Tax Tips: Home Office Deduction

 

Working from home? Your at-home office can save you money this tax season! Keep reading to see what qualifies–and what doesn’t–for home office deductions. Here’s a few tax tips. 

 

Are Tax Deductions Good?

 

Self-employed taxpayers, independent contractors, and those working in the gig economy can claim tax deductions. By writing off certain expenses, you may owe less in taxes. Your claimed expenses must be for business use. 

 

How to Keep Track of Tax Write-Offs 

 

First, know what qualifies for tax deductions. Each year, it is vital to keep track of all business transactions to claim them during tax time. 

 

It is easiest to keep an electronic folder with all receipts. A spreadsheet may also help you stay organized with spending amounts. Consider hiring a professional accountant to plan and evaluate your business transactions. This structure will minimize the legitimate amount of tax you pay.

 

To figure out your home office deduction, the IRS issued a simplified version. Check out the home office deduction calculation to add to your bookkeeping.

 

tax tips

 

Do Employees Qualify for Home Office Deduction?

 

Because of COVID-19, many employees switched to working from home. Some employers provided their employees with WFH equipment. Still, many employees had to buy new items for their home office themselves. They also had to make extra space in their home for work. 

 

Unfortunately, because of the Tax Cuts and Jobs Act, employees cannot use the home office deduction from 2018 through 2025. This includes employees who receive paychecks or W-2’s exclusively from an employer even if they are working from home. This deduction only includes self-employed taxpayers, independent contractors, and those working in the gig economy.

 

According to the IRS, 

 

“If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the percentage of your home devoted to your business activities, utilities, repairs, and depreciation.”

 

Do Home Office Deductions Trigger Audits?

 

It is not likely for the IRS to audit your home office. You should not have to worry if you work from home and use the space regularly and exclusively for business.

 

If you are still unsure, learn more about home office deductions from the IRS Business Use of Your Home guide. You may also contact PL Consulting, a team of professional accountants and bookkeepers. 

 

Outsource Your Tax Preparation to PL Consulting

 

PL Consulting is your go-to resource for tax preparation services. We serve the Baltimore, Maryland area and beyond. We are experienced in tax preparation, including filing individual, small business, partnership, and estate returns. We ensure you consider all your legal deductions to realize your full tax benefit. 

 

Our comprehensive interview techniques and computerized return preparation process assure that your return is complete, correct, and presented to you promptly.

 

Questions? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

 

All Independent Workers Need to Know About 1099-Misc Forms

 

Tax season is typically a stressful time for many people. It’s important not to make any tax mistakes or miss out on extra cash through deductions. 

 

Most people complete their contracted jobs from the comfort of their own home. Because of this, many independent workers started their businesses or began working as freelancers during the pandemic. If you are new to this type of work, it may be more confusing to do your taxes this year. 

 

Get prepared for tax season. Here is what you need to know about 1099-Misc forms as an independent worker. 

 

Who Gets a 1099-Misc Form?

If you are an independent worker and get contracted to do a specific job, you will receive a 1099-Misc form during tax return season. Unlike a W-2 employee, independent contractors have to determine their own payroll taxes. These are paid every quarter. 

 

There are several other differences between being an employee of a company and an independent contractor. Employees receive benefits from their employers. Independent contractors pay for their own insurance policies and retirement plans. 

 

1099-Misc Form Requirements

You must answer “yes” to these questions to receive and file a 1099-Misc form during tax season.

 

  • The payment must be more than $600. 
  • 1099-Misc forms are used to report money paid for services. It is not used for physical products.
  • The services performed must be for business purposes. If the payments were for personal services, you do not need to file a 1099-Misc form. 

 

Independent Worker Deductions

If you are an independent contractor, deduct work-related expenses from your taxes. When filing your 1099-Misc forms, deduct these items:

 

  • Internet
  • Travel/gas
  • Home office 
  • Car/office maintenance
  • Phone bill
  • Computer/laptop
  • Conferences, classes, and training
  • Office supplies

 

There are so many more deductions that you may qualify for as an independent worker. Talk to a professional tax preparer or accountant to maximize the amount that you will receive back from the government.

 

1099

 

More Notes About 1099-Misc Forms

If you are not sure if you need to file a 1099-Misc form or not, you can still file it. There is not a penalty if you do. If you do not file one that is required to, you may be subject to penalties and fees.

 

Before any payments are made with a new vendor, always get a W-9 form from them. It is vital to do this if there may be a requirement for a 1099-Misc. This saves you during tax-time from vendors that are too busy or unorganized to get you the information.

 

Maintain Your Bookkeeping Records

Are you considered a freelancer, contractor, or independent worker? You must keep track of your bookkeeping records. Make sure you are getting payments from the vendors you are working with. Record where your money is going so you can save money for taxes, retirement, and insurance.

