Whenever you are making a charitable donation you’ll want to get a receipt so that come tax time you can decide if you should take the standard deduction or if you should itemize.
Like we said before, the standard deduction is based on your tax filing.
For 2016 taxes these are standard deduction rates.
A Tax Identification number is the same as an Employer Identification Number (EIN). The IRS uses this number to identify your business entity, just like they use your Social Security Number to identify you for your personal taxes. Applying for a Tax ID is simple and can be done online. Don’t be fooled by companies offering to file for a Tax ID for you – it’s a simple process you can accomplish on the IRS website for free and most people don’t need any help to complete the application.
Figuring out if you need a Tax ID is just about as simple as applying for one. The IRS says that you need a Tax ID if:
In addition to filing taxes you may also need an EIN to open a bank account or apply for a credit card in the name of your business. Even if you’re business entity is currently a sole proprietorship you can still get an EIN and use it the same way, although it’s only required for those businesses that fall under the details listed above.
Now that we’ve established what an EIN is and if you need one, lets talk about the nuts and bolts of securing your EIN from the IRS. You can apply for an EIN by fax, phone or email but the quickest way, and the way the IRS prefers, is online. The process will take only a few minutes, but you’ll need to have the answers to a few questions beforehand:
With the online application you’ll have access to your newly generated EIN as soon as you submit your application. The IRS provides an official document that you’ll download to your computer – make sure to save this digitally as well as print a paper copy to save with your other business records.
There is a lot to manage when you’re running a small business, but one of the most important things to take care of is managing the books. In addition to understanding what money is coming in and out of the business on a day to day basis, you’ve also got to be sure you’ve got things set up correctly for collecting and paying taxes.
Sales tax is probably one of the most confusing transactions that occurs, mainly because there’s a lot of gray area for those that run small businesses or sell online.
Sales tax is money collected at a retail’s point-of-purchase and is imposed by both state and local governments. It’s paid by the individual that is making the purchase, but that means as a small business owner you’re responsible for the following:
Figuring out the amount of sales tax that should be paid
Collecting the sales tax from the person purchasing from you
Turning over sales tax to the appropriate authority by the deadline outlined
Sales tax rates vary from state to state, which can lead to some confusion if you sell in more than one state or if you sell online.
It depends on what your state requires. The best way to answer this question and many more for your specific state is to access state tax resources.
Not sure where to find your state requirements. You can look them up here.
You’ll need to check with your specific state for all the details but the general process of collecting and paying sales tax is as follows:
You may have noticed that we mentioned in section above exempt sales and you may be wondering what all that involves. Although there may be exceptions, the general rules for tax exempt sales is as follows:
Resold items – retailers don’t typically have to pay sales tax on wholesale purchases since it’s assumed that the end consumer will pay sales tax on them at the end point-of-purchase. That said, many states require that you have a wholesale license, so you’ll need to check into the requirements and how to apply for one for your specific state.
Non-profits – sales made to non-profit organizations are also exempt
Raw materials – if you selling goods that will be made into other goods, they’re most likely considered raw materials and are typically tax exempt as well.
This is where things can get a little tricky. If you sell online, your customers can live virtually anywhere and what state exactly is the sale made in? And what state’s rules do you’re follow – your state, or the state that you’re buyer lives in?
The first thing you need to determine is where your business has a physical presence. Wherever your store, office, warehouse, employees, etc. are you most likely have physical presence, also known as nexus.
You MUST collect sales tax for your nexus.
If you do not have a presence in a state then you are not required to collect sales taxes. To make sure you’re applying the rules for nexus correctly, make sure you check the requirements for the states that you have physical presence in.
Once you know that you need to charge sales tax, it’s time to determine what rate you should charge. It sounds a little overwhelming to manage due to the thousands of sales tax jurisdictions in the United States.
Our best advice for those that sell online or have a large volume of out-of-state sales is to invest in online shopping cart and sale transaction software because many automatically calculate sales tax rates for you.
Now that you’ve got the details on sales tax, what questions do you have for us? We’d love to hear them in the comments.
You beat the rush and filed your taxes early. Having the stress over with is nice, but having that cash from your tax refund in your bank account would make the success of getting it done all that much sweeter, right? It’s true that the IRS issues more than 9 out of 10 refunds in 21 days, but it’s also possible that a review of your tax filing may take additional time. If you’ve ever wondered what happens between the time you file and when you get your refund and how quickly you’ll get that money back from the IRS, read on.
