Nearly 40 million low-income families will have their tax refunds delayed this year as a result of the International Revenue Service’s effort to combat fraud and identity theft. Families who have claimed child tax credits and income tax credits will be affected by the measure. The tax filing season kicks off on January 23, however, individuals who are filing for those specific claims will have to wait until February 15 for their returns to be processed. The delay is being put into place so that the IRS has more time to vet the returns for fraudulent activity. According to the IRS, in 2014, nearly $3.1 billion in fraudulent tax refunds was distributed to identity thieves. “For most of these people it’s the biggest check they are going to get all year,” IRS Commissioner John Koskinen told the Associated Press. Read More
One of the most valuable tax breaks that homeowners can claim is the mortgage interest deduction. Deductions reduce your taxable income, which can come in handy if you’re trying to work your way down to a lower tax bracket.
However, there may still be time to take action to reduce small business tax liabilities. For example, buying necessary equipment for your business by December 31st may allow you to take a big deduction in your 2016 taxes.
Under Section 179, businesses can deduct the full purchase price of qualifying equipment or software purchased during the tax year. This deduction is intended to encourage businesses to buy the necessary equipment to benefit the company. Instead of getting a deduction as equipment depreciates over time, businesses can deduct the full purchase price in 2016 for qualifying equipment purchased before the end of the year.
Qualifying Section 179 purchases include office equipment, computers, computer software, office furniture, and business vehicles with a gross vehicle weight over 6,000 pounds, such as vans, large SUVs, or trucks. There is a limit of $2 million for qualifying deduction purchases. Check with your tax professional to make sure you are eligible.
If your business uses cash-method accounting, you may be able to defer some of your taxable income until next year. By sending payments or charging expenses before the end of the year, you may be able to deduct those expenses this year even if the charge is paid or the check is cashed in the beginning of next year.
The end of the year is upon us, and it is time to get organized with your accounting records. If you have not done so already, I would highly recommend getting on a robust accounting system for your business. Check out Quickbooks, Xero or whatever works best for you.
To ensure that you are ready for the end the year, I have compiled a list of tips.This not an exhaustive list but a good guide. Some of the tips I got from the National Association of Certified Public Bookkeepers (NACPB).
Enter final transactions for the year
Pay bills, people and other expenses that were incurred in 2016.
Enter ALL cash receipts for business expenses (taxis, business meals, etc)
Review petty cash especially if there is more than one person accessing petty cash.
Reconcile all your accounts and enter any missing transactions.
Work on reducing account receivables by following up with clients/customers to get paid.
Write-off bad debt if necessary, but work on getting paid by customers/clients first.
Make IRA or 401K contributions and donations to charity to reduce taxable income
Make all asset depreciation entries (only applicable for equipment that you had put on a depreciation schedule)
Organize: Make Life Easier on Your CPA and Understand What Happened During The Year
Collect all bank statements and business credit card statements for the year.
Make sure you have check register.
If you have freelancers, get their current address, SSN so you can file 1099s by January 31st.
Inquire from your CPA as to what reports, form and any other documentation are needed.
Ask if year-end reports should be on a cash basis or accrual basis
Back up the accounting file in case of any data loss (cloud or hard drive)
Send a copy of your Income Statement and Balance Sheet to your accountant at the end year to get an idea what your taxes will be for income tax deadline.
H&R Block’s Tax Center is good because tax refunds can be directly deposited into your bank account. I love that it can effectively to put a dent in predatory income tax refund loans.
Tax deadline is this Thursday, April 15. File Later if you have to.
If you need help with your filing, Simplfi has some tips on how to double your tax refund.
Finovate Spring Conference is May 11 in San Francisco.
Invoice Bubble is a new online invoicing tool which is good for freelancers and small businesses.
Free Tax Filing, Efile Taxes, Income Tax Returns – TurboTax.comIf you need file for an extension, then you may want to use File Later.