Tax Archives - GUJRAT INDIA

How to Start a Tax Accounting and CPA Firm

Having gained considerable experience developing five of my own accounting practices and spending the next two decades individually assisting over 2000 accountants develop their own practices, there are a few basic principles accountants can observe to provide themselves the greatest opportunity for success.

The best way for accountants to succeed in starting their own Accounting and Tax CPA practice is by providing themselves with the greatest opportunity for that success. This can be done by remembering that the basic principles for a successful practice are good clients together with the basic tools to service them. Many accountants seeking to develop their own practice position themselves with large amounts of unnecessary overhead undermining their opportunity for success. Unnecessary costs can be deferred until they become necessary. Obtain only necessary items to service the initial clients. It is important to keep the initial overhead as low as possible to create a positive cash flow quickly to finance the development of the practice.

When starting an Accounting and Tax CPA Firm, it is recommended that accountants start from their home. In today’s technological world, clients are very accepting to accountants working out of their homes. In some respect, it provides the clients with the perception that they are receiving a greater value. They feel if the accountant is incurring less overhead, perhaps part of the savings is being passed on to the clients. By saving the cost of rent and other office expenses, accountants will accelerate their positive cash flow, which may be used for financing the expansion of the practice without going into debt. Once the cash flow is sufficient to support an office, then the accountant can decide if expansion into an office is warranted. Accountants who do work from home may also find they enjoy it so much that they may choose to forgo moving to an outside office.

Another way accountants can maintain a low overhead is by avoiding unnecessary costly software. Numerous accountants procure very expensive unnecessary software to support clients they have yet to develop. There are extremely good software companies that provide an excellent product at a low to medium price range. Drake Tax Software is a very cost-efficient software program that has an excellent reputation. In the September 2011 edition of The Journal of Accountancy, the results of a software survey were published, and Drake Tax Software received an excellent score. Accountants who are starting their own Accounting & Tax CPA Firm are encouraged to pursue good software at affordable prices giving them the basic tools to service clients.

There are many other simple ways accountants starting their own Tax and Accounting Firm can reduce startup costs. Simply the name that accountants decide on for their firms will reduce their initial costs. If accountants would use their first name, middle initial, and last name followed by CPA and/or Certified public Accountant, they may avoid DBA registration costs, bank charges, and filing fees. In addition, active licensed Certified Public Accountants have legal rights to practice public accounting under their own names saving them costs associated with fictitious names. Many times, Certified Public Accountants can choose fictitious names, which would diminish potential clients’ perceptions of them, which in turn would impede a start-up business. For example, a licensed Certified Public Accountant doing business as “Bay City Tax Service” or “Accounting & Tax Service” loses credibility. Prospective clients may perceive this company as uncertified and unlicensed.

Accountants who are considering developing an Accounting/CPA practice and who are currently employed are encouraged not to terminate their employment in pursuit of starting their own Accounting & Tax CPA Firm. Instead, they should develop their practice concurrently while still employed. This can be a time-demanding decision when compared to terminating their employment and devoting full time to their practice; however, the sacrifice is well worth the reward. As the practice grows, accountants can grow with it and transition themselves full-time into their own practice without placing unnecessary financial pressure on themselves or on their families.

With the relief of financial pressure while operating the new practice concurrently with employment, there will be a substantial boost in income without incurring large expenses. Cash reserves will substantially increase as employment income is maintained, and new income will begin to flow in from the new practice as well. This increase in cash reserves will be of great assistance in financing a full-time transition, and this will make the move go more smoothly when the time comes

In making that move to a full-time practice, accountants will find it easiest to transition full-time into their own practice in the month of January. January is the beginning of tax season, and along with it comes the beginning of revenue from income tax preparation. The increase in revenue will come right at the time the accountants need it the very most. It is important that accountants position themselves to begin marketing at the start of tax season to aggressively develop individual tax clients taking full advantage of their first tax season. In addition, January encompasses year-end work for many businesses, such as payroll and financial reporting. This will also add additional revenue to the accountants’ practices in the month of their transition.

January is also the best month of the year to transition full-time into the practice because it may be the best month of the year for developing new businesses as clients. Most business owners resist changing accountants. It takes a very solid reason for a client to leave a predecessor accountant. Once a client makes the decision to change, usually he or she will not invoke the change until the end of the business year not desiring to have two accountants split a fiscal year. Accordingly, year-end is the most opportune time for approaching business owners, and it will make the transition into the full-time practice easier.

