1. Keep a Detailed Mileage Log

Maintaining an accurate mileage log is crucial. Here’s what you need to include:

• Date of the Trip: Record the date when you used your vehicle for business purposes.
• Starting and Ending Locations: Note where your trip began and ended.
• Purpose of the Trip: Specify the reason for the journey (e.g., client meeting, site visit, business errands).
• Miles Driven: Keep track of the total miles covered during the trip.

A well-maintained mileage log provides evidence of your business-related travel, which is essential when claiming deductions.

2. Track Vehicle Expenses

Beyond mileage, certain vehicle-related expenses are deductible. Consider the following:

• Gas and Fuel: Keep receipts for fuel purchases during business trips.
• Repairs and Maintenance: If you’ve had your vehicle serviced or repaired for business purposes, document these expenses.
• Insurance Premiums: Your auto insurance premiums may be partially deductible.
• Depreciation: If you own the vehicle, depreciation can also be factored in.

Remember to save all relevant receipts and invoices as proof of these expenses.

3. Actual Expenses vs. Standard Mileage Rate

The IRS allows two methods for calculating vehicle-related deductions:

• Actual Expenses: This method involves adding up all your vehicle-related costs (fuel, repairs, insurance, etc.). While it requires more record-keeping, it may yield higher deductions.
• Standard Mileage Rate: The IRS sets a fixed amount per mile (adjusted annually). For 2024, the standard mileage rate is 67 cents per mile. This method is simpler but may not always be the most advantageous.

Pros and Cons:

• Actual Expenses: Provides a more accurate reflection of your costs but requires meticulous tracking.
• Standard Mileage Rate: Easier to calculate, but you’ll need to weigh it against your actual expenses.

4. Legitimate Business Use

To qualify for deductions, ensure that your vehicle use is legitimate:

• Business-Related Activities Only: Deductions apply only to business-related travel, not personal use.
• Commuting vs. Business Travel: Commuting from home to work is generally not deductible, but travel to client meetings, job sites, or other work-related destinations is.

5. Consult a Tax Professional

Navigating tax rules can be complex. Consider seeking advice from a tax professional or accountant. They can help you determine the best approach based on your specific situation.

Remember, accurate record-keeping is your ally when it comes to maximizing tax benefits. By leveraging your vehicle strategically and understanding the nuances of deductions, you can drive both your business and your financial success.

If you have any questions or need personalized assistance, feel free to reach out to TNT Accounting Services, LLC. We’re here to support your tax and accounting needs.

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What is a 1099 Contractor?

A 1099 contractor, also known as an independent contractor, is a self-employed individual who provides services to a business on a contract basis. Unlike W2 employees, they are responsible for paying their own taxes, including self-employment tax. They are not eligible for benefits such as health insurance or retirement plans provided by the business they are servicing.

What is a W2 Employee?

On the other hand, W2 employees are considered full-time or part-time workers who are employed by a business on a regular basis. As an employer, you are responsible for withholding and paying payroll taxes on their behalf. W2 employees are eligible for benefits such as health insurance, retirement plans, and paid time off.

The Importance of Correct Classification

Misclassifying workers as 1099 contractors when they should be classified as W2 employees can result in significant penalties and legal consequences. Therefore, it’s essential to properly classify your workers based on their job duties and the level of control you have over their work.

We’re Here to Help

If you need assistance in determining the correct classification for your workers or have any questions about the process, please do not hesitate to contact us. At TNT Accounting Services LLC, we’re always here to help you with your tax and accounting needs.

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The post The Importance of Proper Bookkeeping in Tax Planning first appeared on TNT Accounting Services, LLC.

