ABA Tax Accounting: November 2019

Friday, November 8, 2019

Good recordkeeping is just good business

Experienced Tax Accountant –Recordkeeping is an important part of running a small business. In fact, keeping good records helps business owners make sure their business stays successful.

Here are some things small business owners should remember about recordkeeping:

Good records will help business owners:

Monitor the progress of their business
Prepare financial statements
Identify income sources
Keep track of expenses

Prepare tax returns and support items reported on tax returns
Small business owners may choose any recordkeeping system that fits their business. They should choose one that clearly shows income and expenses. Except in a few cases, the law does not require special kinds of records.
How long an owner should keep a document depends on several factors. These factors include the action, expense and event recorded in the document. The IRS generally suggests taxpayers keep records for three years.
A good recordkeeping system includes a summary of all business transactions. Businesses usually record these transactions in books called journals and ledgers, which business owners can buy at an office supply store or keep them electronically. All requirements that apply to hard copy books and records also apply to electronic business records.
The responsibility to validate information on tax returns is known as the burden of proof. Small business owners must be able to prove expenses to deduct them.
Business owners should keep all records of employment taxes for at least four years.
Businesses that keep paper records should keep them in a secure location, preferably under lock and key, such as a desk drawer or a safe.
Businesses that keep records electronically on a computer should always have an electronic back-up, in case the hard drive crashes.

Good recordkeeping is just good business. Questions? Give us a call. We're happy to help!

Amare Berhie, Senior Accountant

CEO, ABA Tax Accounting

CFO Services http://youtu.be/EYJdQtbPZAI

http://abataxaccounting.com/salestaxproblem.php

amare@abataxaccounting.com

(651) 300-4777

Thursday, November 7, 2019

Get Ready for Taxes: Important things to know about tax credits

Experienced Tax Accountant – With the tax filing season quickly approaching, the Internal Revenue Service recommends taxpayers take time now to determine if they are eligible for important tax credits.

Earned Income Tax Credit - The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for working people with low to moderate incomes who meet certain eligibility requirements. Because it’s a refundable credit, those who qualify and claim EITC pay less federal tax, pay no tax or may even get a tax refund. EITC can mean a credit of up to $6,557 for working families with three or more qualifying children. Workers without a qualifying child may be eligible for a credit up to $529. To get the credit, people must have earned income and file a federal tax return — even if they don’t owe any tax or aren’t otherwise required to file. Taxpayers can use the EITC Assistant to find out if they are eligible for EITC, determine if their child or children meet the tests for a qualifying child and estimate the amount of their credit.

Child Tax Credit - Taxpayers can claim the Child Tax Credit if they have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,400 of that amount can be refundable for each qualifying child. So, like the EITC, the Child Tax Credit can give a taxpayer a refund even if they owe no tax. The qualifying child must have a valid Social Security number issued before the due date of the tax return, including extensions. For tax year 2019, this means April 15, 2020, or if a taxpayer gets a tax-filing extension, Oct. 15, 2020. The amount of the Child Tax Credit begins to reduce or phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly.

Credit for Other Dependents - This credit is available to taxpayers with dependents for whom they cannot claim the Child Tax Credit. These include dependent children who are age 17 or older at the end of 2019 or parents or other qualifying individuals supported by the taxpayer.

Education Credits - Two credits can help taxpayers paying higher education costs for themselves, a spouse or dependent. The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are claimed on Form 8863, Education Credits. The AOTC is partly refundable. To get either credit, the taxpayer or student usually must receive Form 1098-T, Tuition Statement, from the school attended. Some exceptions apply. See the instructions to Form 8863 for details.

Questions? Give us a call. We're happy to help!