Finally, when starting an Accounting and Tax CPA Firm, it is important to avoid marketing services as a commodity or product. This often leads to very low response and low quality of clientele. It also can be extremely expensive. There are volumes of accountants who pursue very expensive marketing programs offered by various companies and who are lured by difficult-to-enforce guarantees. Many of these programs are commodity driven. The accounting industry is not commodity driven; it is driven by trust and loyalty. An accountant’s marketing campaign must be driven by truth, honesty, and professionalism, which will enable a client to be more comfortable knowing that he or she is hiring an accountant who can be trusted.

Accountant or CPAs who are currently employed and seeking to start their own Accounting and Tax CPA firms will find it beneficial to pursue the practice by following some very simple steps:

1) Avoid unnecessary costs and expenses.

2) Consider starting the accounting CPA Practice from home.

3) Develop the practice alongside current employment.

4) Avoid marketing the firm as a commodity or product.

Remember, opportunity starts with action. No action, no opportunity. Accountants who take action provide themselves with the opportunity to succeed. They should start their own CPA and Accounting Firms from home while employed. Their successful experience without jeopardizing their future will provide them the confidence and cash flow they need to enjoy the freedoms in ownership of an Accounting and Tax CPA Firm.

Why Is Applying For The Self-Employment Tax Deduction Worth It?

If you are running your own business or are planning to, you should know all you can about the self-employment tax deduction, which can save you a lot of money if you do. A lot of these advantages in the tax reduction are available only if you are self-employed and not if you are employed by anyone. All you have to do is your own personal Social Security number as your company’s tax identification number and then make sure you file under a Schedule C or Schedule C-EZ and you are all set to start benefiting from the deduction.

There is however a difference between Schedule C and Schedule C-EZ and the benefits they can provide you with in terms of taking advantage of the self-employment tax deduction. The EZ form should only be used by those who have a smaller amount of expenses and end the year with a substantial profit. A few other things in terms of taking advantage of the reduction using the EZ form, is that you should be a business without any employees, one that has no reason to claim a home office deduction and are not going to report any depreciation. If you qualify with these you should use the EZ form, otherwise you should use just the Schedule C in order to get the best you can out of the tax reduction. Basically with a Schedule C you can report a loss, otherwise you cannot.

Let’s look at what you can claim using the self-employment tax deduction. First you claim equipment expenditure under what is called Section 179. Under this section you claim any equipment purchased that year. There can be a limit to the amount that tends to change a lot, so please look at the Internal Revenue Service’s publication number 946 to help you in finding out the exact limit.

You can also claim travel under the tax reduction. This includes mileage and percentages of any meals and entertainment that are purchased. As long as you keep good records and your receipts you would do well claiming this. You must also remember to keep this within the limits of business related expenses.

You may also include health insurance, social security taxes and self-managed retirement benefits in your self-employment tax deduction. This means that you can include any premiums for yourself or family members as well as a certain amount of the payment you make on social security tax in any claims you may make in qualifying for the deduction. The only problem is that you the social security claim is only on the Form 1040 and not the Schedule C. As far as the self-managed retirement benefits as long as you open a Keogh or a Simplified Employee Pension and subtract any contribution you may make to these plans. This also can only be done on the Form 1040. But it is well worth the savings you can claim on a deduction.

One last thing you can claim under the self-employment tax deduction is in regards to a home office. Whether you use the office for storage of files and book keeping or if you don’t spend very much time there, you can still claim this as part of your self-employment tax reduction.

As you can see when it comes to claiming and receiving the benefits of being self-employed it is well worth it. As long as you keep careful and exact records you can take full advantage of the reduction.

Identity Theft and Your Tax ID Number

Truth to be told, a business even has its own particular Social Security number that can be stolen by an identity theft criminal, and make things hopeless for an entrepreneur.

Corporate identity fraud (or business data fraud) can close your business’ entryways and even returned if your business isn’t organized to shield you from that danger.

The Tempting Target

There are numerous reasons an identity theft criminal may focus on a business. A bigger organization may have a few Visas on a solitary record, and not try looking over the separated rundown of charges before they pay the bill. Indeed, even little organizations have a tendency to have liberal credit terms and not checked clearly by the bank.

A personality cheat additionally knows that it is so natural to get data about your business. For instance, most organizations show their business permit in the anteroom, now and again on the grounds that they are required by law to do as such.

Obviously, different organizations are avid to expand your organization credit since it implies more business for them. Actually, the procedure to get a credit extension with another organization might be excessively straightforward; at times all it takes is a solicitation on your organization’s letterhead (likewise simple to get,) that incorporates the business permit number and expense ID. To keep your information and other data in a safe hand, you can check LifeLock reviews.

