From the IRS: Tax Tips for Starting a Business

Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

1. Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.

2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can
apply for it online.

4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees. Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get all the tax basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

Additional IRS Resources:
• IRS Tax Calendar for Businesses and Self-Employed
• Publication 505, Tax Withholding and Estimated Tax
• Publication 334, Tax Guide for Small Business
• Publication 225, Farmers Tax guide
• Publication 535, Business Expenses
• Publication 587, Business Use of Your Home
• Publication 510, Excise Taxes
• Publication 538, Accounting Periods and Methods

IRS YouTube Videos:
• Small Business Health Care Tax Credit – English | Spanish | ASL
• IRS Online Tax Calendar – English | Spanish | ASL
• Simplified Home Office Deduction – English | Spanish | ASL

IRS Podcasts:
• Small Business Health Care Tax Credit – English | Spanish
• IRS Online Tax Calendar – English | Spanish
• Simplified Home Office Deduction – English | Spanish

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From the IRS: Federal Tax Help for Landscapers and Gardeners is Just a Click Away

Federal Tax Help for Landscapers and Gardeners is Just a Click Away

If you are a self-employed landscaper or gardener, visit IRS.gov for all your federal tax needs. Be sure to view the IRS webinar “Business Taxes for the Self-Employed: The Basics.” Here are some topics included in the webinar or on IRS.gov that you should know:

• Accounting Method. An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Find out more in IRS Publication 538, Accounting Periods and Methods.

• Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. You may have to pay self-employment tax as well as income tax if you make a profit. Self-employment tax, or SE tax, includes Social Security and Medicare taxes. You may need to pay your taxes by making estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

• Tax Forms. There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form. Use Schedule SE, Self-Employment Tax, to figure your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.

• Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in the gardening or landscaping industry. A necessary expense is one that is helpful and proper for your trade or business. View the webinar “Small Business Owners: Get All the Tax Benefits You Deserve” to learn more.

• Business Use of a Vehicle. If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for the business use. Refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses for details.
Follow the IRS on Twitter! The IRS has three key accounts: @IRSnews, @IRStaxpros and @IRSenEspanol.

Additional IRS References:
• Small Business and Self-Employed Tax Center
• IRS Video Portal
• Online Learning and Educational Products
• e-News for Small Businesses
• Publication 583, Starting a Business and Keeping Records
• Publication 505, Tax Withholding and Estimated Tax
• Publication 334, Tax Guide for Small Business
• Publication 535, Business Expenses

IRS YouTube Videos:
• Estimated Tax Payments – English | Spanish | ASL
• IRS Tax Payment Options – English | Spanish | ASL
• Record Keeping – English | Spanish | ASL
• IRS Online Tax Calendar – English | Spanish | ASL
IRS Podcasts:
• Estimated Tax Payments – English | Spanish
• IRS Tax Payment Options – English | Spanish
• IRS Online Tax Calendar – English | Spanish

From the IRS: A Dozen Key Points about Paying Your Taxes

A Dozen Key Points about Paying Your Taxes

The IRS offers several payment options if you owe federal tax. Here are a dozen key points to keep in mind when you pay your taxes this year.

1. Never send cash. Electronic payment options are the quickest and easiest way to pay your tax.

2. Check out IRS Direct Pay to pay directly from your bank account. Access Direct Pay on IRS.gov. It’s secure and free. You will get instant confirmation that you have submitted your payment.

3. You can pay taxes electronically 24/7 on IRS.gov. Just click on the ‘Payments’ tab near the top left of the home page for details.

4. Pay in a single step by using your tax software when you e-file. If you use a tax preparer, ask the preparer to make your tax payment electronically.

5. Whether you e-file your tax return or file on paper, you can choose to pay with a credit or debit card. The company that processes your payment will charge a processing fee.

6. You may be able to deduct the credit or debit card processing fee on next year’s return. It’s claimed on Schedule A, Itemized Deductions.

