Small Business Financials

Updated for tax  year 2022. You own a thriving graphic design business. Perhaps you create eye-catching logos or comprehensive commercial websites. What you may not spend too much time on is thinking about filing your taxes as a freelance graphic designer. As an independent contractor or freelancer , you might be able to lower your income (and consequently pay less tax) by claiming certain business expenses as deductions on your annual tax return. You would report that information on Schedule C (Form 1040), Profit or Loss from Business. According to the Internal Revenue Service (IRS), your activity qualifies as a “business” if your primary purpose is for generating income or profit. You also have to be involved in your venture with “continuity and regularity.” A hobby or sporadic activity is not a business. If you can justify that a business expense is both “ordinary and necessary,” it might be deductible. The IRS defines an ordinary expense as one that is common and accept...

Facebook fundraisers have become a popular, easy way to raise money for worthy causes. With the social media platform boasting an estimated 2.74 billion monthly users, people have been able to solicit support for organizations that support causes near and dear to their hearts. Facebook even takes the step to prompt users to set up fundraisers for their birthdays. With birthday fundraisers posted on their Facebook page and their friends’ news feeds, it becomes a snap to raise money for charity. The ease of use on both the fundraiser and the donor’s end likely ensures that many are compelled to make charitable donations when they otherwise might not have. People can also set up fundraisers for personal causes that can cover anything from raising money for medical expenses to supporting a political goal. Users have generated billions for nonprofit groups by donating money using Facebook, with millions more raised every day. Just because you are making the donation through Facebook ...

If you’re like most Americans, you’ve changed employers a few times throughout your working career. In fact, the average person switches jobs 12 times during his or her lifetime! While job-hopping can get you a variety of experience, it can also create some complexity managing your finances – specifically when it comes to the money you’ve saved in employer-sponsored retirement plans such as a 401(k) or profit-sharing plan. Every time you leave a job where you contributed money to an employer-sponsored retirement plan, you are faced with the dilemma of determining how to handle those old plans.  Naturally, each time you must ask yourself: What should I do with this account? Generally, you have four options. 1. Leave it be. Your first option may be straightforward – simply leave the account invested in your former employer’s retirement plan. Some employers may allow you to keep your retirement savings invested in their plan after you change jobs or retire. That allows your ...

Want to spruce up your home? You’re not alone. More than one-third of Americans are planning to remodel their homes within the next five years. If you’re like most Americans, your house is one of your biggest expenses, and it’s important to keep it up to date and in good condition. But not all home improvement projects add significant value to your home. Keep reading to find out which projects offer the most bang for your buck and which to avoid if you plan to sell soon. Then discover the projects that can help you save money on your taxes. Selling soon? You may be weighing whether it’s more advantageous to renovate your house or sell it as is. Most homebuyers want move-in-ready homes and will pay substantially less for fixer-uppers. Moreover, some lenders won’t loan money for houses in poor condition. It’s usually a good idea to do non-cosmetic repairs, such as replacing a worn-out roof, patching holes and cracks, painting the interior and exterior, fixing broken appliances o...

Mistakes happen Once you realize you made a mistake or forgot to include an important piece of information on your tax return, how you handle it depends on the situation. For instance, if you entered an incorrect Social Security Number (SSN) for yourself, your spouse, or a dependent, you need to fix it. If you missed an income item that affects the amount of tax you owe, you also need to tell the IRS before they discover it. If they find it before you inform them of the mistake, they may penalize you. If you found a small item you should have deducted, like a $5 receipt, there’s a good chance you don’t need to do anything. It’s probably not worth the trouble as more than likely it won’t have a huge impact on your return. Reach this article for more information on when and how to amend your return. File Your Simple Tax Return for Free with TaxAct More to explore: Why the Qualified Business Income Deduction Can Impact Your Return 5 Things You Didn’t Know Were T...

What can you do to avoid paying higher tax rates when you have a year with more income? If your income level fluctuates from year to year, you may find yourself paying more than you expect at tax time. That’s because when you have higher income, your income may be bumped into another tax bracket, causing you to pay higher tax rates at upper levels of income. The tax rate jumps as much as 5 percent from one level to the next — a significant amount when you’re planning your tax year . The following chart shows the income tax rates you pay at different income levels, based on your filing status. Federal Income Tax Brackets, 2022 Tax Year (Source: IRS Publication 505 ) Tax rate Single filers Married filing jointly or qualifying widow(er) Married filing separately Head of household 10% Up to $10,225 Up to $20,550 Up to $10,275 Up to $14,650 12% $10,276 to $41,775 $20,551 to $83,550 $10,276 to $41,775 $14,651 to $55,900 22% $41,776 to $89,075 $83,551 to ...

