The Tax Breaks Every 20 Something Needs to Remember 

 With almost being halfway through summer, college students will soon be heading back to school and many recent graduates will begin the adventure of job hunting or entering the career force for the first time. With this new responsibility and excitement, another aspect of "adulting” gets thrown into the picture, taxes. We’ve found some top tax breaks that every millennial needs to have stashed in their corner to save the most cash. 

Moving Expenses   

When most millennials get a shot at their first real job, the likelihood of moving away from home is high. Moving costs are an easy deduction to claim on your taxes and the best part is that you don’t have to be working full time in the process of the move.  If you are moving more than 50 miles from your original home you can claim this deduction. This deduction can help with moving fees,  shipping, storage and possibly the cost of hiring shippers to move you out.

Student Loan Break
 
One of the only perks of coming out of school with student loan debt is the tax breaks you can claim when filing. If you are paying off your debt straight out of school, you can receive a tax break of up to $2,500 for interest paid that year. Claiming this exemption is not only helpful, it also allows you to stay on top of your loans as well.  There is an income limit of $65,000 for this exemption if living single as well as a exemption of $131,000 if married and filing jointly.  

Health Savings Account
 
One of the last easy tax exemptions to claim is an HSA account with an employer for a young 20 something. By adding pre-tax dollars to an account, you are reducing your taxable income. The great asset of having an HSA is that it is a no penalty account.  Funds can be used as needed and can roll over year to year (which is a excellent nest egg opportunity for millennials to take part in).  

These are a few tips that are simple, yet efficient for 20 somethings to take advantage of for the next tax season. Remember, Smith Accounting and Tax is here for all of your accounting and financial planning needs. 
 
 
 Summer Tax Breaks You Need to Know About  
The summer season has quickly come upon us and that means it’s time for annual summer spending. Whether it is taking your summer vacation, sending your child to their favorite summer camp, or picking up those additional seasonal hobbies (such as camping, fishing, and spending excess time in the sun) Smith Accounting and Tax wants to make sure you know of the cutting ways to save tax money this summer.  

Check off Summer Camp Expenses 
If you send your child to summer camp every year, it’s time to take a look if that camp can create a nice tax break for you and your family. The child tax care credit offers between 20 and 35 percent of qualifying camps. This break can lead you to a savings of up to $3,000 for a single child or $6,000 for two or more children. Overnight camps do not qualify for a break if both spouses have earned income. Day camps are the best bet to earn a tax reduction as the credit will come from having to pick up your child every day from camp. 

Pay for Your Vacation with Your Home 
If you ever wanted to finally take the leap and plan that special 15 day European or Caribbean vacation, the IRS makes a special rule that if you rent out residential property for less than 15 days you don’t have to file the money earned as a rental income. This is a great way to save and make some extra cash in the summer that can help pay for an extended trip. 

Reap the Benefits of Your Child’s Summer Job 
You can qualify for an additional $350 tax deduction if your child has a summer job. This deduction can be raised to a maxim amount of $6,100 a year if the dependent reaches this cap during the year. If you reach that cap your child won’t be required to fill out an income tax return for their summer job. 

Summer brings the excitement of new adventures, warmer weather, and hopefully new ways for you to save a few dollars here and there when it comes to tax season. A smart spender learns how to appropriately save year round (while enjoying life too!)  


  3 Money Savings Tips for Heading into Summer  
 
Another season has come and gone and we are just at the beginning of another beautiful summer. Summer brings about a lot of nostalgia; outdoor cookouts, concerts, fireworks, and the annual family vacation. Maybe this year you are inspire to do something a bit different and are wanting to save a little bit more money. Here at Smith Accounting and Tax we have three simple tips to encourage extra summer savings. 

Save on Utilities 
One of the easiest and simplest changes you can make to your home is adjusting the thermostat. When the summer heat rolls around many of us want to stay cool indoors. However, not adjusting your AC thermostat, even by a few degrees can cost you major cash. According to Energy Star, half the energy used in your home is for heating and cooling. Moving your thermostat up when you leave the house for work can save you three percent for every degree you adjust on your energy bill.  
 
Don’t Water Your Grass
Another simple trick for saving money this summer is avoiding to water your lawn. It’s estimated the 50-70% of American’s water usage is used on landscaping. Sure you may miss the soothing experience of watering the flowers and grass a little extra, but the savings could also help take you to your next tropical vacation. Imagine what your water bill would look like if you were able to slice it in half this summer. 

Farmers Market Finds 
One of the best ways to help cut your grocery bill costs each month is to shop at a farmer’s market. You can easily save on the fresh fruits and vegetables that are available during the warmer months with the organic value without the price. Making a weekly list of items you need for meals can prevent you from overspending as well. If you want to help save even more this summer, buy little herbs and small vegetable plants you can grow in a small garden or indoors.

We know summer is the most anticipated season of the year and with a few mindful, simple changes, you can be setting aside more savings for those bucket list goals. 
 
 
401K Investments for 2017  
Congratulations! You have finished up all your tax requirements for 2016 and are ready for tax season to officially come to a close. With your federal and state refund (hopefully) on the way, it’s time to think about how to turn around that check into a wise investment.
 
 If you haven’t opened a 401k yet, we highly recommend you do so. A 401k is a retirement savings plan that is sponsored by an employer. It allows individuals to save money and invest a portion of their paycheck before taxes are taken out. Taxes are paid after the specific lump sum has been placed into the account.
 
The IRS for 2017 has placed a cap on how much an individual can place into a 401K each year. The maximum an individual can place into a 401K this year is $18,000. So far this number has stayed consistent from 2016 and 2015. If you are 50 and older, you can make an additional contribution up to $6,000. This number has also remained unchanged since 2015.  401K limit numbers increase or decrease based off of the amount of inflation in the current market. When the inflation rate is higher, limits are higher and vice versa. So far historically limits have either stayed flat or risen incrementally. 
 
