Don’t Leave Money On The Table! Access Your Education Tax Benefits.

by Junita Jackson

A report by the Government Accountability Office found that nearly 14 percent of all tax filers failed to claim a credit for which they were eligible. Tax credits help us afford higher education expenses by reducing the amount of income tax we have to pay or by issuing a refund. Unfortunately, millions of students and their families are unaware or don’t apply for the correct tax benefits, leaving much-needed dollars on the table—an average of $466 for each qualified filer!

Are you one of them?

Recently, NCLR joined Rep. Danny Davis (D–Ill.) and others on a campaign to get more people to apply for their education tax benefits. The Tax Breaks 4Students campaign encourages eligible students and families to apply for tax credits.

While eligibility criteria vary for each credit, there are a number of options available for students and families. The two largest tax credits available are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), although there are many others.

American Opportunity Tax Credit

The AOTC can be claimed for the first four years of post-secondary education if a student is enrolled at least part time in courses. The maximum tax credit for AOTC is $2,500, and up to $1,000 is available as a refund if you owe no taxes. If you are a current graduate student, you are not eligible for AOTC; however, you may be eligible for the Lifetime Learning Credit.

Lifetime Learning Credit

The LLC provides up to $2,000 per year for a student enrolled at least part time. Unlike the AOTC, the LLC has no limit on the number of years it can be claimed, meaning it is available to graduate students and those in continuing education programs. However, if the credit is greater than the total amount owed in taxes, it will not be issued as a refund.

How do I claim these credits?

The IRS provides an interactive guide to help you determine whether you qualify for a tax credit. Only students who attend schools participating in federal student aid programs can qualify for the AOTC. Once you confirm eligibility, the IRS provides Form 8863 to help you calculate the education tax credit. Most education institutions will mail you Form 1098T, which provides this information for you.

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Timing Strategies Could Become More Power In 2017, Depending On What Happen With Tax Reform

by Zach Haris



Projecting your business income and expenses for this year and next can allow you to time when you recognize income and incur deductible expenses to your tax advantage. Typically, it’s better to defer tax. This might end up being especially true this year, if tax reform legislation is signed into law.

Timing strategies for businesses
Here are two timing strategies that can help businesses defer taxes:

1. Defer income to next year. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.

2. Accelerate deductible expenses into the current year. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before December 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.

Potential impact of tax reform

These deferral strategies could be particularly powerful if tax legislation is signed into law this year that reflects the nine-page “Unified Framework for Fixing Our Broken Tax Code” that President Trump and congressional Republicans released on September 27.

Among other things, the framework calls for reduced tax rates for corporations and flow-through entities as well as the elimination of many business deductions. If such changes were to go into effect in 2018, there could be a significant incentive for businesses to defer income to 2018 and accelerate deductible expenses into 2017.

But if you think you’ll be in a higher tax bracket next year (such as if your business is having a bad year in 2017 but the outlook is much brighter for 2018 and you don’t expect that tax rates will go down), consider taking the opposite approach instead — accelerating income and deferring deductible expenses. This will increase your tax bill this year but might save you tax over the two-year period.

Be prepared

Because of tax law uncertainty, in 2017 you may want to wait until closer to the end of the year to implement some of your year-end tax planning strategies. But you need to be ready to act quickly if tax legislation is signed into law. So keep an eye on developments in Washington and contact us to discuss the best strategies for you this year based on your particular situation.

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Offshore penalties and Tax Evasion

by Jason Kelley

 

HMRC is continuing to increase the number of tools available to tackle offshore evasion and are taking an increasingly aggressive stance in relation to offshore matters.

The government’s initiative to direct a further £60m to fund a threefold increase in the number of criminal investigations into serious and complex tax fraud is ongoing, and the enhanced penalties (see below) for undisclosed ‘offshore’ matters make it more important than ever for those with undeclared liabilities to take steps to regularise their tax affairs.