7. Enroll in the Electronic Federal Tax Payment System. You can use EFTPS to pay your federal taxes electronically. You have a choice to pay using the Internet, or by phone using the EFTPS Voice Response System.

8. If you can’t pay electronically, you can still pay by a personal or cashier’s check or money order. Make it payable to the “U.S. Treasury.” Be sure to write your name, address and daytime phone number on the front of your payment. Also, write the tax year, form number you are filing and your Social Security number. Use the SSN shown first if it’s a joint return.

9. If you pay by paper check, complete Form 1040-V, Payment Voucher. Mail it with your tax return and payment to the IRS. Make sure you send them to the address listed on the back of Form 1040-V. This will help the IRS process your payment and post it to your account. You can get the form on IRS.gov/forms at any time.

10. Remember to include your payment with your tax return but do not staple or clip it to any tax form.

11. Even if you can’t pay your tax in full, the IRS urges you to file your tax return on time. You should pay as much as you can with your tax return. That will help keep your penalty and interest costs down. You have options such as an installment agreement, which allows you to pay the balance over time. The Online Payment Agreement tool on IRS.gov is the easy way to apply.

12. To listen to a recorded message on this subject, call TeleTax at 800-829-4477. Select Topic 202, Payment Options.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:
• IRS Free File
• E-file Options
• Filing Your Taxes
• IRS Tax Map

IRS YouTube Videos:
• Online Payment Agreement – English | Spanish | ASL
• IRS Tax Payment Options – English | Spanish | ASL

IRS Podcasts:
• Online Payment Agreement – English | Spanish
• IRS Tax Payment Options – English | Spanish

Reasons Older People Tend to be Happier

While it may not make sense to everyone, researchers at HSBC say it is true that a person must age in order to be happier. According to HSBC’s survey on happiness and aging, people are the happiest between the ages of 60 and 80. Many young people associate retirement age ranges with deteriorating health, but this is not always the case. People who are in their 60s and 70s can enjoy good health by adopting an overall healthy lifestyle.

They also typically enjoy a better standard of living, but these factors are only small pieces of the entire puzzle. External factors play very little part in overall happiness, which is just a natural result of aging. Scientists say that as people age, the negative feelings naturally occurring within a human being decrease. When they do appear, they do not stay as long as they do in younger people.

Levels of happiness vary from one person to another. A person’s genetics and his or her parents’ genetics both play a big part in determining happiness. Health is also an issue, and people who are very ill are not as happy as people who enjoy good health. While this is true for all age groups, frail older adults tend to have a better morale than younger adults who are frail.

Experts say that older adults may be able to stay happier due to their abilities to make the best of the time they have. When people know that their years are limited and are constantly decreasing, they tend to avoid the things that make them angry, stressed or upset. In addition to this, they tend to focus on what makes them happy and the people who are important to them.

The researchers also said that aging affects brain function. Imaging results showed that the brains of older people do not react as strongly to negative feelings over a short period of time. Their conclusion was that an improved life outlook is due to several perspective changes and changes to the part of the brain where emotions are processed. As people age, they also place less importance on obtaining money. It only seems to be an important issue to people who are struggling financially, but people who have a steady income stream tend to adapt accordingly with their lifestyles.

Researchers also said that it helps for older people to remain active in social circles and with physical exercise. All activities should be things that add quality, value or good feelings to life. Volunteering, joining an exercise class, joining a social club or looking for a second career are some good examples. These activities keep the brain sharp and promote better overall happiness. Learning to appreciate life and value remaining time are the keys to choosing activities that are optimal for individual happiness and health.

From the IRS: Top Six Tips about the Home Office Deduction

If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify you can claim the deduction whether you rent or own your home. If you qualify for the deduction you may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction.

1. Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:
• Your principal place of business, or
• A place where you meet clients or customers in the normal course of business, or
• A separate structure not attached to your home. Examples could include a garage or a studio.

2. Simplified Option. If you use the simplified option, you multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the criteria for who may claim a home office deduction.

