US Capitol Building with Caution Tape

Government Shutdown and Tax Refunds – When to File, When You’ll Get Your Refund

With the start of a new year comes the start of tax season. Employers hand out W-2s and 1099s, and taxpayers start organizing tax forms. But with the current partial government shutdown in effect since December 22, 2018, there’s one question on every taxpayer’s mind right now: will the government shutdown affect tax returns?

In short, dealing with a government shutdown and tax refunds at the same time means filing on time and potentially waiting longer than usual to receive your refund.

Will the Government Shutdown Affect Tax Returns for 2018?

The IRS confirmed that, despite the government shutdown, it will process tax returns starting on January 28 and will issue refunds as scheduled. Congress directed the payment of all tax refunds through a permanent, indefinite appropriation. Further details for the filing season will be included in an updated FY2019 Lapsed Appropriations Contingency Plan.

In previous years, shutdown contingency plans included the IRS accepting tax returns during the filing season, but refunds were delayed until the government was funded. The current plan for the 2018 tax refunds have the IRS processing returns and providing refunds, even if the government is still shut down.

Can I Still File My Taxes With the Government Shutdown?

It’s advised to proceed as normal regarding the IRS and the shutdown. Taxpayers still need to file a tax return on time. The IRS will start accepting and processing individual tax returns once the filing season begins on Monday, January 28, 2019. The filing deadline for most taxpayers to submit 2018 tax returns is Monday, April 15, 2019.

If you prefer to file early in order to receive your refund earlier, you can still do so. You can file when you have all of the needed documentation and are ready to submit a complete and accurate return.

Are Tax Refunds Going To Be Delayed This Year?

About 85% of the 70,000 IRS staff members were furloughed during the shutdown. The IRS says it will be recalling a portion of its workforce to work through tax returns. It’s unclear how many employees will return, so tax refunds may be delayed in comparison to previous years.

No matter what the staffing level at the IRS, taxpayers are still expected to file their tax returns on time. IRS employees will continue process returns and issue refunds.

How long does it take to get tax refund?

Refund processing time depends on how you file. Taxpayers who submit an e-file could expect to see their refund directly deposited within 21 days. For mailed-in returns, it can take the IRS up to 6-8 weeks to process and mail your refund. The IRS encourages taxpayers to file electronically in order to minimize errors and for faster refunds.

To check the status of your federal tax refund, you can visit Where’s My Refund, provided by the IRS. Indiana taxpayers can check their Indiana tax refunds and delays at the Department of Revenue Refund Status portal.

Tax Preparation Services for Indiana Taxpayers

From now until January 28, Watson CPA and other tax professionals are accepting and helping taxpayers prepare their returns. Individuals and small business owners in Carmel, Westfield and the greater Indianapolis area can schedule a free consultation with Watson CPA.

At Watson CPA, our team of Certified Public Accountants provide industry-leading accounting services and tax preparation for individuals and businesses. We’ll make sure your Indiana tax refund is accurate and filed correctly. Get ahead of the game with your tax return by calling us now at 317-848-9938!

construction-equipment-cranes

New Heavy Equipment Rental Excise Tax in Indiana for 2019

Starting January 1, 2019, Indiana will implement a new excise tax on the rental of heavy equipment and construction equipment. The new Indiana excise tax will be assessed on equipment that is rented without an operator and from a location in Indiana, and the tax will be 2.25% of the gross retail rent value.

During the legislative session for 2018, the Indiana General Assembly enacted and the Governor signed into law House Enrolled Act No. 1323. The law imposes an excise tax of 2.25% of the gross retail income received by the retail merchant on heavy equipment rentals starting on January 1, 2019.

Heavy rental equipment is defined as property:

  • owned by a person or business that is in the business of renting heavy equipment, including any attachments;
  • is classified under 532412 of the North American Industry Classification System Manual in effect on January 1, 2018;
  • not subject to registration for use on a public highway; and
  • not intended to be permanently affixed to any real property.

