Tag: CPA

A Small Business Owner’s Guide to Choosing the Right CPA

Clint Weeder

Specializes in business tax planning, investment advisory services, business valuations

Email

Small business owners deal with a constantly changing list of tasks and responsibilities. Having to balance books, prepare for tax season, process payroll, and numerous other financial tasks on top of running your business can take away even more time and cause frustration. Hiring a certified public accountant (CPA) can help you better manage your time, so you can focus on your business operations while having a trusted advisor to help you manage your finances and grow your business. This guide will walk you through why you need a CPA, and how they can benefit your business in and around Norfolk.

Table of Contents

  1. Why Small Businesses Need Certified Public Accountants
  2. How Does the Biden Tax Plan Affect Small Businesses?
  3. 10-Step Tax Year-End Planning Checklist
  4. How to File Self-Employment Taxes for Beginners
  5. How to Use QuickBooks for Small Business in 2022
  6. 4 Ways Tax Advisors Help You Save Money

Why Small Businesses Need Certified Public Accountants

As a small business owner, you already have enough responsibilities to manage. Trying to add the balancing of financial statements, keeping up to date with federal and local tax laws, and maximizing profits can be overwhelming and take focus away from other important tasks. Partnering with a CPA can help ensure that your finances are being taken care of so you are free to focus on growing your business. Here are some reasons why small businesses need a CPA. 

Improve Efficiency 

CPAs can handle all the financial responsibilities that accompany running a business. From bookkeeping, creating year-end reports, or handling the taxes, a CPA will take these time-consuming tasks off your plate so you can spend more time on other aspects of the business operations. 

Increase Accuracy 

CPAs are certified individuals who have gone through training and certification programs designed for these specific tasks. That means they possess a set of tools that most small business owners do not. They understand the laws and regulations around small businesses taxes and know how to navigate the often confusing landscape. 

Saves Money

Understanding how to optimize resources is an essential part of running a successful company. CPAs can provide you with advice on how to file taxes to receive the largest return. There are also plenty of CPA firms that you can outsource rather than hiring a full-time, in-house accountant which will help save you additional funds. 

Provides Greater Insight

CPAs are experts in their field which means they can offer unparalleled insights into how your business is operating year over year. They can assist with big purchasing and hiring decisions to help you make the best decision based on your finances and trends. 

To learn more about how CPAs can help your small business, read this helpful article.

How Does the Biden Tax Plan Affect Small Businesses?

President Biden’s tax plan aims to fix some of the damage that has been caused by the ongoing pandemic and level the playing field for small businesses by imposing higher taxes on large organizations and the wealthy. These changes can be difficult to navigate as a small business owner, so here is a quick rundown of what you need to know. For a more in-depth look at the Biden tax plan, take a look at this helpful guide. 

What’s Included in the Plan?

Biden’s proposed tax plan entails tax proposals under the American Jobs Plan and the American Families Plan. In addition, the administration is involved in making changes to individual taxes that affect income-earning individuals.

Under the American Jobs Plan, Biden aims to allocate $2.3 trillion to building infrastructure and job opportunities for the next eight years. This means higher corporate tax rates. 

Under the American Families Plan, Biden aims to cover education, health care, and child care. This is planned to be funded by increasing taxes on wealthy individuals. 

The Biden administration aims at heavily taxing high-income persons through the proposed hike of 39.6% for both capital gains tax and individual income tax rates. Currently, the top tax rate for individuals starts from $523,601 and $628,301 for married taxpayers filing jointly.

How Does the Plan Affect Nebraska?

Small businesses are more likely to benefit from this tax plan. In Nebraska, 99.1% of businesses in the entire state are considered small businesses. This means small businesses drive Nebraska’s economy and the expected benefits from the tax plan will further elevate their growth. These benefits include:

  • More infrastructure
  • A COVID rescue plan
  • Give a more stable environment for small businesses to operate under
  • Protection from tax increases

What Does This Mean for Small to Medium Sized Businesses?

This plan should be viewed as an opportunity for small to medium-sized businesses that are hoping to scale. One of the advantages is $998 billion in refundable tax credits for low-income to middle-income families. This means more money will trickle to the grassroots level, enabling your businesses to gain leverage over constant market changes.

