Tax Services Our Cincinnati CPAs Provide During the Summer Months

Handling personal finances and taxes can be stressful. It often doesn’t feel worth it if the end of the process reveals you owed more than you originally anticipated. Our Cincinnati CPAs at LongSchaefer specialize in assisting with your needs for planning and preparation before and after your yearly tax filing. In today’s article, we’ll discuss the different services offered through summer time, after you file your taxes. 

Related Post: 4 Circumstances When You Want to Delay Filing Your Income Taxes

We Handle 

Tax Problems

Forgetting to file taxes, or choosing to file after the deadline, can become a messy situation. According to SmartAsset, the penalty for filing late is 10 times higher than the penalty for filing, and then paying late. The fee charged for filing late is 5% of the amount owed per each month that passes until your return is filed. If you find yourself or business in this situation, our Cincinnati CPAs can assist by helping you file your return as soon as possible. Then we’ll continue to assist by helping you plan and prepare for the next tax season.

Tax Planning

Our CPAs pride themselves on staying up-to-date on all tax laws and regulations that apply to you and your business. When they prepare for tax planning, we assist in setting up saving strategies that will maximize your after-tax income. 

Our team also take advantage of services that ultimately help you financially such as:

  • Tax Provisions
  • Meeting deductibles 
  • Tax Credits that legally and successfully reduce your tax liability

By successfully completing tax planning with our team of Cincinnati CPAs, you’ll be set for the next step in your tax process: tax preparation.

Tax Preparation

After finishing your tax planning process, our CPAs will begin tax preparation for you and your business. Tax preparation largely consists of compiling all of the necessary documents for filing taxes, and then we help you complete the tax filing process. Tax planning and tax preparation allows our team of CPAs to successfully file your taxes and know that all legalities have been accounted for. 

Business and Personal Tax

We cover an array of services for both individuals and businesses, including payroll services, bank financing, part-time CFO services, small business accounting, and business planning. Once your tax return has been filed and you’ve had sufficient rest, we can begin the process of assessing your business and assets. If there is a service we can perform for you, we’ll gladly do everything we can to make sure your business adheres to all laws and regulations from a tax standpoint.

Related Post: What To Do When Your Taxes Are Late? 

LongSchaefer on Summer Services

The tax season never really ends for our Cincinnati CPAs here at LongSchaefer. We believe in doing everything possible to protect you, your business, and your financial dreams. If you think our Cincinnati CPAs can assist with any of your tax planning, preparation, or business planning needs, we’d love to hear from you. Contact us today to discuss how we can help and become your trusted business advisor.

Tax Planning: What Are the Differences Between Tax Credits & Tax Deductions?

As you prepare to file your income tax return, you’ll probably run across the terms tax deduction and tax credit. Both individuals and businesses can take advantage of tax deductions and credits to lower their income tax and possibly increase their refund. In today’s blog from LongSchaefer, our tax planning experts take a look at the differences between tax credits and tax deductions. 

Related Post: How Filing Taxes Electronically Works

Reducing Income Versus Reducing Taxes You Pay

The major difference between a tax deduction and a tax credit is that deductions lower the income on which the government bases its tax calculations, while tax credits directly reduce the amount of tax you owe.

For example, you get to take a tax deduction of $18,650 because you’re the head of a household. If you made $50,000 in that year, the head of household deduction lowers the amount of your gross income to $31,350. Rather than pay 15% of your income at $50,000, you pay 15% of $31,350. You would pay $4,702.50 rather than $7,500 for taxes in this simplified example.

After you calculate how much money you owe in taxes, a tax credit can lower the amount of tax you pay (or even lead to a higher income tax return). For instance, your tax bill comes to $700. However, you qualify for two tax credits. One is refundable for $500, and one is non-refundable for $750. The $750 credit reduces the amount of tax you owe to $0, while the refundable tax credit means you receive $500 from the IRS.

Deferring income to retirement also has tax benefits for you before you retire. The IRS allows an annual $19,500 elective deferral to 401(k) plans. When you reach age 50, that maximum amount increases to $26,000. You don’t pay income taxes on that pre-tax deduction when you’re working because you’ll pay income taxes after you retire.

Tax planning services can point you to the right types of tax credits or tax deductions available to you.

Examples of Tax Credits

The most common tax credit for individuals is the Child Tax Credit from the Internal Revenue Service. In general, your child must be 16 years old or younger and meet certain qualifications. Each individual can earn up to $2,000 per qualifying child, and up to $1,400 of that is refundable, meaning you can get money back from the IRS. 

