When it comes time to prepare your tax return there are many things that you need to consider. One of the most common questions I encounter as a CPA is who is considered a dependent. Although you make think that the answer is simple, many things determine if somebody is truly a dependent.
Dependency of Children
When it comes to children the best way to determine if they are under 18, live at home and you supply more that 50 percent of their income. From 19 to 24 you can claim them as a dependent if they are living at home the majority of the time and you are still contributing the majority of their income.
The One Up And Down Rule
Although you make think that you can only claim your children, there are other members of the household that can be claimed. If a person is one up or one down from you in terms of relatives than you might be able to claim them. This includes children, stepchildren, adopted kids, parents and stepparents. The general rule is that if you are providing over 50 percent of their support than you can claim them. However, there really is not great benefit to claiming some of these people, because the savings may not outweigh their expenses.
Claiming relatives is the most common way to claim someone as a dependent, but there are some cases where you may want to claim somebody who is not a relative. If this is the case, you need to contact a CPA. They will be able to help you determine if you can claim each individual in your household. There are a lot more restrictions if the individual is not related to you.
Reno’s Best CPA,
Who really needs a Reno CPA? Well, there a lot of people out there who might not think they do. However, they might want to consider that CPAs are experts in tax codes and regulations, and they are not. It is quite amazing how often a CPA can find a tax write-off that was overlooked. Take the three write-offs mentioned later in the article. Would you have known about these?
CPA stands for Certified Public Accountant. Requirements vary by state, but in general, a CPA must have a degree in accounting, have a set amount of experience, and demonstrate expertise by passing a comprehensive and rigorous exam. As a result, they are experts in tax codes and regulations, which considering how complex the US tax code is – is impressive. Certainly, if there is a tax write-off to be found, a Reno CPA will find it.
Of course, taxes are often a sore subject for many people. Not only is Uncle Sam demanding a piece of the pie, but it costs money to have someone tell you how much. As a result, many people look to alternative sources for preparing their taxes such as online software or under-qualified tax accountants. However, is that really a smart move? Keep in mind that Reno CPAs are experts in tax rules and regulations. For example, would the average American know about some of these more quirky tax write-offs?
Tired of paying your child an allowance and getting nothing in return? Would it help if that allowance could be used as a tax write-off? It can be if the parent is the sole proprietor of his or her own business. In this case, parents can hire their own children, and not pay any payroll taxes. Plus, the wages can be deducted on their sole proprietorship. So, basically, it’s like deducting the child’s allowance, and the parent might just get some work out of the kid.
A Noteworthy Loophole
For most parents, listening to their child learn to play the clarinet is a painful experience. However, a CPA might use that clarinet and the lessons as a tax write-off. That’s because orthodontists claim that playing the clarinet can help correct an overbite. That makes it a medical expense. So while the Reno CPA may not make listening to the clarinet any easier, he or she can make paying for it a little easier.
According to the IRS, it’s okay to be a criminal as long as the “wages” are reported as self-employment income. For the thieves out there, however, there’s a little loophole that only a CPA would know. Thieves are required to report and pay the fair market value tax on all merchandise that is… ummm… acquired. However, if the items are returned, the thief can get out of paying the taxes. Plus, he or she will get free room and board at the county jail too.
Okay, so most people won’t fall into the last category, but it does prove the point that a Reno CPA will know every loophole out there. So whether you are a sole proprietor, a parent of a child with an overbite, or a thief, a CPA can make sure that your taxes are done right and every tax write-off is used to maximize the return. In the end, the tax savings will more than pay for the services of a CPA.
Reno’s Best CPA,
Every year as the tax deadlines roll around, business owners find themselves scrambling to file their business taxes. As a result, these owners often miss important deductions that could end up saving them a significant amount of money. However, a little pre-planning and research can help a lot. For example, here are seven business tax deductions that are commonly overlooked.
Working from Home
A home office can supply a business owner with major business deductions. Most are aware that a home office can be deducted, but did you know it doesn’t have to be an entire room? The area just has to be devoted exclusively to the home office. Just measure out the work area and deduct that percentage from all home-related business expenses such as the mortgage and insurance. Even expenses like phone calls can be included here. Not a bad way to help pay for home expenses.
On the Road
Traveling can offer additional hidden Reno business deductions. In fact, many owners overlook the incidentals charges such as car rentals, tipping employees, and even dry cleaning expenses. Another major deduction involves company vehicles. In 2010, up to 50 cents per mile can be deducted for business trips. This can really add up when you consider the number of business miles driven in a year. Plus, don’t forget things like maintenance and insurance. Even if the car is used for personal use, a percentage can still be deducted.