3. Regular Method. If you use the regular method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

4. Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6. Employees. If you are an employee, you must meet additional rules to claim the deduction. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.
For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.

Additional IRS Resources:
• FAQs – Simplified Method for Home Office Deduction
IRS YouTube Videos:
• Simplified Home Office Deduction – English | Spanish | ASL
IRS Podcasts:
• Simplified Home Office Deduction – English | Spanish

From the IRS: Deducting Moving Expenses

If you move because of your job, you may be able to deduct the cost of the move on your tax return. You may be able to deduct your costs if you move to start a new job or to work at the same job in a new location. The IRS offers the following tips about moving expenses and your tax return.

In order to deduct moving expenses, your move must meet three requirements:

1. The move must closely relate to the start of work. Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test. Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.

3. You must meet the time test. After the move, you must work full-time at your new job for at least 39 weeks the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at the new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

If you can claim this deduction, here are a few more tips from the IRS:

Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
Household goods and utilities. You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
Reimbursed expenses. If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
Address Change. When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.
Premium Tax Credit – Changes in Circumstances. If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payment of the premium tax credit in 2014. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace. Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage. Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace. Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.

Additional IRS Resources:

Publication 5152: Report changes to the Marketplace as they happen English | Spanish
Can I Deduct My Moving Expenses? – Interactive Tax Assistant tool
Tax Topic 455 – Moving Expenses
Form 3903, Moving Expenses
IRS YouTube Videos:

Premium Tax Credit: Changes in Circumstances – English | Spanish | ASL
Premium Tax Credit – English | Spanish | ASL
Moving Expenses – English | Spanish | ASL
IRS Podcasts:

Premium Tax Credit Changes in Circumstances – English | Spanish
Premium Tax Credit – English | Spanish
Moving Expenses – English | Spanish

Tablet Safety 101 – Making Your Tablet Safer for Public Use

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Tablet Safety 101 – Making Your Tablet Safer for Public Use

People are relying on tablet devices more and more every day. You use them for work and some for play. Tablets provide users with many of the benefits a laptop delivers, but in a format that’s even easier to take on the go. But, is your information safe when you use your tablet?

As with most things in life, there are things you can do to make your tablet a safer choice to use for business or pleasure while on the go.
•Install anti-virus software for your tablet device. You should only use trusted anti-virus names for this though as some savvy hackers have taken to creating fake anti-virus programs that actually install viruses on your devices.
•Be cautious when installing apps. Apps are notorious for not safeguarding your privacy.
•Enable capabilities to remotely wipe your device if it stolen and notify your provider (if applicable) right away if you have not installed those capabilities.
•Don’t click on advertisements on your tablet. Many ads automatically download viruses onto your device without your notice.
•Lock your screen when you’re not using your device.
•Don’t store log-in data on your tablet device. This makes it too easy for people who “find” your tablet to access your passwords, private, and financial information. The harder you make it for them to do, the less likely it becomes that they’ll go to the effort.
•Backup your data routinely. Some people do this daily. Depending on how often you use your tablet and what kind of data is stored on your tablet, this is a wise move to make.

The Dangers of Public Wi-Fi

Public Wi-Fi connection present very specific dangers to your tablet device. Many hackers disguise themselves as legitimate Wi-Fi connections and hang out in hot spots hoping someone will choose their connection to attempt a logging on. Once you’re connected to their device, bad things can happen. Look for secure Wi-Fi connections and be cautious when using public Wi-Fi.

It’s best to avoid it whenever possible though – especially when using your tablet for business or personal financial matters. Tablet devices are somewhat risky to use – especially for personal and financial information like reviewing tax returns or balancing your checkbook in public. However, the steps above will make your tablet safer for limited use in public.

TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.
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TLC Financial, Inc. (TLC TAX) is a Minneapolis accounting firm that provides a wide variety of accounting, tax and financial management services. Our clients are located in Minneapolis, Saint Paul, Midway, Minnehaha, Como Park, Summit Hill and surrounding communities.