Category: business taxes

Taxes probably rank pretty low in order of importance right now during the coronavirus pandemic. Timing when to file could work to your advantage if you have concerns about income, especially if you consider these 9 tax tips you may overlook if you’re over 50. 

If you anticipate getting a refund, adhering to the April 15 deadline will get your refund to you more quickly. If you may owe the IRS, I suggest filing as soon as you can but holding out until July 15 to pay what is due. Keep that cash longer in your pocket instead. 

When you do file, finding every possible avenue to decrease your tax liability is all the more important this year. To help, check out these lesser known tax tips for anyone age 50 and older.

1. Catch-Up Contributions to 401(k)

Contributing to your 401(k) maxes out each year for everyone. In 2019, that limit was $19,000 until the age 50. From that point on you can contribute an additional $6,000 as “catch-up” in preparations for retirement for a total annual contribution of $25,000. 

2. Catch-Up Contributions to Traditional or Roth IRAs

Likewise, if you’re age 50 or older, you can also contribute an additional $1,000 to either for a total of $7,000. The underage set can only sock away a total of $6,000. By the way, you must withdraw required minimum distribution (RMDs) by age 70.5. BUT, if you donate that amount to charity, you don’t have to pay a dime of taxes on it. However, if your 70^th birthday is July 1, 2019 or later, you do not have to begin your RMD until the age of 72.

3. Health Savings Account Contributions

It’s a fact of life. The older we get, the greater the likelihood we will need increased care. HSAs provide a tax-deductible way to save for these inevitable expenses, allowing single taxpayers over the age of 55 to put away $4,500 and $8,000 for families. 

4. Drawing down Cash from 401(k) Retirement Funds

If you’re over the age of 59 ½ (yes, we start counting half-birthdays from here on out), congratulations! You’ll no longer pay a 10 percent penalty for withdrawing funds from your retirement accounts. Bonus: among various exceptions to the 10 percent penalty, if you’re over the age of 55 and leave a job, you can start receiving distributions immediately from your 401(k).

5. Lifelong learning credits

While not only for the 50+ crowd, the Lifetime Learning credit can be claimed for you or your spouse for more than four years. The credit, worth up to $2,000 annually, can be claimed for education expenses that lead to new or improved skills. Again, this credit has modified adjusted gross income restrictions, phasing out between $58,000-$68,000 for singles and $116,000-$136,000 for married couples.

6. 529 Education Plans

Similarly, grandparents can finance education costs for their grandkids and score a tax break for 529 plans. Once meant only for eligible colleges and universities, 529 plans now cover K-12 expenses for any public, private or religious institution.

7. Increase you Standard Deduction

If you’re over the age of 65, you automatically qualify for a larger standard deduction. How much? The standard deduction in 2019 for those over age 65 increased by $1,650 for single households; if you and your spouse file jointing and are both over age 65, you can add a total of $2,600. (Caveat: your standard deduction could be reduced is someone else claims you as a dependent.)

8. Medical and Dental Expenses

If your unreimbursed medical bills account for more than 10.0 percent of your adjusted gross income – and you itemize your deductions – you may be able to deduct some or all of those expenses. This also applies to buying long-term care insurance, which, depending on your age, could add up to more than $5,400.

9. Tax Credit for Elderly or Disabled Care

Finally, you may qualify for the tax credit for the Elderly or for the Disabled. To qualify, you must either be 65 or older or retired on permanent and total disability with taxable disability income. A reminder: this credit as strict income limits.

Of course, this list of tax tips provides just a sampling of the many additional perks of being a “Boomer.” The IRS helpfully offers this “simple” guide to understanding all the tax breaks for older Americans. Our office can help break down the guide for you and find additional avenues to pay the lowest taxes possible. To learn more, call our office at 724-216-5180 or use our online form.

If you’re a business owner, you know that every decision affects your business in myriad ways. With tax season in full swing, these aspects are likely (or should be) on the forefront of business owners’ minds. So, how will taxes affect your business strategy this year?

