Small business tax tips
Small Business Tax Tips Changes in Tax Law: Trump Prepare for Next Year's Taxes Where Is My Refund? Ask the Accountant: Tax Brackets IRS Potential Tax Scams Important Dates Quick Links Contact Us
In this issue:
A simplified option allows an annual deduction of $5 per square foot of home used for business (maximum 300 square feet, or $1,500) instead of all other home office deductions. The home office deduction cannot exceed your net income from the business – in other words, it cannot create or increase a business loss. Tax Tip #2: Technology Purchases Under Section 179 of the tax code, equipment expenses such as computers, printers, business-related software and even company vehicles are tax-deductible, with certain limits. You can deduct their full cost in the year of purchase, or depreciate it over several years. Under recent tangible property regulations, you may also elect to deduct items costing $2,500 or less as expenses, without electing section 179 or depreciating them. If you purchase a car, you must allocate its cost and expenses between personal and business use. Depreciation benefits are reduced if business use is under 50%. If you only have one car, it would be difficult to prove that you do not use it for personal trips as well as for business. Tax Tip #3: Travel Costs Small business owners sometimes need to travel to promote their brands, meet new clients, and go to conferences. Expenses like airfare, hotel fees, car rental and mileage, and travel expenses like laundry costs can be tax deductible. Food is only 50% deductible (because you have to eat whether you are traveling or not). Here are some points to remember: Feel free to travel with your family but you can only take deductions for your portion of the expenses If you’re taking clients out for a meal, those costs are 50% deductible. Make sure to write on the bill or receipt the business reason for the meal. Conference fees are deductible as long as the conference is directly useful for your business. Entertainment such as amusement parks, tourist attractions, and the like are not deductible.
As a self-employer or founder of a small business, it can sometimes be difficult to understand tax requirements and the extent they can affect your business. You can always speak to a tax professional and/or download the right software, however, it is always good to have a basic knowledge of your own. Filing business taxes can sometimes be overwhelming but if you’re willing to read the fine print, you can save a lot of money utilizing tax deductions. As always with finances, especially taxes, it’s important to keep your receipts and note the business reason for expenditures. Here are some basic small business tax tips: Tax Tip #1: Home Office Many small business can claim a deduction for having a home office. Here are some of the rules: Your office space must be separate from your living area. It is important to differentiate and have a clean line between your office and your home. Don’t use your office as a spare bedroom or a playroom for the kids. If you only have one computer, claiming it as the office computer will be difficult. It will be hard to prove that you do not use the computer for personal use as well. Either dedicate a second computer solely to work, or omit the computer area from your office space. Figuring out the percentage of home expenses deductible for your business is fairly simple. Measure your work area and divide by the square footage of your home. That percentage is the fraction of rent, mortgage interest, utilities, taxes, depreciation, and maintenance you can claim (interest and taxes deducted for the home office may not also be claimed as itemized deductions.
Spring Newsletter | May 2017
April’s tax deadline has come and gone and you met the filing deadlines (nice job!), but before you put all that behind you, right now is the perfect time to make a plan about how you are going to start preparing for next year. Don’t wait to be overwhelmed at the last minute and don’t wait for LM Cohen & Co to contact you next filing season to remind you about your taxes. By taking these steps throughout the year you will be able to ease your tax filing stresses next year. Here are some tips to consider: Tip #1: SAVE! Throughout the year when you receive a document that may or may not be important to us, save it! Better to save it now so later on you don’t have to go and find it or possibly get a new copy. Some support items that taxpayers should keep throughout the year are: bills, credit card and other receipts, invoices, mileage logs, canceled checks or any other proof of payments, as well as records to support deductions or credits claimed on a tax return. Also, save your current and your prior year’s tax returns and the supporting documents. It is important to keep your tax returns for at least seven years. Tip #2: Adopt a new system. It is smart for you to adopt of new system to save your information in a secure place and an easy place for you to retrieve it later. Whether that is keeping everything in a box under your bed or scanning everything into a folder in your computer, it is important you figure out the best way to save so you do not have to scramble when we ask you for a copy of a tax document next year. A well-organized recordkeeping system makes finding information much easier. Many taxpayers look into purchasing online accounting software to track expenses and income (to reduce time later). Mobile apps are also available on your smartphone or tablet that can scan and sort documents, receipts or other tax information. Using a digital archive for managing can make next year’s tax season a little less stressful. According to the IRS, the average taxpayer takes about 13 hours to complete their federal income tax return. To reduce the amount of time you spend on your taxes this year, you must get organized. Tip #3: Review your return with your tax preparer or financial adviser. Most tax preparers take a well-deserved break after April 15th and for many of them their next crunch time isn’t until later in the year. During this slower period, schedule an appointment with your LM Cohen professional to review your return and discuss ways to minimize taxes next year. They may be able to suggest strategies to reduce your tax burden for the coming year. Worst case, you can confirm that you are doing everything reasonably possible to ensure that you pay only what you owe!
