Business Tax Common Tax Mistakes General Tax Information Individual Tax Issues Personal Finance

Why do Yearend Tax Planning

November 8, 2016

WEB_22-CechTo save money that you would otherwise spend paying taxes.  To take advantage of all possible tax deductions.  To position yourself in the best possible light with your banker or mortgage lender.  Finally, to have some idea where you stand so you don’t have any big surprises when you actually file your tax returns.

The above reasons can apply to a variety of situations.  Which ones apply to you will depend on your circumstances.

If you are in business, you could purchase equipment, whether financed or paid for in cash, and take a big tax deduction in the current year as long as the equipment was in service by your year end, usually December 31.  The tax dollars that you would have paid for your 4th quarter tax estimate could cover the down payment on the equipment.  If you didn’t plan and needed the equipment, you could find yourself paying both the tax and trying to come up with the down payment in the new year.

By taking the time to meet with your CPA, before year end, you have an opportunity to discuss things that you should do to take full advantage of all available tax deductions.  This includes accelerating expense payments, retirement planning, deferring income, employee bonuses, etc.

There are also times that you may not want to pay the least amount of tax possible for a year.  What if you are planning to get a new mortgage or your bank loan comes with stipulated income or asset to liability ratios?  Failure to show adequate numbers could cost you with a higher interest rate, a call on the loan, or not qualifying for new financing.

Even if none of the above apply to you, wouldn’t it be better to know in advance what type of tax obligation you are looking at so you have the opportunity to put the money aside?  That way, you can save on underpayment of tax penalties and interest.  Even more important, why not eliminate some unneeded stress?

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Common Tax Mistakes General Tax Information Individual Tax Issues

IRS Imposters – Worse than Zombies

January 22, 2016


A zombie apocalypse would be easier to manage than the countless scammers impersonating IRS and stealing millions of dollars from taxpayers all over the US! Here’s what you need to know to protect yourself from this pervasive plot.


  1. The IRS sends letters. Remember that one point and you’ll be safe. Unless you are already working with the IRS on a case, an IRS agent will NOT call you! Period. They will not email or fax you either. No matter how official an email or your caller ID might look, do not fall for it.
  2. If you do take a call from an IRS impersonator, they will most likely threaten to revoke your driver’s license, deport you, send police to arrest you or some similar atrocity. These things are all non-IRS and non-tax related. All scams.
  3. The impostors will demand payment by wire transfer or prepaid money cards. The IRS will never demand immediate payment or specify HOW you should make the payment.

The Treasury Inspector General for Tax Administration (TIGTA) has a spot on its website to report IRS impersonators. If you talk to one or get an email from one, go to and fill in as much information as you can to help them put a stop to this!

Avert impending disaster! Tell everyone you know, especially your elderly friends, family and neighbors who are the most vulnerable, about these insidious plots to separate them from their hard earned cash. Be informed and be safe!

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Business Tax General Tax Information Individual Tax Issues

IRS Simplifies Business Recordkeeping

January 7, 2016


The IRS finally did something to help businesses reduce their paperwork and also improve their cashflow. Currently, businesses that did not prepare audited financial statements, which are most businesses, had to capitalize individual purchases of tangible property in excess of $500 per invoice item. The threshold amount for deducting the purchase is currently $500 per individually listed item on an invoice. Effective 1/1/16, the new threshold will be $2,500 per individually listed item on an invoice. Tangible property includes both personal property like equipment and also real property, which are items attached to real estate.

This change will save businesses time and money by eliminating the paperwork requirement that they capitalize the item, track the item on a depreciation schedule, and deduct only a portion of the item cost each year for a period of several years. These qualifying items can be deducted in full from taxable income in the year that they are purchased.

The ability to deduct the item in the year purchased instead of deducting it over a number of years also improves cashflow for the business. Even though both ways allow you to deduct the cost of the item and on taxes at some point in time, when you consider the time value of money, (a $1 in your pocket today is worth more that $1 in your pocket 5 years from now), deducting is far better than capitalizing.

For your FREE “Accounting Capitalization Policy Statement” to include with your permanent business records, please email me at

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Personal Finance

Why prepare a personal budget?

December 16, 2015

10-CechDo you have a personal budget?

As we close the books on 2015, now is a perfect time to get your finances figured out for the upcoming year. One of the most beneficial things you can plan is a personal budget.

Many people never consider making a budget. It may be because they don’t know how, or they don’t want to feel financially constricted. Or maybe they’re scared they may not adhere to the plan.

If this sounds like you, don’t fret.

Think about the GPS in your car. You simply tell it where you want to go, and it provides you the best way to get there. You may detour from the path occasionally, but ultimately, you will still end up at your destination.

It’s the same with your budget. There may be unplanned detours, but it’s important to have the roads mapped out beforehand.

The basics of creating a budget are simple.

Begin by listing your categories of incoming and outgoing funds. At the bottom of your list, subtract the money going out from the money coming in. Hopefully, you will show an excess. Resulting in a deficit will require you to either adjust your planned expenditures or maybe plan on short-term borrowing.

