Figuring out how to pay for your child’s trade school or college education can be challenging, and the earlier you create your plan and begin executing it, the greater your chances are of having the needed money set aside to pay for it. The government provides a variety of tax incentives to help defray the cost of education. Some require long-term planning to provide the most benefit, while others provide current tax deductions or credits. The benefits generally apply to both vocational schools and colleges.
Tax-Advantaged Savings Plans—There are tax-advantaged plans that allow you to save for the cost of college. Although they provide no tax benefit when contributing to the plans, they do provide tax-free accumulation and withdrawals if the distributions are used for qualified education expenses. The earlier they are established, the more you benefit from these plans.
- Section 529 Plans—Section 529 plans (named after the section of the IRS Code that created them) are plans established to help families save and pay for college in a tax-advantaged way and are available to everyone, regardless of income. These state-sponsored plans allow you to gift large sums of money for a family member’s college education while maintaining control over the funds. The earnings from these accounts grow tax-deferred and are tax-free, if used to pay for qualified higher education expenses. The accounts can be used as an estate-planning tool as well, providing a means of transferring large amounts of money without gift tax. With all of these tax benefits, 529 plans are an excellent vehicle for college funding. Section 529 plans come in two types, allowing you to either save funds in a tax-free account to be used later for higher education costs or to prepay tuition for qualified universities. For 2017, you can contribute $14,000 without gift tax implications (or $28,000 for married couples who agree to split their gift). The annual amount is subject to inflation adjustment. There is also a special gift provision allowing the donor to prepay five years of Sec. 529 gifts up front without gift tax.
One nice feature of a Sec. 529 plan is that parents, grandparents, a rich uncle, or anyone else, for that matter, can each make annual contributions to the plan, allowing substantial amounts to be contributed each year.
- Coverdell Education Savings Account—These accounts are actually education trusts that allow nondeductible contributions to be invested for a child’s education. Tax on earnings from these accounts is deferred until the funds are withdrawn, and if used for qualified education purposes, the entire withdrawal can be tax-free. Qualified use of these funds includes elementary and secondary education expenses in addition to post-secondary schools. This is the only one of the educational tax benefits that allows tax-free use of the funds for below post-secondary or college-level expenses. A total of $2,000 per year can be contributed for each beneficiary under the age of 18. The ability to contribute to these plans phases out when the modified adjusted gross income of married taxpayers filing jointly is between $190,000 and $220,000, or between $95,000 and $110,000 for all others.
A Coverdell account is beneficial if there are plans for your child(ren) to attend a private elementary and/or high school.
Education Tax Credits—Two tax credits, the American Opportunity Credit (partially refundable) and the Lifetime Learning Credit (nonrefundable), are available for qualified post-secondary education expenses for a taxpayer, spouse, and eligible dependents. Both credits will reduce one’s tax liability dollar for dollar until the tax reaches zero. The credit is not allowed for taxpayers who file married separate returns.
- The American Opportunity Credit (AOTC) is a credit of up to $2,500 per student per year that covers the first four years of that student’s qualified post-secondary education. The student must be enrolled in a program leading to a degree, certificate, or other recognized postsecondary educational credential for at least one academic period beginning in that tax year. The credit is 100% of the first $2,000 of qualifying expenses plus 25% of the next $2,000 for a student attending a trade school or college on at least a half-time basis. Forty percent of the American Opportunity Credit is refundable (if the tax liability is reduced to zero). This credit phases out for jointly filing taxpayers with modified adjusted gross income between $160,000 and $180,000, and between $80,000 and $90,000 for others.
- The Lifetime Learning Credit is a credit of up to 20% of the first $10,000 of qualifying higher education expenses. Unlike the American Opportunity Credit, which is on a per-student basis, this credit covers the whole family, i.e., it is per return, not per student. In addition to post-secondary education, the Lifetime Credit applies to any course of instruction at an eligible institution taken to acquire or improve job skills. For 2017, this credit phases out for jointly filing taxpayers with a modified adjusted gross income between $112,000 and $132,000, and between $56,000 and $66,000 for others. The credit is not allowed for taxpayers who file married separate returns.
The qualifying expenses for these credits are generally limited to tuition. However, student activity fees qualify if they are paid directly to the educational institution for the student’s enrollment or attendance. For the Lifetime Learning Credit, fees for course-related books, supplies, and equipment only qualify if they are paid directly to the school, while for the AOTC, if these types of expenses are needed for a course of study, they qualify whether or not the materials are purchased from the educational institution. Otherwise, eligible expenses paid for with a tax-free scholarship won’t qualify.
You may qualify for either of these credits even if you did not pay the tuition. (However, otherwise eligible expenses paid for with a tax-free scholarship won’t qualify.) The tax law says that if a third party (someone other than the taxpayer or a claimed dependent) makes a payment directly to an eligible educational institution for a student’s qualified tuition and related expenses, the student will be treated as having received the payment from the third party and, in turn, paying the qualified tuition and related expenses. Furthermore, qualified tuition and related expenses paid by a student would be treated as having been paid by the taxpayer if the student is claimed as the taxpayer’s dependent.