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1. Penalties and Fines from the IRS and State Tax Authorities: Neglecting payroll tax obligations can result in substantial penalties and fines from both the IRS and state tax authorities. These penalties can accumulate quickly, creating a significant financial burden for your business. TNT Accounting Services LLC understands the intricate payroll tax regulations enforced by both federal and state authorities. They can guide you through the process, ensuring accurate and timely filing to avoid unnecessary penalties from the IRS and state tax authorities.
2. Legal Consequences and Audits: Non-compliance with payroll tax regulations can escalate from penalties to legal actions and audits. The IRS and state tax authorities have the power to take legal action against business owners who consistently fail to fulfill their tax obligations. This can result in audits, tax liens, or even criminal charges in extreme cases. By partnering with a reputable accounting service like TNT Accounting Services LLC, you can proactively address your payroll tax responsibilities and minimize the risk of legal complications and audits from both federal and state tax authorities.
3. Reputation Damage and Loss of State Benefits: Neglecting payroll tax obligations not only impacts your relationship with the IRS but also with state tax authorities. Your business’s reputation may suffer, and trust among customers, suppliers, and stakeholders can erode. Negative publicity and potential legal issues can harm your business’s image and affect its eligibility for state benefits or incentives. TNT Accounting Services LLC can help you maintain your reputation by ensuring accurate payroll tax filings and promoting transparency in your financial practices, thereby safeguarding your eligibility for state benefits.
4. Financial Instability and State Tax Liens: Failure to meet payroll tax obligations can lead to financial instability for your business. Accumulated tax liabilities, penalties, and legal costs can strain your cash flow, making it challenging to meet other financial obligations, such as paying employees, suppliers, or creditors. Additionally, both the IRS and state tax authorities have the authority to place tax liens on your business assets, making it difficult to secure financing or conduct normal business operations. TNT Accounting Services LLC provides comprehensive financial management services, including payroll tax planning and budgeting, to help you maintain financial stability and prevent cash flow issues, ensuring that you meet both federal and state tax obligations.

Neglecting payroll taxes can have severe consequences for business owners, including penalties, legal actions, reputation damage, loss of state benefits, financial instability, and tax liens from both the IRS and state tax authorities. TNT Accounting Services LLC offers the expertise and support necessary to navigate the complexities of payroll tax regulations enforced by both federal and state tax authorities. By partnering with a trusted accounting service like TNT Accounting Services LLC, business owners can proactively address their payroll tax obligations, minimize risks, and focus on growing their business with peace of mind. Don’t let payroll taxes become a burden—seek professional assistance today.

(Note: This should not be considered as legal or financial advice. Please consult with professionals for specific guidance regarding your business’s payroll tax obligations and compliance with the IRS and state tax authorities.)

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The post The Risks Business Owners Face for Neglecting Payroll Taxes appeared first on TNT Accounting Services, LLC.

A company that fails to keep an accurate record of its business transactions is more likely to operate inefficiently and may lose revenue in the long run. Accounting systems help business owners and their managers to measure business growth in terms of profitability accurately. This identifies areas that need attention and improvement.

Many business owners believe that a sound accounting system starts and ends with the accounting software used in the business’s bookkeeping process. Keep in mind; the output is only as good as the people who are using it.

With the technology we have today, we no longer have to do manual transactions or use ledgers that make many people cringe at the thought of having to use them.

Accounting Software Available

There is a multitude of accounting software available and popular in America. This includes:

-FreshBooks

-Intuit Quickbooks

-Sage Business Cloud Accounting

-Wave Accounting

-Xero

-GoDaddy (E-commerce Businesses)

These computerized accounting systems require a certain level of experience, so be sure your accountant has prior knowledge of these accounting tools. It may be worthwhile sitting down with your accountant and discussing what accountant software they use and whether it would benefit your business.

Some of the above software may also offer free trials. These trials are beneficial for business owners as they can try them out and see what software they prefer to use. You can always upgrade if you need more features that will streamline your business.

Keep Accurate Records

It is well recognized that failure to keep proper books and records is one of the critical factors of business insolvency. Business owners need to keep accurate records of income and expenses and often do not have a developed process or system that allows them to do that.

