Tax Incentives for Companies from Local and State Government

Many local and state governments are trying to entice companies to invest their time, money and business resources in them. To accomplish this goal, local and state governments are offering tax incentives for business. By taking advantage of these incentives, companies can maximize their return on investment and help fund many capital improvement projects. Corporations need to keep in mind three simple steps when planning for capital improvement projects.

Gather Relevant Data

In many corporations, especially large companies, the board or CEOs will plan for capital improvements for the company. While these sounds like a good plan, there is a problem with this way of planning because corporations could evaluate projects based on tax incentives available. Planning should take place with the knowledge of what tax incentives government entities are providing.

Redefine Projects

Many times, the ways companies define capital improvement projects and the way the government entities define “projects” are two different things. Companies need to change their definition to fit the government’s definition so they qualify for the tax incentives. This will maximize the amount of incentives the company qualifies for and will supplement the money spent on capital improvements. Keep track of the requirements for the tax incentives. If the tax incentive requires a three-year window to complete the project, submit a timeline to track the progress. Follow the rules and regulation to the letter.

Let the Race Begin

It is important to realize that there are going to be other companies competing for the tax incentives. Competition is good, but keep your eyes on the prize. Contact the government entity early in the process and keep them updated. Have several different presentations, even if they do not all come into existence. The process can be compared to an auction, and the person with the “last-best” bid will with the prize of the tax incentive. During this negation time, keep a tight control on internal and external communications. Do not let a loose tongue be the downfall of any new project. Discretions is best.

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College Loans: Paying Them Off

Now that you are a college graduate, you have many things to think about; finding a job, maybe a new place to rent, and paying off student loan debts. With all the talk about student loan interest rates in Congress, it is important for student have a plan for paying off loans after college. Nearly 12 million students will take out loans to help pay for college, and with 37 million students currently with outstanding debt, the total student loan debt is reaching towards 1 trillion. Having a plan to help reduce student debt loan is vital for any college graduate.

Most college students do not fully understand the financial burden student loans will be on their future. Around 75% of them will make sacrifices, either personally or financially, to repay the loan. Some tips that will help make it easier to repay student loans debt are:

  • Understand You Options. It is important to know the different options of payment, including standard repayment, graduated repayments, extended repayment, and income-based repayment. Research which payment would work best for you and contact you lender for financial help. If you cannot pay there are options for you including deferment, forbearance, and loan cancellation. Many of the option will require an application and financial proof, so working with your lender is very important.
  • Keep Track of Paperwork. Keeping accurate records including promissory notes, correspondence from lenders, notes on phone calls and other loan related paper. If you lose any paperwork, you may have problems providing information to your lender if you need to seek a deferment, forbearance, or loan cancellation.
  • Grace Period. Most student loans have a 6 to 9 month grace period before official payments start. Use this time to find a job, make a budget and start tracking your monthly expenses. Make sure to budget in paying student loans, so you are not surprised when the payments begin.
  • Student Loan Interest Deductions. If you pay $600 or more to a single lender, our interest is deductable. At the end of the year you will receive Form 1098-E from your lender showing the exact amount of interest paid over the year.
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End of Tax Season, Start Planning for Next Year!

Now that the tax season has ended, most people think “Yeah! I am done until next year.” The reality is that now is the time to start on next year’s taxes. There are a few things that can be done to help plan and prepare for next year’s taxes before January 1 starts knocking at the door.

Organize Now

You want to make tax time next year as stress-free as possible. The best way to accomplish this is to stay organized. It is extremely annoying to hunt for all the documents and receipts when it is time to start filing taxes. Start now. Have a specific location where all tax documents and receipts are kept for the year. This is where only successful if documents and receipts are filed on a regular basis. Take time to make sure that everything is in the file immediately in a file labeled for this year’s taxes.

Adjust Withholdings

Monitor payment withholding from paychecks. The goal is to withhold just enough to cover what is owed to the government. If you received a large refund, consider reducing withholdings to reduce the amount of your refund. This will cause an immediate increase in gross pay, but you can take that “extra” money and increase your IRA or 401(k) savings. This will help you prepare for your future retirement and lowers you taxes at the same time.

If you are the opposite and had to pay in a large sum to the government, consider increasing the amount deducted from your paycheck. You can do this by resubmitting the W4 form to your employer. You can choose to take out at a higher single rate or designate a specific amount to withhold from your paycheck for taxes each paycheck. If you need help figuring this amount out there are several places that offer ways of calculating anticipated taxes based on the last tax return filed.

