wayne-stanforth-cpa

Tax Changes: What's New in '25

Tue, 05 Nov 2024 13:08:51 GMT

Each year, the IRS adjusts for new tax brackets and the yearly standard deductions that reflect higher prices due to factors like bracket creep or inflation. Bracket creep is when inflation inadvertently thrusts a taxpayer into a higher bracket. Here is an overview of the tax changes and what's new in 2025.

Tax Rates and Tax Brackets

The IRS has seven tax brackets:

Your filing status and taxable income determine your tax bracket. This year, the IRS has increased the income thresholds to factor in inflation.

Checks And Balances On Advance Payments on Child Tax Credit

If your family received any advance payments, you have to compare the advance Child Tax Credit payments received last year and what you can claim on that year's (2024) tax return.

If you received less than you are eligible for, you could claim a credit for the balance of Child Tax Credit on your 2024 tax return. If eligible for less and you received more, you have to repay some of the total amounts in excess you received when you file your tax returns.

This January, the IRS should send Letter 6419 with all taxpayers' tax credit payments from last year. If you did not receive the monthly Child Tax Credit payment in 2024, you are eligible for a lump-sum payment. It's payable when you claim for the Child Tax Credit when filing your 2024 federal income tax return in 2025.

Standard Deduction

A standard deduction decreases your taxable income, and for 2025, this deduction will rise to:

$12,950 for a married couple filing separately and single filers
$25,900 for married filers who file jointly
$19,400 for household heads
$1,350 for the blind or those over 65 years
$1,650 for the unmarried and who are not widows or widowers

Earned Income Tax Credit

The EITC, EIC, or Earned Income Credit is a refundable credit for moderate and low-income employees. This amount varies and depends on the number of children and income level. You can also qualify if you have no children.

For 2025, the IRS has set the EIC to $569- $6,935 depending on your income and how many children you have. The reduction of credit available to those with no children will be reduced in 2025.

This reduction comes in the wake of the American Rescue Plan Act, which increased it from $543 to $1502 in 2021, but the Congress has yet to carry it over to the 2025 tax year.

Pass-Through Deduction

Owners and sole proprietors of pass-through businesses qualify for a deduction of 20% to lower their tax rate. This deduction is a portion of the Tax Cuts and Jobs Act.

Conclusion

At the office of Wayne W. Stanforth, CPA, we cater to all taxpayers , from individuals, families, and corporations. Our staff specializes in business consulting, tax and accounting services, retirement planning, estates, and trusts. Visit our website or contact us for more information.

Comparing Trends With Your Financial Statements

Mon, 15 Aug 2022 13:41:28 GMT

Assets, liabilities and equity….oh, my! Financial statements are chock full of essential information needed to make the best decisions for your business. When properly prepared and attested , you can be confident that you have the valuable figures in front of you to effectively allocate your resources.

One way to get the most out of your accounting diligence (and that of your CPA) is to compare your financial statements from one period to another to look for trends and opportunities. Using ratio analysis, you can dig deeper into the profits and losses of your own business as well as compare your growth to similar businesses within your industry.

Financial Statement Ratios

Let’s take a look at some of the common ratios that are used to analyze financial statements. When comparing profitability, liquidity or solvency from one period to another, it is important to take a look at the following:

Gross Profit Margin (Profitability)

This is a good place to start when analyzing your company’s financial health. Gross profit margin measures the percentage of revenue that is left after subtracting the cost of goods sold. This can be a good indicator of how well your business is selling its products or services.

A high gross profit margin indicates that a company is able to generate a lot of profit from its sales.
A low gross profit margin indicates that a company is struggling to generate profit from its sales.

In other words, the higher the gross margin, the better. When comparing your profitability to another period, remember that the following circumstances will affect your gross profit margin:

Your business is experiencing different levels of efficiency which can increase or decrease your gross profit margin depending on if you have become more efficient or less efficient.
You start selling more high-margin products or services which will increase your gross profit margin.
The cost of your raw materials have increased which will decrease your gross profit margin unless you also increase your cost.

Current Ratio (Liquidity)

Current ratio measures how well your business can pay its short-term obligations. A higher ratio means that your business is in better financial health. To calculate your current ratio, divide your current assets by your current liabilities.

For example, let’s say your business has $10,000 in cash and $5,000 in short-term debt. Your current ratio would be 2 ($10,000/$5,000). Ideally, you want your current ratio to be above 1. This means that you have more assets than liabilities and are in a good position to pay off your debts. A current ratio below 1 means that you have more liabilities than assets and may have trouble paying off your debts.

It is important to compare apples to apples when looking at different periods. This ensures that either increasing your current assets or decreasing your current liabilities is feasible for both periods you are comparing; otherwise, your analysis will look skewed.

Debt-to-Equity (Solvency)

Debt-to-equity measures the amount of debt that your business has compared to its equity. This ratio is important because it shows how much debt your business has compared to its assets. A higher ratio indicates that your business is more leveraged and may be at greater risk of financial difficulties. (Creditors or investors typically prefer businesses with lower debt-to-equity ratios because they are seen as being less risky.)