Informed Decisions

For example, finance and business strategies often fail to consider the role of taxes during the decision-making process. This is especially true of plans for small businesses. Effective business planning means accounting for every possible impact of a transaction on the overall health of a business. Owners must factor in all tax and non-tax costs into final decisions by reviewing their Strengths, Weaknesses, Opportunities and Threats. Anyone familiar with SWOT analyses knows that the entries that populate the classic project planning quadrant for decisions have far-reaching, and often unexpected implications.

At least partly, taxes affect your business strategy because of the implications of a move. Whether forming a business, raising capital, expanding or divesting business, taxes have a direct impact on cash flow. Taxes can divert as much as 40 percent of a business’s pretax cash flow to the government. Planning accordingly for these implications can prevent a business owner from being caught “flat-footed” and finding themselves deep in the red with the IRS. 

Whole fields devote study to taxes and business strategy. Every business school worth its weight in saIt offers a full program on considering the taxes, accounting and financial trade-offs involved in strategic planning. I won’t attempt to surpass thought leaders like Scholes, Wolfson and company (google them); however, there’s a reason their classic text, Taxes and Business Strategy, and others after have been so popular. The complexity of the tax code, coupled with how it can impact a business’s future plans, requires expert eyes. A true analysis takes a holistic approach to decision-making. 

Tax Structure

Business owners need to consider both explicit taxes (tax dollars paid directly to taxing authorities) and implicit taxes (taxes paid indirectly as lower before-tax rates for overall return on investments). I cannot stress how important it is to have a team of experts review any business deals before finalizing them. Experts in these fields can potentially save your business tens of thousands of dollars in the long run. 

Let’s say you receive the green light for moving forward with a proposition. Your next goal should be to minimize the amount of tax revenue the IRS makes off your transaction. Certain structuring can help you lower your tax bill while staying in compliance. 

If you’re considering more complex maneuvers, you need a tax attorney to help you navigate processes. This includes converting ordinary income into capital gains that are subject to lower tax rates or completing legal moves that shift transactions and tax consequences. 

With extensive experience in tax preparation and tax law, we’ve helped our clients save thousands of dollars in federal taxes. We can help you pay the minimum amount of taxes possible while still being in compliance with federal tax law. If you have questions or would like to schedule a consultation discuss your specific needs, call our office at 724-216-5180 or use our online form.

Tax season can be a tough time for everyone getting ready to file their tax returns. Even with a basic W-2, there is a lot of additional paperwork that can go with filing. If you’re a business owner, the entire process gets that much more complex. Get organized to help tame the annual beast. I advise all my clients to get their stuff together as soon as possible. Consider this my Business Tax Preparation 101 course.

Need help getting started? Follow these 5 things you can do to make your life (and your tax preparer’s) easier: 

1. Get Started Now

Allow plenty of time to find all your receipts, invoices and statements. Pull everything together into one place so that when we start to go over material, you can readily pull out the correct paperwork to keep moving. Also, schedule your appointment for preparation as early as possible. Taxes aren’t (or shouldn’t be) something you cram the night before the deadline.

2. Want to Save Money? Do the Legwork

Having a CPA or tax attorney prepare your taxes is an expensive, but necessary expense for business owners. If you want to cut costs, don’t skimp on the quality of the preparer. Instead, do as much of the prep work as possible before you hand over your material. This way you only get billed for high-value hours. That means adding up your expenses and revenues BEFORE you get to the office. 

3. Ask Questions Ahead of Time

Much like adding up your receipts on your own, do research on what is considered a qualified write-off before you come to your appointment. A quick review of Business Expense Deductions on the IRS site can help. If you’re still unsure about something, call and ask your tax preparer questions ahead of time so you have all the information you need at your fingertips.

