Filing and paying taxes can be a confusing and daunting task for those who are self-employed. Unlike employees, who have taxes directly withheld from their paychecks, self-employed individuals are the ones responsible for filing and paying taxes on their income. Understanding the basics of tax obligations for the self-employed can make this process less overwhelming. In this blog post, we will discuss tax requirements for self-employed individuals, strategies for staying on top of taxes, and the benefits of hiring a certified public accountant (CPA).
Tax Requirements for the Self-Employed
All self-employed taxpayers are required to pay two different taxes. First, self-employed individuals are responsible for paying self-employment taxes. The self-employment tax rate stands at 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.
In addition to self-employment taxes, the self-employed are responsible for paying income taxes on their earnings. The amount of income taxes you owe will depend on your income level and deductions. Deductions can include business-related expenses such as office supplies, equipment, and travel.
How to Stay On Top of Taxes
Without proper planning, it’s easy for those who are self-employed to fall behind on their taxes. This can lead to serious consequences, ranging from fines to criminal penalties. Read our blog post, “Delinquent Tax Returns and the Consequences You Could Face,” for in-depth information about the repercussions of falling behind on tax payments.
The best way to stay current on your taxes is to make quarterly estimated tax payments throughout the year to the IRS. This is calculated based on your estimated profits for the quarter. Staying up-to-date with bookkeeping is extremely important in order to accurately calculate your estimated tax payments.
Benefits of Hiring a CPA
Even with the best intentions, self-employed individuals can still make mistakes when it comes to taxes. This is where hiring a certified public accountant (CPA) can be extremely beneficial. A CPA can help you stay current on your taxes through tax planning, help you navigate the complex tax laws that apply to the self-employed, and ensure that you are taking advantage of all the deductions and credits available to you.
If you are self-employed and in need of accounting services, contact Larry Bradford today. Larry is a seasoned professional, with over 35 years in practice as a CPA. His expertise and knowledge can help you stay on top of your taxes while also minimizing any potential risks and penalties. Call 512-402-0049 or send an email to firstname.lastname@example.org to schedule an appointment.
Are CPA Fees Tax Deductible?
As a taxpayer, you may often find yourself wondering which expenses are tax deductible. This is especially true when it comes to professional fees, such as those you might pay to a certified public accountant (CPA). So, are CPA fees tax deductible?
Tax Deductions Differ for Businesses and Individuals
Whether CPA fees can be deducted from taxes depends on what the CPA’s services were used for. In general, CPA fees can be deducted for businesses but not for personal use. According to the IRS, businesses can typically deduct any ordinary and necessary expenses that are related to the operation of the business. This includes fees paid to accountants and other financial professionals for services such as preparing and filing taxes, providing financial advice, and performing audits.
It's important to note that in order for CPA fees to be tax deductible for businesses, they must be reasonable in amount. This means that the fees must be comparable to what you would expect to pay for similar services in your area. If the fees seem excessive, the IRS may disallow the deduction.
CPA fees are not tax deductible if they are used for personal purposes. For example, if you pay a CPA to prepare your personal tax return or to provide personal financial advice, those fees would not be tax deductible. Additionally, if you pay a CPA for consulting services that are not directly related to your business, those fees may also not be tax deductible.
Consult With a CPA
In conclusion, CPA fees can be tax deductible for businesses, but not for personal use. However, there are some limitations and exceptions to consider, and the rules for claiming these deductions can be complex, so it's always a good idea to consult with a tax professional for specific guidance on your situation.
If you're in need of professional accounting services, look no further than Larry Bradford, CPA. With over 35 years of experience in the field, Mr. Bradford has the expertise and knowledge needed to help you navigate the complexities of tax deductions and ensure that you're claiming all the deductions you're entitled to. To schedule an appointment, call our office at 512-402-0049 or send an email to email@example.com.
A common misconception people have is that if they haven’t filed taxes in over 10 years, they can file for bankruptcy and not be held responsible for their unpaid taxes. That is not the case. Filing for bankruptcy does not guarantee that your taxes will be discharged, and it can complicate the process of getting back on a positive financial track.
Can Past Due Taxes Ever Be Discharged in Bankruptcy?
The answer to this question is, "It depends." If you have not filed a tax return, your past due taxes cannot be discharged in bankruptcy. Only those taxes that have been filed and are older than 3 years can be dischargeable in bankruptcy, unless the tax return was filed late.
Additionally, you are still required to keep up with your current taxes, even after filing bankruptcy. According to the IRS, “Failure to file returns and/or pay current taxes during your bankruptcy may result in your case being dismissed.” So, if you don’t file your taxes on time, you will still be held responsible for those taxes, even if you declare bankruptcy.
Don’t Get Behind on Your Taxes
Avoid getting yourself into a situation where your taxes are overdue. There are many unintended consequences of delinquent tax returns, and filing for bankruptcy won’t get you out of paying what you owe. The best thing you can do to protect yourself is to stay caught up on your taxes.
