Jake Snelson - Vyde

What are Charitable Donations?

What are charitable donations?

Charitable donations are gifts given to nonprofit organizations. Charitable donations can take many forms. Common gifts include:

Money
Real Estate
Vehicles
Clothing
Securities
Jewelry
Other Assets or Services

Most charitable donations are tax deductible. In order to qualify for a tax deduction the nonprofit organization has to be classified with the IRS as 501(c)(3). You can double check that the organization you are donating to is tax deductible through the IRS Exempt Organizations Select Check.

It’s important to get a receipt from the organization that you donate to in order to claim it on your taxes.

One aspect of charity that is not tax deductible is volunteering. The IRS does not allow you to deduct hours you spent volunteering because it is too hard to track. However, you can deduct traveling expenses like gas, oil, air or bus fair. You must be able to provide receipts in order to deduct it.

Businesses and individuals can make charitable donations. Both can claim charitable donations on their taxes.

Charitable donations scenario

Mike Johnson is a realtor. He is a partner at Sunrise Realty. Every year Mike makes charitable donations through his business and on his own.

individually Mike donates to:

His church
Make A Wish Foundation
PBS

His business donates to the following organizations:

Vetrans Association
Boys and Girls Club
A local Children’s Hospital
The local fire station
Sponsor a local t-ball team

On Mike’s personal taxes he can claim all of the donations as charitable donations because all of the organizations are classified as 501(c)(3) with the IRS.

On Sunrise Realty’s taxes Mike and the other partners can claim, all except sponsoring the t-ball team as tax deductible. Most sport teams don’t qualify for tax deductions; however, some may be registered, so it’s important to look at each team individually. Because Mike’s local team doesn’t qualify as a charitable organization, he is able to write it off as a marketing expense.

IRS Changes Policy on Health Insurance Tax Declarations

In response to President Trump’s executive order regarding Obamacare, the IRS won’t reject tax returns without health insurance declarations this year.

Trump issues executive order

The 2016 tax season was supposed to be the first year that the IRS automatically rejected tax returns that omitted health insurance coverage. However, the Trump administration is taking actions to repeal or at least, lessen the influence of Obamacare. In an attempt to do that, President Trump issued an executive order to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden” on taxpayers.

Trump signed the executive order, Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal, on January 20, 2017.

Trump’s executive order did not repeal the Affordable Care Act. However, it directed agencies on how they should implement the law. Congress is the only governmental body that can change or repeal the law.

The law still states that tax payers must have health coverage or pay a fine. The IRS is still responsible to hold tax payers accountable to have health care coverage.

“Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe‎,” the IRS said.

IRS changes returns policy

The IRS was planning to systematically reject any tax returns that omitted health insurance coverage starting this year. However, on February 6 the IRS removed those initiatives to comply with the executive order.

This means that tax payers can submit tax returns without declaring if they have insurance. The IRS calls returns without health insurance status silent returns.

According to the IRS ACA Information Center for Tax Professionals, “Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund.”

The IRS only changed their policy on accepting silent returns. Taxpayers who submit silent returns are not exempt from the law. The IRS may investigate silent returns to determine if taxpayers had insurance.

IRS recommendations regarding Obamacare

The IRS recommends that taxpayers state their insurance coverage on tax returns. This will help the IRS process refunds quickly. It will also help tax payers avoid further scrutiny.

“When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed‎. This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow,” the IRS said.

Frequently Asked Questions

What does President Trump’s executive order regarding Obamacare mean for taxpayers?

President Trump’s executive order directed agencies to reduce the economic burden of the Affordable Care Act (Obamacare) on taxpayers. While it did not repeal the law, it allowed the IRS to change how it enforces certain provisions, such as the requirement to declare health insurance coverage on tax returns.

Will my tax return be rejected if I don’t declare health insurance coverage this year?

No, for the 2016 tax year, the IRS will not automatically reject tax returns that omit health insurance coverage, following the executive order. However, taxpayers are still required by law to have health coverage or pay a fine.

What are “silent returns” and how do they affect my tax filing?

“Silent returns” are tax returns submitted without declaring health insurance coverage. The IRS will process these returns without automatic rejection, but they may be subject to further scrutiny or investigation at a later date.

Am I exempt from the health insurance requirement if I submit a silent return?

No, submitting a silent return does not exempt you from the health insurance requirement. The law still requires taxpayers to have health coverage or pay a penalty, and the IRS may follow up to ensure compliance.

