What Does the IRS Want from Small Businesses?

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As a small business owner, you have many responsibilities to take care of to help make your business a success. A superior product or service is good to offer, but it won’t keep you from getting audited by the IRS. By having a small business accountant in Tucson as part of your team, you can focus on what you need to do to make your business grow—and let the experts handle your financials. Read on to learn what you can do as a business owner to keep the IRS satisfied and reduce the chances of an audit.

Receipts

The IRS wants to know how much money you had come in in the past year, as well as how much you spent. Make sure you have detailed records of all of your receipts, including your cash register tapes, invoices, and deposit information for both cash and credit sales. An accountant can help you determine the best way to store and organize these receipts to make it easier once tax season arrives.

Purchases

If you buy items to resell to customers, the IRS wants to know how much you spent. Make sure you keep detailed records of what you buy, including raw materials if you are actually manufacturing products. The documents should show how much you spent, the method used to pay, and what exactly you were spending money on. Talk to your accountant if you are unsure about what should be included in your purchasing documents.

Employment Taxes

Many business owners rely on an accountant when it comes to taxes, as this is where the financial side of business can get very tricky. You need to pay payroll taxes, report all wages and tips, and have detailed information on each employee who is getting paid. Keep all employment records for at least four years should you encounter any problems with the IRS.

Let Ledger Solutions help keep your business running smoothly. We provide expert accounting services in Tucson for small and growing businesses. Call us at (520) 618-5390 to find out what we can do for you.

How to Choose a Business Accountant

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Running a business is no easy task. In addition to assembling a reliable team of employees to provide excellent service and product knowledge to your customers, you must also take care of behind-the-scenes tasks such as bookkeeping. If you’re like many business owners, you may not have the time or inclination to handle the numbers for your operation. That’s why it’s important to work with a reputable Tucson business accountant who is experienced and ready to provide you with expert financial services. Keep reading to learn how to choose a business accountant.

Qualifications

While some places claim to offer expert accounting services, it is essential that you look for the qualifications to back up these claims. A CPA has an undergraduate degree, has passed a state licensing exam, and takes continuing education courses to stay current with certification. Some CPAs have additional qualifications and experience to make them better suited to handling the accounting needs of businesses of different sizes. It’s a good idea to look for certifications so that you feel confident that your new accountant will be up-to-date on the latest in bookkeeping methods, as well as tax codes.

Areas of Expertise

Choosing a business accountant can be overwhelming, but it’s much simpler when you narrow your choices down by industry. You can check with businesses similar to yours to find out what they do for accounting needs, or simply search for an accountant that has expertise in your particular industry. Certain businesses have very specific accounting needs, so be sure to speak with your prospective accountants about what it is you do and what you’re looking for.

Size

Accountants may work for themselves, for small firms, or for large corporations. If you have a relatively small business, keep in mind that you could end up falling through the cracks at a large accounting firm. Look for an accountant who will be able to provide you with the personalized service you need.

Ledger Solutions in Tucson is dedicated to providing small businesses with expert accounting services. Call us at (520) 618-5390 to learn how we can help you keep your numbers in good shape, while you focus on growing your business.

Understanding Offers in Compromise

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The IRS will attempt to seek repayment of tax debt in many ways. Wage garnishment or property seizure can significantly harm a taxpayer’s ability to earn a fair wage or maintain a reasonable quality of life. An offer in compromise is a potential solution to an outstanding tax debt in which the taxpayer and the IRS agree to settle the debt for an amount less than what is owed. This solution can provide taxpayers with a fresh new start by eliminating their debt, but must meet several criteria to become a valid option.

How does an offer in compromise work?

When a taxpayer wants to make an offer in compromise, he must submit this offer and the associated paperwork to the IRS. The IRS will assess the taxpayer’s net worth and predicted future income, then calculate the ability of the taxpayer to repay the outstanding debt. If the IRS accepts your offer, you will pay the amount specified and your tax debt will be removed from your records.

Who can use an offer in compromise?