If you haven’t started contributing to a 401K, there is no better time to start investing then the present.  You may not initially receive a tax credit, but you will be able to continue to grow your retirement plan where your investments will accumulate on a tax-deferred basis.   Taking a leap and investing in a 401K sounds intimidating, but it will be a move your future self will thank you for. Ease yourself into the contribution process, increasing your amounts invested a little at a time. Eventually you will be able to put away more than you thought possible.
 
If you need assistance in getting started, Smith Accounting and Tax is here to support all of your financial needs and goals. We take pride in being experts in our field to help you feel confident and secure in your investments. 
 
 
 2017 Tax Deadline Quickly Approaches   
 
It may seem like you have just nailed down your New Year’s Resolutions but winter has come and gone and spring is right around the corner. As well as the season change so is the new tax deadline for 2017. Taxes this year are due on Tuesday, April 18th 2017.   
 
The new change has happened due to the normal "Tax Day” falling on a Saturday with the following Monday being Emancipation Day which is celebrated in Washington D.C.  A similar occurrence happened last year making taxes due two years in a row on April 18th.
 
Those who have the opportunity to file in Maine and Massachusetts get an extra day due to Patriots Day. Those states are able to file their taxes April 19th.  With having the tax deadline moved up a few days, you can use the new date to your economic advantage. There is a little extra spare time to make any last minute additions to an individual retirement account or an IRA account. Individuals who are 50 and older can contribute up to $6,500 during a tax year for an IRA account. Younger savers have the ability to contribute $5,500.   If the new tax date has caught you off guard, or you are still awaiting crucial paperwork in the mail, you can file with an extension from the IRS with a Form 4868 which can give you the ability to file until October 17, 2017. Please note that the extension is only for paperwork, not tax payments.  If you are concerned about the money you may owe for taxes, it’s smart to begin calculating the estimated payment you may need to make before the April deadline.  If taxes are not paid on time, you could accrue interest and multiple penalties on the unpaid tax balances.  
 
Luckily Smith Accounting and Tax is here to make sure that you are taken care of every step of the way when it comes to your finances. If you still need to make an appointment for filing your taxes, we encourage you to contact us before the 2017 deadline. 
 
  
2017 Tax Due Date on the Horizon 
 
With taxes due on April 18th this year (the usual tax day is April 15th but due to the date falling on a Saturday it was pushed up, lucky you!)  it’s time to start getting all of your return slips, W-2’s and other business expenses ready for filing. If you are unsure how to file this year, or want to see if it is possible for you to gain furtherer tax breaks, make sure to schedule an appointment with the professionals at Smith Accounting and Tax. Our experienced accountants are ready to help you with all of your tax needs to close up 2016 successfully. We like to think of ourselves as a one stop shop for small businesses and entrepreneurs. We handle the boring and tedious tax paperwork while you kick off the 2017 fiscal year strong.  
 
By making an appointment with us, you can begin to tackle all of the "higher” priority items on your business’s to do list. If you work on your taxes with us, you also get the added benefit of having new and countless financial information at your finger tips. Who doesn’t want to continue to make smarter financial decisions?  
 
The U.S. Tax Center has a timeline on their website as a guide for when important documentation needs to be turned in for workers and businesses. On top of an appointment with one of trusted professionals, your tax filing should be smooth sailing.  Remember when filing that there are different kinds of forms for the variety of different payments that could have been made during the previous business year.  Use separate forms when documenting your payments to help assure accuracy in your filings.   
 
Last but not least don’t forget to  plan a visit with Smith Accounting and Tax to begin your tax filing process. With over 20 years of professional accounting experience, our representatives will make sure that you are receiving the best breaks and claims for your business. You can call 804.677.9516 or make an appointment online here. We look forward to serving you. 
 
How the PATH Act Could Change Your Filings     
 
The New Year is the best way to start things fresh; fresh goals, resolutions, and new beginnings. It also means your tax year starts over as well. As you begin to file for the previous year, the new PATH Act (Protecting Americans from Tax Hikes) may affect you (in a good way). Here are the top three ways this new piece of legislation could impact your filings.   
 
 College Savings Plans Coverage  
 
When filing your taxes before, qualified tuition plans only covered tuition, fees, books, room and board. Now with the PATH Act, the legislation expands the coverage to technology expenses and storage devices. Anyone can now contribute to a savings plan. 529s (qualified tuition plans) can grow tax free and have taxless distributions making college for your family more affordable then ever before.   
 
 Simpler Retirement Plans  
 
The PATH Act is helping retirement plans become even easier to obtain. SIMPLE IRA accounts have lower administrative costs and no annual FDIC reporting requirement. For small business’s that have fewer than 100 employees, this is an excellent option to give employees a matching retirement savings. The PATH Act is allowing rollover funds from previous employers if a SIMPLE plan has existed for the previous two years. This update helps keep your over all adjusted income in check. 
 
 Confident Tax Planning   
 
The best feature of the PATH Act is that you can more effectively plan your tax breaks.  Unlike previous years, where claiming a tax break may or may not be suitable, the PATH Act is helping individuals to plan ahead on breaks they can claim year after year. To help plan for the new year, review your previous records on which breaks you were able to effectively claim. After mapping out your past claims, you can then work with your tax professional to forecast similar breaks for the future. Filing is about to become a whole lot easier.  If you are still uncertain on how the PATH Act is going to effect you, contact Smith Accounting and Tax LLC. We are always here for your tax deduction and accounting questions and needs.  
 
 Year End Tax Planning: Making the Best Decisions for Your New Year 
 
As the year 2016 is winding down, we want to make sure you are able to save every penny you can when it comes to filing your taxes in early 2017.  In this blog post we are going to address helpful tips for homeowners, self-employed, and investors.  
 
Home owners can save even more cash when it comes to claiming your home on your tax forms. If you have made any substantial energy saving updates to your home, you are eligible to claim them. These updates can be claimed as long as they are installed before the end of the year. This tax credit can save you up to 30% for the costs of qualifying products and improvements.  
 