What does the IRS recommend regarding health insurance declarations on tax returns?

The IRS recommends that taxpayers declare their health insurance coverage on their tax returns to expedite processing and reduce the likelihood of future scrutiny or follow-up correspondence. This helps ensure a smoother and faster refund process.

3 Ways Spend Your Tax Return on Your Small Business

A personal or business tax return can be used in any way. However, if you’re serious about building your business this year, we suggest spending your tax return on your small business.

There are obvious benefits to spending your tax return on your business. The first benefit is that the more you put into your business the more you get out of it. The second benefit is that most investments in your business are also tax deductible. That means that the money you spend from your tax return on your business will go a lot further than it could have otherwise.

Here are three ways to spend your tax return on your small business.

Pay Down Debt

Every business has debt; it’s part of the game. However, it isn’t smart to carry unnecessary debt. If you’re expecting a refund from Uncle Sam, then spend some of that tax return to pay off your debt.

There are two ways to pay off your debt effectively. The first is to organize your debt by total amount and pay off the smallest balances first. That way you can quickly reduce your debt. The second option is to organize your debt by interest rate. Pay off the debts with the highest interest rates first. Then over time you’ll be paying less in interest rates.

Both options are great ways to reduce debt, but they work best depending on the situation. Evaluate your position and choose and the option that works best for you.

Further Education & Training

Another great option for spending your tax return is to invest it in your, or your employee’s, education or training.

Continuing education is a great way to further your business. There are a lot of ways you can learn more to improve your business.

Attend conferences
Enroll in online classes
Listen to inspirational speeches
Buy courses
Apply for certifications

Continuing education is tax deductible, so it’s a great option on how to spend your tax return.

Company Party

If your finances are in order, then consider spending your tax return on celebrating with your team.

A company party or retreat is a great way to build morale. It allows employees to relax and open up. This can help your team come together, and in the long run it will make your team stronger and better.

In most cases, company parties are completely tax deductible; however, it’s always best to run it by your accountant or virtual bookkeeper.

FAQs on Spending Your Tax Return on Your Small Business:

Can I use my personal tax return for my business?

Yes, you can allocate your tax return for your business needs. However, it’s advisable to consider your business’s financial goals and allocate funds accordingly.

Why should I spend my tax return on my small business?

Investing your tax return in your business offers two significant benefits: increased business input yields greater output, and most business investments are tax deductible, maximizing your returns.

How can I effectively use my tax return to pay off business debt?

You can strategize debt repayment by either prioritizing smaller balances for quicker reduction or targeting high-interest debts first to save on interest payments over time. Assess your financial standing to choose the best approach.

Is investing in further education and training a wise use of my tax return?

Absolutely. Utilizing your tax return for professional development, such as attending conferences, enrolling in courses, or obtaining certifications, can enhance your business skills and is often tax deductible.

Are company parties or retreats a valid business expense?

Yes, hosting company events can foster team morale and cohesion. While most company parties are tax deductible, it’s prudent to consult with your accountant or virtual bookkeeper to ensure compliance with tax regulations.

What are Business Tax Credits?

Business Tax Credits are a group of credits available to business owners. Business Tax Credits include:

Investments
Work opportunities
Welfare-to-work
Employer provided day care services
Research and experimentation
Low-income housing
Enhanced oil recovery
Health insurance premiums

These tax credits are grouped together and submitted through IRS Form 3800.

The IRS limits how many credits you can claim each year. The limit is calculated by your tax liability. You can use IRS form 6251 to find out how many credits you can claim each year. If you go over your credit amount then the credits will be held and you can use them the following year.

Business Tax Credits Scenario

Dr. Jared Andrews is a general practitioner, who owns his own family practice. Dr. Andrews has 15 employees. He provides health insurance and day care services for his employees. He also has multiple business investments.

Because Dr. Andrews has multiple items that qualify for the business tax credit he will combine them on IRS form 3800.

Dr. Andrews takes advantage of business tax credits by filing the health insurance premiums, day care services and his investments. Because he claims more than one of the credits he files IRS form 3800.

Claiming these business tax credits allows Dr. Andrews to save money by paying less taxes. He can then spend that money on building his business.

FAQs: Understanding Business Tax Credits

What are business tax credits?

Business tax credits are incentives provided by the government to reduce the tax liability of businesses. They include credits for investments, work opportunities, welfare-to-work programs, employer-provided daycare services, research and experimentation, low-income housing, enhanced oil recovery, and health insurance premiums.

