must be reduced by any salvage value, by any insurance or other reimbursement you receive and then by an additional $100 per casualty or theft event. Then add up all those amounts and subtract 10% of your adjusted gross income from the total to calculate your allowable casualty and theft losses for the year. Losses must be claimed as an itemized deduction on Form 1040, Schedule A.
There are of course additional rules and restrictions but that's the gist of it. Get in touch with your accountant for more detailed information on how this unfortunate loss may turn into a small tax benefit.
There seems to be quite a large number of houses for sale on the North Fork (in fact there are four properties for sale in my 30-home community). If you're one of those people selling your house you're going to need to know how the sale will impact your tax liabilities. Some examples follow.
You can exclude up to $250,000 of the gain in the sale of your primary residence ($500,000 if you're married filing jointly). There are a couple of exceptions to this rule.
1. You must have used this home as your primary residence for two out of the five years prior to the date of the sale.
2. You are not eligible for the exclusion if you excluded a gain from the sale of another home within the last two years of selling your current home.
Reporting the Gains
If you have gains above the $250,000/$500,000 exclusion above, these gains are considered capital gains and are reported on Schedule D of your 1040.
No Deduction for Losses
In this economy it seems especially unfair, but unfortunately the IRS does not allow you to deduct a loss from the sale of your home.
These are the basic rules but there is certainly more to know. I strongly advise that you consult a tax professional prior to making a big move.
ADP issued a report Wednesday morning that, according to their numbers, the country's private sector hired 114,000 workers. Unfortunately, while this is a positive number, it is too small of a number to reduce our unemployment rate which stands at 9.2 percent. If you are one of the unfortunate people in the 9.2 percent or are currently looking for a new job because it's time to move on, the IRS is here to help.
The IRS allows you to deduct your job hunting expenses as long as they meet the following criteria:
- The expenses must be for the same line of work that you are currently in (or were in prior to being laid off or quitting)
- These deductions are not for first time job seekers, but are available to taxpayers who are/were currently employed and seeking new employment.
Here is a quick listing of some of the deductible expenses:
- Costs for out-of-town travel for the purpose of seeking new employment
- A 50% deduction for meals while travelling out-of-town for your job search
- The cost of your resume preparation, copying and postage
- Mileage for any travel to/from prospective employers
- Employment agency fees including career counseling and headhunter fees
The following items are not deductible:
- New clothes (yes a suit makes the man or woman and a nice suit certainly won't hurt your chances of finding a new job, but the IRS does not allow this deduction)
- Haircuts, makeovers and gym memberships
- Internet access and phone (the IRS has determined that these costs are personal and are not deductible for tax purposes, unless there are incremental costs i.e. additional cost for a long distance call made while seeking employment)
It's important to note that these deductions are subject to a 2-percent floor, meaning that you don't get a deduction until these expenses reach at least 2 percent of your Adjusted Gross Income (AGI). AGI is the total of all of your taxable income less some minor deductions. This is not your taxable income. This is the income before your itemized or standard deductions, as well as your exemptions. If you're out of work that threshold gets met much more quickly since you're not earning any wages.
In addition to job search costs, there are other items that are deductible for tax purposes that will help you reach the 2-percent threshold:
- Tax preparation fees
- Legal fees (as long as they relate to income producing activities)
- Safe deposit box
- Seminar fees (as long as they relate to your profession)
- Dues and subscriptions to professional associations
- Unreimbursed employee expenses like travel, meals and entertainment and home office expenses
So in closing, if you're seeking new employment (whether you are unemployed or just looking for a new opportunity), it's important that you keep receipts for all of your job search fees so that you can save some money at tax time.
We hope everyone is enjoying the summer. The weather has been fantastic on the North Fork and we've been spending a lot of time at the local beaches and parks. Hopefully the sun has been shining wherever you are and you've had a chance to enjoy it. Summer or not, it's always Tax Season for business owners and self-employed individuals. There are a couple of tax changes that become effective tomorrow, July 1st, that pertain to small business owners and self-employed individuals.