As a result, owners may not know whether they are even making a profit. Even more concerning is that they cannot identify types of expense or, indeed, whether a payment is an expense at all.

Establish Financial Systems For Your Company

If you are one of those business owners who has not been keeping good financial records, now is a great time to start establishing sound financial systems for your company. Good financial systems will not only help your business grow, but they also identify problems before they get out of hand.

Do you know if your company has a strategy to develop, adopt and review accounting processes? If you don’t know if this is the case or don’t have a plan in place, now is the time to contact your accountant for a friendly chat and talk over your accounting systems. You may be surprised at the information your systems can provide both you and your business.

You must have accurate data. Once you have this part correct, you will confirm the accuracy of what is being reported. This is where good accounting software comes in. These days, most accounting software will provide you with complete financial statements after completing all the necessary data.

Your company must have sound accounting systems in place. Without this, incorrect decisions may be made because of a lack of information. Having suitable accounting systems will give you confidence that what is being reported is accurate.

The post How To Develop And Improve Accounting Systems For Your Business first appeared on TNT Accounting Services, LLC.

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The balance sheet provides a picture of the financial health of a business at a given moment in time — usually the end of a month or financial year. It can tell you if you owe more money than what you currently have, the current value of your assets, and the overall value of your business.

The income and cash flow statement. It is an essential tool for investors to gain insight into a company and its operations. The purpose of a balance sheet is to give interested parties an idea of the company’s financial position and display what the company owns and owes.

Components Of A Balance Sheet

It has three components: assets, liabilities, and net worth or equity. The Balance Sheet is like a scale.

Balance sheets are typically prepared monthly, quarterly, and annually, but you can design one at any time to show your firm’s position.

It will depict your total assets, liabilities, and net worth. The business balance sheet offers a quick look into your financial health and can help inform lenders, investors, or key stakeholders about your business.

Balance sheets are one of the most critical financial statements. Learning how to generate them and troubleshoot issues when they don’t balance can help you become an invaluable member of your organization.

A balance sheet displays the risks and returns that your business faces at any given point in the form of its liabilities and assets. All of the business’s liabilities, whether short-term or long-term, outline its priorities from immediate to more distant ones. In contrast, assets reflect the business’s ability to generate cash through short-term assets and sustain its operations via long-term assets and investments.

The balance sheet results can also indicate if the business is running on losses due to a more significant amount of liabilities. By knowing such critical information, business owners can then plan and adjust towards achieving their future goals and rectify their progress if it strays off-course.

Should A Balance Sheet Balance?

A balance sheet should always balance. The name itself comes from the fact that a company’s assets will equal its liabilities plus any shareholder equity issued. If you find that your balance sheet is not truly balancing, it may be caused by one of these culprits:

• Incomplete or misplaced data
• Incorrectly entered transactions
• Errors in currency exchange rates
• Errors in inventory
• Miscalculated equity calculations
• Miscalculated loan amortization or depreciation

It’s your responsibility as an owner to know and understand your business’s income statement and the balance sheet.

The necessity of keeping a small business’s balance sheet up-to-date is always vital – it gives business owners a good picture of their current financial standing and prepares them for future decisions. If you haven’t updated your balance sheet recently, it’s advised to make an effort to do so sooner rather than later. Contact TNT Accounting if you’re not sure where to start when it comes to having a balance sheet or keeping it up-to-date.

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The Association of Certified Fraud Examiners (ACFE) defines occupational fraud as “the use of a person’s occupation for self-enrichment through deliberate misappropriation and misuse of the employing organization’s asset and resources.” Every year, AFCE confirmed that organizations run at a loss of about 5% of their revenues to occupational fraud, which is way more than the fraud prevention would cost.