When comparing your debt-to-equity to another period, keep in mind that it can be affected by changes in accounting standards. For example, if your company adopts a new accounting standard that requires it to recognize more debt on its balance sheet, the debt-to-equity ratio will increase.

WWS, CPA Keeps Up With the Trends

At the office of Wayne W. Stanforth, CPA, we offer a wide range of tax and accounting services including GAAP-compliant financial statement preparation, attestation, and personalized financial analyses. Contact us for a free one-hour initial consultation to learn more about getting the most out of your finances.

The Basics About Financial Statement Audits, Reviews, and Compilations

Fri, 15 Jul 2022 13:37:48 GMT

As if preparing financial statements wasn't overwhelming enough, there's this thing called attestation. By definition, attestation means evidence or proof of something. When it comes to your financial statements, attestation services are provided by a certified public account (CPA) to make sure everything is copacetic and compliant.

What Is an Attestation Service?

Simply put, an attestation service is when an auditor provides a professional opinion and objective assessment on the financial statements of a company or business. Attestation services can provide valuable insights into a company's financial health to help get a true and accurate financial picture. If you currently use an accounting firm to prepare your financial statements, you already have the professionals you need for attestation as only a CPA can provide this service.

The three most common types of attestation services are audit, review, and compilation.

Audit

An audit is an in-depth type of attestation service, and it will provide an unbiased opinion on your financial statements. An audit provides the highest level of assurance and involves a thorough review of a company's financial records looking for fairness of financial statements and disclosures. The auditor expresses an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with Generally Accepted Accounting Principles (GAAP).

Review

A review involves performing inquiries and applying analytical procedures to obtain evidence about the financial statements. The auditor expresses limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in compliance with Generally Accepted Accounting Principles (GAAP).

Compilation

A compilation is another type of attestation service that can be helpful in providing a general overview of your financial situation. A compilation does not involve performing any tests or procedures. The CPA compiles the financial statements from information provided by the client. The CPA expresses no opinion or assurance on the compiled financial statements.

Why Are Attestation Services Important?

Without attestation services, accounting would be reduced to little more than guesswork. They play a vital role in the world of accounting, helping to provide essential information for making informed decisions. These findings can be used to make informed decisions about where to allocate resources, and how to improve financial performance. In short, attestation services provide valuable insights that can help your businesses to prosper.

An experienced accountant can recommend the level of attestation services that are appropriate for your circumstances.

Attestation Services With WWS, CPA

At the offices of Wayne W. Stanforth, CPA, we are a full-service accounting and consulting firm that can prepare your financial statements as well offer complete attestation services. Contact us for a free consultation to learn which services are best for your business.

A Quick Guide to Financial Statements

Wed, 15 Jun 2022 13:31:10 GMT

If you’re lucky enough to have a skilled accountant help manage the fiscal aspects of your company or business, then you probably know the bare minimum about financial statements. After all, isn’t that why you added a money master to your internal team? That being said, it is important for you to have a general understanding of the purpose of your financial statements, even if your accountant holds the reins.

Here is a digestible explanation of the five major components of a financial statement along with the services an experienced accountant provides.

Income Statement

Income statements are one of the most important financial documents for any business. They provide a clear picture of your company's revenue and expenses over a certain period of time, which can be used to make informed decisions about your business. Income statements can be prepared on a monthly, quarterly, or annual basis. Generally, the longer the timeframe, the more accurate the statement will be.

Cash Flow Statement

Cash flow statements are an essential tool for financial analysis that show the movement of cash into and out of your company over a period of time. Cash flow statements provide essential insights into your company's financial health, showing how well it is able to generate and manage its cash resources. Cash flow statements can also be used to assess liquidity, solvency, and profitability. Cash flow statements are comprised of three main sections: operating activities, investing activities, and financing activities. Each section shows the inflows and outflows of cash for that particular activity.

Balance Sheet

A Balance Sheet is a financial snapshot of your company that shows how much it owns (assets), how much it owes (liabilities), and what is left over for owners (equity).

Assets. While the balance sheet includes a variety of information, one of the most important things to look at is the "assets" section. This section lists all of the things that your company owns, such as cash, inventory, buildings, and equipment.
Liabilities. The "liabilities" section lists all of the money that your company owes, such as debt and accounts payable.
Equity. The "equity" section shows what is left over for the owners of your business after all liabilities are paid. This number can be positive or negative, depending on whether you have more assets than liabilities.

Note to Financial Statements

A note to financial statements is a disclosure provided in the footnotes to the statements. The notes typically provide additional information about items on the balance sheet and income statement. In general, notes to financial statements are intended to provide investors (if you have any) with greater transparency into your company's financial position and operations. While not required by Generally Accepted Accounting Principles (GAAP), they are often included in financial statements to provide stakeholders with a more complete picture of a company's finances.

Statement of Change in Equity

Along with the balance sheet and income statement, the statement of changes in equity provides key insights into your company's financial health. The statement shows how your equity has changed over time, providing information on items such as net income, dividends, and share repurchases. While the balance sheet and income statement offer a snapshot of your company's financial position at a specific point in time, the statement of changes in equity offers a more dynamic view, tracking financial progress over time.

