Income Tax Preparation

In order to avoid multiple delays in the preparation of your tax return, please gather the following information prior to your tax preparation appointment or to upload it to our client secure portal:

Personal Data
– Social Security Numbers (including spouse and children)
– Child care provider: Name, address, and tax I.D. or Social Security Number
– Alimony paid: Social Security Number

Employment & Income Data
– W-2 forms for this year
– Unemployment compensation: Forms 1099-G
– Miscellaneous income including rent: Forms 1099-MISC
– Partnership, S Corporation, & trust income: Schedules K-1
– Pensions and annuities: Forms 1099-R
– Social Security/RR1 benefits: Forms RRB-1099
– Alimony received – Jury duty pay
– Gambling and lottery winnings
– Prizes and awards
– Scholarships and fellowships
– State and local income tax refunds: Form 1099-G

Homeowner/Renter Data
– Residential address(es) for this year
– Mortgage interest: Form 1098
– Sale of your home or other real estate: Form 1099-S
– Second mortgage interest paid
– Real estate taxes paid
– Rent paid during tax year
– Moving expenses

Financial Assets
– Interest income statements: Form 1099-INT & 1099-OID
– Dividend income statements: Form 1099-DIV
– Proceeds from broker transactions: Form 1099-B
– Retirement plan distribution: Form 1099-R

Financial Liabilities
– Auto loans and leases (account numbers and car value) if vehicle used for business
– Student loan interest paid
– Early withdrawal penalties on CDs and other time deposits Automobiles
– Personal property tax information

Expenses
– Gifts to charity (qualified written statement from charity for any single donations of $250 or more)- Un-reimbursed expenses related to volunteer work
– UN-reimbursed expenses related to your job (travel expenses, uniforms, union dues, subscriptions)
– Investment expenses
– Job-hunting expenses
– Job-related education expenses
– Child care expenses
– Medical Savings Accounts
– Adoption expenses
– Alimony paid
– Tax return preparation expenses and fees

Self-employment Data
– Business income: Forms 1099- MISC and/or own records
– Partnership SE income: Schedules K-1
– Business-related expenses: Receipts, other documents & own records
– Farm-related expenses: Receipts, other documents & own records
– Employment taxes & other business taxes paid for current year: Payment records

Miscellaneous Tax Documents
– Federal, state & local estimated income tax paid for current year: Estimated tax vouchers,
– canceled checks & other payment records
– IRA, Keogh and other retirement plan contributions: If self-employed, identify as for self or employees
– Records to document medical expenses
– Records to document casualty or theft losses
– Records for any other expenditures that may be deductible
– Records for any other revenue or sales of property that may be taxable or reportable

How your business can push back against rising costs

Somebody hikes prices on your supplier and suddenly your supplier has no choice but to increase the price on you. Then you have no choice but to raise the price on your customer – who (even if they don’t tell you) notices ... you can depend on that.

Inflation is like that dung they say always rolls downhill -- except the 

 prices you pay go in the other direction. You don’t like charging your valued customers more... but what other choice do you have?

Maybe you can’t break this cycle yourself, but you can soften the blow.

And I have ideas for you today.

But before I get there, let's make SURE that your books are in order and that you are making wise year-end choices -- i.e. accelerating or decelerating revenue and costs (dependent upon your tax situation) and more.

If you want to get ahead of that stuff before it's too late, find us here: www.afitonline.com/appointments

And once you've done so, come right back here so we can talk about pushing against the inflationary tidal wave.

Mike Mead's
"Real World" Business Strategy Note
How Your Business Can Withstand Inflation
“It’s not what you pay a man but what he costs you that counts.” – Will Rogers

As you know if you’ve had to shell out for nearly anything lately, inflation is on the rise. Of course, broadly speaking, inflation is simply costs going up. And this can be driven by a number of dynamics, but one of the most common is supply and demand. Well, we still have enough demand to go around -- but in many areas, not enough supply…

And so we have inflation occurring – more than 6% year over year. The U.S. Bureau of Labor Statistics says that inflation accelerated last March through September worse than any time in 2020. And it’s the worst year-over-year inflation rate in 30 years.

