3 LLC Tax Benefits Businesses Must Know About

Paying taxes is one of the largest expenses that a business faces every year. How would you like to lower your company tax liabilities? Small businesses pay on average 19.8% in taxes. You may be able to lower the amount you pay in taxes by forming an LLC (limited liability company) instead of remaining a sole proprietor or independent contractor.

There are tax and legal advantages of forming an LLC that can easily be overlooked. Are you ready to learn all of the LLC tax benefits?

Let’s get started on 3 top LLC tax benefits for your business!


1. Employee Benefits

Employee overhead is often the largest expenditure for small businesses and LLCs. In order to be competitive and attract the best and brightest, you have to have a great benefits package.

Benefits like healthcare are expected, but that can be a huge burden for employers because healthcare keeps increasing.

You can deduct those expenses you use for LLC employee benefits, which can help you lower your tax bill.


2. Pass-Through Tax Deduction

LLCs can take advantage of a 20% pass-through tax deduction, which was included in the Tax Cuts and Jobs Act.

What this means for business owners is that you can deduct 20% of your business profit from your income taxes. While the LLC setup itself costs money and may have annual maintenance fees, in 2025 you will end up saving a lot more money than you spend with a limited liability company formation.


3. Capital Expenses

LLCs that have to invest in buildings and equipment can benefit from this tax deduction. Capital expenses are often related to real estate, and here is how they impact your taxes.

You can deduct large purchases over a period of years, instead of taking a massive taxation deduction in a single year.


How Much Can You Deduct?

How much you can deduct from your business taxes depends on what type of LLC or corporation you form. How can you compare an LLC vs corporation? Let’s take a look at how the IRS treats LLCs and corporations.

An LLC is a limited liability corporation. It can have one member, such as a sole proprietor, or several members or partners.

In the case of a single-member LLC, the IRS views the member’s finances and business finances as one and the same. Business owners report their income and business deductions on Form Schedule C and pay federal income and self-employment taxes on the net profits of the business.

For an LLC with multiple members, each member will pay taxes on their share of the profits of the business.

Corporations are treated differently by the IRS because the business and owner’s finances are completely separate. The owner usually receives a salary from the business, which they pay income taxes on.

The business is taxed as a separate entity, the business reports its profits and losses and is taxed on profits.

LLCs are often seen as more flexible because you can choose to be taxed as a corporation. For example, a single-member LLC can elect to be taxed as an S-Corp.


The Top LLC Tax Benefits

It is smart to register your business as an LLC because there are legal protections in place and there are LLC tax benefits to consider, too.

You can take advantage of limited liability company or ltd tax benefits like writing off capital expenses, employee benefits, and the pass-through deduction.

If you want more great business tips and taxation tidbits, be sure to visit this site often. For more accounting advice like top LLC tax benefits and ways to save on personal taxes, visit the Frugal Finances section of our site.

Why Get A Tax Planning Accountant For Fiscal Strategies

It is almost the end of the fiscal year, and you might have probably submitted your tax returns a few months ago. When everything is said and done, many business owners don't want to think about taxes when they have finished everything. 

However, it is best if you could plan for the tax season before it arrives so you won't be panicking. A little preparation for your future can make a significant impact, but most business owners may not be doing this. They can be too caught up with their businesses' daily operations (and nothing's wrong with that), but it is still best to give a little thought about the taxes for the following year. 

Contrary to what other people may be thinking, you don't necessarily have to be a big corporation or a Fortune 500 company to plan for your taxes. You may be a small business owner who wants to pay a significant reduction in taxes and ensure that the money is going to where it matters the most, which is to the other more important aspects of your business. 

About Tax Planning 

This process is more than just coming up with an estimate of your liabilities for the end of the year and knowing the tax amount. This is often the process of looking at your current financial health, ensuring that the figures work cohesively, as well as paying the least possible amount when it's time for filing. 

This is a process that may include various considerations like credit opportunities, legitimate deductions, expense planning, timing and size of the purchases, etc. This will help you select the most optimal investment out there that will complement your filing status and current strategy. 

Know that you may need to get help from a certified accountant to do all of these things. With experienced CPA services you will be able to reach your goals, raise more funds, deliver a positive ROI, and minimize cash tax liabilities. All of these are done in the right way, so you wouldn't have to worry even if the IRS contacts you. 

The Role Of Accountants 

For many business owners, the laws and regulations are simply complex and hard to understand. As an individual or a company owner, professional accountants will ensure that you're complying with the federal and state income tax returns so you can pass an audit with flying colors. There are also planning advice services that help individuals and businesses save money in general. Other services include: 

Preparations Of Tax Returns 

Self-employed accountants or those who are currently working for firms may specialize in assisting their clients with preparations of their returns. They meet with the business owners, assess their books, go through their records, and help them prepare. 

In a meeting, there is a need to gather the necessary documentation, get copies of investment income statements, have pay stubs, and check various documents that will be included in the paperwork. Most of these experts are familiar with the law, and they will usually look for credits and deductions for their clients to minimize their payments. 

Helps With The Planning Phase 

Every decision made in a corporate setting may involve tax changes and ramifications. These are very complicated, especially if the company does business internationally. This can result in the growing need for tax planner professionals. 

Some accountants may choose to specialize in the planning phase, where their primary objective is to minimize income taxes. This is a strategy that's often common in corporations where they develop long- term plans to save money for a period of time. 

