Tax Tip Tuesday – Address

Notify past employers, unemployment and loan companies of any address and mailing changes. One forgotten W2 after you file your original return means amendment fees and tax liability. Generally I see this range from $49 to $350. When you amend Federal you need to amend state, which can also add more charges!

Sometimes in our hurry to get taxes done and out of the way we forget about the 6 weeks of unemployment in January for construction or a temporary holiday job that paid out wages in January for hours worked in December.

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Tax Tip Tuesday – First Day Tax Office 2017

Make plans for your tax appointment today. Do it yourself? Put a date in your planner. 

E-file opens January 23. This means that the IRS will not process any returns (even paper filed returns) until this date.

My personal goals has always been the last day of January. I have online access to the forms I need so they come out quicker than the mail. If you have investments – the forms FINAL VERSION are not ready until March. Please don’t bring your tax preparer the former that says NOT FINAL 😉

This week work on getting your small business in order. Mileage logs, inventory, spreadsheets with income and expenses. 

Tax Tip Tuesday – What’s Your Plan?

A long time client has chosen to give Power of Attorney to his bank. He had been the man who helped everyone else who aged, get organised and get to their tax appointment. 

Other clients come in solo, even though they are in a relationship. I always remind them what if something happens to you? Auto pays don’t end with death. 

One of my good friend’s husband was terminal, she had time to start the process of collecting his passwords for the electric, water, mortgage, medical insurance, etc. The ones she didn’t have when he died was his phone and email passwords.

Which one are you? If you are single, do you have a fireproof safety box with logins & passwords and have given a family member the key? Who will help you? What would you need to know if someone close to you couldn’t take care of their bills?

  • My mother has my brother and I on every account, just in case. 
  • In my firebox I keep my credit card info sheets that says if there is an accident while flying and I bought my tickets with their card, there is life insurance money. (Read that small print!) My mom has a key – though she may not remember where she put it! 
  • My email passwords are written down & stored in the firebox. 
  • When I create a new account, Food 52, King Arthur Flour, Netflix, Utilities, Cell phone, I write the log in and password in an email to myself with the subject line the name of the company. When I get the email I save and archive it. When I  (or someone who needs to help me) needs the info they just need to do a search of my email and there it is.

Take a quiet Saturday afternoon and think through some of this. How prepared are you?

Tax Tip Tuesday – Checkbook

Get a separate checkbook for your business. It’s not even an option. 

In an audit, if you have combined personal money with business money, the auditors have the authority to 

  1. Throw out the business. 
  2. Throw out all expenses for the business.
  3. And the worst one I have dealt with – The auditor took all income, including birthday money as income and tried to tax the client.

To go back years and try to separate what was personal and business is extremely difficult. Audits typically do not happen for the current year but are three years back. Do you remember what happened in 2012 tax year?

One of these factors is the bank statements.So many of us, never check them anymore. An email comes saying it’s available, but who opens them and goes to the work of downloading the PDF. We tend to use our app to track daily balances. In audits I have had clients pay hundreds of dollars to the banks to have them printed. Tax auditors can subpoena them for free and do NOT have to share them. 

In an audit, all deposits are income, so if you are re-depositing a bad check, have an insurance reimbursement or loan proceeds, clearly marked them and have a paper trail. In one case a client sold a home and they temporarily put the proceeds in their business account. The auditor taxed them until they could produce the correct paper work.

Keep your business checkbook separate, clearly mark deposits and download or print the bank statements. 
 

Tax Tip Tuesday

Sadly I run in to this one a lot –

My self-employed business client was very excited to get a big boost of income, he sent the checks to the bank and had the bank make a big principle payment.

Sounds like a good idea….but he forgot to put at least 15% in savings to cover his tax liability at the end of the year. 

Yes, the interest on the loan is deductible, BUT not the principle payment. So at the end of the year, he is short on cash. 

Depreciation does not typically match the amount paid as principle and in a year where you are at the end of depreciation, you are caught short of cash to pay the tax bill.

My advice has always been for every dollar earned in your business put 15% in savings. Whatever is not used for taxes, is your “refund”. 

It seems like a steep percent, but for self-employed clients who have been caught owing money, that is what it would have been.