Taxes | Dunham Tax Professionals

5 Common Mistakes in Starting a New Business

by Michelle Roberts | Sep 24, 2020 | Business Entity, Business Formation, Taxes

Starting a business is a bit more than having a great idea for a product or service. There are other important – legal – decisions to be undertaken. The truth is a large percentage of new businesses fail within the first 18-20 months; however, arming yourself with a bit of knowledge can make all the difference.

Here are some things you need to know:

Always Get Advice from A Professional – Forming your business can be very complicated if not unique. There are those who go forth as a sole proprietor and its fine for them, and there are those who require a level of legal protection not afforded by a sole proprietorship, and that’s smooth sailing too. Still, there are those who look at an LLC filing as adding real status or credibility to a business – and in truth it is very easy to obtain an LLC even online – however, not understanding what your business entity is, will cost you more in the long run, especially since there are tax requirements and compliance fees to be aware of, and very few states will permit a company to change business structures once that structure is decided upon, so it’s important upfront to choose your entity wisely. Consulting a professional such as Dunham Tax Professionals is so important moving forward.
Knowing What You Don’t Know – Even if you ensure liability protection, it doesn’t extend that protection to criminal acts, fraudulent practices or using the corporation to further your own personal interests, such as raiding corporate coffers for personal expenses.
Getting the Proper Local Business Licenses – Too often, owners discover they are not in compliance with local business ordinances – even if they are properly incorporated – and end up paying thousands in fines or back taxes, or worse, a combination of both with loads of additional penalties.
Get Compliant and Stay Compliant – Once you do create a business entity – either an LLC or corporation – there are several responsibilities you have to maintain legal compliance, e.g., fees, licensing renewals; reporting timely and accurate changes in ownership or agents; tax liabilities. Failure to file current paperwork or taxes can result in both late fees and other fines and penalties for you and your business.
Having Sufficient Capital – This may not seem necessary to point out, but it takes money to start a business: owners need to be mindful that there will always be liabilities to cover. And if you don’t have enough revenues, assets, capital or insurance to cover your liabilities, you’re going to be subject to some potentially aggressive penalties.

The advice of an accountant or financial professional is crucial to determine what you need to start your business in the right way in your state or municipality. Dunham Tax Professionals are always available to assist you. Schedule an appointment today.

Schedule an Appointment

Why You Might Choose S Corp Taxation for Your LLC

by Michelle Roberts | Sep 22, 2020 | Business Entity, Business Formation, Taxes

A limited liability company – or LLC – is a legal entity formed under state law to run a business. It provides many of the advantages of a corporation but is easier to form and operate. The way that business is subsequently taxed may need some explanation.

A multi-owner LLC is automatically taxed as a partnership by default, while LLCs with one owner are taxed like sole proprietorships. However, LLCs may choose to be taxed as a C corporation or S corporation. This is easily accomplished by filing a document called an election with the IRS. Once this is done, as far as the IRS is concerned, the LLC is the same as a corporation and it files the tax forms for that type of entity.

Choosing to be taxed as an S Corp can have distinct tax advantages

An S corporation is a pass-through entity, meaning that income and losses passes through the corporation to its owners’ personal tax returns. S corporations also report their income and deductions much like partnerships. An S corporation files an information return reporting the corporation’s income, deductions, profits, losses, and tax credits for the year.

Under an S Corp entity, the LLC would then need to set up a monthly payroll where the owner would need to be established as a legal employee and be paid separately from the LLC and require payroll taxes be submitted.

However, it is noteworthy that S Corp strategy does not apply if the business is categorized as a personal service business, such as accounting, law, health, consulting, athletics, financial services, and brokerage services. The pass-through deduction is not available for such businesses where the owner’s taxable income is over $415,000 for married or $207,500 for singles.

Is filing as an S Corp right for your business? Dunham Tax Professionals will help you sort it all out. Feel free schedule an appointment with us today.

Schedule an Appointment

Tax Projections

by Michelle Roberts | Sep 4, 2020 | Tax Projections, Taxes

As we enter the final quarter of the year, many of us are already thinking forward to tax time. Now is the time to look at your full financial picture while there is still time to make financial decisions that will impact your tax burden.

It is important to contact a professional to complete your tax projection, so you know where you stand for the current tax year. A tax projection is like a tax return. It uses your current income and expenses to project your taxable income for the entire year and allows you to estimate your tax due.

A tax projection requires that an individual or business bring together all of the documents that are regularly included on a tax return, which generally include:

Current paystub showing salary, withholdings, and retirement contributions.
Estimated business income and/or year-to-date financial statements from sole proprietorships, partnerships, corporations, and rental properties.
Gains/losses on sales of stock, business interests, tangible business property, and/or rental real estate transactions.
Anything else included on last year’s tax return that applies again this year.
Changes, if any, to your finances that may have occurred since your previous tax return was filed.