Planning For Your Retirement 

Know that accountants can also help individuals aside from business owners. Those people who are saving their hard-earned money through a retirement plan can effectively reduce their taxes. This is when you contribute money into a traditional individual retirement account, which is deducted from your gross income. 

For 2021, if an individual meets all the qualifications, the maximum they can contribute under the age of 50 is $64,000. If they are 50 years old or older, the most will be $7,000 a year. For example, if a 51-year-old female has an income of $60,000 annually and has made $7,000 in contribution to their IRA, the adjusted $53,000 will be taxed, but the contribution will be deferred until she retires. 

Many other retirement plans are out there, and they are available for many people who want to reduce their liabilities. For larger companies with many employees, there is the 401k plan where a participant can defer his income from their paycheck, which goes directly to the company's strategy. The differences between a 401k and a traditional IRA are their contribution limits. 

Gain-Loss Harvesting 

The process gain-loss harvesting can be another kind of management and planning that's often associated with investments. This is very beneficial since can help capital gains offset and your accountant can help you with this. The Internal Revenue Service has a long-term and short-term capital loss that should be used to offset a capital gain of similar types of investments. In the year 2025, here are the taxation for long-term capital gains: 

• A payee who has an income of less than $78,750 is taxed at 0%. 

• For those who are single that has more than $78,750 but they are earning $434,550, the rate will be 15% (Married couples who are filing jointly will be included in this percentage if they have a combined income of $488,850, $244,425 for married people filing separately, and $461,700 for the head of the house.) 

• 20% of the tax for people who have an income that is higher than the 15% bracket. 

According to the IRS, if the capital losses exceed the capital gains, the total max you can claim to lower your income tax is $3,000. If you are married, the amount will be $1,500, but you are filing separately from your spouse. This is also the case if the overall net loss is included on the list shown on Form 1040, line 21 of Schedule D. Have an experienced CPA assist you with these calculations or advise you before making any finalized estimates and payments.

How To Find A Top Rated Tax Attorney

An attorney is a learned professional who is well trained and knowledgeable in the law. He acts as a representative to his client in every legal dealing end court case. He is a recognized legal practitioner. Generally, before someone gets to this level, he/she must have gone through law school. Such a person must also have been called to bar. Still, some attorneys may choose not to practice in court. 

Who Is A Tax Attorney? 

A tax attorney is e legal practitioner who specializes in tax law. The main focus of such counsel’s practice is tax and revenue law. The lawyer will help you handle your tax issues. He majorly gives you advice on how to organize your finances. 

Why Do You Need A Tax Attorney? 

Getting yourself a tax attorney may not look necessary to some. However, if you want your finances arranged properly to settle your tax issues, you will need one. In cases where you also have issues with the IRS, you will also need one. Below are several other reasons why you will need such a lawyer. 

Good Professional Representation 

Handling your tax issues may be time-consuming for you. You may also not have the professional knowledge to do so. This is why you need professional representation. It will be your guide in all your tax dealings. Oftentimes, the IRS may need to communicate with somebody. If you have such an attorney, you will be ably represented if you are unable to go by yourself. 

Of course, you may not want to postpone your work or allow anything to hinder your business. So, getting an able representation will come helpful. 

They Give Professional Advice 

Since these legal practitioners are professionals and well learned in the field, they can help you with the best advice. This advice will be very helpful for arranging your finances in other to swiftly pay your tax obligation. When it comes to IRS issues, you will also need a bit of good advice from a professional on the steps to take. Also, small-end big business owners will need this kind of lawyer to help advise on how to move the business financially. 

This is because apart from being tax specialists, some of them also have experience in business law, giving businesses related advice. This will be helpful to a business owner. Also, young workers or entrepreneurs require this kind of service to enlighten them on issues of tax payment. They also need this kind of service to educate them on some business opportunities and ways to manage finances. You can find suggestions on this website about ways to manage your finances. 

They Are Highly Knowledgeable 

Getting yourself connected with a tax lawyer will no doubt increase your knowledge corning this subject matter. You definitely may not have the requisite knowledge concerning this subject matter. But, when you have a lawyer around you, he/she will help enlighten you. Getting yourself abreast with this knowledge will save you from having issues with the IRS. It will also save you finical loss. 

The importance of knowledge in every field cannot be over-emphasized. The more you are aware of a particular matter, the less vulnerable you are. So, it is better to arm yourself with the right knowledge concerning tax payment and its policies. 

They Ensure Utmost Secrecy Of Privileged Communications 

One of the benefits you enjoy from hiring a lawyer is that you enjoy what is known as solicitor-client privilege. This privilege means that communications made to your lawyer in the course of his duty are kept secret. This information and communication cannot be uttered in public without your consent. It is privileged because it enjoys secrecy. 

You wouldn’t be scared of being hunted for what you said to your attorney. Once you hire one, be rest assured that your secrets are safe. In short, it is important to state that the professional ethics of the profession prohibits lawyers from leaking such information. In that case, you can be free with your counsel. You can tell and disclose whatever you want without fear. One thing you must know is that he/she has your interest at heart. And, he/she cannot do anything to jeopardize your interest. 