It is also possible to claim an in home office as a tax deduction if you are self employed (or earn an extra couple thousand dollars on the side doing business as a freelancer or contractor). This deduction is $5 per square foot claim with a cut off of 300 square feet. This claim equates to a $1500 tax break. If you choose to opt for this claim, you will have to keep substantial records of the business use that is done inside the home office.
 
Last but not least, if you have been involved in the stock market this year, investors have a chance to save some extra money as well. When taking a look at your 2016 gains and losses, create a report that shows your investment losses to offset realized capital gains. Many taxable accounts (nonretirement accounts) should have the capability to create this report for you. When reviewing your data, if you find out you have any unrealized losses (where your shares of stock cost more than their current market value) you can decide whether or not it is a safe financial move to sell your extra shares. Doing so adds extra savings to your accounts that will further allow you to invest wisely back into the market.  
 
Smith Accounting and Tax is here for all of your year end questions. Feel free to contact us with any of your financial needs.    

 
 Basic Tax Deductions for a Larger Holiday Spending Budget 
With Thanksgiving practically under our belts, the holiday season and festivities are just getting started. We know you are working hard to pay your bills, save, and get your holiday shopping taken care of before the Christmas Season. Here’s a few tips to ensure you have a little extra to spend while shopping this year. 
 
Claim Yourself   
 
When preparing for your taxes, claim yourself as a dependent. Sure we hear the typical claiming your spouse and children as dependents, but you can technically claim yourself as well. Taking this deduction (as long as you are older than 24 and make less than $250,000 a year) can knock your tax total by $4,000. This little secret is something to get excited about.   
 
Student Loans have Perks   

Go ahead and reread that title (I know, it sounds crazy) but student loan debt does have an advantage to help save and bring in some extra bucks. If you are still paying off your student loans (according to the Institute for College Access 69% are) you can claim your built up student loan debt as a tax exemption. This write off could save you up to $2,500. Sounds like a new TV might be worth it this holiday season.   
 
Mortgage Interest

 The word mortgage is enough to stir fear into any ones financial soul. However, you can make your mortgage work for you instead of against you. Taxpayers can deduct interest on their first or second mortgage when filing. This filing can lead up to a savings of $1,000,000 if filing as a single individual (the limit changes to $500,000 if married and filing separately). This is a huge break for many individuals who don’t even know this exemption exists.   
 
These three tips are sure to allow extra cash to be available for those big ticket holiday wish list items the people in your life are craving the most. Tuck these exemptions away so that when filing season comes, you know the best way to curb that holiday budget.  Smith Accounting and Tax is here for all of your tax needs, all year long. 
 
 
 

"Fall into Money Saving Tax Tips” 
  Before you can blink, the New Year will have come and gone and so will another tax season. As we are settling into the fall season (as well as the holidays quickly approaching) we know you are all about ways to save money especially when it comes to your taxes. Here are 3 simple tips you can do to fall into extra tax savings.
 1.     Make Charitable Donations  One of the best things you can do before the end of the year is make a charitable donation at an organization of your choice.  Doing so can lead to bigger savings and larger tax breaks when the new year comes along. Remember, only actual contributions are deductible for tax breaks, so if you promised a particular amount to an organization but didn’t finish your contribution only what you paid will count toward a new tax break. 
 2.     Check Your Current Address with the IRS  Now this tip sounds silly, until you realize maybe you need to update your address the IRS has on file. Surprisingly, there are thousands and thousands of checks that aren’t delivered every year because people assume the IRS has their most current address on file. Sign up for direct deposit so you are guaranteed you don’t have a missing check, or make sure your most current information is updated.
 3.     Fund a Retirement Plan   At first glance this tip seems more of a spending suggestion than savings, but we promise it helps! If you are looking to reduce the amount of taxes you owe, consider funding a retirement plan. In doing this the taxes you owe for that year will be substantially lower. You are even able to receive if a deduction if your spouse only contributes to an account.  If you are not part of an IRA account, talk to your employer about what the best options look like for you.  These three tips will help make a huge difference when tax season is under way, and who doesn’t want a little pocket change for the extra things in life we have been hoping to do.  Whether it’s the extra trip, Christmas presents, or a special gift you’ve been eyeing, here at Smith Accounting and Tax LLC we want to do everything we can to make sure you are getting the tax breaks you deserve.  
 
 
 
 
 

As it turns out, Smith Accounting and Tax was hand selected out of 283 Accountants in the Richmond area to be among the top 20 Best Richmond Accountants! Their goal was to connect people with the best local experts. To do so, they analyzed and scored accountants on more than 25 variables across six categories to give you a hand-picked list of the best accountants in Richmond, VA.  They judged each one one the following :

1. Reputation -A history of delighted customers as a signal of outstanding service.
2. Credibility -Building customer confidence with licensing, industry accreditations, and awards.
3. Experience - Masters of their craft, based on years of practical experience and education.
4. Availability - Consistently approachable and responsive, so customers never feel ignored.
5. Professionalism - Providing customers a seamless experience both online and off.
6. Engagement - Actively engaged with their customers across a number of platforms.
 
We are so excited and honored to be among the top twenty.  View the press release here!
 
If you are have any questions for us, please give us a call! 804-677-9516!
 
 
 
 

 

Self Employment Benefits


Let's be honest.  Being our own boss is, for some of us a dream come true. And, better yet for some of us a reality. There can be many benefits to being self-employed. The tax code delivers some tax breaks to entrepreneurs that many may not be taking full advantage of!Here are just a few tax breaks that you need to consider when you are self-employed. 

Retirement Plans Your contributions to SEP-IRA's, SIMPLE IRA's and solo 401K's  are variably tax deductible depending on amount you are contributing. 

Home Office IF you have an office space that you use exclusively for business, then you are allowed to deduct a percentage of this home space.  The sum mortgage, home depreciation, property taxes, utilities and homeowners insurance  for the year is added up. The percentage of the square footage of your home office to your whole house is used to determine how much of that sum can be used to write off. This is something that can be tricky and can sometimes be a red flag to the IRS auditors. So, you should always be prepared to prove this space is exclusive to your business ONLY in the event you are audited. 

