Carol McAtee's Blog

Carol McAtee & Associates, CPAS

                                              Traditional  IRA vs Roth IRA

Are you confused about your choices for deferring taxable income? Is it better to defer now or contribute to a post-tax IRA which then lets you grow your retirement money tax free?

Many factors can contribute to this decision including your age, taxable income bracket or other retirement options.

There are many software tools available to help you with these choices. You can get help from your financial advisor or there are many online software tools such as the Vanguard calculator which determines your net benefit after taxes.

What is a Roth IRA?

A Roth IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An account must be designated as a Roth IRA when opened.

What is a SIMPLE IRA?

A savings incentive match plan for employees (SIMPLE) plan is a salary reduction between you and your employer that allows you to choose to reduce your pay by a certain percentage each pay period, and have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. All contributions under a SIMPLE IRA plan must be made to a SIMPLE IRA, not to any other type of IRA. The SIMPLE IRA can be an individual retirement account. If your employer maintains a SIMPLE IRA plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution.

What is an IRA?

An IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An IRA is referred to as a Traditional IRA if it is not a Roth IRA or a SIMPLE IRA. Traditional IRAs include SEP IRAs.

Roth IRA tax advantages and rules compared to a Traditional IRA:

•  Contributions to a Roth IRA are not deductible. Active participation in an employerplan is irrelevant. Contributions to a Traditional IRA may be fully or partially deductible subject to whether you are covered by an employer retirement plan.

• If certain requirements are satisfied for your Roth IRA, qualified distributions are taxfree. Amounts in your Traditional IRA (including any earnings or gains) are taxed upon distribution.

• Can withdraw Roth IRA contributions any time for any reason without owing taxes or penalties. Early distributions from a Traditional IRA (before you are age 59½) may be subject to a 10% additional tax if no exceptions apply.

• Contributions can be made to a Roth IRA after the participant reaches age 70½. The required minimum distribution (RMD) rules do not apply. Distributions are not required until death of the participant. However, contributions are not allowed past age 70½ to a Traditional IRA and required minimum distributions begin after age 70½.

• Contributions are not allowed to a Roth IRA when modified adjusted gross income(MAGI) is above certain limits. There is no limit on how much you can earn and still contribute to a Traditional IRA, however there may be a limitation on the amount deductible above certain income thresholds.

• You cannot set up a SEP IRA nor a SIMPLE IRA as a Roth IRA.

Contact us for help in assessing your tax situation before making your investment choices. There are significant penalties for excess or ineligible IRA contributions.

Rollover of IRA funds:

There has been a change in the rules from the IRS regarding the withdrawal of funds from your Traditional IRA. The regulations state that any funds withdrawn from your IRA account are subject to income tax (and the 10% penalty if withdrawn before age 59 ½). There are several exceptions to the penalty if the funds are withdrawn for hardship, your first home, etc. However, you are still subject to ordinary income tax. If the funds are redeposited (or rolled over) within 60 days then there is no tax consequence and it is treated as if nothing happened. The regulations were originally interpreted to mean one rollover per IRA account. So, if you had several IRA accounts you could rollover the money from each account effectively having tax-free and interest-free use of the money.

However, all of that changed last year with a tax court case that now defines the  regulations to read one rollover per taxpayer. If you have subsequent rollovers from other accounts those are treated as a withdrawal and excess contribution to your IRA which is not only subject to the 10% penalty (if under age 59 ½ ) but an additional 6% excise tax.

So what does this mean? You have IRA accounts in Bank of America, Wells Fargo and Chase which are self-directed. Funds are withdrawn from Bank of America, used for 59 days and redeposited. You then withdraw funds from the Wells Fargo IRA account which are used for 59 day and redeposited. And so it goes. Prior to this court case this activity did not generate any additional tax scrutiny. However now – any withdrawals after the first withdrawal are not eligible for the rollover provisions and will be subject to ordinary income tax and any applicable penalties.

This is not a surprise we want to discover at tax time. Contact me if you have had multiple withdrawals from your IRA’s to determine the tax consequences.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAS

                           Identity Theft and your Taxes

Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. It presents challenges to individuals, businesses, organizations and government agencies, including the IRS.

Learning that you are a victim of identity theft can be a stressful event and you may not be aware that someone has stolen your identity. In many cases, the IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.