HMRC’s Worldwide Disclosure Facility (WDF) is the latest ongoing initiative to provide a means for taxpayers to bring to light undisclosed offshore income and gains.  Following a number of previous ‘tax-favoured’ initiatives in this regard, the WDF offers no specific favorable terms but does provide a clear forum via which individuals can settle overdue matters.

Penalties

The potential penalties related to undisclosed tax liabilities are currently as follows.  The categories refer to jurisdictions with varying level of perceived ‘secrecy’.  ‘Category 3’ jurisdictions typically have the lowest level of international information sharing agreements.

    Max. penalty if error is deliberate and concealed
(% of “potential lost revenue”)
Min. penalty if error is deliberate
(% of “potential lost revenue”)
Min. penalty if error is careless
(% of “potential lost revenue”)
Category 1 Voluntary n/a 30% 0%
  Prompted 100% 45% 15%
Category 2 Voluntary n/a 40% 0%
  Prompted 150% 62.5% 22.5%
Category 3 Voluntary n/a 50% 0%
  Prompted 200% 80% 30%

 

As might be expected, the rates of penalty are lower where disclosures are made voluntarily by taxpayers, as opposed to instances where HMRC prompt disclosure.  Similarly, the penalties for ‘careless’ as opposed to deliberate behavior incur a lesser penalty, and the timeframe over which unpaid tax may be assessed can also be limited in such cases.

If you would like assistance with offshore issues and managing a disclosure under the WDF please contact us.

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A Sampler of Accountex 2018 Keynotes & Sessions

by Megan Kunis

 

Accountants Need to Be There for Entrepreneurs from the Start

Daymond John (of Shark Tank fame) said in his keynote address that he could have really used the help of accountants when he was starting his business. In fact, cash flow problems nearly shut down Daymond’s amazingly successful hip-hop clothing line FUBU when it was just getting started.

Daymond had borrowed $100,000 from his family for his first production run after securing $300,000 in orders. He spent it all right away on making clothing, not realizing that giving 60 and 90-day terms to his customers meant he wouldn’t be making any deposits for months.

Fortunately, Daymond was able to secure financing in the nick of time, but it was a very close call. He might have been able to avoid nearly going broke if he’d had an accountant helping him with some simple cash flow forecasting.

Back then, Daymond couldn’t afford an accountant. But now with the efficiency of cloud technology, there’s no reason why accountants and bookkeepers can’t offer basic services to entrepreneurs while they’re still in startup mode.

Every Person Is Now a Media Company

Randi Zuckerberg, former Director of Market Development and spokesperson for Facebook, talked about how Facebook and other social media platforms have democratized the media landscape.

Now, thanks to the cameras in our phones, every one of us has the ability to create content potentially viewed by millions of people — at no cost. You can use the internet and social media to build your own personal brand. It can bring clients, help you in your career advancement, or both. The benefits can be huge.

So why aren’t more of us doing this?

Five years ago, it used to be somewhat difficult to put yourself out there online. But now you can publish articles for free on sites like Medium or LinkedIn, which have a built-in audience thirsting for knowledge. You can stream live video to your followers on Facebook, Twitter, and Instagram. You just need a smartphone, not a complicated camera setup. You can use apps like Snagit to record “how to” screencasts and publish them to YouTube where prospects will find them and then come to you for more help.

If you aren’t doing any of this, I strongly encourage you to pick one of these channels and give a try. Try it for at least for six months. You may be surprised by the results.

Even Bookkeepers Can Build a $Million Firm

I was very excited to hear Melanie Power speak because she hails from all the way from Australia, and I’ve been following her for years online. Her private Facebook Group, Bookkeeper Revolution, provides a wealth of knowledge about technology and how to run a bookkeeping practice.

In her session, “The Million Dollar Bookkeeper,” Mel shared how she built her own firm bringing in over a million dollars of annual revenue with just three people.