Internet and Phone - Deduct a percentage or the full bill depending on if you exclusively use the phone/internet for business. 
Health Insurance - Deduct your health insurance premiums. In addition you can deduct premiums that was paid for your spouse and dependents or children under 27 years. 

Meals -If the person you are meeting with is discussing business before and after your meal, then you are eligible for 50% deduction.  
Travel -  Your travel expenses are deductible under certain conditions.  In order to be considered you must have to get sleep while on the trip and have a specific business purpose, such as meeting a new client. Deductions can include cost of transportation to the destination place, cost of transportation while there, hotel/motel fees and meals. 

Interest When you take out a business loan, the interest is tax deductible. 
 
Transportation Keep track of your mileage on your car that was used for business.  .57.5 cents per mile is the amount of your deductible expense. 

Education If you educated yourself during the year for the purpose of improving your business, this is a tax-deduction. 

Publications and Subscriptions If you subscribe to a specialized magazine or online site, then this is tax deductible as long as it is specifically relative to your business. 

Wow! That's a lot of tax deductions and information. If you feel overwhelmed by it all, don't worry. Smith Accounting and Tax can help.  Because we are tax and accounting professionals, we have a good handle on this.  Contact us now to get your 2016 tax reporting under control. 
 
 
 
 
 
 

 
 

Get and Stay out of Debt


Staying out of debt seems like a pretty simple concept. But, what exactly are some recommendations from experts on this topic? And, in a country where we are set up to borrow money at every turn, how can we do successfully stay out of debt?  Here are some simple guidelines for you to follow.
1.     Pay yourself first.  Above all else, even if you are currently in debt, take money off the top of your paycheck and put it away in a savings account.  Then, forget about it.  This savings is so important to you not going into debt.  I’m not talking about the money that may already be going into your ROTH IRA or automatically deducted for your retirement. Have a separate savings or even an envelope in your sock drawer where you stuff away some money every paycheck.  Do this before you pay anyone else or for anything else; pay yourself first.
2.     Budget your money to 0.  The first statement in this sentence is to budget your money.  Do you ever wonder where your money goes? If you find yourself in this situation, try the following technique.  Let’s say you get a $1200 paycheck. Start by paying yourself first, then pay toward your critical living expenses such as food, shelter, electricity and clothing.  After you’ve made these payments, you may have some money left over. Budget that money somewhere- whether it’s into your paying off debt fund, retirement fund, vacation fund or entertainment fund.  Make sure you have an account or sock drawer designated for these specific funds.  Transfer the money there and note how much it is.  When it comes to spending it, don’t over spend.
3. Create a Debt-Snowball.  Make a list of all your debts, include credit cards, auto debts, college debts and your mortgage.  List the  minimum payments and the whole amounts due.  List the smallest whole amount due first and the largest debt last.  With money you've assigned to pay off debt, pay the smallest debt first. Take the minimum amount you were paying on that debt and add it to the funds to pay off the next debt. Continue to make the minimum payments as you pay this Debt Snowball. 
4.     Contact Smith Accounting and Tax   We have a plans in place to help you focus on what you do best.  Let us do the accounting for you.   Give us a call! 804-677-9716



 
June is National Safety Awareness month and Smith Accounting and Tax wants to give you a few safety tips while shopping and surfing online. ·      
1. Shopping Online Safety - While you are shopping online, before you make a purchase, be sure to look in the companies address bar for the secure server status. In the beginning of the address it should always start out with HTTPS://  the "s” after http signifies that the site is secure.  Additionally, you will see a lock next to the browser.  Below is an image of an example secure site at Amazon using the Google Chrome Browser.  There are other browsers out there that you may use instead of Google, so it may look different than the image provided.  But the bottom line is, if you are about to make a purchase- make sure the address bar has an "https” and there is a lock in place. ·      
2. Passwords: ·Never share your passwords. 
a.    Keep them in a safe place offline, for example in an external hard drive on an excel worksheet.
b.    Use 8 or more characters that include numbers, letters and symbols.  Use upper and lower case letters. 
c.    You can get creative and spell out certain words with symbols.  For example, if you your pass phrase you wanted to remember was CarWash! You can cleverly make it more secure by replacing the some of the  letters with symbols. C@r W@$|-|! d.    Don’t reuse the same password fordifferent platforms. If you do get hacked on one platform they will have access to the others. ·      
 
Watch out for key-loggers.  Did you know that you can monitor every keystroke that is typed on a computer with a software program?  Every detail can be recorded, from keystroke, to websites that are visited and what software is used. This type of invasion of privacy happens when you are using a public computer or on public WiFi.  Also, if you happen to download a virus by clicking on a malicious link in an email or website.  Make sure you have adequate security programs on your computer to help protect against these malicious software invasions.  Also, when you are using a public computer, just don't enter your sensitive information.  ·
So, stay safe out there and be careful!. 
 
       

Q & A with Chris Smith

Q: I have a capital gain from a stock this year, what will be the effect?
 
A: Regarding an investment which you have an accumulated loss, it may be advantageous to sell it prior to year-end. As this will help offset the gain on the stock sale. If you are planning on selling an investment on which you have an accumulated gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year.
 

Q: Should I use the standard deduction or itemize?
 
A: It depends. Smith Accounting and Tax recommends that you choose a method that will result in the most deduction for you.Sometimes the value of your itemized deductions might be more than the amount you'll receive as a standard deduction.  This is usually the case if you have a home mortgage and have lived there for less than half the years in the mortgage.Otherwise, it's better to claim the standard deduction.A few items not to forget:  State Taxes paid during the previous tax filings and don’t forget some of those taxes that are on your closing statement when you buy a new home. 

 

 

 

 

Have you heard?

Smith Accounting and Tax LLC received the 2016 Best of Mechanicsville Award this year! The award was announced on March 25th 2016 and was deemed the best of the best in the Accounting services category by the Mechanicsville Award Program.  This award is significant as it acknowledges companies that have achieved incredible success in their community as well as having a strong customer following. Each category was strictly analyzed and sources of information were gathered from all mediums before making a firm decision.  
 
