 If you’re getting married this year, congratulations! There are a lot of details in planning a wedding, and, along with the cake and gift registry, your first tax return as a married couple should be on your checklist. The IRS has tips and tools to help you consider how marriage may affect your tax situation. Here are five simple steps that can make filing your first tax return as newlyweds less stressful.
Step 1: Check your withholding at the beginning of each year, or when your personal circumstances change — like after you’re married. Using the IRS Withholding Calculator is a good way to check your withholding. If you need to change your withholding, complete and submit a new Form W-4, Employee's Withholding Allowance Certificate, to your employer. Step 2: Marriage may mean a change in name. If you and/or your spouse legally change your name, even if you hyphenate your last names, it’s important to report that change to the Social Security Administration (SSA). The name on your tax return must match the name on file at SSA. If it doesn’t, it could delay any refund. Step 3: If your marriage means a change in address, the IRS and U.S. Postal Service need to know. You can file IRS Form 8822, Change of Address, to update your mailing address with the IRS. Notify the postal service to forward your mail by going online at USPS.com or by visiting your local post office. Step 4: If you receive advance payment of the Premium Tax Credit, it’s important that you report changes in circumstances to your Health Insurance Marketplace as they happen. Certain changes to your household, income or family size may affect the amount of your premium tax credit, which can alter your tax refund or cause you to owe tax. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Marketplace. Step 5: Choose your filing status. Your marital status on December 31 determines whether you’re considered married for that full year. Generally, the tax law allows married couples to file their federal income tax return either jointly or separately in any given year. Use the Interactive Tax Assistant to determine which status is best for you. When it comes to weddings, detailed planning is important. By following these simple steps and planning your taxes up front, you can also enjoy a smooth tax season as newlyweds.
1 Comment
 It's the latest and greatest trend. Cryptocurrency! But what exactly is it and what do you need to know regarding the accounting and tax implications of investing in it? Here are the six most important things you need to know about cryptocurrency:
1. Know the types of cryptocurrency. You may have heard of the most popular names of cryptocurrency, such as Bitcoin, but you need to understand there are very distinct uses for cryptocurrency. These include:
2. Liquidity of cryptocurrency. There are only about 200 cryptocurrencies that you can get to cash via the reputable exchanges and most of those require two trades using two different exchanges. Only about 10 cryptos have enough volume to be able to transact without moving the spot price which makes moving larger amounts sometimes expensive. 3. How much to invest or convert. From accepting payments to maintaining value, businesses often ask, “How much?” The top wealth managers say that, even for the most aggressive risk profile investor, you should be putting less than one percent of your net worth into cryptocurrency. 4. How to treat cryptocurrency for accounting. The most common practice is booking cryptocurrency as current assets, following the IRS guidance that cryptocurrency is property. Also gains and losses must be recorded on all crypto to crypto or crypto to cash exchanges. The official guidance on the tax liability of transactions using cryptocurrency was issued by the IRS in 2014, so there will likely be more guidance in the next few years as cryptocurrency increases in popularity and usage. 5. The best way to “store” cryptocurrency. The more value clients have in cryptocurrency, the more secure their storage should be. However, this type of asset is digital, so how exactly should it be stored? The short answer is anything other than a cryptocurrency exchange. Better options include a hardware or software cryptocurrency wallet:
There are a few merchant processors available that convert cryptocurrency transactions into cash. The most popular Bitcoin processor is called BitPay. With processors, if you haves an online store, your customers can pay with Bitcoin and you will receive cash based on that day’s Bitcoin price. This means they would not be subject to the volatility of the cryptocurrency value. Shoutout to Matthew May (@TheTechCPA)  The holiday online shopping season is a prime time for cybercriminals and identity thieves to trick shoppers into giving up financial, identity or password information. The Internal Revenue Service and its partners urge you to follow a few safe practices that will increase your security online and help protect you from identity theft. The IRS, state tax agencies and the tax professional industry are asking for your help in their effort to combat identity theft and fraudulent tax returns. Working in partnership with you, we can make a difference. That’s why the IRS launched a public awareness campaign that they call Taxes. Security. Together. They've also launched a series of security awareness tips that can help protect you from cybercriminals. The Monday after Thanksgiving Day is known as Cyber Monday – the online equivalent to Black Friday -- as shoppers head to retailers’ websites. Here are a few basic steps to make your shopping season safer:
The IRS, state tax agencies and the tax industry joined together as the Security Summit to enact a series of initiative to help protect you from tax-related identity theft in 2017. And you can help by taking these basic steps.  Well, I finally did it. I committed the cardinal sin. I colored my hair...with a BOX COLOR from Wal-Mart. I know. I know. I should have known better, but I was in crises mode....and after all, the commercials make it look so easy!!