 

PL Consulting is your go-to resource for bookkeeping and accounting services. We will help you maintain good records.

 

Questions about 1099-Misc forms, taxes, or bookkeeping? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

Year-End Payroll Processing Tips

 

January is almost here, which means it is time to focus on your business’s year-end payroll processing. Processing payroll is complex and detail-oriented. It requires tax calculations and compensation totals for each one of your employees. 

 

This can be a dreadful time for many business owners, so we are sharing some of our expert tips to make year-end payroll processing run smoothly for you.

 

Update Employee Information

The IRS may penalize you for missing or incorrect employee information on their W2 forms. To avoid these penalties, audit employee information like social security numbers, addresses, and names. If you outsource your payroll or use a payroll service that employees can view online, encourage them to review and edit their information throughout the year.

 

Verify Employee Wages, Benefits, and Deductions

Double-check that each employee has the correct pay-rate on file. Review their benefits and deductions to make sure that everything is listed correctly. Many businesses give bonuses at the end of the year. If these bonuses withhold retirement deductions, do not exceed the annual limit.

 

processing

Process All Checks

Sometimes you make payments outside of your regular payroll processing system. Be sure to keep track of those checks. Pay the tax liabilities for these checks on time. Report all voided checks as well. 

 

Do not mark uncashed checks as voided checks. Report those checks to the unclaimed property office in your state. For Maryland, you can visit their unclaimed property website for more information.

 

Payroll Processing Software

A streamlined payroll process sets a good foundation for your business. Payroll software organizes all important documents and manages employee pay periods. Select which program best suits your business model by weighing out the pros and cons. This is one of the most important payroll management decisions that you will make. 

 

The software will help you out immensely at the end of the year because of its structure and paperless system. If you don’t already use this software, consider acquiring it next year for a trouble-free process.

 

Stay Up-to-Date

Even though you may have done your business’s year-end payroll last year, rules and regulations always change. Stay up-to-date with how your payroll system works. Continue learning about payroll best-practices and make note of important deadlines that you must meet.

 

Payroll Processing Help

If your business is growing and you find it hard to keep up with payroll processing on your own, consider sending it to an outside contractor. This gives you time to focus on what is more important in your business.

 

PL Consulting is here as your business’s go-to resource for bookkeeping and payroll processing. We focus on small and mid-size companies who desire substantial growth. Our payroll services include:

 

  • Payment of State and Federal taxes
  • Track vacation, leave, and sick time
  • Issue paychecks on paper or via direct deposit
  • The ability for employees to view up-to-date pay info online
  • Generate W-2, W-3, 1099 & 1096 forms

 

We customize our services to each of our clients and their business plans. Call us at 410.764.3731 or contact us on our website.

 

 

Should I Apply For the PPP Loan Forgiveness Right Now in 2020 or Defer?

The Paycheck Protection Program (PPP) was created as a result of the COVID-19 pandemic. It is a part of the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act). Many business owners are wondering if they should apply for the PPP loan forgiveness or defer in 2020.

 

PL Consulting has helped many employers apply for the PPP loan and assisted others when deciding not to. Here is our expert advice on the pros and cons of applying before the end of 2020.

 

PPP

 

PPP Background Information

The PPP has helped businesses both large and small ever since it was enacted on June 5, 2020. If you apply for it, all the money that you have borrowed will be forgiven. Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay. The forgivable cash compensation per employee is limited to $100,000 annually.

 

The uncertainty that many employers are having right now is that they want to defer payroll taxes, but still hope and expect to get a PPP loan at some point. Some taxpayers want to avoid IRS penalties that may come with deferring payroll. Others are deferring payroll taxes intending to repay them if they ultimately get loan forgiveness under a PPP loan.

 

Employers who obtain PPP loans may defer the deposit of payroll taxes until the employer receives a decision from its lender that all or any portion of their PPP loan is forgiven.

Once loan forgiveness has occurred, the employer must resume timely payroll tax deposits. The amount that was deferred through the date that the loan was forgiven will continue to be deferred. Half of the deferred amount will be due on December 31, 2021, and the other half will be due on December 31, 2022.

 

Our PPP Recommendation

Instead of rushing to apply, consider how much adequate preparation will help you in the decision-making process. If you wait to apply for the PPP loan, there also may be financial benefits for borrowers. There will be additional information and guidance available to you. The loan forgiveness process has been frustrating for many employers, so the longer you wait, the more established the system is.

 

There is a PPP FAQ page that was recently updated in October. This page has great information that may help with your decision-making process.

 

Do You Have Additional PPP Questions?

We understand many factors go into your decision as a borrower and employer. We suggest that you discuss your decision with a CPA or legal counsel before submitting your application.

PL Consulting is committed to helping each one of our current and future clients with their business finances and bookkeeping. We are continuously researching up-to-date information on the Paycheck Protection Program. We are available for all the questions you have about the PPP loan forgiveness and deferring. If you would like to set up an appointment, call us at 410-764-3731.