This new Indiana excise tax applies to heavy rental equipment without an operator such as:

  • Bulldozer rental or leasing
  • Construction machinery and equipment rental or leasing
  • Crane rental or leasing
  • Earth moving equipment rental or leasing
  • Forestry machinery and equipment
  • Heavy construction equipment rental
  • Logging equipment rental or leasing
  • Oil field machinery and equipment rental or leasing
  • Oil well drilling machinery and equipment rental or leasing
  • Welding equipment rental or leasing
  • Well drilling machinery and equipment rental or leasing

The Indiana excise tax is not applied if:

  • The equipment is rented for mining purposes or heavy equipment that is eligible for a property tax abatement deduction during the calendar year it is rented
  • The rentee is the US Government, the state of Indiana, a political subdivision or an agency or instrumentality of an aforementioned entity
  • It is a transaction of sub-rent from a rentee to another person and the rentee was liable for the tax imposed

What is Excise Tax?

Excise tax, sometimes referred as “duty,” is a tax on use or consumption of certain products. They can be included in the price of a product, such as gasoline, cigarettes and alcohol, as well as be imposed on some activities, like gambling. Both the federal government and state governments can impose excise tax.

To report excise taxes, businesses will need to file Form 720 quarterly. Form 720 needs to be filed quarterly, and it is due a month after the end of each quarter.

  • Quarter 1 (January 1 – March 31): File by April 30
  • Quarter 2 (April 1 – June 30): File by July 31
  • Quarter 3 (July 1 – September 30): File by October 31
  • Quarter 4 (October 1 – December 31): File by January 31

How is an excise tax different from a sales tax?

There are two main differences between excise tax and sales tax are:

  • There are a few specific goods that have an excise tax, whereas sales tax is applied to just about everything you purchase
  • Excise tax is placed on the production of goods, while sales tax applies to the sale of goods

Where applicable, the manufacturer will pay excise tax because it occurs during the production. On purchases with sales tax, the end user pays the sales tax.

If you are a construction or heavy rental equipment business in Carmel, Westfield or the greater Indianapolis area needing help with your tax preparation, or would like to know more about the new Indiana excise tax, request your free consultation with Watson CPA today!

Photo by Victor Benard on Unsplash

Bride in Getaway Car

How Taxes Change After Major Life Events – Marriage, Divorce, and With Children

Life happens. And since taxes are one of the only things that are certain in life, it’s best to know how to prepare and plan for tax changes after major life events. Some of the biggest changes to your taxes come after marriage, the birth of a child, and after a divorce.

How Does Getting Married Affect Your Taxes?

For Federal tax purposes, if you are married at any point during a given year, you are considered “married” for the entire tax year. Once you’re married, you have two filing statuses to choose from: married filing jointly (MFJ) or married filing separately (MFS). The only exception is if one spouse is a nonresident alien, the couple must file separately.

The Differences between Married Filing Separately vs. Jointly

Married Filing Jointly means that the couple can record their respective incomes, exemptions and deductions on the same tax return. The IRS encourages married couples to file jointly by extending several tax breaks to those who do. The joint report combines the income and deductions, and married couples can file jointly even if one spouse has no income or deduction.

When couples file together, the individuals are held jointly liable for the information reported on the tax return. If one spouse brings tax problems from previous years into the marriage, the new spouse should not be affected.

Married Filing Separately means that a couple chooses to record their respective incomes, exemptions and deductions on separate tax returns. Couples may choose to file separately for a handful of reasons. For example, if it’s suspected that one spouse is not honestly reporting his or her income and deductions, then the other spouse may elect to file separately.

However, separate filers are usually excluded from the special tax breaks that joint filers are eligible for, like the Earned Income Credit. If a married couple files separately but has a child together, only one parent can claim the child as a dependent, even if both equally contribute toward child support. If one individual itemizes deductions, the other cannot claim the standard deduction.

