Tax Preparation Blog

Title: 

Tax Issues for Self-Employed Individuals

Word Count:

869

Summary:

The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business. Of course, few of you enjoy the paperwork and confusing tax issues that arise from owning your own business.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes, #1099, #W-2, #W-4, #W-9

Article Body:

The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business. Of course, few of you enjoy the paperwork and confusing tax issues that arise from owning your own business. 

Many self-employed individuals are considered "sole proprietors" or "independent contractors" for legal and tax purposes. This is true regardless of whether you are turning a hobby into a business, selling an indispensable widget or providing services to others. As a self-employed person, you report business revenue results on your personal income tax return. Following are a few guidelines and issues you should keep in mind if you are pursuing your entrepreneurial spirit.

Schedule C - Form 1040.

As a self-employed person, you are required to report your business profits or losses on Schedule C of Form 1040. The income earned through your business is taxable to you as an individual. This is true even if you do not withdraw any money from the business. While you are required to report your gross revenues, you are also allowed to deduct business expenses incurred in generating that revenue. If your business efforts result in a loss, the loss will generally be deductible against your total income from all sources, subject to special rules relating to whether your business is considered a hobby and whether you have anything "at risk."

Home-Based Business

Many self-employed individuals work out of their home and are entitled to deduct a percentage of certain home costs that are applicable to the portion of the home that is used as your office. This can include payments for utilities, telephone services, etc. You may also be eligible to claim these deductions if you perform administrative tasks from your home or store inventory there. If you work out of your home and have an additional office at another location, you also may be able to convert your commuting expenses between the two locations into deductible transportation expenses. Since most self-employed individuals find themselves working more than the traditional 40-hour week, there are a significant number of advantageous deductions that can be claimed. Unfortunately, we find that most self-employed individuals miss these deductions because they are unaware of them. 

Self-Employment Taxes - The Bad News

A negative aspect to being self-employed is the self-employment tax. All salaried individuals are subject to automatic deductions from their paycheck including FICA, etc. In that many self-employed individuals often do not run a formal payroll for themselves, the government must recapture these taxes through the self-employment tax. Simply put, you are required to pay self-employment taxes at a rate of 15.3% on your net earnings up to $87,900 for 2004. For net income in excess of $87,900, you will pay further taxes at a rate of 2.9% on the excess.  

In an interesting twist that reveals the confusing nature of the tax code, you are allowed a partial deduction for the self-employment tax. Simply put, you are allowed to deduct one-half of your self-employment taxes from your gross income. For example, if you pay $10,000 in self-employment taxes, you are allowed a deduction on your 1040 return of $5,000. Many self-employed individuals miss this deduction and pay more money to taxes than needed. 

Health Insurance Deduction

This used to be a very messy area for self-employed individuals, to wit, you received little tax relief when it came to your health insurance bill. This was a particular burden for small business owners when considering the astronomical cost of health insurance. All of this has changed and you now may deduct 100% of your health insurance costs as a business expense.  

No Withholding Tax

Unlike a salaried employee sitting in a cubicle, you are not subject to withholding tax on your paycheck. While this sounds great, you are required to make quarterly estimated tax payments. If you fail to make the payments, you are subject to a penalty, but the penalty is not the biggest concern. A potential and dangerous pitfall of being self-employed is failing to pay quarterly estimated taxes and then getting caught at the end of the year without sufficient funds to pay your taxes. The IRS is not going to be happy if you fail to pay your taxes and you will suffer the consequences in the form of penalties and interest. Making sure you pay quarterly estimated taxes helps avoid this situation and it is highly recommended that you follow this course of action. 

Record Keeping

You must maintain complete records of all business income and expenses. Simply put, document everything.Create a filing system for each month and file every receipt, etc. All business travel expenses must be documented, including auto mileage you incur when performing business tasks. Office supply stores sell business mileage books that you can keep in your car and use whenever you travel. If you have any doubt about documenting something, just do it! 

In Closing

As a self-employed individual, your focus and time is spent on making your business successful. Your focus is not on the complexities of the tax code and how to limit the amount of taxes you owe. If any of the information in this article is new to you, then it is highly likely you have paid far more in taxes than required.

Title: 

Calling a Lawyer Should Be a Private Home Sellers First Move

Word Count:

635

Summary:

When you sell your own home you need to be prepared. Make an appointment with your lawyer so they can prepare you for any legal pitfalls you may be facing at closing time. Sorting these issues out before you sell can ensure a smooth transaction at the most critical of times down the road.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes, #1099, #W-2, #W-4, #W-9

Article Body:

You are selling your own home because you think you’re up to the task, that it can’t be that difficult? You’re right of course; however you want to make sure you abide by some basic common sense guidelines to help ensure your success. It is not all about putting a sign on the lawn and an advert in the paper.

Your first step should be calling a lawyer. If you don’t have one you will need to find one. A good bet is to get a referral from friends or family. A lawyer at this stage of your sale will give you all the legal information you need to enter into the sale with a confidence that would be lacking otherwise. Your lawyer can do a title search on your home to make sure it’s free of encumbrances that may only turn up on closing i.e. an encroachment. Do you have an up to date survey? These can be deal killers at the last minute you want to avoid. You woll need a search done anyway to close your sale.

