Stephen Wallick July 3, 2019 No Comments

Are You Overpaying Business Taxes?

If you’re in business, you already know a portion of your annual earnings is going to the IRS. But if you’re like one-third of the country’s small businesses, you fear you’re paying more than required. No matter how many deductions and credits you dig up, you know, deep down, you’re missing at least one or two.

That insecurity only worsens when tax laws change. Even if your business uses professional tax preparation services, there are things you need to do throughout the year to keep your tax bill at a minimum. 

Structure Your Business Correctly

The way your business is structured plays a huge role in how much taxes you’ll pay for that year. This is especially important with the new tax laws, which change taxes for partnerships, S Corporations, and sole proprietors. It’s essential to make sure your business has the right structure as soon as possible. A business structure assessment is a quick and easy way to make sure you have things set up to maximize your tax savings.

Track All Expenses

Many businesses realize they might have missed a deduction or two sometime during tax season, usually when they’re pulling everything together. It can be all too easy to misplace a receipt or lose track of your mileage during a business trip. Make sure you’re set up to capture as many deductions as possible throughout the tax year by choosing apps that make it easy to snap a receipt. Some apps even automatically update your bookkeeping software with the information from the receipts you scan.

Defer Money

If you haven’t already, you should set up a retirement plan. This will not only protect you in your golden years, but it can also provide tax savings. You can contribute up to $6,000 before taxes to a traditional IRA if you’re under the age of 50, and that amount increases to $7,000 for those age 50 and up. You may also be able to tax deduct those contributions, as long as you or your spouse aren’t provided a retirement plan through work. It’s important to look into your retirement savings options and start putting money in there before the tax year is over.

A 15-minute free business structure assessment can help you get a head start on your savings for this tax year. Only ten of these assessments are available, provided on a first come, first served basis. Contact us today to make sure you’re enjoying all the tax savings available to you.

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Stephen Wallick June 26, 2019 No Comments

Protecting Yourself From Tax Collection Scammers

There’s no shortage of frauds and scams out there, especially those designed to steal your payment information or passwords. Taxes are a prime target, with criminals well aware that the IRS collects information that could be used to steal your identity. With just a Social Security number and your contact information, a criminal could apply for a credit card on your behalf.

Realizing the dangers these threats pose, the IRS has taken measures to protect taxpayers, but there are still things you, the consumer, need to do to keep yourself safe from scammers. Here are a few tips to help you get started.

Know How to the IRS Communicates

The IRS makes clear that it will not call, text, email, or use social media to communicate with taxpayers. If you get any correspondence from the IRS, it will come in the mail, on IRS letterhead. And even then, you should contact the IRS at 800-829-1040 between 7 a.m. and 7 p.m. if you have questions about the mailing you’ve received. There are rare instances where the IRS may call or show up at your home, but at that point you’ll have received multiple notices in the mail about the issue.

Be Careful How You File

With e-filing having overtaken paper-based filing, more taxpayers than ever are using online sites to submit their taxes. You probably have heard some of the most popular online tax preparation services, but scammers can easily set up a website, copying the design of the original site, and trick taxpayers into providing their information. If you do use an online service, make sure you go directly to the site itself rather than clicking on a link in an email.

Avoid Tax Resolution Fees

If you’re in hot water with the IRS, it can be tempting to consider those services that promise to resolve all your problems. Unfortunately, these services also often charge exorbitant fees. Many of the services they offer are things you can do yourself, such as setting up installments or making an Offer in Compromise. The IRS provides information on all of this on its website, but you can also ask your own tax preparer to explain your options and help you navigate the process.

Tax collectors don’t limit their scams to tax season, so be sure to be on alert year-round. If you do suspect someone has tried to scam you, report it to the IRS as soon as possible so they can keep an eye on your account and take measures to protect others.

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Stephen Wallick June 25, 2019 No Comments

Announcing Our New Partner, Michael Wallick, MBA

Please join us in welcoming Mike to the Stephen Wallick and Associates team!

Michael Wallick, MBA

Michael Wallick has joined Stephen Wallick and Associates as a partner.  Mike will be opening our new Philadelphia PA Office and will split his efforts between Nashville and Philadelphia.  Mike holds a degree in Management with an emphasis in Accounting and a Masters of Business Administration.  Mike also served in the United States Navy and is a Disabled American Veteran.