Three Types of Occupational Fraud

Occupational fraud is of three types: Asset misappropriation, Corruption, and Financial Statement fraud. Asset misappropriation is the most common type of occupational fraud. Asset misappropriation occurs when an employee is involved in the theft or misuse of the organization’s assets and resources by stealing cash, billing, or presenting hiked expenses reports.

In cases of corruption, the senior management staff is usually most guilty. Over sixty percent of corruption cases have people in positions of authority as perpetrators. This type of occupational fraud refers to an employee’s involvement in the misuse or abuse of his influence in business transactions to obtain a benefit or any kind of bribery. This corrupt act has caused a median loss of about $250,000 to victim organizations.

Financial Statement fraud is the least common but most costly type of occupational fraud. It involves an overstatement of assets, profits, revenues, and an understatement of losses, expenses, and liabilities. It is deliberately manipulating the representation of an organization’s financial status through the intentional omission or misstatement of amounts in the financial statement in the bid to deceive the receivers or users of the financial statement.

Be Proactive

Every business owner needs to put measures in place to combat occupational fraud. You need to consider the enormous financial consequences of occupational fraud on your business. Being proactive is a necessity. The earlier the protection systems are implemented, the better.

It is essential to set up systems for accountability. In smaller organizations, employees are assigned to check each other’s work to ensure accountability. One individual will not be given to a task without proper documentation and supervising processes.

When setting up an anti-fraud plan, the focus should be on employees who have a higher chance of occupational fraud. Staff in departments prone to fraud include management, accounting, sales, etc. This is because they are at the forefront of invoices, payments, and other items of value. It is crucial to begin your fraud prevention plan from the top because it is easier to get everyone else to comply after the executives and management.

In occupational fraud, a thorough company audit can detect any problem. Regular audits help to assess the company by third parties who will remain impartial while spotting errors.

Fraud Loop Holes

Employees may notice possible fraud loops but may be too timid to report or be completely unaware of the act being fraudulent. Therefore, it is crucial to set up fraud training to acquaint them with fraudulent actions and behaviors and tips to report suspected cases, for instance, through the filing of anonymous tips or reports.

Occupational fraud can be prevented when proactive measures are put in place to ensure accountability and loyalty of all staff members and organizations. You can also hire the services of an expert accountant to guard your resources. Otherwise, without proper anti-fraud plans, the organization is prone to theft and other fraudulent acts that can cause setbacks for the organization, both in the organization’s finances and reputation.

If you have any questions about occupational fraud and how we could help you and your business, please get in contact, and we’ll be more than happy to help.

The post How To Protect Yourself From Occupational Fraud first appeared on TNT Accounting Services, LLC.

The post How To Protect Yourself From Occupational Fraud appeared first on TNT Accounting Services, LLC.

Any reduction in tax that you can find will be vital for their survival. Even the IRS acknowledges that you must keep some money to live on and run your enterprise. Minimizing taxes may be the difference between a profitable business and one that is just scraping by.

Like timing income and expenses, some small businesses must accomplish tax savings strategies before the end of the tax year. But others, such as funding a retirement plan, can be done at any time before you file your tax return.

Different Ways We Can Reduce Your Tax

• Tax credits are the federal government’s way of encouraging businesses and individuals to do things—or not do something—that affect the greater good. You can take tax credits for hiring employees, going green, providing access to disabled employees and the public, and providing health coverage for employees.

• Businesses can take tax write-offs on business equipment, machinery, vehicles, and sometimes even real estate. These write-offs can sometimes be taken in the first year you own and use the equipment.

• You can deduct up to $25 per person from the cost of gifts given to customers and vendors. An exception exists for those that bear your business name, are distributed as a matter of course, and cost less than $4.

• Timing your income involves moving it from one year to another. You first have to determine the year in which you expect to pay the most in taxes. Review your current expenses before the end of each year and prepay some of those amounts if you want to reduce your income for the current year. You can also increase your expenses and decrease payment by making expenditures such as stocking up on supplies.

