Header Right

Retirement Savings Tips for Millennials

by

Coworkers team at work. Group of young business people in trendy casual wear working together in creative office.If you’re a millennial, retirement may barely register in your consciousness. Between paying down student loans, trying to take that first step on the housing ladder, or other financial priorities, you may have little time to think much about your life 35 years from now.

However, you shouldn’t wait until later to start planning for retirement. Retirement success can depend greatly on getting an early start on saving for your future. Here are some basic tips that can help put you on the path to retirement security.

Live Within Your Means

Tip number one is to spend less than you make. That way, you will have some money left over from your paychecks for other purposes, such as saving and investing.

Be a Disciplined Saver

Save as much as you can as early as possible. Give yourself a savings target and stick to it. Decide, for example, to save 3% of your income for retirement and increase that percentage every year. It won’t be long before you are contributing the maximum allowed for an employer-provided retirement plan. Set aside some or all of any tax refunds, bonuses, and pay raises for an emergency fund and your retirement savings account.

Understand the Time Value of Money

Compounding is the magic ingredient when it comes to building your retirement nest egg. It is simply the process of earning money on your savings and then earning money on your earnings as well as your savings. The longer your money is invested, the greater the potential benefit from compounding.

Learn About Investments and Investing

Knowledge is power when it comes to investing. If you feel you lack the patience to study investing, see if your employer’s plan has a target date retirement fund you can consider.

Focus on Your Goal

Remember, saving and investing for retirement is a long-term goal. Have a plan and stick with it. Stay focused on your long-term goal of retirement security and don’t let short-term market changes knock you off course.

Tax Fraud vs. Tax Negligence: Understand the Difference

by

Payment of tax, invoices, bills concept. Financial calendar, money, tax form on clipboard, magnifying glass, calculator, pen, folder. Payday icon. Vector illustration When running a small business, it is essential to understand the difference between tax fraud and tax negligence. In this article, we clarify these terms so that you can avoid unsavory business practices and stay on the right side of the law.

Let’s start with some basic definitions to understand the difference between tax fraud and negligence.

Fraud is wrongful or criminal deception that results in financial or personal gain.

Negligence is failure to take proper care in doing something.

Tax Fraud

The IRS defines tax fraud as “the willful and material submission of false statements or documents in connection with an application and/or return.” From this and the above definition, the key terms are “intended” and “willful.” Tax fraud is intentional. In other words, someone who commits tax fraud is willfully doing so.

Two primary examples of tax fraud are failing to file a tax return or filing a false return. If the IRS suspects tax fraud, they look for key factors:

  • Underreported income
  • Use of a false social security number
  • Falsified documents
  • Intentional failure to file or pay taxes

Of course, not everyone fails to pay taxes if committing intentional fraud. That’s where negligence comes into play.

Tax Negligence

The key point to focus on with negligence is that it is unintentional. For example, let’s say you’re completing your business taxes and accidentally typing in an incorrect amount by mistake. You weren’t intentionally or purposefully entering the wrong amount; you simply made a human error. While you were negligent in that act, you were not behaving fraudulently.

You can think of negligence as a careless error.

If the IRS suspects tax negligence, they will definitely let you know. A penalty will be added to the unpaid or misreported tax up to about 20% of the tax due, so you do not get off easy. In fact, tax negligence is more common than you think. The IRS estimates that about 17% of all taxpayers in the U.S. are non-compliant when filing taxes. In other words, it’s easy to make a mistake.

It’s easy to avoid tax fraud – pay your taxes promptly, honestly. Avoiding tax negligence may be more complicated since it can result from human error. To ensure that you’re not negligent when it comes to filing your small business taxes, employ the services of a qualified tax accountant or CPA. They are trained to find issues that could get you into trouble with the IRS and are up to date on the latest tax laws and regulations. A skilled accountant can save you time, stress, and money in the long run!