They Help Save Cost 

By hiring a tax attorney, you will help save costs. When you run into issues with the IRS, your money and property may not be safe. Especially where you run into debt, your properties may be seized to offset your debt. However, when you have such a lawyer, you do not have to worry about that. They will help you save costs by meeting with the IRS and entering into discussions on your behalf. In this case, sometimes your punishment is mitigated. 

The amount you would have paid will also be reduced. This is one of the benefits you get from having such a counsel by your side. You can imagine your bill if you were to settle matters yourself. You can find a reliable and experienced Los Angeles tax attorney that is affordable to work with. 

They Make Fewer Errors 

Since you may not have the requisite knowledge to handle tax-related matters, it is possible to make certain errors. However, hiring a trained counsel or solicitor to do the work for you will limit your errors. This is because such errors can be detrimental to the success of your case with the IRS. You must limit the errors you make. This is something you may not be able to do on your own. 

You will need the services of someone who is trained and skilled to do so to avoid errors. Therefore, the less error there is, the more chances you have of reaching an amicable settlement with the IRS. The absence of errors in itself can even save you the stress of having any issue with them. You will benefit from having such a counsel who is skilled in this field. You shouldn’t want to miss out on this benefit. 

They Help In Securing Relief From IRS Actions 

The tax attorneys also know how best to maneuver their way through the system. This is something they can do because they’re skilled in the field. On your own, you may be unable to do it. But, with the support from these professionals, you will get relieved from IRS actions. This is one very important reason you need a solicitor by your side. 

This is because a lot can go wrong if you attempt to do it on your own. But with external support and aid, you are sure to get it right. They can do this by reaching an amicable resolution with the IRS. 

What To Look Out For When Hiring The Best Rated Los Angeles Solicitor 

Some of the things to look out for when looking for legal counsel to help you with any legal-related issue include. 

Years of Legal Practice 

You must take into consideration the solicitor or lawyers’ years of legal practice. This is because their years of practice will culminate into his experience and wealth of knowledge. Well-experienced attorneys will be able to do exceedingly well while doing their job. Their performance will be highly noticeable. Of course, the reason this will not be far-fetched is because of their wealth of experience in the field. Therefore, always pay attention to their number of years in business. 

Proximity 

Another thing you will have to look out for is the distance between you and your lawyer. It is always advisable to be closer to your lawyer. This is in case of any emergencies in the future. 

Cost 

You should also put the cost of hiring the lawyer in mind. This is because most of the best-rated lawyers will charge highly for their services. Therefore, you will have to weigh your options to reach the best decision on hiring the right tax law firm. 

Final Note On Top Tax Attorneys

Tax attorneys are professionals whom you will find very important if you are a worker or business owner. Their benefits are quite numerous that you should certainly not brush off the idea of hiring one to handle your taxes.

Considerations Before Applying For Tax Relief

Before applying for tax relief, it is essential to thoroughly evaluate your financial situation and understand the implications of seeking tax relief options. While tax relief programs can provide significant benefits, it is crucial to consider several factors to ensure that you make informed decisions with regards to the Internal Revenue Service (IRS). This article highlights seven key considerations to keep in mind before applying for tax relief services in the USA. 

7 Tax Relief Key Points 

1. Eligibility Criteria

Different tax relief programs have specific eligibility criteria. Before applying, carefully review the requirements and determine if you meet the qualifications. For example, some tax credits are income-based, while others may have restrictions based on factors such as age, education, or employment. Understanding the eligibility criteria will help you assess whether you are eligible for the relief program you are considering. 

2. Financial Impact

While tax relief can reduce your tax burden, it is important to evaluate the overall financial impact of seeking relief. Consider the potential short-term and long-term consequences of the relief option. For instance, some relief programs may require you to repay a portion of the relief in the future, which can affect your financial stability. Assess how the relief will impact your current cash flow, financial goals, and potential tax savings to make an informed decision. 

3. Documentation And Compliance

Tax relief programs often require documentation to support your eligibility. Before applying, gather all the necessary documentation and ensure that you meet the compliance requirements. Failure to provide accurate and complete documentation may result in your application being rejected or delayed. Additionally, be aware of any reporting obligations or ongoing requirements associated with the relief program to avoid penalties or loss of benefits. 

4. Future Tax Implications

Consider the potential impact on your future tax returns when applying for tax relief. Certain relief options may affect your future tax liabilities, deductions, or credits. For example, if you choose to claim a tax credit for energy-efficient home improvements, it may limit your ability to claim the same credit in future years. Assess how the relief option may influence your future tax planning and consult with a tax professional if necessary. 

5. Alternative Strategies

Before pursuing tax relief, explore alternative strategies that may achieve similar or better results. For example, if you are considering applying for an installment payment plan with the IRS, evaluate whether it would be more beneficial to secure a low-interest loan from a financial institution. Comparing different approaches can help you identify the most cost-effective and advantageous option for your specific circumstances. 

6. Impact On Credit Score

Certain tax relief options, such as offers in compromise or settlements, may have implications for your credit score. These programs may require negotiation with the IRS or other entities, potentially impacting your creditworthiness. Understand the potential consequences for your credit score and consider whether the relief option outweighs any negative impact on your creditworthiness. When you are taxed, it could hurt your credit or even cause you to consider bankruptcy. 