Savings on Federal Unemployment Tax:
The Federal Unemployment rate (FUTA) will change on July 1, 2011, from 6.2% to 6.0%. Most companies are eligible for a 5.4% credit, which reduces your effective FUTA rate from 0.8% to 0.6%. All of your FUTA liability gets reconciled when you file Form 940 at the end of the year. FUTA is only on the first $7,000 of each employee's oayroll so you will essentially save $14 per employee after July 1st. It's not a lot of money but in this economy every dollar counts.
Increased Mileage Deduction:
Effective July 1 through December 31, 2011, the mileage rate to calculate deductible costs of operating an automobile for business use increases from $.51 to $.555 per mile.
Also just a reminder that new payroll requirements for New York became effective in April 2011. New York requires all employers to include a business phone number on employee pay stubs. If you're running your payroll through a payroll system like ADP or Quickbooks this information is already likely there, but if you're writing manual checks be sure that the business phone number is on them.
Congratulations to all my gay and lesbian friends and clients who live in the great state of New York and can now be legally wed. For those of you that are planning on getting married, one thing to be aware of is how this will impact your tax filings. Very simply, once married you will file a combined tax return for New York State. Unfortunately, the Federal government has not come around to recognizing gay marriage as a legal union so you will still need to file your Federal tax returns individually. Until the Federal government recognizes your union, a small conciliation is that the "marriage penalty" usually results in a married couple paying more in taxes so by continuing to file individually you will save some money. Perhaps you could use those tax savings for two extra plates at the wedding so you can invite your favorite Mr. and Mrs. CPA.
Once again, congratulations on this small step towards Equality. If you have any questions, please feel free to contact me.
PRESS RELEASE, MARCH 16, 2011
Scott E. Hunzinger, CPA has been named to the Board of Directors as Treasurer for the Mattituck-Laurel Historical Society & Museums. The MHLHS&M was founded in 1964 in order to preserve the heritage and history of the local area. Mr. Hunzinger is passionate about both the history and the future of the North Fork as demonstrated by his board positions with both the MHLHS&M and the North Fork Chamber of Commerce. Says Mr. Hunzinger, "I was very honored when I was asked to join the Board as Treasurer. History is a very important part of who we are on the North Fork and preserving it is a great responsibility. I am very proud to do my part and privileged to be involved with such a great organization."
In addition to serving on local boards, Mr. Hunzinger is the founder of Hunzinger Accounting & Financial Solutions, a Cutchogue based CPA firm that provides accounting, consulting and tax services to businesses and individuals.
For more information:
Scott E. Hunzinger, CPA
Mattituck Laurel Historical Society & Museums
I saw an ad for a refund anticipation loan yesterday and my blood started boiling. These loans provide money equal to your tax refund but they generally charge high interest rates and fees. A study found that taxpayers paid about $800 million in loan fees and other fees for refund anticipation loans in 2008. According to the study, the effective annual percentage rate for refund anticipation loans can range from about 50% (for a $10,000 loan) up to nearly 500% (for a $300 loan), when you include interest charges and refund account fees.
As discussed in our post last week about tax refunds, if you have a good accountant you won't be getting a big refund because you will have been using your money to your advantage all year along. That aside, if you are expecting a refund this year, you can get your money from the IRS almost as quickly as you can by applying for a refund anticipation loan and without any fees or interest charges. E-file your taxes and have your money deposited directly into your bank account and you can generally get your refund in fewer than ten days.
I was speaking to a friend the other day that was telling me how great her accountant was. I told her how happy I was to hear that and that I wouldn't waste my time pitching her on changing accountants. I truly believe that "if it isn't broke then don't fix it." But...
She went on to tell me that last year she received a $10,000 tax refund. You might be thinking "Wow that's great!" But it's not. I explained to her that by getting that huge refund she had merely given Uncle Sam a 1-year interest-free loan. A good accountant can help you to determine how much to withhold without owing a fortune at the end of the year and at the same time making your money work for you instead of loaning it to Uncle Sam. If you're worried that you're going to just spend the money and you're thinking of your tax withholdings as a savings account, instead set up an account just for these monies. It's a great way to save money for a rainy day or to use for focused spending such as paying down high-interest credit cards. Either way, you're putting yourself in a better financial position and making the most of your money.