How do I claim business tax credits?

Business tax credits are claimed by filing IRS Form 3800. This form allows businesses to group together various eligible credits and apply them against their tax liability.

Are there limits to how many business tax credits I can claim each year?

Yes, the IRS limits the number of credits you can claim each year based on your tax liability. You can use IRS Form 6251 to determine your credit limit. Any credits exceeding the limit can be carried forward to the following year.

How can business tax credits benefit a business owner?

Business tax credits reduce the amount of taxes a business owner has to pay, allowing them to save money. These savings can be reinvested into the business, such as by expanding operations or improving employee benefits.

Can you provide an example of how business tax credits are used?

For example, Dr. Jared Andrews, who owns a family practice with 15 employees, provides health insurance and daycare services. He combines these credits with his business investments on IRS Form 3800, reducing his tax liability and saving money to reinvest in his practice

What is After-tax Income?

Define: After-Tax Income

After-tax income, also referred to as income after taxes, is the amount of disposable income that a person or company has left over after all federal, state and withholding taxes have been deducted from the taxable income. You can spend your after-tax income on future investments or on present consumption.

After-tax income isn’t as scary as it sounds. So, what is after-tax income really? It’s simply your wages after you have paid all of your taxes.

After-Tax Income Scenario

Jenna is a photographer; she runs Jenna’s Photography Studio; therefore, according to the IRS Jenna is self-employed. Because she is self-employed, Jenna should set aside 30% of her profits for taxes. The 70% left over after paying taxes is the after-tax income.

Jenna has a lot of options on how she can use her after-tax income.

If she wanted to invest her after-tax income into her business, she could buy new lighting equipment, or she could use the money to buy advertising for her business. The great thing about investing the money back into your business is that you’re able to write off most of those expenses as tax deductions.

Jenna may choose to use her after-tax income for personal reasons. Because she’s self-employed her after-tax income is her salary. It can go towards paying rent, bills or for a vacation.

There are no restrictions or laws on what you can do with after-tax income. It’s your money to spend.

How to Create a Positive Work Environment: Acknowledge Success

When you’ve worked hard on a project, nothing feels better than having someone acknowledge your success. A simple compliment can help you feel appreciated and valued and can even increase your productivity in the future.

Employees, especially millennials, are driven by positive encouragement. One of the biggest issues with employee-employer relationships is that employees don’t feel valued. These simple tips can help you, as a boss or manager, make your workplace better for your employees, just by acknowledging their success or hard work.

Change Company Attitudes

If you want to create a positive work environment, then the first thing you need to do is change your or your company’s attitude. If you view your employees’ hard work as “just doing their jobs” then you’re going to have a lot of uninspired, unappreciated employees. Instead of seeing your employees’ perseverance as “just doing their job” look at what they’re helping you accomplish.

Every time an employee goes above and beyond, you win. You get a little bit closer to your dreams because your employees are working hard. Acknowledging success isn’t a weakness on your part. It’s a way to make your business more successful.

Reward Hard Work

When an employee goes above or beyond what is asked, show your appreciation through a reward. You can set up a system with rewards as employees hit certain marks, or give a reward when a particular employee is doing a great job and you want them, and their coworkers, to acknowledge their success.

Here are a few ideas for rewards

Certificates: It’s simple easy and really only costs the price of paper and ink.
Gift Cards: A $10 gift card to a local hot spot is fairly inexpensive but shows you really do appreciate hard work.
Cash: A little bonus on a paycheck is great, but so is a Visa card.
Food: If you want to recognize your team’s success then go with food. It’s easy to have lunch for your team or company catered.
Company swag: You probably have promotional items sitting around, so give some to your employees when they’ve earned it. Just keep in mind that a promotional frisbee, probably doesn’t show how well they’re doing. Think of something that’s actually useful.

Pay Compliments

A reward is a great way to acknowledge milestones, but it may be too much on a day-to-day basis. The easiest thing you can do as an employer is to pay your team compliments.

Paying someone a compliment helps in numerous ways.