Married Filing Jointly or Separately Tax Brackets

The tax bracket for a married couple depends on if the couple chooses to file jointly or separately. When a couple chooses MFJ, their tax bracket depends on the combined income, which may bump one or both individuals into a higher tax bracket. Tax brackets for MFS are the same as tax brackets for those who file as single.

How Do My Taxes Change When I Have A Child?

To claim a child as a dependent, you’ll have to report the child’s Social Security Number on your tax return; if you have multiple children, you’ll have to report the SSN for each one. You can request a Social Security card for your newborn when applying for a birth certificate at the hospital. Failing to report the SSN for each dependent can result in a $50 fine and slow down your refund. So if this is your first time filing taxes with a child, be sure to register for the SSN right away after he or she is born.

For tax years prior to 2018, claiming your child as a dependent would reduce your taxable your income by the annual dependency exemption. In 2017, the tax deduction for a child was $4,050. But starting in 2018, dependency exemptions are replaced with increased child tax credits that directly lower your tax instead of you taxable income.

With the birth of a new baby comes a $2,000 child tax credit, and you will receive it every year until the child turns 17. You’ll receive the full credit no matter when in the year the child was born. The credit will reduce your tax bill dollar for dollar, so the $2,000 child credit will reduce your tax bill by $2,000.

If you are married with a child, you can still choose to file as MFJ or MFS. If you do file separately, only one parent can claim the child as a dependent. Additionally, when a couple chooses married filing separately, the child tax credit goes to the parent claiming the dependent. Single parents can choose to file as head of the household as long as they claim at least one dependent and the dependent lived with the parent for more than half the year.

How Does Divorce Affect Taxes?

Whatever your marital status is on December 31 is what determines your filing status for that tax year. A married couple undergoing the divorce process must still file as MSF or MSJ until the divorce is final. Ex-spouses filing taxes after the divorce is finalized can file as single or head of the household, considering the circumstances.

If the couple has a child, one may claim the dependent if the child lived with the parent for a longer period of time during the year than with the other parent. The parent who claims the child as a dependent can also claim the child credit.

If there are alimony payments involved, the ex-spouse making those payments may take a tax deduction, even if the deductions are not itemized. The IRS will only consider these payments to be true alimony if they are made in cash and are required by a divorce agreement. The ex-spouse receiving alimony must pay income tax on the amounts that are deducted.

For child support, the ex-spouse receiving these payments does not pay income tax nor does the ex-spouse making these payments get a deduction. If you owe child support and file taxes, the IRS will take your tax refund to cover these arrears, and this money will be given to the appropriate child support agency.

Find Professional Help For Filing Your Tax Return

Whether you’re getting married, filing for divorce or expanding your family, these changes will affect how you file your taxes. Watson CPA is here to handle all your tax preparation questions for any stage of life! Request your free consultation now to get in contact with an experienced CPA today.

Photo by Cayton Heath on Unsplash

Bitcoin

Cryptocurrency Tax Reporting: What to Know About Bitcoin and Taxes

When you use cash to make a purchase in person, you hand over the dollar bills to the clerk. You give up the possession of the bill in exchange for the good or service you’re purchasing. You can no longer use this specific dollar bill for another purchase; it is in the possession of the business now. But you still have other dollar bills to use elsewhere.

With the advancement of technology came e-commerce. Online shopping is now a convenient way for consumers to purchase goods and services from the comfort of their own home or right off of their smartphone. Because of this, e-commerce relies on digital currency to make transactions. But unlike handing over a physical dollar bill, users had the opportunity to copy files containing digital currencies and use the same money multiple times.

Banks solved this problem by creating their own computerized ledgers to track transactions and balances of everyone’s accounts. However, many people have issues with a third-party central authority over their money. They wanted a secure and private way to control their money without an outside entity, thus sparking the development of cryptocurrency.

What is cryptocurrency? What is Bitcoin?