10-Step Tax Year-End Planning Checklist

Planning for year-end taxes can be an overwhelming process. Oftentimes, small business owners will procrastinate, adding even more stress. Following these 10 steps will help you get ahead and eliminate some of the concern that accompanies this process. 

  1. Set Your Deadline

Setting a timeline and deadline will deter you from procrastinating and will help hold you accountable for getting things done.

  1. Pull Together Financial Records

You’ll need to compile your income statement, balance sheet, payroll documents, bank statements, asset schedules, and inventory records. 

  1. Reconcile Loan Balances

Doing this will add the total amount of liabilities that will reflect at year-end. 

  1. Separate Any Personal Finances Paid From Business Accounts

You should be keeping personal and business records separate but during this time, double-check to make sure they are separated. 

  1. Compile Business Expenses 

Business expenses can be used as tax write-offs. Keep these expenses stored in one place to make it easier to compile them at the end of the year. 

  1. Take Advantage of Depreciation for Asset Purchases

Many business assets lose their value over time and become an allowed deduction during tax season. Working with a knowledgeable accountant can help you determine which assets you can use. 

  1. Note Ownership Changes

A change in ownership can affect the equity of a business which needs to be documented during tax season. 

  1. Summarize Estimated Tax Payments

Estimated tax payments are useful in reducing the tax liability when it’s time to file income taxes. Be sure to list these payments and date periods so they can be accounted for and help reduce your overall tax liability. 

  1. Summarize Year-to-Date Investment Activity 

Investment accounts including IRA and 529 plans need to be tracked. Keep track of your investments and any deductions you make. 

  1. Meet with Your CPA 

Your CPA will be able to gather all the important information you need to file your taxes and they can assist with any questions that may pop up along the way. 

For a more detailed look at these 10 steps, take a look at this helpful guide.

How to File Self-Employment Taxes for Beginners

Of the nearly 25,000 people living in Norfolk, Nebraska, at least 6.5% (or about 1,625 people) classify themselves as self-employed in their own business. This number is expected to continue rising as more people gravitate toward freelance, gig work, and opening their own businesses. 

However, one struggle many self-employed individuals face is filing taxes. The process is more confusing and tedious and can be unclear, leaving you with questions and concerns as tax season approaches. Keep reading for the basics of filing self-employment taxes. 

What Is Self-Employment Tax

Self-employment (SE) taxes refer to the amount of Social Security and Medicare taxes you owe the government. These aren’t the only taxes you are responsible for, but they are mandatory for most self-employed individuals. 

There are two qualifications that require you to pay SE taxes: earning more than $400 or making at least $108.28 as a church employee.

It is also essential to understand what kind of business structure you are filing under as there are different requirements depending on if you are filing under an LLC, a partnership, or sole-proprietor. 

How to File Self-Employment Taxes

To file, you will need your social security number or individual taxpayer identification number. The total amount you will pay depends on your deductions, state taxes, licenses, fees, and permits. However, the SE tax rate is 15.3%. 

Use this formula to calculate your income:

Gross Income — Business Expenses = SE Income

Next, apply the 15.3% rate to determine how much you owe in federal tax. 

If you are filing as a sole proprietor, you will also need to use an IRS schedule C, or form 1040, to report your business’s income or losses. 

Filing your self-employment taxes property is essential to the livelihood of your business. To learn more about filing SE taxes, read this guide. 

How to Use QuickBooks for Small Business in 2022

QuickBooks has become one of the top must-haves in the accounting software space. It is user-friendly and very efficient for small business owners to handle basic bookkeeping and accounting needs. Here are some tips on where to start and how to get the most out of QuickBooks for your small business.

Tracking

QuickBooks has the ability to track different aspects of your business to make your year-end more streamlined. These tracking options include:

  • Creating and tracking invoices
  • Tracking expenses
  • Tracking inventory
  • Tracking mileage

Taxes

Compiling your yearly income and expenses is one of the most time-consuming and tedious tasks when it comes to tax preparation. QuickBooks can help you do this so when tax season rolls around, all you need to do is print your financial statements. 

