By now, we all know how frustrating Cam Newton was by losing the Super Bowl. To make matters worse, he actually lost money since the Super Bowl was held in California and he is subject to “jock taxes.” Technically, he has to pay the state of California more than his Super Bowl check. Learn the details.
When you are self-employed, your business profits are taxed to you at federal rates as high as 39.6%. Add self-employment taxes, which in 2016 will amount to 15.3% of the first $118,500 of your net self-employment earnings plus 2.9% of any earnings over that amount. Then there’s an additional 0.9% Medicare surtax on earnings in excess of $200,000 ($250,000 if married filing jointly). At tax rates like these, it pays to take steps to reduce your tax burden.
Step One: Deduct Business Expenses
Be sure you have an organized system for recording your expenses. To be deductible, a business expense must be “ordinary” (common and accepted in your trade or business) and “necessary” (helpful and appropriate for your trade or business). Since personal expenses are generally not deductible, it’s smart to have a separate business bank account and use a separate credit card for business purchases.
Step Two: Deduct Health Insurance Premiums
You may qualify to deduct premiums paid for medical, dental, and qualified long-term care insurance coverage for you, your spouse, and your dependents.* The coverage may include children who haven’t reached age 27 by the end of the year, even if you don’t claim them as dependents on your tax return.
Unlike health insurance premiums paid for employees, the self-employed health insurance deduction won’t save you self-employment taxes. However, it will lower your taxable income. You must meet certain requirements to qualify for the deduction.
Step Three: Deduct Retirement Plan Contributions
Funding a retirement plan can also save you significant tax dollars. Within limits, plan contributions will be tax deductible.** Several types of plans may be suitable for you as a self-employed taxpayer, including a simplified employee pension (SEP) plan, a savings incentive match plan (SIMPLE), or a solo (individual) 401(k) plan. Each plan has specific features and requirements that you will want to weigh carefully before making a choice.
If you are tired of overpaying taxes, call 813-877-8888. Our initial consultation is free.
Bay CPA is a licensed CPA Accounting Firm with offices in Tampa and Clearwater to better serve the entire Tampa Bay area.
Tampa Bay CPA is a full service accounting firm for business owners. Our specialties include dental practice accounting, medical practice accounting, defense contracting compliance (DCAA), and QuickBooks Accounting.
* Dollar limits apply to the deduction for long-term care insurance premiums.
** Although deductible for income-tax purposes, contributions to your own retirement plan account do not reduce earnings subject to self-employment taxes.
If you have a foreign bank account that has not been reported to the IRS, then you could be facing serious civil penalties and even criminal penalties. These penalties fall under the Foreign Bank Account Report, (FBAR) violations.
First, it is important to determine if you are required to report your foreign bank account. It comes down to being able to say yes to the following four questions:
- You are now a US citizen or permanent resident or have been in the last six years.
- You have had a foreign bank account for a year or longer since 2008.
- Your balances in all of your foreign accounts exceed $10K
- You have not reported the account through the FBAR paperwork to the IRS.
The civil penalties for not filing the FBAR will be the greater of 50% of your bank account or $100K. The IRS has also indicated that it is willing to charge these penalties cumulatively for up to four or even six years.
This means that you can be charged these penalties for each year you have had the foreign bank account and not reported it to the IRS regardless of the fact that the penalties may well out pace the actual dollar amount in your account.
In addition to expensive civil penalties, you can also face criminal penalties. If the IRS determines that you willfully knew that you should have filed a FBAR and didn’t, they can charge you under FBAR violation laws as well as normal criminal tax prosecution laws.
A criminal prosecution typically occurs when a person has a large amount of taxable income in their foreign bank account that has not been claimed on their tax return.
A tax accountant or tax attorney can walk you through your options if you find yourself in this situation, as the IRS does offer voluntary disclosure programs, but even with taking advantage of one of these programs, you will still suffer the sting of IRS penalties.
If you are searching for a tax accountant to minimize your tax compliance risks, then call 813-877-8888 and ask for Don. Our goal is to lower your taxes within the legal limits while avoiding large compliance risks.
