tax promotion

DON’T WAIT. ACT NOW TAX SEASON IS HERE. The year 2022 is one of the challenging times. No matter what happens, individuals and businesses must file taxes.

The following ten points can help you scale through the season 1. Maintain good business records 2. Choose a suitable Accounting Method 3. Keep business and personal expenses separate 4. Consider the impact of covid-19 in connection with taxes  Tax implication of paycheck protection program (PPP) loan forgiveness  Payroll taxes affected by the families first coronavirus restore act  Timing of estimated tax payment for your business  Stimulus payment from the cares act  Unemployment payment. 5. Remember important deadline dates 6. Start planning early 7. Information return is required 8. Understanding business penalties 9. Depositing employment taxes 10. Balance the books Maintain Good Business Records • Monitoring firm progress is the best way to improve business growth • Knowing the source of receipts (to separate business from nonbusiness or business from personal • Tracking deductible expenses and records helps the business owner streamline total costs. • File your tax returns- record keeping helps you have supporting documentation to prepare your financial statements. • Records are evidence to support claims on the tax returns Record Keeping Effective and efficient record-keeping produces quality and precise information for decision-making. It tells what is selling and what is not working. What changes to make to improve, grow and develop? Financial statements The essence of record keeping is to create profit and loss /income statements and balance sheets. The P & L account reports the expenses and income, and the balance sheet reveals assets, liability, and equity. Maintain the source of receipt/income The business will receive funds from various sources helps to identify and separate business from nonbusiness funds. It helps to determine what is taxable from nontaxable income. Business depends on profit to survive because, without them, they collapse. The key to sustainable development is to keep accurate records and to evaluate and measure business financial performance. Maintain source of expenses Keeping good records of daily expenses when they occur is the best practice for tax purposes and financial reporting. Maintaining accurate sources of expenses is a key indicator to controlling the cost of business expenditure. Reliable information helps managers to control, manage and minimize costs to make more profit Tax returns preparation Quality record keeping is good for tax preparation for the business because you have supporting documents to back income, expenses, credits, and transfers. These files are finally used to prepare the financial statements. Choose a suitable Accounting Method Accounting method Choose a system that summarizes income/expenses, and assets/liabilities. Electronic storage system. Cash and Accrual are both methods in accounting. Cash method- account for all cash receipts and payment stuff are recorded on the Income statement. Whilst the accrual system records credit purchases or sales made within the accounting period. Revenue earned or payment made is recognized in the accounting period. Document support Transactions like sales, purchases, and payroll need attachments with documents. Examples- are paid bills, invoices, receipts, deposit slips, sales slips, canceled checks, and vouchers, these documents back the books. Gross receipts-Are the income received for the business. You need documents to show the source of your gross income. Examples of that document are as follows: invoices, vouchers, forms 1099, NEC forms 1099 and MISC, receipts books, cash receipts, bank deposit slips, and credit card slips. Inventory Product items bought and re-sell to customers supporting documents must include the following or canceled checks invoices, cash register receipts, and credit card/ sales slips. These receipts or invoices support the cost of inventory. Expenses Business expenses need documentary proof to support data entry: the example-canceled- checks, cash register tapes, account statements, vouchers, invoices, petty cash slips, credit card sales slips, etc. to support accurate and complete postings in the books of account. NB. Attach petty-cash slips to the receipt as proof of payment. Travel, transportation, and gift expenses. For employment taxes Use publication fifteen for specific employment records one needs to keep (A list) Assets: Property used in your business for continued success. You need the document to prove that Purchases or sales invoices, real estate closing statements, and canceled checks/vouchers show or explain the following: • When and how you acquired the assets • Purchases price • Cost of any improvements • Deductions from depreciation • Deduction for casualty losses, such as losses resulting from fire or storms • How you used the asset • When and how you dispose of the asset • Selling price • Expenses of sales Separate Business vs Nonbusiness apart income and expenses The report of your business gross receipt or income is categorized accurately and separates business income/ expenses from nonbusiness income/expenses. Also taxable from non-taxable income for the period. Putting in sufficient record keeping and tracking of business income/ expenditure when they occur makes tax filing easier. Consider the impact of covid 19 in connection with taxes The effect and or impact of covid 19 in connection with the following tax situation such as Tax implication of paycheck protection program (PPP) loan forgiveness; Payroll taxes affected by families first coronavirus restore act; Timing of estimated tax payment for your business; Stimulus payment from the cares act, and Unemployment payment are considered. Remember important deadlines For a sole proprietor, partnership, or corporation here are the following deadlines: Check the scheduled Due Dates below- Estimated Tax Payment Due Dates for 2022 Income Earned within this period in 2022 s Payment Schedule Payment Due Date January 1st - March 31st 1st Quarter payment April 18th, 2022 April 1st - May 31st 2nd Quarter payment June 15th, 2022 June 1st - August 31st 3rd Quarter payment September 15th, 2022 September 1st -December 31st, 4th Quarter payment January 17th, 2023 If you have employees, file form 941 and 940 quarterly. Employers are required to file 940 yearly. However, if your annual liability for the combined Social Security, Medicare, and Federal tax withheld is $1000 or less for the period or end of the year, then file from 944. Start Tax Planning Early Understanding business and taxes The four types of business taxes are: • Employment taxes • Excise taxes • Self-employment • Income tax If you run a business as an individual or sole proprietor, then you should pay, income tax, self-employment tax, and estimated tax. In case you have employees, then, you pay employment taxes which are Social Security & Medicare taxes, plus income tax withholding. Also, pay federal unemployment tax (FUTA) You may pay Excise taxes if you run manufacturing businesses, or use certain products