Did you make a profit on the sale of a house, some investments, or even a car this year? If so, you’ll likely need to report the sale on your return due to the long-term capital gains tax. Fortunately, if your sale qualifies as a long-term capital gain, the taxes are less than what you’d pay on your ordinary income, such as wages. To qualify as a long-term gain, you must own a capital asset, meaning that house, investment or car you sold, longer than one year. In that case, you generally qualify for the special tax rates. A  short-term capital gain includes the profits of an item you sold that you owned for less than one year. That gain is taxed at the same rate as your ordinary income. Here’s what else you need to know to manage your long-term capital gains. Do I have a long-term capital gain? Most things you own, such as your car, investments, and real estate are capital assets.  And when you sell those assets, a capital gain or loss is created. Long-term capital g...

There’s no need to pretend. We know tax planning wasn’t exactly at the top of your summer to-do list. But hear us out … as you’re cooking up exciting summer plans, it’s good to remember how your tax filing could be affected. Tax tips to keep in mind this summer Here are five situations where your summer fun could score you tax deductions or otherwise impact the taxes you do (or don’t) pay during tax time — and how to prepare accordingly. 1. You’re getting married this summer. Planning on tying the knot this summer? If so, keep these tips in mind: Name changes: Report any name changes to the Social Security Administration and your employer, if applicable. To prevent delays in processing your tax return next year, your name must match up with your Social Security number. You can get more information on reporting a name change online or by calling 800-772-1213. Change of address: Notify the IRS of a change of address if you move. This will ensure you receive any vital tax m...

Hey, you. Did you know you don’t have to be a tax genius to file your own taxes? How to DIY your tax return We get it — filing your own tax return can be intimidating if you’ve never done it before. But once you get started, you might realize it’s much easier than you thought it would be. And it has benefits, too. Tax preparation software like TaxAct ® is designed to guide taxpayers through the filing process with ease. We start by asking you for basic information about yourself and any dependents you might have. Based on your answers to our interview questions, we’ll determine the most beneficial filing status for you, pull the necessary tax forms for your financial situation, and help you fill them out step by step. Once you’re done filling out your federal income tax return online (and possibly your state return, too!), we’ll help you pay any taxes owed, choose how to receive any tax refunds , and submit your tax documents to the IRS for processing. It’s that easy! Benefits...

Let’s all breathe a collective sigh of relief — this year’s filing season is finally over. Now that tax filing is behind you, what could you have done differently? One common mistake taxpayers often make is waiting until tax time to think about their taxes. But by thinking ahead and making some financial tweaks now, you’ll be better equipped to save time and money when filing your tax return next year. Here are our top tax tips and tricks to follow that could enhance your tax savings in 2023. 1. Revisit your Form W-4. Not happy with your tax bill or refund amount this year? Adjusting your W-4 is a simple way to ensure you control how much tax is withheld from your paychecks. If you recently started a new job, you might have noticed that the W-4 form looked slightly different. The IRS simplified the W-4 form starting in 2020 to improve employee withholding accuracy and get you close to “breaking even” on your taxes. Ideally, this would mean your tax refund or bill after filing w...

It doesn’t matter if you’re just starting out as a small business owner or you’ve been doing it for a while now — we all know mixing business with pleasure can be a slippery slope. Some businesses, such as LLCs and corporations, are required to keep their business and personal finances separate. When you are your business, such as a self-employed sole proprietor, you are not required to separate the two. But it might still be in your best interest to do so! Keeping your business and personal finances separate can save you countless headaches down the road. Here’s how to get started. What are business finances? While it may seem obvious, let’s start by defining this term: Business finances: How your business gets funding and spends money. Your business typically acquires money in one of two ways — by securing business loans or by raising money from investors. Your business expenses are what you spend that money on. Reasons to separate business and personal finances Here ar...

If you are one of the many Americans who got a significant refund after filing this year, you might be wondering how you should invest your tax refund. 1. Stash it in a savings account or emergency fund. While saving may not be the most exciting option, it’s always good to have some cash on hand in case you need it. One good option is to invest in a health savings account (HSA). HSAs are a tax-free way to save for medical expenses like copays, prescriptions, or even COVID-19 tests. HSA funds are an excellent option for savings because you do not have to use the funds in a calendar year. Many personal finance experts tend to recommend saving three to six months of expenses as an emergency fund. An emergency fund protects you and your family against unforeseen situations such as job loss, sickness, or a hefty repair bill. How much you should save depends on your family’s financial circumstances, cost of living, and risk tolerance. But with inflation the way it is right now, leavin...