She was able to do it by:

  • Leveraging cloud technology
  • Narrowing her focus to a niche
  • Focusing her product offering
  • Having a clear methodology, and
  • Knowing how to communicate her value

Time Sheets Are ‘Immoral and Unethical’

I’m a fan of anyone who applies economic theory and philosophy to how accounting firms should be managed. And that’s what Ed Kless does on a regular basis. He also enjoys being a tad controversial — also something I tend to enjoy.

Case in point: During a panel discussion called “Evolution of the Accounting Technology Ecosystem,” the topic of time sheets arose. Ed happily shared his view on time sheets, which is that they’re “immoral and unethical” when required of professionals — AKA knowledge workers.

That’s because timesheets can be used to help you or hurt you, depending on how a manager feels. And because all intelligent professionals know this, they all “manage” their time to somehow come in on time and budget. That’s why time sheets are mostly useless from a project management perspective — they aren’t real.

Another argument from Ed: You can’t value knowledge in terms of hours. It’s the wrong measurement. So why do we sell it that way?

The App Ecosystem Is the Future of Small Business Accounting

In his session “Zen and the Art of Application Integration,” Ryan Watson of Upsourced Accounting demonstrated a real-life example of the Xero “app ecosystem” in practice.

By implementing this tech stack, Ryan and his firm were able to eliminate tedious physical bank statement reconciliations, printing and mailing of paper checks and invoices, using spreadsheets to track employee hours, manual pay runs, and a whole pile of receipts.

The result was better cash flow and visibility into company performance.

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How to help clients go cashless

by Junita Jackson

The day of the cashless business continues to draw ever closer. You may have heard of how Visa declared a “war on cash” last month as they offered $10,000 to individual restaurants to go cashless, and the bank calculated that businesses could save billions in revenue and save millions of hours in labor. And while Visa does stand to directly benefit from such an approach, accountants should begin talking to their business clients about the reasons they should go cashless.

This conversation needs to happen sooner rather than later. Going cashless entails upgrading a business’s digital payment technology, and the sooner the business realizes the benefits, the sooner they can consider how to upgrade. At the same time, accountants must remind clients of mistakes that can be made while going cashless and afterward as well as how to avoid them.

The benefits of a cashless business

The simplest way to talk to clients about the benefits of going cashless is to note how fewer individuals these days are using cash. A 2016 Gallup survey found that only 24 percent of Americans make all or most of their purchases with cash as opposed to 36 percent five years ago. Perhaps unsurprisingly, the group who have dropped off the most in using cash are technologically savvy young people. Customers are embracing not just debit and credit cards, but new mobile technological payments instead of cash.

A business which has a younger clientele should thus more strongly consider going cashless. And going cashless can be just as convenient for any business as it is for customers. Employees can quickly handle transactions without having to waste time digging through a till for the right amount of change. This makes each transaction faster. Businesses can thus serve more customers and the customer spends less time waiting in line.

And while some small businesses may be concerned about the threat of hackers or electronic security, going cashless can improve physical safety. Having no cash in a till is the ultimate deterrence against thieves, robbers, and the occasional unscrupulous employee. Financial transactions also become more secure, as businesses no longer have to worry about how to store and count cash. Instead of sitting down at the end of every business day counting the total value of cash transactions, a financial ledger can quickly show how much cash the employee has, saving costs.

Going cashless is a major change which breaks with thousands of years of civilization. But the potential benefits of attracting a younger clientele as well as being able to quickly record transactions and having a real-time knowledge about a business’s financial health is huge and can be worth it under the right circumstances.

Slow and Careful Implementation

Despite these benefits of going cashless, plenty of business owners will still balk at the concept. Even if only 24 percent of Americans make all or most of their purchases with cash, that may mean losing a significant amount of customers. For these reasons, the process of updating point of sale technology to go only cashless needs to be done carefully. And according to the U.S. Federal Reserve Bank of San Francisco, 60 percent of business transactions under $10 are done with cash, in part due to how many small businesses require a minimum purchase to accept cash.