Cryptocurrency is a decentralized digital currency that is secured through encrypted codes to protect its users’ transactions and balances.

The most popular cryptocurrency is Bitcoin. It does not require a central authority to validate transactions between users. Instead, the transactions are verified through the massive network of Bitcoin users.

Before going further, one important distinction to make is the difference between “Bitcoin” and “bitcoin.” Bitcoin, with a capital B, is the name for the protocol and network as a whole, while bitcoin, with a lowercase B, is the name for the actual currency.

How Does Bitcoin Work?

Since Bitcoin is decentralized, every participant has a copy of the ledger, called blockchain, on his or her own computer. There is no sole person controlling it; no one can give him or herself more bitcoins because everyone’s ledger needs to match. The blockchain technology is transparent to all the users, so you can see all of the transactions and balances in place. While these actions are open and trackable, you can’t see who sends what to whom. User identities are kept anonymous.

You have a few options for how to get bitcoins. You’ll first have to create a Bitcoin wallet, after which you can find multiple ways to buy bitcoin. You can buy bitcoin using your bank account, purchase bitcoin from peer sellers, or withdraw from a Bitcoin ATM. Once you have bitcoin in your wallet, you can then find participating vendors and businesses to make a transaction.

Because it's all digital, one single bitcoin can be divided into very small fractions. So if your purchase is not worth an entire bitcoin, it can be cut in half or all the way down to 0.00000001 of its original whole.

You can choose to buy bitcoins, accept bitcoins as payment for a good or service, or earn bitcoins through a process called "mining," which is explained below.

How Bitcoin Mining Works

To maintain the blockchain, users can participate in what’s called “mining.” Bitcoin mining is the process of validating and updating the blockchain. This is done by using extremely powerful computers that race against one another to solve an equation by guessing a specific number.

The first “miner” to guess correctly gets to record the next batch of transactions to add to the blockchain. These newly written transaction confirmations are called “blocks.” Each block is sent to the other computers in the network to update the entire blockchain. On average, a new block is added every 10 minutes. In return, the original miner is rewarded with new bitcoins. The current reward per block is 12.5 bitcoins.

If you are interested in mining, you’ll need to upgrade to a highly powerful computer to be successful. Because these equations are extremely difficult, more advanced computers have been developed to make multiple guesses per second. Application specific integrated circuits (ASICs) are the current mining standard as they were manufactured solely for mining Bitcoin.

What is the Value of Bitcoin?

The value of bitcoin fluctuates every day. As of November 26, 2018, the value of 1 bitcoin is $3,632.30 U.S. dollars. In December 2017, 1 bitcoin was valued at almost $20,000 USD. But a few months later on March 31, 2018, the value of 1 bitcoin was $6,994.80 USD. So within the past twelve months, the exchange rate of bitcoin has dropped dramatically.

The Risks of Bitcoin

While the idea of a decentralized digital currency is appealing to some, there are a handful of risks associated with that.

  • The volatile value of one bitcoin can be enough to consider if getting involved is even worth it.
  • There is no formal protection for the individuals. Unlike your FDIC-insured bank account, nothing protects your wallet if the market goes south.
  • It’s not a formally accepted form of currency everywhere. While some businesses accept bitcoins for payment, many others keep a leery eye on it and prefer to accept legal tender currency.

How to Report Bitcoin Income and Pay Taxes on Cryptocurrency

While it’s not a legal tender currency, the IRS recognizes that many consumers use Bitcoin and other cryptocurrencies as a form of payment. In response, it released guidelines that clearly define the cryptocurrency tax laws.