The 2016 Mechanicsville Award program says that "we focus on quality not quantity”. Winners were chosen off of third party data, reviews, polls as well as other internal information during the qualifying process.  Smith Accounting and Tax LLC is so proud to have won this award and continuously focuses on bringing the very best financial services to the local area every single day.
 
 Just in case you are unfamiliar with the Best of Mechanicsville Award program, the program was established to work exclusively with small business owners in order to promote success and achievement within the entrepreneur circuits. Businesses recognized have helped the community tremendously through their services as well as given the area an economic boost.   
 
If this is the very first time you have heard of Smith Accounting and Tax LLC, or have used our services before, we are proud to serve you when it comes to your financial needs. We work on keeping our services affordable so you don’t have to worry about escrow accounting, bookkeeping, payroll, taxes, controller /CFO services, and consulting. We are here to take care of everything for you.   Feel free to contact us anytime. We have over 20 years of experience with continuous knowledge in the ever changing realm of taxes.
 
We look forward to becoming your favorite financial service in the Mechanicsville area for years to come.  

 

 

Spring Cleaning Your Finances 

With warmer weather approaching, we know your mind is on other things besides tax paperwork. As eager as you may be to clear out your closets and other spring cleaning tasks, your tax papers need some tidying up as well in order to prepare for the new fiscal year. It’s important to know what’s crucial to save and toss as well as organizing your important documents desk chore.
 
Toss Worthy Documents

After filing your taxes, you are probably worried about getting rid of an item too soon in case the IRS calls your filing into question. Paperwork that is ok to go into the trash bin is bank statements, credit card bills, retirement account statements, pay stubs, and utility bills. All of these items are ok to shred after being held for a year. When disposing documents, it’s important to shred anything that has crucial banking information to prevent identity theft.
 
Paperwork to Keep

There are certain pieces of paperwork that you should never get rid of as long as you own the assets. Information like car titles, warranties, appliance manuals, house payments, mortgage information, and insurance policies are all keepsake documents; no exceptions. Medical bills also file into this category as insurance companies are notorious for keeping poor records.
 
 Cleaning Tips to Consider

Consider investing in a fireproof safe for your home for important documents like wills, deeds, and certificates. No one wants to think of having to face a disaster but it is always better to be prepared and safe. Create a brand new tax file for all important receipts and deductible items to go into. This is an easy way to make sure everything is in one place for the next tax filing season which can make the initial process quicker. Make sure that for the upcoming year all of your information is completely updated in the folder you create. Having accurate reports, receipts, credit card information and other miscellaneous important items can help ease any confusion.
 
 Spring cleaning isn’t a favorite task when the seasons change, but it is vital aspects of our lives, especially our finances. If you need assistance in spring cleaning your taxes, contact Smith Accounting and Associates today. We can help get you organized so you won’t be overwhelmed!

 

Keeping Your Tax Returns Safe and Protected Online 

Tax season is under full swing and while we are sure you are rushing to get your tax submissions taken care of, it’s important not to forget to submit your information securely.   Modern technology has made it easier than ever to file taxes, receive refunds, and store information. Because of this ease, cyber thieves prey on tax returns and steal millions of confidential information each and every year.   
 
When filing online, it is crucial to make sure that the platforms you are using are completely secure. One of the easiest ways to tell is to look for an "s” in http. This "s” means that the website you are browsing on is secure. You can place important and sensitive information on them. Websites that have an https work to encrypt everything that is posted on their site, which makes it more difficult for thieves to hack into. Information that is encrypted on https sites, (such as credit card numbers, bank accounts, and social security numbers) are impassible from hackers and can not be intercepted.
 
 Protecting your accounts and identity is a priority your family will thank you for focusing on. No one wants to be a victim of cyber theft.  As important as making sure the websites and internet tools you are using are secure, it’s also essential to pay attention to how you save your receipts, claims, and records. The IRS loves to ask questions regarding tax claims, so having one’s files accessible and in order is useful. Many PC and tax filing experts adamantly oppose to storing your tax information on your computer desktop.  Keep all of your files on an external hard drive so that they are not susceptible to virus’s and malware that can infect your files, destroy them, or accessible to thieves.
 
 Tax season is a stressful time of year. Don’t make it harder on yourself by not being careful about where you are placing your confidential information.  Smith Accounting and Tax is here for you year round when it comes to your accounting needs. Have a question about a claim or filing a return? Contact us on our secure site.
 
We are ready to assist and serve you.     
 

 
 
4 Financial Resolutions You Need to Commit to in 2016
A new year has begun and the list of goals for self improvement are at their peak. Many resolutions include, "feeling healthier, losing weight, and self improvement”. With such an emphasis on health, it’s important to not forget about your financial wellbeing. Here’s four financial resolutions you can keep for the new year and beyond.
Build an Emergency Fund  
One of the most important things you can do is to have an emergency savings. Accidents and life events don’t wait until it’s convenient. Work on placing a small amount of a paycheck every month into a separate savings account. When (not if) disaster strikes, you and your family are prepared.  
Strengthen Your Credit  
Taking time to work on building up your credit scores is great for future purchases. As intimidating as it seems, enhancing your credit can be done easily. Start by always paying your bills on time, pay off small balances immediately, and watch your credit card balances every month. These habits will increase your score and leave your bank account fuller.  
Automate Your Savings
One of the easiest ways to build your savings account is to set up your bank to withdraw an amount from your paycheck every month. Before you know it, paying for the new car or T.V. just got a bit easier. As a bonus, you won’t be worried about not remembering or having enough because the deposit has already been done for you.  
Open a Roth IRA  
Your savings account can only accrue so much. Opening a Roth IRA is a great way to invest and let your funds grow without being taxed.  A Roth IRA isn’t like a 401(k) because you are able to place investments where you want (without lengthy restrictions) and retrieve funds when needed.  
Smith Accounting and Tax is here to help with all of your financial New Year’s resolutions.  Our strategic partners are the best in the field and can help you plan and manage your finances, so this year can be the best one yet. Contact us and lets put your resolutions to work.
 
