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 29, 2018 No Comments

End IRS Problems Now

I’m sure you have heard of IRS programs where you pay less than you owe.

How much less?

Well, if you qualify, A LOT LESS!

The IRS looks at these old tax liabilities and knows they will not collect most of them. So, they have set up this great program called Offer In Compromise. This program allows taxpayers to pay what they can afford regardless of the amount the IRS says they owe.

The Offer Program requires the total amount owed to be included in the settlement. Therefore, once you qualify and have an accepted Offer, you are completely paid up and your tax problems are finally over. And, even payroll taxes can be settled this way.

When I say Settle Up, I mean completely, 100%!

Once the IRS has accepted the amount you offer and you pay the reduced amount, then the IRS releases all Federal Tax Liens.

Your IRS nightmare is over and you get your life back.

Your IRS problem will not go away by itself. You only have three choices to end your IRS Nightmare.

You can do one of the following:

1. Pay the IRS 100% of What They Think You Owe Today.

2. Set up a Monthly Payment Which Never Goes Away Due to the Additional Penalties and Interest That Continue to Add Up.

3. Reduce the Total amount Owed to an Affordable Number and Get on with Your Life!

If you are looking for a solution to your tax problems to get your life back, contact your Middle Tennessee tax resolution experts. We specializes in ending the nightmare of your IRS problems.

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.

Stephen Wallick April 25, 2018 No Comments

Everything You Need to Know About Estimated Quarterly Payments

The IRS expects to receive tax payments according to the income you are projected to earn in a given year. This is referred to as “pay as you go” system or estimated quarterly payments. These payments are estimated based on your total income from the previous year’s tax return. These quarterly payments help to ensure that you pay no unnecessary penalties at the end of the year for underpayment.

The estimated quarterly payment is a method to pay tax on the income which is not subjected to tax withholding. This can include the income from your business earnings, self-employment, interests, dividends, rent, and other sources.

If you are employed full or part-time, your taxes will be sent directly to the IRS as they are withheld from your paychecks. If you are self-employed or an independent contractor, you need to make tax payments in the form of estimated quarterly payments or estimated tax. Typically, the IRS requires the estimated tax to be paid quarterly, i.e. in 4 equal installments spread throughout the year. If you underpay your estimated quarterly payments, you will have to write a bigger check to the IRS when filing your tax return. If you overpay your estimated tax, you will receive the excess amount as a tax refund which is same as how withholding the tax works.

Here’s a look at who needs to make the estimated quarterly payments and how to make the quarterly payments:

Who Need to Make the Estimated Quarterly Payments?

There are many factors which determine whether you need to make the estimated quarterly payments. As a general rule is if your tax liability is $1,000 or above for the year then you are expected to make the estimated quarterly payments. If you owed more than $1,000 in taxes when you filed your tax return for the previous year then the IRS expects you will either have more tax withheld from your paychecks or that you will make the estimated tax payments the following year.

Generally, the following people are required to make the estimated tax payments:

  • Self-Employed Persons or Sole Proprietor Business Owners

Those who have income from their own business will need to make the estimated quarterly payments if their tax liability is expected to be over $1,000 for the year. This includes both part-time and the full-time enterprises.

  • Partners, Corporations and S Corporation Shareholders

Usually, the business ownership earnings will need estimated quarterly payments. In the case of corporations, the estimated quarterly payments must be made if the corporation is expected to have at least $500 in tax liability.

  • People Who Owed Taxes for the Previous Year

If you owed taxes at the end of previous year, it probably means that too little was withheld from your paychecks or you had other income which increased your tax liability. This is a flag to the IRS that you should be making the estimated quarterly payments.

How to Make Estimated Quarterly Payments?

The IRS Form 1040-ES (Estimated Tax for Individuals) is used for calculating and making the estimated quarterly payments. To determine how much you are required to pay for the estimated quarterly tax, you must compile your income, credits, deductions and the paid taxes- similar to filing a yearly tax return. Typically, you can look at your income/liability numbers from the previous year to gauge what you’ll owe the next year.

To make your estimated quarterly payments, the year is divided into 4 payment periods in which each period has a specific payment deadline. Failing to make the estimated quarterly payments on time can result in the IRS penalties:

  • 1st Quarter: January 1- March 31. Deadline: April 15.
  • 2nd Quarter: April 1-May 31. Deadline: June 16.
  • 3rd Quarter: June 1-August 31. Deadline: September 15.
  • 4th Quarter: September 1- December 31. Deadline: January 15 of the following year.

Note that it is important to make the estimated quarterly payments. Even if you have already missed a few installments of the estimated tax, you should still try making the estimated payments as soon as possible.

Contact me to setup your payment schedule and figure out how much you owe quarterly. 615-326-TAX9

Stephen Wallick April 11, 2018 No Comments

Deductions Every Real Estate Agent Can Claim on Their Taxes

Tax season is here and here are some ways all real estate agents can maximize deductions. Most real estate agents have various expenses and can confidently identify which expenses to use as deductions to help you keep more money in your pocket. Whether you are filing taxes on your own, or if you have an accountant, you need to take advantage of these deductions. No matter where you are in your career, understanding which expenses are allowed will help you to avoid overpaying on your quarterly as well as your year-end taxes.

1. Marketing and Advertising

Marketing and advertising costs such as flyers, business cards, ads, signs, and promos are all deductible. Production costs such as design and writing fees, whether the materials are produced by an agency or part-time hire are also deductible. Online and digital advertising costs include website design, search engine marketing, hosting fees, video production, pay-per-click advertising and any other IT-related costs and are quickly becoming the largest area of spending for real estate agents.

2. Vehicle Mileage or Expense

You spend your days driving between the appointments and properties. How do you determine whether to go with the standard mileage deduction or track all the auto-related expenses? For instance, if you drive 10,000 miles or more per year for your real estate business, it is likely that you’ll get the greatest tax benefit by taking the standard mileage deduction. If you are a lower mileage driver or have especially high car payments, then the actual cost method may yield a higher deduction come tax time.

For those of you who drive over 10K per year, the IRS needs you to keep a detailed log so that you can claim this deduction. Your records should include the time, date, purpose, and mileage of the trip. You can use an app which tracks and records your trips.

3. Home Office Deduction

Do you have a dedicated area of your home for work? If so,  you are eligible for a home office deduction even if you also have office space at your broker’s office (unless you are already deducting the desk fees). The home office deduction provides an option: a regular or a simplified method. Many self-employed people find that the simplified method maximizes their deduction. On the other hand, if you reside in a very high-cost region or have a particularly large home office, then the regular method in which you track the actual expense may yield the highest deduction.

4. Office Supplies and Equipments

Whether you are taking the home-office deductions or the desk fees, you can still claim other office-related expenses including the photocopies, stationery, and any other consumables required to run your business. Other huge purchases such as fax machines, furniture, computers, copiers or telephone, and the related bill can be fully expensed or depreciated over a period of years. You can deduct the full expense for a dedicated landline telephone for your business. If you use a cell phone, only then you are eligible to deduct the business percentage of that expense. Keep careful records of all receipts.

5. Desk Fees

Your desk fees are deductible even if you are hanging your license under a national franchise or with an independent broker. However, note that you will not be able to claim the home office deduction if you are taking deduction fees for the brokerage desk fees.

If you are a real estate agent with specific questions on deductions for your business, contact me today at 615-326-TAX9 for a free consultation.