Get Your Money in Order for the New Year

This year is quickly coming to a close. Get ahead of the game and get your money in order for the new year. Don’t know where to begin? No worries! Here are some helpful tips.

Get Organized

Organize Concept Metal Letterpress Word in Drawer

You can file taxes after the new year, so now’s a good time to get all your ducks in a row. In January and early February, you’ll be receiving important documents in the mail including your W2, mortgage interest statement (1098), or student loan interest statement (1098-E.)Most companies, by law, have until January 31 to mail statements, so keep an eye out.

Designate a single location where you’ll keep these documents so they are easily accessible when you’re ready to file taxes. You can use a folder, drawer, box or other container. Put a large “taxes” label on it and use the container for tax-related documents only, not other mail or bills. But you may want to keepit near where you sort mail, so you can immediately put the documents in their home.

Then start gathering other items you’ll need for filing taxes, including charitable contributionand expense receipts. Qualified expenses depend on your situation, but could include expenses related to childcare, medical, job (mileage, supplies, relocation) and education. Donohoo Accounting Services can help you navigate the complicated tax structure. In addition to income tax preparation, we handle payroll tax prep, tax levies and liens, back taxes, end tax penalties, estate tax return preparationand more.

Make Year-End Charitable Contributions

Many charities do a final fundraising push at the end of the year, so you’ll probably receive solicitations asking for support. If you want to help non-profit organizations while also possibly reducing your taxable income, make your donations by December 31. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the yearwill count in that year – even if the credit card bill isn’t paid until later. You’ll want to make sure the charity is eligible. Many times, the charity will note its “501c3” status, which is IRS speak for tax-exempt. You can also use the IRS Tax Exempt Organization Search.

Take an Assessment of Where You Stand Financially

Magnifying glass showing assessment word on grey background

Now’s a good time to take a hard look at your income, debt, expenses, retirement funds, college and emergency savings. Are you on track to meet financial goals? If yes – great! If no – why are you falling short? To properly move forward into the next year, you need a realistic picture of where you are now. Put pen to paper and write down all the numbers. It helps to see everything in black and white.

Make a Financial New Year’s Resolution (Or Better Yet – Create APlan You’ll Stick With All Year)

Once you know where you stand currently, you can create a plan for the upcoming year. Perhaps you want an emergency savings fund. You never know when the furnace is going to go out, someone in your family has a medical issue or there’s a company layoff. Experts say you should have enough emergency savings to cover three to sixth months of expenses. Maybe you have all your financial bases covered but want to take an exotic vacation? Set the goal, create a plan and start saving for that overseas beach trip. Although it’s a busy holiday season, set aside time to get your money in order for the new year. Once you’re ready to file taxes, turn to Donohoo Accounting Services, locally owned and operated by Cincinnati native, Duane Donohoo.

What Qualifies As A Donation On Your Taxes

The IRS defines a charitable contribution as “a donation or gift to, or for the use of, a qualified organization.” You must abide by certain rules to claim charitable donations on your taxes legitimately. Do you know the tips for handling donations on your taxes?

 

You must abide by certain rules to claim charitable donations on your taxes legitimately.
You must abide by certain rules to claim charitable donations on your taxes legitimately.

 

Charitable Contributions what Are They?

Donations include property such as vehicles, household items, clothing, land and cash contributions.  You can only deduct the fair market value (FMV) of any property you donate.

How Do You Determine The Fair Market Value?

Fair market value includes donations of noncash property of items like clothes, household items, land and cars additionally stocks may qualify. The FMV comes down to the price the item you are donating and how much it would sell for on the open market.

Do Your Expenses Qualify as a Charitable Tax Deductions?

You can claim a tax deduction for expenses you acquire:

  • To cover a live-in student who is sponsored by a qualified organization.
  • Out of pocket while serving as a volunteer for a qualified organization.

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.
For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

Which Organizations Qualify to Receive Charitable Contributions?

The government allows the following types of establishments qualified to take tax-deductible donations:

  • Religious (such as churches, mosques, synagogues and temples)
  • Literary
  • Educational (such as nonprofit schools)
  • Charitable (such as American Red Cross, Boys and Girls Club of America, Goodwill, Salvation Army and United Way)
  • Those working to prevent cruelty to children or animals
  • Scientific
  • Federal, state and local governments (for contributions intended for public purposes)

These Charitable Contributions Are Not Tax Deductible?

As a general rule, donations to individuals, political organizations and candidates for public office are not tax deductible. The same goes for gifts of money or property given to:

  • Homeowners associations
  • Sports clubs
  • Chambers of commerce
  • Civic leagues
  • Social clubs
  • Labor unions
  • Civic leagues

How Can I Be Sure I’m Donating to a Tax-Exempt Organization?

The easiest way to confirm that you are donating to a tax-exempt organization is to ask the organization directly for proof of their tax-exempt status. You also can search for charities using the Exempt Organizations Select Check tool or confirm tax-exempt status by calling the IRS at (877) 829-5500.

Cash Donations Receipts To Keep

If you donate by check, cash or some other monetary gift, you must provide written communication such as a bank record, payroll deduction records or written acknowledgement from the tax-exempt organization with your tax return. This written proof must include:

  • The name of the organization.
  • The date you made the contribution.
  • The amount of your contribution.

 

The amount of your contribution.
The amount of your contribution.

 

If you still have questions about what is a taxable donation or what constitutes a taxable donation please contact Donohoo Accounting at 513 528 3982.  We specialize in helping small businesses with all you taxable needs.

Are Your Business Receipts Audit Ready?

Do you often ignore or say too quickly “No” when asked whether you want a receipt?  Not small-business owners. Knowledgeable business owners just know how to keep receipts. If they don’t, their tax return could be at risk. The question is: Are your business receipts audit ready?