The IRS combats tax-related identity theft with a strategy of prevention, detection, and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.

Here’s what you should know about identity theft:

1. Protect your Records. Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.

2. Don’t Fall for Scams. The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.

3. Report ID Theft to Law Enforcement. If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.

4. Complete an IRS Form 14039 Identity Theft Affidavit. Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by filing on paper.

5. Understand IRS Notices. Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.

6. IP PINs. If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.

7. Data Breaches. If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft. Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.

8. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

9. Combating ID Theft. Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years. During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft. Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before.

10. Service Options. Information about tax-related identity theft is available online. The IRS has a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

All of us at McAtee & Associates, CPAS, want to take this opportunity to thank you for following our postings and we hope you find them helpful in many ways throughout the year.

                                                                                              Happy Thanksgiving to You All

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAS

continuing with yesterday’s blog post regarding the Affordable Care Act . . .

    What Individuals Need to Know About the Affordable Care Act

Individual Shared Responsibility Provision

The Affordable Care Act includes the individual shared responsibility provision that requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.

Who is subject to this provision?

All U.S. citizens living in the United States, including children, senior citizens, permanent residents and all foreign nationals are subject to the individual shared responsibility provision.

Children are subject to the individual shared responsibility provision.

• Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year. Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

Senior citizens are subject to the individual shared responsibility provision.

• Both Medicare Part A and Medicare Part C (also known as Medicare Advantage) qualify as minimum essential coverage.

All permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes are subject to the individual shared responsibility provision.

• Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
• Individuals who are not U.S. citizens or nationals and are not lawfully present in the United States are exempt from the individual shared responsibility provision. For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present and therefore, is eligible for this exemption even if he or she has a social security number. Claim coverage exemptions on Form 8965, Health Coverage Exemptions.
• U.S. citizens living abroad are subject to the individual shared responsibility provision.
• However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country or countries for an entire taxable year are treated as having minimum essential coverage for that year.
• All bona fide residents of the United States territories are treated by law as having minimum essential coverage.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAS

        What Employers Need to Know About the Affordable Care Act

The healthcare law contains tax provisions that affect employers. The size and structure of a workforce–small or large–helps determine which parts of the law apply to which employers. Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates during the year.

The number of employees an employer has during the current year determines whether it is an applicable large employer for the following year. Applicable large employers (ALEs) are generally those with 50 or more full-time employees or full-time equivalent employees. Under the employer shared responsibility provision, ALEs are required to offer their full-time employees and dependents affordable coverage that provides minimum value. Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.

Employers with Fewer than 50 Employees

SHOP Marketplace Eligibility

Employers with fewer than 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.

Information Reporting–Self-Insured Employers

All employers, regardless of size, that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.

The first information reporting returns are due to be filed in 2016 for 2015.

Credits

Employers may be eligible for the small business health care tax credit if they:

1. cover at least 50 percent of employees’ premium costs
2. have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000
3. purchase their coverage through the Small Business Health Options Program.

Employers with fewer than 50 full-time employees or full-time equivalent employees are not subject to the employer shared responsibility provisions.

Employers with 50 or More Employees

SHOP Marketplace Eligibility

Employers with exactly 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.

Information Reporting

All employers including applicable large employers that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.

Applicable large employers must file an annual return–and provide a statement to each full-time employee–reporting whether they offered health insurance, and if so, what insurance they offered their employees.

The first information reporting returns are due to be filed and furnished in 2016 for 2015.

Penalties

In general, an applicable large employer will be subject to a penalty if the employer does not offer affordable coverage that provides “minimum” value to its full-time employees and their dependents, and one or more full-time employees gets a premium tax credit.

Various forms of transition relief are available for 2015, including for applicable large employers with fewer than 100 full-time employees, including full-time equivalent employees. For additional details, please call the office.

How the Health Care Law Affects Aggregated Companies

The Affordable Care Act applies an approach to common ownership that also applies for other tax and employee benefit purposes. This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer.

These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.

If the combined employee total meets the threshold, then each separate company is an applicable large employer. Each company–even those that do not individually meet the threshold–is subject to the employer shared responsibility provisions.

These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company.

Please come back for tomorrow’s blog for information on the individual shared responsibility provision of the Affordable Care Act.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAS

Continuing with the theme of Starting a Business. . .