4. Former tax problems? Self-Disclose Now

I don’t like surprises. If you already owe money to the IRS, received a letter from them, or are currently under investigation, don’t try to hide this because of embarrassment. Be up front before we get started, it’ll save us both a lot of heartache (and you a lot of money) down the road. As a tax attorney, knowing you have a problem, I’d  approach your current tax responsibilities much differently – and focus on the bigger problems at hand – than I would otherwise. 

5. File for an Extension

I personally hate dragging out processes, but sometimes things happen. You may have an upcoming hearing, a large change in income on the horizon, or a very busy quarter preventing you from filing on time. There is no penalty for filing for an extension, IF you do it on time. If you fail to file, you could be facing hefty fines and penalties, compounded by interest.

With extensive experience in tax preparation and tax law, we’ve helped our clients save thousands of dollars in federal taxes. We can help you pay the minimum amount of taxes possible while still being in compliance with federal tax law. If you have questions or would like to schedule a consultation discuss your specific needs, call our office at 724-216-5180 or use our online form.

Say you own an independent business or need someone to offer tax code or legal advice on a specific situation. You know already you need someone with more experience than your typical tax preparation consultant. But should you hire a certified public accountant (CPA) or retain a tax attorney? Who you go to is largely determined by your specific needs. 

CPAs

For most tax preparation questions, a CPA serves as a logical resource. They understand complex tax situations and compliance of federal laws. A CPA has far more experience than someone at a tax preparation booth in a big box store during tax season. They have earned advanced business degrees. They’ve passed intensive CPA exams. And they complete 80 hours of continuing education every two years. While a CPA is more expensive than the tax preparation consultant you see annually, you build a professional relationship with them. And they will know your business and understand how fluctuations or new tax clauses can affect you and your long-term financial plans. For many, this ongoing relationship provides all the tax support they need. 

Tax Attorneys

Tax attorneys, on the other hand, are legal professionals with law degrees specializing in tax law. A tax attorney has matriculated from a law school and sat for the bar exam. Their expertise is in tax controversy and dispute resolution. Tax attorneys help with especially complex personal or business tax matters. They are invaluable if you have serious tax problems involving negotiations with the IRS or if you are implicated in tax fraud. Tax attorney training prepares them to defend their clients against adverse tax actions. They also will represent their clients during IRS proceedings. 

An important point to note: while both a CPA and tax attorney will look out for your best interests with the IRS, only a tax attorney is bound by attorney-client privilege. Nothing shared with your tax attorney will be admissible against you during negotiations on your behalf without your consent. A CPA will need to disclose information to regulatory bodies outside of the IRS, in private civil matters, or in criminal tax matters. 

How we can help

With extensive experience in complex tax matters, I focus on tax compliance and minimization and resolution of tax controversies. Although I hold a J.D and a master’s degree in taxation, for many years I worked as a CPA. This allows me to interact more closely with accountants and financial professionals while offering insights that only an attorney can provide. I provide an enhanced level of legal advice, right in Greensburg, at lower rates than firms in downtown Pittsburgh. My combination of experience provides a one-stop shop for my clients on everything they need to survive this tax season and ghosts from fiscal years past. 

Interested in learning more? To schedule a free consultation, call our office at 724-216-5180 or use our online form.

It’s getting to be that time of year when individuals and businesses alike begin preparations to file their taxes. Year over year, we see filers stymied with pitfalls that are easily avoidable. Minimize your pain this season by avoiding these three common problems: 

If You Don’t Have a Record of It, Don’t Try to Claim It
Maybe you legitimately paid for a new business computer but cannot find the receipt. Of course, there is a trail somewhere. If you’re missing the original receipt, you can often go back to the card you used to purchase the item or the store where it was purchased for copies of bills of sale… don’t attempt to claim the personal laptop you bought for your kid for college. We both know that’s not a business expense. Guess what? The IRS will figure that out, too. Make several little ‘they’ll never notice’ claims and you could expose yourself to costly penalties. Other murky areas that can raise red flags include claiming utility costs for a home office (be sure you’re doing it correctly), untraceable income to family members, lavish gifts and other expenses outsized for the level of income generated by a business. Be honest. Be real. Be on the right side of an audit.

