Find supporting documents

This is especially true with those documents that will support any deductions. Gather all those receipts, mortgage documents, or utility bills. If you can, try to file them in one folder, this way, when you’re finally ready to do your deductions, you can just grab this folder and begin the filing process.

This tax folder will also be helpful just in case you get audited since you won’t be scrambling of receipts or cram at the last minute.

Consider using tax preparation software

Another way to go about with your income tax preparation is to use tax software. You can actually do the job yourself but, this time, there won’t be any of that tedious task of filling out forms and writing everything by hand. With the software, you can just answer questions about yourself, your home life, your job, and just key in the corresponding amounts that are needed on certain fields.

There are also some tax preparation software programs which can help you file your tax return online. This is the so-called e-Filing. This will get to the IRS more quickly which also means that you will get your tax return earlier than those who file their tax returns manually.

Pay attention to your deductions

This is a very basic income tax tip which every taxpayer must pay attention to. When you are claiming for deductions, you can just standardize your deductions or you can go the longer route and itemize them. A lot of taxpayers use the standardized form though they know that they can save more by itemizing their deductibles. Sure, itemizing takes a little work but it is well worth it.

Learn about your deductions first off so that you may qualify for the upcoming tax year. Here are some of the things that you can classify as deductibles –

• Real estate taxes
• Property taxes
• Home mortgage interest
• Certain home repairs
• Home improvements
• Medical expenses which exceed 7.5% of your gross income. This can also include doctor, dental and lab fees.
• Charitable donations

If you have to pay your taxes, you might as well look out for ways to pay as little as possible. It may take a longer time to gather the data and to calculate everything but with the help of a good tax preparation software or a trustworthy CPA, everything should come out fine!

The post Income Tax Preparation – What Every Taxpayer Must Do appeared first on Big 4 Accounting Firms.

Start Up Costs

As a small business owner, you have the right to deduct your expenses in running your business on your taxes. Take note, though, that nothing can be deducted prior to your business being opened to the public. You can deduct as much as $5,000 in start-up cost and $5,000 for organizational costs on your very first year of business.

Those expenses that aren’t deducted could be amortized over a 180-month period. This begins the moment you open the business to your customers. These expenses often include advertising, market research, employee training, business expenses, and other miscellaneous costs.

Furniture and Equipment

A few businesses can even deduct the full cost of their equipment on the year that they purchased them instead of capitalizing them or deducting the cost over a stretch of years. A small business owner can deduct as much as $250,000 for new equipment costs but take note that some assets may not qualify such as properties bought from a relative or real estate properties.

Educational Expenses

A business owner may also deduct educational expenses on the taxes only if they are related to the current occupation or business. This amount can be deducted if the owner is furthering his education to improve his business skills.

Auto Expenses

Majority of small business owners just take the standard mileage rate deduction which is around 55 cents for every mile. For them, this is an easier way to keep track of mileage records. What they don’t realize is that they can get better deductions if you list everything from repairs, mileage, maintenance, insurance, even parking fees.

Promotions and Advertising

The cost of business cards, marketing, commercials and Yellow Pages advertisements can be deducted on your tax returns. If your small business also sponsors sports events, then this can also be considered a deductible.

Travel Expenses

If you travel with a business purpose, then you can also deduct your airfare’s cost. Lodging and meals costs can also be considered as deductions.

Professional Fees

Legal and professional fees are also deductibles but not if the costs are part of your start-up expense in which case, you’ll need to amortize the cost over sixty months.

Remember these important aspects that you can include the next time that you file your taxes and you will definitely save more.

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April 15^th is one of the most dreaded days of any calendar year. This is that day when most Americans would ask themselves this question – “Have I done my taxes right?” If you’re one of these individuals, then you’re probably considering using professional tax software to make things easier.

There is no doubt that tax preparation is difficult and grueling for most people with so many papers to gather and too many numbers to calculate. Add to these the various forms that need to be filled out and it’s enough to drive anyone nuts!

Though the IRS has published much information pertaining to personal and business tax returns, these are often long, detailed, and, thus, difficult to process. This is why the use of professional tax software is an idea that most taxpayers resort to.

Advantages of using professional tax software

1. The chief advantage of using this kind of software is that it is easy to use and it produces results in the quickest possible way. These software packages often have a 1-2-3 methodology which means you are guided every step of the way.
2. Most of these packages will transfer all the information that you provide to the different forms which you need to file. This will reduce your concerns about which form to file and how to do it.
3. You also have the option to file it online or what’s called as e-Filing. With this, your taxes are going to be processed more quickly than manual submissions. But just be aware of e-Filing since there could be a bit of a cost for this kind of service.
4. You will be able to identify any additional tax credits or deductions which you would not be aware of had you computed everything manually.
5. You will have more precise computations as these software packages can provide expert mathematical calculations that can print out in a few minutes!