Let’s hope inflation doesn’t go much higher. We can hope, can’t we?

Still, there’s no way this doesn’t sting small businesses like yours. According to a recent survey, more than four out of five small businesses have had to increase prices  – and a good chunk of their customer base is complaining even as profit margins shrink for almost half the companies responding.

Not good at all – and not getting better any time soon, at least as far as anybody can predict. So what can you do?

Your best (and quickest) moves

One common-sense response to inflation: Save money where you can.

Reduce inventory: What you sell is more than the lifeblood of your business – it’s probably also one of your biggest expenses. Yet think about it. Chances are good that a lot of your revenue comes from a relatively few number of items in your inventory.

Try classifying your inventory into three groups based on their value to your business. The “A” group includes your biggest moneymakers, the “B” group is somewhere in the middle, and “C” items make you the least.

Once you’ve figured this out, closely watch the supply chain, especially on your A items. If your suppliers are getting prone to longer or fluctuating lead times, stock up on their items when you can. And if you’re finding a lot of items in your “C” group, maybe consider ditching a few of them.

Improve your expense tracking: This not only helps you see where your money goes, but it also keeps you out of trouble with the IRS and makes sure you take every tax deduction you’ve got coming.

Check with us if you’d like specific opinions on expense-tracking software, but generally, the price of this software will depend on the size of your company.

Whatever you pick, scanning receipts is bound to be better than rooting through your shoebox – and it’ll make a big difference in your annual costs.

Fine-tune your marketing: It’s probably the worst move in the business book to give up trying to acquire new customers when times get tough – thinking like that just makes a tailspin spin out faster. Still, I bet your marketing has a lot of parts that could do with some tinkering. Too often in small businesses, marketing is launch-and-forget.

Make the time to take a hard look at your advertisements, for example. Which ones pull in the customers? Which ones don’t? Work on (or just drop) the clunkers. After all, you’re paying good money for those.

And remember: Keeping customers you already have is always cheaper than advertising to bring in new ones. Customer loyalty also becomes even more important during inflation.

Move to a cheaper workspace: The past couple of years have been a gut reno for the work world. For a lot of workers, the office is now their dining room table. Will this continue?

Who knows … but do you really need to keep shelling out for all those square feet of office space? Don’t forget the price tag of furniture, utilities, and those mountains of Keurig cups.

Cheaper alternatives can include co-working spaces, either for-hire or through a partnership with another local business. Ask around.

Inflation sure isn’t fun, but it won’t last forever (it never has). We’re in this with you and your business, and if we can help at all, please reach out. Stay safe.

www.afitonline.com/appointments

 

To a happy and prosperous year-end...

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012

www.AFITonline.com
https://www.facebook.com/AFITonline

 

We have been attending a LOT of continuing education and getting ramped up for tax season 2022.   We are ready to start taking appointments.

You may schedule a time online at https://www.afitonline.com/appointments or you may call us at 816-220-2001 to reserve your time, appointments will fill up fast!  

We offer both in-person and virtual appointments.  

You will also have access to our secure portal to upload all supporting documentation.

Actual reasons people fall into (and stay in) debt

Today calls for a little bluntness… a bit risky, I know, but necessary.

And I’ll give a caveat here and say that what I’m talking about today has nothing to do with people in truly difficult financial circumstances… You know, balance-sheet-wrecking things completely out of your control. Things like unexpected medical emergencies not covered by insurance or a business situation that takes a detour for the worst… or a deadly tornado ripping through your hometown. (Our hearts go out to those who were affected this weekend - here are some ways you can help those areas hardest hit in Kentucky.)

But for anyone else, it’s time for an early intervention.

