The Blog Of TL Wall Accounting

Archive for February, 2016

Do You Want A Tax Refund?

Every year there are a lot of people who end up being very happy because they’re getting refunds from both state and federal tax returns. This allows people to plan different ways of spending all that newly found money; who wouldn’t want to do that?

Actually, there are a lot of people who purposely try to minimize their tax refund, to the point that if they can break even they feel like they’ve maximized their money all year. What are they possibly thinking?

If you get a big refund, it means you paid more tax than you needed to. In essence, you’ve allowed the government to use your money to grow their own instead of you being able to enjoy it or even invest it yourself so that you could benefit from the fruits of your labor.

Being able to spend extra money during the year might sound like a lot of fun. Investing that extra money makes a lot more sense.

Think about it like this. Say your refund is $500. If you invested that instead of allowing the government to use it or you spending it on your own, and you were able to get it into an investing that paid 5% on the year, you’d earn around $25 or so. That doesn’t sound like a lot of money, but stick with us.

Not only would you have started growing your own money but you don’t pay taxes on the money you’ve invested as long as you allow it to stay where it is. That wouldn’t be a major discount on what you’d pay in taxes, but it would bring what you owe down a little bit. And, if you continued adding that same $500 a year, your growth would be around $6,700 in 10 years, all nontaxable.

Of course the idea is that you’re actually investing more money than just that $500, but it all helps an it’s all tax free growth.

It’s something to think about, although if you’re using your refund for that Caribbean cruise you’ve dreamed about all summer it’s probably a tougher choice to make than it should be.

Cameras, Folders, Apps & Paper

As we get close to the time when corporate taxes need to be filed and other taxes need to be calculated, it seems proper to mention that every year many people forget to not only keep their receipts but also to log all the important information they need so they can get proper write-offs to reduce their tax liabilities. We understand how time consuming it can be, as well as how hectic life can be, so we decided it was time to offer some suggestions on what could be helpful… without advertising anyone or any company in particular.

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Let’s start with cameras. Anyone who has a smartphone these days also has a camera. This means it can be used as a helpful work tool to help record a lot of different types of information that you can use later on to help figure out and track expenses. For instance, it can help you track mileage if you take pictures of your odometer when you start and stop a journey. You can take pictures of meal receipts instead of lugging around a lot of paper. You can probably figure out other ways cameras can help you out, and nothing says you have to save every picture you take. This also allows you to set up a digital file if you’d like to submit your receipts that way; accountants love things like this.

Next, folders. The majority of us pick up receipts, stuff them in our pockets and bags and move on with life. The problem is we get home pull all that paper out of our pockets and put it… somewhere. Later on, we might throw it all away because we forgot what it was or the possible significance of it. We’re not saying to carry folders around with you everywhere you go (although that’s not a bad idea), but it would help if you had a folder or two close to where you put all the paper you pull out so that it’ll spur your mind into thinking about some possible business purchases you might have made.

Back to the smartphone thing. There are a lot of apps out there that can help you track receipts, mileage and expenses. Some are free while some you’ll have to pay for. We haven’t spent a lot of time evaluating these which is one reason we’re not recommending anything, but we have noticed that there seems to be a generational gap as to who likes using these more than tracking information in other ways. Still, it’s something to think about because it might help.

The last thing to talk about is good ol’ reliable paper. One of our clients carries around a 3×5 index card notebook to capture mileage, write down where he’s been when making business purchases and highlight other information in case he forgets to log it all into a calendar. Other people carry steno-type notebooks, full folder folios or planners with them. These are all great… just try to remember not to throw away the pages in case you need to refer back to that information for your end of year expense calculations. 🙂