                                          Five Things You Must Know

Whether home-based or not, starting a new business is an exciting, but busy time with so much to be done and so little time in which to do it.

And, if you expect to have employees, there are a variety of federal and state forms and applications that will need to be completed to get your business up and running. That’s where a tax professional can help.

Employer Identification Number (EIN)
Securing an Employer Identification Number (also known as a Federal Tax Identification Number) is the first thing that needs to be done, since many other forms require it. EINs are issued by the IRS to employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates, government agencies, certain individuals, and other business entities for tax filing and reporting purposes.

The fastest way to apply for an EIN is online through the IRS website or by telephone. Applying by fax and mail generally takes one to two weeks. Please note that as of May 21, 2012 you can only apply for one EIN per day. The previous limit was 5.

State Withholding, Unemployment, and Sales Tax
Once you have your EIN, you need to fill out forms to establish an account with the State for payroll tax withholding, Unemployment Insurance Registration, and sales tax collections (if applicable).

Payroll Record Keeping
Payroll reporting and record keeping can be very time-consuming and costly, especially if it isn’t handled correctly. Also, keep in mind, that almost all employers are required to transmit federal payroll tax deposits electronically. Personnel files should be kept for each employee and include an employee’s employment application as well as the following:

Form W-4 is completed by the employee and used to calculate their federal income tax withholding. This form also includes necessary information such as address and social security number.

Form I-9 must be completed by you, the employer, to verify that employees are legally permitted to work in the U.S.

New Hire Reporting is required.  State and federal law (409.2576 F.S. and 42 U.S.C. 653A) require all employers to report newly hired and re-hired employees to a state directory within 20-days of their start date.  Visit the State of Florida Department of Revenue site for filing requirements, https://newhire.state.fl.us/SitePages/home.aspx

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                              Cash Flow: The Pulse of your Business

Yesterday’s blog ended with a short discussion on cash flow.  We want to share more important information on this topic as you plan for the success of your business.

Cash Flow is the lifeblood of any small business. Some business experts even say that a healthy cash flow is more important than your business’s ability to deliver its goods and services! While that might seem counter-intuitive, consider this: if you fail to satisfy a customer and lose that customer’s business, you can always work harder to please the next customer. If you fail to have enough cash to pay your suppliers, creditors, or employees, then you’re out of business!

What is Cash Flow?

Cash flow, simply defined, is the movement of money in and out of your business; these movements are called inflow and outflow. Inflows for your business primarily come from the sale of goods or services to your customers but keep in mind that inflow only occurs when you make a cash sale or collect on receivables. It is the cash that counts! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

Outflows for your business are generally the result of paying expenses. Examples of cash outflows include paying employee wages, purchasing inventory or raw materials, purchasing fixed assets, operating costs, paying back loans, and paying taxes.

Note: An accountant is the best person to help you learn how your cash flow statement works. A tax professional can prepare your cash flow statement and explain the numbers. If you need help please contact the office.

Cash Flow versus Profit

While they might seem similar, profit, and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner. It is concerned with the movement of money in and out of a business. But more important, it is concerned with the times at which the movement of the money takes place.

In theory, even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business.

Example: If your retail business bought a $1,000 item and turned around to sell it for $2,000, then you have made a $1,000 profit. But what if the buyer of the item is slow to pay his or her bill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits you earned on the sale. Furthermore, this cash flow gap may cause you to miss other profit opportunities, damage your credit rating, and force you to take out loans and create debt. If this mistake is repeated enough times, you may go bankrupt.

Analyzing your Cash Flow

The sooner you learn how to manage your cash flow, the better your chances for survival. Furthermore, you will be able to protect your company’s short-term reputation as well as position it for long-term success.

The first step toward taking control of your company’s cash flow is to analyze the components that affect the timing of your cash inflows and outflows. A thorough analysis of these components will reveal problem areas that lead to cash flow gaps in your business. Narrowing, or even closing, these gaps is the key to cash flow management.