The 5 Most Common Small Business Accounting Mistakes

by

Young finance market analyst in eyeglasses working at sunny office on laptop while sitting at wooden table.Businessman analyze document in his hands.Graphs and diagramm on notebook screen.BlurredSmall businesses make accounting errors and oversights regularly. Here, we cover five of the most common small business accounting mistakes. Read on to see if you’re making any of these mistakes and how to avoid them in the future.

1. You don’t take bookkeeping as seriously as you should.

Recording everything is an excellent rule to follow for bookkeeping and accounting for a small business. Ensuring that everything is recorded and categorized correctly in your accounts is essential, from small transactions like purchasing office supplies to large payments from customers and clients. No matter how small your company is, accurate bookkeeping and accounting methods are essential for a reliable assessment of your company’s health.

If you’ve slacked in this area, find the weak spots. For example, you may need to: categorize your assets and liabilities correctly, have a monthly accounts review, or establish a new bookkeeping system. A sound bookkeeping and accounting system is the only way to know how your business performs.

2. You refuse to outsource your accounting needs.

If you read point one above and the need to establish a new bookkeeping and accounting system rings true, you’ve identified a serious issue. Many small business owners decide to handle bookkeeping and accounting in-house because they feel “too small” to justify outsourcing those tasks. While the temptation to reduce costs by controlling the books in-house is tempting, it can be overwhelming when trying to manage a business and wear the accountant hat.

Handling your own accounting could be costing you money. Accountants understand ways to save businesses money that can escape others. They know all the ins and outs of taxes, deductions, write-offs, etc. It’s what they do all day, every day. Consider outsourcing your accounting to a qualified firm instead of missing out on opportunities to save money.

3. You outsource, but you fail to communicate with your accountant.

So, maybe you have already outsourced your business’s accounting. Are you communicating with your accountant? Does your bookkeeper know what’s happening in your business? Keeping up with all transactions – great or small – and sharing those with your accountant is vital. Overlooking even a small purchase can lead to costly issues over time.

A great way to make sure your accountant is fully apprised of any and all expenditures. Keep receipts and a record of all transactions. You can use receipt tracking software or keep a paper or digital log. Regardless of the method, your accountant will appreciate your efforts. Their job will be easier, and it can save you money in the long run.

4. You don’t record every expense, even the small ones.

This point cannot be emphasized enough. It is essential to record all business spending, no matter how insignificant you think. That $5 of petty cash you took out of the register to send your employee to pick up stamps for the business counts! This is particularly crucial for cash-based (i.e., retail) businesses. No expense is insignificant. This is a fundamental rule to follow for new companies. While it is easy to overlook the small stuff, as your business grows, you will be glad you were attentive because it makes managing your books so much easier. Again, this can be a big money-saver in the long run.

The bottom line: No transaction is too small to record. Save receipts, keep a record, tell your bookkeeper.

5. You assume that profit always equals healthy cash flow.

If you make a sale of $1000 that cost your business $300, did you profit $700? Not necessarily. Depending on the type of business you are in, additional costs could be associated with the sale that reduces the profit. For example, if you’re in retail sales, you must account for expenditures like overhead. What if the merchandise is returned and refunded? Handling the refund costs you money, and that cuts into profit. Suppose you’re in a business that provides services like construction or home improvements. In that case, you must consider setbacks and delays due to receiving materials, weather, etc. Any setback you experience in completing a job means less profit to your firm.

Not accounting for costly setbacks can give you a false sense of how your business is performing. While the numbers may look good on paper, a distorted picture of its financial health is detrimental to your success.

Awareness of these small business accounting pitfalls can help you improve in weak areas and position your business for long-term success and a healthy financial future.

Contact our accounting professionals now for more help managing your small business finances.

6 Key Facts About Excise Taxes

by

Matthew J. Rice CPA - Excise TaxesEveryone knows about income taxes and sales taxes, but we tend to forget about excise taxes, because they’re not obvious. Click through for an introduction to this important class of taxes, and see what’s changed.

