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Tax-Deductions For The Self-Employed


As a small business owner, you know how important it is to save money wherever possible. That’s why it’s important to take advantage of tax deductions available to you. If you are self-employed and work from your home, you might be eligible to subsidize some of the related costs you might otherwise classify as personal expenses — helping to lower your tax bill.

AA Tax & Accounting Services is here to guide self-employed individuals through the tax deductions process to save the most money possible. Here are a few tax deductions to watch out for when filing your taxes this year.

5 Tax Deductions for Self-Employed

1. Home Office

To claim a home office deduction, you need to have part of your home used exclusively to fulfill the role. If you can prove you have a home office within your home used consistently and solely for your job, you can have part of your utility bills and insurance costs deducted from your business income. In some instances, you are even able to write off a portion of your rent or mortgage.

While many self-employed individuals are eligible for a home office deduction, many taxpayers don’t take advantage of this deduction. This might be because they are afraid to claim it, or they might not have the required records organized and ready to go. If you have a designated space in your home to conduct your business, it’s worth looking into this deduction to see if you’re eligible.

3. Technology and Equipment

Whether you recently purchased a new laptop to be more efficient during the day or you need to stock up on tablets for a client project, you can write off any technology and equipment used for business purposes. This includes everything from large technology like laptops and camera equipment to small items like phone chargers and keyboards.

3. Bank Fees

If you have a bank account specific to your business that incurs any fees, as a self-employed individual, you are eligible to write those off. When reviewing your bank statement, keep an eye out for the following fees that can be claimed as a deduction:

  • Maintenance fees
  • Overdraft fees
  • Late fees
  • ATM fees
  • Credit card membership fees
  • Loan setup fees

4. Business Vehicle Use

Depending on the nature of your business, you might be able to receive a deduction for the use of your vehicle. While most people assume a business vehicle deduction is only applicable to services like Uber or Lyft, that’s most definitely not the case.

Suppose you’re self-employed and use your personal vehicle for transportation to and from client meetings, to make deliveries, to pick up supplies, or another work-related outing. In that case, you can successfully claim this tax deduction. To make this claim, you will need to keep accurate records of the dates and miles you drove specifically for a work-related reason.

5. Meals

Although you won’t be able to claim a full deduction for meals, business-related meals can be claimed as a 50% deduction. This means that for any meals you purchase through your business, whether it’s a client dinner or a meal for a vendor, you are only allowed to deduct 50% of the total cost of the meal.

Review your dining transactions for the year and write off the following types of meals:

  • Client meals when you pay for the entire meal
  • Meals while traveling for business
  • Office snacks for you and employees
  • Meals for meetings with colleagues

Tax Consulting Services in Cedar City, Utah

If you’re self-employed, we recommend consulting certified public accountants like AA Tax & Accounting Services to better understand all the tax deductions available to you. We have the experience to guide business owners on the best strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right self-employment tax strategies to save you money. Contact us to schedule an appointment.

Accounting Advice When Going Through A Divorce


When you’re in the middle of a divorce, you don’t have time to focus your attention and energy on much else. But unfortunately, your taxes aren’t going to wait until you have less on your plate. Filing your taxes for the first time post-divorce can be complicated — and there are a lot of details you and your ex will need to sort out beforehand.

To help guide you through tax season, AA Tax & Accounting Services has put together a list of accounting advice for when going through a divorce.

5 Accounting Tips For When You’re Going Through a Divorce

1. Determine Your Filing Status

First things first, you need to understand your filing status. Your marital status will determine this at the end of the year.

Were you divorced by December 31st of the tax year?

If you were divorced by then, you and your ex would file your taxes separately. However, if you were in the process of splitting up but didn’t have all the details of your divorce finalized by the end of the tax year, you will still have the option to file a joint tax return should you choose to do so.

Until your divorce decree is finalized, you can file jointly — which is likely to save you money.

2. Navigate the Transfer of Assets

It’s important to note that when transferring property assets from one spouse to another during a divorce settlement, the person receiving the asset will not be required to pay taxes on it. However, if the recipient chooses to sell that property, later on, they will have to pay capital gains tax on all the appreciation before and after the transfer. When navigating the transfer of assets process, you need to consider the tax basis and not just the property’s value.

3. Understand Exemptions for Dependents

Once finalized, your divorce decree will state which partner can claim any children as dependents. If this was not specified in your divorce decree, the custodial parent obtains the ability to claim the child(ren) as dependents.

