Monthly Archives: May 2014

   Tax Information for Students Who Take a Summer Job

Many students take a job in the summer after school lets out. If it’s your first job it gives you a chance to learn about the working world. That includes taxes we pay to support the place where we live, our state and our nation. Here are eight things that students who take a summer job should know about taxes:

1. Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.

2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.

3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.

4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.

5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.

6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.

7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.

8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.

Questions? We’re here to help all throughout the year to support our clients’ individual tax needs. Contact us today for an appointment!

   Why Many Restaurants Fail in the First Year of Operation

Opening a restaurant can seem like a failsafe venture. After all, everyone has to eat. The reality, however, is that eateries are notoriously risky enterprises, with most studies suggesting that somewhere around 60% of them will fold within the first year. At Gurian CPA Firm, we are experienced accountants with expertise working for local restaurant owners. We want you to understand the main reasons why new restaurants so often close their doors so you can take proactive steps to beat the odds and be successful.

1. Wrong Location

Poor location is one of the biggest reasons why new restaurants don’t make it. Some entrepreneurs don’t do enough market research to know whether the demand for their planned cuisine is high enough in the area the restaurant will open. They take a stab in the dark, hoping that the mere presence of the menu will make people buy. Sometimes location is a problem not because demand is lacking, but rather because the restaurant simply isn’t physically visible enough, obscured by other buildings, too far from main roads, or in an area that doesn’t get enough foot traffic.

2. Unprepared or ineffective management/leadership

Restaurants have a very diverse staff, including janitorial workers, various levels of chefs, wait personnel, security, and finance officers. Many entrepreneurs don’t know how to bring all these employees together as an effective team, while others fail to continue to adapt and change the restaurant over time with real vision. It’s also very common for restaurant leaders to be unprepared for the time commitment involved and for them to struggle to balance work and family life. They give up on the restaurant in favor of nurturing their personal relationships.

3. Questionable customer service

Sometimes restaurants fail because their employees fail to bring the amount of energy, courtesy, and consistency that clients expect. They do not respond well to customer complaints or lack the focus it takes to deliver the food in safe way and in a reasonable amount of time. Many eateries also have serious disconnects between different levels of the staff, making it impossible for everyone to spot and resolve service and quality problems in a joint way. Being critical of new hires and making sure they are a good fit for your restaurant’s vision makes a big difference, but even the most motivated and skilled of teams can fall short if you don’t give them enough resources or don’t bother to recognize and reward their efforts.

4. Financial mishaps.

Restaurant owners sometimes drastically underestimate operating expenses for restaurants, including basic food costs. Many times, this means that they don’t take out enough business financing for the restaurant from their lenders. Failing to analyze and plan ahead for cash flow problems is another issue. Other money issues include not keeping a close eye on spending, addressing taxes and licensing fees improperly, keeping too many staff, paying workers too-high salaries, and purchasing equipment or furniture that’s not vital or worthwhile to the restaurant’s atmosphere or operation. A good CPA is critical to keeping these errors in check and will take a proactive accounting approach rather than a reactionary one.

Starting a restaurant is tricky. Poor location, bad management/leadership, poor customer service and monetary issues all can put the business at risk. Taking the time to really investigate the market and get the right staff on board are solid means to address these common weak points. Our Dallas CPA Firm is here to help you make sound financial decisions to ensure your new venture’s success.

   Myths About IRS Audits

There’s plenty of misinformation circling around out there about IRS audits. It’s time to clear the air and get the facts.

A Different Kind of One Percent-er

Research and hard facts tell us everything we need to know – less than 1% of the tax-paying population whose annual earned income falls between $15,000 and $100,000 experience an IRS audit each year. The odds are that slim.

When you combine the small chance of actually being audited with being accurate and honest on your tax return, your anxiety about being audited should begin to diminish.

In fact, IRS Commissioner John Koskinen said the IRS will audit 100,000 fewer individuals this year as part of congressionally mandated cuts to the tax agency’s budget. Congress in January cut the IRS’s budget by $526 million, or 4 percent, to $11.9 billion for the current fiscal year.  In 2013, total IRS audits fell by 5 percent from 2012 to reach the lowest level since 2008.

Myth #1 – The Life-Shattering Audit

One of the most circulated myths about an IRS audit is that an audit will destroy your life. In most cases, however, an IRS audit can be taken care of by answering a few questions about your finances.

Answering a few questions to clear things up is miles away from destroying your life. Correspondence from the IRS should be taken seriously, however an audit letter doesn’t have to send you running for the hills.

Plus, not all correspondence received from the IRS is an audit.  The best thing to do when you receive a letter from the IRS that you don’t understand is to contact your Dallas CPA.  We can review the letter and let you know what type of action, if any, is necessary.  We can even respond to the IRS on your behalf.

Myth #2 – Mistakes Equal an Audit

Although it’s not a good thing to make a mistake on your tax return, it surprises some people to learn that an incorrect tax return doesn’t automatically generate an audit. You can revise your 2013 return before the IRS catches the omission in its matching program and bills you for additional tax, penalty and interest – or to take advantage of a deduction or credit that was originally missed.

While April 15 is the statutory deadline for filing your return, you have three years from the due date of the return, including extensions, – or two years from the date you paid the tax, whichever is later – to “amend” the return and get an additional refund.

Do not file an amended return until the original return has made its way through the system. If there was a refund due on the original return wait until you have received and cashed the refund check.

The IRS uses the Discriminate Function (DIF) system to compare your return, including your deductions, income, credits, and dependents, to the average amount of the same categories for taxpayers who have similar jobs, incomes, and household situations.