According to American politics, the first 100 days of a presidency is a crucial time for the new president. It is the time when the new president sets the tone and path for his next four years in office. As President Donald Trump’s first 100 has passed, let us take a look at some of his recent updates that was covered by LM Cohen & Company. On March 23rd, House GOP leadership introduced the American Health Care Act (AHCA) and scheduled for a vote on March 24th. The AHCA would have repealed certain taxes as well as provisions from the Affordable Care Act (ACA) enacted by President Obama. Due to lack of Republican support, President Trump and House Speaker Paul Ryan pulled the bill from the floor before a vote can take place. The President and House Speaker announced on that day that lawmakers would shift their primary focus to Tax Reform. One month later, on April 26th, President Trump and his administration released a tax cut proposal via Treasury Secretary Steve Mnuchin and National Economic Council director Gary Cohn. Mnuchin and Cohn said the plan would include "the biggest tax cut" in US history, echoing statements made by President Trump. Since being released, the tax proposal has received mixed reviews and does not yet have a prediction of when a law will be signed. As President Trump’s historical first 100 days came to a close, he, Ryan and House Republicans secured the votes to pass the AHCA by a narrow 217-213 vote. The bill is currently being reviewed and revised by the Senate and the Affordable Care Act (also known as Obamacare) will continue to be in effect until a replacement is signed into law. Even though President Trump calls the 100-days measure “ridiculous”, the White House released that the president has signed 28 laws since taking office. President Roosevelt currently holds the crown for bills signed in a presidents first 100 days with 76 laws. President Obama signed 14 laws in his first 100 days.
How to Prepare for Next Year's Taxes Right Now!
Hi Lee, I hope your tax season went well! I’ve been watching the news this past week and I saw something about tax brackets and I wanted to ask you... what is a tax bracket? How do you figure out what tax bracket I am in? Thanks! -Curious Taxpayer
LEe M. Cohen, cpa managing partner
Federal
Hi Curious Taxpayer, That is a very good question! I would be happy to explain. Your tax bracket is the rate at which the last dollar of income will be taxed. There are many factors that can affect your tax bracket like a paycheck change, tax law changes, as well as changes in your filing status. Tax filing status depends on whether you are married or single and whether you have dependents to claim on your tax return or not. A change in income or an increase in interest and dividends or even gambling or lottery winnings could also affect your tax bracket. The Federal income tax currently has seven brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% (although several tax proposals would reduce the number of brackets). The amount of tax you owe depends on your income level and filing status. It’s important to understand that moving into a higher tax bracket does not mean that all of your income will be taxed at that higher rate. Instead, only the money that you earn within a particular bracket is subject to that tax rate. Let’s say you are a single taxpayer with a taxable income of $80,000. According to the IRS tax table, you are in the 25% tax bracket. Does that mean you’re paying a quarter of your taxable income, or $20,000, to the government? No! Each chunk of your income that falls into a bracket is taxed at a different rate. So, the first $9,275 of your income will be taxed at a 10% rate. The next portion of the income you made between $9,725 and $37,650 (or $27,925 in total) will be taxed at a 15% rate. And the remaining portion that you made above $37,650 (the rest of your income, $42,350) will be taxed at a 25% rate. I hope that helps! Sincerely, Lee M. Cohen, CPA
NY State
DID YOU KNOW? The Gettysburg address is 269 words. The Declaration of Independence is 1,337 words. The Bible is only 773,000 words. The tax law today is 7 million words!
Find my refund
Where is my tax refund?