I bought the box, read the instructions, and away I went. It all seemed to be going so well....until it wasn't. I was quickly reminded why I pay a professional and instantly regretted my decision. Isn't this the way of our society. Buy a box and all of a sudden I'm a professional hair dresser. Give me a smart phone and all of a sudden I'm a world class photographer. Give me Google and all of a sudden I'm a doctor. Give me TurboTax and all of a sudden I'm a CPA. Why do we even need professionals anymore? Professionals spend time and money becoming an expert in their field. Professional photographers have taken hundreds of thousands of pictures, experimenting with angles, lighting, and equipment to bring you the most amazing images possible. One smart phone with a couple of cool filters absolutely, positively will not produce the same quality as a professional photographer. A CPA spends thousands of hours and money obtaining the education required to sit for one of the most difficult professional exams in the country. They invest more time and money each year satisfying continuing education requirements. All of this to try to understand thousands of pages of complex tax code. A one size fits all tax program in a box absolutely, positively will not give you the best tax product possible. The "box" may satisfy a small percentage of people, those that fit into the box, however, the vast majority of people need the experience of a professional. So stop self diagnosing, stop self coloring, and stop self preparing. Call a professional.  The health insurance marketplace is still a fairly new process and regardless of how much has been written about it, argued about it, taught about it, and talked about it, most people who participate in the marketplace have no idea the who, what, when, how, and why of how it actually works. One of the most confusing aspects of the marketplace is the premium tax credit.
The availability of the premium tax credit is determined based on a taxpayers income as reported on their prior year income tax return. If you have misrepresented your income or if you experience changes in the current tax season that change your tax situation for the current tax year, you may be required to pay back a portion or all of the premium tax credit you enjoyed. It is important to represent your income accurately and to report life changes immediately so as not to be in a situation to pay back the credit when you file in April. What life changes can impact this credit?
The IRS has developed a Premium Tax Credit Estimator to help you determine how some of the life changes listed above can impact your credit. The estimator does NOT report anything to the IRS. It is a taxpayer planning tool only. This is such a confusing topic and continues to wreak havoc with taxpayers. If you need help deciphering how the premium tax credit impacts you, call us at 361-578-7333.  It seems that the latest obsession in the business world is the illustrious LLC, also known as a Limited Liability Company. It has become the latest craze. The LLC is a good choice for many business owners, however, the decision to form an LLC is only the first of many.
The Limited Liability Company is organized at the state level. The Internal Revenue Service does not recognize the LLC as a viable organization. When we create an LLC, the Service allows us three options for federal filings. 1). Sole Proprietorship: This option is available if the LLC is a single member LLC. All income and expenses are reported on the Schedule C of the Form 1040. The single member is not allowed to take a salary or a wage and all net income is subject to self employment tax. 2). Partnership: This option is available if the LLC is a multi member LLC. The income and expenses are reported on a Form 1065. Net income or losses will flow through to each member's Form 1040. Members are not allowed to take a wage or salary but can take guaranteed payments. All net income is subject to self employment tax based on each member's percentage of ownership. 3). S-Corporation: This option is available for both the single member and multi member LLC. The income and expenses are reported on Form 1120S. Net income or losses will flow through to each member's Form 1040. Each member is required to take a reasonable wage or salary which will be reported on a Form W-2 at the end of the year. This option is the only option that avoids paying self employment tax on the net income each year. Many people visit an attorney or a website like Legalzoom to form Limited Liability Companies. Many times, this option omits the step regarding income taxes. This is an extremely simplified summary of the tax consequences for each option. It is advised to visit with a tax professional to determine which filing situation is best for your individual situation.  I am an entrepreneur. I have been an entrepreneur in some form or fashion for over 30 years. From service oriented to product oriented to so small it was barely a scratch on the surface to mid-sized with massive growth potential, I have been through it. Regardless of the who, what, when, where, and how of the business endeavor, one thing has remained constant...most people are good hearted, patient, kind, and wonderful to work with.