Anyway, it is important to be thinking about what to prepare for next tax season. Stop the annual tax prep hunt and stay organized. Do not procrastinate, start now!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tax Season is Finished! What to Know for Next Year

Phew! Tax Season is over, but now is not the time to sit back and relax. There is next tax season to prepare for, and there are a few simple tasks that can help make next year easier and less stressful.

Stay Organized

It may be simple, but staying organized is critical to a stress-free tax season next year. Keep all tax documents and receipts in one place so they are easy to find. Label a folder with “Taxes 2013” and use it to keep all receipts and other documents in throughout the year. No one wants to play “Look and Find” in January and February. Save yourself time by taking the time to file it now. Label what the receipt was for, especially if it is for business purposes. If the receipt is for a charitable donation, list what was donated. Take the time to file it right away so it will not be lost.

Adjust Withholdings

Believe it or not, you should not be getting a large refund from the IRS each year. The goal is to break even or only have a few hundred in a refund. If you are receiving a large refund consider adjusting your W4, which can be re-filed with your employer, to have less taken out. This will mean an immediate increase in your gross income. That “extra” money could be added to you IRA or 401(k) savings. This will help you reduce you taxes and save for your future retirement at the same time.

If you had to pay in more money to the government, then consider increasing the amount taken out of your paycheck. You can figure this amount by using a tax calculator on the IRS website. This will help you figure out how much extra will need to be withheld from your paycheck so you will not have to pay in any extra, or at least not as much as before.

Remember it is important to start now. Procrastinating will not help make tax time any easier, and being prepared will make it less stressful for you. Stay organized and make your adjustments. This will put you on the right path to a better tax season next year.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Capitol Loss Deduction: Should it Reflect Inflation?

Over the years, the Internal Revenue Code has adjusted for inflation of many different tax incentives to help individuals cope with the negative effects of inflation. Congress selects these provisions and the annual change is driven by the consumer price index. One provision that has not changed is the capital loss deduction.

The capital loss deduction was established in 1976 and allows for a maximum of $3,000 in capital loss deduction each year, and has not changed since it was introduced. There are numerous reasons to explain why there is a cap on the amount of deductions, but it comes down to taxpayers being able to write off all losses, retaining the gain assets and defer taxation by selling them later. It would dramatically decrease the amount in federal tax revenue.

By using the consumer price index inflation calculator, in 2002, the maximum deduction would be around $9,500. Today the deduction maximum would be around $12,000, and if it was tied to inflation the maximum would continue to rise. This would eventually open up the opportunity for people to deduct all losses, or even sell at a loss and retain gained assets, which would defer taxation. This would greatly reduce the amount of federal tax revenue.

So what does this mean for taxpayers? Well, it means at this time, that the highest amount able to be deducted is $3,000. Anything over $3,000 that does not offset capital gains or deducted can be carried over to the next year. Many people argue that this system is has eroded the value of the deduction. However, the real question is can there be a regulation that would increase the amount deducted without undermining the amount of federal tax revenue?

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Things to Consider With a Tax Extension

When it comes to filing yearly income tax returns, you find all types. There are those who are itching to file right after the New Year’s champagne toast, and those who trudge toward April 15 as if it were Armegeddon. And of course there are plenty of people who fall somewhere in between.

Because income can come from many different sources, and at all sorts of different levels, filing taxes is much more of a strain for some than others. Some may wind up with a quick and easy return, while others struggle to find the time, and sometimes the money to meet the deadline.

For those who see April 15 approaching a little too quickly, there is the option of filing the IRS form 4868 to get an extension. By filing an extension, taxpayers have an additional six months to file their taxes. But although there may be extra time, there may also be an extra expense. An extension allows a tax payer extra time to file, but not extra time to pay. If you are one of those who has to pay into the IRS or your state’s revenue department, holding off could mean that you’ll have to pay more. With an extension there is more time to file, but not more time to pay.

In order to limit fees, penalties, and interest taxpayers are best off paying their taxes at the time that they file for the extension. This can be tricky for some who don’t necessarily know what they owe. In order to make the process a bit easier, your tax accountant can estimate what you might owe. While not guaranteed to be accurate, these estimates will give you a place to start when it comes to knowing your tax bill.