The most important part of the budget process is your explanation. This is where you consider your total amount for the current year, and make an educated guess on what next year’s finances will look like. Are you planning on receiving a promotion? Perhaps a big vacation is in the works. Write down your reason for your chosen amount. If things change, and the actual number varies from your budget, at least you will know why, and you can make other necessary changes to compensate.

If a year is too much to tackle at once, start small. It’s OK to begin with a weekly or monthly budget.

If you don’t know where to begin, or you require assistance in taking that first step, please contact me by visiting for your FREE budget form.

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Common Tax Mistakes

10 Small Business Tax Mistakes That Will Cost You

December 7, 2015

death and taxes1. “I can do it myself.” “Most small business owners do not have the tax knowledge they need to stay out of trouble, but they won’t pay for planning,” says Botkin. “They’re cheap so they use TurboTax. But TurboTax won’t represent them if they get into trouble.” Sure, as a member of the profession, Botkin has a vested interest in recommending that you hire a CPA. Maybe you really are capable of doing your own tax planning. Maybe you can also rewire your office, build your own website, and represent yourself in court. That doesn’t mean you should. Just sayin’.

2. “I keep my receipts so I don’t need a tax diary.” Every small business owner must keep an accurate tax organizer, says Botkin, and it’s not the same thing as an expense log. “A tax organizer has all the questions that the IRS requires you to answer about travel, entertainment, and other expenses. It will bulletproof your records and eliminate procrastination, and if you’re audited, it shifts the burden of proof to the IRS,” he says. Anything that allows you to feel smug in the presence of an auditor has got to be worth its price, which is not cheap in this case. You’ll spend over $100 for a decent tax organizer/diary.

3. “Yay! A big fat refund.” Many people are thrilled when they get a big check from the IRS. Wrong reaction, says Botkin. “A refund means you’ve given the government interest-free money for a long time,” he says. “If you have withholding, you want to adjust it to the point where you get very little refund.”

4. “I’ll just borrow a little from employee withholding.” When they’re short on cash, it’s often tempting for small business owners to dip into the trust fund that’s used for employee withholding and Social Security. “Many employers think ‘ this is my money,'” says Botkin. “It isn’t. If they borrow from withholding or Social Security, they are personally liable, with huge potential penalties.”

5. “Let’s make everyone an independent contractor.” Employees are expensive. Independent contractors, not so much. So why not make everyone independent contractor? It’s not that easy, says Botkin. “If you’re going to designate a worker as independent you have to treat him as independent,” say Botkin. Typically, independent contractors can make their own hours and have control over where, when, and how work is completed. If the IRS determines that you incorrectly designated an employee as independent, you may be subject to penalties for not collecting Social Security taxes, and for more than 40% of workers compensation for the specified time period.

6. “I can pay myself whatever I please.” If you’re incorporated, not really. Say you typically pay yourself $100,000 a year. After a good year, you decide to increase that to $300,000. “You have to substantiate a reason for the increase, or part of the money can be disallowed by the IRS as unreasonable compensation,” says Botkin. “Then it can be taxed at the corporate level, and distributed as a dividend. And then you’ll pay tax on the dividend.” Ouch!

7. “My bookkeeper would never steal from me.” “It’s vital for every small business person to have one person who writes the checks and another person doing the accounting, and never the two shall meet,” says Botkin. He says that he’s met hundreds of small business owners who have had their bank accounts cleaned out by embezzlers. So unless you have a trusted family member handling all your finances, make sure that you have different people handling accounting and accounts payable. Nope, this isn’t a tax tip per se, but drop the ball on this one and you won’t have to worry about paying taxes because you may not have a business.

8. “That can’t possibly be deductible.” Not so fast! The dry cleaning for the suits you wore at that business conference in Duluth? If you were away overnight, it’s deductible, says Botkin. A movie and dinner with friends, with whom you also talked business? Also deductible he says, even if your business discussion didn’t occur at dinner, but within the same 24-hour period as the social engagement. Just make sure it’s all documented in your tax diary (see #2). Educate yourself on all the juicy deductions you may be missing out on.

9. “This isn’t a hobby, it’s a business.” Say the “business” you started, selling seashell picture frames online, consistently loses money (those trips to Cape Cod are expensive, after all). The IRS may decide that you don’t have a business at all, but merely a hobby. In that case, you’ll no longer be entitled to the same deductions. “They’ll also disallow your losses,” says Botkin. “The government is the biggest bookie — they’ll subsidize your losses, but they want part of your profits.”

10. “I can’t afford to hire my kids.” Well, sure you can. Especially your kids who are in college. Pay them a reasonable wage for the work they perform (Botkin paid his daughter to build and maintain his website, for instance), and you’ll be able to deduct their wages as a business expense. Then, suggests Botkin, have them use the wages to pay for college. Voila! You’ve just made college tuition deductible. Also, remember that up to $5,800 in income is tax-free for your children.

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