Increases confidence: When an employee is unsure of how well they might be doing it can cause them to make more mistakes. Compliment them on their job and give them the confidence to succeed.
Boosts productivity: Employees who receive compliments on their efforts are more likely to continue to work hard. On the opposite side, when employees work hard but never receive praise they feel unappreciated and begin to slack off.
Builds trust: Complementing people helps show that you care and when your employees know that you care they’re willing to talk to you when they face a problem, instead of trying to place blame on someone else.
Create positivity: If you’re working to build a positive work environment then create a culture of complimenting. When you compliment your employees, they’ll begin to compliment the coworkers. A team that gets along and looks for the good in those around them will automatically create a great working environment.

There are even studies that show paying your employees compliments can be as effective as offering a cash incentives.

Read the other posts in this series:

Put Employees First

Encourage Employee Feedback

Offer Developmental Opportunities

Which Social Media Platforms Are Best for Marketing My Business? Part 1

Marketing has made a dramatic change over the last ten years. The days of placing an ad in your local phonebook are long gone. The age of social media marketing is in. You know you should be using social media in your business, but do you know which social media platforms are best for marketing purposes?

Each platform requires a different approach. In this two-part series, we’ll break down the top seven social media channels that businesses can use and how they’ll help your business

Facebook

Facebook is the social media channel. It surpasses every other social media platform in users. Think about it, even your mom has a Facebook account. A Facebook business page is a must-have for anyone looking to up the social media game.

The great thing about Facebook is that it allows you to share a variety of content. You can connect with your followers through these options:

Website links
Images
Videos
GIFs
Live videos
Messaging

The downside to Facebook is their ever-evolving algorithms. Facebook is constantly changing how many people see your content organically. As more people interact with your content, Facebook shows it to more people. Most businesses have to pay for people to see their content.

Regardless of the challenges with Facebook’s algorithms, it is still a critical platform for your business to be on.

Twitter

Twitter is designed for short messages (under 140 characters.) Most users are looking for news. They follow companies to find out the latest details or to look for deals. Twitter is great for sharing links and photos, but they can count towards the 140 character count.

Twitter is a great place to interact with your customers. Because it was set up with the intent of sharing snippets and short messages, it is a great place for dialogue. Many businesses use Twitter as a customer service tool. You can easily promote the good things people say about your business through retweets and you can address any complaints or concerns your customers have.

Instagram

If your company thrives on visuals, then Instagram is the place for you. What started out as a place to post pictures of your day, has turned into a perfectly curated platform for stunning images. If you want to be successful on Instagram, you must create a visually appealing feed. People are more likely to follow and interact with content that catches their eye.

Instagram recently rolled out “Stories” which let you post photos and videos that are deleted after 24 hours. This is a great way to show your customers the behind the scenes of your business. Stories’ main competitor is Snapchat; however, businesses are more drawn to Stories because you don’t have to build a new following. Anyone who is already following you on Instagram can see your Stories.

LinkedIn is the best social media platform to drive people to your website. It has the highest conversation rate of any social media platforms, especially for companies whose focus is business to business marketing.

The purpose of LinkedIn is to connect professionals together. Because of this, the content shared on LinkedIn is a higher grade. A funny meme isn’t going to go over very well on LinkedIn. According to LinkedIn, 6 out of 10 users are looking for industry insights. When you post to LinkedIn make sure that you are providing valuable content.

Check out part 2 of this series!

Do I Need to File My Self Employment Taxes on My Gross or Net Income?

When you are self employed, you are responsible to pay taxes towards social security, income and Medicare. Usually, these taxes are covered in part by an employer; however, if you are self-employed you are responsible to pay them yourself. You should set aside 30% of your income for self employment taxes.

What is the difference between gross and net income?

In order to determine if you need to pay taxes on your small business and what those taxes are, you have to understand the difference between gross and net income.

Gross income is the total amount of money you earned before taxes or other adjustments are considered.

Net income is calculated by subtracting your gross income from your expenses. This shows your profits or losses for the period.

How do I determine if I need to pay self employment taxes?

The IRS determined that you are subject to self employment taxes if you:

Own a sole proprietorship
Are an independent contractor
Are a partner in a business
A part of any other self-owned business

The next requirement is that you net $400 or more. This is where our gross vs. net income lesson comes in! If you lost money on your business (your net income is in negative) then you don’t owe taxes, but you should still report your loss to the IRS. If you had a net profit of $400 or more then you must pay self-employment taxes.

How do I file my self employment taxes?

In addition to paying income tax, small business owners also file an annual return and pay quarterly self employment taxes.

Self employment taxes are based on estimations. You determine your quarterly taxes based on your previous year’s earnings. The IRS provides worksheets to help you determine what you should pay each quarter.