The disadvantages of using professional tax software

1. You can make a mistake if you provide the wrong information or typed the wrong data on the wrong field. Using this tool means you should know what you’re putting in there so that your tax filing won’t end badly.
2. The basic versions of these kinds of software generally contain the forms that a taxpayer needs but they may not be able to help you on finding out additional deductions or tax credits.

It’s up to you to choose whether the tax software is for you. For some, this is an invaluable tool as it gives them the computations that they need in just a few minutes while others are extra cautious to use it because they might have filled in some information incorrectly. In such cases, it’s better to consult with a CPA and see how he can file your taxes for you.

The post Professional Tax Software – The Major Advantages and Disadvantages appeared first on Big 4 Accounting Firms.

10 Steps in Filing Your Taxes

1. Gather all of your pertinent tax records – you will need to collect information such as your past W-2 forms, Social Security Number, 1099 forms, receipts, previous year’s Adjusted Gross Income, and bank account numbers.

Depending on the taxpayer’s financial situation, you may also need to collect additional information such as – partnership and trust income; pensions and annuities; Jury Duty pay; alimony; gambling and lottery winnings; mortgage interest; moving expenses; sale of your home; scholarships; interest income statements; etc.

If you’re married, you will also need your spouse’s Social Security Number especially when you’re filing jointly. If you have moved, then make sure to use your current address.

2. Know your filing status and exemptions – know which one you should file under – Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child. Know that for every exemption, your taxes will be greatly reduced.

3. Compute Your Annual Gross Income – have all of your financial documents assembled and gather all the correct forms in front of you prior to filling them out.

4. Calculate the AGI or Adjusted Gross Income – you can greatly reduce your tax obligations if you do this.

5. Calculate all the deductions – think of all the items that you are supposed to deduct such as medical expenses, mortgage interest, some taxes (such as income tax, real estate tax or Ad Valorem Tax), charitable donations, casualty or theft losses, educational expenses, etc.

6. Know your taxable income and the current tax rate – there are now computerized software programs that can compute your taxes for you in just a few minutes. Just gather these data and have them keyed in on the right fields.

7. Find all the credits that could reduce your taxable income – see if you have these common credits –

• Child-related credits
• Education credits
• Other credits such as foreign tax credit

* See if the Other Taxes section in 1040 applies to you. This is a section that’s provided for self-employed taxpayers.

* List all the tax payments that you’ve made throughout the year as well as any other credits that you have received such as Non-taxable Combat Pay credit, EIC credit, Work credit, etc.

* Find out about any refunds that you might collect and your payment options.

The post How to Do Taxes – The Easy Way appeared first on Big 4 Accounting Firms.

Features of a Good Tax Preparer Software

• It should be a program that you can use anywhere that you can access the Web.
• It should be manufactured by a company that’s been into the creation of web-based tax software programs for years. You are particularly looking for matured brands rather than those hyped by mere advertisements.
• It should provide technical support.
• 1040 only single user
• E-filing
• Conversion of data
• You should also be able to track the status with the IRS.
• It should have suggestions and diagnostics.
• More importantly, it should be able to provide an all encompassing information regarding the present tax laws. Knowing the current tax laws doesn’t mean that you need to purchase a different software each year. Find one that updates itself without any charge.
• It must provide every little tool that you need in order to completely file your taxes.

How Tax Preparer Software Works

The concept in any such program should be simplicity. After all, not all users are technical people. The program should also lead the user into the following areas with ease –

• Input – this is where the taxpayer will enter his information (mostly those that are found in his W-2, Schedule A and B, 1099, etc).
• Review – this is where you will see a list of tax-related suggestions.
• File—this is the electronic way of filing your taxes or to obtain a printed form for those who prefer manual transmission.

There’s no point in procrastinating to file your taxes. Rather than cram like the rest of the American population, you might as well steer clear of the rush hour and have yours done in just a few minutes!

Those people who resort to using the tax preparer software are the ones who are afraid of making mistakes – and they have every reason to be afraid because errors have their corresponding consequences. Using the program decreases the risk of filing erroneous information, thus, you’ll be able to sleep more soundly at night!

The post Tax Preparer Software – Worth It? appeared first on Big 4 Accounting Firms.

