Choosing an Accountant Who Puts Your Goals First

There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple.

However, a DIY approach only works if you are satisfied with paying more than necessary. Tax preparation software handles all of the basics, importing income and considering common tax deductions. Unfortunately, when it comes to careful application of less-common tax-reduction techniques, these programs simply can’t compete with a skilled tax professional.

The Amazon Best Selling book, The Great Tax Escape, walks you through the process of choosing an accountant. Specifically, you will learn what to look for – and what to avoid – if you want a tax specialist who will help you keep your tax bill low.

Five Reasons to Hire a Highly-Qualified Accountant

As you know from your experience in business settings, companies that focus on their core mission are more successful. Devoting internal resources to creating excellent products and services, while outsourcing peripheral functions like IT and HR, makes it possible to innovate and deliver best-in-class solutions.

Focusing on your core mission is just as critical when it comes to tax preparation. The time you would spend trying to track down tax information is better applied elsewhere, and you are likely to pay more in the end anyway. These are five ways your accountant will free up resources for you to use in ways that will further your personal mission:

• The tax code is constantly changing, and deductions that were available last year may not be appropriate today. Conversely, expenses you couldn’t deduct in previous returns may now be permitted. A skilled accountant stays on top of these changes and applies them to your situation, so you don’t have to complete extensive research.
• Much of the tax code is spelled out and clarified based on specific cases. Unless you are following industry developments day in and day out, you are likely to miss all but the most significant decisions. Your accountant has years of experience with filing returns, and continuing education is required in every state. You can be sure that these professionals understand what works – and what doesn’t.
• Experience also helps when it comes to developing your long-term tax savings strategy. Accountants have watched businesses grow and change, and they know how to get results. Their expertise in complex decisions like choosing a business entity or whether to consider cost segregation can be invaluable.
• Different types of income are taxed at varying rates, and do-it-yourself filers often assume there is nothing that can be done to change their circumstances. Talented accountants know better. With the help of a skilled professional, it may be possible to move income from high-tax categories to low-tax categories, which can mean significant savings. .
• Finally, timing is always important in the financial world, and that holds true when it comes to your tax strategy. Accountants have a deep understanding of the economy’s ebb and flow, and they notice patterns that have played out over the course of their careers. They use this experience to advise on when and how to apply tax strategies for maximum savings.

Contact Lynco Financial & Tax Services, Inc. today by calling (863) 295-9895 or request your free consultation online now. As a thank you for completing a tax consultation, we’ll provide a free tax planning book, The Tax Detective: Uncovering the Mystery of Small Business Tax Planning.

Do you live in a state with high-income taxes? If your saving grace has been a long list of deductions, the game may be over thanks to the SALT limitations. Unless you move out of state (which might be a viable option) you might be losing ground instead of saving money this year.

Some IRS tax deductions have gone away forever—they will no longer be available. However, the SALT deduction, which includes property tax deductions, did squeak by. So, yes, property taxes are still deductible.

The SALT limitation is one of the most controversial new tax changes affecting taxpayers this year. It adds insult to injury after a battery of other tax law modifications in recent months.

Currently, itemized deductions are unlimited as long as taxpayers choose to deduct either income taxes or sales taxes. Most people find deducting income taxes most beneficial. (For those living in a no income tax state this is a non-issue.) Property taxes were also completely deductible.

Under the new plan, starting this year (2018) taxpayers who itemize will be able to deduct a total of $10,000 of their state individual income, sales and property taxes.

Is there any hope for you or will you be watching your financial assets dribble away this tax season?

If relocating sounds attractive but picking up and moving to a lower income tax state is out of the question, there are other ways to faceoff with SALT limitations.

What is most controversial about this change is that while aspects of the plan could help offset the lower threshold, in most cases the benefits won’t be enough to balance the loss of tens of thousands of dollars in SALT deductions some filers will lose.

Who Does SALT Benefit?

Those taxpayers with incomes higher than $100,000 get almost 90% of the SALT Benefit. What’s interesting is less than one-third of taxpayers itemize deductions, and of those that do, almost all take the SALT deduction. The main reason for itemizing is the SALT deduction.

According the Georgetown University Law Center the SALT deduction is valuable to taxpayers on one hand, because it pushes them out of standard deductions. On top of that, they benefit from additional deductions. But going forward, because the new reform nearly doubles the standard deduction, fewer taxpayers are likely to decline itemizing altogether.

Is Marriage Being Penalized?

Homeowners with multiple property assets have been used to being able to fully deduct their property taxes are sitting on the edges of their seats. Married couples are doing the same.

The reason?

The new SALT deduction reduces benefits once afforded married couples since the limit is the same, whether the taxpayers are married or single. Two unmarried taxpayers living together paying $10,000 in SALT receive a combined $20,000. If they get married, that is cut in half.

With weeks left until 2018 becomes a memory, taxpayers have many decisions to make and make quickly.

Request your free consultation today by calling Lynco Financial & Tax Services at (863) 295-9895. As a thank you gift for completing a tax consultation, we’ll provide a free book, The Tax Detective: Uncovering the Mystery of Small Business Tax Planning.

Want the attention of the IRS? All you have to do is make personal transactions on your business account. RED FLAG!

It’s called commingling funds, and it can get you into big trouble at tax time.

No, pleading ignorance will not save you.

What’s The Difference?

Expenses associated with personal products or services, living expenses or family expenses are not business expenses and generally non-deductable. Buying a new TV, even if you watch a program or two focused on your industry, is no more a business expense than taking Grandma to dinner.