Things are expensive no matter what situation you’re in... single, married, parenting, divorced, retiring, etc. And with inflation ballooning right now, it’s certain we’re all feeling some strain on our finances. Some of you may even be working multiple jobs to stay afloat.

But, using any of these as reasons for why you’re struggling to keep money in the bank means there’s a bigger issue lurking behind the curtain.

If you’re up for it, I’d like to put on my “coach” hat today and inspire you to break some bad financial habits and reach for financial security (‘cause I think you owe it to yourself to chart a new path).

I want my clients to think properly about these things ... because when times of crisis do come - however intense or unexpected - it's much easier to work from a place of continued strength than from weakness.

Mike Mead's
"IRS Problems" Strategy Note
Why People Really Go Into Debt
"Knowing trees, I understand the meaning of patience. Knowing grass, I can appreciate persistence." - Hal Borland

We’ve seen all kinds of clients waltz through our doors asking for help to get out from under IRS debt. That’s what we do.

And let’s get this in the open right away: There’s no shame here. We understand that for every "bad financial habit" or trend, there are deeper issues at play. And our job is to help you deal with "what is" -- and not make you feel bad about "what should have been."

The purpose of this note is to wave some flags at you that will be truly helpful. Our goal is to serve our clients by offering help for these kinds of situations.

But perhaps there are a few habits pulling you down right now...

Not budgeting.
Yes, sticking to a budget (or starting one) can be scary, and learning about your true financial situation can be a downer. Frankly, get over it. PLEASE. At the very least get some help with it, find your net worth, add up all your debt, track your spending, and build a budget that reflects your true reality -- not the world you prefer to live in. Only when you face the facts -- by spending the time to manage your money -- will you stop losing ground.

Not paying off debt.
If you’re lacking a plan to conquer your debt, then you're going to do more than "lose ground" -- you'll go broke.

It's time to look at ways to increase your debt payments. Paying just the minimum balance is a sure-fire way to keep the debt around your neck like a noose forever, so dig into that debt by paying it off sooner.

Not saving.
Perhaps you used to be a saver -- and now you're resting on previous good habits. It may be time to INCREASE on that front, or at least return to what brought you upward in the first place. Saving even just a smidgen more of your income is a wise way to get started again. Take a good hard look at your spending patterns, your subscriptions and services, and find ways to cut back.

For example, downgrading your television package -- or canceling it completely -- adds up to money that could be put into high-interest savings or investment account. The idea is to be consistent and set up automatic deposits into a specific account set aside for emergencies and long-term plans. (Again.)

Not resisting the temptation to spend good money on junk.
The marketers for sure love it when you spend your hard-earned money on modern debris. You know... the stuff that's cluttering your house and bursting out of your front door. It's the disposable, upgradeable, and superfluous stuff you buy in a heartbeat because "You’re worth it!"

But it costs. It consumes your space, it can initially make you feel good but can lead to feelings of guilt, and can make you (eventually) broke. Please, learn to identify junk and end the spending spree -- because yes, you're worth it. <smile>

Not earning enough.
This is a toughie. If you've cut the junk, you've made a budget, and you're still inching down your savings, you need to fix the income side of the equation. I've known people with 3 jobs -- THREE JOBS -- to make ends meet. They work their tails off to earn enough money to cover the rent, buy better quality food, and pay off student debt. If need be, they didn't own a car, didn't wear fancy clothing, and didn't wine and dine on the weekends.

The answer here isn't easy -- you'll have to find a way to make more money. Even in a choppy economy, *if* you can swallow your pride, there's always a way. And, with the Great Reshuffle, there are plenty of jobs out there right now for the taking

Bonus, there are more ways than ever before to build something on the side. Leverage that social network of yours and take the entrepreneurial leap.

If any of these resonate with you, then good ... if not, then I do hope that you keep on maintaining the excellent habits that got you here in the first place.