Are you one of those employers who have hired independent contractors instead of employees in order to save on payroll taxes? At first, this may have seemed a great idea because of the following reasons –

• You may have saved thousands of dollars on what would have been employment taxes.
• You had no problem filing the 941 tax returns.
• Your accountant may have coaxed you to do it.

Through those months, you probably also realized that what you did was one of the worst decisions that you’ve ever made in your entire life. Now, you are worried sick that you could get caught anytime especially now that IRS has launched a pilot program aiming to solve this particular issue. You’re probably also worried about the number of months or years that you haven’t been complying.

So now that you’ve realized the dilemma that you’ve gotten yourself into, what do you suppose you should do?

The most common concerns of non-compliant employers

• If payroll taxes haven’t been paid in the past, are you going to raise glaring red flags?
• Are you going to pay for back taxes?
• Is it better to begin a new company and just end the existing one?
• Do you need to pay more now that you’re required to withhold payroll taxes?
• What would happen to all those times that you never gave them 1099 forms?

The New Voluntary Classification Settlement Program

This program was launched just late September 2011 by the IRS. This is a new tax relief program that can help resolve past worker classification concerns and then come clean at a very low cost. This was all detailed on the Announcement 2011-64.

This is a Fresh Start Initiative that has aimed to help business taxpayers in clearing up all of their past debts due to misclassification of workers.

Eligibility requirements

• You should have consistently treated workers as non-employees in the past.
• You are not currently under the IRS audit.
• You have filed all workers’ form 1099 in the past three years.
• You are not currently under the audit of the Department of Labor or State Agency pertaining workers’ classification.

The program cost: Any employer who is accepted into this program will pay about one-percent only of the wages paid to his reclassified workers in the past year. This is a huge benefit since you won’t pay any interest or penalties. You will also not be audited on payroll taxes that are related to your workers in the prior years. You can literally save thousands with this program so there’s no reason not to join it!

The post Tax Programs: Respite for Business Taxpayers appeared first on Big 4 Accounting Firms.

Estimating your tax returns should take no more than a few minutes if you already have all needed information. This is the best way that you could know whether you still owe money or if you need to collect from the IRS. Online, you can use the free tax estimators to know where you really stand.

The simple way to estimate tax refunds

The real essence of computing your tax returns online is that it can be done quickly. You can expect the approximate amount in just ten minutes and then you’ll be able to declare where you stand. A smart taxpayer knows that he should always be on top of things.

There are free services online and it would do you well to find tax calculators that can give you the closest possible computation. After finding the right tool, you should also do the following things –

• Determine your filing status and also your number of dependents.
• Enter the Social security number, dates of birth and the names of your dependents.
• Enter all of the income that you can think of (W-2 income, rental, self-employment earnings, and royalty income) on their appropriate lines in 1040.
• Subtract the deductions like student loans, moving expenses, business losses, IRA or HAS deductions, self-employed health insurance deductions, also the unreimbursed teacher educational expenses. The result will be your AGI Adjusted Gross Income.
• You can then look into the IRS tax tables online to see how much you owe. Enter this amount on your online form and then enter the tax amount withheld from all or your income sources. Enter also any tax credits which you are entitled to like Child Tax Credit or Earned Income Credit. Deduct these numbers from the total tax – the result should either be your balance due or your estimated tax refund.

Looking at all these, you’d know that as long as you have all the needed information, it is quite easy to know the amount that you’re supposed to collect from IRS. If you’ve done everything and you feel that there’s still something amiss, then you can ask for tax help from professionals who do this for a fee. So it’s your choice in the end – to do everything for free online or to pay someone to do it for you.

The post Estimated Tax Return– Why Do Everything Online? appeared first on Big 4 Accounting Firms.

It is understandable that filling out Schedule A of your 1040 isn’t your idea of a great time. And while there are professionals who can prepare this for you, statistics show that about 30-percent of people who hire tax preparers end up complaining.

Keep this in mind when picking out your tax preparer – both you and this professional can be adversely affected by erroneous returns so you had better find the best and most competent tax service expert out there.

A word of caution: If you do decide to hire someone, make sure that this expert will be able to deliver as he promises. There are some people, who pay some accountants only to end up with late tax filings, or worse, they end up getting conned and no taxes are filed at all! Basically, it’s all about being careful in who you hire to do the job.

A food for thought: Make sure to ask for copies of your tax return that was prepared. It is required of ever registered tax preparer or a CPA to provide you with this copy. You might want to check out the IRS website particularly the Circulation 230. In there, you will know all about the tax preparer requirements. If these professionals don’t abide by these requirements, then you should know better.