  1. TAKE NOTICE

The first mindset to get into (especially if you’re trying to prepare your receipts for taxes) is creating a tiny note of the business purpose on the receipt. Whether or not you inscribe directly or put aside time at the top of the day, week, or once a large amount of buying has been completed (say at the end of a business trip for example), you’ll need the purchases to be recent enough in your mind that you will remember to label them properly.

Be sure that you create the note because this one thing which will permit you to classify the expense later. Merely writing “lunch” might not be enough to jog your memory if you’re audited a year or two later.

  1. CLASSIFY

Now that you’ve taken note of all these numbers, the next step is following and organizing it, so you can put the receipts into specific classifications. This will make tax time a breeze and permit you to refer back to any receipts without having to look through tons of files.

Here are some samples of common classifications for tax-deductible purchases:

  • Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance
Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

  • Travel: there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

 there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses
there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

  • Entertainment and Meals: These items may be examined thoroughly by the IRS so be sure these items get listed correctly such as from a business trip.

 

  • Legal and Professional Fees: attorney’s fees, accountant’s fees, other professional consultants’ fees directly related to your business.

 

  • Indemnification: may include business liability insurance premiums, property insurance premiums, disability premiums, workers’ compensation premiums for employees.

 

  • Professional Dues and Licenses: may include franchise fees, professional license fees, business licenses.

 

  • In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.
In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

  1. BE THOROUGH

A crucial step is organizing your receipts and being thorough with your method. Attempt to keep expenses separated by paying with a “business only” designated credit card or bank account when possible and avoid paying in hard cash.

Over time you may find better and newer apps to help manage your receipts but remember to keep using the same classifying process.  By keeping your method, you will be consistent in your receipts collecting and keeping all the overall information easily acceptable to you and your accountant

Duane Donohoo being self-employed himself understands the challenges of owning a small business. He understands the burden the IRS can be to a small business or individual. It was this experience that relates to his self-employment clients and individual clients. Call today (513-528-3982) for a free consultation to find out how Donohoo Accounting Services, Inc. can serve you.

The Five Most Important Pieces of Advice from Your Accountant

Follow These Five Accounting Tips That Could Save Your Business Time, Money, and Aggravation

Financial advice persists everywhere we turn: On the Internet, the radio, TV, and in your email and snail mail boxes. But what is often overlooked is some basic accounting advice that not only could save you or your company from difficulties associated with being audited but also save you time, money, and aggravation in the long run. Whether your business already has an accountant or you’re looking to hire one, follow these five important pieces of accounting advice.

 

  1. Be (or Get) Organized

The simplest and perhaps most important advice an accountant can give you is to stay organized. You’ve heard that there are “pilers and filers” when it comes to being organized. That may be true, but whatever your method, know where your documents are when you need them or if they are called for by the IRS. The better organized your papers and electronic files are, the less likely you’ll have trouble in your financial matters whether they be tax-oriented or not.

 

The simplest and perhaps most important advice an accountant can give you is to stay organized.
The simplest and perhaps most important advice an accountant can give you is to stay organized.

 

  1. Keep Business Expenses Separate

An important part of being organized is to properly categorize your expenses as business or personal. Be sure to keep business expenses separate – don’t tell yourself it’s OK to blur the line or to “fudge” it. If or when you have an audit – internal or external – questions will assuredly arise about any questionable business expenses that may in fact be personal. Keeping business and personal expenses separate, too, will ensure that you don’t accidentally pay for a business expense out of your personal funds without reimbursement. Some accountants like to say, “If you want to reduce your business expenses, reduce your personal expenses.” That’s an indirect way of saying keep them separate.

 

An important part of being organized is to properly categorize your expenses as business or personal.
An important part of being organized is to properly categorize your expenses as business or personal.

 

  1. Document Business Expenses

While you’re keeping your business expenses separate from those that are personal, be sure to create – and maintain – a paper trail on your business expenses. Of course, many of those expense records may also be in electronic form, but you get the idea. The more documentation you keep on your business expenses, the better. Simply stated, for each expense, document and be able to answer these questions:

  • Who incurred the expense?
  • What was purchased?
  • Where was the purchase made?
  • When did the transaction take place?
  • Why was the item or service needed? and
  • How much did it cost?

 

  1. Do an Internal Audit

When your documents are in order, you’ve successfully separated your personal and business expenses, and you have your expenses documented, you’ll have little to worry about when you’re audited. And the best way to get ready for an IRS audit is to perform an internal audit. When your accountant conducts an internal audit, you may feel like your business is being turned inside out. It is, and that’s OK. Better to turn your business inside out and make corrections to your financial records on an internal audit than to have to answer to Uncle Sam in the form of a penalty.

 

  1. File and Pay Taxes

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time. Just at the federal level, there are at least five forms of tax that apply to businesses. They are: Income tax, estimated tax, self-employment tax, employment taxes (Social Security, Medicare, federal income tax withholding, and federal unemployment tax), and excise tax. These are in addition to any state and local taxes, which vary according to the location of your business. Financial penalties for failure to file, failure to pay, failure to pay estimated tax, and dishonored check/payment (“bounce”) have the potential to cause a significant financial setback to your business or even cause it to close. Having an excellent accountant on staff – or contracting with an accounting firm – to meet your tax filing and payment deadlines is even better than doing it yourself.

 

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.
Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.

 

Donohoo Accounting Services is a professional accounting services provider, dedicated to helping our clients overcome the challenges and burdens that small businesses face. To learn more about how Donohoo Accounting can help your business prosper, call us today at 513-528-3982 for a free consultation.