Once you, or the tax professional you hired, hits the submit button on your tax filing it’s just a waiting game on your side. That said, your submitted taxes aren’t just sitting around. Here’s how it all works out:
From there your tax filing is processed and reviewed and only the IRS knows that status and whether or not you owe taxes or should be issued a refund – how you file also adds to the length of time your return takes. That said, you can start checking your status 24 hours after you’ve e-filed your paperwork by accessing the IRS’s tool Where’s My Refund?
If you e-file your taxes, you have fairly good odds that you’ll get your tax refund quicker than doing it the old fashioned way. E-filing provides you with the option to have our refund directly deposited into your account and it’s the safest, and fastest, way to receive your refund – not to mention the easiest process to complete. However, if you’re still filing a paper version of your taxes, you can still take advantage of the direct deposit method.
To take advantage of getting your tax return by direct deposit you simply need to provide the account and routing numbers for the account you’d like the money deposited to. There will be a spot to input the numbers on your return if you’re using a tax software program to do it yourself or you can provide the information to the professional that’s taking care of the filing for you.
Regardless of your method, direct deposit definitely gives you quicker access to your refund than a paper check coming to you in the mail.
Federal tax refunds are often the largest single check many people receive – so it’s a great time to start saving or even invest a portion of your return. You can easily divide your refund into two or three additional bank accounts with a submission of just one extra form. This option gives you the chance to manage your money – sending some to one account for use while the rest goes to savings or investments for future use.
During Q4, tax season seems like it’s lightyears away. But prepping for tax season now, can save you time and money come tax time. Here are 3 year-end contributions you might want to consider before you ring in the New Year, and how they’ll help your bottom line.
No one will refute that it’s the season for giving. But did you know that giving can provide you with tax write-offs in addition to a host of warm fuzzies? It can. Charitable donations can impact taxes for the year in which they were given. To claim donations on your tax return here’s what you need:
Tip: Even if you’re not planning to donate now, maybe you’ve donated sometime this year. Take a few minutes and pull out your books, calendar, and bank statements. Review them and gather the necessary paperwork so you’ve got it ready for tax time.
Invest in your health. It’s something you’ll spend money on anyway, so why not put away some cash in your Health Savings Account (HSA). An HSA allows any unused money to rollover into the following year and when the money is used to pay for qualified medical expenses is tax-free.
Tip: Now is the time to check into HSA options if you don’t already have one. If you have it, but aren’t sure where you’re at, check into your balance, scheduled needed appointments, and see if you’re taking advantage of any employer matching opportunities. Even consider raising the amount you contribute each month so you’re building a reserve for those unexpected medical expenses that may crop up.
It’s always a good time to consider investing in your future. In fact, it can provide you with a tax break now, and cash later. Any contributions made to retirement accounts are deducted from your taxable income, which can lead to reducing the amount of taxes you owe or possibly increase your refund.
IRAs allow for contributions to be made for the previous year right up until the tax-filing deadline. But if you’re looking to stash some cash into a 401(k) and take advantage of any employer matching, you’ll need to act before year end (Dec 31) or check out the specific requirements for your plan.
Tip: Talk to your accountant and see what type of suggestions they’d make when it comes to contribution to your retirement savings. They’ll have a handle on all the ins and outs and can help you strategically place your money so it’s working for you both now and in the long run.
So with these 3 suggestions in mind, what plans do you have to lessen your tax load before year end? If you’re got questions, lets talk.
How can charitable donations impact my taxes?
Charitable donations can provide tax write-offs for the year in which they were given. To claim these deductions, you need receipts from IRS-qualified charities for donations over $250. Non-cash items like household goods, cars, and boats can also be deducted if itemized properly.
What documentation do I need for claiming charitable donations?
To claim charitable donations, you need receipts for any contributions over $250 from IRS-qualified charities. For non-cash donations, you’ll need to determine and document the fair market value of the items. Ensure you itemize these deductions on your tax return.
What are the benefits of contributing to a Health Savings Account (HSA)?
Contributions to an HSA are tax-deductible, and funds used for qualified medical expenses are tax-free. Unused money in an HSA rolls over to the next year, allowing you to build a reserve for future medical costs. Check your balance and consider increasing contributions to maximize benefits.
How do retirement contributions affect my taxable income?
Contributions to retirement accounts, such as IRAs and 401(k)s, reduce your taxable income, potentially lowering your tax bill or increasing your refund. For 401(k) contributions, ensure they are made by December 31 to take advantage of employer matching and year-end benefits.
When should I make contributions to my IRA or 401(k) to benefit my taxes?
IRA contributions for the previous year can be made until the tax-filing deadline. However, 401(k) contributions should be made by December 31 to take advantage of employer matching and reduce your taxable income for the current year. Consult with your accountant for specific deadlines and strategies.