Questions to ask your tax preparer

• Can I get some references?
• Are you registered with the IRS or are you a Certified Public Accountant?
• May I see your business license?
• Are you licensed to practice in this State?
• What are your educational requirements?
• Are you a registered member of the Better Business Bureau or any other organization?

These are the most basic questions that you need to ask and the CPA or the IRS registered tax preparer. If the person that you interviewed answered positively to all of these questions, then by all means, you should hire him!

The post Tax Preparer – How to Weed Out the Worst One appeared first on Big 4 Accounting Firms.

If you are looking for means to get tax help or tax filing assistance, it would be an intelligent choice to file way before the deadline. Tax experts can provide the most competent advice which you will need in filing your taxes. With these advices, there’s also a possibility that you could save on some cash.

Useful Tips in Assessing Tax Professionals

• If you want to get the best tax help, you have got to ask around. First, you need to research regarding your tax preparers. Ask your family members or friends regarding any referrals. If they don’t have any, look online for testimonials. You can also talk to the person and assess him while you do your one-on-one interview with him. There is a need to be convinced that this particular professional would serve you well is to check on his BBB rating.

Bbb.org shows a list of individuals and companies that offer their tax services. A BBB-accredited firm or individual (preferably with a rate of A or higher) is definitely an expert so it would be safe to entrust your tax computations.

• See if you can hire a Certified Public Accountant or a Licensed Enrolled Agent. These are professionals that studied to acquire their skills. These two are your best expert options. Don’t forget to check on the tax preparer’s learning and education

Free IRS Tax Filing Online

The Internal Revenue Service strongly cautions taxpayers to ascertain that they’re on the authentic IRS website by simply typing www.IRS.gov on their browsers. Take note that the site doesn’t end in .com, .net or .org.

Features of the IRS website –

• The Free File is a quick and free way to file your tax returns. This can be used if your adjusted gross income is at $56,000 or less.
• The IRS withholding calculator can help taxpayers assess the amount of their income tax in the most accurate manner.
• AMT or the Alternative Minimum Tax Assistant can be used to know whether taxpayers may be subject to the AMT.
• Online Payment Agreement can be used by taxpayers who won’t be able to pay their taxes completely by the 15^th of April.
• The Electronic Federal Tax Payment System enables taxpayers to do their tax payments online.

There are many other features that a taxpayer can find on the IRS website. What you would need to do in order to determine whether filing it free online is the way to go or if you need a professional to do everything for you, is to check the pros and cons. Hiring a professional can cost you money but these people know what they’re doing so there are less chances that errors would be committed. Filing everything yourself is a bit risky especially if you don’t know what to do – so better make your choice from the onset.

The post Tax Help – Should You Choose Free IRS Service or Paid Professionals? appeared first on Big 4 Accounting Firms.

Doing all the vital record keeping, filling out required forms and calculating payroll processes are enough to make payroll and accounting staff work hour upon hour. Also, to add payroll tax on top of all these could be quite nerving for these professionals. Not to mention that it is not financially feasible to employ a huge number of staff that would keep track of all that’s going on in payroll. This is the very reason why companies now resort to outsourcing all the activities that have something to do with taxes. Companies that offer tax services can take care of everything at a much lower cost.

Benefits of outsourcing tax computations

It is no rocket science that payroll processes are taxing and on top of this, the company also needs to take care of the ever-changing laws on employment and tax. These make the payroll operations a lot more challenging and these are also the reasons why most companies now see the good in outsourcing this kind of activity.

Choosing to outsource tax activities to another company is a sensible step in filing your tax but you have to remember a few fundamentals in choosing the right firm. You don’t want to go out there, picking the first company that appears on your Internet search.

Check the company’s competency: Ask the company itself about their knowledge of tax amendments and tax regulations. If they are aware of the latest updates then you are in safe hands. Remember that even if you hire a renowned company, you will still remain liable if your services such as payroll taxes aren’t settled on time. Also, there are legal complications that you could get tangled into.

Have the backbone to say no: Don’t just blindly follow what the outsource company will dictate. This is the purpose of holding demos prior to signing any contracts. Check the company’s accuracy rate first so that you won’t have to worry about legal issues later on.

The company must keep up with the changing times

Tax laws aren’t constant so the company that you hire should update itself. A good way to ask for the real service offered by the outsource company is to seek out testimonials and to find their latest clients. These people would be able to tell you if you will be making the right decision in hiring this outsource company.

Remember that there are many companies that offer tax services nowadays but you’ve got to be wary of their real intent. Tax activities should be done with accuracy so make sure that you hire only those that have handled such cases in the past.

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