Mike began his career in public accounting and over the last decade as a consultant with various national and international companies with a host of accounting and tax-related issues.  Mike is also Certified in Sarbanes Oxley with extensive experience in risk management and compliance in addition to Six-Sigma process improvement methodologies.  He has also conducted Quarterly and Annual reviews to assure that public companies were in compliance with SEC reporting guidelines

A sampling of clients that Mike has worked with include PharmaNet, Penske, Generally Electric, Urban Outfitters,  GSK (Global Pharmaceutical Company ), Flint Group, Cenlar and Lehigh Cement Company to name a few.

Mike is also the founding and managing partner of Phoenix Transitional Living.  PTL currently serves the community with a focus on providing safe, clean and sober living arrangements to anyone in Recovery.  Mike started PTL with the intent of helping Veterans that struggled from addiction as a result of injuries or psychological trauma related to the effects of war and military service and has evolved into helping anyone suffering from Addiction.  As of today, this has grown incredibly into 6 homes through the Philadelphia metropolitan area.

Mike is currently completing his Enrolled Agent licensure and holds other professional certifications.

Mike is married to Sarah and together they are raising their 4 children.

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Stephen Wallick September 19, 2018 No Comments

Credit Myths and Misconceptions

There’s a ton of information out there and most of it is wrong. There’s information about how your credit score is calculated and even worse… how it is impacted by you simply being a consumer.

Let’s look a few of these and try to dispel them

  • Your score drops if you check your own credit.  This widespread credit misconception fools a lot of people, but viewing your own report and score is counted as a “soft inquiry” and doesn’t change the score one way or another. “Hard inquiries” by a lender or creditor, such as those resulting from your applying for credit, can slightly lower your credit score. If you’re shopping for a loan and concerned about harm to your score, know that multiple loan inquiries within a period of a few weeks are usually treated as a single inquiry to minimize impact.
  • It helps to close old accounts.  This credit myth advocates closing old and inactive accounts to hike up your score. However, this might inadvertently have the opposite affect and lower your credit score because now the credit history appears shorter. If you don’t trust yourself to put a card away in a safe place and not use it, then consider canceling newer accounts.
  • Paying off a negative record means it’s taken off your credit report.  Generally, negative records, such as collection accounts and late payments, will remain on your credit reports for up to seven years from the date of first delinquency. Paying off the account sooner doesn’t mean it’s deleted from your credit report; instead it’s listed as “paid.” Of course, it’s smart to pay your debts, both to reduce the total amount of debt you owe and to show your willingness to repay your obligations but expect the negative record to have some effect until it is purged from your report.
  • Co-signing doesn’t mean you’re responsible for the account.  Regardless of this credit myth, if you open an account jointly or co-sign a loan, you will be held legally responsible for the account. Activity on the joint account is displayed on the credit reports of both account holders. If you co-sign for a friend’s auto loan and that person doesn’t make the payments, your credit profile will be hurt and vice versa. The only way to end the dual liability is to have one party refinance the loan or persuade the creditor to formally take you off the account.
  • Paying off a debt boosts your score by 50 points.  Contrary to this credit myth, credit reporting agencies companies determine your credit score via a complex algorithm that uses hundreds of factors and values to calculate it. It’s almost impossible to calculate the difference in points changing one factor might make. It’s wise to pay your bills on time, work to lower your debts and ask that any inaccuracies be corrected. A proven record of sound financial behavior and time will have the most significant impact on your score.

No matter what your score is, the smartest thing you can do with respect to your credit is simple, keep a strong record of on-time payments, keep your credit card balances below 40% of your credit limit, and make sure that the items on your credit score are correct.  Anything and everything else is too hard to manage.

Consult an experienced Enrolled Agent for more tips on how to repair your credit score.

Stephen Wallick September 12, 2018 No Comments

Why You Should Never, Ever Pay Early (With One Exception)

Much has been written about the struggles business owners face to get paid on time, and how to get clients who are dragging their feet to pay up. Clients stalling on payments, combined with unexpected expenses, can put your business in a cash flow crunch.

