Your business structure has a direct impact on your revenue recognition strategy, as the structure may determine whether or not you make any money.

There are several factors involved when determining what your business structure will be going forward. As you read through, keep in mind your revenue recognition strategy to see which of these business structures is most compatible with your business.

The Four Business Structures

When it comes to structuring your business, there are four different ways you can go about it. Those ways are:

• Sole proprietorship – You are the only owner of this company.
• Partnership – Company is owned by several individuals. There are general partnerships, where the partners share in the obligations and debts of the company. With a limited partnership, these partners act as investors and have no control over how the company operates.
• Corporation – Most complex business structure, it also operates on the largest scale. A corporation is a legal entity in its own right, apart from the legal entities of the business owners. The shareholding owners can direct the company.
• Limited liability company – Blending corporate structure and partnerships, there is no limit on shareholders and any member of the LLC has a full partnership.

How Taxes Affect Business Structure

Each of the four different business structures have a different set of tax laws. Depending on your revenue strategy, one of these business structures will suit your business best.

• Sole proprietorship taxes – Business taxes and personal taxes are inseparable with this business structure. You will need to pay self-employment taxes using your Schedule SE with your Form 1040. Your business earnings will only be taxed once with this business model.
• Partnership taxes – The business itself does not become taxed. Instead, the losses and profits are passed to the individual partners. Each partner has to report their own taxes using the Schedule K-1 of Form 1065.
• Limited liability company taxes – When doing taxes on an LLC, the earnings and losses go straight to the owners and are applied to their personal taxes. This is much like a sole partnership, except that the earnings and losses are split between the various owners.
• Corporation taxes – Some significant tax drawbacks are attached to corporations. The corporation itself is taxed on the state and federal level, but also the shareholders are taxed on their earnings.

You may still not be sure if your business model is helping you make the most money. To help clear the confusion, you can work with trained accountants who can consult with you regarding your business. With an accountant’s insight on tax law and the various rewards and drawbacks these different structures present, you can make sure you are making the most money possible with your business structure.

While many Americans put off preparing their taxes until the last moment, this can contribute to the dread they feel as the tax season deadline approaches.

But you don’t need to panic as April 15 comes closer. Whether you have simple taxes or complicated ones that need an accountant to help you deal with them, there are two steps you can take to prepare yourself for tax time.

Organize Your Forms And Paperwork

Organizing all your paperwork and forms before tax time will help you skip the last minute scramble many people struggle with during tax season. Some of the key forms you will want to secure will depend on various circumstances.

Income Forms – You will want to gather all of your W-2 forms, 1040 Schedule C, 1099-MISC, and any other income forms you have received. You may need to be proactive about collecting your forms, as some companies do not mail forms anymore and simply make the information available through your employee access portal. If you are the business owner, then you will need to hold yourself accountable for acquiring the necessary paperwork.

Receipts – Depending on whether you want to file an itemized return, you will gather up your receipts for several things. Common qualifying deductions are:

• Mortgage interest payment
• Medical expenses
• Investment interest payments
• Charitable contributions
• Property taxes.

If you run a business, you will naturally need to gather more information. Some common business deductions are:

• Employee salary and wage information
• Contractor payments
• Business property rent or mortgage
• Utility payments
• Company supplies
• Business insurance.

Personal – Make sure you have all the personal information you need. It is easy to remember our own personal information, but depending on your circumstances, you may need to gather personal information that is not your own. Some information you may need to consider gathering:

• Dependants’ information (children, elderly parents, etc)
• Assets (Traditional IRA, house, stocks, etc)
• Federal benefits (SNAP, Social Security, FAFSA, etc)

Work With A Great Accountant

Preparing for the tax season on your own can be difficult even if all you are taking care of is your personal taxes. If you are a business owner, the difficulty level skyrockets. But you don’t have to manage your taxes on your own.

AA Tax and Accounting Services is ready to help steer you through the muddy waters of tax season. They have the knowledge and experience to ease you through tax time and alleviate the normal stress most people feel when doing their taxes. So do yourself a favor and work with them today to prepare you for the fast approaching tax season.

Having a reliable accountant to handle your business’ bookkeeping is a key feature of any business. But the question comes down to whether you keep your bookkeeping in-house or outsource it to a third-party accounting firm.

Below are the pros and cons of hiring third-party bookkeepers which you should know before you make your decision.

