Getting a call from the IRS is something most small business owners dread. But if you aren’t careful about the way you approach your taxes, the IRS could be knocking on your door in no time. Listed below are some common tax mistakes made by small businesses. Avoiding these mistakes will make tax time much less stressful.

1. Poor record keeping.  This is one of the most common mistakes that people make, and it is easily preventable. It is essential that you hold on to all of your receipts and records, especially if you are filing deductions. If the IRS reviews your return and asks you for documentation you don’t have, you likely won’t get your deductions.

In addition, it is a good idea to keep ALL of your receipts, even the ones under $75 that you don’t have to file. If you are claiming a lot of small deductions, it will help if you can pull out your receipts as proof. If you aren’t sure whether or not to keep a receipt, just keep it to be on the safe side.

2. Deduction mess-ups.  Many people either want to deduct more than they are allowed, or they miss many deductions completely. What you can and cannot deduct is unique to your business, and if you are unsure when it comes to deductions, consult your CPA.

3. Employees vs. Independent Contractors.  It is imperative to know the difference between these two classifications. Some businesses try to claim full time employees as independent contractors to avoid paying FICA taxes and benefits, whereas other businesses are filing independent contractors as employees. Make sure you know the difference between the two and file accordingly.

4. Not keeping business and personal finances separate.  Keeping separate records of business and personal finances will help you when you file your taxes. The easier you can differentiate business expenses from personal ones the better.
Keep separate business and personal bank accounts. This will greatly help you with your deductions, and it will help keep the IRS off your back.

If you are in need of more tax advice, don’t hesitate to contact me.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Courtesy of The Internal Revenue Service:
WASHINGTON — The Internal Revenue Service today announced cost‑of‑living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2010.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Commissioner annually adjust these limits for cost‑of‑living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

The limitations that are adjusted by reference to Section 415(d) will remain unchanged for 2010.  This is because the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008, and, following the procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced limitation.  For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) will be $16,500 for 2010, which is the same amount as for 2009.  This limitation affects elective deferrals to Section 401(k) plans and to the Federal Government’s Thrift Savings Plan, among other plans.

Effective January 1, 2010, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $195,000.  For participants who separated from service before January 1, 2010, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2009, by 1.0000.

The limitation for defined contribution plans under Section 415(c)(1)(A) remains unchanged for 2010 at $49,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2010 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $16,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) remains unchanged at $245,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $160,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period remains unchanged at $985,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period remains unchanged at $195,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $110,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost‑of‑living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $360,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $16,500.

The compensation amounts under Section 1.61‑21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $95,000.  The compensation amount under Section 1.61‑21(f)(5)(iii) remains unchanged at $195,000.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2010 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $33,000 to $33,500; the limitation under Section 25B(b)(1)(B) remains unchanged at $36,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), remains unchanged at $55,500.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $24,750 to $25,125; the limitation under Section 25B(b)(1)(B) remains unchanged at $27,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), remains unchanged at $41,625.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $16,500 to $16,750; the limitation under Section 25B(b)(1)(B) remains unchanged at $18,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), remains unchanged at $27,750.

The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,000.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) remains unchanged at $89,000.   The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $55,000 to $56,000.   The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $166,000 to $167,000.

The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $166,000 to $167,000.   The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) remains unchanged at $105,000.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

The new Microsoft operating system has been released.  Though it just officially hit the streets to meet  consumers, the general consensus of most people who gained early access to the system is that it’s the best Windows OS yet, not only better than the highly flawed Vista, but more intuitive and reliable than any previous incarnation.

Windows 7 is full of new features and modifications that set it apart.  The overall look and feel of the system is much more polished and refined, and navigation is much simpler.  The design of the system itself is much more intuitive, with advanced desktop enhancements,  such as the customizable taskbar that rivals the Dock found in the Mac OS. Resizing and arranging windows is also much easier, and new features such as Pin and Jump Lists allow you easy access to all your files and programs.

In addition, Windows 7 also boasts enhanced networking capabilities, superior search facilities and better versions of all of their best know programs like the Windows Media Center. Windows 7 also features cutting edge touch-screen technology that allows you to interact with touch screen monitors in a keyboard-less sci-fi like environment.

Like all previous versions of Windows, there are multiple Windows 7 packages available, from the bare bones Starter package to the more powerful Ultimate and Enterprise editions. The Home Premium package is currently proving to be the most popular package, as it is both affordable and powerful.

If you are considering upgrading your business computers to Windows 7, it seems like a pretty safe option. But it is Microsoft, so we are not drinking the coolaid and we know bufs are to come.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Money management can be one of the toughest parts of running a small business.
Because there is so much for them to do, many start up  small business owners end up struggling with this issue. Below are some good money management practices that will help keep your business afloat.

Firstly, it is essential that you pay attention to the cash flow of your business.
While this may seem obvious, it bears repeating. Losing track of your cash flow for just a little while can run your business into the ground in no time.  Make sure that you are paying close attention to your cash flow at all times. If you don’t yet have a balance sheet for your company, create one and review it as often as you can.
Paying attention to the cash flow of your business will save you plenty of hassle down the road, especially when it comes to tax time.