I’ll Do It Tomorrow
The worst time to get started on your taxes is ‘later.’ I don’t care what you told yourself in school about working better under pressure when you waited until the last possible second to write a paper or study for a test, taxes are not meant for cramming. When you wait until the 11^th hour, you risk not having everything you need or not having enough time to pull all the receipts and figures together accurately. Here’s another shocking fact: you can actually collate your receipts and record them (manually or automatically with software) throughout the year! Yes, instead of scrambling to organize paperwork the second week of April, you can enter receipts periodically to avoid fighting the shoebox full of crumpled papers all at once. Bonus: you increase your chances of maximizing your deductions when you have time to consider all possible deductions thoughtfully.

Know What You Owe
Ever hear the expression: ignorance is not a defense? Know the full amount of taxes you’re responsible for. Many taxpayers find themselves in a bind by not being aware of their financial responsibilities. It’s better to go through everything honestly and find out the full extent of your obligations. If you come up shy, we can work out a plan to sort things out with the IRS. Being blissfully unaware does not exempt you and avoiding it will only make things worse. Likewise, as we mentioned in other blogs, if you receive a letter from the IRS, do not ignore it! We cannot stress this enough. Avoiding whatever is in the correspondence, won’t make it go away. It will sit there and accrue mad fees. 

The good news is we’re still early in the year. You have enough time now to deal with the shoebox under your desk, find lost receipts and get yourself organized. You also have time to ask questions about what is allowable and the best way to attack your unique tax situations. That’s where we can help. Contact our office at 724-216-5180 or use our online form. 

This is the time of year you typically start to see those thick letters come from the U.S. Treasury Office. Congratulations! You’re being audited!

Your first response may be to release a stream of creative explicatives. This is normal.

Say what you need to and get it all out.

Your next response should be to carefully review what the IRS or PA Department of Revenue is accusing you of having misstated. Gather up all your information and supporting documentation for the items in question, then call an experienced attorney for a consultation on your situation. Today.

Do not respond to the letter until you have spoken to a professional. BUT, do not ignore it either. I promise you, it won’t go away if you put it in a drawer and forget it. Delaying can add interest to any outstanding debts and further complicate your case. 

If you’re a business owner, you may think your first call should be to your accountant, but generally these are not the best resources as there is only limited accountant-client confidentiality. The taxman could potentially could gain access to your communications with your accountant or financial adviser and use them against you. However, any communications between you and an attorney are protected by attorney-client privilege.

With extensive experience in all types of tax disputes, I can help you resolve your problems and minimize your tax exposure. Call my office at 724-216-5180. 

Congratulations! You filed your taxes on time and your payment (or refund!) is being processed as you read this. For some, this is an annual feeling of accomplishment. However, for many – maybe even you – it was a time of great stress, filled with blood, sweat and tears. 

But it doesn’t have to be that way. By having a solid plan for next year, you won’t be scrambling to get your material together when tax time rolls around again. 

Does your income fluctuate throughout the year? It’s possible to lower or even avoid the penalties by annualizing your income and making unequal payments. Even better, as a business owner, if you properly estimate your quarterly taxes, you save money by not paying late or underpayment penalties. It can also lower your risk of being audited by the IRS.

I know many business owners who start off each year with what seems like a great plan for keeping an organized system. You know what they say about the road to (tax) hell… it’s paved with good intentions. Losing your way isn’t just frustrating, it can be expensive!

Need a little help organizing your payroll and bookkeeping, or sorting out penalties from past mistakes? We can help you get on the road to recovery and not approach tax payment with the same sense of dread. 

As an experienced CPA and tax attorney, I can help you comply with both the IRS and Pennsylvania state tax laws. We can even minimize your taxes through effective use of deduction, credits and other tools. 

Schedule a consultation with us today, by calling 724-216-0704 or emailing at john@jacochranlaw.com.