In scenarios where parents have joint custody, the parent which the child resides for most of the tax year gets to claim the child as a dependent.

Suppose, for some reason, you and your ex would prefer that the noncustodial parent claims the dependent. In that case, this is possible if the custodial parent signs a waiver indicating that they will not claim the child as a dependent on their taxes that year.

4. Consider the Implications of Child Support

Child support will not affect your taxes at all. The child support payments are not taxable income for the recipient. Similarly, the payments are not tax-deductible for the parent that is paying child support.

5. Factor in Alimony Payments

Unlike child support payments, alimony payments are taxable income for the person receiving them. Likewise, they are tax-deductible for the parent who is paying the alimony.

All the details surrounding the alimony payments must be laid out within your divorce agreement for alimony payments to be taxable. If the alimony isn’t listed in the decree, the Internal Revenue Service won’t consider the payments to be true alimony.

Tax Preparation Services in Cedar City, Utah

Divorce can be stressful, but navigating the tax process post-divorce doesn’t have to be. AA Tax & Accounting Services is a full-service accounting firm that can help you navigate the process seamlessly. Our team has spent years serving Cedar City, Utah, and surrounding Southern Utah towns.

Contact us today to schedule an appointment for individual tax preparation.

Business Tax Strategies

Business Tax Strategies

Business Tax Strategies

When the financial year comes to a close, it’s important to take into account all the deductions and credits that can help you save money on your taxes. But navigating all of these cost-saving tax strategies can be a stressful process if you don’t know where to begin.

The team at AA Tax & Accounting Services has put together a list of strategies that can help you maximize your credits and deductions.

Take Advantage of the Health Care Tax Credit

If you pay for at least half of your employees’ health insurance premiums, have fewer than 25 full-time employees, and your employees earn an average annual salary of $50,000, then you might be eligible for the health care tax credit. This can save you money on your taxes but is helpful to navigate with the help of a certified public accountant.
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Consider Charitable Contribution Deductions

If your business has made any charitable contributions, you will want to deduct these when filing your taxes. A charitable contribution can be anything from donating money, goods, or services to an organization. When these offerings are donated, you can deduct the market value of the contribution when filing your tax return.

Account for Property Deductions

If your business has recently changed locations or acquired a new property, you can take advantage of property deductions. When this happens, you can deduct up to $500,000 of eligible business property. But keep in mind, that you can only use this deduction in the year that you first obtain the property.

Utilize the Work Opportunity Credit

When your business hires employees that are veterans, disabled, or part of another disenfranchised group, you are eligible for the work opportunity tax credit. This can be very beneficial when it comes to filing your tax report because you can receive up to 40% of the first $6,000 paid to a new employee from a disenfranchised group. However, it’s important to note that the size of this credit can vary in different situations.

Offer Child Care Expenses

Do you provide child care expenses for your employees? If so, you are eligible to receive a tax credit! If you pay for child care expenses, the credit will cover 25% of your paid expenses up to $150,000 annually.

Fund an Employee Retirement Plan

If you don’t have a retirement plan set up for your employees, it can be a great opportunity for you to save money on taxes. Set up and fund a qualified plan that is recognized by the Internal Revenue Service and you’ll be able to start taking advantage of the tax savings. There isn’t a one size fits all retirement plan for every company. Our team of professionals can help walk you through the different contribution plans and determine which is best for your business and your goals.

Account for the Cost of Gifts

If you’ve purchased any gifts for customers or vendors over the past year, you have the opportunity to deduct up to $25 per person off the cost of gifts. However, you aren’t able to claim this deduction if the gifts were provided to anyone bearing the same name as your business.

Tax Consulting Services in Cedar City, Utah

We recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your business tax return. We have the experience to guide businesses on the best strategies for maximizing their deductions and tax credits with our accountant services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

Gift Laws and Tax Implications in Utah

Gift Laws and Tax Implications in Utah

Gift Laws and Tax Implications in Utah

Everyone loves gifts, but did you know that if you gift a large sum of money you might need to pay a federal gift tax? Before gifting money, you must understand the federal tax laws to ensure you’re following all gift tax guidelines set by the Internal Revenue Service (IRS).

AA Tax & Accounting Services has compiled a guide to help you navigate gift tax for Utah residents — keep reading to learn more.