  • When computing gross income, any taxpayer who accepts virtual currency as a form of payment for goods or services must include the fair market value of the virtual currency in USD as of the date that the virtual currency was received.
  • Employers paying with Bitcoin must report employee earnings to the IRS on W-2 Forms. The bitcoin value must be converted to the USD value as of the date each payment is made. Wages paid in virtual currency are subject to withholding to the same extent as dollar wages.
  • Employees paid in Bitcoin will need to convert their W-2 wages to USD and report as such.
  • Any Bitcoin held as a capital asset will be taxed as property. General tax principles applicable to property transactions also apply to transactions that use virtual currency. Any gain or loss from the sale or exchange of the asset is then taxed as a capital gain or loss.
  • Bitcoin miners must report any earnings as income. The bitcoins earned must be converted into the fair market value of the USD at the time of the earning.

In November 2018, Ohio became the first U.S. state, and one of the first governments in the entire world, to allow businesses to pay taxes using bitcoin. Businesses can register through OhioCrypto.com and pay any of the 23 different types of state taxes with bitcoin. The website will then, through a third-party processor called BitPay, convert the bitcoin into USD to then deposit into the state's accounts. The hope is to eventually extend this option to individuals for the same purposes.

Get Help with Cryptocurrency Accounting, Preparing and Reporting

If you use Bitcoin or any other cryptocurrency, you’ll want to make special preparations for your tax return. Today’s tax laws are already tricky enough, and throwing in the considerations for cryptocurrencies only adds to the confusion.

Most taxpayers, whether they use Bitcoin or not, benefited from using a professional tax preparer. Call Watson CPA today for a free consultation to learn how to best prepare your tax return.

Photo by Viktor Forgacs on Unsplash

Income Tax Forms

IRS Red Flags that Trigger an Audit

What is an Audit by the IRS?

The IRS website defines an audit as “a review/examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.” The IRS conducts audits in an effort to minimize the tax gap — the difference between what the IRS is owed and what the IRS actually receives.

Selection for an audit doesn’t immediately mean there is a concern. The IRS chooses accounts based on random selection and computerized screening that compares your tax return to the “norms” of similar returns. The IRS may also choose to audit you if you do business with another taxpayer being audited.

What are some IRS Audit Red Flags?

When finalizing your taxes, you’ll want to have proper documentation for your valid deductions. Avoid these IRS red flags on your tax return that may increase your chances for an audit.

Unreported nonwage income

If you have a salary income but decide to pick up a freelance gig for a bit of extra pocket change, you will need to report your earnings on your Form 1099 along with your regular W-2. Failing to report part of your income is the one of the biggest red flags for an IRS audit.

Mathematical errors

Mistakes happen, but even a small mix-up within your calculations could merit an audit. Triple check your numbers before submitting your tax return. An unintentional mistake could lead to hefty fines. Worried about your math skills? Prepare your taxes with the help of an accountant.

Claiming too many charitable donations

The IRS can sense where your comfort level would be with charitable donations based on your salary. If your deductions are higher than average, the IRS will want to investigate further. Be sure to save your receipts and proof of charitable contributions to prove that you really are that generous.

Questionable business expenses

The IRS is strict about not mixing business expenses with personal expenses. A valid business expense must be both ordinary and necessary to your line of work. A chef could write off new utensils during a kitchen update. But a lawyer with an affinity for baking cupcakes couldn’t claim a stand mixer as a business expense.

Home office deduction

Writing off your home office can be a major pro to owning a business. But the IRS won't accept your kitchen table or living room couch as a home office. For a valid home office deduction, the office needs to be a space in your home solely dedicated to your business operation.

Hire a CPA during an IRS Tax Audit Representation

If you’ve received an audit notice from the IRS, don’t go through it alone. Having a CPA represent you is the best way to get tax audit help. The IRS will then communicate with the CPA, and the CPA will ensure that the audit is efficiently handled. Contact Watson CPA today for a free consultation and to accurately prepare your taxes.

Year-End Tax Planning Checklist for Small Business Owners

When Does the Tax Year Start and End?