Trying to recover after a natural disaster is incredibly overwhelming. But, trying to get your business to recover can be a whole new headache. Using an external accountant, an accountant that doesn’t work from your office, can be beneficial because it’s one less thing on your plate. An external accountant can help take some of the load off and help you get your business back on track.
Here are a few ways an external accountant can help you and your business through a natural disaster.
Damage to your office can mean that you lose a lot of important documents. As you know, documentation is an important part of taxes and bookkeeping. If you’ve lost your documentation, you may be in trouble when you need to claim a tax deduction; however, an external accountant can come to the rescue.
When you use an external accountant, you normally send them documents showing purchases, income, and more. Which means there is a backup of all of your documents in another location. Because of this your accountants can replace those lost documents.
If you’re in the opposite situation, where your accountant’s office is in a natural disaster, then you are still covered. The IRS grants you a filing extension, which we’ll go into more in depth later.
Tax credits are available to business that have suffered from natural disasters. In order to qualify for tax credits or deductions, the president has to declare your area as a “federally declared disaster area.”
One of the credits available to business owners in a natural disaster is the natural disaster casualty loss break. The casualty loss break allows people who have been affected by a natural disaster to file an amended tax return on the previous year’s taxes. This is helpful so that people can get a refund quickly, instead of waiting until the next tax season. The rules for casualty loss differ between business and personal property, so make sure you talk with your accountant and find out exactly what your business needs to do to use the tax credit.
You will need to assess and document the following areas in order to take advantage of disaster tax credits.
To ease the burden on victims of a natural disaster the IRS can extend tax filing dates. When IRS does extend filing dates, it only applies to areas designated as federal disaster zones. The IRS has already issued tax extensions for victims of Hurricanes Harvey and Irma.
After a federally-declared natural disaster, the IRS allows businesses more time to send in payroll taxes and returns. As long as you send them in before the new deadline, the IRS will wave any penalties or interest that may have accrued.
Whether the IRS has granted your natural disaster a tax extension or not, an external accountant, like Vyde, can help you get your taxes in on time.
At Vyde, we have a lot of experience with business taxes. Ben Sutton, one of Vyde’s founders and a Certified Public Accountant (CPA), recently hosted a webinar on the most commonly missed business tax deductions. Ben’s experience as a CPA has helped him learn what business tax deductions business owners are missing out on. In the webinar, Ben discusses what business tax deductions are the most lucrative for small businesses. You can watch the webinar below.
Entity structuring can be confusing and overly complicated. At Vyde, we found that setting up your business as an S Corp can be the most tax-efficient because S Corps usually pay the least amount of taxes.
We always check with our clients to see if they qualify to structure their business as an S Corp. If you structure your business as an S Corp, you, the business owner, have to be on the payroll and you have to pay yourself a reasonable salary .S Corps don’t have double taxation like C Cops do, so the only thing that is taxed is the salaries the shareholders take. So, as the business owner, you only pay social security and Medicare taxes on the salary you take out. Other business entities require you to pay taxes on your total profits and on any salary you take.
Changing your business entity to an S Corp can result in $5,000-10,000 in tax savings.
If you are using your personal car for your business, then you should be taking business tax deductions! Automobile tax deductions are especially helpful for realtors and insurance agents because those professions require a lot of driving. There are two ways you can get automobile tax deductions.
The auto deduction can save you $3,000-8,000 in business tax deductions.
We’re going to focus on the SEP-IRA. While a SEP-IRA is very inexpensive to set up, you will want to meet with a financial advisor to cover your bases.
Your business is the contributor to the SEP-IRA. Companies can contribute 25% of the employee’s compensation or up to $54,000 a year. The only catch is that the company has to contribute the same rate for all employees.
If you set up your business as a S Corp, then a SEP-IRA is a great option. Because you are an employee with a salary, you can have the business contribute to your IRA. You can still set up a SEP-IRA even if you don’t have an S Corp. LLCs and Sole Proprietors can have SEP-IRAs, the requirements are just different.
All of the money you put in your SEP-IRA counts as a business tax deduction, so the savings depend on your contributions. However, you will have to pay taxes on that money when you pull it out of your retirement account.
For non-business owners, health insurance costs and medical expenses are only deductible when you do an itemized deduction. The problem with that is, in order to deduct any insurance or medical expenses, the total you spent must exceed ten percent of your adjusted gross income. Which makes it hard to qualify for.