IRS Current Status and Reminders

by Michelle Roberts | Sep 2, 2020 | Taxes

The Internal Revenue Service reminds taxpayers and tax professionals to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.

To protect the public and employees, and in compliance with orders of local health authorities around the country, certain IRS services such as live assistance on telephones, processing paper tax returns and responding to correspondence continue to be extremely limited. Any tax return which requires review, whether it was filed electronically or on paper, may also take longer because many review processes cannot be done virtually. While some volunteer tax preparation sites are operating at a reduced capacity, most remain closed until further notice.

There will continue to be delays in phone calls – both those answered and returned – and other communications – both email and written correspondence via United States Postal Service – which may also include notices of liens, garnishments and other notices of balances, penalties and fees as applicable.

The IRS indicates that the website – IRS.gov – remains the best source for questions about tax law, checks on refund status, tax payments and other services, and automated phone lines which handle most taxpayer calls, also remain available – which also have an option to reach a customer service representative eventually, but that callers should continue to expect long waits due to limited staffing.

Payroll Tax Deferral: The Bottom Line

by Michelle Roberts | Sep 1, 2020 | Payroll, Taxes

The COVID-19 Pandemic has certainly had a financial impact on us all: Businesses have been closed – some of them permanently – countless employees have been furloughed if not let go entirely, and we’re afraid of what might happen next.

In a recent Executive Order, the President has suspended the Federal Payroll Tax, deferring the 6.2 percent payroll tax that funds Social Security in hopes of bolstering consumer spending and ultimately stimulating an economy that is still struggling under pressure from the systemic, lasting shutdowns across the nation.

But what does all that mean for the American people?

First, a little information is necessary, here: Every payday, 7.65% of your wages are subtracted from your paycheck to fund Social Security and Medicare (6.2% for Social Security; 1.45% for Medicare). Your employer – or if you are the business owner – pays an equivalent amount of tax.

It’s noteworthy that employers already can defer payment of their share of Social Security taxes on wages paid through the end of the year. For 2020, the Social Security tax is only levied on the first $137,700 of earnings; however, an additional 0.9% Medicare tax is collected on wages over $200,000 for the year.

Now, under the Executive Order, under the president’s executive order, Social Security taxes (6.2%) won’t be taken out of your paycheck if your pre-tax bi-weekly salary is $4,000 or less – for the remainder of 2020. This means that someone making $10 per hour and working 40 hours per week will get about $25 more per week, or around $100 per month. From September through December, that will add up to about $446. A full-time worker making $15 per hour would get approximately $37 more per week, $149 more per month, and $670 by the end of the year. For someone making $25 per hour, the savings will be about $62 per week, $248 per month, and $1,116 through December, and so on.

But – and this is especially important to all taxpayers – the IRS reports reiterate that this Executive Order only applies to the rest of 2020, and as such, postpones the due date for these taxes until April 30, 2021. After that date, penalties, interest and “additions to tax” will begin to accrue.

The IRS guidelines do state that Employers – referred to as the “affected taxpayers” in the documentation issued – “may make arrangements to otherwise collect the total applicable taxes from the employee.”

But make no mistake; the IRS will collect those deferred and accrued taxes as soon as they are legally able to do so.

Schedule an Appointment

Starting a Business?

by Michelle Roberts | Aug 28, 2020 | Bookkeeping, Business Consulting, Business Formation, Payroll, Taxes

Starting a business can be an overwhelming process, and no matter how successful you just know you’re bound to be, it may be necessary – and it’s always a good idea, anyway – to get some help from an accountant or bookkeeper; tax preparer or tax planner.
Dunham Tax Professionals can be a critical component in the success of your new business

Did you know that an accountant can and does:

Form your business
Help write a business plan
Audit your cash flow
Find cost-cutting opportunities
Advise on business strategy
Manage debt
Chase down payments
Write and submit loan applications
Plan budgets
Set up your accounting software
Manage inventory
Recommend business tools
Help open new bank accounts
Oversee payroll
Year-end financial reporting
Prevent audits
Advise on personal finances

A bookkeeper can and does:

Reconcile accounts
Record transactions
Manage accounts receivable and accounts payable
Adjust entries
Prepare financial statements
Send invoices
Set up and manage technology and tools
Stay up to date on laws and regulations
Basic payroll

Moreover, a Tax Preparer and Planner can and does:

Answer your questions
Look over your returns
Find deductions that apply to you
File your taxes
Prepare and submit your documents
Be there for you

Contact Dunham Tax Professionals or make an appointment today, to work together to determine your business needs. Let us focus on what we’re good at so that you can focus on what you’re good at: Keeping your business going.

Schedule an Appointment