The IRS defines a “tax year” as an annual accounting period for keeping records and reporting income and expenses. There are two types of tax years you can use to determine the end of the tax year:

  • Calendar year: 12 consecutive months beginning January 1 and ending December 31
  • Fiscal year: 12 consecutive months ending on the last day of any month except December

End-of-Year Business Checklist

Stay on top of your business as you close out your tax year, whether it’s based on a calendar year or fiscal year. Use this handy checklist to organize and prepare for the coming year.

  • Organize your financial records. Having your books in excellent order will be an advantage for the new year.
  • With the help of your accountant or CPA, conduct an audit, review or compilation – whichever financial report is most appropriate for your business. Determine your financial status after examining your balance, cash flow management, accounts receivable and income statements.
  • Evaluate your current tax strategy. Is your current business structure the best plan for your tax strategy? Decide what to change for next year’s small business tax plan.
  • Create a new business plan, reflecting off the end of year reports for your small business. Set fresh goals based off of this past year’s achievements.
  • Review your client and vendor list, and make sure all the contact and profile information is correct. Additionally, update records for current and past employees in your payroll system.
  • Prepare payroll records at the local, state and federal levels. Your accountant or CPA can help ensure that you comply with all payroll regulations. Decide if you will give a year-end bonus to your employees. Just like regular pay, employee bonuses are subject to income tax withholding.
  • Start preparing your tax documents. Will you need to request an extended filing deadline? Confirm your deadlines based on your business’ structure. You can find which end of year tax forms for small business you’ll need from the IRS.

Need Help Completing Your End of Year Small Business Checklist?

If you need help organizing your books, finalizing your payroll records or preparing your tax documents, contact Watson CPA today. Small business owners in Carmel, Westfield and the greater Indianapolis area can request a free consultation to successfully close out this tax year and plan for 2019. Call 317-848-9938 now to get started!

How to Become a Sole Proprietor

What does “sole proprietor” mean?

A sole proprietor is someone who owns an unincorporated business by himself or herself. The business and owner are legally the same. The business is not a taxable entity; all assets, liabilities and income are treated as belonging directly to the business owner.

The advantages of a sole proprietorship include:

  • No state filing required to create a sole proprietorship.
  • No separate business income tax filing. Any business income or loss is reported on your personal tax return, and any tax is paid at the individual level.
  • It is relatively quick, easy and inexpensive to establish a sole proprietorship.
  • Fewer ongoing requirements and formalities than an LLC or corporation.

Can a sole proprietor have employees?

A sole proprietor can hire employees, and there is no limit to the amount of employees that can be hired. As with any other employer, the sole proprietor is responsible for filing taxes and the appropriate paperwork regarding his or her employees.

Does a sole proprietor need an EIN?

Any business owner must acquire an Employee Identification Number before hiring employees in order for to IRS to identify the taxpayer. Even if the sole proprietorship does not have additional employees, the owner may consider obtaining an EIN to establish notoriety as an independent contractor.

Without an EIN, a sole proprietor would use his or her Social Security number when filing taxes. The sole proprietor would then share his or her SSN with clients. But in the case of identity theft, having an EIN could help protect your SSN.

Additionally, the sole proprietor would need to obtain an EIN if he or she sets up a 401(K) retirement plan, buys or inherits the business, or wants to form a partnership or LLC.

Can a sole proprietor be an LLC?

A sole proprietorship and an LLC are two separate business types. In a sole proprietorship, the business and the owner are the same entity. In an LLC, the business and the owner are separated. You can convert your sole proprietorship into an LLC, following the guidelines given by your state. Each state has guidelines that define how to change from a sole proprietor to an LLC.

The main difference between a sole proprietorship and an LLC is the protection that the business owner gets in an LLC. If someone were to sue an LLC, the business suffers the blow while the business owner is personally protected. But in a sole proprietorship, where the owner and the business are the same, the business owner may suffer major loss in a lawsuit.

Does a sole proprietor need a business license?

Most sole proprietorships need a general operational license to establish it as a legitimate business. Depending on the business type or industry, you may need additional licensing or permits. Industries such as child care, construction, finance and real estate require professional licenses to operate a business. Positions like massage therapists, dietitians, tattoo artists and fitness trainers would also need a license to prove they have the legal authority for these roles.