Secondly, it is a good idea keep your personal and business expenses separate.
Even if you are a sole proprietor, it is important to do your best not to mix your business finances with your personal ones.  If you dip into your business budget too often, you could end up negatively impacting your cash flow. Make sure that you have both a personal and business budget, and try your best not to spend any money you don’t have.

Finally, it is imperative that you keep track of your taxes. Many small business owners neglect this part of their business and end up paying major consequences for it down the line. Don’t do this. Instead, keep a keen eye on all of your taxes and make sure you have all of the necessary papers together.

At MEDOWS CPA, PLLC we can help you in this regard. If you are in need of a CPA, please contact us.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

October 17, 2009- New York, New York-  At the Manhattan accounting firm of MEDOWSCPA,  PLLC Managing Member Jonathan Medows is making taxes fun for his clients. He has recently released a new website featuring a Javascript based dress up game entitled “Uncle Sam Dressup”.  The website (www.unclesamdressup.com) allows visitors to to dress up the iconic Uncle Sam in everything from a clown costume to the Pope’s robe.

The game was developed by Mr. Medows and designed by Bob Smith of Normal Bob Smith Design (normalbobsmith.com). Mr. Smith has designed many other such dress up games for a variety of clients. In addition to having it’s own url, the game is also featured on the firm’s website (medowscpa.com).

Mr. Medows had this to say of the game:  ” I did it to take the stress out of taxes and to have some fun.”  Mr. Medows says he wanted to create a more inviting, less intimidating environment for his clients by providing them with something fun to do while they visit his website. To experience the fun for yourself, visit www.medowscpa.com.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Governor David A. Paterson today announced that New York has submitted a plan for federal approval that would provide consumers with rebates for purchasing certain energy-efficient refrigerators, clothes washers, freezers and dishwashers through a program funded by the American Recovery and Reinvestment Act (ARRA). If New York’s plan is approved by federal government, the Great Appliance Swap Out program will allow the State to issue nearly 170,000 rebates totaling $16.8 million.

Under the proposed plan, which is scheduled to be offered during President’s Week in February, 2010, rebates for high-efficiency appliances will range from $50-$105 for a single unit and up to $555 for the purchase of a three appliance package. The plan must be approved by the Federal Department of Energy (DOE), which is expected to take at least 30 days. In addition, the program encourages recycling by offering a larger rebate to consumers who recycle their discarded appliances.

“New York must continue to build a clean energy economy that will cut our energy costs and reduce our greenhouse gas pollution. This program will provide an important boost to the economy, while encouraging consumers all across New York to buy appliances that reduce energy consumption,” Governor Paterson said. “We thank President Obama and our entire Congressional Delegation for working to make this critical stimulus funding available. Without this federal funding, which will provide much-needed economic stimulus in New York, we would not have pursued this program. We look forward to receiving DOE approval and moving forward in offering these cost- and energy-saving benefits to New Yorkers.”

NYSERDA President and CEO Francis J. Murray, Jr. said: “Consumers can save hundreds of dollars a year by replacing an old appliance with the appliances we’ve included in our rebate program. The program will not only help consumers save money and reduce the environmental impact of older appliances, but will help us meet the Governor’s ambitious goals of improving our environment and decreasing our energy usage in the future.”

James R. Sherin, President and CEO of the Retail Council of New York State, said: “New technologies make new appliances for the home more energy efficient. We applaud Governor Paterson and NYSERDA for mapping out a rebate program that will help put those appliances into the homes of New Yorkers who need and want them and for working with the retail industry to ensure that it’s something we can deliver to the consumer. The rebate makes a great incentive for New Yorkers to make their households greener than ever.”

Under the proposed plan, consumers could receive rebates for purchasing eligible appliances individually or in a bundle. Appliances will qualify only if they have earned the ENERGY STAR® label, meaning that they are up to 30 percent more efficient than standard models on the market. Consumers may receive a larger rebate by purchasing three eligible appliances that meet standards issued by the Consortium of Energy Efficiency (CEE) that are higher than ENERGY STAR standards.

Under the proposed plan, customers purchasing appliances would qualify for a rebate of $75 ($105 with documented recycling) for refrigerators, $75 ($100 with documented recycling) for clothes washers and $50 ($75 with documented recycling) for freezers. Rebates are available for dishwashers when they are purchased as part of a three appliance package, which may qualify for a $500 rebate ($550 with documented recycling).

“Thanks to our collaboration with our retail partner network, there will be many retailers offering free recycling to make it easier for the customer to receive the maximum rebate,” added Murray. “NYSERDA is also coordinating efforts with the New York State Department of Environmental Conservation and New York City Department of Sanitation so consumers can also recycle their appliances at local landfills, waste stations and recycling centers.”

Consumers must be New York State residents to be eligible for the proposed rebate program. Appliances can be purchased at any retail location and must meet specified ENERGY STAR or CEE standards. The program is open only to individuals purchasing appliances for their own use. Adequate documentation of recycling must be included to receive the maximum rebate amount and the rebate cannot be combined with other appliance rebate programs from utilities or municipalities. The rebate can, however, be combined with other manufacturer rebates or retail promotions.