Lawyers can also advise you on any new by-laws or regulations you should be aware of for your home and area. Every jurisdiction seems to have rules that need to be followed when preparing an offer to purchase form. A lawyer can make sure these special clauses are written into your offer to purchase form. Have your lawyer provide you with copies of the offer to purchase in hard copy format and also on disk so you can print them off your home PC when needed. Ask your lawyer how he would prefer to see your offer set up.

Ask your lawyer to give you any information you will need to make the closing of your sale timely and without any surprises. If there is anything that will hold up or quash your deal you want advance notice so you can take care of the problem now. Count on being charged for your lawyers’ services but it’s the old adage pay me now or pay me later. 

Ask your lawyer to give you some insight into your mortgage situation. He can give you details and options based on your current loan that perhaps will help your sale. At the very least the lawyer can give you questions to ask at your lending institution i.e. is your mortgage assumable? If the interest rate and terms are attractive the purchaser may want to assume your current mortgage. All good stuff to know in advance of your sale. Likewise your mortgage may need to be removed so the purchaser can arrange their own financing. What are the ramifications with this, will it be expensive to remove?

When you recruit a real estate agent to help you sell your home, the good ones know all this information in advance. Any information they don’t have that can create problems generally surfaces at closing thanks to the lawyers. Your agent acts in your best interests along with your lawyer to sort out these problems at closing and many issues are usually dealt with to either parties’ satisfaction one way or another. 

Not having an agent working for you means your chances of having a problem sometime during the process of trading your real estate is a real probability. The best way to mitigate your chances of potential headaches is to spend the money up front for a legal professional to sort through the land mines before you step on one and your deal disintegrates at the worst possible time. You will be investing a great deal of time selling your home. Make sure you are prepared. It is fairly simple to sell your own home. Closing that sale cleanly is another matter entirely.

Title: 

Nine Ways to Exit Your Company

Word Count:

808

Summary:

As many of you may remember, singer Paul Simon said there are 50 ways to leave a lover.  If you are a business owner thinking about how to leave your business you have nine options to consider. This article contains a brief summary of the pros and cons of these options.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes, #1099, #W-2, #W-4, #W-9

Article Body:

As many of you may remember, singer Paul Simon said there are 50 ways to leave a lover.  If you are a business owner thinking about how to leave your business you have nine options to consider. Here's a brief summary of these options. 

1. Sell or give your company to a family member; 

2. Sell your business to one or more key employees; 

3. Sell to your employees (ESOP); 

4. Sell your business to other shareholders; 

5. Sell to an outside third party; 

6. Bring in an outside investor and keep a minority interest 

7. Go public; 

8. Hire a management team to take over and become a passive owner; or 

9. Liquidate your business.

Determining exactly which option is right for you is a challenge that many business owners put off until it is too late.  Opportunities pass with time.  If you wish to "leave your business on your terms and on your time table," you need to be proactive about understanding your exit options. 

We recommend that you follow a four-step process to determine which exit option is best for you. This process will ensure that your exit options are consistent with your personal goals and take into account the realities of your company and the marketplace.  

Choosing a Path 

Step One: Set Personal Goals.  You need to identify your most important objectives; both in terms of financial goals ("How much money do I need from the exit to ensure my familyís financial security?") and in terms of non-financial goals ("I want the company to stay in my family," or "I want to my key employees to be rewarded during the exit").  Establishing well defined and written objectives is the first step in the exit planning process.  Doing so in advance of your exit gives you and your advisors the time necessary to make your goals a reality.

Step Two: Make Sure Goals are Consistent.  With the help of your advisors you need to determine whether your goals are consistent with each other.  Very often this is not the case.  For example, many business owners want to receive all cash at closing when they exit their business.  At the same time the owner may want to transfer the business to a family member or a key employee.  Unfortunately, these two goals may be mutually exclusive.  Family members and key employees often do not have sufficient capital to structure a transaction this way.  A great deal of stress and heartache can be avoided by addressing these kind of issues early in the process. 

Step Three:  Understand Value and Salability Issues.  Once you have defined a set of consistent objectives, you need to understand the market value and salability of your company.  This analysis is important in that it will provide you with further direction and can eliminate certain exit options.

For example, if the value of your company is below what you feel you need to support a comfortable lifestyle after your exit, you may decide to take some time to enhance the value of your business or to do further financial planning to ensure  you clearly understand your financial needs.

 

In addition to understanding the value of your company you also need to understand how salable your business is.  Value and salability are not always the same.  Salability determines how quickly a business will sell and how much leverage a business owner will have when negotiating with a buyer.  Salability depends to a large extent on external market conditions.  External conditions are things that are out of your direct control like business, market or financial conditions.  For example, the option of selling your business for cash to an outside buyer may be eliminated because of a downturn in your business or industry. 

 

We recommend that you work with an investment banking firm to determine the value and salability of your company.  Only an investment bank that is actively talking with buyers can give you an accurate read of the marketplace and a "real world" sense of the value and salability of your company. 