equipment, and or facilities. Income tax forms 1040, Sch C, Sch F, and 1040-SR. • Self-employment tax forms (1040, SCLSE, and 1040 SR) • Estimated tax forms (1040-ES) • Employment taxes forms (944 / 941 / and 943 farmers, 940 FUTA) • Excise taxes form 720 Partnership A relationship starting with two or more people to form a business is a partnership. They contribute capital through money, shares, property, labor, or skills and share profits and losses according to their investment. IRS Publication 541 provides details on the topic The partnership pays its annual income returns and files form 1065. Partners must pay excise taxes in case they run the following: manufacturing business and using certain products. Individual partners under partnership An individual partner is like a sole proprietorship. He (the individual) must pay income tax, self-employment tax, and estimated tax. Forms 1040 or 1040 SR and Schedule E, Schedule, and 1040 ES C Corporation / S Corporation Pay income tax, on form 1120 (C Corporation and S Corporation form 1120S. Estimated taxes be paid on form 1120-W (Corporation only). The sole proprietor will file Schedule C and pay self-employment tax. Also, payment on excised tax, if you run a manufacturing business and other certain products and equipment. S Corporation Shareholder The S Corporation shareholder must pay income tax on 1040 / 1040 SR, Schedule E, and Estimated tax on form 1040. These are shareholders who own interest in the business entity and are paid distribution and salary. They report income and losses on their income tax return. An information return required Individual taxpayers, sole proprietors, partnerships, corporations, suppliers, investors, and businesses are required by law / internal revenue code to file an information return and to report all their business engagements within the period. The internal revenue code, provide general guidance over how to report information return and schedule deadline/ due/ dates and some specific forms to use. These forms are 1099s, W-2G, W2s, 1097, 1098, 3921, 5498, and 3922. Each of them has specific due dates to report to IRS. But we shall work on the 1099s and W2. Form 1099-MISC Miscellaneous income, if you make a payment of $10 or more for royalty, also $600 or more spent on rent, and or you made a cash payment over $600 more including $600 for prize-winning report them on the above form. Use this form to report consumer products payment over $5,000 or more. Due dates: recipient January 31 to February 28th – Form 1099-NEC Use the above form to report the payment to contractors or worker who is not your employee. Recipient Jan 31st. due date Jan 31st. Also, use this to report direct sales/ payment to consumer products of $5,000 or more to IRS. W2 If a business owner employs workers and pays remuneration, withheld income, social security, and Medicare, he must file W2 to report them to IRS. Failure to report, we face a penalty under the information report. The above form is used to report payments given to your employees such as wages, tips, also income withheld for Social Security and Medicare. Understanding Penalties The internal revenue code, the federal tax laws penalties are charged to those who failed or pay their taxes within a given period. If we understood the penalties, their causes, and their impact, we can avoid them and then invest the savings into the business growth. These are types of penalties to guide you; information Return, failure to file, failure to pay, Accuracy-Related, Erroneous Claim for Refund or Credit Penalty, Failure to Deposit, Tax preparer penalties, Dishonored Checks, Underpayment of estimated tax by a corporation, Underpayment of estimated tax by individuals, and international information reporting. Failure to file tax We pay penalties if we do not follow the law to file our tax return within the period and due time. The penalty is 5% each month or part of the month the return is late. In total, the penalty will be less than 25% of unpaid taxes. Failure to pay Also, for failure to pay within the period and due dates, you pay a penalty of 0.5% for every month or part of the month you owe. Further to stop accruing penalties and interest pay all debts. If you failed to pay the bill IRS sends you, it attracts penalties and interest for the period under review. The penalty is calculated based on 5% for every month or part of the month your unpaid tax remains. These percentages can increase up to 25% if you do not pay on time. IRS may charge you interest on penalty if you do not settle your debt on time. Failure to pay, deposit, and withheld taxes In case you withheld income for Social Security and Medicare but do not deposit or pay to the IRS within the period and due dates, you pay a penalty and interest for your action. Pay as you go and comply with what the law requires. Avoid penalties and save money. Failure to meet the information reporting deadline Failure to meet the information reporting deadline and requirement set up by law shall result in the payment of a penalty. If a businessperson, individual, partnership, or corporation engages in trade or business, accordingly, must report those transactions to the IRS, then make a copy to the recipient. It means you report wages, salaries, fees, tips, and commission on W3, 1099’s, etc. before the specified due date. If we delayed is a failure to file, called late filing, and you pay a penalty and interest. Failure to file information reporting returns By law, failure to file information reporting return within the period and due dates, or provide false information and insufficient data, you pay the penalty Failure to provide the right payee statement If you failed to provide the correct statement of the payee to the IRS, you pay the penalty for your actions within the period and due dates. However, the penalty can be waived if you show a reasonable cause, not through negligence. Act wisely and smartly never to encourage tax evasion. Failure to provide the taxpayer identification number Business owners who failed to add their tax ID (SSN or EIN) when it is required on the form shall pay a penalty of $50 each. An individual taxpayer who refuses to provide tax ID when required faces the same charges. Do it now. Depositing employment taxes The employer’s mission is to ensure that federal income tax withholding, FICA both the employer and employee, including FUTA tax are deposited at appropriate due time. Individual contractors, Self-Employed must pay self-employment tax through estimated tax remittance quarterly as required by law. Balance the Books Maintaining clean and accurate accounts is the deal. It means we reconcile the accounts and brings the balances down to zero. Books balancing is part of controlling measures to manage your business. It ensures that cash and bank accounts are reconciled and brought to zero. It is a major step in getting ready to file your tax returns. You can reach us at the below contact: Tax Bookkeeping Winners LLC Phones: 347-637-9242 & 929-303-2934 Email: info@taxbookkeepingwinners.com Website: https://taxbookkeepingwinners.com Dr. Samuel Afosah.