Friday, April 21, 2017

What you should do when the IRS contacts you


After you file your tax return, the last thing you want to see is a notice from the IRS questioning your return. Some IRS notices involve very minor changes, like a correction to a Social Security number. Some are for serious changes that could involve a lot of money, such as a billing for more taxes, interest, or penalties due for an adjustment to your total tax liability.

So, what should you do if you get a letter from the IRS?

Here is a list of do’s and don’ts concerning contact from the IRS.
  • Don’t ignore the notice; the problem will not go away.
  • Act promptly. A quick response to the IRS may eliminate further, more complicated correspondence.
  • If you agree with the IRS adjustment, you do not need to do anything unless a payment is due.
  • If the IRS is requesting more money or a significant amount of new information, be sure to contact your tax preparer immediately.
  • Always provide your tax preparer with a copy of any IRS notice, regardless of how minor it appears to be.
  • Keep a copy of all the IRS correspondence with your tax return copy for the year in question.
Often taxpayers experience anxiety when they receive correspondence from the IRS. Don’t worry. The most important thing to remember is not to ignore the IRS. Bring any notice you receive to our office and let us assist you in resolving the problem quickly.

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Thursday, April 13, 2017

Find the best employees to contribute to your company

Turnover is an often overlooked cost of doing business. Sometimes it can run as high as 25% of salary and benefits. One way to reduce this cost is to hire wisely. It’s an oft-quoted cliché that employees are a company’s most valuable assets. Try generating revenue with unmotivated or unskilled employees, and you’ll soon discover that the cliché rings true.

How do you locate the best employees?

Know what you’re looking for. Before you publish a job announcement or talk to potential candidates, consider the type of skills that would fit best with your company. This may involve clarifying the types of skills that are essential to your company, as well as skills that are specific to the position being filled. For example, if the business prides itself on written communications, you don’t want to hire a candidate who struggles with grammar or balks at the prospect of writing a report.

Look in the right places. Once you’re clear about the type of employee you’re hoping to hire, focus on discovering the best candidates and drawing them to your company. You might post the position on job boards of specific trade organizations, network with local colleges and technical schools, or ask for recommendations from your current employees. In general, the more specific skills you hope to find, the wider net you’ll have to cast.

Make the interview count. Potential candidates are often counseled to conduct mock interviews, and wise employers will hone their interviewing skills too. You want to identify candidates who will be eager to contribute to your company. Asking focused questions and listening with a purpose are key to the interview process. A good interviewer will also attempt to identify “red flags” that indicate potential problems. For example, the candidate may provide vague or rambling answers to simple questions. This could indicate normal interview anxiety, or he or she might be hiding key facts from you – information that could directly affect your hiring decision.

Finding quality employees that will mesh well with your company culture is not an exact science. But, thoughtful preparation and careful interviewing can pay dividends for years to come.

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Wednesday, April 12, 2017

2 Smart Tax Ideas for Your Refund


Are you looking forward to your tax refund? By now you know how much you’ll be getting and approximately when the cash will land in your bank account. The only question is, what’s the best way to put the money to work for you?
Here are two tax-smart ideas

Tax Refund Tip #1

Fund your IRA. Depending on your income, making a contribution to a Traditional IRA could result in a deduction on next year’s tax return – and possibly a credit of as much as $2,000. For 2016, you can contribute a maximum of $5,500 to your IRA. Add another $1,000 for a total of $6,500 if you’re age 50 or older.

Tax Refund Tip #2

Invest in knowledge. Establish a qualified tuition plan, commonly called a Section 529 plan, or a Coverdell Education Savings Account. While contributions are not tax-deductible, the account earnings grow tax-free, and distributions used for educational expenses are also generally tax-free.
Do you need work-related training? Education required by your employer or courses that improve or maintain skills necessary for your present job, can qualify for a deduction.

Give us a call if you would like to talk about how these options apply to your tax situation.

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Monday, April 3, 2017

That’s Taxable?!?!

Have you ever wondered about the taxability of funds or services you receive? There are many areas in the tax code that cause confusion regarding what’s taxable. These are some of the most common.
 
Alimony. Alimony is taxable to the person who receives it and deductible to the person who pays it. Special rules apply. Make sure you have proper documentation as part of a divorce decree to ensure you can support your tax position.

Child support. Child support is not taxable to the person who receives it on behalf of their dependent. It is also not deductible for the person who pays it.

Free services. Free service is almost always taxable as ordinary income under IRS barter regulations. You should report the fair market value of services received as income on your tax return. If you exchange services, you can deduct allowable business expenses against the value of services received.

Illegal activities. Even income received from illegal activities is taxable income and must be reported. Incredibly, the IRS even states that stolen items should be reported at the fair market value on the date the thief stole the item.

Jury duty pay. This is taxable as ordinary income. Yes, even doing your civic duty can be a taxable event.
Legal settlements. A general rule of thumb with legal settlements is to consider what the settlement replaces. If the settlement revenue replaces a taxable item, like lost wages, the settlement often creates taxable income. This area is complex and often requires a detailed review.

Life insurance proceeds. Generally life insurance proceeds paid to you because of the death of an insured are not taxable. However, there are a number of exceptions to this general rule. For example, if you receive benefits in installments above the value of the life insurance policy at time of death, or if you receive a cash payout of a policy, you could have taxable income.

Prizes. Most prizes received should be reported as ordinary income using the fair market value of the item received. This area has been a major surprise to contestants on game shows and celebrities who have received large gifts at celebrations like the Academy Awards.

Unemployment compensation. Typically unemployment compensation is to be reported as taxable income. Many are confused by this because of a temporary federal tax law that made unemployment compensation non-taxable during the recent economic recession. This is no longer the case.
Some of these areas can be complicated. What is most important is to realize when to discuss your situation. Call us if you need help.

More Info: Business Accounting Systems, PC