Payroll

QuickBooks allows you to track and run payroll automatically to save you more time and money. It also offers features to help you track employees’ hours, time-off management, and shift scheduling. 

More small business owners are relying on QuickBooks to assist with accounting services. For more information about how QuickBooks can help you, take a look at this blog.

4 Ways Tax Advisors Help You Save Money

While their responsibilities may seem similar, tax advisors and CPAs are two different resources for you as a small business owner. A tax advisor is specifically trained in tax accounting and law and is more invested in your long-term goals and success, unlike a regular accountant who may only help on one specific project or a certain time of the year. 

How Can a Tax Advisor Help Your Small Business?

Now that you understand what a tax advisor is, it’s time to dive into the ways they can help you and your small business. 

  1. Save You Money

Since tax advisors are experts in taxes and tax law, they know how to save you the most money when it comes time to file taxes. 

  1. Year-Round Advising

Tax advisors are also available to help you year-round. They are familiar with the in’s and out’s of your company and are comfortable giving you advice about different aspects. 

  1. Help Create Wealth Management Plans

These professionals are intimately familiar with you, your business, and therefore your personal goals. This allows them to help you create plans for your future based on your financial goals. 

  1. Help Your Business Grow

Improper financial management can be the ruin of a small business. Tax advisors will help you avoid these detrimental pitfalls, therefore ensuring the long-term success of your organization. 

You don’t need to wait until the end of the year to start focusing on your finances. To learn more about the benefits of a tax advisor, read this informative article.

QuickBooks for Small Business in 2022

Andrew Steffensmeier

Specializes in small business preparation and planning, investment advisory services, business tax planning services

Email

By now, QuickBooks has quickly become the ‘must-have’ accounting software for most small business owners. It’s not only highly-rated but highly efficient. Small business owners can count on it for managing invoices, tracking cash flows, paying bills, and more. 

In fact, Investopedia ranks QuickBooks as the ‘Best Overall’ accounting software for small businesses, citing that it makes bookkeeping more fluid and efficient. They also list that most business owners use QuickBooks because it has a mobile app, is scalable, cloud-based, and easily integrates with third-party applications.

If you haven’t adopted QuickBooks, there’s a good chance it’s because you’re not sure where to start. Here’s a guide on how to use QuickBooks for small business owners to simplify the adoption process.

TRACKING

One of the best components of QuickBooks for accounting is its ability to track important financial records you’ll need for your year-end tax planning checklist. This includes your invoices, expenses, inventory, and even mileage. 

Create and track invoices

QB automatically records your income and can track how much each client owes you. Right off the bat, you know the full amount of each sale, how much you received so far, and what is still owed (and when).

Even better, QuickBooks has built-in tools that assist in collecting payments via payment links and automatic reminder emails. You can also view outstanding invoices to ensure you’re up-to-date on which clients are caught up in payments and which ones you may need to reach out to soon. 

Keep track of expenses

Connect your bank account and benefit from everything from your bank account to your credit cards, being automatically downloaded and categorized in the software. What’s more, you can manually enter in checks or other expenses that can’t be automatically transferred to the software following the transaction. 

You can also add bills to QB to track when they need to be paid and if you have any outstanding bills that need attention right away. This ensures you stay on good terms with all your business relationships. 

Track inventory

QB allows you to track the quantity and cost of your inventory in one place and provides real-time reports and updates throughout the entire inventory process. Not only can you manually input data if you need to, but you can track what’s on hand at any given time to help prevent shortages that could unexpectedly disrupt business. 

QB will also automatically remind you to order more inventory when you are running low, which can make a significant difference between running your business as smoothly as possible and not having supply for demand. 

Track mileage

Whether you need to keep up with mileage in one or more vehicles, the QB app can help by automatically tracking when you are in a moving vehicle for work. All you or your drivers need to do is check user permissions, add the right vehicle and turn mileage tracking on, and have the QuickBooks Online app open when you start driving. 

From there, you can also go back to review, edit, and add notes. Your notes combined with QB’s automatic tracking can really come in handy come tax time when you need to calculate your deductions.