What Is Gift Tax?

The gift tax is a federal tax that is applied to money or property that is gifted to another person for nothing in return. It also applies to transfers where the gift giver receives less than the full value in return.

You may be wondering why you’ve never heard of this or paid a gift tax — it doesn’t apply to all gifts. If your gift or inheritance meets the set criteria, the IRS can collect a tax if you’ve already exceeded the annual or lifetime gift exemptions. So what are these exemptions? Let’s find out.

When Is a Gift Tax Applied?

As of 2020, the annual exclusion is set to a gift of at least $15,000 in a single calendar year — this number increases to $30,000 if a couple is gifting money from joint accounts or assets. Additionally, there is a cap on the amount a person can be gifted within their lifetime. This lifetime exclusion was raised to $11.58 million in 2020.

If your gifts are valued at or above these thresholds, you will need to report it to the IRS. Any gift of money or assets under these amounts are excluded from gift taxes.

Gift Tax for Utah Homeowners

If you live in Utah, there is no inheritance tax. But that doesn’t mean you’re always off the hook when it comes to paying taxes. If you are gifted something in an inheritance from a person who lives in a state other than Utah, there might be an inheritance tax applied to out-of-state inheritors. This varies from state to state, so you must take the time to understand inheritance laws if you inherit money or assets above the specified threshold from someone who lives outside of Utah.

Similarly, Utah also doesn’t have a gift tax. You will follow the same federal exclusions of $15,000 per individual — if you receive a gift at or above this amount you will need to report it to the IRS. While you won’t pay tax on the specified amount, the gift will reduce your lifetime exemption of $11.18 million.

Tax Consulting Services in Cedar City, Utah

There’s no reason to stress out about receiving a gift or inheritance. If you have questions about reporting a gift over $15,000 to the Internal Revenue Service, AA Tax & Accounting Services can help you navigate the process and walk you through everything you need to know.

The AA Tax & Accounting Services team is committed to helping you feel confident come tax season. Contact us to schedule an appointment.

Personal & Business Tax Changes To Expect If Joe Biden Takes Office

Personal and Business Tax Changes To Expect If Joe Biden Takes Office

With November 3rd on the horizon, the deadline to cast your vote in the presidential election is nearly here. Democratic presidential nominee, Joe Biden, has shared his tax policy proposals that will impact both business owners and individuals. As a way to raise federal revenue by $3.2 billion, Biden focuses on getting more taxes from both the wealthy and big corporations.

AA Tax & Accounting is here to inform you of some of the biggest proposed tax changes, not to sway you on your presidential vote. Let’s take a deeper look at how Biden’s plans will impact individual taxes and business taxes so you can have a well-rounded picture when casting your ballot on election day.

Individual Tax Changes

Although everyone will likely see some tax changes in 2021 based on Biden’s proposed tax plan, the most impacted will be wealthier Americans.

Taxes Remain Steady for Incomes Below $400,000
Under Biden’s proposed tax plan, households with an annual income under $400,000 shouldn’t see the amount they pay in taxes change. While middle-income families’ taxes will typically remain steady, there are a few instances where they could end up paying more.

One way individuals could end up paying more is through Biden’s proposed reinstatement of Obamacare’s mandate penalty for not having insurance. If health insurance isn’t purchased, the penalty would be an additional tax. Another way households might find themselves paying more in taxes is because of corporate tax increases. This will directly impact those owning stocks.

Adjustments for the Top 1% of Taxpayers
While middle-income families are mostly in the clear for tax increases, high-income households will likely take the burden of the proposed tax plan. In fact, Americans in the top 1% of households would see an after-tax income decrease of 16%—averaging a tax increase of $265,640.

Cap Deductions for Wealthy Taxpayers
For taxpayers that earn less than $400,000, they’ll be able to take the full value of itemized deductions. Households earning more than the $400,000 threshold will have the value of itemized deductions capped at 28%.

Capital Gains Taxed as Income
This proposed tax change has the largest impact on investors — especially those who have large investments in the stock and bond markets. When investors currently sell a share, they’re taxed differently than income. Under Biden’s plan, these gains would be treated like standard income.

As a result, any capital gains earned annually would be added as a form of income similar to salary and bonuses. This means that if individuals currently earn a lot of money through capital gains, they could find themselves with a big increase in their taxes.