As the owner of a small business, you probably have experienced watching the mailbox each day for a payment that’s overdue, even as you pay your own bills and invoices upon receipt.

If so, what I’m about to tell you may seem stingy, scrimpy, or downright tight:

Never pay early.

You won’t always have control over when you get paid, but you do have some leeway when it comes to when you pay your own bills.

Apart from the fact that you are a nice person and may feel a need to make people happy, why would you pay early? What benefits are being derived?

The harsh reality is that unless there is a clear, compelling reason for making early payments to anyone (cash discounts, pricing discounts, special delivery arrangements), DO NOT do it. Hold on to your cash as long as you possible can by closely managing accounts payable.

Hold on to your cash.

Take as long as you possibly can to pay your company’s bills without incurring late fees or impacting your ability to operate. Having said that, carefully manage your communications and relationships with your vendors.

Normally, your vendors will have terms established for the payment of their invoices presented for the delivery of their respective products or services. In order to maximize cash flow, you should attempt to extend the payment a minimum of a week or two beyond those established terms.

So here’s the ONE Exception…

Certainly, if sufficient cash is available to meet the other obligations of your company, you should take full advantage of any and all cash discount opportunities. The relative returns from cash discounts are usually quite significant and are well worth the extra effort required to manage shorter payment timeframes.

  • For example, assume a vendor offers a 2% cash discount for payments received within 10 days as opposed to the normal 30-day terms, and your company’s standard payment cycle would dictate that payment be made in 40 to 45 days. By making the payment within the discount terms you are losing the use of the funds at least 30 days sooner than would otherwise be the case. However, your company realizes a 2% return for the use of those funds over the one-month period, the equivalent of a 24% annual return (2% x 12 months).

There are very few investment opportunities that offer such attractive returns with the certainty of a cash discount. This is obviously one of the clear and compelling reasons for paying early.

Consult an experienced Enrolled Agent for more advice regarding your small business expenses.

Stephen Wallick August 1, 2018 No Comments

Understanding the Damage That Wage Levies Can Cause

As bad as the bank levy is, the wage levy (Garnishment) is much worse.

The bank levy is a one shot deal. Meaning that the IRS must issue a new Bank Levy every time they want to clean out your bank account. This repeated effort on their part isn’t necessary with the Wage Levy or Garnishee. It’s designed to bring you to your knees.

Once a Wage Levy is issued, IRS requires the employer to immediately start withholding everything you earn above a pitifully small amount they leave you to try and survive on. At this point, you are trying to pay both current and old tax liabilities at the same time. Wage Levies often result in you receiving only a few hundred dollars per pay period. It is impossible to pay your bills and eat on the pittance they leave you out of your earnings.

IRS knows that Wage Levies cause all types of harm to you and your family, yet they mail out thousands every day.

Having IRS problems gets old

There can be no real rest and relaxation until your IRS problem is completely solved. It’s hard to keep a good job or get your credit report cleaned up when the IRS continues to issue Federal Tax Liens and Levies.

Without a bank account it’s difficult to cash your checks or even pay your monthly utility bills. Even if you’re lucky enough to have a bank account, you have to always worry about the IRS wiping out all of the money in the account without notice.

Some taxpayers with IRS Problems have just a few assets they want to hang onto. Then the IRS pulls out all of the stops. They simply seize your assets and sell them at auction!

Getting the IRS serious enough to seize your assets is not that difficult. Taxpayers with IRS Problems can end up losing everything to the IRS. For example:

  • Autos, Boats, & Motorcycles
  • Real Estate
  • Retirement Funds
  • Insurance Policies
  • Antiques, Collectibles, & Jewelry

All of these items may be very personal or sentimental in value to the taxpayer. IRS could care less. If the taxpayer will not agree to whatever the IRS wants, then they risk having their assets seized. Do not underestimate an IRS employee’s ability to follow through on the threat of seizure. Every IRS office in the country has a public list of recently seized assets and details about the upcoming IRS auction to sell those seized assets.

It is important to pay the taxes you owe to the IRS as non-payment can negatively impact your life. Do you have questions about bank levies or garnishments? Consult an experienced Enrolled Agent for assistance in dealing with these issues and avoid them in the future.