In Favor Of Third-Party Bookkeeping

There are many benefits to outsourcing your bookkeeping to an accounting firm. The main upsides to sending your financials out-of-house are:

• Cost reduction – Working with a third-party bookkeeper cuts down the cost of having an in-house bookkeeper. While you need to pay for the services you require from the outsourced bookkeeper, your business doesn’t need to pay for the third-party bookkeeper’s overhead costs as you would with an in-house employee.
• Expert work – No need to worry about your bookkeeper’s qualifications or abilities. By outsourcing to an accredited accounting firm, you can be assured that they employ the well-trained and experienced experts.
• Time saving – For many businesses, their in-house bookkeeper performs several roles such as human resources, scheduler, and training. By sending your accounting out-of-house, you can free up your employee. Also, you no longer need to spend time overseeing your bookkeeping.
• Greater professionalism – Never deal with delayed or mishandled accounts again. With a third-party bookkeeper, you can feel secure knowing your business’ accounts will be taken care of on time.

Cons Of Outsourcing Your Bookkeeping

While there are many benefits to outsourcing your bookkeeping, there are still a few potential downsides as well.

• Security risks – When transmitting sensitive financial data outside of your business, there is always the danger of the information being stolen or abused. It is important to inquire about the security measures your potential third-party bookkeeper uses.
• Time difference – Even if you outsource to a third-party bookkeeper within your time zone, operating times between the two businesses can create difficulties. Even if your operating times coincide, communication can lag between your business and your third-party accountant.
• Language barrier – Depending on how far afield you send your bookkeeping, language may be a barrier.

Many of the negatives your business may encounter when outsourcing your bookkeeping can be mitigated. The key way you can be sure you are working with a credible and reliable accounting firm is to make sure the accountants have a track record of success.

AA Tax and Accounting Services has experienced accountants at the helm. They have years of experience working with everyone from individuals to businesses. When your business chooses to outsource to AA Tax and Accounting Services, you can be assured that the downsides of outsourcing can be mitigated by their professionalism.

Businesses at all levels of development can benefit from having trustworthy accountants to help streamline operations.

It can be tempting to try to manage your business’ monetary needs without an accountant. But this is one area where you shouldn’t try to cut corners. By working with an accountant, you can save money as well as make your business more efficient.

Accountants Help Startups

When it comes to starting up a business, working with an accountant can seem like you are jumping the gun. But there are several areas where your business can be helped by an accountant.

• Analyze your plan – Accountants can look over your business’ financial plan and help you analyze if your plan is sound. They can find financial areas you may have missed and where in your plan you may be able to save more money.
• Business structure – Whether you need to create an LLC, partnership, corporation or something else, your accountant can help identify which business structure works best.
• Tax code compliant – An accountant can help you set up your business finances to comply with the local and federal tax code.

Established Businesses Can Be Streamlined

Business owners can fall into the trap of – “If it’s not broken, don’t fix it”. However, your accountant can offer plenty of help when it comes to streamlining your established business.

• Entity restructuring – As your business has grown, you may find your original business structure may not be the best fit anymore. An accountant can help you with entity restructuring, help you reduce your tax liability and mitigate personal risk.
• Payroll and payments – An accountant can streamline the long process of handling payroll and processing payments. You won’t have to worry anymore about late vendor payments or incorrect payroll processing.
• Submit taxes – Instead of trying to compile your business taxes on your own, you can work with an experienced accountant. With an accountant, you can receive help estimating your quarterly taxes, then have your accountant prepare and file your taxes.

Develop A Stronger Business

As businesses look to grow, an accountant can help guide a business as it looks to grow. Expanding your business can be difficult, but quality accountants can help smooth a business’ development by offering business consulting.

By working with your accountant, they can identify areas of improvement as well as areas for potential growth. So contact your local accountants and see how they can help you streamline your business today.

Everyone has to file a tax return, right? Actually, no…there are situations where a person may not have to file taxes. It depends on age, income level, where income comes from and what status you are filing under.

Let’s take a look at some of the guidelines provided by the IRS.

Thresholds For Income

Anyone who makes under the minimum income line does not have to file taxes. You are entitled to one standard deduction and an exemption, unless you are being named as a dependent on another person’s tax return that year. Anything over that rate is subject to a tax and you have to file a proper return.

The amount of those deductions and exemptions are changed every year to keep up with changing inflation rates. You can see those rates at the IRS website. The amount will be partially decided by whether you are filing as a single taxpayer or in a joint filing with a spouse.

