Archive for September, 2013

It’s Show Time!!!

September 28, 2013

October 15If you filed an extension on April 15 to put off the filing of your 2012 Form 1040, just a little reminder.  The clock is ticking down to get your records together and prepare your tax return.  If you use a tax professional, do them a favor – don’t put it off until October 14.

But getting your tax records to your tax professional sooner rather than later is a great advantage for you.  This gives some time to actually go over the return and see if there is anything that can be done to reduce your tax bill or increase your refund.  The longer you put it off, the less time there is for strategy.

Actually you should be planning NOW for your 2013 tax return.  MyTaxBuddy.com has a subscriber that used our service to input all her 2012 tax records at one time.  She told us that it felt so good to have 2012 done that she decided to input all her 2013 records and is now staying current.  And she is enjoying the peace of mind in NOT having to think about being stressed out next year. We love happy subscribers.

If you dread the time when you have to battle your avalanche of receipts , do yourself a favor and start getting your tax records together now.  You can let go of the year-long dread that you carry around and, once you file your return, have the comfort of knowing that, when the IRS does call, your records are ready.    Wouldn’t that be a welcome change?

Similar Questions – Different Answers

September 21, 2013

Groucho SmartOn the surface, the questions “Can I deduct it?” and “Is it deductible?” seem very similar.  They are not.

“Can I deduct it?” means that a person has enough guts to put it on their tax return and risk the consequences if they are wrong.  It does not necessarily mean that there is any legal support to take the deduction.

“Is it deductible?” means the same as “Is there any legal justification for taking this deduction?”  A whole different question.

Many people get tax advice from “interesting” places – party talk, their stylist, realtor, mechanic, business associates, at church.  If you do get tax advice from those sources, be certain the person knows the actual tax law and have not just heard it somewhere then had the guts to deduct something on their own return.

Although a heart surgeon and a motorcycle mechanic both understand how systems work together to make a unit operate properly as a whole, I’m not letting my mechanic do heart surgery.

But I’m just funny that way.

An Expense By Any Other Name

September 11, 2013

RoseA tax deduction is a tax deduction is a tax deduction.

People ask me all the time “What should I call this expense or that?” If you can show that there is a business purpose, it doesn’t matter to the IRS what you call it.  What is important is what it means to you in managing your business.

If you purchase an inkjet cartridge to print off brochures, you could call it computer supplies, advertising, office supplies, printing or anything else that has a meaning for you.

I once had a client bring in her list of expenses and saw a category called ESP.  When I asked her what that was, she told me Error Some Place.  Since it took place in her business account, we took the deduction (of course we called it something else).  And at the same time don’t use a label that will call attention to the deduction either.

The important thing is to keep your records and receipts so that when the IRS asks, you can easily support your deductions.

Big Numbers Attract Attention

September 6, 2013

Rising incomeAccording to the IRS, there were approximately 23.4 million individual income tax returns that reported nonfarm sole proprietorship activity, a 1.8-percent increase from 2010. Profits reported on these returns rose to $282.6 billion in 2011, a 5.6-percent increase over 2010.

These numbers sound impressive until you break them down to the individual level.  If we divided the total amount of the profits by the total number of returns, we find that the average business Schedule C shows a profit of less than 12,000 and the average weekly increase in profits was $12.30.   Some businesses were more.  Some less.

Big numbers can draw attention.  Small ones are easy to ignore.  Think about this when you look at your business tax schedule.   What kinds of expenses are drawing the attention of the IRS for audit?  Are they the kind of expenses that could possibly be personal and disallowed on audit?  Hmmmm.

When preparing your taxes, go to the other side of the desk and ask yourself, “If I were an IRS Agent (perish the thought), what things on this return would I look at to audit?”   I’m not saying you should not take the deductions that you are entitled to take.  Far from it.  Judge Learned Hand once wrote “Any one may so arrange his affairs that his taxes shall be as low as possible;”  Good advice.

However, the Roman poet Horace reminds us that “he who is greedy is always in want”.

Good Records – Timeless Advice

September 3, 2013

Luca Pacioli Luca Pacioli*, the father of modern accounting,  wrote:

“If you are not a good bookkeeper in your business, you will go on groping like a blind man and may meet great losses.”

Not only that, but you are dead meat in front of an IRS Auditor.

You don’t need to be an accountant, bookkeeper or tax expert to have good documentation.  The best records system for you is the one you will actually use.

If you have been telling yourself, “One day I will start keeping better records” and then you put it off (yet again), we invite you to visit http://www.MyTaxBuddy.com for a simple and yet flexible system.

Good tax records can support your tax deductions which could gift you with hundreds or thousands in tax savings.

Make today the day you stop your worry and begin gaining deductions.

Listen to Father Luca.

*Luca Pacioli – a 15th century monk, Father of modern accounting and Leonardo DaVinci’s mathematics teacher.  The above quote is from In The Rules of Double-Entry Bookkeeping ( Particularis de Computis et scripturis).


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