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January 2020

Tax Preparation Checklist to Get You Ready for This Year’s Returns

We still have several months before our taxes are due on April 15th. Therefore, we still have plenty of time to start working on our income tax returns. Following this tax preparation checklist will help you get ready for this year’s return, ensuring you don’t miss any document or information. This includes having all your personal information ready, having all income records in order, and also having all expense records together. This will ensure your income tax returns get processed in a timely manner.

Personal Information

As surprising as it may sound, there are many taxpayers who do not know their Social Security Number, and that might not even know they need it to file a tax return. For others, this number is so common, it is easy to forget about adding it. Also, it is important to have the SSN of your spouse and any children or dependents, too. This will ensure your returns have all the personal information needed.

Income Records

Another piece of essential information we simply cannot forget as part of this tax preparation checklist is our income information. We need to let the IRS know how much we earned during 2019, including income from our main employer, a temporary job, a side job, or any investments we might have made.

There are two forms we must include in our income tax returns, the W-2, and the 1099. Form W-2 is the one that your employer will give you. 1099 Form is for anyone who might have worked on a freelance basis, making $600 or more. In addition, we will need a record of any other income we might have received during the year coming from:

  • Social Security Income if applicable,
  • Investment Property Income
  • Alimony Payments
  • Debt Cancellations
  • Jury Duty Income
  • Gaming Winnings
  • Virtual Currency Payments

Expense Records

Lastly, we also need to provide the IRS with complete and accurate expense records, since there are many deductions and credits we might qualify for. In order to claim such deductions or credits, we need to show the IRS proof of such expenses. Some of the most common deductions include mortgage interests, property taxes, charitable contributions, and medical expenses. These are some other deductions you might be eligible for:

  • Student Loan Interests
  • Higher Education Expenses
  • Child Care Costs
  • Educator Expenses
  • IRA Contributions
  • HSA Contributions
  • Business Expenses such as equipment, supplies, travel, and home office.

 

In order to make sure you file your income tax returns properly, accurately, and in a timely manner, work with the best tax advisor. Besides, following this tax preparation checklist, you will be able to claim every eligible deduction and receive a tax refund in no time.

Essential Payroll Tips Every Business Owner Should Know

Being able to properly manage our company’s payroll is an important skill that might take time and effort to master. After all, the last thing we want to do is make a mistake that affects our employees and their salaries. The consequences, even when manageable, could have a negative effect on our staff’s morale and motivation. Thus, we have gathered four essential payroll tips every business owner should know to successfully manage their remuneration records.

To begin with, we should always classify our employees properly, whether they are proper employees or contractors. Also, automating our payroll recording system will help us avoid making mistakes or entering the wrong information. Besides, accurately keeping track of our employees’ attendance and punctuality can be an effective way to avoid time theft. Lastly, staying updated in regards to payroll laws and regulations is one of the essential payroll tips we will cover.

Classify Your Employees Properly

One of the most important aspects when it comes to successful payroll management is workers’ classification. So, classifying them as employees or independent contractors is imperative, and we can’t just arbitrarily do this. This is because the wage and tax laws will be different, depending on the worker’s category.

For employees, we are required to collect and pay taxes, follow state and local minimum wage laws, and pay overtime wages if such is the case. Nonetheless, these do not apply for independent contractors, as they take care of their own taxes and negotiate their rates.

Payroll Automation Is Key

Depending on the size of our company, investing in payroll processing software might sound like an appropriate decision. If we have reached a point where the number of employees is enough to create processing complications, we shouldn’t ignore automating the process.

There are many advantages that come from investing in payroll software. Firstly, it will help us avoid human errors like typing in the wrong number, recording in the wrong spot, and even forgetting about someone. Besides, these programs can help us calculate and even pay payroll taxes.

Keep Track of Attendance and Punctuality

Keeping track of our employees’ attendance and punctuality is another one of the essential payroll tips we should always follow. This is particularly true for employees who work under an hourly wage and that can earn overtime wages by the hour. By doing so, we make sure we are not paying them less for the time they worked. Besides, it can help with bonuses, if we offer such benefits, of course.

Just like with payroll automation, using time tracking software is a great alternative that tends to be cost effective. Online software, for example, offers affordability and accessibility, which is quite beneficial if we work with remote employees.

Stay on Top of Payroll Updates

Last but not least, we need to make sure we are staying on top of any update regarding payroll laws and regulations. Local and state governments are constantly revising, modifying, and updating these laws, at least once a year. We want to make sure our company remains compliant with such laws, as violations could have severe consequences.

If we are payroll software users, the provider should update the programs whenever payroll tax laws change. However, the best way to stay on top of our payroll recording, regulations, and practices is by hiring a professional consultant. This will save us a lot of time and money, and help us remain compliant and informed.