However, there are always those few that are determined to break your spirit. Determined to rain on your parade and whose sole purpose seems to be to derail you and make you as miserable as they are. As a business owner, these are the ones we seem to focus on. The bad reviews. The snarky comments. A tsk of the tongue. Remember: 1) Under-promise and over-deliver 2) Accept responsibility 3) Offer solutions for improvement and share that with your unhappy client If you do these three things, you just may win them over. And if you don't, let them go. Fire them as your client or customer, Sometimes it's better to release a bad apple than to taint the entire barrel with the negativity. And when it's all said and done...give yourself a break!!! Choose to learn from it and move on...and at end of the day, laugh!!! A new business was opening and one of the owner's friends wanted to send flowers for the occasion. They arrived at the new business site and the owner read the card. It said "Rest in Peace". The owner was angry and called the florist to complain. After he had told the florist of the obvious mistake and how angry he was, the florist said: "Sir, I'm really sorry for the mistake, but rather than getting angry you should imagine this: somewhere there is a funeral taking place today, and they have flowers with a note saying 'Congratulations on your new location'."  It's usually the little things that make the biggest difference in our lives. A good meal shared with a good friend. A glass of wine after a hard day. A bubble bath with a little pinterest action. OK...so I'm speakin' chick right now...I think you get the gist though. In his new book "The Automatic Millionaire", David Bach recounts lessons learned from today's self made millionaires and one recurring theme emerged. Pay. Yourself. First. Most of us get paid and start deciding what and how much to pay to bill collectors and creditors. Rent, utilities, cell phone, internet, car payment, mortgage, the list is endless, isn't it? We devise intricate budgets to determine how to get everyone paid and have a little left over at the end of each month or each year to set aside in a rainy day savings account. This mindset is absolutely, unequivocally financially backwards and is a surefire way to keep you controlled by your finances instead of YOU controlling your finances. Bach writes, "Nothing will help you achieve wealth until you decide to pay yourself first … [It] means just what it says. When you earn a dollar, the first person you pay is you. Most people don’t do this.” Don't know where or how to start? Don't overthink it...JUST START! 1) Take it off the top. Have your employer directly deposit 1%, 2%, 5%...you decide what you are comfortable with...into a separate account that you don't see and you don't touch! 2) Consider a pre-tax retirement instrument like a 401(k) or Traditional IRA instead of a traditional savings account. These accounts help to hold you accountable and will deter you from sneaking money out of the account on a whim. 3) Continue to push yourself until you reach that 20% mark. This is you target percentage! Having financial freedom is yours to take. It's just a decision away...with a healthy dose of self discipline, of course!  You should be getting knee deep in tax forms by now. Forms W-2, Forms 1099-MISC, DIV, INT. The list goes on and on. The deadline for filing most of these informational forms is February 1, 2016. Most companies are churning them out about right now, including our team here at CLO.
So what should you do when you start receiving your tax forms? Here are three quick steps you should take: 1) OPEN THE FORMS IMMEDIATELY. Many people know what's in the envelope the moment they receive it. Most of the time it's stamped right there on the outside. IMPORTANT TAX DOCUMENTS ENCLOSED. Our first inclination is to cram the envelope in a folder labeled "TAX STUFF" and just let the CPA deal with it. I can't tell you how many unopened envelopes we receive here at CLO. However, you should open all of these immediately and make sure they are correct. Copies of these forms are sent to the IRS and the amounts are matched with your social security number or EIN. If you report a different amount on your tax return, this can be a red flag for an audit. Insuring they are correct early can reduce or eliminate massive headaches in the future! 2) REPORT MISTAKES IMMEDIATELY. If you find a mistake on either your Form W-2 or Form 1099, you should call the company who sent the form and report the mistake. Ask them to submit a corrected form both to you and the IRS. 3) FILE IN SAFE PLACE. Now you can stuff the forms in that folder labeled "TAX STUFF". Keep them all together in one place to take to your CPA. The deadline for filing tax returns is April 18, 2016, however, you should get your documentation to your CPA at least a month in advance. This will insure your CPA has plenty of time to prepare an accurate tax return on your behalf.  Guess what? Tax season is upon us again! I can see it now, the beads of sweat forming on your brow as you think about stacks of receipts, missing bank statements, unpaid tax balances from years past, and where did you put that W-2 you received last week?
It's the same thing every year. And when you finalize your tax return in April...or October, you will promise yourself you'll never let it get this bad again. You'll be more organized, more on top of it, more proactive. The truth is, we're busy. We're all busy and we push things off because, in the moment, there are other pressing things that need to be dealt with. That's where having a capable tax professional can help you, guide you, coach you throughout the year. But choosing a tax professional is much like choosing a dentist...we know we need one....but we really don't want one! So, what should you look for when choosing a tax professional? 1) RELATIONSHIP! Choose someone who is willing to form a long lasting professional relationship with you. Someone who will get to know you, your family, your business, your life. It is only when these relationships are formed that a tax professional can successfully guide and coach you along the way. 2) EDUCATION! Choose someone who not only invested time and money in their initial education but who truly values the continuing education experience. The CPA is required to get a set number of hours each year. Many professionals view this as a check in the box. However, the field is ever changing and extremely complex. It is only the professional who values the continuing education experience that can grow with you and your ever changing life. "Running water never grows stale, so you just have to keep on flowing." Bruce Lee 3) ACCESSIBLE! Ok. I"ll admit it. I"m human! There are times that I get behind! But for the most part, I try to return phone calls, e-mails, and text messages timely. Your tax professional should do the same. This is an extremely deadline driven industry and many times, if your professional does not get back with you in a timely fashion, you may miss an opportunity. Choose a professional who values your time, values your money, and values your opportunity. |
Author
Catherine L. Ozment, CPA Archives
May 2019
Categories |
RSS Feed