Age Specific Exemptions

The rules for tax filings changes when you hit the age of 65. You may be subject to a higher income bracket before you are required to file, especially if you are receiving social security benefits.

Keep in mind that social security benefits are taxable if you are receiving an income from another source in addition to that monthly allotment. So make sure it is being factored into your final calculations when ascertaining whether you need to file a return.

ACA Status

The Affordable Care Act has opened up an insurance marketplace with benefits that offset the cost of health care for many Americans. At the end of the year, people who used the Marketplace are required to report it on their taxes, which includes providing information given from a special form issued in the mail along with W-2’s.

If you have used the Marketplace you will have to file a tax return.

Filing Rules For Dependents

Dependents are not able to name themselves as a deduction because they are being named on someone else’s return. Income they earn over $6,300 has to be reported on a return. If they are not employed but earning dividends on investment accounts or interest on bank accounts they are required to report it once it hits $1,500 per year.

Why You Should File Anyway

There are several instances where you can get out of filing a return. But do you really want to? Many Americans learn later on that they could have gotten a refund if they had only filed. You may want to consider filing a return even if it isn’t necessary. You never know what you could get.

Find out more at AATAS.

Allowing someone else to deal with your money requires a lot of trust. But that said, many people are nervous to meet with an accountant. Here is our four-step sequence for learning to trust your accountant.

1. Identify Your Fears

Ask yourself: What am I really worried about regarding my accountant?

Everyone’s answer will be different. You might realize your nervousness actually lies elsewhere in your business. You find some actual specific pain points with your finances: taxes! paying employees! spending! Or you might just find, you simply don’t like your accountant.

This last point is certainly a valid concern. Not all accountants are created equal. Maybe you a hard time communicating with your current accountant. If that is the case, find yourself a new accountant that you’re more comfortable with.

2. Take a look at your recent numbers

In step one, you clarified your emotions. Now, you’re going to get a numerical perspective.

Find key numbers for the last three to five years — yearly tax returns are a good place to start — and write the answers to these four questions:

1. How much income did both my business and I receive?
2. What the total expenses both my business and I accrued?
3. How much did we each pay in taxes?
4. How much did we each earn in profits?

Continue on to step three.

3. Speak with your Accountant

It is now time to speak with one or more accountants. Start by visiting your current accountant. If all you receive from that visit is bluster and jargon, find an accountant you can trust.

With whichever accountant you meet, focus your meeting on these three questions:

1. What are the answers to the four fundamental questions above?
2. How can I be more involved in my own finances?
3. How can I trust you as my accountant?

The answers will speak volumes. You can expect a clear breakdown of the basic numbers and what they mean, practical tips on how to prepare for key parts of the financial year, and a walk through of the accountant’s process.

4. Commit to Trust and Understanding

Much of the hesitation for working with an accountant stems from a lack of understanding. Many people don’t understand what they are paying their accountant to do.

Learn more about your personal finances and learn more about your accountant’s process. As your understanding increases your trust will too. Then you’ll finally be able to get some sleep at night.

If you’re running a non-profit organization, you might have a lot of questions about tax-exemptions, IRS regulations, and what you are — and are not — required to file. Many non-profits are exempt from paying federal taxes, but contrary to popular belief, not all of them are.

If your organization is tax exempt, does that mean you aren’t required to file a yearly return? Not necessarily. And if you do need to file, you probably wonder which forms should you use and when they are due. For clarification, always speak to an accountant or CPA; they can ensure you have the proper structure to maintain tax-exempt status. However, here are some of the basic requirements when it comes to non-profits and the IRS.

Do You Need to File?

As a rule, the vast majority of non-profit organizations are still required to file yearly tax returns. Why? Because although most of them are tax-exempt and don’t pay federal taxes, they are still required to provide certain information to the IRS to keep that tax-exempt status in force. This informational return is filed using IRS form 990.

About Form 990

It’s vital that non-profit organizations file IRS form 990 on a yearly basis. This form helps the IRS verify and evaluate the operations of any non-profit, ensuring the laws governing these organizations are being followed. Form 990 includes important data about the organization’s finances, mission, and the programs they support.

There are different variations of form 990. They include plain 990, 990-EZ and 990-N. Which version you should are required to file depends on gross monetary receivables and what year you are filing. Most tax-exempt organizations should file form 990, with some exemptions such as state institutions and churches. Every private foundation classified as a 501(c)(3) should also file a 990, as should 527 political organizations.