7. Professional Advice

Seeking professional advice from a tax attorney, certified public accountant (CPA), or tax professional is highly recommended before applying for tax relief. Accountants can provide expert guidance based on your specific situation, help you understand the implications, and navigate the application process. A tax professional can also provide insights into alternative strategies or additional relief options that you may not be aware of. 

Tax Relief Considerations Conclusion 

Before applying for tax relief in the USA, carefully consider factors such as eligibility criteria, financial impact, documentation requirements, future tax implications, alternative strategies, and the potential impact on your credit score. Making informed decisions about tax relief options requires a thorough evaluation of your financial circumstances and objectives. 

Seeking professional advice can provide valuable insights and help you navigate the complex tax landscape, ensuring that you choose the most suitable relief option for your needs. Don't try to go it alone when you are seeking reduced taxes or other financial assistance! It is time to say goodbye to excess taxation.

Income Limits For Chapter 7 Bankruptcy Filing

If you are at the point of being overwhelmed by debt without an easy path out, it may be time to consider whether or not bankruptcy is a valid option for you. Before you file for a Chapter 7 bankruptcy discharge, you should first determine if you meet the income limit for getting a Chapter 7 bankruptcy discharge from the bankruptcy court. 

Although Chapter 7 bankruptcy is often the cheapest, quickest and easiest bankruptcy to file under, debtors still have some stringent requirements they must meet before the bankruptcy discharge is issued. 

The entire purpose of filing a bankruptcy case is to get a bankruptcy discharge, as it releases the debtor from any legal obligation to repay the debt. Without getting a bankruptcy discharge, you are obligated to pay every dollar you own in 2024 to destroy your debt. 

Understanding The Income Limit For Chapter 7 Bankruptcy Cases 

Before getting started, it is important to realize that bankruptcies can vary from state to state. For instance, if you file for Chapter 7 bankruptcy in Michigan, it may look different than an Ohio Chapter 7 bankruptcy or a Texas Chapter 7 bankruptcy. Keep this in mind when moving forward with filing for bankruptcy in the states of TX, MI, or OH. 

Congress revised the law that guides who get a bankruptcy limit in 2005, during which they added an income limit for anyone who wishes to file under Chapter 7 bankruptcy. BAPCPA (the Bankruptcy Abuse Prevention and Consumer Act) was set up to change the way debtors qualify to get a discharge under the Chapter 7 bankruptcy debt relief plan. The reason for this modification was to prevent abuse by high net worth individuals, and ensure that only those who can’t afford to pay their debt qualify for a discharge. 

Why Income Limits Are Important In Chapter 7 Cases 

Your income can stop you from getting a bankruptcy discharge if it is above Chapter 7 income limit for your state of residence. Although, this income limit doesn’t stop you from filing a Chapter 7 bankruptcy case, as you can file irrespective of what you earn. In other words, that you filed for bankruptcy does not necessarily mean that you’ll get debt relief as the bankruptcy court can reject your application based on abuse. 

If you notice that your income is higher than the acceptable income for Chapter 7 bankruptcy, then, the most suitable alternative is to file under Chapter 13 bankruptcy to get a discharge, the general assumption is that if your income is higher than the state’s median income; then, you can afford to pay part of your debt to unsecured creditors. 

Unsecured creditors are those that don’t have a lien on your property; as such, they are at risk of losing money when you’re unable to pay back. Some examples of debts in this category are medical bills, credit cards, and personal loans. 

Here are the income limits for the following states for cases filed after 2023. If your household size is greater than 5, you would add $9000 per member. 

Michigan 

# Of People : Annual Income 

1 : $53,815 

2 : $67,015 

3 : $80,465 

4 : $99,179 

5 : $108,179 

Texas 

# Of People : Annual Income 

1 : $52,953 

2 : $71,287 

3 : $77,110 

4 : $89,196 

5 : $98,196 

Ohio 

# Of People : Annual Income 

1 : $52,415 

2 : $67,059 

3 : $79,022 

4 : $96,175 

5 : $105,175 

Let’s now discuss how income works in the Chapter 7 means test. 

How To Calculate Income For The Chapter 7 Means Test 

The first thing is to show the proof of your earnings in the last six months. Income is calculated based on what you earned six months prior to filing a Chapter 7 bankruptcy case. As such, if you’re filing for a Chapter 7 bankruptcy on July 10, then you have to show your proof of income from January 1 to June 30. 

The income that should be declared is those earned and those from other sources, with the exception earned as a result of the Social Security Act. When calculating the Chapter 7 Means Test, you won’t add income from SSI, SSDI, and Social Security retirement income. 

Some of the incomes used in calculating Chapter 7 Government Means Test are: 

● Unemployment income 

● Royalties, dividends, and interest 

● Salaries and wages, including commissions, bonuses, and overtime 

● Rental Property Income 

● Income from operating a business or self-employment 

● Income from workers’ compensation 

● Spousal support and child support 

● Pensions, annuities and retirement income 

● Income from private disability insurance 

● Income from others in the household, such as money from a friend, parent, roommate, or domestic partner 

Also, if this feels complex, a free Chapter 7 means test calculator can help you estimate qualification. 

Completing The Means Test 

Your bankruptcy attorney may be able to fill out all of this information for you unless you decide to file without an attorney. 

Section One—Median Income 

Before filing the first part of the means state, you should first understand two terms, which are: annual median income and current monthly income (CMI). The annual median income in itself is calculated based on your CMI. 