Tampa Bay CPA has convenient office locations in Tampa and Clearwater to better service the broader Tampa Bay area. We work with all types of small businesses providing accounting, financial reporting, outsourced controller and tax compliance services.
First, as an employer, you are required to protect employees that are killed on the job, are injured, or become ill. Most employers obtain either state sponsored or private insurance. Others will use self-insurance. Regardless of which option you select, it is the employer who foots the bill.
Secondly, workman’s comp is a state based program as opposed to a federal program. Most states require some form of workman’s comp, and as the employer, you are expected to accept the rules and regulations. For those businesses with under four employees, there is an exemption to carrying the coverage, at least in some states.
Next, workman’s comp pays four different types of benefits. These are survivor’s benefits, disability benefits, rehabilitation benefits, and medical benefits. The injured employee or their heirs receive a lump sum payment which then relieves the business of any further liability.
Also, employees are covered with a few exceptions. These exceptions include business owners, independent contractors, unpaid volunteers and domestic employees in private homes.
In addition, workers’ comp is paid on the no-fault basis. This means that regardless of who is at fault for the injury, the employee receives the benefits, and the business does not have to admit liability.
Finally, even when an employee is outside of the workplace, they may be covered. This can include traveling for business purposes, running work related errands, or attending a required business social event.
The state rules and regulations for workman’s comp insurance can be tricky, but they do protect both the employee and employer. When purchasing this insurance, it is always best to work with a professional that can ensure your business’s needs are met.
If you struggling with insurance, accounting and taxes for your business, call 813-877-8888 and ask for Don Musselman.
Tampa Bay CPA is a full service accounting firm for business owners. We are licensed to operate in Florida and Illinois. To better service the Bay area, we have offices in Tampa and Clearwater. Our specialties include dental practice accounting, medical practice accounting, defense contracting compliance (DCAA), and QuickBooks Accounting.
Keeping a restaurant up and running and profitable is no easy task. It is estimated that one in five restaurants will close within two years time, so it’s no wonder that tax issues can be pushed to the side when you’re working hard just to keep the doors open. Unfortunately, these five top tax mistakes can cause even more damage if not correctly quickly.
Tips may keep your wait staff happy, but the IRS still wants their cut. There are specific rules and requirements that both your employees and you have to follow. For example, the total tip income reported for a pay period must equal at least 8% of sales. In addition, it is your responsibility to collect and report social security, Medicare, and income tax on tips.
Because many restaurants deal in cash, it can be tempting to deposit less than $10k at a time to avoid having to fill out a Currency Transaction Report, (CTR). Too often, business owners feel that filing a CTR will raise a red flag, but the opposite is actually true.
If you structure your deposits, so they are less than $10K, you will quickly gain the attention of the IRS and possibly other government agencies. In addition, avoiding the CTR is a felony.
It can be tempting to classify your employees as independent contractors to avoid taxes, but this will catch up to you. A business owner can’t make this type of classification on their own. The IRS rule comes down to whether or not your employee is under your control and direction. If so, they are an employee and not an independent contractor. To classify them incorrectly can lead to heavy penalties.
Not Paying Employment Taxes
If you’re having trouble paying vendors or your lease payments, it may seem like a good option to put off paying employment taxes. This is always a mistake. You will be liable for IRS penalties not only as a business but also as an individual. This debt cannot be discharged in a bankruptcy.
Unorganized Record Keeping
This is one area where the pain comes from losing possible deductions instead of being penalized by the government. By keeping good records, you can take full advantage of business tax deductions. This can be the difference between being in the black or falling back into the red.
If you are tired of overpaying taxes and worried about tax compliance, then call 813-877-8888 and ask for Don Musselman. Our initial consultation is free for business owners.
Tampa Bay CPA helps business owners lower their taxes legally. We work with all types of businesses throughout the Bay area and have offices in Tampa and Clearwater to better service the entire region. To learn more about our restaurant accounting services, call today.
Section 179 allows a business to deduct the total cost for qualified leased, financed, or purchased equipment in the year it was purchased instead of depreciating the cost over the life of the equipment. Typically, however, Congress waits until after the first of the year to renew this section which can hurt small business owners and manufacturers as well as farmers, dentists, and medical providers.