 

These Are the 4 Tax Mistakes to Avoid in 2020

We are less than two weeks apart from the start of this tax season, and we must start preparing to file our income tax return accurately and in a timely manner. However, it is common for people to feel overwhelmed by this process. If we feel stressed when we think about our taxes, these are 4 tax mistakes we should avoid in 2020. These mistakes include not adjusting our tax withholding and not keeping an accurate record of business expenses. Not including taxes for side and temporary jobs as well as not hiring a professional tax preparer on time are also examples of mistakes to avoid this year.

Not Adjusting Your Tax Withholding Properly

As a result of the 2018 new tax law, we saw a large number of taxpayers receiving bigger paychecks during the year by lowering most individuals’ tax brackets. Another change is that the IRS issued new withholding tables that allowed employers to know how much tax to withhold from the earnings of their workers. However, one of the tax mistakes to avoid in 2020 is not adjusting our tax withholding properly. If we make this mistake, we should expect the unpleasant surprise of owing money to the IRS.

Not Keeping an Accurate Record of Business Expenses

Business expenses represent an important and quite useful tax deduction that many taxpayers can take advantage of. In order to qualify and obtain this deduction, it is important that we track all our business-related expenses. Therefore, one of the most important tax mistakes to avoid in 2020 is not keeping an accurate record of these expenses. If we deduct less than what we spent, we won’t be fully taking advantage of this. If we deduct more, we might be subject to an IRS audit.

Not Including Taxes for Side and Temporary Jobs

In today’s economy, getting side and temporary jobs can be a great way to get additional income. Nonetheless, if we opted for one of these two options, we must remember to include all our earnings as part of our income when we file our tax returns. Working as a freelancer and self-employed means we are responsible for giving the IRS their part from what we earn. Failing to do so can result in costly penalties and audits in the long run.

Not Hiring a Professional Tax Preparer on Time

Lastly, one of the biggest tax mistakes to avoid in 2020 is not hiring a professional tax preparer on time. We might think we have a clear understanding of tax law and feel familiar with the income return process. Yet, having the help of a professional tax preparer can come with many benefits. They can help us fill out every form properly, maximize our savings and returns, and reduce our tax bill.

6 Frustrating IRS Challenges Taxpayers Might Face this Year

Every year, millions of taxpayers get ready to file their income tax return, a process that is feared by many, but that we all need to take care of. Having to collect and document our expenses can be a daunting task, especially when we don’t have the proper guidance. However, there are other situations that can be frustrating to taxpayers, including the IRS challenges we are likely to face. From customer service and insufficient staffing, to aging technology, delayed refunds, dissatisfying software, inexperienced preparers, and language limitations, these are 6 frustrating IRS challenges taxpayers might have to face this year.

Customer Service and Insufficient Staffing

One of the main IRS challenges taxpayers are likely to face is the quality of customer service provided. Last year, the IRS received around 100 million telephone calls, and only 29% were answered. This may be due to the insufficient staffing situation this federal agency is going through. The IRS is one of the lowest-performing agencies when it comes to customer experience, and its shrinking budget isn’t helping.

Aging and Outdated Technology

Another challenge that the tax agency and taxpayers alike are facing is the issue with aging and outdated technology. As we mentioned above, the IRS budget has been shrinking, which makes technological updates and infrastructure improvements quite difficult. In order to improve the systems it has, this federal agency needs around $2.5 billion.

Financial Hardship Due to Delayed Refunds

Refund fraud is one of the most common IRS challenges the agency must deal with every year. In order to prevent this, they have designed several filters that usually work well. However, these filters can also end up delaying legitimately filed returns, which could cause financial hardship to some taxpayers.

Dissatisfaction with Free File Software

Free File is a free federal tax preparation software that taxpayers can access through the IRS.gov website. However, the vast majority of taxpayers who filed their returns electronically prefer suing other software products. Only 2% of e-filing taxpayers actually use Free File software. The other 98% chose other options mainly due to dissatisfaction with the platform.

Inexperienced Preparers Entering the Business

It is always a good idea to hire a tax preparer that can help us file our income tax report. However, we should always make sure we hire well-trained and experienced professionals to do the job. One of the most concerning IRS challenges is the fact that it is now easier for untrained prepares to enter the business. This jeopardizes the information and the finances of taxpayers altogether.

Serious Lack of Multilingual Notices

As a federal agency, the IRS is required to implement a system that allows people with limited English proficiency to have access to the services it provides. However, one of the biggest IRS challenges is the lack of multilingual notices taxpayers the agency offers. The agency only translates some important notices into Spanish, but with more than 300 languages spoken in the US, more options are in order.