 
Your Options When You Owe the IRS but Can't Fully Pay - April 7th 2015

Effects of the current economy show in your bank account and on your brow. 
If you simply do not have the money to pay your bill in full, you have several options:
• Ask for more time. If you are temporarily unable to pay your tax liability, you may be eligible for a short-term—up to 120 days—extension. You pay nothing extra for this request, which you can make online.
• Make regular payments. If another 120 days still isn't enough time, you can request an installment agreement. If you owe less than $10,000 in the tax alone (not including penalties and interest), and you meet the IRS's strict qualifications, you may be able to pay off your liability in monthly installments. If you owe $25,000 or less and can pay your liability within 60 months, you may qualify for a "streamlined” installation agreement. Finally, you can apply for a more traditional type of installment agreement, which requires extensive financial disclosure and a detailed financial analysis.
• Make an offer. Called an "offer in compromise,” the IRS may allow you to provide less than full payment. Grounds for acceptance of your compromise are stringent, and the penalties can be long term.
• Declare hardship. If you can show that collection of the tax debt would cause a financial or other hardship for you or your family, the IRS may suspend collection of your debt for one year, at which time it will reexamine your situation. Penalties and interest, however, will continue to accrue during the suspension period.
• Declare bankruptcy. Filing for bankruptcy could halt IRS collection actions. However, filing bankruptcy has serious consequences and should be considered carefully.
 
 


Smith Accounting and Tax Receives 2014 Best of Mechanicsville Award

MECHANICSVILLE November 25, 2014

Smith Accounting and Tax has been selected for the 2014 Best of Mechanicsville Award in the Payroll & Payroll Tax Preparation Services category by the Mechanicsville Award Program.

These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Mechanicsville area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2014 Mechanicsville Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Mechanicsville Award Program and data provided by third parties.

 

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7 Unusual Tax deductions

 
09/21/14

Business owners should strive to take advantage of every possible deduction in order to minimize their tax liability.  While the IRS provides a short list of don’ts (for example, you cannot deduct anything illegal such as traffic tickets), it doesn't offer a definitive list of tax deductions available to businesses.
The tax forms for businesses to use to declare income and expenses list all of the broad categories of accepted deductions. These are all the "ordinary and necessary” business expenses that the IRS states you may deduct. However, it’s that last line, the one entitled "Other deductions,” where creative minds begin to work to come up with often overlooked write offs.  Here is a list of seven unusual but usable business deductions that have passed IRS audits (however does not guarantee it will pass in the future):

1. Pet Food. If you own an animal that serves a useful purpose at your place of business and cannot be construed as a family pet that you simply bring to work every day, you may have a valid write off of food, vet bills, training, toys and any other expenses associated with the care of the animal.  The animal must have a job: a cat who keeps down the rat population, a security dog, a herding dog. 
2. Body Oil and Sunscreen. A pro body builder was allowed a deduction for body oil used to make his muscles glisten under the lights. However, the IRS disallowed special dietary foods and supplements, which by the way, would not be deductible as medical expenses either. A tennis pro may write off sunscreen products as they fall under the category of protective gear.
3. Breast Augmentation. A stripper once increased her breast size and attempted to write off the bill as a medical expense and the IRS disallowed the deduction, claiming it falls under the category of cosmetic surgery which is not deductible.
However, the agency allowed the deduction as a bona fide business expense. This would also reduce her self-employment tax whereas if taken as a medical deduction it would not.
4. Law Suit Settlements. If your business is sued and you lose, you may be able to write off the settlement amount as well as the legal fees you incurred.
5. Freebies. Gifts you give to customers are allowed as business deductions. You can spend up to $25 per gift per recipient (including employees).
6. Payments to Family Members. You may be able to hire your children to work in your business without incurring a payroll tax liability if they are under the age of 18.  You may even hire your significant other to help out and take the write off. Don’t forget to issue a W2 or 1099 and conform to the rules for determining whether the worker should be classified as an employee or a contract worker.  A payroll services or accounting company will help you with these formalities.
7. Landscaping and Housekeeper. If you have a home office, you may deduct the cost of a housekeeper to keep the office area clean. And if you regularly meet clients at your home office, you may deduct a portion of landscaping costs as well. The place has got to look good, right?
Open your mind to all the potential deductions you can enjoy in your business.  If the intent is business, the cost is likely deductible by the business.   As with all deductions, make sure you keep receipts and cancelled checks or credit card statements. And for the most unusual deductions or other questionable deductions such as travel, meals, and entertainment, be sure to include plenty of documentation to prove business intent in the event you are audited. And run your ideas by Smith Accounting and Tax first to make sure the deductions will fly.
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7 Reasons Your Small Business Should Use Accounting Software

09/16/14

During tax season, many business owners provide me their tax data in various ways:  boxes of receipts, clumps of expenses stapled together with adding machine tape totaling each type of expense, or a listing of income and expenses in a spreadsheet format. When the information is fed to me by these means, I often wonder what expenses may have fallen through the cracks. I often have to ask after some deductions that appear to be missing such as bank charges and credit card interest.

But when a client sends over a computerized accounting file that has been kept up to date and includes cash and credit card purchases, I’m fairly confident that every eligible deduction will be included on the tax return.

I encourage all serious business owners to keep their books on computerized accounting software; Smith Accounting and Tax has packages to help with this; contact us. Aside from completeness of data, there are other good reasons to track your business’s financial transactions using accounting software:

Bank reconciliation made simple. You don’t miss deductions when you reconcile your bank account on computerized software. The account won’t balance if you don’t post the bank charges or the missing receipt for that debit card transaction at the office supply store.

Easy input. If you don’t like keyboarding in your transactions, most banks will allow for a direct download of your bank account data. With a few keystrokes, you can enter an entire month’s worth of transactions. Tracking credit cards used in the business can be simple and you will remember to post the finance charges. Reconciling the credit card balance in the same way you reconcile the bank balance to the statement will ensure that all transactions are accounted for.