There’s also the Earned Income Tax Credit for working people with low to moderate incomes who have children. The EITC is in addition to the Child Tax Credit. 

Business owners can take advantage of tax credits, too. Small employers can take the General Business Credit for undertaking certain activities, such as investing in electric vehicles, increasing research activities, retaining employees, and having employer differential wage payments. Tax planning staff at LongSchaefer will show you what tax credits you may be eligible for.

A refundable credit means you could get that money back from the IRS. A non-refundable credit simply lowers the amount of taxes you may owe, all the way down to zero.

Examples of Tax Deductions

Tax deductions work differently for individuals and businesses. Individuals can take a  standard deduction based on your filing status (single, head of household, or married filing jointly). 

Individuals may choose to deduct certain health care expenses, interest paid on mortgages, and charitable donations. There is one caveat: You can itemize your deductions for federal income taxes, but they must be more than your standard deduction. 

You can deduct certain business expenses from your income to lower your income. Let’s say your business earned $200,000 in 2020. But you invested in new equipment that cost $25,000, advertising for $5,000, and computer software at $3,000. All of these items could lower your income to $167,000. At 25%, you would pay $41,750 in income taxes rather than $50,000 in this simplified example.

Related Post: Tax Credits You Didn’t Know About

Tax Planning From LongSchaefer

The tax planning pros at LongSchaefer can help you get the most out of your income taxes, whether you’re a business or an individual. Contact us online or call (513) 245-0300 for more information on how our firm can help.

Tax Planning for the Taxes You Must Pay as a Business Owner

All businesses must pay taxes to state and federal governments. The types of taxes vary, so paying taxes every year can get confusing. That’s why you need a tax preparation and tax planning partner on your side. In today’s blog, LongSchaefer’s tax planning experts discuss the taxes you must pay as a business owner.

Related Post: Tax-Saving Strategies for Small Business Owners

Income Tax

All businesses must pay a tax on their income, much in the same way individuals pay income taxes. Your business structure determines how you pay income taxes. Self-employment taxes are essentially double what you pay as an employee of a business. Sole proprietors may have similar income taxes to that of self-employed individuals, in that both self-employment and sole proprietors pay taxes on the net income of the business (profit minus expenses).

Partners in a partnership arrangement pay their income taxes separately, based on their share of the business. Limited liability companies and S-corporations pay income taxes based on the owners’ share of the companies. Corporations pay income taxes as separate entities from the owners. LongSchaefer’s tax planning experts help you determine what income tax strategy is right for you based on your company structure as a legal entity.

Employment or Payroll Tax

Business owners pay their share of payroll taxes based on the number of employees on staff. How much payroll tax you must withhold is based on an employee’s gross pay. Each employee’s portion of the payroll tax (called FICA, collectively) lowers their overall paycheck. Business owners must pay their portion of Social Security, Medicare, and federal unemployment taxes based on their employees’ income. Our tax planning experts can show you what this means for your workers and your revenue.

Property Taxes

Do you own your facility or office? What about any company vehicles? Chances are good you’ll pay property taxes to the city or county in which your business is located. Contact your local tax authority, usually a county treasurer, auditor, or assessor, to find out how much property taxes you owe and when they are due. LongSchaefer can help with this process.

Sales or Excise Taxes

Sales and excise taxes are similar to each other. Your company pays sales tax on products and services bought or sold. For example, your company sells lawnmowers. Your business pays sales tax to state and local authorities based on a percentage of the sale price. If your business purchases certain goods or services, you’ll pay sales tax as part of the overall price (but the company selling the item distributes the tax).

Excise taxes involve using or consuming certain products, such as fuel used in transportation. If you have a fleet of vehicles, your business may have to pay state or federal excise taxes. Tax planning experts at LongSchaefer can teach you how to account for excise taxes and when to pay them based on your company’s unique situation.

Related Post: Tax Services: Three Common Tax Problems Faced by Businesses

Tax Planning From LongSchaefer

The tax planning pros at LongSchaefer can help you get the most out of your income tax filing every year. Contact us online or call (513) 245-0300 for more information on how we can help.

Tax-Saving Strategies for Small Business Owners

It’s the final quarter of the year. You’re looking to end the year strong while planning for next year’s budget. LongSchaefer showcases some relevant and practical tax-saving strategies for small business owners in today’s tax planning blog.