Tax Day came and went and now you’re probably thinking “Hey! Where’s my Refund?!” If you want to get your refund as fast as possible, the IRS recommends that you e-file your tax return and use direct deposit. (If you filed by paper, it will take a bit longer!) The IRS in previous years would post a chart showing when exactly you would receive your refund based on the day you filed your return, but they no longer release an official schedule. Instead, the IRS encourages you to use the "Where's My Refund?" tool on their website (the IRS usually updates their website once per day). Links to sites where you can check the status of your federal and state refunds are below. Even if you request direct deposit, you may still receive a paper check in the mail. The IRS has changed the rules related to refunds and direct deposit: No more than three electronic refunds can be directly deposited into a single financial or bank account or applied to a pre-paid debit card. Taxpayers who exceed the limit will instead receive their refund in the form of a paper check. The IRS won’t issue a refund by direct deposit into just any account: it can only be deposited into an account in your own name, your spouse’s name or both of your names if married with a joint account. If there's any issue with the account, the IRS will send a paper check – better to be safe than sorry! If it’s been more than 21 days since the IRS received your e-filed return and you still don’t have your refund, they may have run into a processing issue. There might be an error on your return, it may be incomplete or require further review, or you may have been impacted by identity theft or tax fraud. If the IRS needs more info, they will contact you by mail. If you receive a notice by mail, please send it to our office so we can correct any errors as soon as possible. The IRS expects to issue more than 90% of federal tax refunds in less than 21 days; some tax returns, however, may require additional review and may take longer.
NJ State
Ask the accountant
In recent years, thousands of people have lost millions of dollars and their personal information to tax scams and fake IRS communications. It is important to know that the IRS does not initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. In addition, the IRS does not threaten taxpayers with lawsuits, imprisonment or other enforcement action. Knowing this will make you aware of phishing or a tax scam that could prevent you or a family member from tax fraud or identity theft. There has been an increase in people impersonating IRS employees via phone. These impersonators generally tell victims that they owe money and that they need to pay the IRS right away over the phone to avoid penalty or an arrest. They may also mention that you are owed a refund and they request personal banking information. The IRS has issued several alerts about the fraudulent use of the IRS name or logo by scammers trying to gain access to consumers’ financial information in order to steal their identity and assets. Scammers use the regular mail, telephone, fax or email to set up their victims. The IRS also warns taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Before donating your hard-earned money, it is essential that taxpayers take the time to research organizations. Don’t give out personal financial information, such as Social Security numbers or passwords, to anyone who solicits a contribution. Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift. We encourage you to stay alert and be aware of these types of tax scams. If you receive a phone call, hang up right away. If you receive an email from the “IRS," put it in the trash as it is fraudulent. If you have any questions or concerns about tax fraud please feel free to call our office.
important dates
IRS Warns Taxpayers of Potential Tax Scams
August 21, 2017 NY Sales Tax for monthly filers due NJ Sales Tax for monthly filers due September 15, 2017 Individual, S Corp, C Corp, Partnership and LLC estimated tax payments due S Corp and Partnership Tax Returns Due for Taxpayers who requested a Six Month Extension to file September 20, 2017 NY Sales Tax for monthly filers due NY Sales Tax for quarterly filers due NJ Sales Tax for monthly filers due
May 22, 2017 NY Sales Tax for monthly filers due NJ Sales Tax for monthly filers due June 1, 2017 Real Property Income and Expense (RPIE) Statements due June 15, 2017 Federal, NYS, NJ Individual, Estate & Trust, and NYC UBT 2nd Quarter estimated tax payments due June 20, 2017 NY Sales Tax for monthly filers due NY Sales Tax for quarterly filers due NJ Sales Tax for monthly filers due July 20, 2017 NY Sales Tax for monthly filers due NJ Sales Tax for quarterly filers due NJ Sales Tax for monthly filers due Commercial Rent Annual Tax Return due
Please Note, The IRS Will Never:
LM Cohen & Co. will be closed on the following day in observance of national and religious holidays: Memorial Day Monday, May 29, 2017
1. Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes. 2. Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying. 3. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe. 4. Ask for credit or debit card numbers over the phone. 5. Send emails to taxpayers regarding their information.
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New york state department of taxation
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