Individual Tax Write-Offs

It is tax time again and you may be wondering what you can write off. Write-offs on your personal returns are considered itemized deductions usually. For more on itemized vs. standardized deductions, see our post here http://www.genesisaccountingsolutions.com/standard-deduction-2020/. Here are a list of common itemized deductions;

  • Home Mortgage interest
    • You will receive a tax document from your mortgage company if this applies.
  • Medical expenses
    • If you had out of pocket medical expenses including co-pays and medication, you may be able to write these off.
  • Charitable contributions
    • Whether you donate money or items, charitable contributions are tax deductible. If you donate, make sure to get a receipt from the organization you donated to for tax preparation purposes.
  • Investment Interest
    • If you made investments that you had to pay interest on you should receive a tax document from your investment firm that you can use to write off the interest on your returns.
  • Property, state and local income taxes
    • Talk to your tax preparer to find out if you can write off any of these type of expenses.

  • Self-employed business expenses
    • If you run a small business but have not yet incorporated, you can write your business expenses off on your tax return provided you have accurate documentation.
  • Business use of home
    • If you use a portion of your home to run your small business and are not incorporated, you may be able to write off a portion of your home expenses like rent and utilities.
  • Business use of vehicle
    • Similar to business use of home, if you use your vehicle for business purposes and are not incorporated, you may be able to write off your mileage or vehicle expenses.
  • Work related education
    • You must be self-employed, a qualified performing artist, a fee-based state or local government official or a disabled person with impairment-related education expenses in order to claim this itemized deduction.
  • Casualty, disaster and theft losses
    • If you live in an area that had a federally declared disaster such as a hurricane or tornado or if something was stolen from your property, you may be eligible for this deduction.

If you are looking for tax preparation services feel free to contact us contact@genesisaccountingsolutions.com. We offer tax preparation for businesses and individuals.

Corporate Compliance

Many business owners are unaware that incorporation requires corporate compliance. When you incorporate you become a legal entity. Becoming a legal entity requires registering with state and federal agencies. Federal agencies will require a Federal Tax Identification number. State agencies will require employment ID numbers. Registration with any state or federal entity will require different forms of upkeep to keep your corporation compliant.

State Corporate Compliance

When you incorporate, you register the name you want to use with the state. The state approves your entity and assigns a corporate identification number. Once registered, the state will require you to file an annual report. Annual reports are part of corporate compliance. Annual reports are intended to update the state on changes to your corporation. If an annual report is not filed, you may be subject to penalties.

If you have employees, the state will require you to pay payroll taxes. Keeping compliant with state regulations for operating a business will also require compliance in the following areas;

  • Workers Compensation insurance coverage in case employees get injured
  • Registration for a sales tax ID number if subject to sales tax
  • Registration for an employer ID number if subject to payroll taxes
  • Quarterly and/or annual tax filings for employer taxes and/or payroll taxes
  • OSHA requirements for workplace and jobsite safety
  • Registration with state entities for specialized industries such as law, accounting, construction and health care
  • Reporting of newly hired employees to state employment agencies
  • Obtain a business license or occupational permit from your local city or county allowing you to conduct business in that area
  • Paying W-2 employees the required minimum wage
  • File annual income tax return for corporation

Federal Corporate Compliance

The federal government will not require you to file an annual report. The federal government will require the following to keep your corporation compliant;

  • File annual income tax return for corporation
  • Registration for FEIN (Federal Employer Identification Number)
  • Maintain accurate and detailed records of expenses and income
  • File annual employment tax forms 1099’s and W-2’s
  • File quarterly and annual employer payroll tax returns

When you incorporate it is a great idea to research corporate compliance in your state. Part of many incorporation services is help and advice regarding corporate compliance. Avoid fees and penalties from late filings by understanding what your state and government require to maintain your corporate protections.

If you need help with incorporation don’t hesitate to call us at 1-800-572-4419 or email contact@genesisaccountingsolutions.com to get a quote for incorporation services. Feel free to subscribe to our blog for more accounting, tax, bookkeeping and HR tips.

Sole Proprietorship

Over the next few posts we will discuss different corporate structures. Many wonder what corporate structure is right for them when owning a business. These posts will discuss each corporate structure available and when they should be utilized. In this post we will discuss Sole Proprietorship.

A Sole Proprietorship is not a legal entity as far as the state and federal government are concerned. This type of corporate structure is used often for businesses that are just beginning. If you have a side gig that earns you income. If you will only be working a small amount of hours on your business to start. If you aren’t quite sure what corporate structure you should use yet, you will probably use Sole Proprietorship.

Legalities of running a Sole Proprietorship

First you will probably want to register your business with the county you will conduct business in. This is called a DBA or “Doing Business As”. If you plan to conduct business in a name other than your own you will want to register the name you want to use. Registering your business name will enable you to operate using the business name you wish in your county.

As a Sole Proprietor you will be eligible to file a schedule C on your 1040 tax return. A schedule C is a schedule of business expenses that are deductible on your taxes. Not all expenses are tax deductible and some have certain regulations. You may also be eligible to write off vehicle expenses and business use of home.

A corporate veil is the legal protection operating a legally registered corporation provides. As a Sole Proprietor you do not have a corporate veil. If someone initiates legal action against you, your personal assets are unprotected. Only legally registered corporations offer protection of your personal assets.

If you are considering incorporation or need help with accounting or bookkeeping, please feel free to call us for a free consultation at 800-572-4419 or email contact@genesisaccountingsolutions.com. Subscribe to our blog today for more bookkeeping, accounting and HR tips!

New Employee Paperwork

What is it and when to fill it out?