If you overestimate or underestimate your earnings, the IRS has forms to help you refigure the next quarter’s taxes.

Quarterly Taxes for 2017 are due:

1st payment : April 18, 2017
2nd payment : June 15, 2017
3rd payment : Sept. 15, 2017
4th payment : Jan. 16, 2018

The IRS requires that you submit an annual return stating how much you paid in social security and Medicare taxes at the end of the year.

You can learn more about self employed taxes with these articles

Which Tax Forms Do I File as a Small Business Owner

4 Forgotten Tax Deductions for Entrepreneurs

FAQ: What Home Office Expense are Tax Deductible?

Income Tax Checklist: What Your Accountant Needs to File Your Income Taxes Copy

It’s everyone’s favorite season! TAX TIME! We’re here to make this the easiest tax season ever.

You won’t be scrambling to find all of the important financial documents you need to file your income taxes, only to have your accountant call and tell you he needs just one more thing. Instead, you can take charge with this comprehensive income tax checklist with everything you’ll need to take to your accountant to get the job done accurately and on time.

Download the printable version here.

Build a Better Business

We want you to succeed in your business ventures. To make that happen, we’ve compiled a series of tutorials on simple ways to build your business. We’ll talk you through your marketing and advertising strategies, hiring and firing employees, effective communication in the workplace, business etiquette, operations, human resources, and of course, accounting. Check out each of the articles in our “Build a Better Business” series to grow your business into a thriving enterprise.

Improve Your Online Presence Part 1: 8 Steps for Reviewing Your Website

Most people will learn about your business online, so you need to make sure that your website up to date. A great website is user friendly, helpful and interesting enough to draw people in. Check out our list of to-do’s to make sure your website is an asset to your business.

Improve Your Online Presence Part 2: Perform a Quarterly Social Media Audit

Social media is essential to marketing and customer service. It’s important to do a social media audit to make sure your information is up to date and that your customers can contact you through it. Planning out content for your social media platforms is another sure-fire way to make sure you don’t neglect it.

Improve Your Online Presence Part 3: Contact Information & Review Sites

Over the life of your business, your web presence increases. It’s important to make sure that your contact information is always up to date so that people can find your business. It’s fairly simple to make sure your website is up to date, but what about the other places your information can be found online?

4 Low Cost and Low Risk Ways to Grow Your Team

Growing your team can seem like a costly and stressful venture, but we’ve outlined 4 ways you can add people to your team without spending a lot of money.

Planning Your Summer Marketing Efforts Part 1: Who, What, When, and Where

Summer is a great time for marketing because there are a lot of events you can attend in order to spread the word about your business. It’s a great time to get out and meet your community. So take stock of the who, what, when, and where of your marketing.

Planning Your Summer Marketing Efforts Part 2: Celebrating Holiday and Events

While summer holidays may mean that your team is in the office less, it’s still a great time to take full advantage of marketing! Use summer celebrations as a way to do a promotion or giveaway. Because people are busier you can also increase your correspondence with your clients. Remind them how you can help out while they’re busy spending time with their friends and families!

Planning Your Summer Marketing Efforts Part 3: Cheap Advertising Tips

You’ve pumped money and man power into your marketing campaigns through attending events and giving away swag. Now it’s time to pull in the reigns and save some money while still boosting your advertising.

How To Attract the Right Talent For Your Company

Employees can make or break your business. Like we mentioned in 4 Low Cost and Low Risk Ways to Grow Your Team, it’s important to get the right fit before you hire anyone. These tips will help you make sure that you’re hiring the right people the first time.

Quick Money Management Tips to Build Your Business

If you want to get a better handle on your finances this is the best place to start. With simple steps you can remove the gray areas from your business finances.

Plan for Holiday Success by Hiring Seasonal Employees

The holiday season can be the busiest time for small businesses. While you may not be able to afford another full-time employee, you could definitely use some help around the busiest time of the year. Here are a few best practices to make sure you’re going about it the right way.

How to Create a Succession Plan for Your Small Business

Sure, your small business may be your life right now, but what about when it’s time to move on to something bigger and better? Set up a succession plan now so that your baby is always taken care of.

How to Protect Your Small Business from Theft

Theft can come from many angles, and it happens to more than just brick-and-mortar businesses. Learn how to protect your business from all types of theft.

Resources

Author: Jake Snelson