The term “marriage penalty” in taxes refers to the situation that two people with the same income would pay more tax if they married and filed a joint return (MFJ) than if they stay single and file separately as single taxpayers.
Each month, your accounting system yields actionable information for you to run your business better. Here are some key reports that all business owners should review every month.Read more
A quick review of the balance sheet can tell you the balances of your current assets and current liabilities. Current assets should always be larger than current liabilities; if it’s not, you may have liquidity issues.
You can also take a look at these accounts: cash, accounts receivable, and accounts payable. They should look reasonable to you based on your business history.
Accounts Receivable Aging
Your gaining report can alert you to who has not paid their invoice, so that you can take action to collect that money. Any balances over 30 days should trigger a collection process since the older the receivable gets, the less likely it is to collect.
Accounts Payable Aging
Hopefully, this report is clean and you are able to pay all of your bills on time. If you have an unusually large amount in this account, you’ll want to make sure you have the future cash to pay the bills.
The first number most entrepreneurs look at on the income statement is profit. It’s a good idea to review every account balance on this report to see if it is what you expected. Some questions to ask yourself include:
- Did I generate the amount of revenue that I expected? If not, should I ramp up marketing for the next few months?
- Do all of my expenses look reasonable? Are there any numbers that look too high?
- Are my payroll expenses in line with what I was expecting?
- Which accounts caused me to generate more or less profit?
- What I can I do next month to improve performance and increase profit?
There are many excellent sales reports to dive deeper into your revenue so you can see what sold and what didn’t. Sales by Item and Sales by Customer are two good options for you to get more detail about your revenue balances. By analyzing your revenue, you can see what promotions worked and how you might take action to increase sales.
These five reports are very basic, but they are also very key to your business. To profit from these reports, it’s up to you to take action in your business to improve your success.
Contact P.T Anderson and let us assist your business with its financial reports and accounting needs.
There are many tax scams out there with the purpose of stealing your identity, stealing your money, or filing fraudulent tax returns using your private information. Tax scammers work year-round, not just during tax season, and target virtually everyone. Stay alert to the ways criminals pose as the IRS to trick you out of your money or personal information. Read more
IRS-Impersonation Telephone Scam
An aggressive and sophisticated telephone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be employees of the IRS, but are not. These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets from information gathered from online resources. Also, these scammers usually alter the caller ID to make it look like the IRS is calling.
Also, if the phone is not answered, the scammers often leave an urgent callback request. Victims are often told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation, or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Alternatively, victims may be told they have a refund due to try to trick them into sharing private financial information.
Phony IRS Emails — “Phishing”
Scammers copy official IRS letterhead to use in email they send to victims. Emails direct the consumer to a web link that requests personal and financial information, such as Social Security number, bank account, or credit card numbers. The practice of tricking victims into revealing private personal and financial information over the internet is known as “phishing” for information.
The IRS does not notify taxpayers of refunds or payments due via email. Additionally, taxpayers do not have to complete a special form or provide detailed financial information to obtain a refund. Refunds are based on information contained on the federal income tax return filed by the taxpayer. The IRS never asks people for the PIN numbers, passwords, or similar access information for their credit card, bank, or other financial accounts. If you receive an email from someone claiming to be from the IRS and asking for money, take the following steps:
- Do not reply to the email message.
- Don’t give out your personal or financial information over email.
- Do not open any attachments or click on any of the links. They may have a malicious code that will infect your computer.
- Forward the email to the IRS at firstname.lastname@example.org.
- Delete the email.
Ways to Protect Yourself from Scams
- Personal information shouldn’t be provided through phone,mail, internet, unless the taxpayer initiated contact or is certain they know whom they’re dealing.
- Social Security cards or any documents that include your Social Security number (SSN) or individual taxpayer identification number (ITIN) should not be carried around.
- Do not give a business your SSN or ITIN just because they ask — provide it only if required.
- Financial information should be protected. Do not give out any financial information over the phone or via email.