Choosing a tax preparer isn't as easy as it may seem, especially for those folks that have seemingly "simple" returns. I remember when I first moved to New York, tax time rolled around I wanted to get my taxes done as quickly and as cheaply as possible. H&R Block was one such option, as was the local Joe Shmoe CPA. Looking back I realize that even my "simple" return would have been better taken care of if I'd taken the time to find the right accountant. H&R Block and Joe Shmoe both got my return filed but after having been married to an accountant for many years I realize now that H&R Block's freshly trained staff didn't get me nearly the deductions I should have gotten and Joe Shmoe, well he got me plenty which luckily didn't turn into fines and a jail sentence.
I recommend spending a bit of time to find an experienced and honest accountant to handle your taxes this year. It's not a big effort-spend 15 minutes getting a recommendation from someone you trust or just doing some homework. How much experience does the person have? What are their credentials? Do they have references? What makes them the right choice for you? And what are you getting for your money?
For example, one local accounting firm is seeking a per diem tax preparer with 2-3 years experience. In other words they will be outsourcing the work to a junior tax preparer with little experience and likely charging you full rate for their time as a CPA. My favorite example is the local tax preparation/bookkeeping firm (i.e. not a CPA) who has chosen "Parking in Rear" as their selling point. If the best thing your tax partner has to offer is parking they're probably not the best choice.
Choose the right accountant for the right reasons and know the credentials of the person doing the actual work. And of course for those in the Tri-state area, my husband Scott E. Hunzinger CPA and our firm Hunzinger Accounting & Financial Solutions is an experienced and reliable choice.
Happy New Year! We hope everyone had a great holiday season and enjoyed some quality time with their family and friends. We sure did but it's time to get back to business.
Many of you likely made resolutions for the new year. The most popular seem to always be focused on diet and physical fitness. But what about fiscal fitness? Did you set any financial goals?
Here are some thoughts on goals for 2011:
1. Create a budget
Take the time to understand where your monies are going each month. You'll probably be surprised by how much is spent on things that you just don't need or use. For instance, we haven't used our Netflix account in over two months. Perhaps it's time for us to cancel this.
2. Talk with a financial planner
In this economy it can be tough to make ends meet, much the less to save. It's imperative however that you find a way to do so. Bad economy or not, the future will come and you will need to be prepared. Talk to a financial planner about saving for a rainy day, saving for retirement, saving for your kids' college tuition and ensuring that you have enough life insurance to cover your spouse and/or kids in case, God forbid, something happens to you. Be sure that your financial planner talks with your accountant to ensure that the financial moves you make are the right choice for your tax situation.
3. Review your tax withholdings and benefits
Are you getting a large tax refund this year? If so, you withheld too much money. By doing that you're merely giving Uncle Sam an interest-free loan. Withhold less and save that money in something that will earn interest. Have your money work for you.
What about your benefits? Do you have the right medical plan? Should you add a dental or vision plan? Perhaps saving in the short-term is costing you more in the long run in out-of-pocket expenses.
Does your company have a 401k plan that offers some kind of matching? Are you fully utilizing this benefit? If not, why? You're just costing yourself money if you're not.
Special note: the new tax law will require less monies be taken out for social security so you should have approximately 2% more in your check so there's never been a better time to save.
4. Get ready for tax season
Take some time to get organized and prepared for tax time. The more you can do now, the less you will have to do later. Gather your receipts for charitable contributions, business expenses, and medical bills (if material). Talk to your accountant now and see what else can be done in advance to make getting your taxes done less painful.
Give us a call to talk about how we can help put together a fiscal fitness plan that's right for you.
If you are a business owner who makes monthly payroll deposits to the IRS, you have probably received a letter (or soon will) stating that manual tax deposits will no longer be accepted. As of January 1, 2011 Federal Tax Deposit Form 8109 will no longer be used and instead all federal tax payments will have to be made electronically via EFTPS (Electronic Federal Tax Payment System).