Make a Statement With WWS, CPA

If you're looking to prepare your own financial statements, we hope that our quick guide points you in the right direction. If a professional accountant is a better fit for you and your business, give us a call for a free consultation. Wayne W. Stanforth, CPA has decades of experience preparing GAAP-compliant financial statements and custom financial analyses that can help bring your business to the next level.

Top 10 Ways a Bookkeeper Can Help Your Business

Mon, 16 May 2022 13:28:03 GMT

Everyone knows that a bookkeeper collects and records financial information. The extra cost on any business for having a bookkeeper really shouldn't be overlooked. In addition to keeping track of numbers, they also play an integral role in fiscal policy development and implementation.

Bookkeeping entails daily data entry tasks that must reflect the actual status of your business. In this blog, we discuss the core mandates of a successful bookkeeper. Understanding the sales tax services and financial forecasting is an added advantage. Here are 10 ways a bookkeeper can greatly help your business - both small and large.

Frees you up to focus on the growth of your business. More often than not, bookkeeping involves time-consuming tasks. Leaving these details to a professional partner allows you to spend more time on the bigger picture.
Manages your cash flow and whether or not it means money in the bank. Bookkeepers manage your cash flow and determine it actually means money in the bank. They recognize patterns of your business cash flow especially when you’re scaling up.
Saves Professional Fees for Tax Prep and Financial Statement Prep. In addition to crossing the t's and dotting the i's of your finances, having your statements in tip-top shape can save you extra costs when tax time comes around.
Spots suspicious transactions, fraud and embezzlement. The unbiased eye of an experienced bookkeeper knows to look for unusual financial activity that could be a sign of monkey business in your business.
Watches your profits and losses…with a keen eye on both! As you take advantage of the extra hours you'll gain to focus on more global aspects of your business, a bookkeeper will keep you in the know when it comes to where you are gaining AND losing money.
Identifies and advises on money-making opportunities. Your bookkeeper is a specialist with your funds and understands when your business has a chance to reallocate capital. Bookkeepers have an eye for long-term wealth and keep the current company’s financial state in its best interest.
Ensures prompt payment of invoices. Whether it’s an outgoing or incoming invoice, clients expect to be billed with consistency. Not to mention, when the business has to pay others, prompt payments build trust in partnerships and will maintain credibility.
Keeps the IRS smiling with timely filing and immaculate books. Ensuring smooth tax preparation means you won’t be sifting through disorganized filings and tax paperwork. You reduce your chance of an audit from the IRS and you also can get a clear snapshot of your company tax obligations.
Saves you money with spot-on deductions. Every dollar that you claim is going to have a positive effect on your tax bill. Every deduction needs some sort of proof - no matter how big or small the expense - and your bookkeeper plays a major role in putting these details together.
Compliance, compliance, and more compliance. Having another set of eyes on your books keeps your business on the government’s good side. There are laws and regulations that your business has to follow, and bookkeepers know exactly what their capabilities are. They know when to give advice and when to pass it off to another professional, such as tax advice.

Count on WWS, CPA to Keep Your Books

At Wayne W. Stanforth, CPA, we offer a one-hour free initial consultation. We advise on the threshold of identifying, recording, and tagging assets and liabilities, which helps in business succession. Learn more about how we can help your business by contacting us today.

More than Just Bitcoin: Different Types of Cryptocurrency

Fri, 15 Apr 2022 13:25:13 GMT

Bitcoins are the parent cryptocurrencies, and the rest are "altcoins" altogether (from "alternative coins"). Although it is hard to tell which cryptos are ideal, Bitcoin and the following eight altcoins are top-tier choices because of their scalability, confidentiality, and spectrum of functions.

Bitcoin (BTC)

This crypto enables users to execute open peer-to-peer trades thanks to blockchain. Although anybody can monitor its activity, one can only decrypt any of the transactions using the owner's "private key". Bitcoiners influence the transmission and reception of funds, which ensures their untraceable transfer across the globe.

Litecoin (LTC)

Litecoin is a fully decentralized, open-source worldwide payment system. With an 84 million coin cap, it offers speedier transaction times.

Ethereum (ETH)

Ethereum is a public blockchain-based open-source framework. It also emphasizes executing any decentralized app's programming language, allowing app creators to use it to settle transaction costs and offerings.

Bitcoin Cash (BCH)

Bitcoin Cash raised the embedding capacity, enabling for speedier processing of more transfers.

Ethereum Classic (ETC)

This is a derivative of the Ethereum blockchain that uses a comparable decentralized infrastructure to conduct smart contracts. It also offers a value token called "classical ether," that one can use to make purchases.

Zcash (ZEC)

This cryptocurrency's major defining trait and differentiator is its enhancement of maximum confidentiality. Individuals can send and receive it without exposing the source, recipient, or sum of the amount transacted. However, this is not a feature offered to participants on Equity Trust's forum.

Stellar Lumen (XLM)

This is a type of auxiliary currency that makes currency trading easier. Users can send whatever currency they have to anyone in a different currency using Stellar.