If you want to calculate CMI, the income you got for six months prior to filing for Chapter 7 bankruptcy should be added and divided by six. Thus, if after calculating your six-month income, and the total sum is $25,000, then your current monthly income will be $25,000 divided by 6, which is $4,166.67. 

You can calculate your annual median income by multiplying the CMI by 12. In the example given above, the median income will be $50,000.04 ($4,166.67 multiplied by 12). 

A comparison will be made between your annual median income and the annual median income for your state of residence (See our chart below). But in a situation where your median income is lower than that of your state, then it is assumed that you’re eligible to receive a Chapter 7 bankruptcy discharge. 

As stated above, the income for Chapter 7 bankruptcy is often dependent on where you are in the United States. For example, the income limit for filing bankruptcy in Tennessee may be different than the income limit for filing Chapter 7 bankruptcy in Illinois every single one of those places are going to have their own specific requirements. 

Section Two—Disposable income 

If you earn above the income limit for a Chapter 7 bankruptcy, you can still qualify for a Chapter 7 bankruptcy discharge if you pass the disposable income test. 

Disposable income is your remaining income after deducting your mandatory payroll deductions and ordinary living expenses. You must include your disposable income when writing your Chapter 13 bankruptcy plan. 

It is possible to qualify for a Chapter 7 bankruptcy discharge even if your annual median income is higher than the state’s income limit—this can happen if your disposable income is lesser than the limit stipulated by the state law. 

Some expenses you can deduct from CMI to calculate disposable income are: 

● Clothing, food and household expenses 

● Public transportation costs and vehicle operating costs 

● Disability insurance premiums, term life insurance, and health insurance 

● Some health care costs 

● School expenses and some childcare costs 

● Alimony payments or court-ordered child support 

● Some payroll deductions like uniforms, union dues, compulsory retirement savings, and payroll taxes 

These expenses are determined by the number of individuals that reside in your home. Also, some acceptable monthly expenses depend on the national standards for living expenses. Monthly expenses that are high-end like golf clubs or expensive gym memberships cannot be used if you go bankrupt. Also, if your expenses seem outrageously high, then the bankruptcy court will ask you to provide proof to support your claim. 

The Bottom Line On Bankruptcy 

Filing Chapter 7 bankruptcy is a big decision that takes a lot of consideration. Understand the income limit for Chapter 7 bankruptcy filing in Michigan, Texas and Ohio. You can also look for alternatives to bankruptcy filing with such options as debt negotiation, debt management or debt payoff planning. If you become bankrupted, there are solutions and there is help!

How To Do Accounting For Small Businesses

Do you know the biggest challenges for small businesses in terms of finance? 

Not having a diversified client base is one. If you mostly rely on a single client to keep your business running, you are more of an independent contractor than a business owner. 

Another huge challenge is maintaining quality while trying to scale. Especially for some entrepreneurs, it is quite hard to let go of some tasks when they're so used to wearing different hats.

Then there is money management. With overseeing day-to-day operations, some businesses tend to not prioritize bookkeeping and accounting as much as they should. If you however recognize the need for accounting help, then you are in luck. 

Here, we will be sharing some basic accounting tips to help your small business get on track financially.


Think About Automation

No matter how good you are at numbers, you can't be spending all your time making sure your accounting books are balanced. Remember, you have other duties and responsibilities to take care of. If you can't quite justify hiring an accountant, your next best bet is to use a tool that can automate accounting tasks.

The good news is there are tons of accounting software to choose from. If you do your homework, you should be able to pick the best one that fits your needs and budget.

Before you pay for one though, make sure the software you choose can grow with you. You don't want the hassle of learning how to use another software just because you didn't plan properly for the features you need as your company scales.


Identify What Type of Accounting Help You Need

You don't have to hire a CPA or an accountant full-time. There are small business accountants who can work on an as-needed basis to keep you in good standing with the Internal Revenue Service (IRS). 

For example, if you are thinking of starting a new business, an accountant can provide invaluable advice about your business structure. He or she can also help with obtaining the necessary licenses and permits, writing a business plan, etc. 

The same applies to nonprofit organizations. If you are running one, this article can give you insights on the basics of nonprofit accounting. 

Other accounting partners who can help are CPAs if you need audited financial statements and bookkeepers for managing day-to-day records. You can also hire tax preparers for filling out and filing tax forms on your behalf, as well as tax planners for finding ways to lower your tax obligations.


Optimize Your Accounting Methods

Whether you choose to use accounting software or hire an accountant, don't forget to track their performance. If you don't know how much time and effort you're spending on your books, it will be hard to improve your accounting processes. 

Also, when evaluating your accounting methods, always think about the future. Solid accounting is a powerful forecasting tool. It can help you identify upcoming costs, plan for company expansion, new investments, and so on. 


Need More Accounting Tips?

Now that you know some basic accounting tips and where to get accounting help, don't stop there. There are other aspects of financial management you have to master if you want to keep your small business or NPO growing.

For more accounting advice and financial assistance, check out our other articles. For additional accounting help and bookkeeping tips, visit the Frugal Finances section of our blog right now!

7 Instances When You Must Hire A Tax Attorney

Getting behind on your taxes is never pleasant, but it is incredibly common. More than 15 million taxpayers owe the IRS back taxes. 

