IRS Withholding Estimator

IRS Withholding Estimator: Time for a checkup

IRS Withholding Estimator

The IRS has released a new Tax Withholding Estimator and is encouraging everyone to perform a “paycheck checkup”. The new tool is to assist with better calculating taxes and withholdings to reflect recent changes in the tax law.

CLICK HERE TO USE THE CALCULATOR

Reasons to check your withholding:

  • Calculate enough withholding to ensure you don’t have an unexpected tax bill
  • Calculate enough withholding to ensure no penalties and interest for underpayment of tax
  • Better calculate withholding and plan your refund
  • Look for tax planning opportunities

Once you have determined if your withholding is adequate or needs to be changed, you will need to work with your tax preparer and/or HR department of your employer to get your withholdings corrected. To do this you will need to complete a new Form W-4 for your employer.

Although this is a useful tool provided by the Internal Revenue Service it may not work for all. If you need help using this tool or your situation is more complex, we can be contacted HERE. We’re always happy to help.

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Support Agreement

Support Agreements: Software

Support Agreement

Consider the scenario: You’ve just purchased QuickBooks and the salesperson asks if you’d like to buy the support agreement.  Far too often, the support agreement is not purchased and eventually support is needed.  It can seem like a waste of money, but it can cost you more time, possibly down time, if your accounting software stops working and you need help fixing it.

These support contracts include support for everything relating to your accounting software.  Strange errors when you try and post a check?  Don’t know how to post a check? Need help installing the software on a new PC?  Their support will help you with all of this! There are some quirks with calling support.  Sometimes the person you speak to isn’t the most knowledgeable with the product or issue you are having, it happens.  But guess what? You can ask to speak to someone else or ask that your issue be escalated if you feel like the technician has spent too much time on it and they will honor that request. 

You don’t think you need to purchase the additional support because you have an IT person or a Managed Service Provider handling all your IT needs?  Not always the case.  Your IT person can only do so much.  If they run into a problem they cannot resolve, they must contact the vendor for support and without an active contract with that vendor, they cannot fix your issue costing you even more delays and down time.

If the price seems to high, don’t be afraid to ask for a discount.  We’re not saying you will get one, but it doesn’t hurt to ask if they can offer the support at a cheaper rate, especially since you are purchasing licenses. 

Do your research before making the investment.  Just because QuickBooks is the most commonly used, doesn’t mean it’s the one that is going to work best for your growing business.  There are a lot of options out there and some may be better than others.  The support agreements that these vendors offer can also vary widely so be sure you know what you are agreeing to.  Some vendors have different support packages with different service level agreements that you must choose from.

After you’ve decided which application to use and purchase the licensing and support agreement, make sure you add your IT person as a contact with the vendor.  This is extremely important and rarely happens ahead of time.  If you have an issue and call your IT person for help and they can’t figure it out they will then contact the vendor support on your behalf.  Support won’t talk to your IT contact because they aren’t on their “List”.  Put them on the list ahead of time, it will save you time and headaches in the future.

If you need any advise regarding your current accounting software or suggestions for future use, feel free to give us a call 248-934-0550 or contact use HERE!  If we can’t help, we can point you in the right direction.

Disclaimer

Like-kind Exchanges: Tax Deferred Gains on Real Estate

Like-kind Exchanges: Tax Deferred Gains

Like-kind Exchanges: Tax Deferred Gains on Real Estate

Like-kind exchanges are most popularly thought of exchanges of real estate under current law. Exchanging property is also a strategic way to dispose of property tax fee. Under the 2017 Tax Cuts and Jobs Act (TCJA) exchanges of personal property and intangible personal property no longer qualify as tax free exchanges under Internal Revenue Code Section 1031 after December 31, 2017. Machinery, equipment, vehicles, artwork, collectibles, patents and other intellectual property and intangible business assets no longer qualify. Like-kind exchange rules are now limited to real property that is not held primarily for sale. Nonrecognition treatment of like-kind property is mandatory, so a taxpayer wanting to recognize a gain would need to structure the transaction so that it fails to qualify as a like-kind exchange.

Requirements

  • The form of the transaction is a sale or exchange
  • Both the property transferred, and the property received are held either for productive use in a trade or business or for investment
  • The properties transferred and received are like-kind property

What is like-kind property?