Education Loan Interest—You can deduct qualified education loan interest of $2,500 per year in computing your AGI. This is not limited to government student loans and could include home equity loans, credit card debt, etc., if the debt was incurred solely to pay for qualified higher education expenses. For 2017, this deduction phases out for married taxpayers with an AGI between $135,000 and $165,000 and for unmarried taxpayers between $65,000 and $80,000. This deduction is not allowed for taxpayers who file married separate returns.
We all know that a child’s success in life has a great deal to do with the education they receive. It’s never too early to start the planning process for how you’ll finance the higher education of your child(ren). Please call our office if you would like assistance in planning for your children’s future education.
When you’re running a health and wellness business, you need to focus on the daily operations of your company instead of trying to do everything on your own. Your top priorities likely include keeping your customers satisfied, as well as growing your company. You probably don’t have time to manage the accounts receivable aspect of your business. However, in order to secure the cash flow you need to operate smoothly, you must stay on top of your accounts receivable.
How Outsourcing Can Help
By outsourcing to a reputable U.S. company (like us), you can get the billing services you need performed by a team of experts. Why should you do this? Consider the following reasons:
- No Time: You are a small health and wellness company, and you don’t have the time to do the billing yourself.
- Limited Resources: You are a business of small or medium size, and your staff resources are limited. You can’t afford to hire internal personnel solely for the purpose of managing your accounts receivable.
- You Aren’t Being Paid on Time: While it isn’t unusual for some customers to pay late, you can’t afford to have all of your clients do this. If you have trouble keeping track of which clients currently owe your business, your company is probably losing money.
Hiring Experts Leads to Quality Results
You need to focus on your business. You can’t grow your company if you are trying to do all of the administration and accounting tasks yourself. Managing accounts receivable requires a significant amount of time, effort, and specialized knowledge. You must delegate some of these tasks to professionals who are trained to do them.
We will read the details of your client contracts and bill according to the specific terms. We bill directly to your customers, and we make sure this is always done accurately and in a timely manner. Don’t allow your invoices to go unsent or unpaid due to lack of time and resources. We eliminate the stress of handling your accounts. You are then free to remain focused on the success of your health and wellness company. Contact us today, so we can provide your business with solutions.
If you hire a domestic worker to provide services in or around your home, you probably have a tax liability that you don’t know about – or one that you do know about but are ignoring. Either situation can come back to bite you. When the worker is your employee, your liability includes both withholding and paying payroll taxes as well as issuing a W-2 after the close of the year.
Sure, it is a lot easier simply to pay your worker in cash so as to avoid federal and state payroll taxes – and all the paperwork that goes with them. Your domestic worker will likely be fully cooperative with a cash deal because he or she can also avoid paying taxes. However, if the IRS or your state employment department finds out about these payments, the result could be very unpleasant for you.
Not everyone who performs services in or around your home is classified as an employee. For instance, a plumber or electrician who makes repairs in your home will generally be a licensed contractor; the government does not classify contractors as employees.
On the other hand, the IRS has conclusively ruled that nannies, housekeepers, senior caregivers, some gardeners and various other domestic workers are employees of the people for whom they work. It makes no difference if you have a written contract with the employee; similarly, the number of hours worked and the amount paid do not matter.
You are probably thinking, “Wait a minute” – perhaps everyone you know pays in cash, and none of them has paid payroll taxes or issued a W-2 for a household employee. However, if a worker gets injured on your property or if you dismiss the worker under less-than-amicable circumstances, it’s a pretty sure bet that your household employee will be the first one to throw you under the bus by reporting you to the state labor board or by filing for unemployment compensation.
Even some big-name people have been caught up in this issue. Just recently (as seems to happen every four years), a presidential nominee, Rep. Mick Mulvaney (R-SC), was revealed to have failed to pay more than $15,000 in taxes on behalf of the nanny for his newborn triplets. He subsequently paid the back taxes and was confirmed as Director of the Office of Management and Budget.
Some individuals try to circumvent the payroll issue by treating a household employee as an independent contractor, incorrectly issuing the household employee a Form 1099-MISC.
Here are the correct actions you should take for domestic employees:
- Obtain a Federal Employer Identification Number (FEIN), which you will use in lieu of your Social Security Number when filing the required reporting forms. Note: If, as the owner of a sole proprietorship business, you already have a FEIN, you should use that number instead of requesting a separate one as a household employer.
- Obtain a state ID number for unemployment insurance and state tax withholdings.
- Withhold Social Security and Medicare taxes from the employee’s pay if it exceeds the annual threshold ($2,000 for 2017).
- Withhold income tax from the employee if the worker requests and if you agree to do so.
