An Excerpt from TaxAssurances’ Book for Small Business

do-it-with-passionWhether they are starting a new business or expanding an existing business, entrepreneurs of all strips need to have passion and drive for what they are doing. They need passion and drive because the road for any entrepreneur is littered with challenges and hurdles that have to be overcome on a constant basis.

Passion and drive is reflected in the time and energy that is put in the little details in starting and running a business. It is reflected in the financial commitment that owners put into the business. It is reflected in the sometimes lonely journey and effort that a business owner endures to make their business a success.

Deliveries will be late or missed. Employees will be late or quit. Clients will find a million and one reasons not to pay you on time or if the entrepreneur is really luck, not at all. And none of this will be in the original or revised business plan the entrepreneur may or may not have done. Business owners need that passion and drive because that is what is going to move them forward during the tough times.

Owners will want to cry about any one of the challenges they face, but the problem will still be there when the crying is over and a solution still needs to be found. Passion and drive for what they do during those gut wrenching times will propel them forward and help them overcome those challenges.

Passion and drive will help them devise solutions and responses that keep the business going. The challenges may spark a creative bent that they otherwise might not have used. And in really breakthrough moments, it will put the business on a much better trajectory then before the challenge first appeared.

 

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Married? File Taxes Jointly

Taxes_DueDuring a recent tax filing season, a new tax client of mine openly cried at my desk because of her newly discovered $8,800 tax bill to the IRS and $2,200 tax bill to New York State. All primarily because she filed her taxes “married filing separately” instead of “married filing jointly” with her husband.

Married Filing Separately

Federal and state governments want legally married couples to file their taxes together and to encourage them governments don’t allow certain credits, deductions and exemptions for couples who file “separately.” It also puts couples who file “separately” in a higher tax bracket then those who file “jointly.”

Taxes for 1099 Independent Contract Work

My client also got the new tax bills because she worked as a 1099 independent contractor during the year outside of her normal 9-5 and did not pay taxes on that income throughout the year. $18,000 worth of self employment income.

W4 Exemptions/Allowances

To cap off her problems and to make matters worse, her job in the social services field did not take out enough in taxes every paycheck to meet her tax obligations for the year. Had she simply put zero or one on line 5 of her W-4 form, her employer would have taken out more each paycheck to meet her tax obligation.

Tax Solutions

To make my client’s life better going forward, I gave her a number of recommendations. First, I talked with her about the differences between filing separately and filing jointly. She’s going to try to work with her husband on that. Next, I gave her the necessary paperwork she’ll need to pay her estimated taxes for her self-employment.

Then, I told her to talk with her employer about changing her exemptions/allowances so she can make them as low as possible. That way more taxes are taken out of her paycheck then needed. Finally, I gave her the websites for the IRS and New York State to work out a payment plan for her outstanding debt. With all of this hopefully we’ll have a much better tax prep experience next year.

 

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Is An Employee Paid in Cash Worth Going to Jail For?

Michael-GrimmHere is a recent story of a US Congressman who lost his seat and is going to jail for his employees. Here are the details that stand out:

The indictment accused him of underreporting more than $1 million in wages and receipts to evade payroll, income and sales taxes, partly by paying immigrant workers, some of them in the country illegally, in cash.

Sentencing was scheduled for June 8. Prosecutors said a range of 24 to 30 months in prison would be appropriate, while the defense estimated the appropriate sentence as between 12 and 18 months.”

Here is the rest of the story.

In my upcoming book focused on Small Business and Accounting, I explain how to avoid this.

 

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Can I Write off My Work Clothes on My Taxes?

EarthWindFire_Legacy

Every so often, I get a variation of the same question from friends and clients, “can I deduct the cost of my clothes on my taxes?” The answer depends. If you are part of Earth, Wind & Fire or Twisted Sister, sure. If not, probably not.

In all seriousness, the IRS allows individuals to write off the purchase and care of their clothing if it is unique, special and required for the job. For instance, nurses, police officers and other professionals who have to wear a uniform for work, can write off the purchase and upkeep of their clothing.

If someone is a professional that wears a suit every day and needs it to keep up appearance like a news anchor, then they cannot write off the purchase and upkeep of their clothing. If they do write it off and the IRS does an audit, the write off will be reversed and the taxpayer will end up owing the IRS the money for the deduction.

For more information, here is what the IRS says about writing off work clothes:

Work Clothes and Uniforms

You can deduct the cost and upkeep of work clothes if the following two requirements are met.

• You must wear them as a condition of your employment.
• The clothes are not suitable for everyday wear.

It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.

Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).

Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.

However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.

Protective clothing. You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves.

Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.

Military uniforms. You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses.

If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.

You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.

 

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