Excise taxes are paid when purchases are made on specific goods or activities, such as wagering or highway usage by trucks. The producers or merchants pay the tax and typically include the additional tax in the price to the end consumer. Governments levy excise taxes on goods and services that have a high social cost, such as cigarettes, alcohol and gambling. Excise taxes are also referred to as selective sales or differential commodity taxes.

Here are six key facts regarding common, little-known excise taxes —

  • The tax reform bill exempted certain payments made by an aircraft owner or sometimes a lessee, related to the management of private aircraft, from excise taxes imposed on taxable transportation by air.
  • To support the use of alternative fuels, fuel tax credits are allowed on certain types of fuel including the following: biodiesel, including renewable diesel and mixture; alternative fuel credit and mixture; and second-generation biofuel producer.
  • Indoor tanning service providers may need to file a federal excise tax return. These services are subject to a 10 percent excise tax under the Affordable Care Act. This is an example of how excise taxes are often levied on goods and services that are considered unnecessary.
  • Taxpayers who engage in certain specified activities related to excise tax must be registered by the IRS before engaging in the activity. This is known as the 637 registration program. The taxpayer can go online to confirm whether they or a specific company has a valid IRS registration.
  • You may be surprised to know that there is an archery federal excise tax, including the importation and manufacture of archery and fishing products. These, of course, affect relatively few people, but are good examples of how a product or service may be subject to a particular excise tax that is not necessarily obvious.
  • The Environmental Protection Agency’s list of devices to reduce high tractor idling may be exempt from the 12 percent retail excise tax. This shows that a major component of the excise program is motor fuel, and different rates may apply to different types of fuel — gasoline, diesel and gasohol.

The idea is to limit the use of certain products, such as alcohol and tobacco. States also levy excise taxes. Some people say that excise taxes are stopgap measures to solve short-term problems. In fact, some note that discriminatory excises on the consumption of specified products is a step back in development of fiscal systems, postponing a more proper reform for the country or state.

Are you unsure how excise taxes may affect you? Call us at 704-609-1119 now or request a consultation online to learn more.

Need to Set Up Users in QuickBooks Online?

by

Matthew J. Rice CPA - QuickBooksYour employees probably don’t need access to every corner of QuickBooks Online. Here’s how to set limits.

One of the best attributes of QuickBooks Online is that multiple users can access it without having software installed on their PCs. No more paying up front for a boxed copy that you’ll store on your hard drive. You just pay a monthly subscription fee.

Unless you assign specific access rights to your users, though, they’ll be able to see and do everything that you see and do on the site. You undoubtedly trust your employees or you wouldn’t have hired them, but it’s just good business practice to restrict individuals to their specific work areas. You probably did the same thing if you ever ran a manual accounting system.

QuickBooks Online makes this easy. Once you’ve set up individuals for a specific set of screen permissions, that’s all they’ll see when they log in with their user names and passwords. Here’s how it works.

Several Levels

Click the gear icon in the upper right of the QuickBooks Online screen, then select Manage Users under Your Company, then click New. This mini-interview will open.

QuickBooks Online’s mini-interview will walk you through the steps required to assign access rights to employees.

As you can see, four access levels are supported. You’ll probably select Regular or custom user most often because you can drill down and set permissions at the screen level. The Company administrator is you, of course, unless you’ve assigned this role to someone else. The user at this level has access to everything.

You can also let someone see Reports only, with the exception of payroll reports and those that contain contact information about customers, vendors, and employees. If you have employees who submit time sheets but don’t otherwise work in QuickBooks Online, you can let them in to do Time Tracking only.

Tip: There’s a fifth option here. You can grant us access to your QuickBooks Online company data, making it easier for us to monitor and troubleshoot your accounting information. Let us know if you want to take advantage of this.