Very often, Congress doesn’t get around to renewing tax breaks, such as Section 179, until well after the end of the year. Then they make it retroactive. This creates all sorts of issues for businesses who attempt to plan purchases with tax breaks in mind. Often, small businesses will miss out on the tax altogether.
While tax breaks such as Section 179 are typically renewed each year, it isn’t a given. That means businesses as well as farmers and even those in the medical profession won’t know if they are allowed to deduct $25,000 or $500,000. The final approved amount depends on whether or not the larger deductions are renewed. If not, the limit reverts to the original $25,000.
This can make a buying decisions difficult. For example if a farmer needs to buy a new combine, the farmer is looking at an investment of up to half a million dollars. If Section 179 isn’t renewed at the higher levels, this investment may need to be reconsidered. The same goes for medical or manufacturing equipment.
Still, for a small business, even the limit of $25,000 can make a tremendous difference. As off-the-shelf software also qualifies for this deduction, a small business could update their software to enhance efficiency therefore increasing their bottom line.
Tax planning is a critical component of a successful company. That’s why it is so important for Congress to act quickly and in a timely manner, so small businesses can plan for the next year while they still have the time to implement smart decisions. Small businesses are the backbone of this county and do drive the economy, and Congress shouldn’t forget that.
If you are interested in lowering your tax liability legally, Don Musselman at 813-877-8888. Our initial consultation is free for small business owners.
Tampa Bay CPA is a full service CPA Accounting Firm servicing clients throughout Pinellas County, Tampa Bay and along the west coast of Florida. Section 179 is key to our year-end tax planning for dentists, doctors, manufacturers and family owned businesses.
Besides being healthier for the environment, purchasing an electric car can be healthy for your tax return. However, there are a few requirements that go hand-in-hand with the purchase of an electric car that one needs to understand to reap the full benefit from the tax credit.
Put simply, the current tax credit for purchasing an electric car is $7,500. This tax credit is not a rebate, so you will not receive it when you purchase the vehicle, nor is it a tax deduction. That means you cannot use it to reduce the amount of your taxable income.
How to Use an Electric Car Tax Credit
In the year you purchase an electric car, you are allowed to reduce the total amount of income tax you owe by $7,500. This means that if you own less than $7,500, you will lose the remainder of the tax credit. For example, if your tax liability is $6,500, then that is the full amount of the tax credit you will receive. The balance is not a refund nor can it be used to offset future tax liabilities.
Determining Which Cars Qualify for the Tax Credit
When considering the purchase of an electric car, keep in mind, it must be a new vehicle that will be used for your personal use. You cannot use the credit on a used car or a lease as the leasing company typically receives the tax credit. In addition, the car must have been manufactured by a car company and cannot be a conversion. Finally, the car must be used in the United States.
As with all things related to the IRS, there are conditions that must be adhered to when using the electric car tax credit, but the upside is that by utilizing this credit, it is possible to bring the cost of an electric car down to where it is inline with a gasoline vehicle.
If you would like to lower your tax bill and in need of creative new ideas, call 813-877-8888 and ask for Don Musselman.
Tampa Bay CPA is a Florida certified public accounting firm servicing clients on the west coast of Florida. We have convenient office locations in Tampa and Clearwater. While we service all types of businesses, we also provide additional expertise for dental practice accounting, medical practice accounting and DCAA compliance for governmental contractors.
The AMT, also known as the alternative minimum tax, is one of the most hated taxes in the United States and for good reason. For those individuals above a certain threshold of taxable income, or corporations, trusts, and estates, the AMT creates a higher tax burden beyond that imposed on those that fall under the threshold.
The alternative minimum tax was first originated with the thought that those individuals and corporations in the higher tax bracket were able to find and utilize large tax breaks that the middle class could not. It was decided that the AMT would ensure that those with the highest incomes would pay a minimum tax rate regardless of the tax breaks and loopholes they may have available to them.
The current AMT was enacted in 1982 and is applied to all taxable income when an individual or entity’s taxable income falls above a pre-determined level. In 2013, that level was tied to inflation, or CPI rates.