Bitcoin Satoshi Vision (BSV)

This crypto coin aspires to be more similar to Bitcoin's initial goal, which is essentially decentralization and to operate as a cryptocurrency digital wallet .

Chainlink (LINK)

The Chainlink crypto coin encourages a worldwide computer network to supply essential external data to smart contracts (contracts that function after satisfying specific criteria) that extend onto blockchains.

The Takeaway

When looking to invest in cryptocurrency, it is important to first do your research keenly and find a coin that will multiply your equity. Better yet, you can rely on the help of professionals who know all about the industry. A competent CPA firm, such as Wayne W. Stanforth, could help.

At the office of Wayne W. Stanforth, CPA, we serve a diverse clientele spanning from individuals to medium-sized businesses. Retirement planning, company consultancy, estates and trusts, and individual budgeting are all areas of expertise for our team of CPAs and associates. We also offer tax and accounting solutions, such as tax planning, return filing, and bookkeeping, besides our specialties. If you are seeking a cost-effective way to get high-quality financial solutions, please contact us .

Note: This blog is for informational purposes only and should not be taken as professional financial advice.

Can I Write That Off? Tips for Legit Tax Deductions

Fri, 25 Mar 2022 13:20:25 GMT

Everybody dreads taxes. Not only are they inevitable, they sometimes take off a huge chunk of money that could be reinvested in a business or used for other purposes. While it's your duty to pay the IRS, are you aware that you could be paying more taxes than you actually should simply because you've failed to take advantage of legitimate deductions?

Many business owners are unaware of legit deductions that could substantially reduce their tax liabilities.Let's look at some of the overlooked deductions.

Hiring Your Children

If your own children are working for your company, you can officially hire them. It's a win-win because you can write-off that working expense while you can guide your child through working and saving money simultaneously. Wages could be paid to children free of tax up to $12,000, so that means their taxable income within this limit is nothing. On the flip side, your business receives a deduction!

Educational Assistance Plan for the Children You Employ

If you're a small business owner, you could actually deduct a portion of your employed child's tuition. Start by creating an educational assistance plan for all of your employees. Afterwards, keep track of documentation proving that your child is a legitimate employee at your company. Finally, you can reimburse your child's tuition and book expenses for over $5,000. It's important to note that they have to be 21 or older and must not be a dependent on their taxes.

Home Office Deductions

COVID-19 has seen more and more people convert part of their homes into offices and if you're in this category you could qualify for tax deductions for various expenses that you've incurred. Home office expenses are 100% deductible but, for you to qualify, these expenses must be related to the running of your business and should exclude expenses related to the rest of the home. Common expenses in this category include:

Purchase of home office furniture
Renovations and repairs
Office maintenance, for instance, cleaning, plumbing, and painting.

Automobile Deductions

Purchasing either new or used vehicles with the intent of business use and transportation commonly qualify for tax deductions. For instance, the Tax Cuts and Jobs Act allows 100% bonus first-year depreciation for assets (such as vehicles) new to you or your business. Your vehicle may also be eligible for a full deduction if you use it for business purposes entirely.

Educational Expenses

Have you enrolled in an online class in a bid to improve your skills? Could you also be purchasing books and other industry-related journals? The expenses you incur in acquiring the skills you need to help you perform better in your business are tax-deductible but you need to provide evidence that the education you're getting is relevant to your business .

Students are also eligible for tax reduction for the interest on school loans . The maximum amount that they can get is $2500.

Advertising and Promotion

Advertising and promotion taxes are 100% deductible. These include such services as:

Expert help with designing a logo
Printing cards and brochures
Paying for ad space in print and online platforms
Launching a new website
Sponsoring an event

Bottom Line

Since 1993, the office of Wayne W. Stanforth, CPA has been offering tax and financial advice to our clients in Central Connecticut. Our skilled team of accountants, agents and clerks can help you manage your business and understand your finances to reduce and minimize tax burden.

Contact us at (860) 628-4995 or email wayne@wws-cpa.com for a free consultation. We respond to all requests within 24 hours.

Ready for Tax Season? You'll Need These Tax Documents

Tue, 22 Feb 2022 13:12:58 GMT

Whether you do it yourself or hire a professional tax expert, you need to have certain documentation when preparing to file your taxes. It is not uncommon for taxpayers to forget one or more of these documents. This article breaks down the major types of documents you will need during the tax season.

Identification and Personal Documents

It is always recommended to bring in some personal identification, even if you are using the same tax preparer as last year's. These include:

Your tax ID number
Social security number for yourself, spouses, and dependents
Information about your stimulus payment
IRS Letter 6475
Your IRS-issued identity protection PIN
Form 8332 for those claiming a dependent (the form shows that a custodial parent has released the right to claim a child to you)
IRS Letter 6419, which has the necessary details required to report your advance Child Tax Credit (CTC) payments.