The EFTPS is very easy to use and will actually make your life a bit easier in that it will mean one less trip to the bank. That said, there is some work that needs to be done to register for an EFTPS account and registration can take several weeks to complete (one of the steps involves the IRS mailing you a PIN via the US Postal Service and we all know how busy they are this time of year).
Visit www.eftps.gov/eftps/ to begin the registration process and if you have any questions, please give us a call.
Hot off the presses, a new tax form for your viewing enjoyment. (We can hear the ooohs and ahhhs now). Form 8941 has just been released by the IRS which gives small businesses a tax credit for paying the health insurance of eligible employees (http://www.irs.gov/pub/irs-pdf/f8941.pdf). In a nutshell, if you pay your employees an average of $25,000 or less and pay for their health care, you will be able to claim a credit of 35% of the health care costs paid on their behalf (subject to some criteria of course). If you paid your employees on average over $25,000 but under $50,000, you are still eligible for a credit, but it will be phased out. For employers with average payroll over $50,000, unfortunately you are not entitled to this credit. There are additional rules to consider so give us a call and we can help you with this and other credits for which you or your business might be entitled.
The end of 2010 is quickly approaching which means it's time to do your final tax planning. You want to ensure that when April 15th comes around you don't owe a small fortune and be left scrambling to find money.
Most estimated tax payments are not due until the 15th of January but there is a great advantage to making some payments earlier. If you itemize your deductions (versus taking a standard deduction), any payments made to state and local taxing authorities prior to December 31st are tax deductible in the year that they are paid- meaning you'd get an advanced tax deduction for your federal tax return.
As I often do, I'll quote my old boss Marty (picture the Swedish Chef from the Muppets), "Failing to plan is planning to fail." Let's plan now and save you some money on your 2010 tax liabilities.
How much money did you save this past year? How much money do you have to spend on holiday gifts? Can you afford to give employees bonuses? If you can't answer these questions you probably don't have a budget--something every company, family unit, and individual should have. Without one you will very likely spend money you should be planning to use for something else. For example, retail businesses have sales taxes due every quarter; you may have an annual license or insurance policy due on a certain date; your sales may be seasonal requiring you to hoard cash in the busier months so that you have the funds to get you through the slower months; etc. If you haven't budgeted for these and other expenditures in advance you could find yourself a day late and more than a dollar short.
As you've heard us say many times "Failing to plan is planning to fail." Put a plan together for 2011 and, if you need help, please give us a call.
It's probably not a coincidence that October 15th is both National Grouch Day and the last day that individuals can file a personal income tax return. If you filed a six-month extension on April 15th your tax return is due shortly. The IRS no longer allows an additional extension, so your tax return is due no later than October 15th, period.
Don't wait until the last minute. Contact us today so that we can get your return filed as soon as possible. Perhaps you'll even be able to enjoy National Grouch Day.
Ironically a recession can be a very good time to get a business off the ground. A lot of great companies were started during a recession-Burger King, MTV, Microsoft and FedEx to name a few. The Small Business Jobs Act of 2010, or as it's also known "The Main Street Stimulus," provides some good incentives to start or expand your business during the current recession. Here's a brief summary of the main points related to lending initiatives and tax breaks.
Small business lending initiatives
The centerpiece of the bill is the creation of a $30 billion lending facility that would direct taxpayer money to regional banks, on the condition they lend it out to small businesses. Unlike the emergency financial rescue package implemented at the height of the crisis in 2008, banks would have to volunteer to participate in this program. In theory this should make it easier to get a loan for your small business.
Small business tax breaks
- The bonus depreciation scheduled to expire in 2009 has been extended through the end of this year. This tax deduction enables a business to expense fifty percent of the cost of new equipment, such as computers or software, in the year of purchase.