Stephen Wallick June 20, 2018 No Comments

10 Frequent Tax Preparation Mistakes Small Businesses Should Avoid

If you are a small business owner, it’s important to understand the small business tax preparation mistakes to avoid which could otherwise trigger overpaying taxes, errors that might cause an IRS audit, and financial penalties.

Here are 10 frequent tax preparation mistakes that you should avoid as owner of small businesses:

  1. Structuring Your Business Incorrectly

    How a business is structured can have a huge impact on how they are taxed. If you structure your business as a C-Corp, you are taxed twice. If you go for a sole proprietorship but don’t know how to account for certain items such as self-employment taxes, it can create problems later on. In general, an S-Corp or an LLC may be the best alternative.

  2. Improperly Classifying an Employee as an Independent Contractor

    While it may be tempting to misclassify an employee as an independent contractor due to cost savings, it would not be good for your business. There are strict rules for proper classification of an employee and steep penalties for failure to apply the law correctly. Additionally, if you misclassify your independent contractors as employees, you may end up paying higher taxes.

  3. Not Making Yourself an Employee of the Business Entity 

    Even if you are the owner of your business you should still make yourself an employee of the business entity with a reasonable salary. Failing to do so may result in additional social security taxes which are often collected in the form of the self-employment tax. When in doubt, consult a CPA or Enrolled Agent about this.

  4. Mixing Personal & Business Funds

    Many small business owners fall into the trap of not following the business formality of maintaining separate financial accounts for their businesses. Mixing business and personal finances can be quite chaotic during tax filing. Also, if your business is ever audited then it can get you into a lot of trouble with the IRS.

  5. Not Keeping A Mileage Log for Business Vehicles

    Not all small business owners keep a mileage log for their business. As per the Globe and Mail, if you use your personal vehicle for the business travels then the fuel that you use could be claimed for deductions during tax filing. Ensure to support these with necessary documents.

  6. Not Having a Tax Organizer

    It is important for every small business owner to have a tax organizer as it will provide you a glimpse of all the questions which the IRS asks your business such as about entertainment, travel and other important expenses. Keeping track of these things will save you time and will be a great help if you are ever audited.

  7. Having Disorganized Financial Records

    A disorganized financial record is one of the most costly business tax mistakes made by small businesses. If you properly document your business expenses, it can help reduce your taxable income. Further, all your financial transactions should be recorded properly. Ensure that your financial documents such as financial statements and balance sheets are accurate and readily available anytime.

  8. Not Keeping Your Accountant Informed

    This is one of the biggest tax mistakes most small business owners can make. If you don’t keep your accountant informed about what’s happening in your business, they won’t be able to provide you effective advice. Often when it’s time to file your taxes, it’s too late for them to help you make huge savings.

  9. Contributing Too Much to Your Qualified Retirement Plan or IRA

    If you contribute more to your retirement plan than the law allows, you could be penalized with a 6% excess contribution penalty that will apply every year until you correct the excess.

  10. Over-reporting Income

    If you over-report your income, it will lead you to pay more taxes than required. For instance, if you sell goods on which you collect the sales tax then your reportable income should not include the sales tax. You should always subtract the sales tax before reporting the income from the sales.

For an in depth review of your three past tax returns to see where you could save even more money, please contact me.

Stephen Wallick May 16, 2018 No Comments

Best Time to Reach Out to an IRS Enrolled Agent 

An IRS Enrolled Agent is a tax professional representing taxpayers in matters relating to the Internal Revenue Service (IRS) tax laws. This position is comparable to an attorney or an accountant specializing in IRS matters. IRS Enrolled Agents can choose to represent any taxpayer and may specialize in certain areas of tax law which they practice. The benefit of working with an enrolled agent is that we specialize in dealing with the IRS on your behalf.

Usually, the enrolled agent acts as a legal representative for the taxpayer in issues related to the IRS tax matters.  The enrolled agent must be accredited by applying for an enrollment care, which certifies that the agent has proven competence in the areas of tax laws. The services of an enrolled agent for tax problems are indispensable to resolving your IRS related tax issues.