Proof of Income

An income tax return must reflect your income in its entirety. The necessary financial statements include:

Form W-2 for the employed
Form 1099-G for the unemployed
Form 1099-MISC for contract work
Form 1099-K if you are paid through a third party such as Amazon or PayPal
1099-B for broker handling transactions
1099-DIV for dividends

Deductions

These help you reduce your taxable income, translating to a lower tax bill. Below are popular tax deductions. Ensure you have documentation for each:

Medical bills
Health insurance
Education expenses (Form 1098-T) or Form 1098-E in case you paid student loan interest
Retirement account contributions (5498 series forms)
Charitable donations
Property tax and mortgage interest (Form 1098)
State and local taxes

Proof of Losses

Losses generally happen due to theft, fire, natural disasters, or other unexpected catastrophes. Provide proof of the events in the form of insurance claims, police reports, or other official documentation spelling out the event's details.

Contact a Tax Filing Expert

At the office of Wayne W. Stanforth, CPA, we provide small business tax preparation services. As a leading certified public accountant and bookkeeper, we strive to help you gain financial transparency. We provide top-notch bookkeeping services to help you check for anomalies. Contact us for our accounting, tax preparation, and bookkeeping services.

Why Having an Accountant on Retainer Is Important

Wed, 28 Aug 2019 15:57:35 GMT

An accountant will always be there to help you make the best business decisions.

Bill Gates, Richard Branson, and Mark Zuckerberg have one thing in common - aside from being some of the world's richest people, they are also experts at delegating work to the right people. In fact, many of the world's most successful business owners are supported by incredible individuals and teams.

So, if you are a business owner, your business will have a far greater chance of success if you get the perfect mix of professionals working for your company. One of the professionals that you should have on-board is a Certified Public Accountant. The following are the reasons why having an accountant on retainer is beneficial:

1. Allows You to Focus on Your Business

There's a lot of work that goes into running a business. As the business owner, you may be forced to assume multiple roles, depending on the number of staff you have. One of the roles that can eat up plenty of time is that of an accountant.

There are many accounting tasks to handle, from simple responsibilities such as recording receipts and bookkeeping to serious responsibilities such as setting financial targets and filing tax returns. While these types of tasks are important to business stability and success, they also take up a lot of time.

Once you enlist one of our accountants on retainer, you will be able to delegate these time-consuming tasks so you can focus on what's really important - generating revenue. The time you get back will not only help you to focus on growing your business, but it will also allow you to have a good work-life balance.

2. Manages Complex Accounting Tasks

It takes several years to become a qualified accountant, which speaks volumes about the intricacy of the job. While some accounting tasks are simple, there are many others that are incredibly complex. Unless you have an expansive knowledge of accounting practices and procedures, taking up the role of an accountant or delegating the task to an unqualified staff can lead to costly mistakes.

If you have been struggling to manage complex accounting tasks, having one of our accountants on retainer is the most sensible thing to do. Our accountant will ensure that complex accounting tasks are handled effectively, leaving no room for costly mistakes.

3. Helps Keep Costs Down

While you are busy searching for opportunities to grow your business, you may fail to notice some costly financial drains. For instance, you may continue making regular payments to vendors, lenders and suppliers, even long after you've settled the balance.

Part of our accountants' job is to keep an eye on the financial well-being of the businesses that we serve. The needless expenses that you may not identify when your attentions are focused elsewhere will be easily unearthed by our accountant. So, having an accountant on retainer is beneficial as it helps keep costs down by ensuring that money is not spent unnecessarily.

4. Helps Fulfill Your Tax Obligations

There is a lot that goes into ensuring that tax obligations are met. You have to keep your business aligned to the most recent tax laws, complete compliance paperwork, and ensure that your business status is in good standing on government registries. You also have to ensure that payroll responsibilities are kept within all tax codes, all payments are recorded correctly for tax purposes, and that business tax documents are appropriated organized and maintained.

If you don't already know, there are dire consequences that usually occur when tax obligations aren't met. Incorrect tax return filing or missing out on a tax deadline, for instance, attracts fines and penalties that can hit your business hard. One of the benefits of having an accountant on retainer is that the professional will ensure that all your tax obligations are met accordingly.

5. Helps You Reduce Your Tax Bill

There are various ways you can minimize your tax bill. Methods to reduce your tax bill can both be run throughout the ear and utilized on the tax return day. As much as you may want to utilize such methods in order to keep costs down, you may neither have the time nor the expertise to utilize them.

Our accountant, on the other hand, is conversant with all the methods that can help slash your tax bill. Therefore, having our accountant on retainer will also be beneficial in the sense that you will free up money that you can use to grow your business.

6. Improves Your Chances of Obtaining a Business Loan

Obtaining a business loan is not usually as easy as most business owners would like. Financial institutions take their time to scrutinize your business to check its financial health and creditworthiness.

Just having our accountant on retainer will show potential lenders that you are serious about your business. An accountant will also secure all the relevant financial documents and statements and help you come up with an effective loan application in facts and figures. What's more is that an accountant will also provide you with important insights about the lender's terms and conditions and inform you of the loan types that are more ideal for your company.

7. Helps You with Valuable Advice

If you are looking for a financial expert, then you'll find one in an accountant. Accountants know business in and out, thus can offer valuable advice on everything from day-to-day business operation to financial acquisitions. So, having an accountant on retainer will enable you to obtain sound financial advice that can help you avoid pitfalls and set up your business for success.