Some of the more important components to examine are:

• Accounts receivable. Accounts receivable represent sales that have not yet been collected in the form of cash. An accounts receivable is created when you sell something to a customer in return for his or her promise to pay at a later date. The longer it takes for your customers to pay on their accounts, the more negative the effect on your cash flow.
• Credit terms. Credit terms are the time limits you set for your customers’ promise to pay for their purchases. Credit terms affect the timing of your cash inflows. A simple way to improve cash flow is to get customers to pay their bills more quickly.
• Credit policy. A credit policy is the blueprint you use when deciding to extend credit to a customer. The correct credit policy – neither too strict nor too generous – is crucial for a healthy cash flow.
• Inventory. Inventory describes the extra merchandise or supplies your business keeps on hand to meet the demands of customers. An excessive amount of inventory hurts your cash flow by using up money that could be used for other cash outflows. Too many business owners buy inventory based on hopes and dreams instead of what they can realistically sell. Keep your inventory as low as possible.
• Accounts payable and cash flow. Accounts payable are amounts you owe to your suppliers that are payable at some point in the near future – “near” meaning 30 to 90 days. Without payables and trade credit, you’d have to pay for all goods and services at the time you purchase them. For optimum cash flow management, examine your payables schedule.

Some cash flow gaps are created intentionally. For example, a business may purchase extra inventory to take advantage of quantity discounts, accelerate cash outflows to take advantage of significant trade discounts, or spend extra cash to expand its line of business.

For other businesses, cash flow gaps are unavoidable. Take, for example, a company that experiences seasonal fluctuations in its line of business. This business may normally have cash flow gaps during its slow season and then later fill the gaps with cash surpluses from the peak part of its season. Cash flow gaps are often filled by external financing sources. Revolving lines of credit, bank loans, and trade credit are just a few of the external financing options available that you may want to discuss with us.

Monitoring and managing your cash flow is important for the vitality of your business. The first signs of financial woe appear in your cash flow statement, giving you time to recognize a forthcoming problem and plan a strategy to deal with it. Furthermore, with periodic cash flow analysis, you can head off those unpleasant financial glitches by recognizing which aspects of your business have the potential to cause cash flow gaps.

Make sure your business has adequate funds to cover day-to-day expenses.

If you need help analyzing and managing your cash flow more effectively help is just a phone call away.

If you have any questions about these topics or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAS

                      The Home-Based Business: Basics to Consider

More than 52 percent of businesses today are home-based. Every day people are striking out and achieving economic and creative independence by turning their skills into dollars. Garages, basements, and attics are being transformed into the corporate headquarters of the newest entrepreneurs–home-based business people.

And, with technological advances in smartphones, tablets, and iPads as well as a rising demand for “service-oriented” businesses, the opportunities seem to be endless.

Is a Home-Based Business Right for You?

Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take the time to learn as much about the market for any product or service as you can. Before you invest any time, effort, or money take a few moments to answer the following questions:

• Can you describe in detail the business you plan on establishing?
• What will be your product or service?
• Is there a demand for your product or service?
• Can you identify the target market for your product or service?
• Do you have the talent and expertise needed to compete successfully?

Before you dive head first into a home-based business, it’s essential that you know why you are doing it and how you will do it. To succeed, your business must be based on something greater than a desire to be your own boss, and involves an honest assessment of your own personality, an understanding of what’s involved, and a lot of hard work. You have to be willing to plan ahead and make improvements and adjustments along the way.

While there are no “best” or “right” reasons for starting a home-based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

• Are you a self-starter?
• Can you stick to business if you’re working at home?
• Do you have the necessary self-discipline to maintain schedules?
• Can you deal with the isolation of working from home?

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment. If at all possible, you should set up a separate office in your home. You must consider whether your home has space for a business and whether you can successfully run the business from your home.

Compliance with Laws and Regulations

A home-based business is subject to many of the same laws and regulations affecting other businesses and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.

Zoning

Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.

Restrictions on Certain Goods

Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.

Registration and Accounting Requirements

You may need the following:

• Work certificate or a license from the state (your business’s name may also need to be registered with the state)
• Sales tax number
• Separate business telephone
• Separate business bank account

If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.

Planning Techniques

Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Estimating Start-Up Costs

To estimate your start-up costs include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

In addition, business experts say you should not expect a profit for the first eight to ten months, so be sure to give yourself enough of a cushion if you need it.

Projecting Operating Expenses

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

Projecting Income

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points, and cash-flow statements. Use your marketing research to estimate initial sales volume.

Determining Cash Flow

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

If a home-based business is in your future, then a tax professional can help.

Don’t hesitate to call our office if you need assistance setting up your business or making sure you have the proper documentation in place to satisfy the IRS.