Perhaps the only thing more complicated than business taxes is dealing with benefits. However, a CPA can help business owners find hidden deductions here too. For example, if an owner is considered self-employed, he or she can now deduct the premiums not only from the income tax but from the self-employment tax. Finally, don’t forget business deductions for retirement benefits. The self-employed pay double the social security, but the IRS will allow half of that to be deducted. That’s a huge savings.
What if it’s a family business? There are overlooked business deductions here too. For example, if a business owner is a sole proprietor or is in a partnership with a spouse, a Reno CPA might tell them to put the kids to work! As long as the child is 17 or younger, no social security taxes will be collected, and the salary can be deducted as a business expense. No other employee comes with those benefits to the company.
Operating cost deductions can only be taken for expenses incurred after the business opens its doors. As a result, many owners miss start-up costs such as lawyer’s fees or licensing fees because they occur before opening day. However, these can still be taken as part of the business deductions for start-up. In most years, this is up to a $5,000 deduction the first year with the remaining spread over 15 years in equal amounts. In 2010, the first year deduction was doubled up to $10,000! Now, that’s a deduction!
Of course, there are a plethora of other business deductions that can be overlooked by business owners – subscriptions to trade magazines, memberships to professional organizations, and dining out expenses, just to name a few. To make the most of these on your business taxes, contact a Reno CPA. He or she will help find not only the seven deductions mentioned above, but may just find a few more that can really affect your bottom line.
Reno’s Best CPA,
I sat down with Chuck McCumber of the Nevada Small Business Development Center (NSBDC) and talked taxes. The interview was featured in the NSBDC’s monthly e-newsletter. Here is one quote from our conversation:
“It’s also one of the best times,” said Tim Nelson, “because when the economy is down it stirs people to be more creative, entrepreneurial.”
To read the rest of the interview CLICK HERE.
Reno’s Best CPA,
Every year in April, everyone begins scrambling to complete and file his or her taxes. Although many people prepare their own taxes, a business owner or someone with significant assets and investments needs to use a professional’s services. There are many kinds of Reno tax preparation services and Reno tax planning professionals. Some of these are Enrolled Agents, CPA’s, and attorneys. What is the difference between a tax preparation service and an Enrolled Agent?
Tax Preparations Services
Most people are familiar with Reno tax preparation services, such as H&R Block and Jackson Hewitt. These services will prepare and file your yearly return for a fee, and often offer refund advance loans. Many smaller such services exist all over the country. Usually they are staffed with certified professionals such as accountants, although some may hire experienced nonprofessionals or accounting students. Be careful using an uncertified tax preparer, because they may not know the tax code well and miss deductions.
Individuals can be certified as tax preparers in many ways, but the CPA is the most common. A Certified Public Accountant has to attend secondary school and receive a degree in accounting. They are licensed by their state, and take yearly continuing education classes for re-certification. Accountants do not just prepare taxes; they also give financial, business and tax planning advice. Some CPAs work for tax preparation services full- or part-time. It is recommended that large businesses keep a CPA on retainer. Any Reno CPA should display their most recent credentials or offer them openly.
Attorneys can choose to specialize in a certain area of the law, just like doctors. Some choose tax law, which can be a very lucrative specialty. Tax attorneys are there to assist their clients in tax disputes, to set up tax shelters, draw up paperwork for corporate tax measures, and more. They are not specialists in filing actual returns. A tax attorney is good to have on retainer for a larger corporation, as they know the tax code well and can advise how to invest and what deductions might be best for the business. Check with the local Bar Association to find out if the attorney you are considering is well qualified.
A Reno Enrolled Agent (EA) is different from a CPA in the scope and training of their job. EA’s are certified by the IRS to represent taxpayers. They do not have a set training course, but do have to pass a certification exam and get continuing education. An EA is a tax specialist who advises taxpayers in audits, investigations, and can prepare taxes. They have client privacy obligations, unlike other most tax preparers. An authorized agent is also the only taxpayer representative designated by the federal government. There are only about 49,000 EA’s in the US, and they should display their credentials prominently.
Different Areas of Expertise
CPA’s are financial jacks-of-all-trade. Their certification exam has 1000 questions, only about a quarter of which deal directly with taxes. Most Reno accountants focus more on actual accounting practices and only actively work on taxes during tax season. Their advice and guidance is very important for running a business efficiently. An Enrolled Agent, however, specializes only in taxes. Their exam covers every part of the tax code and does not include accounting and business principles. They have passed a very strict exam to become an EA in the first place, plus yearly Continuing Education classes and tests.