Many sole proprietors consider filing a DBA (doing business as) to establish a difference between the names of the business and the owner. Otherwise, the business’ name is the same as the owner’s. Potential customers, banks and other vendors may prefer you have a DBA, as it gives more legitimacy to your business.

Filing Taxes as a Sole Proprietor

Because a sole proprietorship is not seen as a taxable entity by the IRS, all business income or loss must be reported on your personal income tax return. You will need a file a Schedule C with your 1040 to inform the IRS about your business’ profit or loss for the year.

If you are a sole proprietor or small business owner in Carmel, Westfield or the greater Indianapolis area, you can learn how to file taxes as a sole proprietor from Watson CPA. Call us today to get your free consultation from Watson CPA.

Audit vs Review vs Compilation: How Small Business Financial Statements Differ

CPA firms are a great resource for small business owners to get help organizing their financial reporting. When a business owner applies for a loan or wants to get a new investor on board, the business owner should have the appropriate financial statement prepared to accurately reflect the business’ financial health. The three different financial statements that a small business owner can use are audits, reviews and compilations, but they each mean different things.

The Difference between Audits, Reviews and Compilations

Audits

A small business audit is when a CPA takes an extensive and methodical look into your business’ finances, transactions and accounting records. After reviewing everything, the CPA will form an opinion whether or not your financial statements comply with generally accepting accounting principles (GAAP). You would provide this insight to a lender, investor or potential buyer to assure that your finances are in line.

Reviews

Not as rigorous as an audit but still a look into your finances, a review is a good idea for small business owners who don’t have the time or expenses for a full audit. The CPA will do a basic analysis to make sure that the financial statements make sense, giving a limited opinion if your procedures follow GAAP. These reviewed financial statements are given to a lender when the business owner is trying to secure a small loan.

Compilations

A compilation report doesn’t require a hard analysis or deep dive into your finances. It’s the best option for simple accounting and organization. During a compilation, the CPA will help you prepare your financial statements without issuing an opinion; whereas during an audit or review, you prepare your financial statements and the CPA analyzes them to give an opinion.

Which financial statement is best for your small business?

Since each report has different requirements and levels of assurance, knowing which one to choose can be tough. That’s why Watson CPA is ready to help small business owners in Carmel, Westfield and the greater Indianapolis area and find the best financial statement for their business. Request your free consultation today to get started!

Hidden Small Business Tax Deductions and Tax Extension Deadlines for 2018

Small Business Extended Tax Return Due Dates for 2018

While fall isn’t considered “tax season,” there are a handful of crucial dates for businesses to know as Q3 wraps up and the fourth quarter begins. The remaining deadlines for 2018 are for those who have requested an extension to filing their tax return.

September 17, 2018:

  • Deadline to make estimated tax payments for the 3rd quarter of 2018
  • Final deadline for Partnerships and S-Corporations to file corporate tax returns for 2017 (with extension)

October 1, 2018:

October 15, 2018:

  • Final deadline for C-Corporations and Individuals to file corporate tax returns for 2017 (with extension).
  • Last day the IRS will accept an electronically filed tax return. You will have to file by paper after this date.

Home Office and Other Small Business Tax Deductions You Didn’t Know About

Starting, owning and running a small business can be incredibly difficult at times. Ease some of the load and take advantage of these hidden tax deductions that small business owners can claim.

Home Office Deduction

In order to properly write off your home office for your small business tax deductions, it’s important to understand how exactly this rule works. The IRS states that the space is exclusively used for your business and serves as the principal place of business. To calculate the deduction, the IRS offers a simplified option: deduct $5 per square foot of home used for business, up to a maximum 300 square feet. The regular option is to calculate the percentage of space in your home used for business. Read more about the different options for calculating your home office deduction.