No One’s Talking

Looking on the Internet (i.e. doing a Google hunt) will raise a few hits about business fraud, yet when you look through the connections that surface a large portion of them manage expressly securing yourself, the incidental state law, the Fair Credit Reporting Act (FCRA), FACTA and such. The examinations about how an organization can be straightforwardly influenced by corporate data fraud are not too many. Most organizations are not in any case mindful these sorts of things can happen… until it happens.

That is the point at which they discover that their protection, holding, permitting powers and other expert associations are of little assistance. Like Valley View, they can undoubtedly wind up attempting to stay above water.

The reason no one is talking is straightforward: no one can make sense of how to stop it. A decent arrangement of business fraud is conferred by people or associations that are outside of the United States’ purview. The issue moves from a budgetary field to the business world, and traverses to wind up a legitimate issue. In any case, once it goes global, legislative issues become possibly the most important factor too.

Tax Tips for Freelance Writers: How to Lower Your Bill – 5 Things You Probably Didn’t Know

April 15th, the deadline for filing taxes for Americans, is almost here. If you’re a freelance writer — especially if you do your own taxes like I do — it’s critical that you get all the deductions you can to lower your tax bill. Why? Because running an online business can be very low cost, which is one of the reasons many are so attracted to the profession. If you have a computer and an internet connection, you’re pretty much ready to go.

So, following are five things you probably didn’t know that can help you lower your tax bill — making the difference between owing (possibly a lot) and getting a smidgen of a refund.

1. PayPal Fees: Do you deduct these? Almost very time you receive a payment, PayPal deducts fees, which are mostly 2.9% + $.30 per transaction.

For international sales, the PayPal fee is 3.9%, plus a fixed fee based on currency received. FYI, PayPal’s fees can be less if you sell more.

Visit PayPal to learn more about their transaction fees, and don’t forget to add this column to your expenses sheet moving forward, OK?

2. Banking Fees: For example, let’s say you’re a travel writer and you go away and use an ATM that charges you fees for withdrawals. This is a legitimate, deductible expense — because you’re on assignment.

3. Recurring Fees: For example, I publish ebooks. So I use an ebook cover-making site to help me with the designs. The monthly fee for this site is $9, which comes out of my PayPal account every month. I may go for three or four months without using the site (because I also outsource some of my ebook covers), then two or three where I use it all the time.

My point? It’s easy to forget these expenses and if you have two, three or four accounts like this (eg, magazine subscriptions, software subscription sites, paid newsletter subscriptions, etc.), it can really add up to $400, $500 or more per year — that you could be deducting as legitimate expenses.

4. E-File: If you’re in danger of missing the deadline (which could cost you penalties and interest if you owe), consider e-filing your taxes. Why? Because returns filed in this manner tend to be processed faster.

5. Don’t File & Save Money! Did you know that if you are owed money my by the IRS (ie, are expecting a refund), that there’s no penalty for filling late? Well, it’s true! According to the CNN article, Owed a refund? There’s no penalty for filling late:

If you’re owed a refund and you don’t file your taxes by Tuesday, you won’t get hit with a penalty. This has always been the case, but many people don’t realize it. The IRS is chomping at the bit to get its tax revenue. It’s less concerned about doling out refunds to people who haven’t claimed them yet.

So if you have a deadline you’re trying to meet (where you make money), and don’t have time to file taxes (which costs you time), by all means — meet that deadline. If you’re owed money, the IRS is not going to penalize you if you file your taxes late (wish this applied to me!).

Happy filing, and if you’re going to file late and owe, here’s a great tax calculator for estimating what you should send in.

What To Do At Tax Time When You Sell Through Home Parties

Many people who sell products through home parties do it for the discount it gets them when they purchase their own goodies. Others are dead serious about becoming one of the company’s top sales reps. How you see yourself is important at tax time, because your business goals are what determines how you should treat that income, and any money spent making those sales, on your tax return.

If your goal is simply to buy products at a discount, help a friend out by hosting one or two parties, to give a party just because your friend needs to sign a new sales rep up this week, or to become involved only for the pleasure and social aspects of selling a particular product, you must report all sales rep income as miscellaneous income on your personal tax return. According to IRS rules, you are engaged in a hobby that produces occasional income.

When your goal is not just to make a few sales, but to build a long-term business, to sign up new hostesses so that you can build your sales force, and you put a realistic business plan in place to accomplish your goals, you can report your income on the small business Schedule C tax form. Because you are acting in a profit-minded manner, according to current tax code, your sales efforts are considered to be a business operation. A business owner can write off expenses that exceed business income.