SIMPLIFY TAX SEASON

One of the biggest headaches when it comes to filing taxes as a small business owner is compiling income and expenses. QuickBooks automatically does this for you, so when tax season rolls around, all you have to do is print your financial statements. QB also gives you the option to share your statements with your tax preparer, so they can directly view your numbers and print whatever information they need.

Documents your small business will need to present to an accountant for filing include:

  • Financial statement — cash flow, income, and balance sheet
  • Vehicle use for deductions — QB mileage tracking
  • Capital-asset — traded, sold, and bought assets can be inputted and tracked on QB
  • Home-office expenses — if you use a part of your home for work or meet with customers in your home office
  • Form 1098 — needed for your typical mortgage-interest deduction and your home-office deduction

The type of taxes your small business should be familiar with include income, self-employment, estimated, and excise. Having a solid record of all your accounting income and expenses not only ensures you’re prepared for tax season but makes your accountant’s life much easier as well. 

Tip: Stay up to date on deadlines for filing your small business tax return with a tax calendar. This will save you a substantial amount on preventable late fees and charges. 

MANAGE PAYROLL

QuickBooks has a function to track and run payroll automatically, so you don’t have to do it manually. This means even more cost savings! According to recent research, manual data entries can cost your business as much as $16 or more per invoice — not to mention nearly 20-30% of your annual revenue in inefficiencies. 

QB also has beneficial tracking features that record employee hours, saving you at least 11 hours a month in time spent managing employees:

  • Streamlined payroll and invoicing
  • Real-time reports
  • Job and shift scheduling
  • See who’s working
  • Mobile app with GPS
  • QuickBooks integration
  • Time-off management
  • Alerts and notifications
  • Time clock kiosk
  • Photo attachments
  • Unlimited live customer support, and more if you upgrade

What’s more, hours are automatically added to customer invoices if billable. This way, you and your clients have easy access to the breakdown in costs of your service and how employee hours played into it. This can also inform bidding in the future to ensure you’re pricing your service with the average time spent on similar jobs.

QUICKBOOKS FOR SMALL BUSINESS OWNERS IN THE NORFOLK, NE AREA

Today, more than half of small businesses are using automated accounting software, with many of them relying on QuickBooks to keep records and track business income and expenses. The more you know about how to use it and get started, the better prepared you will be in ensuring you are in compliance with ever-evolving laws and regulations, as well as typical tax preparations. 

If you’re a small business owner in the Norfolk, Nebraska area, contact us at McMill CPAs & Advisors for more expert financial and accounting advice. 

Tax Filing 101: Filing Self-Employment Taxes

Andrew Steffensmeier

Specializes in small business preparation and planning, investment advisory services, business tax planning services

Email

As tax season rolls around, a large portion of the Norfolk population may find it challenging to complete their taxes properly. This becomes especially true as more people venture out of the traditional workforce and into self-employment, taking on more complex filing.

Of the nearly 25,000 people living in Norfolk, Nebraska, at least 6.5% (or about 1,625 people) classify themselves as self-employed in their own business. This figure is expected to rise in the coming years as more workers gravitate towards freelance, gig work, and opening their own businesses. According to Forbes, at least 20% (or 10 million people) in the nation are currently considering doing at least one of the three. 

More often than not, Nebraska business owners feel overwhelmed by the process and need a one-stop shop to find accurate, straightforward guidance on how to file their taxes. Here’s your basic how-to for filing your self-employment taxes as a beginner. 

WHAT IS SELF-EMPLOYMENT TAX

Much like the same Social Security and Medicare taxes withheld from most wage earners, self-employment taxes (SE tax) refer to the sum of Social Security and Medicare taxes you owe the government. It is by no means the only taxes you will have to pay as a self-employed worker, but it is mandatory for most SE workers.

Since it isn’t automatically deducted from your income, there are a few more steps you will have to take to pay these federal taxes that a typical wage earner would not. 

Qualifications

Two qualifications require you to pay self-employment taxes: making more than $400 (not including church earnings) or making $108.28 or more as a church employee. You still qualify for the SE tax if you fall under either (or both) of these qualifications, even if you’re currently receiving Medicare or Social Security support. 