Like-kind refers to the nature of character of the property not its grade or quality. Generally real property is of like-kind whether improved or unimproved. This may be broad, and it must be mentioned that one class of property may not be exchanged for a different class. The predominant use of the property will be used to determine if it qualifies for Section 1031 nonrecognition treatment.  In addition, domestic property would not qualify as a tax-free exchange if exchanged for foreign property.

Like-Kind Exchange

The transaction must involve a direct exchange of property to qualify as a like-kind exchange. An exchange would occur when one taxpayer conveys property to the same party from whom the taxpayer acquires the property.

Deferred Exchanges

A deferred exchange occurs when the property received is not received immediately upon the transfer of the property given up. To qualify for a deferred exchange the replacement property must be identified within a 45-day identification period and must be transferred before the earlier of 180-days or return due date.

Related Parties

Related party exchanges between related persons (family members, related entities, etc.) are subject to a 2-year holding period. Any gain or loss not originally recognized would be recognized if disposed of within two years except under certain exceptions.

Gain or Loss

  • Gain is realized when the fair market value (FMV) of property received exceeds the basis of the property given up. Not reported as taxable income when the transaction qualifies for the mandatory non-recognition rules.
  • Gain is recognized and reported as taxable income when the transaction does not qualify for the mandatory non-recognition rules.

Income Tax Reporting

  • For transactions that qualify as like-kind exchange Form 8824 must be filed for each exchange
  • If gain or loss is recognized it should be reported on Form 4797 or Form 8949

More details can be found on the IRS website HERE. Determining if your transaction qualifies as a tax free like-kind exchange may be difficult and certain details of your situation may be different than those above or need further consideration.  We always encourage you to seek professional help in regard to your personal situation. If you have any questions regarding like-kind exchanges or need any help calculating realized or recognized gains or losses, please reach out to us HERE . We can help!

Disclaimer

Investing in Data Protection

Investing in Data Protection

Investing in Data Protection

One of the most valuable investments you can make as a business owner is to invest in data protection and retention.  Far too often, we see clients who don’t make the investment and subsequently lost important accounting and finance data because of a drive failure on a PC or worse, flash drive. 

The cost can add up, depending on how much data you have and how many backups you are keeping, so it’s important that you keep your data current and clean it up often so that your data doesn’t balloon the cost of backups.  You will want at minimum, 3 copies of your data for disaster recovery.  This includes the original copy, stored in its normal home (server shares, desktop PC, network attached storage device, etc.), your local backup which should be on premise (another server in your office acting as a backup server or a network attached storage device), and finally an offsite “Cloud” copy. 

Why is this important from a tax standpoint?  Easy! Your accounting and tax data is single handedly, the most important data you have.  Without this information, you cannot run your business.  What would happen tomorrow if your server was compromised and all your data encrypted? (believe us, this happens far more often than you can ever imagine!)  Or, you had a catastrophic drive failure on your server and your one and only backup failed 4 weeks ago but you didn’t know it?  How would you handle that?  If you cannot answer that question, it’s time to make sure you have those 3 backups and they are active, running every day and are completing successfully.  You should also be doing random data recovery tests from those backups to ensure the data is there and accurate.

Were not going to go into backup policies, retention periods, backup schedules and so on in this article but we do suggest you discuss all of those with your IT department or IT person and if you don’t have someone who handles it or need suggestions for a 3rd party, let us know! We can recommend someone to you if needed. 

Feel free to contact us HERE with any questions!

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Bank Reconciliation
Freelancing and Taxes

Freelancing and Taxes: Plan for them

Freelancing and Taxes

Freelancer is a term we see a lot these days and the tax implications are different than as an employee. An employee has the luxury of their employer withholding and paying their tax to the appropriate taxing authorities on their behalf. A freelancer does not. In its simplest form a freelancer is a sole proprietor for income tax purposes. Becoming self-employed as a freelancer comes with great flexibility of being your own boss but one should be mindful of proper record keeping requirements and timely tax payments. Feelancing and taxes are becoming a problem for those not timely paying and planning for taxes.

Income and Deductions

A freelancer is tasked with tracking income and expenses for calculating income tax and related filings. Tax is calculated on taxable income (revenue less deductible expenses) and typically reported on Schedule C of Form 1040. Income tracking is fairly simple, but many do not take advantage of available deductions. Those may include (but certainly not limited to) advertising, supplies, travel, business related meals, home office, professional fees etc.