This means that as noted above, only certain businesses, such as online casinos, should look into going cashless and those that do may face a tricky transition period where they may lose a few customers. Above all else, a business interested in going cashless must make huge efforts to let customers know about this change. This includes sending an email and social media alerts as well as posting signs letting customers know that this business is going cashless.

Training your employees is also a critical aspect of going cashless as well. Going cashless almost certainly means upgrading a business’s point of sale technology, and all employees should be aware of how to use it. But even more important than that is that employees know why the business is undergoing this change and know how to answer common questions. For example, some customers may try to argue that a business has to accept cash as it is legal tender. This is not the case, which is why you cannot pay for your groceries by dumping a giant jar of pennies at the cash register.

Remember that no matter how much a business tries to inform customers of new changes, there will always be some customers who will be caught unawares and react negatively. Your client’s goal is to make that number as small as possible. By making the downsides smaller with preparation and training, your client can reap the benefits of going cashless and help make things easier for their customers as well.

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The Cutting Edge in PH Finance: You and AI

by Junita Jackson

 

In the recent years, foreign investors started taking notice of the potential of Filipino professionals in finance and accounting outsourcing in the BPO industry, making the Philippines one of the favored global hubs for corporate and shared service offices that produces higher-end of business essentials ranging from creative concepts, software development, medical transcription, and legal services to financial management.

The Philippines once became a world leader in business support systems according to IBM’s 2010 research of annual global locations trend, foreign investors are seeing competence in its qualified pool of graduates with their set of skills, flexibility to work on different shifts, adaptation to internationally recognized accounting standards and ability to communicate well in English.

As finance and accounting outsourcing accelerates dramatically in the Philippine corporate setting, the services are no longer limited to general processing and auditing that requires manual work alone as technology maintains its distance in providing continuous improvement in processing, device enhancements, and new software developments to ensure clients and corporations a growing insight on innovation and digital transformation of data.

With all these advancements, business leaders are expected to allocate resources responsible to keep track on financial operations such as tax reporting, account maintenance, payroll processing, analysis and auditing, management consultancy and the like. However, to get the peak of the mountain of work, collaborating with a third party organization specializing finance and accounting outsourcing is a tested and trusted business strategy among foreign corporations and shared services.

Getting an outsourced finance and accounting partner may help you save human resource allocation, but in order to pick the best one for the business, leaders may look on the possible corporate edges and consider the type of organization they may be interested to work with.

There are a few growth indicators that may help leaders create business decisions before tying-the-knot with a particular service provider:

Business Decision making

CEOs are able to make better investment decisions with the help of their finance and accounting partner by giving consultations from results of financial data and lays down all pros and cons for the business and the market. They suggest and re-assess investments and allocation if needed.

Technology Awareness

Competition starts with technology, the best service is often expected to work with digital convenience for the users and the company as well. A good outsourced partner should help the business thrive with digital developments that may save the company from having excessive allocation of investments without sacrificing state-of-the-art software applications and hardware improvements.

Research and Analytics

A study on your company’s financial performance is a proof of a good finance and accounting partner as gained knowledge from research and observation provides the most intricate parts of a business-decision, the facts, and the solutions.

In the report of Everest Research Institute last 2016, the global multi-process of finance and accounting outsourcing market witnessed an increasing number of providers using robotic process automation (RPA), this suggests that top service providers are now starting to invest in developing  their capabilities related to technology, delivery presence, and domain and process expertise.

Aside from machine advancements, leaders should put high importance in supporting organizational improvement, cost-reduction, and business-outcome driven insights with the help of their service provider.

Worldsforum Accounting is a world-class organization that provides expertise in helping companies build business advancement and achieve financial success at a low cost. They also provide finance and accounting outsourcing services with their unique method that helps companies to improve financial processes and cash workflow. Other services include: Transaction processing, Financial Management reports, Expert financial advice, P&L management, Risk Management, and the list goes on.

Did you find what you’re looking for? Maybe we can help you out. For more finance and accounting outsourcing information, contact us here.