Come back tomorrow for a second blog with more detailed cash flow information.  along with additional information on things you need to know if you expect to have employees.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates

                    Eight Facts to Know if You Receive an IRS Letter

The IRS sends millions of letters and notices to taxpayers for a variety of reasons. Many of these letters and notices can be easily dealt with without having to call or visit an IRS office. Here are eight things you should know about if you receive a notice or letter from the IRS.

1. Don’t panic. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return. Most of the time, you can take care of a notice simply by responding to it.

2. Each letter and notice offer specific instructions on what action you need to take. Typically, an IRS notice is about a specific issue, such as changes to your account, regarding your federal tax return or tax account. It may ask you for more information. It could also explain that you owe tax and that you need to pay the amount that is due.

3. If you receive a correction notice, you should review the correspondence and compare it with the information on your tax return. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

4. Each notice has specific instructions, so read it carefully because it will tell you what you need to do.

5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment. If you do not agree with the correction the IRS made, a tax professional can help you to prepare a written explanation to send to the IRS of why you disagree and make sure it includes any information and documents the IRS should consider that support your case. You should hear from the IRS within 30 days regarding your correspondence.

6. Most correspondence can be handled without calling or visiting an IRS office. In order for your accountant to handle any issues that arise more quickly, please have a copy of your tax return, as well as any correspondence from the IRS available when you call.

7. Always keep copies of any notices you receive with your other tax records.

8. Be alert for tax scams. The IRS sends letters and notices by mail. The IRS does not contact people by email or social media to ask for personal or financial information.

If you have received a letter or notice from the IRS and have questions or concerns don’t hesitate to call.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates

. . . . continued from last week’s post,

NEVER TOO EARLY TO START THINKING ABOUT FILING THE NEXT TAX RETURN

                            Seven Tips to Determine if Your Gift is Taxable

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are seven tax tips about gifts and the gift tax.

1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are not taxable gifts:

• Gifts that do not exceed the annual exclusion for the calendar year
• Tuition or medical expenses you paid directly to a medical or educational institution for someone
• Gifts to your spouse (for federal tax purposes, the term “spouse” includes individuals of the same sex who are lawfully married)
• Gifts to a political organization for its use
• Gifts to charities

2. Annual Exclusion. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year. For 2015, the annual exclusion is $14,000 (same as 2014).

3. No Tax on Recipient. Generally, the person who receives your gift will not have to pay a federal gift tax. That person also does not pay income tax on the value of the gift received.

4. Gifts Not Deductible. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

5. Forgiven and Certain Loans. The gift tax may also apply when you forgive a debt or make a loan that is interest-free or below the market interest rate.

6. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.

7. Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:

• You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.
• You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
• You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
• You gave your spouse an interest in property that will terminate due to a future event.

Questions about the gift tax? Don’t hesitate to call.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAs

. . . . .continued from last week’s post

Never too Early to Start Thinking About Filing the Next Tax Return

                                          Health Care Issues for 2015 and Beyond

In March of 2010 Congress passed health care legislation which has become known as the “Affordable Care Act” or ACA. For purposes of filing your 2015 tax returns and beyond you may be eligible for a new refundable credit called the “Premium Assistance Credit” (PAC). You are eligible if you have obtained your insurance coverage through the government’s “market place” or American Health Benefits Exchange.
Each state was required to establish an exchange no later than January 1, 2014. For those states that did not do so, there is a Federal Exchange through which insurance can be obtained. The credit is available if the insurance you obtained meets the requirements of “minimal essential coverage” as provided in the legislation. About 8 million individuals have acquired insurance coverage through the Exchanges and about 6.7 million are eligible for the premium assistance credit and you may be one of them. The credit is based on your modified adjusted gross income which will be determined when we prepare your 2015 federal income tax return in 2016.

If you are eligible for the credit, then you may have already benefited by it in the form of an “advanced” PAC where the government has paid a portion of your monthly premiums directly to the insurance provider. In order to determine whether you will receive additional credit or have to give some of the credit back because your income actually increased over what was reported when you applied for the coverage, there will be a reconciliation calculation at the time we prepare your return.