Do Not Make These Mistakes on Your Taxes Next Year

 

Tax day is always April 15th – besides this previous year, of course! Even though that date seems far away, it is never too early to be ready for the time of the year that everyone dreads. 

 

Prepare yourself and your small business for next year’s tax season so it runs smoothly. Do not make these mistakes on your taxes next year.

 

dont make these mistakes

Income Reports

Inaccurate income reports are a big mistake that is often made in small businesses. Do not fail to report income or accidentally over-report your income. The IRS has access to the information that you are trying to withhold. Throughout the rest of 2020, make sure that all income reports are correct by double-checking them. 

 

Small Business Tax Deductions

Small businesses have the opportunity to claim tax deductions. By writing off certain expenses, your small business should owe less in taxes. 

 

The IRS says that business expenses must be ordinary (common in your industry or trade) and necessary (needed to run the business). Expenses must be for business, not for personal use. Below are a few tax deductions that small business owners should keep track of.

 

  • Car and truck expenses
  • Salaries, wages, and contract labor
  • Supplies
  • Depreciation
  • Business rent
  • Utilities
  • Insurance
  • Repairs

 

This article goes in-depth about expenses that can be considered a tax deduction

 

Personal vs. Business Finances

Small business owners commonly mix up their personal and business expenses. Although it may seem easier to keep everything in your personal account, it causes problems during tax time. This might cause you to overlook a small business deduction. Avoid mixing these expenses by opening up separate accounts.

 

File On Time

This might seem like an easy decision, but make sure to file your taxes on time. Steer clear of problems caused by late taxes by asking for a filing extension. 

 

PL Consulting Will Prepare You For Tax Season

We want to help small businesses in any way that we can. We hope that you can take these suggestions and implement them in your business as soon as possible. 

 

We are experienced in all facets of tax preparation. We ensure that you consider all of your legal deductions so you realize your full tax benefit. Our comprehensive interview techniques and computerized return preparation process assure that your return is complete, correct, and presented to you promptly.

 

We help structure transactions to minimize the legitimate amount of tax you pay. Through careful evaluation, we help plan your tax obligations for the entire year so there are not any surprises at tax time. We can explain the tax structure so you know where your money is going. 

 

Along with tax return preparation services, we offer a diverse range of bookkeeping and budgeting services. We are here as your business’s go-to resource when you have questions. Our services are customized to each of our clients and their business plans. 

 

If you have questions about tax preparation, call us at 410.764.3731 or book an appointment through https://calendly.com/michaelplc.

 

 

4 Tax Preparation Tips for Small Businesses

 

Tax season is right around the corner and quickly approaching. You don’t want to wait until the last minute to file your business taxes. In fact, it’s better to plan ahead and prepare so that you know what to expect financially and are able to get your taxes done faster. Here are four great tax preparation tips for small businesses!

Hire the Right Accountant

The first thing to remember is that there is nothing wrong with seeking professional help for your business taxes.

 

The best way to prepare for tax season is to invest in an accountant before tax season so that they can assist you throughout the entire year.

 

The right accountant will do more than just your taxes, instead of working with you to track financial transactions, profits, etc.

 

A good accountant helps you properly maintain your finances the entire time so that when it’s time for tax season, everything is already organized and in place.

Separate Business & Personal Accounts

When kicking off a small business, it may seem easier to just keep those finances in your personal account.

 

However, even if you reported all business expenses correctly, the IRS now has access to your personal account.

 

They can look into your personal account because of the combined money and this could end up impacting your tax information.

Keep Financial Records

It is so important to keep track of all your business expenses, both internal and external, as you go along. If you are unsure of the proper way to keep track of your finances, a professional finance service can help.

 

Bookkeeping has been made easier due to digital software, but a professional can ensure that all expenses are accounted for and also analyze financial information to help improve your small business and keep it growing.

Claim all Income Reported to the IRS

Trying to get over on the IRS is never a good idea because they most likely have access to the information that you are trying to withhold.

 

The IRS gets a copy of the same 1099-MISC forms that you receive, so they know exactly how much income your business has made within the year.

 

They compare the amount you made to the amount you reported and if they don’t match, it’s a red flag for the IRS.

Contact PL Consulting Today to Prepare for Tax Season!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax preparation, budgeting, and more.

 

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

 

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

The Benefits of Annual Book Cleaning

Your bookkeeping records keep track of all internal and external financial transactions made from your business. Though you should be cleaning and organizing your books as you go, it is especially important to do so at the end of every year. Having a clean set of books at the start of the year allows you to analyze the financial progress of your business over the course of the year. Here are some more great benefits of annual book cleaning for your business!

annual book cleaning

Tax Preparation

One of the main reasons you should clean up your books before the years end is to help prepare you for tax season.