Review Your Accounts

• The end of the year is also the time to review your customer accounts if your business operates on the accrual accounting method. First, find those customers who aren’t likely to pay you. You can write off the amounts they owe as “bad debts” and deduct them from your business income to save on taxes.  Bad debts can also include loans made to clients, vendors, or employees who don’t pay you back.

• Consult a tax professional before making any decisions that can affect your business tax return or spending money for the sole purpose of saving on taxes. Make sure you select someone who can help you all year, not just at tax time. Consider hiring an expert who can represent you before the IRS in case you ever get audited.

• Keeping track of your spending is easier than ever these days, but it can still seem daunting to some. Most credit cards will send you a year in review, and all of your bank transactions are available online. While online banking has made things a lot easier, there is still plenty of room to miss something. Use accounting software like Quickbooks to make things easier for you.

• Too many people who work from home are afraid of taking the home office deduction. If you work from home, at least look at if you qualify for this tax deduction. You may be surprised by how much money you can save.

Wise Planning

With wise planning, you can reduce your taxable income as a small business owner and keep more of your money working for you. Just remember to consult a tax professional to make sure you qualify for the potential savings discussed here. Contact us today to find out how we can help you and also what tax credits might be available for you.

The post Tips For Tax Reduction For Businesses first appeared on TNT Accounting Services, LLC.

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What is the medical expense deduction?

For tax returns filed in 2021, taxpayers can deduct qualified, unreimbursed medical expenses that are more than 7.5% of their 2020 adjusted gross income. For example, if your adjusted gross income is $40,000, anything beyond the first $3,000 of medical bills — or 7.5% of your AGI — could be deductible. That means if you had $10,000 in medical bills, $7,000 of them could be deductible. 

The 7.5% threshold used to be 10%, but legislative changes at the end of 2019 lowered it.

As part of the $1.4 trillion spending bill Congress passed, millions of Americans will get a permanent break on the deductibility of out-of-pocket medical expenses. Not only is this a great tax break for retirees it will also be helpful for the unemployed, the underemployed and even working folks with employer coverage who are paying ever more in high out-of-pocket medical costs. 

Look at your state’s rules, because even if you can’t get the deduction on your federal return, you might be able to on your state return. 

It’s important to remember that it’s the year in which you pay for your health care services is when the amount applies toward the deduction — not when you incur the expense.

Be aware that any expenses paid for with funds from a flexible spending account or health savings account cannot count toward the deduction because those contributions are already tax-advantaged.

What kind of medical expenses are tax-deductible?

Below is a summary of what comprises of tax-deductible medical expenses:

• Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners
• Hospital and nursing home care
• Acupuncture
• Addiction programs, including quitting smoking
• Weight-loss programs for doctor-diagnosed diseases, including obesity (but diet food and health club dues usually don’t count)
• Insulin and prescription drugs
• Admission and transportation to medical conferences about diseases that you, your spouse, or your dependents have (but meals and lodging don’t count)
• Dentures, reading or prescription eyeglasses, contacts, hearing aids, crutches, wheelchairs, and service animals
• Transportation costs to and from medical care
• Insurance premiums for medical care or long-term care insurance if they’re not paid by your employer and you pay out of pocket after taxes
• Travel costs associated with health care also can be used
• Even modifications to your house — i.e., a wheelchair ramp, perhaps a swimming pool — can count if they were installed for medically necessary reasons
• If you pay for health insurance with after-tax dollars, your premiums might be able to go toward the deduction

These are the medical expenses that you can’t claim for:

• Funeral or burial expenses
• Toothpaste, toiletries, and cosmetics
• Vacations
• Most cosmetic surgery
• Nicotine gum and patches that don’t require a prescription

While you don’t send in your receipts and records with your tax return, you’d need to be able to produce them if the IRS were to ask for proof of those expenses.

The post Medical Tax Deductions – What you can and can’t claim first appeared on TNT Accounting Services, LLC.

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