Which 990 Should I File?

If you aren’t sure which form 900 you should be filing, the IRS can provide some guidance. However, here are some of the basics:

• For private foundations, use form 999-PF
• If your gross receipts are over $50,000, use form 990 or 990-EZ
• If your gross receipts are under $50,000, file 990-N (e-Postcard)

Could I Be Exempt?

As stated above, most non-profit, tax-exempt organizations are still required to submit annual tax returns, at least for evaluation purposes. But generally speaking, the following types of non-profits are not required to file:

• Government operations
• State programs that provide essential services
• Subsidiaries of other non-profit groups (usually, the return will be submitted by the parent organization)
• Religious organizations like churches, missions or missionary organizations, and religious schools

While these are the basics, any non-profit should check with their accountant and/or the IRS to ensure they are filing all necessary paperwork and doing so with complete accuracy. For the sake of public trust and information, non-profit organizations are actually required by law to make their IRS Form 990 available for public view during business hours.

When to File Form 990

When your return is due will depend on the taxable year of your organization. Your form must be submitted by the 15th day of the 5th month after the close of your tax year. So if you are following the calendar year ending December 31st, you’d need to file your 990 by May 15th.

If you file your form 990 every single year, you can avoid certain IRS fees and extra paperwork. On the other hand, if you do not file for 3 consecutive years, your tax-exempt status will be rescinded by the IRS. In fact, thousands of non-profit organizations lose their tax exemption every year because they haven’t filed their 990. There is no appeal process if this happens to you, meaning you’ll likely to be required to pay income tax.

Don’t Leave Your Tax-Exempt Status to Chance

If you’re running a non-profit organization, the last thing you want to do is risk having to give much-needed funds to the government in taxes. This is why is so important to make sure you know the laws and follow them precisely. The IRS has provided instructions for form 990. However, for clarification and practical knowledge, it’s always best to consult a qualified tax professional who is well-versed in the tax requirements for charitable organizations.

Buying a home is likely the most significant investment you’ll ever make. Not only are you paying hundreds of thousands of dollars, but your home is the place where you’ll make the most meaningful memories of your life.

As a first-time homeowner, you might also be aware that there are some tax implications when you buy a home. Let’s take a look at some of those, so you know what to expect when you file your year-end tax return.

Tax Implications of Buying a Home

• Your Down Payment: Your down payment isn’t tax deductible. However, if you use some of your retirement plan to make this payment, you should let your plan administrator know. If you’re under age 59 1/2 and a first-time buyer, you can avoid early retirement withdrawal penalties.
• Remodels and Repairs: Once you buy home, it probably won’t be long before you face your first repair or remodeling project. These costs are not tax deductible, but keep a file of your receipts along with photos of any construction you do on your home. Why? Because things like a water heater, new roof, kitchen remodel, new windows, or home additions can be classified as capital expenditures, which may reduce your capital gains tax when you sell the home. Note that repairs like plumbing, maintenance, cleaning, or painting are not capital expenditures.
• Closing Costs: Unfortunately, the closing costs you pay when you buy a home are not tax deductible. But take a close look at your escrow settlement statement, where you might find some things like property taxes and fees for loan origination (also called “points”). These items may be tax deductible. Also keep documentation of the closing costs you pay when you refinance, as these can reduce your capital gains when you sell. Any points you pay for a loan refinance are eligible for amortization over the life of the loan, and you can deduct them on your tax return.
• Mortgage Interest: The interest you pay on your mortgage and property tax escrow over the year are deductible on Schedule A — your itemized deduction. Your lender should be sending you form 1098 sometime in January, letting you know how much mortgage interest you paid. If your property taxes are paid through an impound account by your lender, your property taxes will show here, too.
• Private Party Financing: Let’s say your parents helped you with your down payment, and you’re repaying them. If there’s interest on these payments, you can deduct it, but only if their “loan” note is secured by your property.
• Private Mortgage Insurance: In 2017, private mortgage insurance (what you’ll pay if you put less than 20% down on your home, until you reach an 80/20 loan-to-value ratio) will no longer be tax deductible.

If you bought a home this year, it’s important to consider all the tax implications when filing your tax return. As home or business ownership can complicate your tax profile, it may be best to let a CPA or certified tax preparer help you get the most accurate filing — and the biggest return.

When most people think of accounting, they think about daily tasks like accounts receivable and payables. They might also consider things like like tax filings and bank reconciliations. However, working with an accountant can also help business owners plan for and achieve future growth. Here are some of the different ways your accountant can help you ensure a prosperous future.