If paying the whole amount is not feasible, pay what you can. Any penalties and interest will be calculated based on what you owe after April 15. If you’re due a refund, you won’t be charged penalties or interest. The following situations can make your tax obligation creep upwards: failing to file on time (your 4868 should take care of this), failing to pay, and Interest.

Failing to file can bring you a penalty of as much as 25% of your tax bill. For each month your return is late, 5% is added to your tax bill. This maxes out at 25%. The failure to pay penalty is less per month — only .5%, however this does not max out so delaying that payment too long could really add up. Interest charges can vary somewhat, but is currently around 4% of the amount that was underpaid.

If you’re feeling rushed or overwhelmed, knowing that there is an option to file an extension can bring some peace of mind, but still even with that extension it is always in the taxpayers best interest to get their taxes in order as soon as they can.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal..

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It’s Tax Season: Here’s Some Write-Offs You Should Know About

Yes, it’s the New Year, which means it’s time to gather your W-2’s and start preparing your tax return. Yes, you’ve got until April to file, but why not start getting your information together now? And a big part of these documents you should be gathering are write-offs. You should already be well aware that you can write-off charitable contributions, money you gave to church and mortgage interest, but here’s a look at some other things that you can write-off to enhance your tax return or minimize what you owe to the IRS.

Student Loan Interest: If you’re still paying off student loans, you can claim the interest paid on them as a write-off.

Business Expenses: Have you purchased items for work that haven’t been covered by your company? Perhaps calendars, electronics, a cell phone, etc.? Write the expenses off on your taxes. As long as your company didn’t buy them for you, that’s an eligible write-off.

Home Business Grant: Do you work out of your home? Then you’re likely eligible for a home business grant, where you can write-off things like energy and utility bills, Internet costs, phone bills, ink cartridges and the costs of any new office equipment on your taxes.

Job Hunting Costs: As our country still lingers from its economic recession, the reality is that many Americans are still looking for work. And with job hunting comes travel expenses, mailing costs, food and room (in the case of overnight trips) and cab fares. Don’t let the opportunity to write these expenses off pass you by should you qualify.

Relocation Costs: Did you get a job within 50 miles of your original address that requires you to move? If you’re not given a relocation allowance by your new employer, these expenses can be written off on your tax return. This includes moving expenses, parking expenses, tolls, etc.

Child Care: You should already be aware of the fact that you can claim your children as a dependent for a tax credit, but did you know that you can also claim up to 35 percent of what you pay for child care services – that is, if you have your children in child care while you’re working? You can – and it’s an opportunity you shouldn’t be passing up. Child care is expensive – don’t be shy about recouping some of the costs.

While tax season for most is anything but fun, utilizing write-offs and deductions to the fullest extent can put money back into your pocket. Now we’re talking fun!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Steps to Prepare for the Tax Season

The start of a new year is a busy time for any individual. Although the year has just begun, it is time to start preparing for the tax season. By starting the preparations early, it is easier to avoid mistakes and ensure the paperwork is ready before deadlines start coming up.

Gather and Organize Paperwork

Although the W2 forms are not normally sent out or even prepared until the middle to the end of January, the forms are only part of the paperwork involved in taxes. Paperwork will also include the tax deductions, charity donation receipts and other receipts related to taxes.

Gathering as much paperwork and documentation as possible beforehand will make it easier to put the information into the tax documents after the W2 forms finally arrive. Early organization and preparation simplifies the amount of organization that is required later, which makes it easier to complete and submit the IRS forms before the due date.

Write Down Questions

Tax paperwork and preparation can lead to many complicated questions. Taking extra time to write down any questions that arise will prevent confusion when the paperwork is being prepared. The taxes that are related to new events, such as filing jointly after marriage when compared to filing separately, can lead to many questions.

When new situations arise or new tax laws are applied to the paperwork, it is important to write down the questions and find out the answers before working on the paperwork. The preparatory step makes it easier to avoid accidental mistakes.

Review Any Changes to Laws

Laws related to taxes are constantly changing as world events and the situation of the country takes different paths. Since the laws can change when new regulations are passed, every individual should learn about any changes to the filing system or any regulations that might apply to a personal situation.

After learning about any changes, determine if other questions arise. The legal aspects of taxes are often confusing and complicated, particularly when it differs from previous years. If any new questions arise related to legalities, then it is important to add the question to the list.