Step Four: Understand Tax and Legal Implications.  The final step in determining the best exit path for you is to a path is to evaluate the tax and legal consequences of the exit options that are available to you.  This evaluation will include factors such as legal structure of your business entity, how its ownership is structured, exiting legal agreements, as well as any changes that must be made.  For example, if a transaction involves a sale of assets and the company is a "C" corporation, there would be significant adverse tax consequences.  Good advice from your CPA and attorney can help minimize the taxes you would otherwise have to pay.

Using this four-step process, you will be able to narrow the list of exit routes to determine which one is best for you.  The important thing is to start early.

Title: 

Oscars and Taxes

Word Count:

343

Summary:

Ratings for the Oscars were down a whopping 10 percent compared to 2005. Well, at least the Internal Revenue Service was watching.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes, #1099, #W-2, #W-4, #W-9

Article Body:

Ratings for the Oscars were down a whopping 10 percent compared to 2005. Well, at least the Internal Revenue Service was watching. 

Goodie Bags ñ Not So Goodie

Actors that get nominated for an Oscar are might happy indeed. Praise rains down upon them for a good performance and better parts are often in the offering. Win an Oscar and the world is their oyster. More important than all of this, of course, is the Oscar goodie bag. 

Get an Oscar goodie bag and you know you’ve made it in Hollywood. The bag is a collection of obscenely expensive things. The 2006 goodie bag was valued at over $100,00 and included items such as vacation packages to posh resorts with a butler included, the latest mobile phone gadgets, more vacation packages, private rooms at top restaurants and so on. Heck, who needs to actually win the Oscar?

In a hilarious and cheeky move, the IRS decided to have a little fun with the nominees. Just days before the show, the service issued a press release. It wished all the nominees the best of luck at the show. IRS Commission Mark Everson than reminded the nominees that the goodie bags were taxable and he wanted them to Walk the Line. I kid you naught. 

In this instance, the IRS has really gone to far. Why must the agency be such a burden to the hard working professionals in Hollywood? Just one look at Joaquin Phoenix and you could see the effect. Or it could be constipation, but who can really say. 

This move by the IRS is particularly overbearing when you consider the non-winners. Winners could care less about the taxes since an Oscar is a guarantee of more roles and more money. 

The losers, on the other hand, must suffer twofold. First, they have to do their best acting performance by pretending to be happy the lost. Second, they have to suffer their loss of instant fame. I mean, remember that actor. Name was Johnny Depp or something? He lost and who has heard of him since?

Title: 

Reasons to Avoid Foreclosure

Word Count:

552

Summary:

Real estate is not always an easy venture to be involved in. Mortgages are huge loans, and monthly payments can be extremely steep. Especially with the trend a few years back to give out sub-prime mortgages, there have been a lot of foreclosures lately. But foreclosure should be avoided at all costs.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes, #1099, #W-2, #W-4, #W-9

Article Body:

Real estate is not always an easy venture to be involved in. Mortgages are huge loans, and monthly payments can be extremely steep. Especially with the trend a few years back to give out sub-prime mortgages, there have been a lot of foreclosures lately. But foreclosure should be avoided at all costs.

So let's assume for a moment that you are unable to make your mortgage payments. You become a defaulted owner. Now what? Well, typically, your lending institution will foreclose its mortgage. If this happens, not only will you lose your property when it goes back to the bank, you will lose all your equity. In addition, foreclosure reduces your credit rating, leaving a permanent stain on your credit account. This can be extremely hard to remove, and may prevent you from ever borrowing again. Finally, you may even have to pay taxes on the debt reduction amount. So in trying to save money, you've only added another expense to your list of bills. All in all, foreclosure is a bad deal for you.

There are two main types of foreclosure, foreclosure by judicial sale and foreclosure by power of sale. In the former, the court supervises the sale of the property. In the latter, the bank or mortgage holder sells the home. In a strict foreclosure, not in use in all states, the bank would assume the deed of the defaulted mortgage, without the obligation to sell. This method is less popular as few banks want to become landlords. Usually, by whatever means, the foreclosure involves the sale of the property. 

If you are unable to make your mortgage payments, or in any other way are unable to fulfill the obligations of your lending contract, it is best if you sell your real estate as soon as possible. This may mean selling at a much lower rate than market value, however as a homeowner, you may be able to retain some equity from your home, and you will definitely save your credit rating. This is very important for your future real estate purchases, and just about anything else in your life. By selling your home yourself, with or without the help of an agent, you are keeping the power in your hands. Even if you come out of it with no equity, the chances of losing money is slim unless your home has become totally derelict. Even then, you are still better off selling it yourself than allowing a foreclosure to go ahead. 

While in a stressful situation such as mounting debt, it can seem like the easy thing to drop everything and run. But as I've outlined, it is never to your advantage to let a property foreclose. The key to saving yourself from this fate may be an honest analysis of your expenses. If you can see a problem coming, you have more time to act on it. Rather than waiting to the last minute, put your home up for sale as soon as you suspect you will have trouble making payments in the future. The more time you have to sell, the more likely you'll walk away with a fair price for your property. You may even be able to find another, cheaper home, and nobody will have been the wiser that you narrowly escaped financial disaster.