The IRS has home party sales reps grouped with other part-time occupations normally carried on as a hobby. Because of that, those who are operating as a business are prone to tax audits. But, that’s never a problem when you keep good records. A hobby audit is generally tossed out once you produce a solid business plan, well-organized financial records, and documentation of changes implemented to increase your profits.

A sales rep using the Schedule C tax form can write off all normal business expenses; when you engage in a hobby you cannot deduct more expenses than the income your hobby produces. Both are required to report inventory costs according to IRS laws, deducting only the items sold, carrying unsold inventory expenses into the following year.

Operating in a profit-minded manner will not only increase your sales, it will allow you to grow your business with pre-tax dollars. A self-employed sales rep can take advantage of the same tax laws big business owners use to buy equipment, home office furnishings, computers for use in the business, to further their business education and much, much more.

Understanding what the IRS expects of the independent sales rep is an important part of operating a successful small business. And, you’ll pay less tax.

Understand Your Tax Code

If you are employed under PAYE then HMRC will provide you with a tax code which tells your employer how much tax to deduct from your income before paying you. A tax code is usually made up of several numbers and a letter, for example: 117L or K497. The tax code spreads your tax-free amount equally each month so that you get roughly the same take-home pay or pension every month. To work out your tax code your tax allowances are added up and the total amount of income you’ve not paid any tax on deducted. The amount you are left with is the total of tax-free income you are allowed in a tax year.

The code is usually made up of several numbers and a letter. In general this represents the amount (divided by ten) of income you can receive before you pay tax. Therefore if you are entitled to ٤,475 before paying tax then your tax code will be 647L. It follows that most codes are numbers although some are just letters, for example BR (Basic Rate) which tells the employer to deduct tax on all income at the basic rate, or NT (No Tax) usually for non-resident individuals who are not liable to UK tax on their earnings. If you are entitled to the basic Personal Allowance then L is added to the number. If you are entitled to a higher allowance due to age then P (65 to 74 ) or Y (over75 ) are added.

You will be allocated a K code if your deductions are more than your allowances. If you’re starting your first job your employer will give you a P46 to complete and your employer will work out the tax you owe. When HMRC deal with your P46 they will revise your tax code and the tax paid will be adjusted accordingly. BR means your pay from that employment will all be taxed at the basic rate, normally because you have a second job or pension. D0 signifies that all your income is taxed at the higher rate, again usually because you have another source of income.

If you earn more than £100,000, your tax code also allows for the income-related reduction to the Personal Allowance. If you earn more than £150,000 from your main source of income, tax is deducted at 50 per cent as appropriate. It may be that your tax may well need to be adjusted when your self assessment tax return is submitted so that gift aid or pension contributions are treated properly. Whatever your circumstance, if you are unsure whether or not you are on the right tax code, you should first contact your payroll department. If you have an accountant, they can check whether it is correct. Most of the time, codes are fairly accurate but it’s always worth checking to make sure.

These 4 Last-Minute, Year-End Tax Strategies Can Save You Money

FSI Tax Corp is alerting taxpayers to end-of-the-year actions they can take to reduce their 2006 tax bills. After the New Year, it will be too late to take advantage of many tax-saving opportunities, such as reducing 2006 income, exploring available tax credits and pursuing all legitimate 2006 write-offs.

1. Minimize your income

Because you are taxed on your yearly income, the simplest way to decrease your tax bill is to decrease your income. It may not sound like that’s a strategy that could save you money, but postponing income until 2007 can reduce your taxable income for 2006.

If you have clients, you can delay your invoices or push back due dates until after January 1, 2007. Unless a financial hardship requires immediate funds, wait a couple of weeks. It won’t count as income if you don’t receive it during this year, but you will still receive what you are owed. You will give your clients a needed break over the holidays and your patience will pay off in April. If you are an employee, see if your employer can delay your holiday bonus until after the New Year.

2. Tax Credits

People tend to focus on deductions more than tax credits when it comes to planning for tax season. However, there are many tax credits available that, if you qualify, can save you a lot on your tax bill. Below is a list of tax credits; detailed explanations of each credit can be found on the IRS website.

• Retirement Savings Credit: Available to low to moderate income level taxpayers who contribute to a retirement savings account. This credit can save up to $1,000 or $2,000 if filing jointly.

• Credit for Elderly or Disabled: Taxpayers earning a limited income may qualify for this credit if over 65 years old or permanently disabled.