The importance of an accountant cannot be overemphasized enough. Having an accountant on retainer means that you will get the support that you need to grow your business, every step of the way. From keeping your accounting books in check to helping you meet your financial obligations to helping you obtain ideal business loans, an accountant on retainer will always be there to help you make the best business decisions.

If you are in need of an accountant on retainer, you should consider the experience and competence of Wayne W. Stanforth CPA.

7 Construction Tax Tips

Fri, 15 Feb 2019 15:54:00 GMT

Running a construction business it tough work. You have to train employees, pay salaries, and constantly deliver best-in-class services to your customers. So, when it comes to taxes, we don't expect you know the nuances of the tax code. But, understanding some of the unique tax situations that are available to construction businesses can help you stay compliant, file a correct return, and reap as many deductions as possible.

Today, we're going to go over some of the special tax situations that are available to construction companies. These tax tips will help construction businesses reap the rewards of their labor and itemize their tax returns properly.

1) You Need An Accountant That Understands Construction

Accounting for construction companies requires different practices than accounting for standard businesses. For starters, construction businesses often work remotely on-location at various sites. The mobility of these businesses introduces new tax and accounting complexities that need to be accounted for to stay tax compliant.

Not only do constructions company monitor different cost outlets (i.e., travel, mobilization, delivery, etc.) but construction companies may use unique pricing models and revenue calculation methods that don't fit into a typical accounting model.

It's mission-critical that construction companies work with a tax specialist to ensure that all revenue is being tracked, recorded, and reported appropriately — which will lead to more compliant (and often more significant) tax statements.

2) Pay Attention to Common Deductions

To make the most of each return, construction companies should pay attention to the common deductions within the construction industry. The most common deductions for construction companies include:

Travel : This is usually the most significant deduction for construction and includes time spent traveling from location-to-location, traveling to meet clients, and any other travel that was directly work-related (tool runs, material delivery, etc.) The current rebate for this mileage is 54.5 cents per mile.
Asset Deductions : There are two types of asset deductions that construction workers typically qualify for: immediate and depreciated. Immediate deductions are for assets such as cars, trucks, salaries, tools with a short lifespan, supplies, materials, and marketing. Depreciated assets include long-lasting tools like heavy machinery or long-lasting tools, which you can deduct over a long period of time.
Small Deductibles : Small items like steel-toed boots, clothing, hard hats, and other construction-specific equipment can be used as deductions.
Training : These are deductions for school, certificates, or even learning materials (i.e., journals, membership fees, etc.)

Let's go over some examples.

Travel example : If you traveled 500 miles throughout the year from location-to-location (note: this does not include commute time) you can claim a total of 54.5 cents per mile, which equals $272.50.

Immediate asset example : If you were to purchase a new truck that was work-specific, you could deduct a percentage of that truck immediately. You would only receive a deduction on this vehicle for this tax year.

Depreciated asset example : If you were to purchase a $10,000 piece of heavy equipment, you can itemize that deduction as follows:

Subtract $1,000 from the value of the itemization on years 1 - 4.
On year 5, you would receive $5,000.
On year 9, you would receive the final $1,000.

Small deductible example : If you purchased hard hats and work-specific clothing for your construction team, you can deduct those from your taxes.

Training example : If you had to purchase training classes, new certifications, or supplementary training materials, you could deduct those from your taxes.

3) There's a Difference Between Business Assets and "Mixed-Use" Assets

Most small businesses couple assets as both work and "play." These are considered mixed-use assets, and they give smaller deduction percentages than strictly business assets. So, if a construction company supplies cellular devices that are used both at-work and at-home, these are mixed-use assets.

Common mixed-use assets include:

Cellular devices
Some clothing
Vehicles

You can only deduct the percentage of business-use from these assets instead of the entire asset.

4) Understand the "Kiddie Tax"

A common tax shelter for family-owned businesses is dividend-sprinkling throughout the family. Under new laws, any college-aged (under 24) family member will be taxed at their parent's marginal tax rate — unless they earned at least half of what the parent earned. It's crucial that families who use dividend sprinkling as a tax shelter adjust their plans accordingly.

5) Take Advantage of the Section 199 Manufacturers Deduction

The Section 199 deduction was proposed to encourage domestic manufacturing. However, current updates to the bill have expanded the deduction to include businesses engaged in construction, engineering, and other activities. This tax break can save construction businesses up to 9% on their taxes — which can be a significant boon for small businesses facing strict tax rates.

6) Understand How Your Materials are Taxed

In some states, construction workers are charged a general sales tax on materials, which is usually preferable since construction companies can easily make up this tax on markups. However, other states treat construction workers as material "resellers." This means that construction companies will be charged a higher tax rate since it's assumed that the material will be marked up.

7) Make Sure That You Identify Employees Correctly

Some construction companies get confused when it comes to filing employee under a w-2 or 1099. While filing all employees under a 1099 may seem tempting, it can land you in a load of trouble. For a worker to be considered a "contractor", they must be hired independently from all other workers, and they must have control over the job's completion.