Myth #3 – All Letters Received are Audits

Many taxpayers think every letter received from the IRS is an audit, but actually not all correspondence received from the IRS is an audit.  The IRS has three separate forms of communication and fact-checking when it comes to your tax return.

IRS adjustment letter – probably the simplest and least intrusive communication from the government regarding your taxes. Basically, the IRS will send you a letter notifying you that there was an adjustment due to a miscalculation or small typographical error.

Once you review the errors and agree with the adjustments needed, all you have to do is follow the instructions contained within the letter and you’re done.

A correspondence audit – basically an audit through the mail. You’ll receive a letter from the IRS usually asking for clarification about certain parts of your tax return. Once you supply the correct official documents requested by the IRS, usually documents confirming deductions and expenses, the correspondence audit will be satisfied.

An examination audit – Usually the product of an irregularity found by the DIF system. Some audits can be handled over the phone or through the mail, however you may meet with an IRS agent to finalize the procedure.

Just remember, an audit isn’t the end of the world – simply make sure you’re accurate, honest, and keep your receipts and records. However, working with a Dallas CPA to handle your audit can be invaluable. If you’ve received letters from the IRS, contact us today to schedule a consultation.

   Tax Relief for Small Businesses in 2014

It’s not too early for small business owners to begin planning to take advantage of various tax-saving opportunities when they file their 2014 federal income tax returns. In addition, substantial relief from past payroll tax obligations is available to eligible employers who agree to reclassify their workers as employees in the future. Here are further details.

Credit Helps Small Employers Provide Health Care Coverage

Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the small business health care tax credit. First available in 2010, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014. Targeted to small employers that primarily employ low-and moderate-income workers, the maximum credit, in tax-years 2010 through 2013, is 35 percent of premiums paid by small businesses and 25 percent of premiums paid by tax-exempt organizations.

In 2014, the maximum credit rate rises to 50 percent for small businesses and 35 percent for tax-exempt organizations. In addition, the small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace (or through a direct enrollment process if available).

Many Employers Can Qualify for Substantial Payroll Tax Relief

Many businesses can now resolve past worker classification issues at a low cost by voluntarily reclassifying their workers. Better yet, they don’t have to wait for an IRS audit to do so.

By prospectively reclassifying workers, making a minimal payment and meeting a few other requirements, eligible businesses can achieve greater certainty for themselves, their workers and the government. More than 1,500 employers have applied to participate in the IRS Voluntary Classification Settlement Program (VCSP) since it was launched in September 2011.

The VCSP is available to many businesses, tax-exempt organizations and government entities that currently treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees in the future. To be eligible, an employer must:

  • Consistently have treated the workers in the past as nonemployees,
  • Have filed all required Forms 1099 for the workers for the previous three years
  • Not currently be under audit for employment taxes by the IRS
  • Not currently be under audit by the Department of Labor or a state agency on the classification of these workers. If either IRS or Labor previously audited the employer on the classification of the workers, the employer must have complied with the results of the audit and not currently be contesting the classification in court.

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. It’s that simple. Moreover, employers will not be audited on payroll taxes related to these workers for prior years.

Questions? Contact us today for a consultation.

   3 Ways You Can Use Technology to Simplify Your Payroll

To save money and time, it’s critical that you simplify your company’s payroll processes and modern technological advances let you do this with minimal hassle. If you haven’t started using powerful accounting software or cloud services to help you streamline your payroll processes, our Dallas CPA is here to help you with three ways you can speed up what you need to do with modern payroll technology:

1. Online portals and cloud storage

The main problem with offline payroll software programs is that they tie you and your employees down to the business location, requiring you to be on-site to access or enter information. With online portal and cloud storage, you can input, organize, share or print off payroll data from virtually anywhere. This makes it a snap for you to stay on top of payroll tasks while traveling, or to quickly get information for shareholders, investors, or board members. You and your workers can easily access payroll-related documents, such as timesheets, without having to worry about the office hours of the company. This is a huge benefit for workers who don’t work the traditional 9 a.m. to 5:00 p.m. or who telecommute – these employees are becoming much more common, as companies strive to accommodate new market demands. The fact that everything is in the cloud also reduces clutter and can make it much easier to locate the data you need. You drastically can reduce costs and errors by going digital, all while improving efficiency and speed. Gurian CPA Firm provides cloud-based accounting and payroll services to help you stay organized and mobile.

2. Custom payroll reports

It’s not always necessary for you to see all of your payroll information at once. With a good technology solution, you can create a report just for the task you have at hand. For instance, if you’re working on your taxes, you might want a customized report for deductions. Similarly, if you’re looking to see if each department has adequate staff, or what percentage of the budget each department is really taking, you can make a labor distribution report. Good programs and providers can automate the creation of dozens of different payroll documents for you. For detailed report generation manage and information organization, Gurian CPA Firm offers QuickBooks set-up and implementation assistance for Dallas businesses.

3. Electronic payments

Issuing payment with hard copy checks is costly for your business, racking up paper, ink and postage expenses. Modern payroll technology allows you to automatically submit payment requests and transfer funds, eliminating these costs and reducing the amount of time it takes for your workers to get the money they need and deserve. Using direct deposit also reduces the need to track uncashed checks or spend time with reconciliation. You can use payroll technology to submit electronic tax-related payments, too, ensuring your company stays compliant and doesn’t get hit with unnecessary penalties.

Payroll traditionally has been a time-consuming area for businesses, but with good technology, it doesn’t have to be problematic anymore. With the ability to go online, customize what you see and handle payments without paper, Gurian CPA Firm is ready to help you reduce what payroll costs your business and remove many of the headaches compensating your employees can cause.