Formalized financial statements. A computerized accounting software program can provide profit and loss statements and balance sheets that are necessary to evaluate your business’ progress. If you are seeking financing for your business, you must present investors with financial statements.

History of the business. There is nothing more educational and satisfying then bringing down a comparative income statement to compare your current year activity with prior year(s). A spreadsheet program can give you this as well, but the data entry is clumsy and more prone to inaccuracies. Speaking of spreadsheets, you can always dump your data from the software to your spreadsheet program in the event you want to play with the numbers and do projections.  This process is especially important when trying to hit it rich with a sale of your business.

Customer history and aging. Using a software’s invoicing feature allows you to track your customers’ purchasing history and payment habits. Aging reports can be generated to facilitate collection efforts. In fact, you can note collection attempts in a special "Notes” box on the customer profile screen.

Vendor history and aging. Rather than simply cutting checks when bills are due, you can use the accounts payable system to track bills as they arrive and plan for cash flow. Using software will also provide you with reports for each vendor. It makes it easy to locate prior payments and invoices.

Audit-proof the books. Whenever I’ve dealt with IRS auditors and the agent sees that the books have been kept on a formalized accounting software, especially by a professional bookkeeping service, the audit tends to be short. The agent will run a cursory review of the bank statements and if things line up with the software, he or she may take a sampling of expenses to audit, rather going line by line.

Whether you are looking for accounting services in Mechanicsville or surrounding areas, or Tax Preparation in Mechanicsville or surrounding areas, or a comprehensive small business accounting provider in Mechanicsville or surrounding areas; contact Smith Accounting and Tax. 





Is this lunch a tax deduction??

07/21/14

When you're a small business owner, pretty much any meal is a tax-deductible business meal, right? Not necessarily.  For additional help with the topics in this blog or any other accounting and tax services in Mechanicsville, VA, contact us.
The IRS has very specific rules for what is, and what isn't, considered a business meal for tax purposes. And unfortunately for many small business owners, eating lunch at your desk will most likely not be considered a tax-deductible business meal.
So what are the rules for when a meal can also be a write-off?
When It's a Travel Expense
There are generally only two ways that the cost of a meal can qualify as a tax deductible expense. The first is if your meal expense was incurred while traveling away from your home on business.
However, it's worth noting that your tax "home" is not necessarily your real home. For example, if you live in a different city than where you work, you can't claim your meals while at work as travel expenses; for the deduction, your tax "home" is considered to be the city where your main place of business or work is located, regardless of where you live.
Travel expenses are also only deductible when you are away from home for "a period substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away."
This means that if your job requires you to travel to other areas during the day as part of your normal daily activity before returning home, then meals purchased during this daily travel would not likely be deductible as travel expenses.
When It's a Business Entertainment Expense
The second (and most commonly misunderstood) way of deducting meal expenses is the business entertainment expense deduction. Here's what you need to know:
• Meals are only deductible as an entertainment expense when provided to a customer or client.
• In general, only 50% of the cost of the business meal can be deducted; other rules limit "lavish or extravagant" meals and other expense deductions.
• Business entertainment meals must either be directly related to your business (meaning the main purpose of the meal was business, you engaged in business during the meal, or you had more than a general expectation of getting a business benefit from the meal), or associated with the active conduct of your business and taking place directly before or after business discussions.
In simpler terms: Meeting your friend for lunch on your lunch break isn't a business lunch just because you talked about what you did at work that day. The meal must have more than just a tangential or trivial relation to your job, or it might be disallowed as a deduction.
To learn more about how tax laws may affect your business' bottom line, we also help with tax planning and tax preparation in Mechanicsville and surrounding areas.



Business Performance

06/12/14

"A firm understanding of finances and business performance is crucial for a small business to be successful," said Steve Strauss, president of TheSelfEmployed.com. "Managing finances is a challenging process and many business owners are often unaware of the tools and resources available that can help them make smart decisions and, ultimately, improve their bottom line."

Smith Accounting and Tax can help we have packages starting at $75/monthContact us for a free consultation.




3 Mistakes and the Government will call on you

05/27/14

There are three accounting mistakes a business can cause an immediate government call to your business.

1) Non Payment of Payroll Taxes - Smith Accounting and Tax will handle all government reporting with our Payroll Services
2) Non Payment of Sales Tax - Smith Accounting and Tax will handle all government reporting with our normal monthly accounting services
3) Non Payment of Use tax - Smith Accounting and Tax will handle all government reporting with our normal monthly accounting services

Smith Accounting and Tax can help keep you out of the cross hairs. Contact us for a free consultation.





2.6B hrs spent on filing taxes...Let Smith Accounting and Tax reduce your time

05/20/14

People in the United States spend an estimated 2.6 billion hours to file their tax returns each year, and spend $33.6 billion to comply with tax law, according to a new report.
Filing individual tax returns occupies the largest share of time and money, imposing compliance costs of 7.7 billion hours and $170.4 billion, according to new analysis from the conservative-leaning American Action Forum. An estimated 150 million people filed tax returns this year.
The individual tax code is accompanied by 199 different forms, and the estimated time it takes to process all those returns is at an all-time high. The paperwork burden reported by the Treasury Department reached a new record in 2012 and 2013, and is 47 percent higher than what was reported in 1995.
The analysis comes as lawmakers in both parties agree that the tax code has become overly complicated. However, efforts to reform the tax code and simplify it have repeatedly run into a difficult political reality, and have struggled to gain traction in Congress.
AAF’s analysis indicates that the complex nature of the code carries a real economic burden, as complying with it pulls billions of hours and dollars from the economy that could have been used on other purposes.
IRS data indicates that filing individual tax returns carries the highest compliance cost, but the agency also only tracks costs for five of its 874 recording and recordkeeping requirements. All told, the IRS reports just $33.8 billion in compliance costs, almost all taken up by the filing of individual returns.
AAF applied the average hourly cost of a civilian employee to the IRS’s remaining projects, and found that compliance costs could reach a total of $170.4 billion, which is five times higher than what the IRS reports for compliance costs.
All told, the IRS has 897 different forms required for various tax circumstances, and individual returns account for 22 percent of that total.
The top five largest requirements from the IRS — individual returns, bond tax credits, partnership tax returns, depreciation and amortization, and S corporation tax returns — account for roughly two-thirds of the total man-hours the IRS says the tax code demands.
AAF’s analysis also found that the Treasury’s job of processing tax returns means it by far imposes the largest paperwork burden on people. The Treasury Department reports 7.7 billion in paperwork compliance time, compared to just 600 million hours reported by the Department of Health and Human Services, which is the second-ranked government department in the category.