Business Tax Changes

Businesses tend to take the brunt of the impact of Biden’s proposed business tax changes.

Increase the Corporate Tax Rate to 28%
The current tax rate for corporations is 21%. Under Biden, he is proposing the tax rate is increased to 28%—a pretty big jump in size. While there is a chance that tax increases get passed down to consumers through raised prices and labor, the increase in corporate tax rates shouldn’t impact the consumer much.

Set a Corporate Tax Minimum
In the past, large corporations like Amazon have been able to find ways to not pay taxes through various loopholes. However, Biden’s proposed tax plan ensures that all companies, no matter the scenario, will pay a minimum of 15% on all reported profits.

Tax Foreign Profits at 21%
One of the most drastic changes to tax rates impacts corporations and is related to foreign profits. Any money that is earned by foreign arms will have its tax doubled from 10.5% to 21%.

Tax Consulting Services in Cedar City, Utah

With proposed tax changes right around the corner, it can be overwhelming wondering what to expect. As you run into scenarios that may affect your taxes, you might decide that you’d like a tax consultant on your side to walk you through everything you need to know.

The AA Tax & Accounting Services team is committed to maximizing our clients’ tax savings and helping you feel confident come tax season. Contact us to schedule an appointment.

Important Tax Info For Multi-Family Properties

Important Tax Info For Multi Family Properties

As a residential property investor, it’s important to take advantage of tax benefits when possible to ensure you’re boosting your bottom line. Paying taxes is a must and can be quite costly, which is why there are many tricks to minimize the obligations surrounding multi-family home taxes.

Let’s explore the different ways that real estate investors can make reductions to the amount of property taxes owed on their multi-family homes.

Real Estate Depreciation Tax

Real estate depreciation is based on the principle that a rental property’s value declines over time due to wear and tear on the home. Think about it like a car’s value. As soon as the car comes off the lot, the quality and value begin to diminish. However, the home’s value is not usually decreasing because of factors like maintenance, renovations, neighborhood popularity, and market demand — which is why real estate depreciation is often referred to as a “phantom” expense for investors.

Because of real estate depreciation, the IRS allows investors to take a tax deduction based on the estimated decrease in the value of the multi-family property. This means that the investors can actually have a positive cash flow from the multi-family property, but shows a tax loss on paper — offering investors a major tax break.

How to Calculate Real Estate Depreciation

The IRS believes that a residential property is only useful for 27.5 years. This means that investors are able to deduct a depreciation expense from their taxes. Calculating your multi-family property’s depreciation amount is relatively simple and requires you to divide the property’s value by 27.5.

As an example, let’s look at a multi-family property worth $750,000. When dividing it’s value by 27.5, you will calculate a depreciation expense of $27,272.

Factoring that depreciation expense into your taxable income illustrates just how much an investor will save. Consider that your multi-family property generates $100,000 per year. This means you would have the following tax obligations:

Taxes owed without depreciation = $100,000 x 25% (federal income tax) = $25,000
Taxes owed with depreciation = ($100,000 – $27,272) x 25% = $18,182

With no other deductions other than a real estate depreciation tax, investors in this scenario would save $6,818 annually — which is massive tax savings of property taxes for multi-family homes!

Cost-Segregation

Similar to real estate depreciation, there is another tax benefit known as cost-segregation which also factors in the depreciation of elements within the multi-family property. This includes elements such as appliances, fixtures, and cabinets.

Unlike the home itself, these items within the home have a much shorter lifespan which can be written off taxes for no more than seven years.

One important thing to note when considering cost-segregation is that the more you use this on your annual taxes, the higher your tax bill will be upon selling the property. If you plan to sell the property and want to reduce taxes during the sale, be mindful of this tax benefit for multi-family homes in Utah.

Tax Deductions

As a residential real estate investor, you must take advantage of various tax deductions. In layman’s terms, a tax deduction is any type of expense that can be written off of your taxable income. With your multi-family home taxes, you have the ability to deduct any expenses incurred while managing, maintaining, or repairing your property from the total taxable rental income.

Consider writing off the following expenses you might incur with your multi-family property:

  • Property management costs
  • Maintenance or repair fees
  • Monthly utilities (water, gas, electric, etc.)
  • Property marketing costs
  • Mortgage interest
  • And more!

Investors of multi-family properties can really benefit from tax deductions (as well as depreciation and cost-segregation) in comparison to single-family investments. When filing property taxes for multi-family homes, you can pay a single tax bill that covers all the units within the property — making it more efficient to file and likely offers a higher rate than that of a single-family home.

The AA Tax & Accounting Services team is committed to maximizing our clients’ tax savings. Our full-service accounting firm has spent years serving Cedar City, Utah, and surrounding Southern Utah towns providing effective tax strategies for multi-family investors. Contact us to schedule an appointment.

Tax Lessons You Should Know About RobinHood And Other Stock Apps

Tax Lessons You Should Know About RobinHood And Other Stock Apps

Filing taxes is a complicated process. Now imagine adding stocks bought and sold in apps like RobinHood to your mix. This article explores some of the benefits and pitfalls of stock apps like RobinHood. It will also help you understand how you can streamline the process of obtaining “Robinhood taxes” with a tax accountant.

Sweep down from the forest. Obtain the evil King’s money and save the day by helping the poor. That’s what Robinhood did.

Like many stock apps, RobinHood offers you the promise of “Robinhood taxes.” That is, saving yourself from paying high taxes on stocks. But how much of this is true? Read on to find out about the history of stock apps like RobinHood and their pros and cons.

The RobinHood Stock App

Stock websites have existed since the 1990s and are very popular. The reason that the RobinHood stock app, as well as others like it, are popular is due to a certain number of reasons.

The Benefits of app like Robinhood

  • With the RobinHood app, you don’t need to pay any fees for trading or for commissions. Typically, other apps or software would require you to pay some sort of fee. RobinHood does this all for free.
  • At the end of the year, RobinHood helps you by providing a 1099 tax form. The 1099 is a form for income made outside of ordinary wages.
  • The RobinHood app is very convenient and promises to help you lower your taxes at the end of the year.

As you can guess, stock apps are one way that you can get your foot into the door of buying and selling stocks. It makes it easier to track and monitor while providing you with the simplicity of an app. However, there are many pitfalls to using these apps that need to be mentioned.

The Pitfalls of Using Stock Apps Like RobinHood

  • Filing taxes, as was mentioned before, is not an easy process. It’s easy for these apps to make mistakes. For example, the app considers all stocks and sometimes might encourage you to sell a stock that would incur more taxes. This is because you don’t get to choose which stock is sold. So, if you’re not careful or aren’t very informed about this, you might be paying more taxes than you would have been had you not used the app.
  • There are different tax requirements based on your tax bracket. You need to know where you fall so that you know how much taxes to pay based on your stocks.
  • The 1099 does account for the taxes that should have been taken out. You will need to take the taxes that should have been taken out normally on your own. So, you may end up needing to pay Robinhood taxes for having made profit.

Streamline the Process and Save Yourself Some Time

While there are many benefits to the RobinHood app and other stock apps, it’s important to simplify filing your taxes. One way that you can avoid the flaws associated with the stock apps while still getting to use them for their benefit is by having a consultation with a tax accountant.
Some of the benefit of consulting with the tax account include:

  • Knowing how to take out the taxes that were not taken out of the 1099 tax form.
  • Getting advice on which stocks would help you decrease the taxes that you’d need to pay.
  • Avoid getting audited by having an expert view your forms before submitting them.

So, yes, you can still have your cake and eat it too! Enjoy the benefits of stock apps, but avoid the pitfalls. Have an expert, like AA Tax & Accounting Services help you!

How to Deal with Tax Liens

How to Deal with Tax Liens
As Benjamin Franklin famously said over 200 years ago, “nothing is certain but death and taxes.” Even today, this quote still rings true. While countless Americans have tried to avoid paying their taxes, everyone must pay in the end.

But what happens when you neglect to pay taxes? The IRS has many tools in their arsenal, but the most common in this situation would be a tax lien.

What Exactly is a Tax Lien?

A tax lien is a judgment filed by the Tax Commission against a taxpayer’s real or personal property when they neglect or refuse to pay a Utah tax balance. This lawful claim against your property safeguards a taxing organization’s interest in your possessions.

This lien does not take the property away from you, it simply means that the government is securing your property against any debts you might owe. Typically, they are only filed after multiple attempts by the taxing agency to collect the taxes owed.

Tax authorities are not required to go through the court to impose a tax lien. If a taxpayer does not pay what they owe, the government may take the liberty to unload the asset(s).

Utah is a tax lien state: if any individual or business fails to pay their Utah state taxes, the Utah State Tax Commission (USTC) may file a tax lien. Any taxpayer that owes taxes may have a lien filed against them in Utah if they fail to pay or show a good faith effort of repayment.

What is a Tax Levy?

A tax levy is a legal seizure of your property to satisfy a tax debt. A tax levy is a bit more severe than a tax lien, working as an ultimate choice to collect money where traditional approaches have been unsuccessful. The execution of a tax levy is when the government exercises the rights secured by a tax lien.

A few possessions that may be taken to fulfill your debt include property or real estate, various finances from personal accounts, current or future wages, and vehicles. The federal government can also commandeer your federal and state income tax refund checks as well.

The IRS and the Utah State Tax Commission have the right to levy up to 100 percent of any asset that you or your business may own to collect on your tax debt. Similar to a lien, the tax authority does not need to go through a court to levy your property.

How a Tax Lien Can Affect You

A tax lien can have a significant negative impact on your financial well-being and overall health. A tax lien is considered to be a public filing. So, anyone who conducts a search on you or your business can see that a tax lien has been filing against you, including the sum owed and the assets affected.

Tax liens also appear on consumer credit as well as business credit reports. A lien can impact your credit score, making it significantly more difficult for you to qualify for a credit card or loan.

A tax lien that is filed against your business or your home can make it more difficult for you to sell a particular property. Property buyers will very often conduct a search for any tax liens and will often refuse to make an offer until the lien has been withdrawn.

How to Avoid a Tax Lien

The easiest way to avoid receiving a tax lien is to continually pay your taxes. If you happen to be remiss on your taxes, it is recommended to contact a tax accountant to receive help in dealing with your unique situation.

Perhaps the most detrimental action you can take would be to ignore communications from the IRS or USTC. If you owe taxes towards these agencies, it is best to take a proactive approach towards dealing with the situation. Taxing agencies, above all, just want to settle the dispute by being paid what they are owed.

It is important to be realistic about what you can pay. If you are having trouble budgeting or agreeing upon a particular amount, it may be advisable to contact a tax consultant.

What if I Need Help with my Tax Lien?

Receiving a Notice of Lien can be a very stressful thing for most people. The good news is that help is readily available.

While talking to the IRS or USTC may be daunting or stressful, having someone in your corner can turn the tide of this important financial dispute.

Contact a trusted Cedar City UT, tax accountant today to help with tax liens or levies.

Small Business Planning During Uncertain Future Markets

Small Business Planning During Uncertain Future Markets
The COVID-19 outbreak has negatively affected countless people around the world, and small business owners are no exception. In addition to causing many businesses to shut down or significantly reduce their in-person operations, the outbreak has also disrupted supply chains, has forced layoffs, and has sparked myriad other issues. Regardless of what you believe should be done in response to the virus, there is one thing that remains universally clear: the virus itself has created a tremendous amount of uncertainty.

In the small business world, uncertainty can create a host of new challenges. If a restaurant doesn’t know whether it will be able to serve food next week, doing things such as placing delivery orders and managing payroll will all become much more difficult. These businesses can be both overprepared and underprepared, both of which can result in glaring inefficiencies.

Planning for the future is something that today’s best accounting firms already know is challenging, but the extreme volatility we’ve already witnessed in 2020 has made this task even harder. However, even keeping these things in mind, there are still quite a few things all small business owners can do to help them weather these uncertain times and even prepare themselves to thrive.

Take Advantage of All Government Programs and Tax Deductions

Following the outbreak, the government has created a series of programs to help small businesses, including the CARES Act, the Economic Injury Disaster Relief, the Paycheck Protection Program (PPP), and many others. Additionally, the government has also reduced disaster tax deductions, some tax deferment options, and even some debt-forgiveness programs. Navigating these programs can be challenging and, in some cases, the window to apply for support may be very limited. Be sure to have a small business accountant that can not only help you adapt to these changes but also adequately (and legally) take advantage of these new laws.

Give Yourself an Opportunity to Scale

In a world that is plagued with uncertainty, it can be very difficult to know where your small business will be one year or even one month from. If you were to run 10,000 different simulations, some of them would likely move your business in a positive direction, whereas others would move your business in a negative direction. Naturally, you’ll want to put yourself in a position where you adequately adjust to all likely scenarios, meaning that scalability should be at the forefront of your mind. Hiring scalable outsourced partners—such as accountants, lawyers, marketers, and even labor that all work on an as-needed basis—will make it much easier to adapt as new market conditions unfold. Creating conditional contracts (we will deliver x product if y event occurs) can also help reduce your exposure to the risk of uncertainty.

Take Advantage of Unexpected Opportunities

There is no denying that the COVID-19 outbreak has had a negative impact on the economy. But when things become undervalued, this means that those who are able (and willing) to take action will quickly find themselves finding unexpected opportunities. For example, the outbreak has pushed already low mortgage interest rates lower, meaning that the risk of investing in real estate has been widely reduced. Additionally, many banks—particularly those that partner with the SBA—are also expanding their lending pools and creating some easier paths to capital. Furthermore, with many people suddenly unemployed, the labor pool has been flooded with new talent. While your business may be hesitant to make any major commitments during times of uncertainty, expanding your operations appears to be more affordable than ever before.

Consider Permanently Cutting Certain Expenses

When many small businesses, even including brick-and-mortar retailers, were forced to suddenly shift to a work-from-home or digital model, they were worried things would never be the same. But some owners were surprised to find that their new model was just as productive—or even more productive—than their old ways of doing business. If cutting back on infrastructure, physical locations, full-time staff, and other expenses does not seem to have a direct effect on your end product, then you may want to consider carrying these “temporary” changes forward.

Conclusion

The business world is full of uncertainty and this simple fact of life is clearer than ever before. But even though times are tough and future conditions are uncertain, there are still many ways to prepare yourself to continue moving towards its long-term goals. With a holistic approach, a willingness to adapt, and the ability to spot new opportunities, 2020 can still be a great year for many business owners.

Contact us to learn more about how your business can keep moving forward.

The Basics of Foreign Earnings and Taxes

The Basics of Foreign Earnings and Taxes
In this highly globalized era, more people are working remotely—many in foreign countries—than ever before. Working abroad can provide many advantages including allowing your enterprise to expand into new markets and allowing you to experience a new culture. However, as most people working abroad will quickly discover, working in a foreign country can provide some tax and legal complications.

One of the primary concerns of people working overseas is whether they will be subject to double taxation. According to today’s leading tax experts, the answer, to put it simply, is it depends. Below, we will discuss the most important things to know about being taxed while working abroad.

Does the United States Tax Income Earned in Foreign Countries?

To understand how you will be taxed while working abroad, you will first need to determine whether you qualify for the foreign earned income exclusion. According to the IRS, in addition to earning foreign income and having a “tax home” that is in a foreign country (meaning you are subject to this country’s tax codes), you must either be a resident of the country “for an uninterrupted period that includes an entire tax year”, live in a country that has an income tax treaty with the United States (of which, there are many), or be a US citizen that lives in a foreign country for 330 full days within a year.

The IRS further explains that “If you are a US Citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020). In addition, you can exclude or deduct certain foreign housing amounts.”

In other words, while foreign earnings will be subject to US tax law, the deductions (if you qualify) are rather generous. If you are unsure whether you qualify or whether you are subject to double taxation, consider speaking directly with your tax accountant. Furthermore, if you believe your earnings will be above the stated amount, you may want to consider speaking with both an American accountant, along with an accountant in the country you’ll be living in.

What Other Income Tax Rules Apply to Americans Living Abroad?

Generally speaking, money that is earned in foreign countries can be considered “foreign income.” The IRS defines foreign income as “wages, salaries, professional fees, or other amounts paid to you for personal services rendered by you.” But, as you might expect, there are many variables that can complicate this situation.

There are many types of income that, even if you are living abroad when the income is received, do not qualify as foreign income. This includes income earned by all military personal or civilian employees of the US Government, incomes earned in international waters and airspace, income received during the tax year after services were rendered, compensation that could be excluded from income taxes at home, and compensation that comes from social security and other annuities. Each of these cash flows will all be treated as if they were accrued in the United States.

Conclusion

Generally speaking, income earned abroad by American citizens will be subject to American tax law. But be sure to see if you qualify for the foreign earned income exclusion, along with the many deductibles and other exceptions currently available. While these situations can sometimes be rather complicated, it is still quite possible for many people to earn an income abroad without being subject to double taxation.

Interested in learning more about how income earned abroad is taxed? Be sure to contact us, here.

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