Budgeting

Claiming Dependents On Your Weekly Or Biweekly Paycheck

How many dependents do you claim on your taxes? I’m not talking the once a year tax-preparation, but the daily or weekly or biweekly taxes that are deducted from your paycheck.

Most people across the country will claim the same number of dependents that they do on their yearly tax form. What this is supposed to do is remove enough tax so that when you file your income taxes for the year you’ll either have paid everything that you owe or will either owe a little bit more or get a very small refund.

What some people do is claim fewer dependents on their paycheck so that more money is taken out at every pay period. What this does is guarantees them a refund when their taxes are done, and many people plan around that refund. However, it might not be the best use of their money. Let me explain.

Getting a refund from the government is nice. However, by taking more money out of your check it’s the government that gets to use that extra money to build interest on than you. If you have no problems with the government using your extra money then that’s fine. But if you’d like to use that extra money you might think about claiming one less dependent and then rolling that money over into some kind of investment. Not only would you be growing money for yourself, but because you’re investing it you get that extra bit tax-free for a while, which means you won’t have to pay much more on your yearly taxes, if you have to pay anything at all.

Did you know that you can claim anywhere up to nine dependents for your pay checks whether you have that many dependents or not? This is not a recommendation by the way, but it’s something you should probably know.

Every once in a while if you need a little bit of extra cash, it might not hurt to look into claiming more dependents for a pay period or two. What you’re doing in essence is borrowing against yourself instead of having to take out a loan or asking someone else for money. If you claim 9, for instance, you might not have any taxes taken out of your check or very little, and you can roll that money into something else. You could even roll it over into some kind of investing, but the tax amount that you’ll owe on it at the end of the year will still be higher than what you might want to deal with if you decided to do it more than a couple of pay periods.

That’s the main thing you needs to think about if you decide to claim more dependents than you actually have. You will still owe the government its money, and if you don’t plan for that then when you do your taxes at the end of the year you might be shocked to find out how much money you owe. Of course you could probably keep doing the same thing and borrowing against yourself, but that’s not a wise thing to do. Still, if you ended up having to make a deal with the government to pay back outstanding taxes, it will cost you a lot less than the interest on a credit card.

This is just something to think about if you’re ever in a spot where you need a little bit more money, or maybe want to take some of the money and invest it so that you’re making money rather than allowing the government to make money off of you. Of course you’ll want to talk to your accountant or money manager to see how this type of thing will work for you if you’re going to invest it, as well as talking to your accountant if you’re planning on upping your dependents for a short period of time so you can be warned as to around how much that might end up costing you if you don’t catch back up later on.

Accounting

5 Items You Can Deduct From Your Taxes

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Most people don’t itemize, but for those that do, especially if you’re self employed, you will find that there are lots of little ways you can save some money on your taxes, which could end up gifting you a refund if you’re lucky. Let’s look at 5 of these things.

1. Health care costs. Actually, you won’t save money on medical bills per se, but you can write off any health insurance you pay for right now if it’s a business expense, and once the health care bill kicks in you can write that off if you end up having to pay out of pocket for it. Right now you can also write off some of your expenses if you have a Health Savings Account.

2. Mileage. Almost everyone with a small business knows that they can write off mileage, but many people forget to track it. You might need to either start carrying around a notebook or track the mileage once for those places you visit often and then remember to track that whenever you go to those places again.

3. Cell phone costs. If you pay for your cellphone and you use it for business you can write off certain portions of your bill. You won’t be able to write off the entire amount if you’re on a family plan but you can certainly write off half of it. If your bills are exorbitant you might be asked to prove which calls were for business and which ones weren’t, but if you’re under control you should be fine.

4. Home office expenses. Not only can you write off all the things you buy to use in your home office but you can also write off a portion of the house expenses that you use while you’re in your office. This includes your mortgage, electricity, if you have someone who cleans the house and even if you have someone who cuts your grass, although that one might be harder to track. If you have any maintenance done in your office such as painting the walls you can write that off. Don’t push things like trying to get a discount on your cable because you have a TV in your office though.