Self-employment Tax 

Since a freelancer is considered self-employed, they now must pay self-employment tax which is another term for Social Security and Medicare tax. A self-employed individual pays both the employer and employee portion which is approximately 15.3% in addition to federal income tax (and state if you live in a state with income tax). An employee has the luxury of an employer bearing ½ of the Social Security and Medicare tax along with withholding and remitting to the IRS on their behalf. A freelancer must do this on their own or work with a quality Certified Public Accountant (CPA).

Quarterly Estimates

Quarterly estimates should be calculated for two reasons:

  1. To ease the burden of the amount due into 4 installments
  2. To ensure no penalties or interest are paid for late payment of tax

Most taxpayers will avoid penalties and interest if they owe less than $1,000 in tax (after withholding and credits) or if estimated tax payments cover at least 90% of the current year tax or 100% of last years tax (110% if AGI is over $150,000). When calculating quarterly estimates be sure to account for income tax and self-employment tax on taxable freelance income. Click HERE for full details from the IRS.

Accounting and Recordkeeping

In the event of an audit by a taxing authority a freelancer will need to keep record of income and deductions as support of the filing. As such having a good accounting system in place and keeping detailed records of income and deductions will ease this burden.

As your freelance business grows, the accounting and income tax calculations may become more complex so you may want to consider incorporating for liability protection and/or for income tax purposes.  If you have any questions regarding the accounting needs for your freelance business or need any help calculating tax on your income, please reach out to us! We can help! Contact us HERE.

Disclaimer

2019 Youth Baseball Opening Day: Independence Township

2019 Youth Baseball Opening Day: Independence Township Parks, Recreation & Seniors. As big supporters of our community and baseball, sponsoring a Little Sluggers (ages 3-4) team was a must. The team consisted of 12 kids eager to learn the fundamentals of baseball. The event took place at Clintonwood Park from 8:30AM – 11:00AM.

Sponsor Booths

We had the opportunity to set-up a tent and hand out water and mini-baseballs to kids (and parents) from all teams in the league. This also gave us the opportunity to spend time with our family, friends, colleges and other kids in the community.

Parade of Players

The kids all lined up with their respective teams and enjoyed cheers and clapping from parents and spectators as they entered the field for opening day festivities.

Games, Bounce Houses and Other activities

Independence Township Parks, Recreation & Seniors put together a great event for the kids including the following:

  • Soccer fields full of various games, blow-ups and bounce houses
  • Concessions stand
  • Vision screening
  • Uniform exchange

Weather

As an approaching storm loomed the premises were promptly evacuated at 11 am with patrons attempting to escape the rain. Few games were played but most of the evening games were canceled due to inclement weather.

If you’d like to follow along with what we’re doing in the community like our Facebook page HERE. If you’d like to contact us to learn more about our community involvement that can be done HERE.

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Matthew Senter, CPA: Introduction

Welcome to our blog! Our goal with this blog is to keep our friends and clients informed about us, information relevant to you and our involvement in the community. I thought I’d share in our first post a little more about, well, ME: Matthew Senter, CPA.

My Family

We are a family of 5 consisting of me, my beautiful wife Cassie, Ben (11), Waylon (2.5) and Charlotte (7 months). We only plan to add a dog or two in the future. Our best mug shots are below.

Fun Facts

  • Name: Matthew Ryan Senter
  • Nickname: Groundhog
  • Born: February 25, 1986 in Columbia, Tennessee
  • I grew up in a small town 45 miles south of Nashville, Tennessee called Culleoka. Known to some a “Sweetwater” but famous for the Culleoka Queen salmon colored cantaloupe
  • I had approximately 65 students in my graduating class, K-12 all on one campus
  • Though I received my undergrad and graduate degrees from Middle Tennessee State University I am a fan of the University of Tennessee (hence the orange you will see around our office)
  • Education: Masters of Business Administration emphasis in Taxation
  • Professional Certifications: Certified Public Accountant
  • Favorite sport to play: baseball
  • Favorite hobby: fishing
  • Fear: snakes
  • Music: Country
  • Miss the most of about the South: food

We hope you enjoy the articles to come, find this blog useful and if there is a topic you’d like to see covered please share with us.

If you’d like to know more about me and my humble beginnings, contact Matthew Senter, CPA HERE. If you’d like to know more about our services, click HERE.

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