Look for Mistakes

Financial statements are not always accurate. Before using any financial statements on tax paperwork, it is important to look for and correct any mistakes. Although mistakes are uncommon, catching problems and changing the data to accurate figures will reduce the risk of accidentally filing the wrong information.

With the tax season around the corner, it is important to start taking steps to prepare the paperwork and documentation. Early organization is a key part of simplifying the process and avoiding complications when the tax paperwork is filed.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Subtracting Holiday Bonuses From Company Accounts

As the holiday season comes around, businesses are providing year-end bonuses or holiday benefits to employees as an additional reward for hard work. The problem that many small businesses and companies face is accounting for the additional expense. Recognizing the appropriate accounting method is the key to providing bonuses and benefits during the holiday season.

Cash Bonus Accounting

The process of accounting for a cash bonus is relatively simple. Business owners or the appropriate department within a company must determine the bonus amount for each employee and record the bonus in a similar method as regular income.

Payroll departments or an outsourced service are informed of the bonus and make appropriate calculations for withheld amounts. The paycheck is then given to the employee through direct deposit or a check, depending on the normal method of payment.

The company accounting books will reflect the bonuses provided to employees as a company expense along with regular paychecks. Since the process of providing a cash bonus is similar to a regular paycheck, accounting for the special pay is not a complicated process.

Non-Cash Bonus Accounting

Although a cash reward or bonus is commonly provided to employees, a non-cash bonus is another option for business owners. Non-cash bonuses include the expenses of a company party, holiday hams given to employees or similar gifts that come from the company during the holiday season. Accounting for a non-cash bonus is a little more challenging because it is not subject to the same tax laws.

The appropriate way to add non-cash bonuses during the holiday season is through “de minimis” on IRS tax forms. It is included in the costs and expenses of a company, but employees are not taxed for the gift.

Any non-cash bonuses provided to employees are accounted as a company expense or liability. As a result, the business will pay less in taxes due to the increased expense from the holiday bonus.

Although the non-cash bonus is added as an expense to the company, employers need to use caution when providing de minimis bonuses. The IRS has limitations on the number and amount of rewards employers can offer. A large number of non-cash bonuses might result in paying more in taxes.

The holiday season is a time to offer bonuses and special perks to employees. The bonus is a motivation to continue working hard and is not difficult to add to company accounts. Bonuses for the holiday season are added to the company books as an expense, but the taxation requirements will vary based on the type of holiday benefit offered to employees.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Charitable Deductions: Individuals Going to the Limit

Charitable DedutionsThe leaves are changing and the weather is getting cooler, and people are starting to think about the upcoming holiday season. We all know it will be here before we know it, and it is the time to give to those less fortunate then us. Charitable giving by individual donors accounts for 75% of all US giving according to recent reports by Blackbaud Inc. and Atlas of Giving, national organization that provide analysis trends over charitable giving in the United States.

Charitable giving as defined by the IRS as a contribution or gift to, or for the use of the following:

  • A state, but only if the contribution is made exclusively for public purposes, such as a gift to reduce the public debt.
  • A corporation, trust community chest, fund, or foundation that is created or organized in the United States exclusively for religious, charitable, scientific, literary, educational purpose, to foster national or international amateur sports competition, for the prevention of cruelty to children or animals, for war veterans, an auxiliary unit or society of, or as a trust or foundation for an entity.
  • A cemetery company owned and operated for the benefit of its members or a corporation chartered solely for burial purposes.
  • A domestic fraternal society, order or association operating under the lodge system, but only if the contributions is exclusively used for purposes stated above.

Once you know to whom you want to give your donation, it is important to know how much you can deduct on your taxes. When giving charitable donation, if an individual gives 20% or less of their adjusted gross income then there is no limit considerations. Depending on the type of donation and organization, there may be a limit of 20%, 30% or 50%.

There are very stringent documentation rules that govern donations. You must have a record of the amount of the donation and how the donation was made, example: cash, noncash, or out-of-pocket expense. Some documentation that works is bank statements, credit card statements, written communication from the organization, payroll deduction record. These must have the amount donated and the name of the organization.

By knowing the legal restrictions and regulations governing charitable giving, the process is easier for everyone. Having a good, trusted financial advisor to help is always the best course of action when making large donations.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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