5. Travel. If you’re a small business you actually get to write off one business trip a year whether you really take one or not. You have to be incorporated to do this however, and it’s a way to get a deduction from taking a family trip. You get to claim at least one night of your trip as a shareholders meeting, and if you conduct any type of business at all you can claim other days as well. However, you won’t get away with claiming an entire cruise as a business trip unless you were hired by the cruise line so don’t even try.
 

Budgeting

Quarterly Estimated Tax Payments; Do You Need To Make Them?

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If you own a small business, you may already know that there are requirements to pay something towards what’s known as a quarterly estimated tax. In essence, this is an advance on taxes you may owe by the end of the year to both the IRS and whatever state you live in.

Here’s the thing. It’s not actually a requirement. You don’t have to pay anything; you don’t even have to acknowledge it until tax time. What it offers you is a chance to get ahead on your taxes to lessen your tax liability when the new year comes.

It’s a smart thing to do if you’re making a lot of money and have a significant cash flow. By budgeting your quarterly tax payments, which are due in April, June, September and January, you lessen the impact of having to come up with a large payment by the middle of April every year, especially since you might not have any idea just how much you owe until your accountant has taken a look at everything.

However, if your income is pretty low, or you have a lot of expenses that will drastically reduce your income, you might not have to pay anything, and if you do you might get it all back. Of course it’s better to be safe than sorry, so sending something in wouldn’t be a bad idea.

This advice changes if you owe money, or if either the IRS or the state writes you asking you about it. If you had a banner year the previous year both entities might wonder why you’re not paying anything during these quarterly periods. Unless they specifically tell you that you should pay something you don’t have to worry about these letters. Sometimes they’ll send you payment coupons; once again, unless they tell you they’re looking for money you don’t have to deal with these either.

How are you handling this issue? If you want to talk more about it don’t hesitate to call our offices.
 

Accounting

5 Things Your Accountant Needs From You For Your Business Taxes

Even though it’s late for those of you who aren’t filing for a tax extension, the fact of the matter is that when it’s time for your accountant to do your taxes, there are things you’re going to want to have ready to give him or her so they can do their job properly. Listed below are the 5 most critical things they’re going to need, though not necessarily in this order.

Mileage – Even if you use your vehicle for personal reasons as well, keeping track of your business mileage is very important because it will offer legitimate deductions that will help bring your tax bill down. If there are places you go all the time you should have an estimated mileage count for that, and then you just have to totally track your mileage for anything outside of that. You only get to count what you don’t get paid back for expenses. And if you used a rental car, you don’t get to claim mileage.

Receipts – Anything that’s somewhat business related, you need to make sure you keep your receipts for it. This includes business meals, stamps, any supplies you might use for business, buying a new smartphone, etc. If you need to you can write little notes on them; for instance, I write little notes on all my receipts for business meals in case anyone wanted to track who I was meeting for business purposes.

Bank Statements – Hopefully you have a bank account that’s specific for your business, which is easy to use. For my purposes, I also give my accountant my personal account statements, just in case they see something that pops out that they can use. Your bank statements will show any payments you got for the year, as well as some of your business expenses. You’ll probably need to go through your payments and expenses and highlight where some of the money came from if you earned it in different ways so they can categorize it for you.

Any statements showing estimated tax payments – I bring this one up because if you’re like me, you don’t always pay your estimated taxes from your bank account. I paid some of mine with a credit card, and thus I had to go back and retrieve those statements online to give to my accountant for my records.

Any pertinent W-2′s or 1099′s – Truthfully, your accountants can do your taxes if you don’t have these statements by using your business bank account information, but any of these you have makes it easier for them. The times I didn’t use them was when they either came late or were incorrect.

Budgeting

The Basics Of Budgeting

Whether you’re in business or you’re worried about your home finances, budgeting can help bring peace of mind to you and help you know where your money is going. It gives you the opportunity to pay bills, save money, and even figure out if you need more money or to control expenses so you can sustain yourself.

budgeting cake

Budgeting sounds really hard and boring to most people, which is probably why they don’t do it. If you have a lot of debt you probably don’t want to know about it, but you can’t address your issues without knowledge; that goes for everything in life. Budgeting isn’t hard, although there are aspects of it that can be complicated. We’re going to give you the easiest way to go about it, which is a great start.
Continue reading The Basics Of Budgeting →

Accounting & Financial Advice from the Syracuse NY area