 

Procrastination is way too common when it comes to taxes, but the earlier you get them done, the better off your business will be financially.

 

Cleaning up your books makes it easier to determine your estimated income for the past year as well as an estimate on taxable income. Cleaning up your books before the year’s end also allows time to make financial decisions that could possibly lower your taxable income for the season.

Business Analysis

If you don’t keep your books clean and organized, it’ll be difficult to keep your business organized as well. Cleaning your books at the end of the year allows you to go back and see how much money you made and lost in the past year.

 

You can get a better understanding of what brought in more money versus what caused your business to lose money. You can analyze which sales methods were more effective, what expenses went outside of your budget, and more.

Fresh Start

After analyzing your business books from the previous year, you can now plan properly for the upcoming year. Starting the year fresh, organized, and with a plan in place will allow your business to have a strong start in the new year.

 

If you don’t have your books cleaned up at the end of the year, the start of the new year will be quite unorganized and your business may end up making the same financial mistakes as the prior year.

 

A clean set of books gives you something to refer back to without being overwhelmed and helps you to create a concrete budget for the upcoming year.

 

Organization is key to the success of any business, especially when it comes to finances!

Contact PL Consulting Today to Clean-Up Your Books!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax management, budgeting, and more. If you have questions on annual book cleaning give us a call.

 

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

 

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

4 Important Tax Planning Concepts

Tax time can be a stressful time of year for everyone, but everything becomes easier when there is a plan in place. Tax planning is a great tool to use for things like business, wills, retirement, and properties.

In short, it is a way to help figure out just how much money you will be spending on taxes per year, while figuring out the best ways to minimize your tax liability.

Here are four concepts you should know to make tax planning easier.

tax planning

1.  Tax Bracket

The first thing you need to understand when tax planning is your tax bracket. This is important because it gives you an idea of your current standing, which is vital before you can plan for the future.

The U.S follows a progressive tax system, meaning that the higher your income, the more money you pay in taxes.

There are seven general tax brackets (10%, 12%, 22%, 24%, 32%, 35% and 37%), but often times, you won’t pay that percentage on your entire income.

This is because tax deductions are taken into consideration and the government also divides your taxable income into segments before applying taxes.

2. Tax Deductions vs. Tax Credits

Both tax credits and deductions can reduce your tax bill, but they do so in different ways. Tax Deductions are expenses that you have that can be subtracted from your taxable income. Tax Credits are more beneficial, giving you a dollar-for-dollar reduction.

3. Standard Deduction vs. Itemizing

  1. Standard Deduction: A lot of taxpayers choose to utilize standard deduction because it’s a lot faster. A standard deduction is a flat rate, no questions asked deduction. The government sets an amount of the standard deduction each year and the one that you qualify for depends on your filing status (single, married, head of household)
  2. Itemize: This is a longer process, but typically ends up in more deductions than if standard is used. Itemizing means you take your tax deductions one by one. PL Consulting can help you determine exactly which deductions you qualify for and if it’s worth itemizing over using standard deduction.

4. Tax Records

A crucial part of tax planning is keeping all records of tax returns and documents. It can take the IRS up to three years to decide whether or not to audit your return, so you want to hold onto your records for at least that long.

If you’ve under reported your income by more than 25%, you want to keep your records for at least six years. If you’ve ever skipped a tax return, keep your files indefinitely.

PL Consulting for all Your Financial Needs!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax management, budgeting, and more.

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

Tips to Combat Smaller Tax Returns

Employees eagerly await tax season. Why? Because that’s when they get their tax refund! This year, workers have been eagerly filing their taxes only to find that they received less money than last year.

Employees eagerly await tax season. Why? Because that’s when they get their tax refund! This year, workers have been eagerly filing their taxes only to find that they received less money than last year. But why? Well, if you remember, 2017 was the year that mandated a tax reform. Tax reforms are supposed to be beneficial. The goal of tax reform is to save money. What changed this year? Payroll comes into play. The amount of money withheld from your paycheck adjusted to match the projected tax amount. Fewer funds coming out of your paycheck decreases your tax refund. Keep reading for tips on how to offset smaller tax returns.

Continue reading “Tips to Combat Smaller Tax Returns”

Tax Planning Strategies for Small Business Owners

Tax Planning Strategies
Small business owners with effective tax planning strategies will be better able to navigate shifting tax laws.

As a small business owner, you have a lot to remember. And while you’re keeping all those balls in the air, sometimes the thing that gets pushed down on your to-do list is your tax planning strategy, so that at the end of the year you’re scrambling to make some last minute tax decisions. Instead of all that scrambling, this year you should plan your budget to include some of these tax strategies made possible by the Tax Cuts and Jobs Act. Continue reading “Tax Planning Strategies for Small Business Owners”