I hope this little dose of "tough medicine" goes down smoother than anticipated. And also, I hope you’ll forgive me for my possible insensitivity. The reality is, I wouldn’t say this if I wasn’t in your corner. If you’re one of my clients doing quite well, huzzah. Keep at it. But sometimes it's important to admit when you're not.

Before the year ends

There are many of our clients for whom this time of year is like their version of the Super Bowl. Some businesses are earning 30-50% (or more) of their yearly revenue in this one month.

Others ... well, this is a normal month -- except of course for all of the holiday craziness.

But for ALL of our clients, this is a time where you can bring home some serious bacon.

And one way you can do so is by making some tax moves before the clock strikes 12 on New Year’s Eve.

Now I get it ... the rush of customers and clients, strange hours, extra errands: It’s a tough time of year to think about tax.

But the calendar waits for no business, and time is getting short to plan your moves.

If you want to talk all of this through and get ahead of the game while you can, we're right here:

www.afitonline.com/appointments

In the meantime, let's dive in.

Mike Mead's
"Real World" Business Strategy Note
2021 Year-End Tax Moves for Your Small Business
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” - Winston Churchill

Get your tax documents together to back the tax moves we talk about here and any others you might take. Consider temporary bookkeeping help through the end of this year and the beginning of 2022.

You’re the boss. If you have employees, you have some special tax preparations to think about concerning tax preparation this year. For one, if you have employees who worked remotely, you should find out ASAP if new laws in the states where these employees worked will create reporting and payment requirements for employment taxes.

The end of the year is also a great time to make sure you’re getting the biggest tax bang out of your company’s retirement plan, anything from a SEP IRA to a Solo 401(k) to the combination of a 401(k) with a defined-benefit pension plan. Believe it or not, you have until the extended due date of your 2021 federal return to establish a qualified retirement plan and fund the plan for this year.

And oh yeah: If you took advantage earlier this year of deferring payment of your portion of Social Security payroll tax liabilities that would have been due from March 27 through Dec. 31, get ready to pay half that deferred amount by the last day of 2021.

Timing’s everything. While we’re on the subject, wringing the most out of the business tax system often comes down to two things: deferment or acceleration.

If you think you’re going to be in a higher tax bracket next year, do all your billings soon and collect on as many as you can before the end of 2021. You want that money sooner so you can be taxed on it in 2021.

A much higher rate on long-term capital gains is also making its way steadily through the catacombs of Washington lawmaking – and since gain on the sale of a business or investment property is generally taxed at this rate, closing such a sale before year’s end might be the safest call.

You bet your assets. There’s no sign that this goody is going to change, but you should know that 100% first-year bonus depreciation is available for qualified new and used property acquired and placed in service in calendar 2021. You might be able to write off the entire cost of assets that you add this year. Regarding vehicles, passenger cars that your company puts into service in 2021 have limited deductibility, but SUVs, pickups, and vans don’t. What a deal.

Or is it? This brings us to a key concept of tax planning. Examine tax breaks for whether they’ll continue: Will they be around next year? Will your tax rate be higher in 2022? You may want to wait and get the break then to lower your 2022 taxable income.

It’s your loss. The pandemic might have made this … well, let’s call it a “robust” area of activity for some businesses in recent years. Hope you weren’t one of them, but if you did get dinged on a few deals there are definitely some ducks you want to get in a row regarding losses.

Did you have bad debts in 2021? You can get a write-off if that debt is wholly uncollectible by the end of the year. Damaged or abandoned property can generate ordinary losses for specific assets; so can some insolvent subsidiaries.

Also, make sure that your business has filed claims for all net operating loss (NOL) carrybacks. You still have until Dec. 31 to file for NOLs originating in 2020.

Credit due. The taxman isn’t completely without heart, and the feds, along with a lot of states and local governments, offer a lot of tax credits for things like research and development, innovation and technology, renewable energy, and investing in low-income communities.