Entity

As you navigate your journey as a business owner, you must understand what business structure you fall under. According to TurboTax, “Whether your company will be a sole proprietorship, an LLC, a partnership, an S-corporation, or C-corporation will affect how your taxable income flows through to your personal tax return.”

If you have an LLC, or a legal business structure, you must file as a sole proprietor, partnership, an S-corporation, or C-corporation. If you’re a sole proprietor, you own your unincorporated business yourself and must report your income and expenses on a Schedule C form. 

A partnership refers to having a business partner, and you can file your business as a partnership or corporation, typically under a Form 1065. Unlike sole proprietors and partnerships, C-corporation is a separate entity, earning special deductions and being taxed at a corporate level. S-corporation is more like a partnership in the sense that your income is on your personal tax return but is still subjected to a set salary and corporate-level payroll taxes. 

What you need

To file your SE tax, you will need one of the following:

  • Your Social Security Number (SSN) or
  • Your Individual Taxpayer Identification Number (ITIN)

If you have lost or misplaced your SSN, you can call (800) 772-1213 to reach the Social Security Administration office. The IRS adds that “The IRS will issue you an ITIN if you are a non-resident or resident alien, and you do not have and are not eligible to get an SSN.” You just need to fill out Form W-7. 

What you will have to pay 

Your SE tax is imposed strictly on the federal level. The total amount you pay will depend on your deductions, state taxes, licenses, fees, and permits. However, the IRS breaks down what you will owe for the SE tax rate as follows:

“The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).”

HOW TO FILE SELF-EMPLOYMENT TAXES

Self-employed individuals who expect to owe more than $1,000 in taxes should file quarterly since no tax is automatically withheld. This will allow you to avoid owing one large lump sum at the end of the year. A tax calendar is incredibly beneficial as a new business owner in Norfolk since it has all four Quarters and the due dates for getting your taxes in.

Calculate Self-Employment Income

Calculate your self-employment income with the following formula:

Gross Income — Business Expenses = SE Income

Keep in mind that after you calculate this figure, at least 92.35% of your earnings are subject to tax.

After determining your income, apply the 15.3% rate

After calculating your SE income, you’ll need to apply your 15.3% SE tax rate to determine how much you how for this federal tax. For instance, if you made $100,000, you’ll owe $15,300.

$100,000 X 0.153 = $15,300

Remember, however, that only the first $142,800 of your earnings is subject to the social security tax.  

IRS Schedule C tax form

An IRS Schedule C, or Form 1040, is used to report your business’s income or loss as a sole proprietor. The IRS qualifies an activity as a business if your primary purpose for engaging in the activity is for income or profit or if you are involved in the activity with continuity and regularity.

To fill out your Schedule C, you will need to make the following calculations:

  1. Calculate how much self-employment tax you owe
  2. Calculate Deductions

When It Gets Too Overwhelming, Consult a CPA

A lot goes into ensuring your self-employed taxes are filled out and filed correctly, and it’s common to get overwhelmed with the process. Working with a CPA (Certified Public Accountant) like McMill CPAs and Advisors will improve your efficiency, increase accuracy, save you money, and offer you expert insight and guidance. 

McMill is here to help Norfolk, Nebraska small business owners file their taxes. When you’re ready, contact us for more information on how we can help ease the burden of tax season.

5 Compelling Reasons Why Small Businesses Need a CPA

Andrew Steffensmeier

Specializes in small business preparation and planning, investment advisory services, business tax planning services

Email

Many small businesses lack the capacity and the financial muscle to manage specific functions effectively. Preparation of financial statements and complying with the federal tax laws are among the most challenging functions that can put small businesses at risk.
​​As a business owner, do you find yourself wondering if your business is maximizing profit? Do you struggle to take advantage of the always-changing tax laws? Is your business running as efficiently as it should?
What’s more, the IRS has a string of tax-related penalties that can result in substantial fines and cripple your business. How do you avoid these penalties while ensuring you’re maximizing your earning potential?
Partnering with a Certified Public Accountant (CPA) can help comply with IRS regulations, improve efficiency, and be accurate in your operations. Here are some of the ways we help business owners in Norfolk and surrounding communities throughout Northeast Nebraska.

