Small Business Financials

One of the most important decisions you’ll make as a small business owner is choosing your legal business structure. As with most business decisions, there is no one-size-fits-all for selecting the best option. Which classification you choose ultimately depends on your business goals, ownership structure, and more. But how do entrepreneurs determine if a limited liability company (LLC) or a corporation is right for their business? Let’s take a look at the important features of each. At a glance First, let’s look at a couple of things LLCs and corporations have in common: Both are separate legal business entities that offer liability protection for their owners Both have state compliance requirements they must meet From there, each business classification has its own unique requirements depending on the type of corporation or LLC. The main differences we’ll go over include the ownership restrictions, management structure, and taxation of each type of business. Ownership and m...

Nobody likes unpleasant surprises when it comes to taxes. And if you unexpectedly find yourself owing the IRS hundreds or thousands of dollars that you don’t have, it’s normal to feel the panic start to set in. But we can help. If you can’t afford to pay your entire tax bill upfront, you aren’t alone. And you have options! Read on to see how TaxAct ® can help you set up a tax payment plan with the IRS that fits within your budget. What is an IRS payment plan? The IRS lets taxpayers set up short-term (balance due paid in 180 days or less) and long-term payment plans. In this article, we’ll be discussing long-term plans called installment agreements that allow you to break up your tax bill into more manageable monthly payments. You can request an installment agreement using Form 9465. When you e-file with TaxAct, we can walk you through the steps to fill out the tax form online. Setting up a tax installment agreement request through TaxAct Form 9465 is available in all versions ...

Let’s set the stage: You’ve been self-employed for a while, and you’re a pro at doing your small business taxes by now. You hustled and worked hard last year — business has been booming. As you fill out your tax return for the year, you start to realize that Schedule C is looking a bit more crowded than you’re used to. Is it time for a change? Eventually, self-employed taxpayers might find themselves outgrowing their roles as small-scale sole proprietors and decide they’re ready to graduate to something a little more official, like a limited liability company (LLC). But how do you know you’re ready to make the switch? Here are some signs you might be ready to create an LLC and what steps you should take once you’ve decided to make the leap. When to switch from sole proprietor to LLC When thinking about turning your business into an LLC, ask yourself one simple question: Are things getting serious? And by “serious,” we mean: Is your business growing? Are you earning, or do yo...

Should I Itemize or Take the Standard Deduction? To itemize or not to itemize? This is a question many taxpayers find themselves asking when tax season rolls around. Thankfully, deciding whether you should itemize your deductions or take the standard deduction is usually straightforward. The main question you need to answer is: “Which method leads to a greater deduction for me?” The standard deduction explained The standard deduction is essentially a tax freebie for everyone — it’s a flat dollar-for-dollar reduction of your taxable income. Any taxpayer can take the standard deduction. How much you can deduct depends on your tax filing status . Here are the standard deduction amounts for tax years 2021 and 2022: Tax filing status Standard deduction 2021 Standard deduction 2022 Single $12,550 $12,950 Head of Household $18,800 $19,400 Married filing jointly $25,100 $25,900 Married filing separately $12,550 $12,950 Most taxpayers tend to take the stan...

As cryptocurrency investments become more mainstream, many taxpayers wonder how they can quickly and accurately report digital currency transactions on their tax returns. Enter your newest tax-filing duo: TaxAct ® and TaxBit . What crypto means for your taxes The IRS classifies cryptocurrencies, NFTs, and other digital assets as property for tax purposes. As property, a taxable event is recognized when you dispose of the asset. This can happen in several ways: Selling crypto for cash Trading one digital asset for another (e.g., NFT) Using crypto as payment The taxable amount is the market value at the time of disposal minus the amount you originally paid, also known as the cost basis. Depending on how long you held the assets, the amount will be treated as a short- or long-term capital gain or loss. Additionally, you may have received cryptocurrency from mining, staking, airdrops, or payment for goods. This should be reported as income when received. The market value when ...

You’ve successfully e-filed your taxes. Congratulations! Now, where’s your refund? Here’s what happens to your return once it’s submitted to the IRS. The Process of Getting Your Refund E-filing your tax return with TaxAct is easy, fast, and secure. After completing the Q&A interview, TaxAct checks your return for errors and guides you through the simple e-file steps. TaxAct then transmits your encrypted tax return to the IRS over secure lines. With TaxAct e-file and direct deposit, you’ll receive your maximum guaranteed IRS refund the fastest way possible. When should I expect my tax return? Also, what to expect from tax return? The more detailed answer to the above questions is in the following infographic. CON-11-TY21-200-Feb. Tax News_What to Expect When Expecting a Refund_Infographic (1) Additional resources: You can check the status of your e-filed return by signing in to your TaxAct return or at efstatus.taxact.com . Remember, the IRS updates refund status...

Nobody wants to drag out the tax filing process — just make sure you aren’t sacrificing accuracy for speedy filing. To help you avoid making any costly errors this year, we’ve put together six common mistakes taxpayers make when filing their federal tax returns so you know how to prevent them ahead of time. 1. Filing too early The earlier you file, the earlier you’ll usually see your income tax refund. But while you don’t want to wait until the tax deadline (April 18 for tax year 2021) to file, you also don’t want to file too early. So, what’s the sweet spot? You can still file early! Just make sure you wait until you have all the tax documents you need before filing your tax return, such as any W-2s, 1099s, or other necessary tax forms. 2. Missing or inaccurate information This probably goes without saying, but typos are bound to happen in the days of e-filing. Some of the most common mistakes in this area include misspelled names, missing or incorrect Social Security number...