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The most common mistakes when managing personal finances

by Jason Kelley

The ability to manage money competently is especially valuable quality in the conditions of the financial crisis when the purchasing power of the population is shrinking, inflation is rising, and currency exchange rates are completely unpredictable. Below are the common mistakes related to monetary affairs along with financial planning advice to help manage your own finances properly.

The budget is the most basic thing in financial planning. It is therefore especially important to be careful when compiling the budget. To start you have to draw up your own budget for the next month and only after it you may make a yearly budget.

As the basis takes your monthly income, subtract from it such regular expenses as the cost of housing, transportation, and then select 20-30% on savings or mortgage loan payment.

The rest can be spent on living: restaurants, entertainment, etc. If you are afraid of spending too much, limit yourself in weekly expenses by having a certain amount of ready cash.

"When people borrow, they think that they should return it as soon as possible," said Sofia Bera, a certified financial planner and founder of the Gen Y Planning company. And at its repayment spend all that earn. But it's not quite rational ".

If you don't have money for a rainy day, in case of an emergency (e.g. emergency of car repairs) you have to pay by credit card or get into new debts. Keep an account of at least $1000 in case of unexpected expenses. And gradually increase the "airbag" to an amount equal to your income for up to three-six months.

"Usually when people plan to invest, they only think about a profit and they don't think that loss's possible", says Harold Evensky, the President of the financial management company Evensky & Katz. He said that sometimes people do not do basic mathematical calculations.

For example, forgetting that if in one year they lost 50%, and the following year they received 50% of the profits, they did not return to the starting point and lost 25% savings. Therefore, think about the consequences. Get ready to any options. And of course, it would be wiser to invest in several different investment objects.

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Unpaid Business Taxes: How To Settle Your Debt And Avoid Bankruptcy

by Zach Haris

If your business is in danger of facing bankruptcy, there may still be a way to avoid it. The ramifications for a business bankruptcy is pretty dire and can affect not only your business but other companies who are involved with you in hopes of improving their own efforts toward success. By declaring bankruptcy, you are opting out of paying your debts to these companies that are expecting money from you. This, in turn, affects their business’ bottom-line revenue, because now they’re taking a loss.

Bankruptcy. Not Cool. Not Cool at All!

Imagine if you loaned a friend $100 who promised to pay you back. That’s $100 that you’re expecting to put back in your bank account. You may have already spent that those funds trusting that your friend is going to make good on his or her promise—especially if there was a signed agreement that he or she signed. Then next month, they file for bankruptcy! What does that mean for you? It means that you’re out of $100 and if you jumped ahead and spent that promised money, then that snowballs into another debt that won’t get paid, or money taken out another stream of revenue to supplement the loss.

Either way, it doesn’t look good for you.

When you file for bankruptcy, you’ll suddenly understand the origin of the term, “You’ll never do business in this town again!” because no one will want to conduct business with someone who can’t successfully manage a business.

Bankruptcy is Avoidable!

One way you can settle your business debts is to negotiate with each of your debtors to accept a reduced payment to settle the loan. Many businesses will gladly accept that than nothing at all once they learn that you’re going out of business. In fact, they will appreciate your efforts of coming to them first trying to work something out rather than leaving them high and dry.

This may sound pretty simple, but before you start making negotiations, you’ll first need to prioritize your debts. There’s still payroll and payroll taxes that need to be met as well as other business expenses like rent/mortgage and utilities. Make a list of all the most pressing debts that your business has and address them accordingly.

Still, Need Help?

Even with prioritizing your debts, deciding which businesses get paid and which ones don't can still be a painful process. Another way to settle your debt and avoid bankruptcy is to let the tax experts handle everything.

Success Tax Relief has over 30 years of experience getting people out of tax debt, whether it’s personal or business-related. We specialize in audits, Offer in Compromise, tax preparation, installment agreements, personal credit counseling and helping you re-establish your business credit. Read all of the services we have to offer here.

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How to Increase Sales Revenue and Keep Customers Happy

by Zach Haris