- The section 179 deduction allows taxpayers to write off the cost of a fixed asset in the year of purchase, rather than amortizing the cost over the useful life of the asset. The Act has increased the maximum amount of this deduction to $500,000 for the years 2010 and 2011. (Initially it was to be $250,000 for 2010 and $25,000 for 2011.)
- Prior law required that a business had to substantiate the business use of a cell phone device and plan minutes, which meant a full accounting of the business purpose of each and every minute and then prorating the cost of the device and mobile service accordingly. Business owners will no longer have to keep track of individual calls on their cell phone plans as the Act removes the listed property classification from cell phones and mobile telephone service.
- The Small Business Act expands the start-up expense deduction to $10,000 for the year 2010. The amount was $5,000 for 2009 and will be $5,000 in 2011 unless there is another "stimulus."
- Those that are self-employed can now deduct the cost of their own health insurance as a business expense that will reduce their self-employment tax. This tax reducing provision is valid only for the year 2010. For 2009 and presumably for 2011, the deduction for health insurance is an adjustment that will reduce the regular income tax but does not reduce the self-employment tax.
For assistance with developing a business plan, a business model, a financial forecast, etc., for your small business idea give Hunzinger Accounting & Financial Solutions a call at 631.734.8016 or email us at firstname.lastname@example.org.
Accountants are a lot like grocery stores. People often shop at the grocery store closest to their home and stick with it forever because it's convenient. It might not have the friendliest cashiers, the freshest produce, or the biggest meat department but it's close by and it's the devil you know. Likewise, people and/or businesses often hire an accountant and stick with him or her throughout their entire lives simply due to the convenience of location, familiarity, or out of a sense of loyalty to someone they've known for a long time.
This isn't always the best decision. For example, I was recently speaking to a local business owner who has been using the same accountant for 20+ years for the sole reason that he's been with the guy for so long, and, here is the kicker, "he pays for his mistakes". Wait - what? Of course he pays for his mistakes! If he doesn't, he has a huge legal problem on his hands. That's like saying you stick with the grocery store that sells the spoiled meat because they pay the co-payment on your hospital bill when you get food poisoning. There shouldn't be mistakes for which need to be paid.
So with that, here are the Top 5 signs that you need a new accountant:
- You only see your accountant during tax season. Your accountant should be your financial adviser and partner. If your accountant doesn't meet with you regularly and understand both your business and your industry, you aren't getting the guidance you need.
- Your accountant doesn't know your short- and long-term goals. An accountant is supposed to help you make and keep as much money as possible and cannot do that effectively without understanding what you are striving to achieve.
- Your accountant simply plays the expert card and doesn't give you thorough and understandable answers to your questions. If your accountant isn't educating you, you aren't getting your money's worth.
- Your accountant waits until the last minute for everything, which gives you too little time for questions, changes, and the ability to plan properly.
- Your accountant doesn't provide a prior-to-year-end tax projection. As I often say, failing to plan is planning to fail. Will you owe a fortune on 4/15? Are you withholding too much now? Surprises are great for birthdays, but not for taxes.
If any of the statements above describe your accountant it's time for a change. Give us a call and we'll make sure you are getting your money's worth.
HR3590, or as most people know it “the healthcare reform bill,” has some items in it that don’t just concern healthcare. As it’s often said, the devil is in the details. This is especially true with bills passed by Congress. One of the items hidden into this bill (in section 9006) is the new IRS requirement for 1099s.
Currently form 1099-MISC must be submitted by businesses to vendors, subcontractors, independent contractors, and others paid $600 or more per year. Starting with the year 2012, 1099-MISC reporting is expanded in two ways. First, reporting will be expanded to include payments made to corporations. Secondly, reporting will be expanded to include payments for property.
The first expansion will of course require the issuance of several more 1099s, but what about the second? What does “property” mean? The IRS Commissioner, Douglas Shulman, mentioned this expanded 1099-MISC reporting requirement.
"Congress also recently passed a new information reporting provision requiring expanded information reporting on payments made from businesses to corporations, and on payments businesses make for goods. This new information reporting requirement applies if businesses pay a single entity $600 or more per year in aggregate for these types of transactions starting in 2012.”