Not everyone can settle their tax debt using this solution. If the IRS believes that you can repay your debt either as a lump sum or via an installment plan, you may not qualify to reduce your debt with an offer in compromise. While the IRS has become much more willing to accept offers in compromise in past years, it’s still the best practice to contact an accountant for help if you’re considering this option. An accountant can ensure your offer in compromise has a high chance of acceptance to help you settle your tax debt more quickly and easily.

If you’d like to make an offer in compromise to settle your tax debt, it’s vital to work with an experienced CPA during this process. At Ledger Solutions of Tucson, we are dedicated to helping you find the right tax solution for your needs, including assisting clients with the submission of offers in compromise. You can learn more about us on the web, or by calling (520) 618-5390 today.

Preparing Yourself for Payroll Issues

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Regardless of the size of your business, managing your payroll can be a challenging task, while even small payroll mistakes can become serious concerns during tax time. Understanding the most common payroll issues you’re likely to face and how to avoid them can help you reduce the chance of a payroll mistake costing you money on your small business taxes.

Classification of Employees

Businesses must classify their employees for tax purposes to determine the amount of employment taxes that must be paid. While regular employees require the payment of these taxes prior to the issuance of a paycheck, independent contractors fall into a different category that does not require these taxes to be withheld. However, misclassifying employees, even by accident, can raise red flags within the IRS that may lead to an audit or other tax consequences. Ensuring that you understand the difference between employees and independent contractors will help you avoid this simple but common mistake.

Paying Overtime

Overtime typically consists of any work hours logged in excess of 40 hours per week. While many employers believe that overtime requires a straightforward payment of 1.5 times an employee’s regular hourly wage, this practice is not universal and does not apply to all employees. Overtime is calculated based on both an employee’s hourly wage and other factors associated with work compensation, such as shift differentials and production bonuses. Furthermore, overtime rules often vary from state to state. Before you make an overtime payment to any employee, it’s vital to calculate the correct overtime rate based on all of these factors.

If you’d like assistance with your payroll in Tucson, Ledger Solutions is here to help. We offer comprehensive accounting solutions for small businesses, including payroll services, tax preparation, and bookkeeping. Please visit our website to learn more about how we can reduce stress, money, and time associated with your business accounting needs, or give us a call at (520) 618-5390 to speak with an experienced CPA.

The Importance of Bookkeeping for Small Businesses

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Financial bookkeeping plays a vital role in daily, monthly, and annual business operations. Through bookkeeping, businesses are able to accurately balance income with expenditures to track cash flow and fund growth. Small businesses in particular can benefit greatly from accurate bookkeeping, as small fluctuations in spending and income can have large effects on small business operations over the short and long term.

Covering Business Expenses

Bookkeeping ensures that your business can adequately and consistently cover expenses. By providing an up-to-date view of your current assets, income, and costs, bookkeeping allows you to track profits and spending to eliminate issues associated with unwanted or unexpected debt. Identifying and tracking potential cash flow issues early can help you cut costs in a timely and appropriate manner to reduce financial concerns in the future.  

Allowing for Business Growth

Accurate bookkeeping can also help you forecast and execute business growth. Making sure you have adequate resources for new projects and partnerships is a vital first step in the long-term health of your business. If you require a loan or other form of financial assistance to achieve your goals, providing your lender with accurate information based on your bookkeeping records will increase the likelihood of receiving the loan and the rate you want.

Preventing IRS Audits

The IRS often targets small businesses for audits because of common mistakes associated with poor bookkeeping practices. Thus, you can prevent an audit from ever occurring by ensuring your records are accurate and up to date when filing your taxes. If you are audited, you’ll have all the information the IRS needs to prove your tax returns are correct and resolve the audit quickly.

Do you need assistance with small business bookkeeping in Tucson? Ledger Solutions is pleased to offer accounting and bookkeeping services that allow you to put your time and energy into your business, rather than your accounting needs. You can find out more about our comprehensive small business accounting solutions on our website, or reach us by phone at (520) 618-5390 to discuss your needs.