As it stands now, the alternative minimum tax rates are 26 and 28%, and to determine whether or not you are subject to regular tax rates or the AMT rates, you would be required to calculate your taxes twice. This can become problematic as the AMT does not allow the same deductions as the regular tax does, so your adjusted income levels will be different.
The bottom line is you will be required to pay the higher of the two rates. It can become quite complicated to determine if you are subject to the AMT as well as what deductions are allowed and which are not. Often, the best course of action is to contact a qualified tax accountant to walk you through the process.
The AMT is hated for good reason. It’s complicated and some would say creates a separate class of citizens that is being penalized for their financial success.
If you are tired over overpaying taxes, call Don Musselman at 813-877-8888. Our initial consultation is free.
A corporate inversion, simply put, is a method corporations use to reduce their tax responsibilities. While this loophole may present a sound tax solution for the corporation in question, it has a direct impact on tax revenue collected by the United States government, as well as on competition between companies.
A corporate inversion takes place when a U.S. corporation renounces it’s citizenship by merging with a smaller company in a foreign country. This country typically has a more favorable corporate tax structure as well as tax rules that allow the U.S. corporation to reduce its tax burden.
Once the corporation merges with the foreign entity, it declares the new country as its place of residency. At that point, the United States can no longer impose or collect taxes on the corporation for future or past income. While this may be a positive situation for the company, it does has a negative effect as it reduces tax revenue for the U.S. as well as creates an atmosphere of unbalanced competition between corporations that have transacted an inversion and those that have not.
Over the last decade, corporate migration has increased to the point that now only one-tenth of total tax revenues collected come from corporations. That’s down from one-third in the 1950s. In fact, in the past ten years, a total of 47 U.S. corporations have performed corporate inversions and changed their legal residences to countries outside of the United States.
While it stands to reason that a corporation should do all it can to reduce its tax burden, and it could even argue that doing so is its fiduciary responsibility to its shareholders, this particular tax loophole is stripping tax revenues from the U.S. government at an unsustainable rate.
In addition it is also pitting the corporations that have made an inversion against the corporations that have not creating a toxic business environment which is why this is one loophole that needs to be fixed.
If you are tired of overpaying taxes, then call Tampa Bay CPA at 813-877-8888 and ask for Don Musselman. Our initial consultation is free.
As a business owner, it can be difficult to delegate important tasks. When you complete them yourself, you know they will be done correctly and in a timely manner. Even so, if you want your business to grow, and keep expenses low, there are three tasks that you should consider outsourcing.
Website and Graphic Design
By outsourcing your website and graphic design, you will have access to an expert in the field, on demand. The person or company you outsource to will have the equipment, experience, training and knowledge to provide you with design concepts that would otherwise be beyond your reach.
You will also receive a professional product which is doubly important as your website is your online business card. This is one area that you want and need a professional’s assistance.
As your company grows, the complexities of your payroll grow as well. In addition to saving time and money, payroll is one area of your business that the government takes great interest in. Payroll specialists make it their job to stay current in government regulations which means they will keep you and your company compliant.
In addition, payroll companies can provide you and your employees with an added layer of security. This can reduce the risk of embezzlement, identity theft, and interference, by an employee, with company records for financial gain.
Accounting and Tax Returns
Much like payroll, your accounting and tax returns are not an area of your business where you can afford errors. Without specialized tax knowledge, you run the risk of missing deductions leading to paying higher taxes than necessary or to making errors that result in penalties.
One of the main benefits of outsourcing any task is that while you may pay more per hour for the task to be completed, you will save much more money, in the long run, than if you hired a full-time employee when you take into consideration salary, benefits, taxes, health insurance, as well as the overhead to provide space for the employee to work. In the end, outsourcing can be a cost efficient way to expand your business.
If you are looking to outsource accounting, tax reporting, call 813-877-8888 and ask for Don Musselman.
Tampa Bay CPA has offices in Tampa and Clearwater to better service businesses throughout the entire Bay area. For more established businesses, we have developed additional expertise in dental and medical practice accounting, defense contracting and DCAA compliance, and QuickBooks accounting.