Coworking Spaces

Perhaps you don\'t operate your business out of a home office, but instead from a collaborative workspace. Save a purchase receipt for any fees associated with your coworking space, and you can write off these expenses.

Travel Expenses and Mileage

Certain conditions apply when writing off travel-related expenses. In order for a trip to quality as business travel, it needs to be ordinary, necessary and away from your tax home. You also need to be traveling for longer than a normal day’s work. A few business travel expenses approved by the IRS are meals and lodging, tips, shipping of baggage, and transportation fees such as bus or taxi fares, car rentals, airplane tickets, and mileage of your personal car.

Insurance Premiums

If you are self-employed and pay for your own health insurance premium, these costs are deductible as long as they don’t exceed your business’ total profit. If your health coverage is through a secondary employer, though, you can’t write off those premiums.

Employee Benefits

You can deduct the cost of employee benefit programs, including wellness assistance programs, education assistance and retirement plan accounts. If you’re self-employed with no additional employees, you may be eligible for personal deductions if you make contributions to your own qualified retirement plan.

Education, Certifications and Self-Improvement

Educational costs are fully deductible if they add value to your business or increase your work ethic and expertise. This includes books, workshops, conferences, and traveling to and from classes. Any educational cost that is unrelated to your business or industry don’t qualify.

Start-Up Costs

If this is your first year of being a small business owner, you may be able to write-off costs related to creating, preparing and organizing your business. This can include providing surveying and field work, employee training programs, visiting potential office locations, or advertising fees.

Hire A Local Accountant for Small Business Tax Filing Help!

With so many possible deductions and the fine print behind them, it’s easy to get confused about whether or not you qualify for them. If you’re self-employed or a small business owner in Carmel, Westfield or the greater Indianapolis area, consult with Watson CPA today to verify the business tax write-offs you’re qualified to make.

Recent IRS Phone Scam: How to Protect Yourself and Report Fraudulent Calls

In late July 2017, the United States Justice Department sentenced 21 conspirators of a large-scale IRS scam to prison, with sentences up to 20 years. This case is considered the nation’s largest multinational telephone fraud operation, causing 15,000 victims to collectively lose hundreds of millions of dollars.

IRS Phone Scam Based in India

From 2012 to 2016, scammers posed as IRS officials and targeted vulnerable Americans, including immigrants, with threats of arrest, deportation and similar actions if the victims did not immediately pay their debts or taxes using wire transfers or prepaid cards. The demanded payments were in thousands of dollars at a time. The prepaid cards included gift cards to major U.S. retailers that the victims paid for and then gave the card information to the callers.

When these calls came through, caller I.D. screens lit up with the words “U.S. Government.” The callers claimed to be officials from the IRS or from US Citizenship and Immigration Services. The Justice Department said that victims’ information was obtained through “data brokers” and other sources.

The scammers called from centers based in India. The money was routed through these call centers, then sent back to the operation’s leaders positioned in Alabama, Arizona, California, Florida, Illinois, Indiana, New Jersey and Texas.

How to Report IRS Scams

It’s important to know that the Internal Revenue Service does not call consumers to threaten legal action or harass them over debts. Additionally, the IRS does not demand immediate payment of debts using a specific method, like a prepaid card or wire transfer. Instead, the IRS will initially mail a bill to the taxpayer and will not threaten to get the police, immigration officers or other law enforcement involved.

If you receive a call from someone impersonating an IRS official, do not give out your personal information or make any payments. If you receive an email claiming to be sent from the IRS, do not reply to, open any attachments, or click any links within the email.

For further information on how to report an IRS scam, and more details on how to identify a scam, visit the IRS website.

Hire a trusted CPA for all tax services

It can be intimidating to deal with the IRS, whether it’s legit or a scam. Hiring a trusted CPA gets a third-party involved who understands the ins and outs of taxes, payment plans, and more communication with the IRS. Receive your free consultation with Watson CPA today, or call us at 317-848-9938 today to get started.

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