Is it a Business or Hobby? Answer Has Implications for Deductions

ABA Tax Accounting | Small Business Accounting | St. Paul, MN Accounting Firm

What New Business Owners Need to Know About Taxes

Small Business Accounting – The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations. For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200  866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Starting a Business

ABA Tax Accounting | Small Business Accounting | St. Paul, MN Accounting Firm

Small Business Accounting – Starting, Operating, or Closing a Business - Important tax information related to the various stages of owning a business. Starting a business could be exciting.  If you're considering starting a business, please consult experienced professional that provides information on everything from a checklist for a new business, to selecting a business structure, and more. For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

QUICKBOOKS TIPS - Recording of Barter Exchanges

ABA Tax Accounting | QuickBooks Accounting Services | St. Paul, MN Accounting Firm

If you have customers who are also vendors you may decide to trade some or all of your services / products in exchange for payment.

To record such a barter transaction, invoice the customer for the goods provided or services performed as you normally would. To record the "payment" use the "Receive Payment" function to apply the barter amount against the invoice the same as you would when receiving cash or a check as follows:

Go to Customers: Receive Payment. Payment Amount will be the barter amount (the amount of the invoice you received from your vendor). Pmt. Method will be Barter. Check the radio button for "Group with other undeposited funds". Save this transaction.

Go to Banking: Make Deposits. The payment you just received will come up in the Payments to Deposit screen. If there are also other payments to deposit, make sure you select only the payment(s) being recorded for the barter exchange. When you hit OK the Make Deposits screen will come up with the barter deposit(s) showing. Before recording the deposit make a negative deposit entry on the next blank line below the barter deposit for the amount of the barter as follows:

Deposit To be your normal operating checking account. Date is the date you would have normally paid your vendors invoice. Memo should be changed from Deposit to Barter.

If you have entered the vendors invoice as a bill for payment, Received From is the vendor name and From Account is Accounts Payable.

If you have not entered the vendors invoice as a bill for payment, leave Received From blank. In the From Account column select the expense account you would charge the vendors invoice to, the same as if you were entering it for payment. In the Memo column note the vendors invoice number.

In the Amount column enter the vendors invoice amount with a negative sign first. This negative amount should exactly offset the deposit amount above, resulting in a "Zero" deposit transaction. Save the "deposit" and the transaction is complete. For no obligation free consultation contact us today!

ABA Tax Accounting

Authorized QuickBooks Affiliate

612-282-3200 Toll Free (866) 936-0430

http://www.abataxaccounting.com

amare@abataxaccounting.com

QuickBooks Accounting Services

U.S. Senate: Transfer pricing, other tax strategies lead to avoidance

Microsoft, HP skirted taxes via offshore units: U.S. Senate panel | Reuters

Members of the U.S. Senate's Permanent Subcommittee on Investigations questioned transfer pricing used by large companies, including Hewlett-Packard, Google, Apple and Microsoft, to avoid taxes. Sen. Carl Levin called the strategy "gimmicks and charades," but the companies defended the practice as legal. For free consultation contact us today.

ABA Tax Accounting

Amare Berhie, International Tax Advisor

amare@abataxaccounting.com

612-282-3200 Toll free 866-936-0430

http://www.abataxaccounting.com

ABA Tax Accounting | QuickBooks Point of Sale | St. Paul, MN Accounting Firm

ABA Tax Accounting | QuickBooks Point of Sale

QuickBooks Point of Sale provides sales, inventory and customer information that helps you understand your business so you can make better decisions.

QuickBooks Point of Sale 2013 gives you detailed sales and inventory reports that let you know what is selling and what is not. You can also keep track of your customers' shopping history so you can delight them with personalized service and rewards.

NEW Point of Sale now includes a mobile feature that lets you accept credit and debit cards on your mobile phone or tablet-all mobile sales and inventory information syncs with your software keeping your records accurate and up-to-date.

And, Point of Sale is designed to be easy to set up so most retailers can start using the software the same day. For no obligation free consultation contact us today!

ABA Tax Accounting

Authorized QuickBooks Affiliate

612-282-3200 Toll Free (866) 936-0430

www.abataxaccounting.com

amare@abataxaccounting.com

QuickBooks Accounting Services

Domestic Outsourcing Lowers Costs, Improves Efficiency, and Reduces Risk.

ABA Tax Accounting | Domestic Outsourcing

ABA Tax Accounting provides customized, high-quality and cost effective outsourcing solutions for Accountants / CPA firms as well as other small, medium, large businesses, non-profit organizations, and federal, state, local governments who do not want to have a large in-house accounting team. Our aim is to reduce the burden of “behind the scene" functions of businesses so that they can focus on their core revenue generating roles. For more info or to explore possibilities please contact us today.