- Credit reports should be checked yearly.
- You should review your Social Security Administration earnings statements annually.
- Protect personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for internet accounts.
- Report any instances of tax scams to the IRS.
Can you believe that half of 2019 is gone already? That means it’s a great time to take stock of how your business has done for the first half of 2019 so that you can meet your financial goals for the entire year. Read more
On Track for Sales
Are you on track to make your 2019 revenue number? The first step is to check your 2019 budget numbers for total revenue. (Don’t have a budget? – Check with us; we’d be delighted to discuss that service with you.)
Next, get your Income Statement for June 2019 Year-to-Date and check the revenue figure. Are you on track with your budget, or are you halfway there revenue-wise, accounting for seasonality? If so, pat yourself on the back! If not, what promotions will you put in place to boost your growth for the rest of 2019?
On Track for Profit
Looking at the same Income Statement, check your net income figure. Are you on track with what you planned? If so, great! If not, the reason is simple: it will be either lower sales than expected or higher expenses than expected.
If your expenses are too high, you’ll need to drill down into each of your expense accounts, including cost of goods sold, to see which ones are higher than expected. Were there some unanticipated costs? Does your pricing need adjusting? Do you need more volume to cover your costs? This is where we can help you with an analysis of where your opportunities are to increase profit.
On Track for Cash
One more place to look is your cash balance. It can be uncomfortable when you are running short of cash for your business. If your balance is lower than you’d like it to be, it could be because of some of the factors mentioned above. It could also be because you just purchased an asset like a truck. If you need help with improving your cash flow, that’s another thing we can help you with.
This mid-year review can help you head off any small problems before they grow into big ones throughout the rest of the year. And it can keep you on track so you can meet your 2019 business goals.
Undergoing the scrutiny of an IRS audit is liable to put any taxpayer on edge. While it may seem like the IRS randomly hands out audit notices like candy to unlucky victims, there are some best practices you can put in place in order to avoid inadvertently putting up any red flags. Read more
There are several myths you may have heard when it comes to triggering an audit. A common myth being that you are more likely to be audited when you efile versus paper file. Or if you file an extension you are less likely to get audited. It’s also a false notion that if you claim deductions, credits and expenses you are more likely to be audited. One of the most common worries is that IRS audits are everywhere and are always terrible and could destroy your life and finances.
IRS audit statistics show that audits are not as commonplace as they may seem. In March 2018, the IRS published its 2017 data book reporting that they received 149,919,416 individual tax returns for the 2017 tax year. Of those, only 933,785 were audited. That means that less than 1% of taxpayers who filed an individual return were audited – 0.6% to be exact. This is the lowest audit rate since 2003.
The IRS has ascribed this decrease in audits to its reduced budget and staff levels. With the limited number of audits, the IRS focuses on looking at certain inconsistencies. That is to say that the timing of when a taxpayer files, whether it be on extension or not, does not affect the likelihood of an audit so much as other hot topic items included on a return.
There are audit trends that manifest based on the feedback from tax professionals. One area that seems to be under more scrutiny is real estate professionals. There are two tests one must past in order to be deemed as a real estate professional. One must also materially participate in order to deduct any real estate losses against nonpassive income.
Schedule A Deductions
The IRS is also paying close attention to Schedule A medical expense deductions. Auditors will be looking for expenses that do not qualify as medically necessary such as cosmetic treatments or the installation of a swimming pool for someone whose doctor prescribed swimming as a form of exercise. It is predicted with the changes to Schedule A miscellaneous itemized deductions under the Tax Cuts and Jobs Act that this area could be another red flag to trigger an audit should the IRS suspect any incorrect deductions.
While an audit may seem overwhelming, make sure to communicate clearly with the IRS. Many times, an audit is to check if a taxpayer can substantiate their claims. Keep organized records and make sure to understand the numbers that are submitted to the IRS so you can explain your reasoning if needed.
Contact us for assistance with your tax and business accounting needs.