As an immigrant or non-resident of the United States, it’s normal to have many questions about filing your taxes. Why should you file? What forms do you need? How could this affect me? The list goes on and on. Americans love to complain about filing their taxes — often with good reason. But the process isn’t nearly as complicated as it might seem, even for non-citizens. Let’s go over some questions you might have about filing your federal income taxes and how it could impact your residency status (in a good way!). Below, we’ve included a list of common questions and answers, as well as some valuable resources to help you get started. Do I need to file or e-file an income tax return if I’m not a US citizen? Yes, you are legally obligated to pay federal taxes on any type of income earned in the United States, regardless of your resident status. This includes your regular salary, capital gains or losses, and any other U.S. source income. You’ll also need to pay any state income tax...

You’ve heard about writing off your internet bill as a business expense — but can it also count as an education expense? We cover the answer to this question and many more. As virtual learning becomes more prevalent after the pandemic, many students and parents are wondering if there are any new tax benefits for education to accommodate this new learn-from-home environment. Here’s an updated look at what the IRS considers qualified expenses for education credits in 2022, and what other tax breaks are available for those investing in higher education. What education tax credits are available for college students? There are two higher education tax credits for students in tax year 2021: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). Both credits can be claimed using Form 8863 . There are different eligibility requirements for each credit, but both require the purchase of qualified education expenses for an eligible student enrolled at an eligib...

Working from home comes with many perks. Are tax deductions one of them? Ever since the COVID-19 pandemic made remote work a necessity, teleworking has become the new normal for many American employees. In fact, more teleworkers are now choosing to work remotely and increasingly say they prefer it to working in an office. So, if you’re one of the many Americans who scored a new work-from-home job last year, you might be wondering, Can I write off my work-from-home expenses? It’s time to weigh those expectations against reality — let’s take a look. Expectation: I’m working from home due to COVID-19. Now I can claim that home office deduction I’ve heard so much about! Reality: Unless you’re self-employed, you won’t be able to deduct work-from-home expenses. It’s true, some people who work from home can claim this tax break. However, as of 2021, the home office deduction only applies to self-employed workers. If you’re a salaried employee who works remotely, your work-from-home ...

Your child has started earning their own money, but you’re still claiming them as a dependent. How will this situation affect your taxes? One of the most common tax questions parents have is if they should report their dependent child’s W-2 on their tax return or if the child should file their own return. Here’s what you need to know before you file. Should my child file their own tax return? You cannot report your child’s Form W-2 on your tax return. If your child has earned income during the tax year, they must file a separate return to either receive a tax refund or pay any balance owed to the IRS. However, even if your child must file separately, you can still claim them as a dependent on your taxes if they meet the criteria of a qualifying child. When you file a separate return for your child, you will just have to indicate that they can be claimed as a dependent on someone else’s return (AKA your return). How do I know if my child qualifies as a dependent? For your child ...

*Updated for tax season 2021 and 2022. Buying a home can help lower your tax bill in certain circumstances. In fact, tax breaks for homeownership are a primary motivation for many people to buy their own homes. To get the maximum tax benefit from your home purchase, it’s important to understand what options are available to you. Here are some potential tax deductions for homeowners to keep in mind when  purchasing a home . Property tax deduction and mortgage interest deduction Your house payment includes both interest and principal payments. You may also pay insurance and property tax payments to an escrow account managed by your mortgage holder. Your mortgage holder, in turn, pays your home insurance and property taxes when they’re due. When required, you may also pay other charges, like insurance premiums. If you itemize your deductions, you can generally take a tax deduction for the home mortgage interest paid to your bank or another lender. Due to the Tax Cuts and Jobs ...

I-R-A. Who knew three letters could be so daunting yet yield so many benefits for our financial lives?   IRA stands for Individual Retirement Account. And if you’re like most people, you likely think it sounds like a fancy investment tool that is reserved for people with loads of money and an unattainable level of financial savvy-ness. But the truth is IRAs are an excellent type of investment account that virtually anyone looking to save for retirement can obtain and contribute to regardless of how much money they have to invest. There are also some notable tax advantages. What is an IRA? The purpose of an IRA is to  invest money for retirement . Any person can open one; some individuals even have the opportunity to open an account through their place of employment. The money contributed to these accounts is invested and gains interest over time, exponentially growing your earnings the more you contribute. That helps you gradually build a nice nest egg for retirement. W...

One of the best money moves you can make this year is maximizing contributions to your deductible or nondeductible retirement plan. Whether you’ve contributed all year or have yet to start, here are a few tips to get the most from tax-advantaged retirement plans. 1. Know your contribution limits. Try to contribute as much as the law allows so you  get the most benefit , but don’t go over the annual contribution limit. If you contribute too much to your retirement account, you may have to pay double the taxes. If you have an Individual Retirement Arrangement (IRA), the contribution limits for 2021 and 2022 are $6,000 ($7,000 for any taxpayer aged 50 or older at the end of the tax year). If you are married and filing jointly, each of you can contribute up to that amount in your retirement accounts. For Roth IRAs, the amount you can contribute in 2021 starts to phase out when your modified adjusted gross income reaches $125,000 ($144,000 in 2022) or $198,000 if married fili...