Hope for your financial life and beyond

Year End Tax Planning For Small Businesses

Plan MazeThe following is a guest post by Kim Fourman.

Taxes may not be foremost on your mind right now, but they are important to think about before the year is over. It would be wise to know what kind of changes are coming and how that can affect you. For those in business, including the self-employed, here are two big changes coming for this year’s tax return.

Section 179

So what is Section 179 anyway? Well, first you need to understand depreciation. If you buy an asset (say, a computer), you are generally not allowed to expense (“expensing” means writing off or deducting) the entire amount in the year that you purchased it. Instead you are supposed to spread out the expense over several years.

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Getting An Electric Car For Free Through Tax Credits

Welcome to a Q & A tax session at Luke1428. Today we are discussing how to fund the purchase of an electric car with tax credits. Some states offer tax credits as incentives for many transactions, including purchasing or leasing an electric car.

To answer your tax credit questions I’ve pulled in none other than Mrs. Luke 1428, who just happens to be a CPA. So here we go.

Electric Car

The Nissan Leaf – source of a nice little state tax credit

Q: What are tax credits and how can I use them?

A: Great question. First, I’d like to make sure that we’re clear on the difference between a tax credit and a tax deduction. As an example, let’s assume you have $50,000 of taxable income, and your tax rate is 10%. Let’s compare the difference between a $1,000 tax credit and a $1,000 tax deduction.

A tax deduction lowers your taxable income. Without any deductions, your tax would be 10% of $50,000, which is $5,000. So, a $1,000 tax deduction lowers your taxable income to $49,000. Then we apply the 10% tax rate and come up with a tax of $4,900.

Tax Deduction Savings: $100.

Now, instead of the tax deduction, let’s try a tax credit.

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Ranking the Tax Prep Options

This following is a guest post by Kim, otherwise known as Mrs. Luke1428. She is a CPA at an accounting firm in Georgia.

Liberty TaxStill haven’t done your taxes? No worries, I haven’t either! Maybe the better question is do you even know HOW you are going to get your taxes done?

As I see it, there are five different methods of preparing your taxes. (Well…six, if you include just blowing it off and not doing it at all. Guess you can imagine I do NOT recommend that!) Here is my assessment of them:

1. Do It All Yourself

a. Paper and pencil: OK, this is still possible. You can just go to irs.gov and download the forms right there and go to it. Geek factor and bragging rights are high, but accuracy level is generally low. It is free, but the pain in the tail factor is off the charts.

Grade: C-

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When Should I Consult a Tax Professional?

The following is a guest post by tax professional Kim Fourman, otherwise known as Mrs. Luke1428. She is a CPA at Loggins, Kern & McCombs in Jonesboro, Georgia. The following is not tax or legal advice. If you have questions about your own situation, please consult a professional to discuss your particular situation.

tax professionalWhen is it important to consult a tax professional? Well, as a tax professional, you may be surprised at my answer. At my firm, this is what we tell people who inquire about our services:

If you understand the questions and can answer them properly, then Turbo Tax works great.

It really does. It would make no sense for someone with a couple of W2s and some mortgage interest to pay a CPA to prepare their taxes. But, there are times when you need to consult a tax professional.

Consult a Tax Professional When…

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Considerations When Starting a Business

BusinessThinking of starting a new business? Congratulations and thank you from the rest of America! Small businesses are what keep our country running. I thought I’d post a few things to think about if you are starting a new business. Of course, this isn’t an exhaustive list, and I’d encourage you to take the time to speak with a lawyer and a CPA to make sure that all your ducks are in a row. The expertise is worth the cost.

Having said that, here are a few things to think about:

What type of business will it be? 

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How Does a 1040 Work?

1040 Tax FormFor years when our W-2s came in the mail, I just plunked our numbers into Turbo Tax, and out popped a form. We sent that form in (or just e-filed) and then boom…a refund check showed up shortly thereafter. Cool. But I really didn’t have an understanding at all about how the form flowed…I just answered the questions.

Now that I prepare tax returns for a living, I’ve come to appreciate how important it is that a taxpayer really understands what they are reporting on the form and how it all flows together. So, without further ado – here it is – the Form 1040 broken down into manageable chunks. I’ll try to keep it in plain English as much as possible. [Read more…]

5 Articles Worth Your Time (1/5/13)

Here are five great articles I read this week. Enjoy your weekend reading!

10 Ways to Be Rich Without Being Wealthy (Money isn’t everything. Check out other ways your life can be rich.)

How to Stick to an Exercise Program (Want to get in shape in 2013? You’ll need to do these 5 things.)

Why Is My Paycheck Smaller? Understanding Your 2013 Paycheck (This article discusses reasons you are not bringing home as much money in your paycheck in 2013.)

The Advantages of Being a DINK (Dual Income No Kids) (This one is for all you young married couples out there – or for you parents who dream of being a DINK again some day.)

5 Ways to Build Savings (Here are some helpful ideas to help you save more in 2013.)

Bonus Read:

6 Ways Your Brain Attempts to Sabotage Your Goals and Dreams (Don’t let your mind play tricks on you. Beat it today!)