ABA Tax Accounting

Amare Berhie, Managing Member

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Romney Releases 2011 Tax Return

ABA Tax Accounting | Tax Planning | St. Paul, MN Accounting Firm

Mitt Romney released his 2011 tax return this afternoon, which revealed that the Republican presidential candidate paid taxes of $1,935,708 on $13.7 million in income, mostly from investments, giving him an effective tax rate of 14.1 percent. To Read More... click the link. For more info please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

http://www.youtube.com/watch?v=yWvYfSr40Fw

Tax Preparation

ABA Tax Accounting | Tax Preparation | St. Paul, MN Accounting Firm
Preparing your own income tax return can be a task that leaves you with more questions than answers. According to a study released by the US Government's General Accounting Office, most taxpayers (77% of 71 million taxpayers) believe they benefited from using a professional tax preparer.

Romney's 47% Comments Distance Him from Bush-Era Republicans

ABA Tax Accounting | Tax Services

Eleven years ago, eliminating income taxes for low-income Americans was an applause line for a Republican president. Mitt Romney in 2012 sees the number of people paying nothing as a political problem. To read the full story click here. For more info please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.youtube.com/watch?v=yWvYfSr40Fw

http://www.abataxaccounting.com

QuickBooks Online Goes Global

ABA Tax Accounting | QuickBooks Accounting Services

QuickBooks Accounting - Intuit has confirmed that its QuickBooks Online has gone global through multi-language and multi-currency features that will allow businesses and accounting firms in any country to utilize the product.

As an Authorized QuickBooks Affiliate, you may access QuickBooks' products website directly from ABA Tax Accounting's website. When you place orders for QuickBooks software or programs through our website, you will receive the same discounts as our Pro Advisors with all the conveniences of ordering directly from QuickBooks.

Furthermore, our in house QuickBooks Pro Advisors provide the opportunity for year round training to clients. Having both Affiliate and Pro Advisor status keeps us current with all the QuickBooks products and updates. For no obligation free consultation contact us today!

ABA Tax Accounting

Authorized QuickBooks Affiliate

612-282-3200 Toll Free (866) 936-0430

amare@abataxaccounting.com

QuickBooks Accounting Services

Strategic Outsourcing: Lowers Costs, Improves Efficiency, and Reduces Risk.

ABA Tax Accounting | Domestic Outsourcing

In a rapidly changing world, forward-thinking CFOs and managers are looking for innovative strategies and creative collaborations to keep their businesses thriving. More and more, they are turning to third party experts like ABA Tax Accounting for strategic outsourcing of their behind-the-scenes business processing as a way to streamline operations and reduce costs and risk. For more info or to explore possibilities please contact us today.

ABA Tax Accounting

Amare Berhie, Managing Member

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

http://www.abataxaccounting.com

Domestic Outsourcing Solutions

ABA Tax Accounting | Domestic Outsourcing Solutions
Strategic Outsourcing: Lowers Costs, Improves Efficiency, and Reduces Risk.

U.S. Treasury, United Kingdom Sign Bilateral Agreement to Improve Tax Compliance, Combat Offshore Tax Evasion and Implement FATCA

ABA Tax Accounting | Expatriate Tax Services

EXPATRIATE TAX – The U.S. Department of the Treasury announced today that it has signed a bilateral agreement with the United Kingdom to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The bilateral agreement signed this week is based on the model published in July of this year and developed in consultation with France, Germany, Italy, Spain, and the United Kingdom and marks an important step in establishing a common approach to combating tax evasion based on the automatic exchange of information. For free consultation contact us today.

ABA Tax Accounting

Amare Berhie, International Tax Advisor

amare@abataxaccounting.com

612-282-3200 Toll free 866-936-0430

http://www.abataxaccounting.com

Tax Strategies for Business Owners - Home Office Deduction

ABA Tax Accounting | Small Business Accounting

The Home Office Deduction  – Under the IRS rules, a taxpayer is allowed to deduct expenses related to business use of a home, but only if the space is used "exclusively" on a "regular basis". To qualify for a home office deduction you must meet one of the following requirements: 

1. Exclusive and regular use as your principal place of business
2. A place for meeting with clients or customers in the ordinary course of business
3. A place for the taxpayer to perform administrative or management activities associated with the business, provided there is no other fixed location from which the taxpayer conducts a substantial amount of such administrative or management activities

A separate structure not attached to your dwelling unit that is used regularly and exclusively for your trade or profession also qualifies as a home office under the IRS definition.

The exclusive-use test is satisfied if a specific portion of the taxpayer's home is used solely for business purposes or inventory storage. The regular-basis test is satisfied if the space is used on a continuing basis for business purposes. Incidental business use does not qualify.

In determining the principal place of business, the IRS considers two factors: Does the taxpayer spend more business-related time in the home office than anywhere else? Are the most significant revenue-generating activities performed in the home office? Both of these factors must be considered when determining the principal place of business. If you have any questions, don't hesitate to contact us for no obligation free consultation!