The key word there is “goods.” This would mean that businesses would be required to send a 1099 to anyone that they paid $600 or more for either goods or services for the entire year. Think Staples for stationery items, Poland Spring for water delivery, the IT company for servicing your computers, etc., etc. That’s a lot of 1099s.
How to prepare
According to the Mayan calendar, the world will end in 2012. Just in case it’s wrong, we strongly recommend that businesses begin planning now for these new requirements. All businesses should have a computerized accounting system, even if it’s a simple one (for audit trails, customer and vendor information, financial analysis, etc). This becomes even more important in anticipation of the forthcoming 1099 requirements. In particular, it is important to ensure that accounting systems are keeping track of all payments issued throughout the year and the name, address, and taxpayer identification number of the payee. It’s also a good idea to request a Form W-9 from all vendors, contractors, etc. which will provide you with their legal name, address and taxpayer identification number.
Hunzinger Accounting & Financial Solutions can help you find an accounting system to fit both your business needs and your budget. Give us a call at 631.734.8016 and we will help you prepare for the devil in the details of HR3590.
So the health insurance bills have passed and now all US citizens are required to have health insurance by 2014 or face penalties on federal income tax returns. How much you ask? Good question. The penalty for not having health insurance will be the greater of (1) a flat dollar amount or (2) a percentage of your household income, both of which will be phased in over the course of three years...
2014 - $95 per adult or 1%
2015 - $325 per adult or 2%
2016 - $695 per adult or 2.5%
Notice that is per adult. For uninsured minors the amount is one-half the adult fine. In addition, the flat dollar amount per family is capped at three times the adult fine for the year.
Let’s look at an example of how much this would cost. Say that Jane Doe earns $100,000 per year, is married with two children, and is the sole breadwinner. The Doe’s flat dollar penalty for 2014 would be $285 ($95 x 2 plus $47.50 x 2). Their income percentage amount is $1,000 (1% of $100,000). Because the income-based penalty is greater, they would owe a tax penalty of $1000 in 2014 for not having health insurance. In 2016 the Doe's tax penalty would be the greater of $2,085 ($695 x 2 plus $397.50 x 2) or 2.5% of $100,000 which is $2,500. The Doe's would therefore owe $2,500 per year for not getting health insurance.
Weighing the tradeoff
Obviously many people will decide not to buy health insurance and pay the tax penalty instead. Assuming good health and rare doctor visits, annual health care costs (including the tax penalty) might be much less than the cost of buying health insurance. Then in the event of serious illness or injury, health insurance can be purchased at that time since as of 2014 the legislation will prohibit insurance companies from denying applicants because of pre-existing conditions.
What makes sense for you, buying healthcare insurance or paying the penalty? Give us a call. We can look at your specific situation and help you make an informed decision.
We previously posted that the Homebuyers Tax Credit was expiring June 30th (if you signed a contract by April 30th). Many US taxpayers made the effort to get a contract signed by April 30th only to have their mortgage application take much longer than usual. We're refinancing our mortgage and the process is in its 5th month so we know first-hand how painful it can be. Apparently the US government recognizes this as they have extended the deadline for the tax credit to September 30th. It's important to note that the April 30th contract deadline has not shifted, just the closing deadline. So if you signed a contract to buy a house before April 30th and have yet to close, you can breathe a sigh of relief knowing that your mortgage processor didn't cost you money (up to $8,000 for first time homebuyers and up to $6,500 for current homeowners buying a new house).
Hunzinger Accounting & Financial Solutions is thrilled to have our new website launching today (www.hunzingerpc.com for those of you on Twitter and Facebook). We want to thank our friends Josh & Skylar (and Pinky, too) for their creativity and hard work in getting our new website launched. Josh Smith is a talented designer, who among other great work is responsible for our brand identity. Skylar Challand has a company that specializes in website design and web applications. Please visit www.oakmade.com and contact them for all of your website needs. They also have a great blog focused on branding and design at www.idsgn.org. Pinky, well he's just a cute dog. Thanks again to our good friends!