Larry Bradford, CPA, can help you get caught up on past due taxes and create a plan to ensure you don’t get behind on your payments in the future. Call our office today at 512-402-0049 or send an email to firstname.lastname@example.org to set up an initial appointment.
The end of the year is a busy time for many people, and as a result, tax planning often gets pushed to the side. Don’t let this happen to you, as year-end planning can save you a significant amount of money. Tax planning is the process of creating a financial plan to maximize your tax return and ensure you pay the lowest taxes possible. The process includes calculating expected quarterly tax payments, creating a plan to avoid penalties, and utilizing any available deductions. Taking the time to create a year-end tax plan benefits taxpayers in the long run.
When Is the Best Time to Begin Tax Preparation?
The best time to complete tax planning is right before the end of the calendar year, ideally in November or December. Taxpayers need to know how much income they have made throughout the year up until the end of October to be able to calculate their expected taxes. Creating a plan to pay taxes throughout the year will ensure that taxes are paid on time, the payments are manageable, and no penalties accumulate. The deadlines for making estimated tax payments throughout the year are January 15th, April 15th, June 15th, and September 15th.
Consequences of Not Creating a Tax Plan
All taxpayers are required to submit their tax return by April 15th, with all taxes due to be paid on that date. If quarterly taxes have not been paid, the amount that is owed on April 15th can accumulate to an overwhelming amount. Individuals and businesses who have not completed prior tax planning frequently choose to extend their tax return. It is important to understand that extending the tax return deadline does not extend the payment due date. If the April 15th tax return deadline is missed, the IRS will charge a penalty of 5% for every month that taxes go unpaid. As a result, the longer you put off paying your taxes, the more money you will accumulate in penalties and fees.
Why You Should Utilize a CPA
Taxes can be complicated. With a Certified Public Accountant, you have an expert to help you calculate your estimated tax liability for the year and figure out which deductions you are eligible for. With proper tax planning, a CPA can make sure the taxes are paid in full by January 15th so penalties and interest don’t accumulate. Depending on what your tax liability is, just having a meeting with a CPA can save you thousands of dollars. Larry Bradford, CPA has over 35 years of experience as a Certified Public Accountant and can help you come up with a plan to pay the lowest taxes possible and avoid paying penalties and interest. To schedule an appointment, send an email to email@example.com or call 512-402-0049.
Did you know that filing late taxes can result in the complete loss of your tax refund? The IRS takes filing taxes very seriously, and if you don't remember to file on time, you should be aware of the consequences you could face.
Filing Late Taxes Puts Refunds at Risk
A tax refund is a refund of the taxes that an individual or corporation has overpaid to the government. A tax refund can be obtained only after filing a tax return. The IRS has a set of guidelines for when you can file your taxes and still receive a refund. If you fail to submit a return for two years past the tax submission due date, you will not be entitled to any refund whatsoever.
Many individuals believe that if they are entitled to a refund, they aren’t required to file their taxes. This is a common misconception that can result in significant repercussions. Not only will filing late result in the total loss of a refund, if an individual does not file for more than three years, they can face federal criminal prosecution or jail time.
Preventing the Loss of Your Tax Refund
The only way to avoid forfeiting your tax refund is by staying caught up on tax filings. You should always file your taxes, even if they are late. Larry Bradford, CPA can help you stay current with your tax filings to protect your refund and avoid potential consequences from the IRS. To set up an appointment, send an email to firstname.lastname@example.org or give our office a call at 512-402-0049.
Be prepared. Tax audits are coming for the middle class. The United States government recently announced a plan to provide the IRS with $80 billion in additional funds and allow them to hire 87,000 new IRS employees under the Inflation Reduction Act. This upsurge in funding and hiring will result in an aggressive increase in auditing tax returns. The IRS is going to be much more thorough when it comes to collecting taxes and examining tax returns. This also means that there will be higher taxes for anyone the IRS believes has not been paying their fair share.
Who Is at the Highest Risk for a Tax Audit?
Tax audits are a surprisingly common event. Last year, the IRS conducted over 659,000 audits. With the incoming influx of IRS employees, the number of audits will drastically increase. The IRS is not just looking for those with the highest incomes; they are also going after lower and middle income earners. Statistics show that low-income households are five times as likely to be audited by the IRS compared to everyone else. Individuals who have completed their own tax return and those who own a business are also at an extremely high risk of getting audited.
How to Protect Yourself From a Tax Audit
If you want to avoid an audit, it's best to hire a CPA to help you prepare your taxes. With their knowledge of handling tax preparation, a CPA will make sure everything is in order so that you won't be audited. In general, if a CPA completes your tax return, you will not be audited.
Don't get caught unprepared. Larry Bradford, CPA has over thirty-five years of experience as a Certified Public Accountant and will utilize his expertise to help you avoid a tax audit. Give our office a call at 512-402-0049 or send an email to email@example.com to set up an appointment.