Rebate instructions and forms will be available at www.GetEnergySmart.org , through NYSERDA’s hotline (1-877-NY-SMART), or from a participating retailer. The application and proper documentation must be mailed for processing within 30 days of purchase and applications will be processed on a first-come, first-serve basis until funds are expended. Once the application is verified as complete, it will be processed and payment will be issued.

NYSERDA offers homeowners information on how to reduce their energy costs through its “Home Performance with ENERGY STAR®” program which offers strategies for encouraging comprehensive home energy improvements for existing homes. This program has helped more than 27,000 New Yorkers significantly cut their energy usage.

Additional information, including guidelines for the appliance rebate program and other programs to help homeowners reduce energy costs, can be found on NYSERDA’s web site at www.GetEnergySmart.org  or from NYSERDA’s consumer hotline at:1- 877-NY-SMART

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

There is a sales tax deduction available towards the purchase of new vehicles for the 2009 tax year. This deduction is a part of The American Recovery and Reinvestment Act, and it applies to most vehicles, from cars to motor homes and recreational vehicles. However, the deduction is only valid on vehicles that are purchased after February 17, 2009 and before December 31, 2009. So if you would like to take advantage of this deduction opportunity, you should act now.

To qualify for this deduction, the vehicle you purchase must be new. The vehicle must be either an automobile, light truck, or motorcycle with a gross weight of less than 8,500 pounds. Recreational vehicles and motor homes also qualify for the tax, but no weight restrictions are mentioned for them in the law.

The deduction is limited to taxes and fees of up to $49,500 of the purchase of a qualifying vehicle. Also, to qualify for the vehicle sales tax deduction you must have a modified adjusted gross income of $125,000 ($250,000 for joint filers). Individuals with a modified adjusted gross income of up to $135,00 ($260,000 for joint filers) qualify for a reduced deduction. Those who with a modified adjusted gross income of over $135,000 do not qualify for the deduction.

For more information about the vehicle sales tax deduction, contact us.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

If your small business is like most small businesses, you probably operate on a shoestring budget.  And regardless of your budget, we could all use some extra cash nowadays. Listed below are some things that you can do to help save money in your business.

The most obvious advice is to take a look at your expenses. Make a list of all of the things your business is spending money on and evaluate them. What do you really need, and what don’t you need? And can you get what you need for a better price somewhere else? For instance, if your office is spending loads of money every month on ink cartridges, start buying recycled cartridges and bulk printer ink, and you will save at least half of your money.

While evaluating your expenses, take everything into account. Could your business  be at a less expensive location that would still meet the needs of your market?  Could you be paying less in insurance elsewhere? Could you be paying less in interest with a different credit card or bank account? When tax time comes around, are you filing all of your deductions?

If your business has employes, take them into mind as well. If you don’t have a need for employees year round, consider hiring people for temporary or part time work, that way you don’t have to pay anyone during your down time. Depending on your industry, you may be able to find interns who will work for free.

While writing your list of expenses, try to think hard about any way your small business may be wasting money. Think about things like energy costs. Do you leave the lights on when you leave for the day? Do you keep the heat on even when you are gone, the computer plugged in even when no one is there to use it?
Cutting back on energy waste can save your business plenty of cash, and it’s good for the environment too.

If you would like to hear about other ways your business could save some cash, talk to us.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

There is a new tax that requires an estimated tax payment by November 2, 2009.  It applies to employers (ie people who payroll and is paid as part of your payroll processing) and to those who are self-employed and active members of LLCs and Partnerships (ie those people who pay self-employment taxes as part of their tax returns).

Below is an excerpt from an email I sent out in Mid Agust.  The main thing to remember is that if you have self-employment earnings (aka profit) over $10,000 this tax applies to you.  Feel free to reach out to me if you need assistance preparing this estimated tax.   I estimate the prep fee to handle this will be between $50-$150 depending on how long it takes me to prepare this for you.

The metropolitan commuter transportation mobility tax (MCTMT) is a new tax imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD). This department administers the tax for the Metropolitan Transportation Authority. (The MCTD includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.)

For those with payrolls, this tax will be collected as part of the New York State payrolls. For those who are members of partnerships, LLC or self-employed there are additional filing requirements. The tax is .34% (.0034) of your total net earnings from self-employment allocated to the MCTD for the tax year when self-employment earnings (i.e. for partners or members of LLC who are active member of self-employed individuals) are in excess of $10,000. The state is requiring:

• For tax year 2009, your estimated tax payments are due as follows:

• For tax years after 2009, pay estimated tax for each quarter as follows:

In addition, the state now requires a separate tax return to account for this tax. The return for 2009 will be due by April 30, 2010.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

The non-filing of outstanding tax returns can have serious ramifications.  If you have outstanding tax returns, especially those spanning multiple years, please contact us today so we can help you to avoid a similar fate.

Method Man Busted on Tax Rap

(taken from the New York Post)

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses