Tax Talk: Do You Have To Pay Taxes On Facebook Marketplace Earnings?

Tax Talk - Do You Have To Pay Taxes On Facebook Marketplace Earnings
Whether you are preparing to do your own taxes or working with tax professionals, it is essential that you document all your income streams carefully. For many people, their income stream is simple, and a W2 form from their employer is all they need.

But in this more gig-based economy, it is not unusual for some individuals to cobble together income from several sources, from ride-share driving to selling online. Facebook Marketplace is one such popular venue for local sellers, and raises the question, do you need to pay taxes on your earnings there?

Well, the answer is—it depends, though in most cases, you probably don’t need to pay any taxes on your Facebook Marketplace selling.

Paying Facebook Marketplace Taxes Will Depend On Use

There are four basic instances that may apply to selling on online platforms like Craigslist, Facebook Marketplace, LetGo, and others. Check the ones we have listed below to see what applies to your situation to determine if you need to pay taxes.

Selling Personal Items At A Loss

For most sellers who casually use online platforms, they are selling personal items that they have used for a loss. Generally, the rule is if you have used the item and then sell it for less than you paid for it, then you don’t owe any taxes. However, you also can’t claim the loss on your tax return. It is simply written off.

To help clarify this point, say you bought a mountain bike for $400. After a few years of use, you end up upgrading your bike and sell your old bike for $150 on Facebook Marketplace. Since you sold your bike at a loss after using it, you don’t owe any taxes on your earnings.

Claim Appreciated Assets Sold Online

So, what happens if you sell an item online that isn’t at a personal loss? An item that has gained value, such as a collectible or antique that you sell for more than you purchased, is considered an appreciated asset.

Depending on what type of seller you are, this income may need to be reported as business income—if you are a regular seller—or as capital gains.

Online Hobby Sales

Now, if you sell items on Facebook Marketplace and other online platforms without the express purpose of making a profit, this income can be classified as hobby income. A simple test of whether something is hobby income is if you have not made any profit for two out of five consecutive years.

For example, say you crochet items and sell them for the cost of materials or less, also taking a loss on your labor. This income can qualify as hobby income, and you can deduct your hobby expenses, though not any losses.

Use Facebook Marketplace & Other Platforms For Business

If you use online selling platforms as a way to move items you have bought and want to resell for profit, you can be classified as a small business. From furniture flippers to thrift store hunters who look for quality pieces to resell, it is important that if you engage in this kind of online income earning that you recognize your tax liability.

Also, if you have turned your online selling into a business, working with our tax consultant can help you set up your own business entity to reduce your liability and prepare for your future taxes.

Work With AA Tax And Accounting Services This Tax Season

If you need assistance compiling and filing your taxes this year, you still have time. Thanks to the automatic deadline extension, tax return filing is now due July 15, 2020.

So, if you are ready to tackle your taxes with our accountant to ensure you are in the clear, contact us today to arrange an appointment.

Due To The Coronavirus Utah Tax Deadline Is Now July 15th

Due To The Coronavirus Utah Tax Deadline Is Now July 15th
If you’ve been delaying bringing your taxes into your local Cedar City accountant, all while dreading the April 15 deadline, you are in luck. Due to the novel coronavirus—also called COVID-19—the tax deadline has been pushed back to now be July 15, 2020. But, instead of procrastinating a little longer, it’s time to tackle your taxes, especially since it can impact your stimulus check.

COVID-19 Taxes Deadline Automatically Extended

Unlike a standard tax deadline extension, the federal tax deadline is automatically extended to be July 15. You don’t need to apply for an extension to be able to file your taxes on July 15 as the extension has been set down by the IRS. Also, if you owe taxes, they can be paid on July 15, rather than the former tax deadline without any late penalties being applied.

If you do want to extend your tax filing further, you will need to file for that, and then your taxes will need to be filed by October 15. The shift of the tax deadline to July 15 has not moved the extension deadline.

Those who are self-employed can also expect an automatic extension to July 15. The benefit of this deadline move also means the self-employed can wait to make their first-quarter estimate taxes on July 15.

Utah Tax Day Also Extended

While some states have not moved their tax deadlines, the Utah statute mandates that state taxes are due to be filed with federal taxes. Thanks to this statute, you can file your Utah state taxes by July 15, 2020, without a penalty being applied.

However, with both your federal and state tax deadlines being extended, you really should take advantage of accounting services and get your taxes filed sooner, rather than later. Part of it is due to the fact that you could have a tax refund waiting for you. The other part is due to the stimulus check that has been issued as part of the US response to the economic impact of COVID-19.

How Your Taxes Impact COVID-19 Stimulus Check

At this time, the economic stimulus check is being sent out. This check is based on your 2018 tax filing, or if you have already filed your 2019 taxes, it will be based on that more recent tax filing. However, if you have had an income change from 2018 to 2019 filing where you made less in 2019, you will want to file quickly to ensure that your stimulus check is calculated properly.

Single tax filers who make an adjusted gross income (AGI) under $75,000 are able to receive the stimulus check full amount, which equals $1,200. The amount will decrease as your income is above $75,000. For those single filers who make over $99,000, no check will be received.

Married filing jointly couples who make an AGI under $150,000 are able to receive the full amount of the stimulus check of $2,400. This check amount will decrease in amount until AGI $198,000 is reached.

Dependent children will also qualify tax filers for an extra $500 on top of the stimulus check. A qualifying child will be under the age of 17.

For those individuals who normally don’t file taxes due to low income but would still like to receive the stimulus check, the IRS has provided a way to input your information to receive this benefit.

Let AA Tax & Accounting Services Take Care Of Your Taxes

Here at AA Tax and Accounting Services, we are still working on our clients’ taxes and accounting needs. We are open for document drop-off and can help you get your taxes in order in time for the July 15 deadline.

So, if you would like our accountant’s help with your taxes this year, feel free to contact us so that we can arrange what needs to be done, and help you maximize your tax return.

How Your Local Cedar City Accountant Can Get You The Best Tax Refund

How Your Local Cedar City Accountant Can Get You The Best Tax Refund
While tax filing has been extended to July 15 due to COVID-19, it is better to take care of your tax preparation and filing sooner rather than later. But should you be using an online tax software service or working with your local Cedar City accountant?

If you have asked yourself this question, then you may want to learn exactly how your local Cedar City accountant can secure you the best tax refund.

Greater Understanding Of Local And State Tax Laws

There are taxes that apply at the federal, state, and local levels. Keeping up with all the tax changes can be difficult for public-use tax software. However, by working with a local accountant, you can be assured that they are on top of the local and state tax laws that will apply to you and your taxes.

For instance, there are tax credits that Utahns can receive, such as the At-Home Parent Tax Credit and the Historic Preservation Credit. Your average online tax software may not account for these credits, unlike if you work with a tax accountant who works in Cedar City, UT.

Major Life Events Can Be Properly Accounted For On Taxes

There are several major life changes that can significantly alter your taxes, such as the birth of a child, marriage, divorce, etc. Some of these broader life changes can be straightforward—i.e., you got married and can now choose married, filing jointly. However, other circumstances can be more difficult to account for on your taxes.

Say, for example, that you received an inheritance from your great-uncle. Depending on what you inherited, how much you inherited, and where you live, different tax laws may apply. Here in Utah, there are no inheritance taxes, but if you received the inheritance from an out-of-state relative, taxes may still apply.

These kinds of major life events are best handled with the help of an experienced local accountant who can walk you through what you need to do to protect yourself from excessive taxes.

Tax Deduction Itemization Is Best With In-Person Accountant

Should you want to itemize your taxes, there are many different expenses, tax deductions, and tax credits that can be included. But, as most Americans opt for the standard deduction, you may not be familiar with all the ways that you can save with itemization.

With the help of an experienced accountant—rather than relying on software to give you the correct prompt—you can better maximize your tax return.

Business Owners Get The Right Credits And Deductions Applied

There are specific deductions and credits available to business owners, such as an alternative energy credit if the owner has decided to opt for renewable energy for their fleet vehicles. In other cases, if you have losses to report, you can save on what your business made. But, without the help of an experienced tax consultant, it can be tough to know if you have covered all your bases.

Our accountant here in Cedar City has worked with many small business owners to help minimize their tax liability and ensure that all the appropriate tax credits and tax deductions are claimed.

Navigating Complicated Tax Situations Call For Real Accountant

While online tax filing software can work for those who have simple taxes—i.e., have only one or two W2 forms and no other assets—many Americans have more complicated taxes. Owning assets such as multiple properties, stocks, a business, and more can make your taxes far more complex than your average tax software can handle.

Rather than relying on software to try and account for your tax liability, our accountant can work in-person with you. Whether you have capital gains taxes due to your stocks dividends, have rental properties, navigating a divorce, or other complex tax circumstances, our accountant can help guide you through to successfully filing your taxes.

So, if you need help preparing and filing your tax return, feel free to contact us today to set up a consultation with our accountant.

Tax Talk: Can I Be Taxed On An Inheritance?

Tax Talk - Can I Be Taxed On An Inheritance
When a person receives an inheritance after someone has passed, often, their thoughts are on their loss, not the tax implications of the inheritance. Unfortunately, there are three types of taxes that can be tied to an inheritance—an inheritance tax, estate tax, capital gains tax.

To help steer you through potential taxes associated with your inheritance, your Cedar City tax consultant is here to assist.

No Utah Inheritance Tax or Estate Tax

As AA Tax and Accounting Services is located in Cedar City, UT, our accountant handles many questions concerning Utah inheritance tax and estate tax. There is a difference between the two taxes:

  • Inheritance tax – This tax is calculated by assessing the value of the inheritance you receive from the deceased individual’s estate. If there is no provision in the will for the estate to cover the inheritance tax, the individual benefiting from the inheritance will need to pay the tax.
  • Estate tax – This tax is calculated with an assessment of the net value of the deceased individual’s estate. Any remaining liabilities—i.e., debts—are subtracted from the full value of the estate, leaving the net value of the estate to be taxed.

Luckily, Utah does not impose an estate or inheritance tax. If you inherit from someone who lives outside of Utah, there may be applicable taxes.

No Federal Inheritance Tax, But There Is A Federal Estate Tax

On the federal level, there is no inheritance tax that you need to worry about. In part, this lack of inheritance tax is because there is a federal estate tax. With only one of these taxes, you don’t have to worry about double taxation on the same inherited estate.

Frankly, you may not have to worry about the federal estate tax either. With changes made to tax law, the federal estate tax allows for an exemption for the first $11.4 million of the estate’s value. Also, inheritance does not count as income, so you don’t have to worry that an inheritance will impact your taxes.

Capital Gains And Your Inheritance

Not all inheritances come in the form of currency. Property, stocks, and other assets are often part of an inheritance. If you opt to sell these inheritance assets, you may owe capital gains taxes. Whether you owe short-term or long-term capital gains taxes will depend on a variety of factors that you should sort through with an accountant. There are some provisions made so that something like an inherited property can be sold and taxed as a long-term capital gain under a shorter timeframe.

Also, you won’t be paying the capital gains on the entire lifetime of the property value gain. For example, say your grandparents bought their home for $80,000. Over the years, the property went up in value, so when you sold it, the property sold for $150,000.

However, you don’t owe taxes on the $70,000 value gain. Instead, say the value of the property was $140,000 at the time of your grandparents’ death. The amount you will be taxed on will be based on the gain from their time of death, meaning you will only pay capital gains taxes on $10,000.

Protect Your Inheritance With Our Tax Consultant

Whether you are looking at out-of-state inheritance tax, federal estate tax, or capital gains tax on your inheritance, working with our tax consultant can protect your inheritance. With his years of experience, our accountant has helped people manage legacies of various sizes and complexities.

Also, if you are considering estate planning for your future inheritors, our accountant can assist with those plans. From creating trusts to setting up elder care, he is here to help.

For expert guidance when it comes to your inheritance, tax liability, and other accounting questions, feel free to contact us to set up an appointment with our accountant.

Tax Talk: What School Expenses Are Tax-Deductible?

Tax Talk - What School Expenses Are Tax-Deductible
College students are faced with seemingly endless school expenses associated with higher education, from paying tuition to paying for campus parking permits. A question that often comes up around tax season is which of these school expenses are tax-deductible, and how can students receive the best tax return possible?

As your local Cedar City, UT accounting firm, we have helped plenty of Southern Utah University students as well as other college students—and parents who claim them as dependents—with their tax preparations. Below is a breakdown of what college expenses can be deducted from taxes, what tax credits and tax deductions students are eligible for, and other college-related tax answers.

What School Expenses College Students Can Deduct From Taxes?

When it comes to saving on your college-related expenses, you might be surprised how much can be deducted from your owed taxes to help you have a better tax return.

  • Educational supplies – There are qualified educational expenses that you can deduct from your taxes, ranging from your textbooks to necessary equipment like your transportation.
  • Student loan interest – For those who have an adjusted gross income under $80,000 for single filers—AGI of $160,000 for married filing jointly—you can deduct the interest you have paid on your student loans.
  • Room and board – In some cases, the amount you spend on room and board for college can be deducted from your taxes.
  • 529 plans – Adding money to a 529 saving plan is tax-free, so you can pay for your college expenses with your 529 plan to help save on taxes.

Some professions require continuing education, even after you are finished with your college days. Depending on your expenses, you may be eligible for an employer-required education tax deduction.

Tax Credits College Students Should Use

There are a couple of tax credits that are available to college students that allow you to save on your taxes.

  • American Opportunity Tax Credit (AOTC) – In the first four years of college, you can claim the American Opportunity tax credit. This credit provides you with a $2,500 credit, and if your tax liability goes to zero dollars thanks to this credit, the IRS will refund 40% of the credit, up to $1,000. You will need to have at least $4,000 in college expenses claimed to receive the full AOTC credit.
  • Lifetime Learning Tax Credit (LLTC) – Once the time limit on the AOTC has run out, you can still claim the Lifetime Learning tax credit. For this educational credit, there is no limit on the years you can claim it. With the LLTC, you can reduce your taxes by $2,000.

There are other eligibility criteria that may apply to you, such as if your parents are claiming you as a dependent, and other concerns. Utilizing our accounting services to prepare your taxes can help ensure that you are receiving the correct deductions and tax credits.

When College Students Should File A Nonresident Tax Return

While some college students stay in-state for their higher education, plenty of other students take the opportunity to start their adult lives outside of their home state. This move also usually necessitates at least a part-time job, where the out-of-state student earns income while attending college.

However, in most cases, these out-of-state students are still legal residents of their home state. Because of their state residency status, these students will need to file nonresident state tax returns in the state their university is located as well as file resident state taxes in their home state.

For those who live in states that don’t collect income taxes—i.e., Wyoming, Nevada, Alaska, Washington, Florida, Texas, and South Dakota—you don’t need to file a resident tax return or a nonresident tax return. But for all other out-of-state college students, you will need to file a nonresident tax return, resident tax return, and federal tax return.

Work With AA Tax & Accounting Services To File Your College Taxes

With all these expenses, some college students don’t want to add the expense of paying for quality tax preparation services. However, not all tax returns are that straightforward, which can leave students missing out on deductions that can increase their tax return.

Instead of gambling that one-size-fits-all tax software can prepare your taxes properly, you can use an experienced accountant who knows what questions to ask and information that is needed to help you save on your taxes and boost your return amount.

When you are ready to take care of your taxes with an experienced tax professional, feel free to contact us today to set up your appointment.

Don’t Bank On Doing A Tax Extension, Let Our Accountant Help You Out

Don't Bank On Doing A Tax Extension, Let Our Accountant Help You Out
Tax season is already in full swing, and some Americans have already filed their tax returns. However, often the early tax filers have simple taxes that are easy to complete. If you have complex tax circumstances, you may be tempted to file for a tax extension to buy you more time.

The problem is, a tax extension isn’t always the answer to tax issues. Instead, working with a reliable tax preparer can help get your taxes filed on time and penalty-free.

Tax Extensions Can Drag Out Tax Preparation Issues

Filing for a tax extension allows you to have until October 15 to finish filing your taxes. That can sound pretty good, considering that it gives you an extra six months to complete your tax preparations and filing. But there are several downsides to filing a tax extension.

  • Still need to pay taxes on April 15 – While the IRS will accept an extension on the actual filing of your taxes, if you owe taxes, you will need to pay them on April 15. Some people ask how they can know how much to pay if their taxes are incomplete, and the answer is—you can’t know exactly. But that doesn’t matter to the IRS, penalties will still be applied for nonpayment or late payment.
  • Married couples don’t receive extra time for filing changes – If you are a married couple, you will not have extra time to change your filing status from joint filing to married filing jointly. You will still need to have your status determined by April 15.
  • IRA contributions cut off is the same – April 15 is still the cut off for contributions to a Roth IRA and traditional IRA. Filing for a tax extension doesn’t change this deadline.
  • Can’t recharacterize your IRA contribution – Thanks to the Tax Cuts and Jobs Act, you can no longer recharacterize your IRA contribution even if you file for an extension.

Also, in the unlikely event that you find that you don’t need to file a tax return, by filing for an extension, you may leave the IRS confused. They may require you to file a tax return anyway since you filed for an extension.

Change Your Tax Season With Our Tax Preparation Service

Rather than dealing with the issues that crop up with tax extensions or trying to manage your tax return on your own, you can rely on our tax preparation services to drastically improve your upcoming tax season.

Help You Be More Organized

Working with our accountant can help take the disorganization and stress of tax season off of your plate. Instead of trying to organize what you might need on your own, you can work with our accountant to know exactly what paperwork is needed to file your taxes properly.

Find All Applicable Deductions And Credits

Tax law is constantly changing, and it can be nearly impossible for the average taxpayer to stay on top of these changes. Rather than trying to tackle tax law on your own, you can rely on our accountant.

With the help of Adrian, you can feel confident that he will find all the tax credits and tax deductions that are applicable to your taxes. That way, you will never overpay on your taxes and may receive a hefty return instead!

Determine Taxes Owed

Depending on your tax bracket and other factors, you may end up needing to pay taxes. However, you don’t have to resign yourself to paying high taxes with the help of our accountant when it comes to your tax preparation.

There are a number of saving strategies that our accountant can help you use to assist in keeping more of your income. During your consultation, he will be able to provide you with tailored insights.

File Federal And State Tax Returns

After your taxes are completed, our accountant will take care of filing both the federal and state tax returns. If there are any errors in the filing, our accounting firm will take care of it with the IRS, so you don’t need to stress.

Assist In Planning For Future Tax Savings

Once your taxes are filed, our accountant can help you prepare for the next tax season. Along with advising you on what to do with your tax return, he can advise you about tax-free contributions, upcoming credits you may qualify for, and more.

For expert accounting help with your tax return, you can count on AA Tax and Accounting Services. Our accountant can get your taxes in order and properly filed with no need for an extension. To work with our accountant, please contact us today to schedule your consultation.

Tax Talk: Deductions On Out-Of-Pocket Classroom Expenses For Teachers

Tax Talk - Deductions On Out-Of-Pocket Classroom Expenses For Teachers
Teachers often don’t have the supplies they need without providing for them out-of-pocket, as public schools are chronically underfunded. In fact, according to information from the U.S. Department of Education, 94% of teachers in public schools to buy supplies for their classrooms.

To help reduce the burden on teachers at tax time, there is a special tax deduction for teachers called the Educator Expense Deduction. With the help of our accountant at AA Tax and Accounting Services, you can be sure to secure this deduction on your upcoming taxes this year.

Meet The Educator Expense Tax Deduction

While there are many ways that a tax consultant can help you save on your taxes, there is a specific tax deduction called the Educator Expense Tax Deduction. This tax deduction has strict requirements to claim it—like all deductions—which are:

  • Claimants need to work in a school that serves children in kindergarten through grade 12.
  • You will need to complete 900 hours of logged work over the course of the school year.
  • That work needs to be as a teacher’s aide, principal, teacher, school counselor, or instructor.

The requirements may be a bit strict, but at least it is easy to know quickly who is and is not eligible for the tax deduction. Though, to be clear, these educators are not eligible for the Educator Expense Tax Deduction:

  • Pre-school aids and teachers
  • Homeschool instructors
  • College and graduate professors and instructors

What Are Qualified Expenses For An Educator

However, just because you are a qualified educator under the definition of the Educator Expense Tax Deduction, that doesn’t mean that everything is fair game. The kinds of items that are eligible for expense deduction are:

  • School supplies
  • Athletic equipment bought by PE teachers
  • Books
  • Computer software and equipment
  • Items appropriate for student classroom use

Also, it is important that you only count expenses that have not been reimbursed. If you have bought these items and had your school district, union, or others reimburse your expenses, then you can’t claim the Educator Expense Tax Deduction.

How To Claim The Educator Expense Tax Deduction

Once tax season rolls around, and you are looking to claim the Educator Expense Tax Deduction, there are some things you need to do to properly claim this deduction.

Track your expenses – It is important that you keep all your receipts and records of what you bought for your classroom. You may want to file them all together to ensure that the receipts don’t get lost.

Married teachers can file together – At most, the Educator Expense Tax Deduction allows for a single teacher to deduct a maximum of $250. However, if you and your spouse are both teachers and are filing jointly, you can claim a combined $500 deduction.

Work with an accountant – With claiming all the deductions you deserve and managing other tax filing issues, it can help to work with an experienced Cedar City accountant to ensure you have the easiest tax season possible.

Iron County School District Educators Can Find Tax Help With Us

For Iron County School District educators looking for a reliable accountant in Cedar City, look no further than AA Tax and Accounting Services. Along with our regular accounting services, our firm can prepare and file your taxes with a close eye on what deductions, credits, and other tax-saving measures can be implemented to help you save.

If you are ready to tackle your taxes with expert assistance, please contact us today to set up an appointment. We look forward to helping you have the best tax return possible.

Why A Bookkeeper Is More Beneficial Than Bookkeeping Software

Why A Bookkeeper Is More Beneficial Than Bookkeeping Software
There are a million and one tasks that require the attention of a business owner. Arguably, the bookkeeping is one of the more important tasks. Yet, many small business owners are not experienced in managing their bookkeeping, especially with the careful tracking needed for business accounting.

Bookkeeping software seems like a natural solution, but it may not be the best answer to your accounting issues as a small business owner. Instead, choosing a bookkeeping service can free up your time, save you money in the short- and long-term, and many other benefits.

Outsourced Bookkeeping Is More Affordable

It may seem counter intuitive, but outsourcing your bookkeeping can be far more affordable than simply purchasing bookkeeping software to take care of it yourself.

For one thing, there are many different levels of bookkeeping software. The pricing of bookkeeping software can vary widely, but if you opt for more affordable bookkeeping software, you may not have all the features you need. This restriction can leave you without the proper financial tools to manage your business properly.

By outsourcing your bookkeeping to your local Cedar City accountant, you can relax, knowing that our accountant has the best bookkeeping tools available. That way, you don’t have to invest in software that may not be what you ultimately need.

Free Up Your Valuable Time

The time you spend taking care of your company’s bookkeeping may be better spent on some other aspect of your business. From marketing to providing services or products, there are other tasks that take up the time of a small business owner.

But if you are spending hours reconciling bank accounts, balancing the general ledger, chasing down accounts receivable, and other common bookkeeping tasks, you won’t have the time you need to effectively run your company. Even with bookkeeping software, you still have to take care of the bookkeeping yourself, even if some of the processes are streamlined.

Instead, you can leave your bookkeeping in the hands of our qualified accountant and focus your attention on tasks that need your attention more.

Enjoy Human Oversight

As long as there is nothing egregiously incorrect with your bookkeeping, your average bookkeeping software will not recognize the issue. However, there are a number of errors that can slip by software that has no other human oversight than your own. With no one else to review your bookkeeping, expensive mistakes can be made.

By opting to outsource your bookkeeping, you can be reassured knowing that an experienced accountant is reviewing your accounts, and an accounting firm will often have multiple check system to catch any errors.

Accurate Financial Reports

Part of the importance of keeping up with your bookkeeping is that these records help to create an accurate picture concerning the status of your business. But, if you haven’t updated your bookkeeping software with the latest information, you won’t be able to have an accurate overview until you do.

Also, not all bookkeeping software is able to generate the financial reports you are looking for when you review your business. Depending on your needs, our accountant should be able to create the financial reports you need to assess the viability of your company.

Better Employee Payroll And Benefits Tracking

One of the highest predictors of employee satisfaction is being paid on time. However, getting payroll completed on time can be difficult if you have other tasks that require your attention. Even with bookkeeping software, you will still need to input employee hours, ensure that pay rates are correct, review tax withholding’s, and double-check benefits accrual.

As payroll is often every other week, it is easy for this task to sneak up on a busy company owner. Instead of having upset employees due to late paychecks, using our payroll services, you can ensure that your employees are paid on time, and the associated benefits are accurately tracked.

Easier When Tax Season Arrives

Making sure that all your financial records and bookkeeping is successfully transferred to your accountant during tax season can be a massive hassle. It can become even worse if your bookkeeping software is not compatible with what your accountant uses.

Rather than go through all that stress, you can leave your tax preparation and filing in the hands of the accountant who is already taking care of your bookkeeping. That way, you won’t face the same kind of stress that other business owners who DIY their bookkeeping.

Greater Security With Outsourced Bookkeeping

How confident do you feel about storing all your financial information on your home computer or laptop? Considering the ease at which computers are infected with spyware and malware, it is a gamble to use bookkeeping software on unprotected devices.

At an accounting firm, the best security is used to protect client information. Also, as these computers are not used recreationally, there is a far lower chance that they could be potentially infected.

Have An Experienced Accountant On Your Side In Cedar City

If you would like to work with our accountant, and see how our bookkeeping services can improve your business, feel free to contact us. We look forward to helping you optimize your company’s finances.

Tax Talk: 8 Changes For Your 2020 Taxes

Tax Talk: 8 Changes For Your 2020 Taxes
Every year when you prepare your taxes for filing, there are changes to the tax law that should be taken into account. Without accounting for change, you may end up surprised by a tax bill you weren’t expecting.

As your local Cedar City tax accountant, AA Tax and Accounting Services is here to give you a heads up on eight of the tax law changes that you should be aware of when it comes to your 2020 taxes.

1. Changes To Tax Brackets For 2020

To help account for inflation, the Internal Revenue Service (IRS) has made adjustments to the 2020 income tax brackets. Below are the updated tax brackets:

Rate Single Filer Married Filing Jointly Head of Household
10% $0-$9,875 $0 – $19,750 $0 – $14,100
12% $9876 – $40,125 $19,751 – $80,250 $14,101 – $53,700
22% $40,126 – $85,525 $80,251 – $171,050 $53,701 – $85,500
24% $85,526 – $163,300 $171,051 – $326,600 $85,501 – $163,300
32% $163,301 -$ 207,350 $326,601 – $414,700 $163,301 – $207,350
35% $207,351 – $518,400 $414,701 – $622,050 $207,351 – $518,400
37% $518,401 and up $622,050 and up $518,401 and up

2. Expand Tax Exemption For Gift And Estate

Previously, people could gift—or hand down to descendants—up to $5.49 million, tax exempt. However, in 2020, that exemption amount has been expanded considerably. Now, the estate and lifetime gift tax exemption has been expanded to $11.58 million per individual.

This tax exemption does not include the annual gift exclusion, which is not included toward your lifetime gift tax exemption. For the annual gift exclusion, you can give $15,000.

3. Increase 401(k) Contributions Limits

For the first time in years, you can increase your contributions to your 401(k) retirement plan as well as your individual retirement accounts (IRAs). Naturally, these contributions can be deductible on your upcoming taxes. As it stands, your retirement plan contribution limits look like this:

  • IRA contributions – $6,000 limit
  • Catch-up IRA contributions for individuals 50 years old or older – An additional $1,000
  • 401(k) contribution – $19,000 limit
  • Catch-up 401(k) contributions for individuals 50 years old or older – An additional $6,000

4. Remove Individual Mandate Penalty

With the Affordable Care Act, there was a penalty applied if you did not have health insurance, don’t qualify for an exemption or the correct level of coverage. This tax penalty was often called the individual mandate penalty.

With the Tax Cuts and Jobs Act of 2017, this penalty was set to be eliminated, but that penalty removal didn’t come in until the upcoming tax season in 2020. So, if you did not have health insurance during 2019, you won’t be penalized for it on your taxes.

5. No Alimony Deduction Or Income

Another effect of the Tax Cuts and Jobs Act was to eliminate the alimony tax deduction in 2019. That means, should you have gotten divorced in 2019 and need to pay alimony, you will not be able to deduct the amount you pay from your taxes.

It also impacts the party that receives the alimony. They will no longer be able to count the alimony payments as part of their income.

6. Greater Health Saving Account Contribution Limits

If you have a health savings account (HSA), you can increase your contributions a bit more and help reduce your tax burden. The slight changes are reflected below and only apply to these plans:

  • HSA self-only – $3,500 limit
  • HSA family – $7,000 limit

7. Deductions For Medical Expense Higher

For those individuals who itemize their taxes, you may find it harder to do that while preparing to file your 2019 taxes. For two years, deducting dental and medical expenses was only possible after they passed the threshold of 7.5% of your adjusted gross income (AGI).

However, when you go to file your 2019 taxes, your dental and medical expenses will only be eligible to be deducted if they surpass 10% of your AGI. This change can make it more difficult to itemize your taxes, as well as the fact that the standard deduction has risen again.

8. New Tax Filing Form For Senior Citizens

After a lot of talk of creating a simpler tax filing system, the Bipartisan Budget Act of 2018 has lead to the creation of the Form 1040-SR. This form is created for senior citizens to help simplify their tax returns. The main requirements to use this form to file your taxes are:

  • Have to be 65 years old or older
  • Must take the standard deduction (no itemization option)

You can check out a draft of the new Form 1040-SR on the IRS website and see what it will be like to file this form.

Let AA Tax And Accounting Services Help You File 2020 Taxes

Filing your taxes on your own can be complicated, and when you use tax software, you are always left with the nagging worry that something has been overlooked. To have the human touch and insight involved when it comes to your 2020 tax filing, you can count on our accountant.

If you would like to have our accountant’s help in preparing and filing your 2020 taxes, feel free to contact us today to schedule your appointment.

How To Improve Cash Flow To Your Business

Improve Cash Flow To Your Business
It is well-known that little over half of all startup businesses make it into their fifth year of operation. While there are a variety of factors that cause these companies to shut their doors, one of the main issues is problems with their cash flow.

If you want to protect your business, it is essential to always be on the lookout for how the cash flow to your company can be improved. From staying on top of creditors to assessing the viability of a business loan, our accountant here at AA Tax & Accounting Services is here to help.

Keep Tidy Financial Records

Without accurate and tidy financial records, it is next to impossible to improve your business’ cash flow. Accurate records will show you what is doing well and what services or products are not performing as expected.

Also, by tracking the cash flow within your company, it is easier to ensure that all is accounted for at the end of the day. With poorly kept financial records, embezzlement and petty theft are far easier. If you don’t have time to keep up with your financial records, outsourcing your bookkeeping can keep your records in better order.

Review Accounts Receivable

Hopefully, you are up-to-date on your accounts payable. If not, you may want to contact your creditors and set up a payment plan that will allow you to generate cash flow as you repay them.

However, an area where many small businesses struggle is their accounts receivable. It can be awkward to contact debtors and remind them that you require them to pay for your services or products. But, if you are not proactive in pursuing your accounts receivable, then you may find your business underwater before long.

If there is a chance that the business relationship can be preserved, it is better not to take your debtors to court. But, if you would prefer to end any business with a particular debtor and have no expectation of payment otherwise, then pursuing court-ordered repayment may be the best course of action.

Reconsider Revenue Recognition Strategy

Your company’s revenue recognition strategy can impact both your taxes and cash flow. If your current revenue recognition strategy doesn’t work for your business, then it may show greater profits than you actually have in-hand. These skewed profits can cause your tax burden to be greater without the cash to help alleviate what you will owe to the IRS.

For instance, say you provide a software service to a client. Maybe your current strategy is on sales-basis, which recognized revenue the moment you and your client agreed to a contract. But for a long-term project, it may make more sense to switch to percentage-of-completion.

Consider A Business Loan

If you need more time to improve your business’ cash flow, a business loan may be just the thing you need to get you through a hard patch. Shopping around for different business loan rates can help you find the best loan possible and help your company make it through a tough spot.

However, this measure is just a stop-gap. If things aren’t improved elsewhere in your business, you may end up both out-of-business and in further debt. By working with an accountant, you can identify the areas of your company where improvements can be made to improve your cash flow.

Negotiate With Suppliers

When you first agreed to your current deal with your suppliers, you may have been at a disadvantage, especially if you were a new company. Other factors, such as market changes, can allow you to work out a better deal with your suppliers.

Either way, it is worth your time to reach out and see if you can get a more favorable deal on your company supplies. Also, you may want to reach out to other companies that may be to supply your needs and receive bids from them.

Let AA Tax & Accounting Services Help Your Business Improve Cash Flow

What changes your business can make to improve cash flow is highly dependent on your company’s circumstances. While the advice in this post is helpful, our accountant can provide far more personalized advice on how you can improve the cash flow to your business.

If you would like to consult with our accountant for personalized insight regarding improving your business cash flow or other accounting needs, please contact us today to set up an appointment.

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