When you begin hiring employees you are required by government entities to have them fill out paperwork. This is often referred to as new-hire paperwork. The paperwork you have your employee fill out will depend on what type of employee you hired.

Subcontractors

A subcontractor is also known as a 1099 employee. For more about what a 1099 employee is please visit our post here: http://www.genesisaccountingsolutions.com/w-2vs1099/
1099 employees must fill out at W-9 Form. You can find the federally required 1099 form here: https://www.irs.gov/pub/irs-pdf/fw9.pdf
Make sure that if you search for the W-9 form online, you obtain it from the IRS website. Many other sites will sell you a pdf fillable form when you can get it for free from the IRS. Subcontractors do not need to fill out any state forms.

W-2 Employees

W-2 employees tend to be any workers that work in your physical place of business. Employers are required to pay matching taxes on W-2 workers. Employers are also required to run pay for W-2 employees through payroll. W-2 employees must fill out paperwork according to federal requirements. Proper employee paperwork establishes an employee’s citizenship and identity. The US Federal government requires employees to fill out a W-4 which you can find here: https://www.irs.gov/pub/irs-pdf/fw4.pdf and an I-9 which you can find here: https://www.uscis.gov/i-9

Other paperwork that your W-2 employees should submit within three days of being hired;

  • Either a copy of the employee’s drivers license and a copy of the employee’s social security card/or a copy of the employee’s birth certificate or a copy of the employee’s passport will cover both the requirement to establish citizenship and identity.
  • A copy of the employee’s insurance policy card if the employee will drive a company vehicle.
  • Research your state, they may have a special tax calculation that will require its own form.
  • An authorization from the employee to conduct a background check if your company handles sensitive information or requires background checks.
  • An employment application that shows the employee’s background information and employment history and 1 to 2 emergency contacts.
  • Offer letter if your company wants to outline the position and terms of employment.

If you have further questions about employee paperwork or need other bookkeeping and accounting services, please feel free to contact us for a free consultation at 800-572-4419 or email contact@genesisaccountingsolutions.com. Subscribe to our blog today for more useful information about accounting and HR.

When To Incorporate

You may be wondering if it is time to take your small business to the next level. Maybe you’ve been self-employed and your business has grown. Maybe you secured funding for your business venture from investors. Maybe you’ve been freelancing and want to expand operations. Knowing when to incorporate can save a lot of headache and unnecessary expense.

Cutting Costs

Being a self-employed owner is often expensive. Paying for costs out of your pocket can add up. Maybe it seems like incorporation would save you money. It doesn’t. Incorporation often makes the cost of running a business go up. State filing fees can range from the 100’s to the 1000’s of dollars depending on your state. Incorporation also puts you on the radar with many state and federal agencies making you liable for taxes and corporate compliance.

Who is Liable?

This is a good question to ask if your business operations involve others. When you are self-employed and are the sole employee of your business you are responsible for only yourself. When you begin hiring employees, open a physical location or start taking on investors, you become liable for others involved in your business as well. When you incorporate you create an entity outside yourself that is liable for your business operations. Any assets like buildings and equipment for your business are owned by your business. Your personal assets such as houses and vehicles remain your own. If someone sues your business, your personal assets are protected and remain your own so long as your corporation is compliant. If you are concerned about liability, hiring W-2 employees or taking on investors, incorporation is a good way to protect yourself and your assets.

Taxes

When you incorporate your business is required to file its own tax return with the government and the state you operate in. While this is an additional expense, filing taxes as a corporation can also save you money. If your self-employed business is making more than $100,000.00 per year, it may be time to look into incorporation. As a self-employed business owner you are subject to self-employment taxes. Self-employment taxes mimic corporation taxes which can be higher than corporate taxes depending on your income and deductions. You may also be able to deduct more as a business than you can as self-employed. Certain business expenses are not tax deductible unless you file a corporate tax return.

No Longer Flying Solo

If you are taking on a business partner incorporation is probably the way to go. Becoming a corporation, LLC or General Partnership will protect all people involved in the business. Incorporation also involves detailing the percentage ownership and corporate responsibility of each owner. Having a partnership agreement in place does not require incorporation but is almost always a part of incorporation. If you will be accountable to investors, especially investors that own part of your business, incorporation will help protect your personal assets. Keeping your assets separate from your business assets is essential to your personal financial health.

If you have more questions about incorporation and whether it is right for you, feel free to call us at 1-800-572-4419 for a quote and free consultation. You can also email us at contact@genesisaccountingsolutions.com.

Standardized Deductions 2020

As we head into tax season it is beneficial to know about your itemized and standardized deductions. What is a standardized deduction? Your AGI or Adjusted Gross Income is the amount used to calculate what taxes you owe. To arrive at your AGI the sum of your earnings minus any deductions or tax credit is used. The standardized deduction is the minimum amount the IRS will allow you to deduct from the sum of your earnings to arrive at your AGI.

Itemized deductions & Tax credits

What is an itemized deduction? Itemized deductions are specific expenses that the IRS allows you to deduct from your income to arrive at your AGI. Tax credits are a dollar reduction in the overall amount you owe. For most people the amount of the standardized deduction will be more than the sum of all itemized deductions. You can take either the standardized deduction or the sum of your itemized deductions but not both.

2020 Standardized deduction List

  • Standard or Single deduction
    • $12,400
  • Married Filing Jointly
    • $24,800
  • Married Filed Separately
    • $12,400
  • Head of Household
    • $18,650

If you need someone to file your personal or business taxes feel free to email us at contact@genesisaccountingsolutions.com or call 800-572-4419 for a free consultation. We specialized in virtual bookkeeping and accounting services and also offer tax preparation and filing.

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