• Adoption Tax Credit: If you adopted a child this year, you may be eligible for this credit which repays adoption expenses up to $10,639 in 2006 or about $5,000 for each adopted child.

• Child Tax Credit: Low-income parents with children under 17 years old may qualify.

• Child and Dependent Care Credit: This is for parents who have children under 13 and place their children in daycare or with babysitters so the parents can work.

• HOPE Credit: Students may qualify for a tax credit of up to $1,500 for tuition and fees assistance.

• Lifetime Learning Credit: A credit of up to $1,000 for which students (including part-time students) and students not in school due to pursuing a post-secondary degree or for a business purpose may qualify.

The Energy Tax Incentives Act was signed into law in August, and while critics of the law argue it is aimed at providing benefits to big energy companies, it also includes tax credits for consumers. Under the new law, taxpayers can take a credit for:

• Energy efficient home improvements, like insulations of windows and doors.

• Solar energy equipment for residences.

• Hybrid, fuel cell and other energy-saving or alternative energy using vehicles.

• Other energy equipment purchases, such as electric heat pumps and water boilers.

3. Deductions

In addition to delaying income and taking advantage of tax credits, loading up on deductible expenses in 2006 can also reduce your taxable income. Taxpayers need to be careful to only include legitimate deductions because every deduction will be scrutinized by the IRS. Here are a few ideas:

• Prepay your state and local taxes. If you withheld state and local taxes this year, and you plan to itemize, it would be advantageous to prepay the taxes now and the payment will count as a federal deduction.

• Increase your 401(k) contribution to cut your taxes and increase your retirement savings. Some 401(k) plans permit “catch-up” contributions in lieu of yearly contribution maximums. According to SmartMoney.com, a taxpayer in the 28% tax bracket can save $280 by contributing an extra $1,000. You are getting paid to save!

• Include additional deductible mortgage interest by paying January’s mortgage bill now.

• Don’t postpone paying tuition and university fees. Pay for next year’s education now and save. In some states, contributions to your 529 college savings plan can also be deducted.

4. Donate to Charities

The holiday season is a “season of giving” and a great time to donate to your favorite charity. Not only does it feel good to give to the less fortunate, but you can help yourself by donating before January 1st and including the contribution on your 2006 tax return. For more information on charitable donations visit [http://www.irs.gov/newsroom/article/0],,id=164997,00.html.

You can also donate stock to charity, avoid paying taxes on the appreciation and deduct the full value of the stock.

For taxpayers looking for maximum generosity and time to consider how to give back, a donor-advised fund may be the answer. For a contribution of at least $10,000, you can deduct the entire amount now and disperse the funds over time.

In a Nutshell

There are many ways to work the tax system in your favor, as long as you are willing to roll up your sleeves and dig into the details. These last-minute, year-end tax tips are a good starting point.

Contact:

FSI Tax Corp.

9212 Berger Rd.

Columbia, MD 21046

1-877-437-4669

mbeetz@fsiholding.com

Business Tax Return – All You Need to Know

Any running organization in a country needs to pay some amount to the government. The amount is a fixed figure and is decided by the respective government of any country. However, in many countries there is no tax on business. But still majority of countries charged a fixed amount from any business or organization.

The amount of income one earns is taxed. There is a prescribed percentage that is levied upon every profit or business. If you are a fresh start up or is a known business owner, you must be familiar with the basics concept of business tax return. There are many of the assumptions that help in solving the puzzle of tax and help you to find precise way to get relieved from these business taxes.

The business tax return term is coined in connection with the relieving of a specific amount from your tax deduction, on the basis of various extra spending you made. To make it more clear, we can say that it is the return of your taxed money in case you have spend it on a specific place or way.

If you are a start up, it is advisable to spend a little time in getting in depth knowledge of the same. If you are smart enough to break the codes, you can easily get a benefit of tax saving through your investments. In case of small businesses, you can file Schedule C which allows you to reflect your calculation of Costs of Goods. It helps in reporting and documenting the amount of your business profit and the cost kept behind making the purchase of the goods. The whole review of the difference between the two costs of purchase as well as of selling will reflect the actual amount of tax, you have to pay for.

Another important section is including the Schedule SE in your income tax return for various businesses. It is defined as self employment tax and it includes the calculation of total amount of money you have earned.

With the help of inclusion of these two sections, you can easily go ahead and can save a lot of your money.

To summarize, we can state that detailed information about Business tax return that can help you to take a wise decision. Every single penny you saved is equal to the amount you earned.

Hence, before going ahead with the process of Business tax return, you can get the expert advice from the professionals.