Even if you are not eligible for the PAC, everyone is required to have health insurance coverage and there could be a penalty imposed for not having coverage. Even if you have coverage you will need to report that fact on your Form 1040 and are required to do extra reporting on your return as a result of the legislation. Your employer and/or insurance provider will be sending you a required government report which you will need to provide to us in order to properly prepare your return. You will receive an IRS Form 1095-A if you receive your insurance coverage though the government marketplace. If you have private insurance you will receive an IRS Form 1095-B from your insurance company. If your employer has a health insurance plan you will receive an IRS Form 1095-C from your employer which informs you of the health insurance offer and the coverage received if any.

      Important Health Insurance Marketplace Dates for 2016 Enrollment

•  November 1, 2015: Open Enrollment starts — first day you can enroll in a 2016
insurance plan through the Health Insurance Marketplace. Coverage can start as soon
as January 1, 2016.

*** FYI Plans and prices for 2016 will be available by late October. ***

• December 15, 2015: Last day to enroll in or change plans for new coverage to start
January 1, 2016.

• January 1, 2016: 2016 coverage starts for those who enroll or change plans by
December 15, 2015.

• January 15, 2016: Last day to enroll in or change plans for new coverage to start
February 1, 2016.

• January 31, 2016: 2016 Open Enrollment ends. Enrollments or changes between
January 16 and January 31 take effect March 1, 2016.

Coverage start dates

If you enroll before the 15th of any month, your coverage starts the first day of the next month. If you enroll after the 15th of the month, you’ll have to wait until the month after that for your coverage to start. So, for example, if you enroll on January 16, your coverage would start on March 1.

If you don’t enroll in a 2016 health insurance plan by January 31, 2016, you can’t enroll in a health insurance plan for 2016 unless you qualify for a Special Enrollment Period. For details on this and other health insurance coverage options, visit the government’s site at www.healthcare.gov.

If you don’t enroll in 2016, you’ll be fined 2.5% of your income or $695 per adult, whichever is higher. Again, for details visit the government’s site at www.healthcare.gov.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAs

. . . . . continued from our last week’s post,

Never too Early to Start Thinking About Filing the Next Tax Return

                                             Consider Making IRA Contributions

Contributions to an Individual Retirement Account (IRA) are a good way to save for your future. The maximum contribution for 2015 is $5,500. Anyone who has “earned income” such as wages, salary and self employment is eligible to make the IRA contribution. The taxpayer with a modified AGI below specified thresholds based on their filing status has the opportunity to deduct their contributions therefore paying less tax in the current year. Again the ability to deduct your IRA contribution is based on levels of income and whether or not you participate in an employer-sponsored retirement plan. For a married couple filing a joint return if your income is less than $98,000 then you can deduct $5,500 in full for both you and your spouse even if only one of you has earned income. Therefore with a minimum of $11,000 of total earned income you could deduct it in full. As your modified AGI increases up to $118,000 you begin to lose the ability to deduct the contribution. However, the excess amount can be contributed to a Roth IRA which is a nonductible contribution but the growth will never be included in your gross income when you take a future distribution.

If you are age 50 or older on the last day of the tax year then you can contribute an additional $1,000 for what is called the “catch up” contribution. This will increase your deduction to $6,500 and for a married couple filing a joint return the total amount would be $13,000.

For taxpayers whose filing status is single or head of household you are eligible for a $5,500 deductible IRA when your modified AGI is $61,000 or less. When you have an income in excess of $71,000 and participate in an employer-sponsored retirement plan, you can no longer make a deductible IRA. Between $61,000 and $71,000 the $5,500 is phased out but again you should contact me about the benefits of a Roth IRA contribution.

There is a special rule only for married couples who file a joint return where one spouse either does not have any earned income or has earned income but is not eligible to participate in an employer’s pension plan. If this is your situation then for 2015 you can have a $5,500 deductible IRA contribution when your joint modified AGI is $183,000 or less. The $5,500 maximum deductible contribution decreases as your income grows between $183,000 and $193,000. And again if you and/or your spouse are/is age 50 or older on the last day of the tax year then you can contribute an additional $1,000 for each qualifying spouse for the “catch up” contribution.

If you want total tax-free growth in an IRA then let’s discuss a contribution to a Roth IRA which is available to single taxpayers whose modified AGI is $116,000 or less with a phase-out up to $131,000. For married couples filing a joint return the threshold is between $183,000 and $193,000 of modified AGI.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.