Tips for Avoiding an Audit

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Each year, the IRS conducts tax audits to further examine tax returns that appear erroneous or out of the ordinary. Audits do not necessarily mean that you will be penalized, but they do mean that the IRS plans to evaluate your tax records and claims much more closely. Understanding the most common reasons for IRS audits can help you avoid these mistakes when preparing your tax return this year.

Work with an Accountant

Simple math errors can cause serious mistakes on your tax return. These errors are an extremely common cause of IRS audits, especially when they lead to underpayment of taxes. One of the simplest and most effective ways to avoid these mistakes is asking an experienced CPA to handle your taxes. Your CPA has access to accounting software that will double-check all calculations to ensure no math mistakes occur.

Sign Your Return

Another common cause of tax audits is failure to sign the tax return before submission. If you send in a tax return without signing it, the IRS may suspect that other important requirements have been missed as well. Hiring a CPA to complete your tax return will ensure that no required signatures or sections are missed. Your accountant will make sure to obtain all required signatures and double-check each section for completeness before submitting your return to the IRS.

Report Income and Donations Accurately

Misreporting income and donation amounts, whether intentionally or unintentionally, is a serious red flag for the IRS. If you have several sources of income, it’s vital to include each source on your tax return. Similarly, if you make charitable donations throughout the year, report them accurately and avoid valuing donated items too high, which can cause suspicion within the IRS. Ideally, donated items should be valued at 30% or less of their original cost, even if they are in like-new condition.

Working with an experienced CPA to complete your taxes is the very best way to avoid an unwanted IRS audit. You can reach Ledger Solutions of Tucson for tax assistance and advice by calling (520) 618-5390 or contacting us via our website.

Tax Tips for Self-Employed Workers

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Rather than acting as part of a company that manages schedules and workloads, self-employed workers retain control over the work they complete and for whom it is performed. In the United States, as much as 30% of the national workforce consisted of self-employed workers and their employees in 2014. As an independent worker, you must file an independent annual tax return and pay an estimated tax quarterly based on your earnings; you must also pay a self-employment tax, rather than separate Social Security and Medicare taxes.

Know Your Possible Deductions

Self-employed workers are able to take advantage of a variety of tax deductions that are unavailable to other individuals. These deductions can include certain startup costs for new businesses, such as legal fees, advertising, and bank fees. Self-employed workers may also make home office deductions if they work from home, which can include deducting a portion of mortgage or rent payments, utilities, and property taxes. Other deductions available to self-employed workers include journal or magazine subscriptions relevant to your field, business travel expenses, and educational expenses for skills necessary in your current occupation.  

Keep Comprehensive Records

As a self-employed individual, it falls upon you to keep your own financial records. Developing a consistent system for storing or filing expense information may take time, but will prove beneficial when you are confident that your records are both complete and easily accessible at tax time. If you find that you don’t have time or the desire to handle your own financial recordkeeping, a CPA can provide accounting services for you to reduce errors and stress, allowing you to focus your time and energy on your work.

If you are self-employed in Tucson, you can benefit from the assistance of an experienced CPA. Ledger Solutions is pleased to offer tax services and solutions for self-employed individuals and business owners to help you take advantage of all available credits and deductions. Please visit our website or give us a call at (520) 618-5390 to learn more.

Reasons to Work with an Outside Bookkeeper

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Accurate and complete financial bookkeeping is essential for any business. However, keeping your own books can be time-consuming and even stressful, particularly if you are unfamiliar with the type of documentation that must be maintained or the best system to keep it organized. Working with a separate accounting service to manage your business’ bookkeeping needs offers several key benefits over both the short and the long term.

You’ll Save Time and Money

Hiring an outside bookkeeper will save your business time and money. Rather than paying your existing employees to take time away from their work to handle bookkeeping requirements, working with a CPA for bookkeeping purposes will keep your existing employees on task. This allows your employees to focus on what they do best, while minimizing the time and costs required for bookkeeping, thanks to your CPA’s experience and the tools at his disposal to easily organize and maintain your financial records.