Did you feel the Self Employment Tax pain?

05/06/14

Was Tax Preparation eye opening?  Do you feel like you are paying too much in self-employment taxes? You’re not alone, especially

 considering the rate for 2013 is higher than it has been the past few years.
If you make self-employed income, there’s not a lot you can do to avoid this tax completely. However, you can check with your CPA or tax service provider (Smith Accounting and Tax provides this consultation for free) to see if changing your business structure to a corporation or LLC that’s taxed like an S Corporation can help lower your SE taxes.  S Corporations might cause the need for payroll services, so that needs to be weighed in the overall picture as well.
 



Why Cash Flow Is King (and Other Lessons in Small-Business Finance)

04/24/14

Nearly a third of new employer firms fail within the first two years, according to the Small Business Administration.
There’s no single reason for their failure. But after working with hundreds of entrepreneurs, consultant and author Richard Weinberger says "a lack of knowledge of basic finance is a common — and dangerous — mistake. Too many business owners don’t understand their own finances, and have no idea what products or services make the most profit.”

You say that many business owners don’t understand their own finances. How can they start to get a handle on this?

First, begin a financial review with your accountant. If possible, try to have at least three to five years of financial statements available. If you don’t have them, tax returns can be substituted, but they might not contain all of the information you need.

Why is it important to understand your cash flow?

Small businesses may be profitable but not have much cash. They may have made sales on credit, they’re servicing debt, they’re paying for equipment, or maybe they’ve got lease payments. If you know in advance that you may be short of cash, you can prepare. You could look for additional bank financing or try to modify the repayment terms on loans or other debts. But to do any of that, you have to be able to predict your cash flow.

Is there an easy way to understand your business’s cash position?

It’s called the quick ratio. It consists of cash, cash equivalents, and accounts receivable divided by current liabilities. It does not include inventory, because it normally takes time to work though the sales process and be converted to cash.

What about collections?

One key component of cash flow is how long it takes your customers to pay you. If you analyze this and see that the amount of time it takes you to be paid is lengthening, you have a problem. You may be extending credit to customers who aren’t credit worthy, or maybe you’re not putting enough effort into collections. Shortening the amount of time it takes to be paid obviously improves cash flow.

Speaking of cash, aren’t there controls a business should have in place?

Here are a few: The check signer and the check writer should not be the same person. Refunds to customers should be approved by someone other than the employee actually making the refund. When that isn’t possible, refund receipts should be reviewed daily.

Final words of advice?

With an accountant or bookkeeper working with you, you can better understand what each item on your P&L or Cash Flow means and what is driving the numbers.  It is your business you need to understand what is driving the results.




Estimated Tax Payments: Should You Use Annualized Income?

4/3/2014

Making estimated tax payments comes with the territory when you strike out on your own. If business is predictable, it’s easy enough to send the IRS a set amount on a quarterly basis. But if your income fluctuates throughout the year, how do you ensure you don’t get penalized for underpayment?

The general rule is: You may owe a penalty if your total withholding and estimated tax payments do not equal at least (1) 90 percent of the tax you owe for the current year or (2) the full amount of tax you owed the previous year, whichever is less.

Separate penalties are applied to each estimated tax payment and due date, so you could end up facing multiple penalties — or get slapped with one for underpaying in April, even though you paid the balance of what you owed in September. Underpaying is classified as missing the due date for a full payment. This holds true even if you end up getting a refund when you file your return. It isn’t a trivial problem: In 2012, U.S. businesses were assessed over $936 million in late fees for failing to file business income tax on time.

So, how can you avoid paying penalties when your income varies?

As with everything involving taxes, the IRS has a form to fill out. Follow the process outlined on Form 2210 [PDF] to determine whether you owe a penalty. (Get instructions here.) Whether you owe will depend on whether you use the regular amendment calculation or the annualized income installment method. The form will help you figure out which one best fits your business.

If your income varies during the year, then figuring your tax burden using the annualized income installment method will allow you to show why your business should be able to lower (or eliminate) one or more of the required estimated tax installments. Submitting your justification via this form — if you meet the criteria to submit it — can often get an underpayment penalty reduced or eliminated.

Filling out the annualized income method section of the form takes more time than using the quick or regular amendment method, but it gives highly volatile businesses more leeway for errors and holds out the prize of reduced penalties. You should use annualized income when calculating your estimated state income taxes as well.

Of course, hiring a good accountant to help you may save you a lot of headaches. And being able to anticipate the high and low quarters your business is likely to experience in a given year can also help you avoid penalties in the future. Regardless of how you manage your tax planning, you now know that even if you have a massive windfall in Q4 next year, you have a means to set the record straight.



Q&A

3/26/2014

Q. My two children (17 and 19) worked in 2013. What would you recommend that I do in terms of filing my taxes? The amounts were $2,500 and $3,300 respectively. Should they file their own tax return or should I include their income in my tax return?

A. Your question has two parts, so let's start with the easy one. Income from work is called "earned income" and earned income from your children cannot be included on your tax return.

The second question is: Should they file their own tax return? They may or may not be required to file. Even if they don't have to file, they would want to file anyway if they are due a refund. It is common for teenagers to work a little bit, have taxes withheld from their wages, but owe nothing at tax time. Then, they should file a tax return to claim a refund for the taxes withheld. Such refunds are generally small, so the cost of tax preparation could exceed the refund itself—or leave very little. Contact Smith Accounting and Tax for special teenagers filing discounts.



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