However, if you have expenses that are partly personal and partly business, as long as you divide the total cost appropriately, the IRS permits deduction of the business portion. Doable, yes, but keep in mind this complicates things during tax season.

For example, let’s say you use your credit card to borrow money. You spend 90 percent of it buying a new office phone system and the other 10 percent for a cordless home phone. The 90 percent used for business is deductible. The remaining 10 percent is a personal expense must be divided out. It’s not deductible.

Home-Based Business Expenses

Here is another potentially sticky spot if you try to fudge.

Do you work from home? Many people do these days. It makes good sense, and not only for entrepreneurs. Many corporations allow employees to sign onto their computers and work from home. The company saves money and ultimately, employees can be more productive in a home setting.

It gets sticky when home-based business owners try to claim all of their home expenses and utilities and file for business deductions on the lump sum.

The IRS sees RED.

It’s best not to comingle funds, but if you find yourself needing to make separate calculations for personal and business expenses from the same account, accuracy is paramount, i.e. don’t make mistakes.

There are two options for home-based businesses at tax time. Which one is right for you?

Regular Method

When using the regular method to calculate expenses, home office deductions will be based on the percentage of your home devoted to business use. Whether you use a part of a room or the whole second floor of your home for conducting business, figure out the percentage of that space and related expenses to determine deductions.

Simplified Option

There’s also a simplified option that makes things easier for many small business owners. It was designed to cut out some of the burdens of tedious recordkeeping associated with the regular method.

In lieu of calculating and dividing expenses, the simplified method allows qualified taxpayers to multiply a prescribed rate by the allowable square footage of the business space.

Mixing Business with Pleasure

Be aware that mixing personal expenses in with business expenses by running them through your business will likely NOT go unnoticed. You won’t be the first to try and the IRS is paying attention.

Never use your business account for personal purposes, and if you do, don’t claim those expenses on your taxes. Home rent, pet care, and other personal expenses are blatantly disallowed.

What surprises many new business owners is that clothing (yes, even though you get dressed for meetings) and groceries are not deductible. Don’t even try.

Certain items, such as gifts and entertainment, may be allowable if they are business expenses. Hold onto receipts and keep good records. Always talk to your tax professional to be sure.

You can avoid a red flag by keeping business and personal accounts separate. Right. Two different accounts. This will minimize issues at tax time, and help you avoid an IRS audit.

 

The most recent tax reform law effectively reduces taxes for many small businesses. It also creates some new complications. Here are the highlights.

Corporate tax rates are cut.

The graduated corporate tax structure has been replaced by a flat rate of 21%. This represents a significant rollback for corporations in the former top 35% bracket. Of particular note to owners of closely-held C corporations: the new law repeals the corporate alternative minimum tax and makes the simpler cash method of accounting available to more corporations.

Owners of “pass-through” entities gain a new deduction.

The legislation creates a new deduction for 20% of business pass-through income. This deduction is available to owners of almost any type of trade or business whose taxable income does not exceed $315,000 (joint return) or $157,500 (other returns). Above those amounts, the deduction is generally limited to the greater of:

• 50% of W-2 wages paid by the trade or business, or
• The sum of 25% of W-2 wages paid plus 2.5% of the original cost of tangible, depreciable assets used in the business.

When the business has more than one owner, the owners use their allocated shares of wages and assets in computing the limitations.

Different restrictions apply to individuals in certain service businesses (e.g., law, medicine, and accounting). For those individuals, the ability to take the deduction is reduced with taxable income between $157,500 and $207,500 ($315,000 and $415,000 on a joint return) and is unavailable once taxable income reaches the top of the applicable range.

The taxable income thresholds will be adjusted for inflation after 2018, and the 20% deduction is scheduled to expire after the 2025 tax year.

Depreciation and expensing provisions are more generous.

• Bonus depreciation percentage increases from 50% to 100%. Businesses may deduct the full cost of qualifying property acquired and placed in service after September 27, 2017, and before January 1, 2023 (before January 1, 2024 for certain property). Unlike under prior law, the property does not have to be new — used property can also qualify. Starting in 2023 (2024 for certain property), the deduction is gradually scaled back, and it sunsets after 2026.
• Section 179 expensing limit increases from $500,000 to $1 million. The law doubles the annual expensing limit and raises the investment threshold over which the deduction begins to phase out to $2.5 million. These new limits will be adjusted for inflation after 2018. The new law also makes the Section 179 expensing election available for more types of property, including certain improvements to nonresidential real property.
• Auto depreciation limits increase more than threefold. The new annual caps are generally effective for business autos placed in service after 2017.

Other changes could have an impact.

• The deduction for business entertainment expenses is repealed, effective for expenses paid or incurred after 2017.
• The costs of certain employer-provided transportation fringe benefits, such as transit passes, are no longer deductible, also effective for expenses paid or incurred after 2017.
• For the 2018 and 2019 tax years, employers that provide paid family and medical leave may claim a credit for a portion of the expense (requirements apply).
• The domestic production activities deduction is repealed, effective for 2018 and later tax years.

These are just highlights of some of the changes included in the Tax Cuts and Jobs Act of 2017. Please consult a qualified tax advisor for more detailed information about how the law’s provisions may apply to your business and personal tax situation.

Request your free consultation today by calling Lynco Financial and Tax Services at (863) 295-9895. As a thank you gift for completing a tax consultation, we’ll provide a free book, The Tax Detective: Uncovering the Mystery of Small Business Tax Planning.

Source/Disclaimer:

This communication is not intended to be tax advice and should not be treated as such. You should contact your tax professional to discuss your specific situation.