The Four States Of Taxpayers

How do you prepare for your taxes? Strange as this may seem, it’s not necessarily true that people who are expecting big refunds are always the people who file their taxes fast and early. It’s also not true that people who feel that they might have to pay something are always waiting until the last minute either.

Dealing with taxes is a much more mental process than that. As it is with business and employees, you find that not everything concerning taxes has to do with money. It has a lot more to do with personality and the perception of it all. Let’s take a quick look at the four states of taxpayers.

1. Energetic. Those people who are energetic are ready to get things out of the way, no matter if they’re getting a refund or not. Those who are getting refunds look forward to their return and how they’re going to spend the money. Those who aren’t sure or know they’re not going to get a refund want to know what their liability is and also want everything to be over so they can get on with life. There’s no hiding with these folks; good for them.

2. Distracted. Distracted people mean well, but they keep putting things off because they have other pressing matters to deal with. Sometimes those pressing matters are as minor as getting something to eat, but who doesn’t think eating is more important than taking care of their taxes?

3. Stressed. Just like the energetic people, it doesn’t matter whether they’re getting a refund or not. They see the entire process of taxes in the first four months of the years as a major challenge. Numbers are confusing to them, or maybe past history has put them on edge. If you’re married, you might have had problems getting refunds so many times that this is an unpleasant time of year, no matter how much in taxes you paid out.

4. Laid back. These folks don’t really care one way or another; they’re just not in the mood to be bothered by any of it. I’ve known people who didn’t file their taxes for a couple of years in a row who, if they had, would have reaped thousands in refunds, and even after they eventually file and learn about the penalties, they’re not bothered by any of it. I know others who haven’t filed taxes, ended up owing money, and set up payment plans and got on with life.

For all of these states, it can help to have an accountant who knows you and is prepared to get you through the process. Accountants obviously prefer to get everything early, and if they know your pattern they’ll work with you for your benefit and theirs as well. Many people need the extra boost, and they like knowing that their accountant cares about their needs. It’s something to think about at tax time when you have to decide between one of those tax agencies or an accountant you’ve worked with before.
 

Preparing For Tax Season

True, it’s still 2012, but that doesn’t mean that you need to wait until the last minute to prepare for your 2013 tax returns. Before we get into that, we’d like to remind you of our previous posts Trip Expenses You Can Deduct and Are You Preparing For Next Years Taxes Yet.

Here are some highlights we’d like to remind everyone about:

Child Tax Credit is $1,000 per child now, but decreases to $500 in 2013.

Earned Income Credit up to 3 children has a maximum credit of $5,891. This year there’s certain proof you have to provide to qualify for the credit which includes school records, medical records, utility bills, and property tax records. Check out the new form to see what’s specifically required of you.

Business mileage for 2012 is 55.5 cents a mile, and in 2013 it goes up to 56.5.

There’s no increase in capital gains taxes for 2012, but in 2013 it increases to 20%.

Student loan interest gives a deduction up to $2,500.

The electronic filing date has been pushed back until January 22nd in 2013; no real idea why, but last year some people waited longer than normal for their refunds so maybe it’s related to that.

If you had a lot of medical expenses and kept all your receipts, make sure to bring them in to see if you might qualify for some write-offs.

More changes for 2013? No one knows yet. You’ve probably heard “fiscal cliff” until you’re sick of it but no one knows what’s coming just yet. We know that someone will have increased taxes but unsure of who. We also know that more changes will come to health care in 2013, though the bill officially doesn’t kick in until 2014, and we’re unsure what that might mean financially right now either.

Overall, just be prepared for anything, and of course don’t wait until the last minute to get your information to your accountant or tax professional, as corporate taxes this year are due on March 15th.
 

Trip Expenses You Can Deduct For Your Business

One of the best things about being in business for yourself is that you get to write off a lot of expenses. This includes travel; not everything, but a lot of things. We will cover some of the things you get to write off and when.

Air Travel – if you have to fly anywhere you get to write off the cost of your flight and your bags if you have to pay for that. You even get to write it off if you get to the airport and upgrade to first class because the airline is offering a deal.

Car Rental – if you have to rent a car it’s covered, but you don’t get to write off any mileage if you go that route.

Mileage – if you don’t rent a car and drive instead, you get to write off all mileage associated with your trip. Here’s the other side. While you’re out of town, you get to write off all mileage, which includes weekends. Say you’re an hour away from a beach and you’re using your own car because it’s too far to drive home every weekend. It all counts as part of mileage.

Hotel – your hotel costs are covered for write offs. Any clothing you wear for business is covered if you need to have it cleaned and pressed. However, your personal clothing isn’t covered specifically, although you might be able to get a package that includes everything but that’s rare. Meals that you eat in the hotel are covered, but not personal convenience items or snack items you might buy in the hotel store.

Meals/Food – all of your meals are covered whether you eat in the hotel or not. If you stop for ice cream or a milkshake, that’s not considered a meal so that doesn’t count. If you’re staying in an extended stay hotel and you decide to buy food at the grocery store, you can write that off.