Paring Down Access

Click the button in front of Regular or custom user if it’s not already highlighted, and then click Next. This third screen in the mini-interview deals with Customers and Sales and Vendors and Purchases Access Rights. Click All or None if appropriate.

This screen in the mini-interview helps you restrict user access in Sales and Purchase areas.

If you’re allowing Limited access in these two areas, be sure to read the fine print explaining what is and isn’t allowed. When you’re satisfied with your selection, click Next.

On the next screen, you’ll set administrative rights for that user by indicating whether he or she can manage other users’ access rights and work with your subscription status and other company information.

You’ll supply the individual’s email address and name on the following screen. This will be used to send an email inviting the user to sign in using an existing Intuit Business Services user name or one he or she creates. Click through the next screen and click Finish when you’re done. The mini-interview will close, and you’ll be back at the Manage Users page.

Your User Overview

The Manage Users page displays a list of all users who have been invited or are active.

The Manage Users screen

The table here lists all users’ names, email addresses, access rights, billable standing, and status. If you haven’t received a response to an invitation (Invited), you can click the Resend button to issue another email. When he or she responds, Invited changes to Active. Click on a row to highlight an individual, and you can Edit or Delete him or her, and see an audit log of Activity.

You or your appointed Master Administrator should set up access rights before any new employee is admitted to QuickBooks Online. Let us know if you’re having trouble with this element of the site, and if you’d like us to join your list of active users. It’s a lot easier for you and us if we can get in there and see what problems you’re having — and resolve them.

Take advantage of QuickBooks today! Request a free initial consultation or call us today at 704-609-1119 and ask for Matt Rice.

Time for a Tax Checkup

by

Matthew J. Rice CPA - Time for a Tax CheckupMidyear is a good time to review your tax situation. You can make sure your estimated tax payments are on track and look ahead to see if there are any tax-saving opportunities you can take advantage of before year-end.1

The Need to Estimate

The IRS requires individual taxpayers to make four quarterly installment payments of estimated tax (based on the amount of the “required annual payment”) to satisfy their tax liability for the year. Individuals also have the option of paying their income taxes throughout the year through payroll withholding.

To avoid penalties, payments must equal the lower of (1) 90% of the tax liability for the current year or (2) 100% (110%, for higher income individuals) of the tax liability on the prior year’s return. No penalty will apply if the tax shown on the return (after withholding) is less than $1,000.

Paying the Right Amount

Though you don’t want to underpay, you might not want to overpay either. A refund may be welcome, but it’s essentially an interest-free loan to the government.

If you need to change the amount being withheld from your paychecks, contact your payroll department and ask for IRS Form W-4 so you can make the appropriate adjustments. If you have additional nonwage income, you may need to increase your withholding or make estimated payments to avoid an underpayment penalty. If you are self-employed, you probably need to make estimated tax payments.

Save Taxes, Save for Retirement

Do you (or your spouse) have a retirement savings plan at work, such as a 401(k) plan or 403(b) tax-sheltered annuity? You can reduce your 2019 income tax liability by making pretax contributions to the plan. Permitted contribution levels for such plans are typically generous. For 2019, an employee may contribute up to $19,000 ($25,000 for those 50 and older) to either a 401(k) or 403(b) plan, unless a lower plan limit applies.

Capitalize on Lower Rates

You also might be thinking about selling an investment that has performed well. If the investment is held in a regular taxable account, your capital gain would potentially be subject to tax. However, long-term capital gains are taxed at lower rates (generally 15% or 20%) than your ordinary income.

Source/Disclaimer:

1This communication is not intended to be tax advice and should not be treated as such. Each individual’s tax situation is unique. You should contact your tax professional to discuss your personal situation.

Matthew J. Rice CPA offers reliable and comprehensive tax planning and preparation services to help ensure that you take advantage of current tax laws, submit accurate and on-time tax returns, and put together a plan that may significantly reduce your tax liability. Call us at 704-609-1119 now or request a consultation online to learn more.