A company should have a CPA on retainer all year, to give advice on business matters as well as taxation. Their services are invaluable for running a business efficiently and profitably. While an Enrolled Agent will charge slightly less than a CPA, their services are more limited. If you or your business have specific tax problems, it might be best to call an enrolled agent instead of a CPA. They are bound by EA-Client privacy privileges, and are extremely experienced in tax matters, especially audits. A tax attorney should be retained by corporations or people with a high net worth to take proactive measures to shelter their income.
Reno tax preparation services can and do employ all types of tax professionals. When it is time to choose your tax-planning professional, determine the extent of your needs first. If you are an individual with a straightforward return, a tax service or CPA will work fine. If you fear an audit or need special representation to the IRS, employ and enrolled agent. For legal tax matters, hire a tax attorney. Each of these financial advisors can do their job within the scope of their specialization, but are not necessarily interchangeable.
Reno’s Best CPA,
Payroll taxes can be a headache for business owners. Employers are required to withhold some types of payroll taxes from an employee’s paycheck. Some payroll taxes must be paid by both the business owner and the employee, while some are the responsibility of the business owner alone. Along with understanding the different types of payroll taxes, employers must stay up-to-date on the amount of each tax, as well as the most current legislation regarding taxes. Many business owners consult a Reno CPA to make it easier.
What Are Payroll Taxes?
There are federal and state payroll taxes. A CPA can help business owners understand both types, but state payroll taxes usually create more problems for employers because the requirements are different depending on the location. In Nevada, there are no state income taxes. Individuals and business owners are only required to pay federal income taxes, social security tax, and Medicare. Like most states, Nevada does have an unemployment tax that business owners must pay. Nevada also requires many employers to pay an additional payroll tax, known as the Modified Business Tax.
The amount of federal income tax that a business owner takes out of an employee’s paycheck is determined by an IRS W-4 form. Employers are required to have every employee complete a W-4. Generally, social security and Medicare taxes (FICA) are shared equally by the employer and the employee. But in 2011, the employee tax contribution rate was lowered to 4.2% for social security. Business owners are still required to pay 6.2% on all wages less than $106,800. Medicare tax rates are still 1.45% for both parties. A CPA can keep business owners stay informed about current tax rates.
Unemployment taxes are collected by the federal government, as well as individual state governments, to fund the unemployment program. Most business owners are required to pay unemployment taxes by filing a Form 940 with the IRS. As of July 1, 2011, the federal unemployment tax rate is 6%, but a credit of 5.4% is available for employers who pay state unemployment taxes. In Nevada, the state unemployment tax is referred to as unemployment insurance tax, or UI tax. Calculating the UI tax rate depends on several factors that are best explained by a Nevada CPA.
UI Tax Rate
Any business owner in Nevada who pays at least $225 in wages within one calendar quarter is subject to UI taxes. The amount of the tax is a percentage of every employee’s wages, up to $26,400 (2012 wage limit). New businesses pay 2.95% for the first 14 to 17 quarters in operation. After this period, the UI tax rate is determined by Nevada’s ‘experience rating.’ Depending on how much a business pays in UI taxes and the unemployment benefits its employees receive, the UI tax rate can range from 0.25% to 5.4% of the total taxable wages the business has paid.
Modified Business Tax
On October 1, 2003, the state of Nevada made it a requirement for business owners to also pay an excise tax on their paid wages. The Modified Business Tax is a quarterly payroll tax based on an employer’s gross wages and paid to the Nevada Department of Taxation. This tax is in addition to the UI tax that is paid to the Employment Security Commission. The current Modified Business Tax rate is 0.63%, and there are no wage limits or caps to benefit the business owner. There are deductions available to reduce the tax. Most of these credits are associated with health care payments.
Many business owners are unsure of the legislation concerning payroll taxes, but failing to comply with state and federal tax laws can be detrimental to a company. An experienced Nevada CPA is the best resource for learning more about federal payroll taxes, as well as current information on the UI and Modified Business taxes.
Reno’s Best CPA,
Small business owners have a lot of tax filing requirements that have to be met, from filling out specific forms to keeping thorough records on everything. At times, the whole process can be very frustrating. It is easy to become fixated on one issue as you try to work things out, and it can quickly become problematic if you cannot determine how to make numbers match up or if there are pieces of the puzzle missing. Small business financial consulting with a certified public accountant in Reno is a great way to relieve the stress and make sure everything is filed correctly.
The Technical Help
One of the most important advantages of having a certified public accountant for financial consulting is that they take over the tedious, frustrating work of crunching the numbers and keeping expenses and profits organized. This allows small business owners to focus on more important things, like running their businesses. Whereas keeping up with things like this can be very frustrating for some individuals, CPAs are trained to do it, so it’s second nature to them. As long as they’re provided with the data, they can keep track of it in order to show the important information a business needs for tax preparation and for the day to day practices of running a business.