When this happens, taxpayers face scrutiny from the IRS, audits, fines, and sometimes even criminal charges from a judge. 

A tax lawyer can help represent your case and interact with the Internal Revenue Service (IRS) for you. However, understanding when it is time to get legal help can be more complicated than you might have thought. 

Here are 7 major instances where getting legal help for your taxes is in your best financial interest. 

7 Times You Need To Hire A Tax Lawyer

1. You Are Getting Audited By The IRS

No matter how many times you have filed taxes in the past, it never gets easier. Even the simplest return can be incredibly complicated. 

This leads hundreds of people to make mistakes on their returns every year. While some of those mistakes are minor, others can be large enough that the IRS audits your finances. 

Dealing with an IRS audit is something no one should try to do on their own. 

If you have received notice that the IRS is auditing your accounts, hire a tax attorney as soon as possible. They will be able to communicate with the IRS on your behalf and will do everything they can to reduce any fines or penalties the IRS may assess. 

2. You Own Your A Company 

If your personal tax return seems complicated, just think how difficult it will be to file your business’s taxes!

For business owners, a tax attorney will be able to make sure you’re filing everything correctly and receive the deductions you qualify for. They’ll also be able to double-check your hiring paperwork so your payroll and employee tax documents get issued on-time and correctly. 

They won’t be able to help you file your returns. You’ll still need to hire an accountant and get them to help you claim deductions, fill out tax documents, and stay on top of quarterly payments. 

3. You Are In Major Debt 

Getting behind on your taxes isn’t something to feel ashamed of. It is, however, something you’ll want to get help dealing with. 

The IRS will pursue you for taxes that you owe. If you only owe a few hundred dollars, they’ll likely be flexible. If you owe a lot, you can expect the IRS to come knocking. 

Hiring tax relief attorneys can help you negotiate the amount that you owe the IRS and can represent your interests in court if needed. Experienced attorneys may be able to get the IRS to forgive a large portion of your debt. 

Keep in mind that all situations are unique and what your attorney may be able to do for you may not be what others have experienced. The best thing you can do is schedule a consultation. 

4. You Did Some Hiding Of Income In Past Years 

No one likes paying taxes. The more money you make, the more money you owe the IRS at tax time. 

It makes it tempting to lie about how much income you generate or to fail to report a good portion of your income. 

Unfortunately, the IRS has a way of finding out that you hid income in the past. If they do, you could face criminal charges and even be sent to a white collar federal prison like countless others for tax evasion. 

A tax lawyer will be able to represent your case and argue on your behalf. Keep in mind that they may not be able to get the tax evasion charges against you dropped completely. Every situation is unique though when it comes to tax evasion. 

5. You Are Self-Employed 

When you’re self-employed, there are all sorts of challenges you’ll face. Taxes are some of the biggest ones. 

A tax attorney will be able to make sure you’re on the right track and are submitting things correctly. Even better, they’ll be able to make sure you’ve formed your business in such a way that you’ll be able to enjoy tax savings every year. 

If you haven’t, they’ll be able to recommend a simple restructuring process that will let you take advantage of tax savings for years to come. 

6. You’ve Planned Your Own Estate 

Most people want to set aside money for their loved ones or set up funds to support their favorite causes when they pass away. While a clear will is always an absolute must, there’s more to leaving money to those you care about than you might think. 

You need to understand the tax risks associated with your accounts. You will also have to work to find a way to reduce the amount of taxes your loved ones will pay when they receive the money. 

Hiring a tax lawyer will help you figure out the best way to set up funds to reduce the amount of taxes your loved ones will owe. They’ll also be able to double-check the way your accounts are set up currently so you can maximize your contributions and save on your personal taxes. 

7. You Have Assets You Do Not Want Seized By The IRS

If you’re facing a tax levy, the IRS can seize assets to settle your debts. Without the help of an experienced income tax attorney, you may lose assets that you would rather the IRS not know about in the first place. 

When you hire an attorney, they will be able to review your assets and potentially find ways to keep them out of the IRS’s hands. 

They will also be able to review the ways you store those assets to find better and more tax-secure options. 

Don’t Wait Any Longer If You Need To Hire A Tax Attorney 

If you are getting audited or just have questions about the amount of money you owe the IRS this year, don’t wait. Schedule a consultation with a tax attorney immediately. 

The sooner you do, the sooner they will be able to review your legal tax case and find a positive solution. 

Just make sure that the attorney you work with has experience representing cases like yours. This way, you will get the best legal representation possible. 

Conclusion

Interested in finding more tips to help you save money on your taxes year after year? Check out our latest posts in the Frugal Finances section of the Frugal Finance Blog. Also visit the Legal section of our business site for additional insights on corporate law and compliance.

How to Use Excel for Accounting

Did you know that over 750 million people still use Microsoft Excel? It is a great program that is easy to use and can help you and your business do several tasks, such as data analysis and accounting.

If you want to improve your business then keep reading to find out how to use Excel for accounting.


How to Use Excel for Accounting, Successfully

Using a program like Microsoft Office Excel for your accounting spreadsheets can help save your business time and money. Once you and your employees are familiar with MS Excel and the formulas you need to use, the process becomes very easy.


1. Use Excel for Cash Basis Accounting

Small businesses often use and rely on cash basis accounting. Accounting in Excel using cash basis accounting is easy to do and can help keep your finances in order. All you have to do is open a new worksheet and create column headers for the following: date, transaction, description, and transaction number. You should also include columns for income, expense, and account balance.

It might be useful to make monthly cash basis accounting sheets, so you can find specific costs easier.


2. Make Use of Formatting

Excel bookkeeping helps you keep track of your business's finances but it can also save you time. Using formatting features ensures you and your team can quickly input data and highlight any important expenses or invoices.

There is a whole range of formatting features available that are designed to speed up the process of data input. You can also use these features to segregate your columns so they are easier to read and analyze.


3. Display Data With Sparklines

Sparklines is an Excel feature that will help make your data presentations easier. Sparklines allows you to display small charts in individual Excel cells, such as line charts or bar charts. To do this, select the range of numbers you want to be included and select the 'Insert' menu to choose one of the chart options and then select a location range.


4. Excel Templates

If you don't have time to learn the ins and outs of Microsoft Excel, why not rely on the trusted templates provided? There are plenty to choose from and you can edit them to suit your business's needs. 

Alternatively, you can save your own templates in Excel and use them in the future.


5. Create Tables Quickly

In a rush but really need to input the finances of the day? Whether it is the end of the day or you only have a few seconds before a meeting, you can quickly create a table by selecting the cells you want to be included and pressing Ctrl+T. How convenient!


Follow Our Guide on Using Excel Accounting

As you can see, Microsoft Excel can help you create effective accounting spreadsheets that are accurate and detailed. If you want to improve your business, implement our tips on how to use Microsoft Excel sheets for accounting.

Read some of our other blog posts to find out more about how you can improve your business and finances with frugal hacks. Visit the Frugal Finance and Investing sections of our site right now for more financial insights or software use!

Tips To Better Understand 1031 Exchanges

There is a lot of economic uncertainty at the moment. Investors are seeking shelter in trusts and in healthcare real estate investments, although even those are no guarantees for high ROI. 

Investors in stocks are getting hammered, but real estate investors are breathing easier. If you want to sell a property and move your assets quickly, you’d have to think about capital gains taxes. 

Capital gains taxes could defeat the purpose of moving your assets because you have to pay taxes on the profits of the sale. That is unless you do a 1031 exchange. 

Want to know how they work? Read this guide to understanding 1031 exchanges. 

What Is A 1031 Exchange? 

A 1031 exchange is the section in the IRS code that spells out how you can defer capital gains taxes when you sell investment properties. 

What you do is that you sell your investment property and use the funds from the sale to purchase a like-kind property. 

Like-kind property is a big gray area for investors because the section of the IRS code doesn’t do a great job spelling out the details. You could sell a four-plex and turnaround and buy an empty lot. 

The value of the properties comes into play. For example, if you were to sell a property and purchase one for a lesser value, you wouldn’t qualify for the exchange. 

It used to be that you could use a 1031 exchange in many types of investments, from art to intellectual property. When the Tax Cuts and Jobs Act was passed in 2017, that legislation limited the scope of 1031 exchanges. 

You are only allowed to apply this rule when you are selling a property that is used for business purposes. Your business could own an office building or warehouse. If you needed to upgrade your facilities or needed more space, a 1031 exchange could be used to offset taxes. 

If you are wondering whether or not a 1031 can be used on residential property, the answer is no. It is only for business property. 

Does a 1031 exchange mean that you don’t pay taxes at all? No, your taxes are deferred. You will pay your capital gains taxes when you do sell the replacement property. 

Read more here about 1031 exchanges and a potential alternative to a 1031 exchange. 

The Rules And Deadlines Of 1031 Exchanges 

Does a 1031 exchange sound like a great idea to you? Your next step in understanding the rules that you have to comply with. 

You already know that 1031 exchanges require that you have to invest in real property that is like-kind. Here are the other rules that you need to know about. 

You Need A Qualified Intermediary 

You’re probably thinking that you can do the exchange on your own or use a real estate broker to handle the sale and purchase of your investment properties. 

You actually need a person called a qualified intermediary. They are the ones that handle all facets of the 1031 exchange. They also handle the money involved in both transactions. The reason why they handle the money and you don’t is because when you touch the money, the IRS considers it income. 

That money then becomes taxable. With a qualified intermediary, they handle the finances to make sure you don’t pay taxes on the capital gains. 

The Deadlines 

You can think of a 1031 exchange as a transaction that comes in three phases. Each phase has its own deadline attached to it. 

The first phase is the sale of the initial property. The date of close of the sale is going to determine the other dates and deadlines in the 1031 exchange. 

After the sale comes the next phase of the transaction, which is to identify the replacement property. You have 45 days from the close of the sale to figure out the property that you want to purchase. You can identify several properties at the same time. 

The final phase is the purchase of the replacement property, which has to close 180 days after the sale of your first property. 

There are a couple of items to note with these deadlines. The first thing is that the days are counted in calendar days, not in business days. 

The second item has to do with Tax Day, which is usually April 15. Should April 15 come within that 180- day window, you have to make sure that your transaction closes by April 15, or in 2023 it will be April 18th for an extra few days. In other words, if you sell your property after October 15, your window to buy a replacement is shorter. 

When 1031 Exchanges Fail 

If a deal falls apart and you miss a deadline, the 1031 exchange would fail. This is important because if an exchange fails for one reason or another, you need to know what the consequences are and plan accordingly. 

In many cases, you will be able to defer your capital gains taxes the year after the failed exchange. It is not a guarantee that you would be able to do that. Check with your qualified intermediary to see if that tax path would work for your finances. 

Understanding 1031 Exchanges To Manage Your Wealth 

Like any other investment strategy, a 1031 exchange is a tool to help you build and manage wealth. When you are learning about and understanding 1031 exchanges, it can be difficult to know what is fully involved. 

You have to know the rules and deadlines of a 1031 exchange. You also have to be aware that these rules are subject to change, like when the rules changed several years ago. It is always best (and necessary) to work with a professional to help guide you through the process. 

Do you want more great real estate, investment, and financial tips? Keep visiting this site for the latest tips on property investing and other investments. Visit the Real Estate, Frugal Finances, and Investing sections of the Frugal Finance Blog right now!

How Much Taxes To Pay As An Independent Contractor

It is believed that between 7% and 10% of all workers in America are independent contractors. 

Whether you are freelancing as your full-time job or as a side-gig, being self-employed can make paying taxes more complicated. 

How are you supposed to know how much to set aside for taxes? 

Let's take a look at what you should know about planning for taxes as an independent contractor. 

What Is an Independent Contractor? 

When you work as an independent contractor, you are working for someone else but not as their employee. You are therefore considered self-employed because you are running your own business and taking someone on as a client rather than working for an employer. 

When you work as an employee, someone else determines what will be done and the way it will be done. When you're an independent contractor, you're hired for specific work and paid based on the resulting work. 

Types of Independent Contractor Jobs 

There are a lot of different occupations that could lead to you filling out 1099 taxes. 

Tradespeople are frequently independent contractors. This could mean painters, carpenters, plumbers, electricians, bricklayers, wedding planners, hairstylists, mechanics, and many more. 

Consultants are another group of occupations that are often independent contractors. This refers to advisers in any sector of the economy such as financial, legal, health care, or personal services. 

People who work as artists will often also pay taxes as independent contractors. Whether they are musicians, photographers, writers, sculptors, glass cutters, or woodworkers, they are seen as having and running their own business. 

People who work in the gig economy are also frequently going to file independent contractor taxes. No matter what job you work, it is important to understand whether or not you're an employee or a sole proprietor, as it impacts how much you pay in taxes. 

What Is a Sole Proprietor? 

A sole proprietor is a business with a single-owner that isn't a corporation. If you are an independent contractor, you will be considered a sole proprietor when it comes time to pay your income taxes. 

Does Being an Independent Contractor Affect My Pay? 

When you are an independent contractor, you still get paid for your work but not in wages or a salary. Rather, your payments are taken out of the business's income. When you get paid for your work, the money goes into a business checking account. 

Since you are an owner and not an employee, you can take money out in the form of a "draw" but not in the form of a salary. You must pay taxes on all of the money you make, it doesn't matter how much you draw out of this account. 

Since you aren't an employee of another company, taxes haven't been deducted out of the money you receive for your work. Whereas for another job you might even get a tax refund come tax time, as a freelancer you're responsible for paying your own self-employment taxes. 

Saving for Taxes as an Independent Contractor 

The best way to save taxes for freelancers is to actually have the IRS do it for you. Every three months, you should be sending estimated quarterly payments to the IRS. This way, you're basically paying your taxes as the year goes along, the same way you would if you were employed by a company. 

The IRS can apply penalties if you don't pay quarterly taxes by the due dates each year. Paying quarterly also avoids having a big terrible surprise once a year come tax seasons. 

How Much to Set Aside For Taxes as a Freelancer? 

The recommended percentage to set aside for independent contractor taxes is 25-30% of your income. If this sounds high, it is because you're paying self-employment tax on top of income tax. The self-employment tax is the FICA taxes, which is the Social Security and Medicare normally withheld from your paycheck. 

When you are employed, you are only responsible for half of these FICA taxes while your employer is responsible for the other half. When you work for yourself, you've got to fit the whole bill. 

How to Calculate Your Income 

While this all might sound like a lot, don't forget that you can deduct the costs associated with running your business from your freelance taxes. When tax time rolls around, you will fill out a Schedule C form that documents your business expenses. You will be able to subtract your deductible expenses from your income, leaving you with your taxable income. 

The best way to do this is to keep track of your deductible expenses as the year goes on. Things that are deductible include travel expenses, office supplies, maintaining an office, and miles driven for business purposes. 

If this is only your first year freelancing, you will have to estimate taxes. It is best to estimate your income on the low side rather than too high with the IRS, but you can always make an adjustment the following quarter or year. 

Are you employed after all? Check out this salary calculator. 

How Much to Set Aside For Taxes: Final Thoughts 

There are a lot of advantages to working as an independent contractor as well as a lot of disadvantages. The tax situation is definitely on the 'cons' side of the list. 

If you value being your own boss and being in control of your own schedule, however, dealing with slightly more complicated and more expensive taxes can be worth it. It is just important that you understand how freelance taxes differ from employee taxes so that you aren't caught by surprise come tax season. 

Did you find this article about how much to set aside for taxes helpful? If so, be sure to check out the rest of our blog for more useful and informative articles!