Budget Forecasting and Reporting

With your accountant, set some goals for the next year. Your accountant can then use charts, graphs, and different data to track your progress and compare past and current periods. You’ll need to determine how costs compare with sales volume, and what future events (a change in season or market conditions, for example) are likely to impact those numbers. All of this information will help drive sound decision-making, ensuring you make the right decisions at the right time.

Key Performance Indicators

Your accountant can help you determine what key performance indicators (KPIs) your business should be looking at. Some of these might be inventory turnover, cost per customer acquisition, market share, revenue growth, profit margins, or any number of things. Using these KPIs, your accountant can help you measure and estimate your business’ performance over time.

Cash Flow Projections

Understanding your KPIs is also vital to planning and managing cash flow. Will you have the means to buy new equipment, provide employee perks, or extend discounts to your best clients? Everything from hiring employees, to developing new products, to changing locations will also impact your cash flow. Let your accountant keep track of it all and give you the results of that analysis — before you make important decisions.

Business Valuation

In order to get financing or bring investors onboard, you’ll need to have an accurate picture of your business valuation. Only an experienced financial pro can help you valuate your business properly, and provide the documentation to back up those numbers. Business moves fast, and opportunities can pass you by if you don’t have a constant, accurate picture of how much your business is worth.

Tax Liability

Every business decision you make has the potential to impact your tax liability. Your accountant will have a constant pulse on tax codes, both federal and local. Since you’re busy running your business, there is no need to stress yourself out trying to keep up with the frequent changes in tax codes and regulations. He or she can inform you how each business decision will affect how much you’ll owe the government — and that knowledge is important to your future growth.

Entity Restructuring

As your business grows, you’ll likely need to change the way it’s structured. This is helpful in mitigating your personal liability and reducing your tax bill. Only a qualified accountant or attorney can help you ensure the proper business structure.

Don’t Risk It

The future of your business hangs in the balance of every decision you make. An accountant can provide you with much more than daily financial help. He or she can be an invaluable partner in planning for the growth and expansion of your business. When your future is at stake, you have every reason to bring an accountant on board to help you plan for success.

The U.S. tax system isn’t the easiest thing to navigate and it is unlikely to change any time soon, despite presidential promises.

But there are interesting ways you can save money by finding if you can use any of these three odd tax deductions. They aren’t illegal or even shady loopholes, but it could surprise you to find that they may apply to you and save you some money on your taxes.

Your Health Can Be Tax Deductible

There are actually several ways your health can be tax deductible. Some ways you may not have considered are:

• Installing a pool for medical purposes – Before going wild and using your scoliosis as a reason to get a free pool courtesy of the IRS, pump the breaks. While a man was able to deduct the installation of his in-ground pool, it was strictly for medical purposes. So no pool parties along with your medical needs.

• Quit smoking – You may qualify for a tax write off for using a smoking cessation program, quitting aids, etc. Feel free to check with your accountant if your method qualifies.

• Get in shape – If your doctor has recommended you get in shape and indicated your life may be in danger if you do not, you could get the course your doctor recommends you follow written off at tax time.

Write Off Rent/Mortgage When Applicable

If you run a business, you know that business taxes are a difficult matter. But if you run one from your home, you may be able to deduct some of your rent or mortgage from your taxes as a business expense.

However, there are fairly stringent rules set down by the IRS governing deducting business expenses. Some basic requirements to deduct rent as a business expense are:

• Area only used for business – This part of your house has to be set specifically set aside for your business. So like the pool, it cannot serve any other purpose.

• Conduct business regularly there – The part of your home (whether attached to the house or a structure on the property) has to be regularly used as a place where you do business, not an additional rented office or coffee shop.

• Importance of activity – You may need to prove that you cannot perform your work elsewhere and that it is a key part of your business

On the plus side, if you can prove your home business deduction, things like utilities, repairs, insurance and depreciation can also be written off.

Deduction For Childcare Cost

Want to volunteer for a charity but can’t afford childcare as you work for the charity? One woman successfully filed the costs of her babysitter’s cost as a donation to the charity she was helping.

As she wasn’t compensated in any way and had records to prove the time she had spent correlated with the costs, she managed to get the costs written off!

To make sure you get all your bases covered, be sure to contact us at AA Tax and Accounting Services and be secure in the knowledge that the experts are on the job.