Another important service a certified public accountant provides is avoiding audits. While a CPA can’t guarantee you won’t be audited, they can make sure your tax papers are all correct and error-free. This is one aspect of ensuring that you’re not targeted for an audit by the IRS. They also have the unique ability of looking at the entire financial picture rather than simply focusing on just one aspect. This is priceless, because they can use the information they receive to give you advice about the way your business is performing and different moves you can take to improve profits or reduce expenses.
Finally, with small business financial accounting in Reno, a certified public accountant can help you fully understand the numbers and what they mean. This gives you a unique advantage in business, and it can actually help improve your business. When you communicate with your CPA, you can learn a lot, without having to do the tedious job that your CPA is handling for you.
When it comes to small business finances, it’s more than just saving receipts and adding up profits. Having a CPA can help ensure that your numbers are thoroughly organized and that your business is on the up and up with the IRS.
Reno’s Best CPA,
A Reno CPA or certified public accountant is a huge help to individuals and businesses when it comes time for filing taxes. However, in order for the CPA and client relationship to be successful, communication is imperative. By understanding how communication works best between a CPA and his or her client, you can make sure your relationship with your CPA is solid. In addition, this helps to ensure that filing taxes, keeping records, and all other processes are easier and more accurate.
Don’t Be Afraid to Ask Questions
One of the best methods of communication is asking questions. As a client, if you are unsure of a specific process or you do not know why certain results are the way they are you can ask your CPA to explain it to you. Things like tax preparation, expense records, and loss charts can be very confusing for someone who doesn’t work with those numbers every day. A great accountant will take the time to explain what he or she is doing and why things have to be completed a certain way. Just because you’re not doing the tax preparation or other processes yourself, doesn’t mean you shouldn’t be able to understand what’s happening.
Reports and Information
If there’s something a CPA knows about, it’s keeping records. A great certified public accountant will record everything and provide reports and information to you regarding the processes he or she is going through in order to file your taxes or keep up with your business records. This will allow you to examine the processes yourself, and keep your own records for those processes. It’s also very important for you to keep records and provide your CPA with information as well. Keeping receipts and transaction logs of expenses will allow your CPA to prepare your taxes in the most accurate way. This ensures that your taxes are paid correctly and that you’re on an even ground with the IRS.
Why a CPA is the Best Choice
In addition to learning how to prepare taxes to begin with, a CPA will spend hours each year learning new information about laws that have changed, new stipulations for tax preparation and so much more. Most individuals don’t have the time to spend themselves learning these things, and trusting a professional is the best choice. A qualified CPA understands tax laws easily and in-depth, so they can make sure your taxes are filed correctly and accurately. In the same way that you’d hire an expert cake decorator to make sure your wedding cake is perfect, hiring a CPA ensures that your taxes are filed perfectly.
Overall, by having a great relationship with your Reno CPA, you can be sure that your tax preparation is done accurately and that nothing has been missed. It’s important to trust your accountant and communication is the best way to build that trust.
Why is small business consulting a necessity? Starting a business and running a business are difficult tasks. There are many different things to worry about, and financial issues are one of the main ones. Without a full understanding of all the financial aspects of a business, owners could potentially lose money or face even more dire consequences. A CPA can help with financial consulting in Reno, Nevada and ensure that the business is on track to succeed.
Defining Business Structures
One of the most important small business consulting roles a CPA can play happens when you are starting your business. You will need to decide on the best structure, and the structure you choose will affect several different things. This includes taxes and what you will owe to the state you live in, and much more. A CPA can ensure that you choose the correct structure for your personal situation and the correct structure from a financial and tax standpoint.
Creating a Legal Tax Strategy
CPAs understand tax laws in-depth, meaning that they can help you create a legal tax strategy that accomplishes two things: keeps you in compliance with state and local laws and allows your business to keep as much money as possible. With financial consulting from a professional CPA in Reno, Nevada, you will understand exactly what taxes your business must pay, when they must be paid, and what deductions your business can claim as well. This will allow you to keep every cent possible in a legal manner, so you are covered without paying in unnecessary money.
Another important thing a CPA can do during small business consulting is help you determine what kinds of investments your company needs to make and can afford to make. From marketing to other business ventures that can eventually help the growth and success of your business, a CPA can help advise you on what the best choices are while staying within your investment budget.
Annual Tax Return Preparation
One of the things a CPA is most known for is preparing the annual tax returns. This is especially important for businesses, because there are certain forms that must be filed and certain types of taxes that must be paid. Your CPA can also set up different types of tax payment plans and ensure that you are fulfilling all of your legal obligations and that you do not owe the IRS anything.
For small business consulting, a fresh pair of eyes will equal a lot of savings and can make sure your business is stable and financially secure.
Your Reno CPA,