There are circumstances when you need the help of an enrolled agent in order to solve an important tax problem. Here are some:

Specific Role of IRS Enrolled Agent for Tax Problem

Enrolled agents such as CPAs and tax attorneys are tax professionals licensed to represent the taxpayers in their dealings with the IRS. Enrolled agents are specialists in dealing with the IRS related matters as they need to work with the IRS for five years or pass a series of tough tests conducted by the IRS to establish their competence for representing the taxpayers before they can qualify for the license. All the enrolled agents are required to undergo a background check and many hours of Continuing Professional Education (CPE) to keep them up-to-date.

Since the enrolled agents are licensed by the US government and not by the individual states, they can practice across the country. Because of all these specific qualifications, you should consider an enrolled agent for your tax problem, especially if the nature of the problem is related to areas such as the IRS audit representation, unpaid back taxes or to counter an impending tax lien or tax levy on your account.

The best time to reach out to an IRS Enrolled Agent

During uncertain economic times, more and more people find themselves unable to fulfill their tax obligations to the IRS. These same economic conditions cause the IRS to crack the whip on defaulters and adopt every possible means to enforce the collections. In fact, recently the enforcement budget has increased and the IRS has added and intends on adding more staff to their team for greater effectiveness. So, if you have piled up the unpaid back taxes, chances are that the IRS may come knocking your door soon. To avoid a visit from the IRS, you should reach out to an experienced IRS enrolled agent for your tax problem.

An IRS enrolled agent is the best tax professional to help you if your tax problems are specifically related to the areas such as IRS audits and responding to the IRS collection enforcement. If the IRS has expressed intent to place a lien on your physical assets,  place a tax levy on your bank accounts, or garnish your wages, then it is time to contact an IRS enrolled agent. If a levy has already been placed, then the IRS enrolled agent will help to release it.

The following are examples of some of the resolutions which an IRS enrolled agent can negotiate on your behalf:

  • Penalty Abatement
  • Offer in Compromise
  • Payment Plans
  • File Unfiled Tax Returns
  • Innocent Spouse Relief

It is best to reach out to an IRS enrolled agent because they specialize in matters of tax law and are well-versed in the regulations and workings of the IRS. If you have been contacted by the IRS for an audit, or if a lien has been placed against you, we can help you find the best possible solution to your tax problems. Contact us today.

Stephen Wallick May 9, 2018 No Comments

5 Top Tips for Independent Contractors for a Painless & Stress-Free Tax Season

Independent contractors has great advantages while earning a living which includes flexibility of setting their own schedule, the freedom of being their own boss and say yes or no to the work as per your interest and availability. Additionally, the age of the Internet makes this occupation easier and more in demand than ever. But the catch is many think that things tend to get more complicated for independent contractors when it comes to the tax season.

So here are 5 top tips for independent contractors that can make filing taxes as painless and stress-free as possible:

  1. Keep track of your paperwork

Come April 15 the deductions are a key way to trim your tax bill. So keep all the paperwork for your business related travel, gas mileage, office supplies and other business related deductions. The strategy is to keep a file on your desk for these receipts and one in your car and throw the receipts in as you get them. This will save your considerable time and effort. And you will be way ahead of the game in the unlikely event of an audit. 

2. Hunt down your 1099’s

It is small but simple things ensure that each of your employers has sent you a 1099-Misc. If you are a part-time freelancer having just one or two gigs then it is easy for you to keep track of 1099’s. However, if you have gaggle of clients then have a quick checklist of who has and hasn’t sent you the proper form so that you don’t file without all the proper information. You should receive a 1099 by early February in any given year hence, any time past this is when you should start making calls. It is worth noting that clients only require to give you a 1099 if you have earned over $600 from them. The IRS will also get a copy of this form and you will want to ensure that when filing your return your income matches those 1099’s. A big red flag for the IRS is small business owners pocketing more cash than disclosing them.

3. Hire your family members

Another great way to save on your taxes is to hire your spouse or children to do a little work for you. If your spouse works for you then you can get a tax break on medical insurance while if you hire children to do things to help your business then you can in effect move a bit of your income to your children who may not be subject to the unemployment taxes and the social security tax.