Since filing employees under 1099 doesn't require businesses to pay a portion of taxes and unemployment insurance, many construction companies use this to avoid paying significant employee taxes. Unfortunately, the penalty for these instances can often be thousands of dollars per employee — not to mention the added pressure from the IRS, which may manually pour over your entire return.

Make sure that you're filing employees appropriately and accurately. While you may pay more upfront, your long-term savings will likely be a net positive from avoiding fines and IRS inquiries.

Final Thoughts

Working in the construction industry requires careful attention to tax details. Some construction businesses prefer to hire an accountant or tax specialists to help them secure the highest possible return.

If you're looking for an accountant and tax specialists who understand the intricacies of construction, contact Wayne W. Stanforth online or at 860-628-4995. Our firm may not know how to plan construction projects, but we can certainly help you run your business.

Ways Businesses can Prepare for Tax Time

Wed, 13 Feb 2019 15:29:04 GMT

Tax time can be stressful for even the most well-prepared individual or organization. With recent tax law changes now coming into play and so many forms and lists to keep track of, it can feel like you're trying to corral toddlers as you try to get your materials in place for filing.

Luckily, there are a few simple tricks to keep in mind and get thinking about ahead of time to help you skate through tax season with ease.

Seven Ways to Start Preparing for Tax Time

1. Choose Your Preparer & Schedule an Appointment

Assuming you don't already have a tax preparer, now is the time to get yourself one. Selecting your preparer may be one of the most important decisions you can make regarding your business and finances, so taking your time here and ensuring that you do your research will never hurt.

One way to get leads on trustworthy and efficient preparers is to speak to friends and advisors; pulling through reviews online, looking up certifications, and so on should also be a part of this process. It's critical that you ensure whoever you choose has a Preparer Tax Identification Number (PTIN).

As soon as you've selected a preparer and they've agreed to work with you get a meeting set up with them. The sooner you can get started on the tax preparation process, the longer you'll have to work out bumps and kinks along the way. Should you be eligible for a refund, you'll also receive those funds sooner the quicker you get to work.

2. Gather Your Information Returns

As January draws to a close, you should find yourself in possession of forms and information returns that you may need to prepare your taxes. Take the time to go over each form individually and verify that whatever information is displayed matches your own records. This is another time when getting ahead of the game can help tremendously-- if something is wrong, it can take a considerable amount of time to get things back in order.

Some common forms to be on the lookout for and start going over include:

Form W-2 if you've got a job
Form SSA-1099 if you were the recipient of Social Security benefits
Various 1099s to report income; these may include cancellation of debt, dividends, and interest
Form 1095-A for reporting from the government Marketplace from which you obtained health coverage

3. Get Your Receipts Ready to Go

It can be tough to know exactly which receipts you need; that preparer selection you made should certainly be coming in handy at this point. Get in touch with your preparer for the nitty gritty, but there are a few basics to consider while you wait to touch bases:

Decide whether you'll itemize your personal deductions or claim the standard deduction.
You can choose to itemize in cases where it may provide a greater write-off
You can only determine whether this is the vase by determining the amount of your itemized deductions and comparing them to your standard deduction amount
For itemizing , get your receipts in order ASAP; ideally you'll have a system in place already to manage this in an organized way; if not, now's the time to get it done
Look for receipts for things like medical costs that aren't covered by insurance or are reimbursed by other health plans
Also be on the lookout for receipts from property taxes and job and investment-related expenses

4. Get Up to Speed on Recent Tax Law Changes

A slew of tax law changes took effect in 2018 and more are on their way this year. Understanding these laws and changes and what they mean for you and your organization is critical. Some key things to keep in mind are:

There are new forms for claiming the premium tax credit for individuals who got their coverage through a government Marketplace
Beginning in the 2019 tax year, there is no longer a penalty for not having health insurance
The home-equity loan interest tax deduction has ended
There has been a drop in the home-mortgage interest deduction on many new mortgages
State and local deductions now max out at $10,000

5. Make a List of Personal Information

This seems so obvious and simple that perhaps one would think it doesn't need mentioning-- but it does. Nobody would bat an eye if you said that you knew your own social security number, but can you list off the ones that belong to each and every dependent you claim? If not, it's time to get that information easily accessible and ready to go.

Other things to get written down and organized include:

The addresses of any rental properties or vacation homes you own
Dates that you moved (this could be related to your household or your business)
Information pertinent to any property you've bought or sold

6. Decide How to Handle a Refund

You have a few choices when it comes to accepting your tax refund from the government. Knowing which of these you'd prefer and getting that choice locked in and communicated ASAP will mean a quicker return for you and fewer headaches for your preparer.

Apply the refund (in part or in whole) towards your next return's tax bill
Have a check or direct deposit sent to you with the full amount of your refund
Directly move (again, in part or in whole) your refund into certain accounts like an IRA or health/education savings account

7. Grab a Copy of Last Year's Return

This will be easy if you're using the same preparer that you have in previous years; and even if you aren't, it shouldn't be a tremendous struggle. If you have a new preparer, looking over last year's return with them can help give them an idea of pointers and things not to overlook this time around. If you received any income related to payers of interest and dividends last year, for example, you should be waiting for a relevant 1099 to land in your mailbox this year.