However, if you are self-employed you can deduct 100% of your insurance costs and medical expenses on your taxes, without itemizing. This isn’t a business tax deduction, it’s a personal tax deduction that only applies to business owners. There isn’t a threshold you have to meet for this deduction like there is for non-business owners. This only applies to people who purchase insurance. If you use a health share ministry, which is exempt from the marketplace fines, then you can’t deduct it because they aren’t considered premiums.
When you own a business, you use a lot of personal items for your business. Normally you wouldn’t get a tax deduction for personal expenses, but because you own a business, and use these items for your business, they are now deductible, The following items all qualify as previously personal expenses:
These expenses won’t get you a huge deduction, but all together they can add up to a few thousand dollars each year. While the savings are still moderate, it’s still well worth the time to count them.
While no one enjoys paying taxes, but it’s a simple fact that if you make money, you must pay taxes. There isn’t a way around it. If you are doing your best to take advantage of all the business tax deductions you can, then you need to have a plan for saving money to pay your taxes.
Six to eight months before you file your taxes, meet with an accountant to determine what you’re going to owe in taxes. At Vyde, we like to schedule a tax discussion call with our clients. We look at how much money you’ve made and what you plan to make for the rest of the year. Then we look at what tax deductions you’re going to take advantage of. Once we know all of this, we can determine how much you’re going to owe in taxes.
A tax discussion is also helpful so that you aren’t surprised when tax season rolls around and all of a sudden you owe the IRS a big chunk of money. Instead, you can put money aside throughout the year so that you’ll have plenty of money to pay the tax man.
What is the most tax-efficient business structure for small business owners?
Can I deduct my automobile expenses if I use my personal vehicle for business?
How does a SEP-IRA work as a business tax deduction?
Can self-employed individuals deduct their health insurance premiums?
What are “previously personal” expenses that can now be deducted as business expenses?
Sales tax is a consumption tax on goods and services. State governments, along with county and local governments, set the sales tax; however, not every state has sales tax.
The purpose of sales tax is to fund government projects. The revenues from sales tax are used to fix roads, improve communities, or build infrastructure.
Consumers pay sales tax at the point of sale on goods or services. Businesses charge the consumers and then pass the taxes onto governments. Businesses are liable to pay sales tax if they have any presence in the state. This can mean a brick-and-mortar business, an affiliate, an employee or any other type of presence. States have passed laws requiring online retailers, like Amazon, to charge and pay sales tax.
Because products can pass between many businesses between production and the final sale, only businesses who sell directly to customers have to pay sales tax. The other businesses who handle the products get a resale certification from the government. The resale certification says that the business is not liable for the sale tax because they are not selling directly to consumers.
Sales tax at brick-and-mortar businesses are fairly straight forward. We’ll present a scenario for affiliate sales taxes.
Jordan is a tech blogger. He uses affiliate links from several companies to make money from his blog. Jordan lives in Georgia, where there are affiliate nexus laws. Affiliate nexus laws state that companies who use affiliate links and make over a certain amount from those sales must pay sales tax.
The Georgia nexus affiliates state that if a company makes over $50,000 from the nexus in Georgia, then the company must pay sales tax. The companies who work with Jordan have a two options on how they want to proceed. First, they can wait and see if the hit the threshold of sales before paying the taxes. The downside to this is that they may be liable for any penalties or interest due on the unpaid taxes. The second option is that the company collects sales tax up front and then if they have to pay sales tax, they already have the funds set aside to do so.
Jordan, as an affiliate, doesn’t have anything extra to do. However, some companies avoid working with bloggers who live in states with affiliate nexus laws. As more states enact affiliate nexus laws this may change.
If you’re a small business owner who drives a lot for work, then claiming a mileage deduction on your taxes is a great way to save money.
There are two options when you’re claiming a deduction for mileage. You can choose to claim a standard mileage deduction or you can calculate the actual costs of using your vehicle for business.
The IRS announced the 2017 standard milage rate as:
Mileage deductions can be taken for business, charitable, medical and moving purposes.
There are two important factors to track if you want to use a mileage deduction. First, you need to track your actual miles. This is important so that you know how much you can deduct at tax time. Second, you need to track the reason for your trip.
Take John, for example, John is a real estate agent who drives his car to show houses. John tracks of how far he goes and what the purpose for the trip was. That way when it comes time to pay taxes John knows exactly how much he can deduct. John tracks the purpose of each trip as well. If the IRS ever audits John he has proof that the miles he claimed were for business purposes.
To help you out we’ve create a Free Mileage Log so that you can keep track of your miles. Grab our Mileage Log and keep it in your car so you can mark down each of your business trips.
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.
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.
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.
Continuing education is tax deductible, so it’s a great option on how to spend your tax return.
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.
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.