Stroll back through your 2021 memory lane to make sure you’re claiming all the tax credits you might have coming – and, just as important, begin eyeing possible tax credits for your activities planned for 2022.

This is just a sample of moves you can make to save on business taxes before the end of the year. We can also discuss if your company is the right kind of business entity for the best tax leverage or how our good state’s taxes might influence your moves between now and New Year’s.

Give us a buzz. We’d be happy to talk more about the details – and about you. Happiest of holidays.

www.afitonline.com/appointments

 

To more holiday bacon staying in your pocket,

 

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012

www.AFITonline.com
https://www.facebook.com/AFITonline

What are “dissipated assets” and why does the IRS care?

 It’s easy to fall on the wrong side of tax debt when things are tough economically. But what about consistent negligence even when you have the money? Well, that’s another case altogether. And the IRS isn’t prone to playing nice or making modifications with people in that category. Unless you understand how things work early on.

Take my buddy, Randy Realty, for example. He owes the IRS about $100,000.

He got himself in deep. This guy lives commission check to commission check and never sets aside anything from those commission checks to pay his taxes. Like, ever.

But strangely, unlike many people with tax issues, Randy does dutifully file his 1040 return every year and just shrugs and lives with his growing tax debt.

That is, until one day when the state Board of Real Estate Licensing tells him he can't renew his real estate sales license unless he deals with the IRS problem.

After some quick Google searching, Randy learns about something called an Offer in Compromise. With his less-than-average income and that '82 Datsun in the driveway, he figures this might be a solution to his sticky situation.

But as he stumbles his way through the forms in the IRS booklet for doing a reduced settlement offer, he discovers a problem: asset calculations.

See, a few years ago, Randy's father passed away and left him a mint condition 1965 Pontiac GTO. We're talking original paint and only 275 miles on the odometer, garaged its entire life. The cart was re-titled and registered in Randy's name, so he knows the IRS will find it when they go looking into him. The car is currently sitting covered in Aunt Becky's barn.

Randy wants to qualify for that Offer in Compromise but knows the car will become a problem. So he comes up with a solution: He sells the car to his best friend for $40,000.

Hey, sweet, now Randy has $40,000. He can finally afford that kitchen and bath renovation project that he’s been wanting for so many years. Yup, sure makes that $40k disappear in a hurry, especially at today’s plumbing and cabinetry prices.

Then Randy files for an Offer in Compromise.

Unfortunately, Randy never got to reading about dissipated assets, because that's the kerfluffle that he just created for himself.

Merriam-Webster defines dissipate as "to spend or use up wastefully or foolishly." In other words, make it go POOF! and disappear.

The IRS is going to have an issue with this. Why? Because that money should have gone toward his tax debt. The IRS is going to add the $40,000 to Randy's minimum offer amount, but since Randy no longer has that $40k, he won't be able to pay the necessary dollar amount that the IRS is now going to demand.

And if you can't pay the offer, well, then, it will get rejected.

Now, you may think that the above is a ridiculous example. And yes, it is, for purposes of illustration. But in a recent Tax Court case, the sale of a $500 car -- effectively for the scrap metal -- triggered this exact same situation.

Yes, the IRS fought the case all the way to court because of a $500 car. In fairness, other things were going on in the case, but this $500 was definitely a significant sticking point.

This subject of dissipated assets is just one of the many complexities that can arise when you owe back taxes. You need to take these complexities into account very early on when talking to the IRS. If you aren’t aware of them, then you don’t know to bring them.

That’s where we come in.

This just isn’t one of those things that you want to tackle by yourself. If you owe the IRS any amount that you can’t pay, whether it’s $2500 or $250,000, we can help.

To get started, let’s schedule a time to chat:

www.afitonline.com/appointments

Let us take care of the tax mess so you can move on with your life.

 

Warmly,

Mike Mead
www.afitonline.com/appointments