If you're interested in leaning more about how to prepare for tax season, email our office or drop us a line today! We would be more than happy to speak with you about your business' individual and unique needs and assist you in setting up a plan of attack that's sure to get you through the battles of tax season.

5 New Tax Laws

Fri, 08 Feb 2019 10:56:50 GMT

Taxes are fluid, and each year new bills pass through the federal and state level that impact how much you pay and what kinds of deductibles you qualify for on your return. Over the last year, the federal bills have stolen the spotlight, and nationwide taxes seem to take up the majority of airtime. But, what about those Connecticut state taxes? As many of you know, Connecticut is in a budget crisis — a big one! Anytime there's a deficit; there are taxes. So, let's take a look at 5 new Connecticut tax laws on the slate that might harm your wallet.

Food & Medication Tax

This first tax is being proposed by (or to, depending on how you look at the situation) Gov. Ned Lamont is the grocery tax. This tax is actually being led by the Commission on Fiscal Stability and Economic Growth , which is headed up by some major names (CEO of Webster Hank, CEO of Stanley Black & Decker, CEO of The Hartford, etc.) While this bill hasn't been handed in (expect it at the end of February) the most likely proposal will be a 2% tax on groceries and medicine. As part of this plan, Gov. Ned Lamont seems to be aiming to cut the sales tax rate down from 6.35%, while adding an additional tax on top of consumer foods and medicine.

Of course, the end tax rate could be higher than suggested, and it may climb all the way into the 6.35% range. Either way, grocery taxes are on the horizon. Whether this will impact Connecticut's budget deficit is unclear, but what's completely clear is that it will impact CT citizens' wallets.

There's some friction with this bill, and talk of the new tax seems to be followed by confusing dialog across Connecticut's political landscape. In fact, Gov. Ned Lamont told CT Post that the bill was not "in the top 50" of his preferred tax solutions. We'll all know in a few months whether or not we're going to be paying an additional tax on medicine and groceries.

Ammunition Tax

Another sales tax that could be on the horizon is the "sin tax" ( House Bill (HB) 5700 ) that aims to 50% tax to all ammunition in the state. This is undoubtedly a widely debated tax, and issues of gun ownership and constitutional rights are inevitably going to play into whether or not the bill makes it into law.

But, as of now, the bill is still making rounds. If it passes, we expect to see a lengthy debate in the Supreme Court of legality before it either fails or is instituted state-wide. The bill is currently being pushed by state representative Jillian Gilchrest in the Connecticut State House of Representatives. Simultaneously, state representative Will Haskell has produced a companion bill in the Connecticut State Senate.

SALT Tax

This tax bill isn't on the horizon; it's already enacted. The Tax Cuts and Jobs Act now caps the deductibility of state and property taxes at $10,000. Last year, 484,000 CT citizens took paid over $10,000 in property taxes, which means that these people will now be unable to claim those post-$10,000 deductibles.

If you're in this camp of Connecticut residents who was paying over $10,000 in property taxes, you should expect to see th e impact on your tax return. Contact Wayne at 860-628-4995 to set up an appointment with us. We'll help you adjust to these lower deductibles and see if we can find you additional deductible avenues to make up for the loss.

Who will this impact?

Generally, those who pay over $10,000 in property taxes make over $150,000 annually. This new act will also disproportionately impact two-income households.

This is certainly an area where you need to consult your tax team, especially if you pay over $10,000 a year on property and state taxes.

Car Tolls

Another bill in the political pipeline involves tolls for drivers. While this bill was initially proposed as a tax on large trucks only, current reports suggest that Gov. Ned Lamont is looking at tolls involving all cars on the road. These electronic tolling booths could impact all drivers by charging a small fee for road travel, which would be funneled back into state road infrastructure.

As it stands, the governor is looking this proposal over and may tack it to his list of tax objectives for the year. We'll keep you updated on any movement in this area.

Transportation taxation is a big item on the governor's agenda. This bill could be part of that agenda.

Online Sales Tax

Like the SALT tax, this tax bill has already passed and is currently in effect since the beginning of December. Online marketplaces (Amazon, eBay, etc.) will now charge customers state tax rates on all goods. This tax nexus will certainly help the Connecticut deficit but may have an adverse impact on some consumers who rely on online shopping. In a sense, this will raise the price of online good by 6.35%.

Connecticut isn't the first state to pass these laws. Alabama, Arizona, Iowa, Minnesota, Oklahoma, Pennsylvania, and Washington all have similar laws in place.

Of course, this new law is good news for all brick-and-mortar retailers in Connecticut, who were already required to include taxes into their pricing. While this may impact CT citizens wallets immediately, the broader impact of this bill will likely be positive for the state as a whole.

Conclusion

The current deficit situation in Connecticut is giving rise to many different tax solutions that are in the pipeline as we speak. Some of these changes will impact citizens across the state. From groceries to cars and online purchases, keeping up-to-date with these new tax laws can help you prepare for shifts in the way you pay.

If you're looking at all of these new laws and thinking, "I need a budget and a tax expert." Great! Contact our firm at 860-628-4995 or online to set up a consultation. We'll help you plan for the future. You work for your money; we work for you!