You’ll Have an Accurate Picture of Your Business

Regardless of whether they are newly-established or trusted brands in their field, businesses often struggle with developing a beneficial plan for future growth without accurate financial information and records as a guide. By keeping your records organized and up to date, an outside bookkeeping service can give you a clear picture of your business in terms of your financial standing at any time. This accurate snapshot can provide you with the information you need to determine whether spending should be adjusted for greater efficiency and business success.

Hiring a CPA with experience in bookkeeping is a smart move for your business. At Ledger Solutions, we are here to help you manage your business’ bookkeeping and tax needs with comprehensive accounting services in Tucson. You can reach us by phone at (520) 618-5390 or click through our website to find out more about the accounting solutions we offer.

What Tax Deductions Can You Take?

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Tax deductions reduce the amount of taxable income you make, thereby lowering the total amount of taxes you owe once your return has been completed. Deductions may be either standard or itemized, and there is typically an IRS cap above which you can no longer deduct a certain type of expense from your taxes. While some of the most obvious deductions are hard to miss, your Tucson CPA can help you determine whether you might be able to make additional tax deductions for costs you might not have considered.

Health Insurance Premiums

In some cases, medical expenses such as health insurance premiums may be deductible from your taxes. If you are self-employed and handle your own health insurance coverage, you can deduct 100% of your health insurance premiums from your adjusted gross income. Individuals that are not self-employed may still be able to deduct some medical expenses if they exceed 10% of your adjusted gross income in a tax year.

Moving Expenses

If you move to accept a job, you can deduct many of your moving expenses from your taxes that year. This deduction is available even if you are moving to take your first job, rather than moving from one job to another. However, there are certain rules and restrictions regarding this type of deduction; your accountant can help you determine which of your expenses were deductible for the maximum benefit.

Home Office Expenses

If you are self-employed and work from home, some of your costs can be deducted as work expenses based on the percentage of your home and your daily costs that your work consumes. Deductible costs can include a portion of your utility bills and your rent, as well as the costs of any work-related magazine or journal subscriptions and organizational memberships.

At Ledger Solutions, we are pleased to offer accounting and tax services for individuals and business owners in Tucson. You can find out more about how we can help you manage your tax returns for lower stress and maximum deductions when you visit our website or give us a call at (520) 618-5390.

How Charitable Donations Affect Your Taxes

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Giving to charity is a worthwhile endeavor that brings personal joy and improves the world around you. Regardless of the reason behind your actions, donations given to a qualified charitable organization are considered deductible expenses when you and your accountant sit down to complete your tax return. Keep reading to learn more about the types of donations you can deduct from your taxable income and how these deductions will affect your tax return this year.

Deductible Donations

The IRS considers several forms of donation acceptable deductions when you file your tax return. Most individuals know that deductible donations consist of money and physical items, such as clothing or other possessions, but there are other types of donations you can deduct on your taxes as well. Out-of-pocket expenses and miles traveled for charitable work also qualify for tax deductions on your return. However, the IRS does not consider all nonprofit organizations eligible to receive tax-deductible donations, so you’ll need to make sure your charity is eligible before donating if you wish to claim a deduction.

Deductible Amounts

The IRS does place restrictions on the amount you can deduct from your taxes for charitable donations. In most cases, you can fully deduct cash donations up to 50% of your adjustable gross income and property donations up to 30% of your adjustable gross income per year. You may also fully deduct appreciated long-term securities of up to 20% of your adjustable gross income on a single year’s taxes. Donations made above these amounts are not eligible for deductions, but can be carried forward and deducted on your next tax return for a period of up to five years after your original donation.

Do you have questions about tax deductions or other accounting and finance matters in Tucson? You can reach an experienced accountant at Ledger Solutions by calling (520) 618-5390 for assistance with bookkeeping, tax preparation, payroll solutions, and more. We also invite you to check out our website to find more details on our services or to read out monthly accounting blog.