Retirement planning

A great way to protect some of your hard earned income is to open a self-employed retirement plan. You are allowed to put in up to 20% of your earnings into this retirement plan called a Simplified Employee Pension Plan or a Keogh plan. You can contribute maximum amount of $52,000 a year to this retirement planning which is a great way to save some money and protect some of your income.

5. Don’t do it yourself

Freelance and independent contractors are as independent as they come. But the tax hurdles for them are far more numerous than for the typical 9-to-5ers and the risk of potential penalties isn’t worth taking. This goes double for people who are new to the gig economy. It is one thing to try to swing it yourself with the tax accounting software once you have been on your own for a few years but if you have just started then don’t do it yourself. Instead seek advice from a professional tax accountant having experience with freelancers, small businesses and independent contractors.

Now that you know the 5 top tips for filing taxes as independent contractors, I hope that doing business on your own doesn’t mean wrestling with your taxes on your own. Get in touch with us to get help with the affordable tax services for keeping your hard-earned income and also keeping yourself on the right side of the IRS.

Stephen Wallick May 2, 2018 No Comments

Understanding the Basics of Payroll Taxes

What are “Payroll Taxes”?

Payroll taxes are taxes that an employer withholds and pays on behalf of his employees. They are based on the wage or salary of the employee. In most countries including the US, the federal authorities and many state governments collect some form of the payroll tax. The governments use revenues from the payroll taxes to fund the programs such as health care, social security, unemployment compensation and workers compensation.

Sometimes, the local governments will collect a small payroll tax to maintain and improve the local infrastructure and programs including:

  • Road maintenance
  • First reports
  • Parks and recreation.

What do the Payroll Taxes Include?

The US federal payroll taxes include the following:

Federal Income Tax Withholding

Taxes withheld from the employee pay for the federal income taxes (FIT) owed by the employees. The amount of FIT is determined by the information provided by the employees on Form W-4 at hire. This form can be changed by the employee at any time and as often as they wish.

Taxes Paid for Social Security and Medicare called FICA (Federal Insurance Contributions Act) Taxes

Employees and employers share these FICA taxes with the employer deducting the employee share which is one-half of the total due from the employee salaries/wages and the employer paying the other half. The payroll taxes also include the amounts payable by the businesses for FICA tax that are equal to the amounts paid by the employees.

The Payroll Tax Process

An employer calculates the gross pay for an employee and, based on the employee’s gross pay, will deduct a specific amount for:

  • Federal income tax based on the W-4 form the employee has completed most recently
  • FICA taxes

FICA Tax Withholding Rates

The employee tax rate for social security is 6.2%. Also, the employer tax rate for social security is 6.2%: 12.4% total. The social security share of the tax is covered each year at a maximum wage subject to social security. The employee tax rate for Medicare is 1.45% amount withheld while the employer tax rate for Medicare tax is also 1.45%: 2.9% total.

Starting from the 2013 tax year, an additional Medicare tax of 0.09% has been imposed on the higher-income individuals. This tax is applicable on income over $200,000 each year and is payable based on the individual’s income level and federal tax filing status. There is no wage limit for the Medicare tax and all covered salaries and wages are subject to the Medicare tax.

How do State Payroll Taxes Work?

The state payroll tax includes the state income tax withholding for those states which imposes the income taxes. Additionally, other state payroll taxes are:

  • State worker’s compensation funds
  • State disability funds (California is one of these states)
  • State unemployment tax funds

Depending on where your employees work the state payroll taxes apply to your business.

How do Employers Pay Payroll Taxes?

The payroll tax process includes several steps. After you have completed the calculation of the amounts for federal income tax withholding and FICA taxes and withheld these amounts from the employee paychecks:

  • After completion of the payroll process, you must calculate the amount you as a business must pay for FICA taxes and set aside those amounts
  • Finally, you must make payments to the IRS either monthly or semi-weekly depending on the size of your total employee payroll
  • You must report on payroll taxes quarterly using Form 941

Please note this information is only intended as the basics of payroll taxes, hence, it is not a tax or legal advice which you can rely upon for your business. Consult a tax or legal professional for proper guidance and specific advice related to your business.