1. Improve Efficiency

Preparing the book of accounts, end-of-year reports, or taxes is a complex and time-consuming operation. Businesses without the requisite set of skills cope through experiments and consultation.

Accountants possess a unique set of skills to incorporate historical data, dissect numbers, and give sound financial advice. Certified public accountants can also analyze data for the decision-making process.

Here’s how partnering with a CPA can improve business efficiency.

Take over Financial Tasks: Bookkeeping is a daily task that a business must undertake to track performance and prepare financial reports. The daily entries include entering checks and deposits, invoicing customers, reconciling the bank account, and maintaining other sub-ledgers.

Partnering with an accounting firm takes away the burden and time required to perform these tasks. Consequently, the business owner and the employees can focus on the core operations of the business. In addition, a CPA will take minimal time to prepare the books and other statutory reports, effectively improving business operations.

2. Increase Accuracy

A regular employee or business owner dispenses duties to the best of their knowledge. On the contrary, a Certified Public Accountant operates by following a code of conduct set by the American Institute of Certified Public Accountants, among other professional bodies.

As a result, a professional accountant must demonstrate competence and due care to clients. They must also uphold professionalism and integrity while performing their duties. The accountants can face disciplinary action that includes license revocation for failure to follow the code.

Besides professionalism, a CPA increases accuracy through:

  • Provision of Core Services: A business owner who combines running the operation and doing the work of an accountant is likely not operating at an efficient pace. On the contrary, a CPA specializes in maintaining financial records and statements. A CPA is, therefore, best suited to analyze trends and make sure the books are up to date and accurate.
  • Accurate Accounting: Professional accountants have a set of tools that enhance the accuracy of their work. Some of the items they employ include a double-entry system, trial balances, balance sheets, and financial ratios. Ultimately, an accountant has knowledge, skills, and tools that’ll help your business achieve accurate books and reports.

3. Saves You Money

Running a profitable enterprise is among the top objectives of every business owner. Resource optimization also complements efforts to run a healthy business. Therefore, when you partner with an accountant, the business greatly reduces mistakes that waste money.

Here’s a breakdown of how an accountant can save you money:

  • Tax Advice: The failure to file the proper taxes on time can attract considerable penalties for a business. Tax is also applied differently to entities like corporations, sole proprietors, or partnerships. Accountants, in general, offer essential insights like tax planning, business consulting, deadline management, and transactions that can mitigate your tax bill. These matters affect your bottom line, which is why it’s critical to involve an accountant.
  • Outsourcing: Hiring an internal accountant has additional costs like benefits, welfare costs, and office space. You can bypass the associated labor cost by partnering with a firm that offers you accounting services on demand.
  • Optimize Your Time: Time that is improperly utilized equates to lost money. For example, if you suspend your operations every two weeks to prepare books, you’ll lose an opportunity to close sales or concentrate on your operations. An accountant frees the schedule of an employee or a business owner, effectively saving money.

4. They Are Experts

A Certified Public Accountant undertakes professional exams and is registered independently. As such, CPAs perform their work in conformity with IRS rules and global standards of financial reporting.

Here are some of their skills that can add value to your business:

  • Industry Knowledge: The subscription to professional bodies offers them constant updates and changes in reporting standards. They also work as a network which boosts their knowledge of the practice.
  • Time Management: By partnering with a CPA, you will be able to focus on growing your business by outsourcing the routine financial tasks that a CPA can manage.

5. Gain Unparalleled Insight

An accountant has analytical skills that they can apply to analyze financial data. Business owners can tap on the professional relationship to gain valuable insights on how to improve their businesses.

For example, CPAs can analyze year-over-year trends to determine if you are spending too much on payroll or if a business owner needs to raise their bill rates.

Partner With McMill to Ease Your Operations

A professional accountant brings years of experience, reporting standards, and a supporting team. Therefore, your business will gain from improved efficiency, reduced cost of doing business, accurate financial reporting, and tax planning.

Here at McMill CPAs & Advisors, we are proud to serve Norfolk and all of the Northeast Nebraska community. We treat your family like ours and can’t wait to help you improve your operations. We serve clients ranging from medical, construction, specialty contractors, family farming operations, manufacturers, among others. Contact us for more information.