ABA Tax Accounting

Amare Berhie, Tax Advisor

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

2012 Offshore Voluntary Disclosure Program

ABA Tax Accounting | International Tax Services

The IRS began an open-ended offshore voluntary disclosure program (OVDP) in January 2012 on the heels of strong interest in the 2011 and 2009 programs. The IRS may end the 2012 program at any time in the future. The IRS is offering people with undisclosed income from offshore accounts another opportunity to get current with their tax returns. The 2012 OVDP has a higher penalty rate than the previous program but offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk detection by the IRS and possible criminal prosecution.

Whether you need to structure an international transaction, reorganize your business, transfer family property or defer tax on the sale of assets, ABA Tax Accounting provides a wide array of services that cover every aspect of your business and personal finances.

For a Free Consultation call or email:

ABA Tax Accounting

Amare Berhie, Senior Tax Advisor

amare@abataxaccounting.com

612-282-3200 Toll free 866-936-0430

http://www.abataxaccounting.com

Pay less tax! What's New with Self-employment tax for 2012?

ABA Tax Accounting | Small Business Accounting

Small Business Accounting – The maximum net self-employment earnings subject to the social security part of the self-employment tax is $110,100 for 2012. For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

ABA Tax Accounting

Amare Berhie, Tax Advisor

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Income Tax, Payroll or Sales Tax Audit

ABA Tax Accounting | IRS Audit

If you've received an audit notice from the IRS, please contact us today to for Free Consultation! 

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

Now is the time for 2013 tax planning

ABA Tax Accounting | Tax Services

With the current income, estate and gift, and capital gains tax rates scheduled to expire and new taxes under the health care reform legislation set to take effect in 2013, high income taxpayers may see marginal tax rate increases of up to 189% percent, depending on the type of income. Yes, we are available to help. For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

Direct 612-282-3200

Toll free 866-936-0430

http://www.youtube.com/watch?v=yWvYfSr40Fw

http://www.abataxaccounting.com

How outsourcing tax functions can keep you compliant and focused on your core business | Smart Business

How outsourcing tax functions can keep you compliant and focused on your core business | Smart Business

U.S. Based Strategic Outsourcing Solutions for CPA and Law firms

ABA Tax Accounting provides low cost 100% U.S. based outsourcing solutions for Tax & Accounting Professionals, CPA & law firms and other businesses from bookkeeping to tax return preparation services. For more info or to explore possibilities domestic outsourcing please contact us today.

ABA Tax Accounting

Amare Berhie, Managing Member

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

http://www.abataxaccounting.com

It's not too late to file your 2011 tax return

ABA Tax Accounting | Tax Services

Income tax Services - Believe it or not, your kids don’t always have to separate you from your money. Sometimes they can actually help you keep some. If you haven’t filed your 2011 tax return yet, you have five good reasons to file today. 

Adoption Credit

You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. For tax year 2011, the adoption credit, at up to $13,360 per child, is the largest refundable tax credit available to individual taxpayers.

Child Tax Credit

You may be able to take this credit for each of your children under age 17. The Child Tax Credit may be worth as much as $1,000 per qualifying child depending on your income. If you can't claim the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. 

Child and Dependent Care Credit

You may be able to claim the Child and Dependent Care Credit if you pay someone to care for your children, age 13 or younger, so you can work or look for work.

Earned Income Tax Credit

The EITC is a tax benefit for people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax owed and may also give a refund. To qualify, you must meet certain requirements and file a tax return — even if you don’t owe any tax or aren’t required to file, you must file to claim the credit.

Education Credit

Education tax credits can help offset the costs of higher education by letting people claim qualifying education-related expenses. The American Opportunity Tax Credit and the Lifetime Learning Credit can be subtracted in full from federal income tax, not just deducted from taxable income. A portion of the American Opportunity Tax Credit is refundable if no other outstanding debt exists.

For information about these credits and much, contact us today to for Free Consultation! 

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

Put more money in your pocket now and prevent tax bills later

ABA Tax Accounting | Tax Planning

Tax Planning - Check your withholding: It's not too late to adjust your 2012 tax withholding to avoid big tax refunds or tax bills when you file your tax return next year. You should act soon to adjust your tax withholding to bring the taxes you pay closer to what you actually owe. In some cases, this will put more money in your paycheck. Each year, millions of American workers have far more taxes withheld from their pay than is required, resulting in large refunds. They must wait for their tax return and refund to process before they can access their money. If they’ve tied major financial decisions to the receipt of their refund, they may face stress. This is especially true if they’re depending on their refund to arrive by a certain date.

Others wind up owing money on tax day. They may experience stress from having to add an unanticipated federal tax bill into their budget.

Here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return.

Employees

·         New Job. When you start a new job, your employer will ask you to complete Form W-4, Employee's Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete Form W-4 accurately. 

·         Life Event. You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, and purchasing a home. Keep your Form W-4 upto-date. 

You can submit a new Form W–4 anytime you wish to change the number of your withholding allowances. However, if your life event results in the need to decrease your withholding allowances or changes your marital status from married to single; you must give your employer a new Form W-4 within 10 days of that life event.

Self-Employed

·         Form 1040-ES. If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time.

 

Need a little help to determine how much to withhold? Contact us today to get a Free Consultation!  

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

International Tax Strategy

ABA Tax Accounting | International Tax

International Tax Strategy -The Internal Revenue Service has issued new procedures to help nonresident U.S. taxpayers, including dual Canadian citizens, comply with U.S. tax laws even if they have previously undeclared foreign bank accounts. For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, International Tax Advisor   

amare@abataxaccounting.com

Direct 612-282-3200

Toll free 866-936-0430

www.abataxaccounting.com

QuickBooks for Nonprofit

ABA Tax Accounting | QuickBooks Nonprofit Edition

QuickBooks Accounting - QuickBooks Nonprofit Edition is an all-in-one solution recommended to help nonprofits easily show accountability to the Board of Directors. QuickBooks Nonprofit Edition is recommended if your work involves charity, religious, human service, arts, education, or other tax-exempt groups.

Key Advantages:

• Nonprofit Edition organizes your financial information the way your Board of Directors, donors, and the IRS want to see it.
• Automatically track your organization's finances with the Nonprofit Chart of Accounts as you enter donations, fund programs, and pay bills. Plus, create a budget automatically.
• Finish basic accounting tasks faster. Get direct access to bills, bank accounts, pledges, donations, vendors, and reports from the new simplified Home Page.
• Streamline donation processing and fundraising. Turn pledge forms into thank you letters and receipts with just a few clicks. See contact information, pledge status and contribution history for any donor at a glance in the new Customer Center.
• Generate any of the 8 nonprofit-specific reports with one click.
• Start fast and get help when you need it, with in-product Help focused on nonprofit-specific issues, built-in tutorials and FREE QuickBooks callback support for 30 days following registration.

For no obligation free consultation contact us today!

ABA Tax Accounting

Authorized QuickBooks Affiliate

612-282-3200 Toll Free (866) 936-0430

amare@abataxaccounting.com

http://www.youtube.com/watch?v=yWvYfSr40Fw

QuickBooks Accounting Services

Like to get out of a tax debt caused by misdeeds committed by your spouse?

ABA Tax Accounting | Tax Problems

Innocent Spouse Relief - Did you know that you can get out of the tax debt due to the misdeeds or fraud committed by your spouse? Innocent Spouse Relief was designed to alleviate unjust situations where one spouse was clearly the victim of fraud perpetrated by their spouse or ex-spouse.

If you qualify for Innocent Spouse Relief, you may not owe any tax. Please contact us for Free Consultation to see if you qualify for Innocent Spouse Relief.

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Increased Control Over Business Outcomes

ABA Tax Accounting | Business Process Outsourcing | St. Paul, MN Accounting Firm

Affordable 100% U.S. Based Outsourcing Solutions - Outsourcing gives companies the ability to manage and organize business results in a variety of critical areas, including increasing reliability, improving cost variability and allowing effective planning and implementation of ideas. For more info or to explore possibilities please contact us today.

ABA Tax Accounting

Amare Berhie, Managing Member

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

How to set up accounts for contractors that will be given 1099s.

QuickBooks Accounting - The first thing you must do is tell QuickBooks that you will be issuing 1099s. Click on Edit (from the menu bar), then Preferences. Scroll down until you find the picture that says "Tax: 1099" and click on it. On the Company Preferences tab, answer yes to the question about the issuance of 1099 forms, and then follow the rest of the instructions on this screen.

Next, you'll need to identify those vendors who are eligible to receive a 1099. Click on Vendors, then Vendor List. Double-click on the first vendor in the list, then the "Additional Info" tab. In the lower left hand corner, put a check mark in the box that says “vendor eligible for 1099” and enters their tax ID number they have provided. Repeat this process for any vendors that need to receive a 1099.

Finally, to run the 1099's and related information, click on Reports, then Vendors, then any of the 1099 reports. Verify the data, correct if necessary, and print your 1099's all within QuickBooks.

It's important to review this topic with your accountant to ensure you are collecting the proper information and preparing the 1099 forms correctly for your business. For no obligation free consultation contact us today!

ABA Tax Accounting

Authorized QuickBooks Affiliate

612-282-3200 Toll Free (866) 936-0430

amare@abataxaccounting.com

http://www.youtube.com/watch?v=yWvYfSr40Fw

QuickBooks Accounting Services