Clothing – if you need to buy new clothes to go to your client’s office those items are covered. But if you buy something like t-shirts, shorts or sunglasses, those items won’t be covered.
 

3 Most Important Things You Need In An Accountant

Suffice is to say, there are a lot of accountants in the world. Probably not as many as there are lawyers, but one is never really sure. Truth be told, most accountants are pretty good at what they do, otherwise they wouldn’t have any business. If someone tries to tell you they’re the best accountant in town, they’d better be talking about their search engine ranking or something other than how accurate they are.

If all accountants are pretty accurate, that means you have to have other criteria to look at so that you can judge who you want to hire. This is where intangibles come into play. What do you want in an accountant both short and long term? How do you want to be treated? What do you want to see? We can’t speak for everyone, but here’s 3 things we believe are important for any accountant that you want to work with.

1. Trustworthiness. This might seem like something that would be common among accountants until you think about it some more. Who remembers the name Arthur Andersen? That’s actually an easy one, as they were the accountants that “fixed” the numbers that, when caught, brought down both Enron and their own company, to the extent that they had to change their name just to survive.

A name that’s less known by many people who know what it’s related to is David Friehling, who was the accountant for Bernard Madoff, the man who pulled off the greatest Ponzi scheme in American history at billions of dollars over the course of 20 years.

Both of these accounting firms were very good but, as it turns out, weren’t very trustworthy. If you have an accountant that will do anything they can to hide assets or fix the books for any other reason, well, if they’ll do it for you they’ll do it to you as well.

2. Someone you can talk to. Let’s face it; a lot of people could probably do their own bookkeeping but the overwhelming number are probably better off letting someone else handle that, and other financial aspects of their business.

However, sometimes you sit down and start talking to the person handling your books and they’ll use terminology that you don’t understand. Or suddenly your mind goes off and starts watching last night’s game while your accountant is talking to you because they’re not interesting enough to listen to.

If someone is talking to you about your money you need to know what they’re talking about. And you need them to be engaging enough so that you’ll listen, and if need be ask questions. If your accountant is talking at you rather than talking to you, they’re the wrong person for you to be working with.

3. Sometimes tells you what you don’t want to hear. Sometimes things aren’t going great. Everyone knows who Elton John is, correct? Many years ago he sued his accountants because his money was low. It turned out that he was spending way too much, and his complaint was that they told him he was doing it but he thought it was their job to either stop him from spending it or helping him grow that money so that he could continue to spend as he pleased. He lost the case because the judge told said his accounting firm told him the truth, and it was his problem is he didn’t like what they were telling him; that’s paraphrasing the actual words.

Good accountants will make sure you know what’s going on, and won’t be afraid to let you know when things aren’t going well. They’ll help you by giving you advice, whether you take it or not. They won’t be afraid to do the right thing because they’re worried about losing your business, or worried that you might talk badly about them later on, possibly causing their business harm. If you can possibly with with your accountant to get things working properly, isn’t it better knowing the truth than pretending it’s not happening?
 

Are You Preparing For Next Year’s Taxes Yet?

I hear you now saying “It’s only September; why would I be ready for next year’s taxes already?”

Many people think that they should wait until the new year has begun to start getting ready for the next year’s taxes. As an accounting firm, we tend to disagree with this for many reasons.

One, what we find is that people will put things off until the last possible moment, and then suddenly start scrambling around trying to pull everything together at the last minute and are unable to find everything they need. Remember, you get to write off your business expenses, but if you’re unsure of all of them you’ll miss out.

Two, if you’ve been writing your mileage down but not properly logging it, if you do it ahead of time that’s one less task you’ll have to deal with later on. Keeping track of it monthly helps you to remember which part of travel was for business and what wasn’t business travel. For instance, if you took a quick trip to an office supplies store and bought something you’ll use in your business, in six months you’ll have forgotten that you did that and missed the opportunity to claim that mileage.

Three, sometimes you forget what items were business expenses after awhile. For instance, if you’re a corporate consultant your business clothes are a legitimate write off, and if you remembered to keep the receipt and write something on it so your accountants know, that’s a good thing. But if you just tossed it into a receipts folder and now it’s months later, you might not remember what that purchase was for unless you went to a specialty shop specifically for clothes.

Four, you might want to think about paying some of your estimated quarterly taxes if your income was high enough so that it’ll reduce some of your tax payments for the new year. This means you’ll have had to be tracking your income as well to make sure you don’t pay too little or too much. And you’ll want to make sure you’ve indicated in some fashion on your bank statements which payments went to that.

Five, bank statements. Sometimes it’s not enough to have them, as you know. For your business account, if you make money in multiple ways and you want to track it all then you probably go through the process of pulling out your statement and going through it marking everything. If you do it ahead of time you’ll save yourself the frustration of coming to certain items and wondering what they were.

These are only some of the things you probably want to think about ahead of time, and with only 3 months left in the calendar year, getting a jump on things would probably ease your mind a bit.
 

Accounting & Financial Advice from the Syracuse NY area