Related Post: Strategic Business Planning for the Last Quarter of Any Given Year 

Capital Investments

Capital investments in equipment offer huge tax deductions for your federal income tax return. In 2020, the deduction maxes out at $1.04 million. The deduction covers new and used equipment as well as software. Accountants and tax planning specialists call this a Section 179 Deduction. The team at LongSchaefer can advise you as to what kind of equipment applies to this deduction.

Depreciation

Congress passed a law in 2017 to make it easier to depreciate any property you purchase. Depreciation occurs when a piece of equipment loses its value over time. For example, you buy a new car worth $20,000 in 2020, but in 2021 it’s worth only $15,000 because it depreciates due to wear and tear as well as normal use.

In the past, you needed to depreciate your property over time. Until the 2023 tax year, business owners can depreciate the entire value of qualifying property. You record the depreciation as an expense on your taxes, thereby lowering your tax liability. The IRS lets you depreciate up to $1.04 million in property this way.

Qualifying property includes, but is not limited to, computers, machinery, furniture, vehicles, and building equipment. The LongSchaefer tax planning team can point out what assets you have that may qualify for this deduction.

Deferring Income

Businesses can defer income by delaying sending invoices in the fourth quarter of the current year and sending them in January of the next year. The main benefit is that taxes on the income aren’t paid until next year. This strategy works if you plan on having about the same income next year. 

If your business expects to take off and you make significantly more income next year, you might consider sending those invoices in the current year versus next year. The tax planning pros at LongSchaefer will examine your situation and plan the best possible strategy for you.

Related Post: 4 Reasons to Hire a Small Business Accountant 

Tax Planning Services From LongSchaefer

We recognize that everyone’s definition of success is different. It’s part of our company culture. The tax and accounting pros at LongSchaefer can tailor a tax planning strategy to your specific situation. Contact us or call (513) 245-0300 for more information on our tax planning services and end-of-year tax strategies.

Tax Planning: End-of-Year Tax Strategies to Plan for Now

It’s the last quarter of the year, and you’re prepping for the holiday season. The last three months of the year are a great time to employ some end-of-year tax planning strategies so you can optimize your return and lower your income tax liability. LongSchaefer explains in today’s blog.

Related Post: Tax Planning Tips for the Holiday Season

Know Which Deduction to Take

Before you make any firm tax planning decisions, you need to determine which deduction to take. The standard deduction is a set amount by which the IRS reduces your income liability. Amounts of the standard deduction vary, depending on if you’re filing as a single person, married and filing jointly, or submitting your taxes as the head of a household. 

It makes sense to itemize deductions if your total annual deduction will be greater than the standard tax deduction. Common itemized deductions include interest on mortgage payments, certain healthcare expenses, and charitable contributions. 

Contribute to Retirement Accounts

Contributions to retirement accounts are a tried-and-true tax deduction that individuals and businesses can make for tax planning purposes. That’s because the annual contribution limits for these plans are $19,500, as of 2020. Those limits may go up in the coming years.

Do you have any extra income in savings heading into the end of the year? Have you lagged in your contributions to IRAs and 401(k) plans? As you decide how best to invest your money at the end of the year, contributions to retirement plans can defer taxes until you use the money for your retirement. 

If you’re 40 and you want to retire at 70, you can put off paying income taxes on those contributions for 30 years. Suppose you put the maximum amount, $19,500, into your retirement account by the end of 2020. That reduces the income used to figure your tax liability by $19,500.

Leverage Stock Losses to Offset Capital Gains

The stock market took a beating in 2020 due to the COVID-19 pandemic. Although the stock market has climbed back up, you can deduct up to $1,500 ($3,000 if filing a joint return) of capital losses in excess of capital gains per year from your ordinary income. Although this isn’t as great as contributing to a retirement account, these smaller deductions add up when it comes to tax planning and reducing your income tax liability every year.

Related Post: Tax Planning: Charities and Tax Deductions

Tax Planning Services From LongSchaefer

The tax and accounting pros at LongSchaefer can tailor a tax planning strategy to your specific situation. We recognize that everyone’s definition of success is different. Contact us or call (513) 245-0300 for more information on our tax planning services and end-of-year tax strategies.

May 2020 COVID-19 Update

In order to comply with the Ohio Health Department Order & CDC social distancing recommendations, our offices are closed until further notice. Rest assured that our established protocols and available technology will allow us to provide the same level of service and quality you expect from LongSchaefer during this time.

The SBA has announced details of how it’s helping small businesses through the Coronavirus outbreak. The IRS is sending payments to families affected by this crisis. 

Please click on our Coronavirus information pages for more information.