- File state employment tax returns as required – generally quarterly (although beware that some states require monthly returns) – and make the required deposits for state employment taxes.
- Prepare a W-2 for the employee and a W-3 transmittal; file them by the end of January.
- File Schedule H with your federal individual income tax return, and pay all the federal payroll and withholding taxes (i.e., the federal taxes that you withheld from the employee’s pay, plus your matching share of Social Security, Medicare and federal unemployment taxes). Limited exception: If you operate a sole proprietorship with employees, you may include the payroll taxes of your household workers with those of the business’s employees, but you cannot take a business deduction for those taxes. Generally, it is better to keep the personal and business reporting separate.
Some additional issues to consider are as follows:
Overtime – Under the Fair Labor Standards Act, domestic employees are nonexempt workers and are entitled to overtime pay after working 40 hours in a week. Live-in employees are an exception to this rule in most states.
Hourly Pay or Salary – It is illegal to treat nonexempt employees as if they are salaried.
Separate Payrolls – If you own a business with a payroll, you may be tempted to include your household employees on the company’s payroll. The payments to the household employees are personal expenses, however, and are not allowable deductions for a business. Thus, you must maintain a separate payroll for household employees; in other words, you must use personal funds to pay household workers and instead of paying them from a business account.
Eligibility to Work in the U.S. – It is illegal to knowingly hire or continue to employ an alien who is not legally eligible to work in the U.S. When hiring a household employee who works on a regular basis, you and the employee each must complete Form I-9 (Employment Eligibility Verification). You will need to examine the documents that the employee presents to establish the employee’s identity and employment eligibility.
Other Issues – Special situations not covered in this overview include how to handle workers hired through an agency, how to gross up wages if you choose to pay an employee’s share of Social Security and Medicare taxes, and how to treat noncash wages.
Please call our office if you would like assistance with your household employee tax and reporting requirements or with any special issues that apply to your state.
Have you ever wondered why you need QuickBooks Online Accounting for your small business? Small business owners and the self-employed face so many issues, including cash flow problems and fatigue from trying to do too much. Businessmen with small businesses also find getting and keeping good customers, is a big challenge, as well as are many other issues. With QuickBooks, you will save so much time on accounting for your business, so finances don’t have to be an area of concern.
Issues Small Business Owners Face
Small business owners face major issues every day, so if accounting is not a problem for them, their lives will be much less stressful. Some of the problems involve accounting issues. Some do not. Regardless, not stressing out over accounting makes a business owner’s day more peaceful. They include: Cash Flow Issues
1. Cash Flow Issues
If you are self-employed or own a small business, you may very often face stress from clients that avoid paying you, bills you need to pay immediately, and unexpected outgoings. Problems include how to manage cash flow, budgeting, and bill payments.
Quickbooks can help by making automatic bill payments and creating budgets.
If you have a small business with few employees, let alone if you’re self-employed, you might try to do everything yourself and put in a lot of hours. It’s no wonder you may face fatigue, perhaps even exhaustion, perhaps making you cranky, forgetful, and inattentive to clients.
If you want a little time to rest, for hobbies, or spend time with your families, Quickbooks can help by automating recurring bill payments and invoices and the syncing of data across bank and credit card transactions. You can categorize and reconcile expenses automatically.
3. Finding and Keeping Profitable Customers
How do you find customers with problems only you can solve? You want to spend time researching your customers and their interests and needs and how you can meet them. This should take up a large part of your time. With all the automated features Quickbooks has, there is more time for what’s really important.
4. Motivating Employees
Ensuring your employees are productive and happy is vital to any company’s success. Perks such as free coffee, tea, fruit, biscuits, and staff Christmas parties can cost little but leave a favorable impression. happy and productive means communicating clearly, and being approachable. Asking for employees’ feedback is important too.
How QuickBooks Can Help
With all these and many more issues consuming so much of your time, QuickBooks can help by saving time on your accounting.
Do you want less stress, automated tasks, and for accounting to be less time-consuming? QuickBooks Online Accounting is for you. Would it help if your bill payments and invoices were automated with QuickBooks? In addition, the syncing of data across credit and bank card transactions is possible. Your expenses are automatically categorized and reconciled, so you never have to do every transaction manually. In addition, the software has a huge collection of built-in reports, to save you a lot of time. If you’re worried about safety, be comforted by the knowledge that all your data is backed up automatically. You will know that all your books are current and safe.
QuickBooks offers other time-saving features, including email invoices, which help you get your money quicker. You can also track and accept online payments.
To make your life simpler, QuickBooks also integrates with more than 150 apps to help you do necessary things online. There are apps for eCommerce, payment processors, email marketing, customer relationship management (CRM), payroll services, time tracking, and much more. You can save time by streamlining processes and automatically export, import, sync data in real-time among a variety of services.
For more information, feel free to contact us.
Having a healthy business is a term that we’re hearing more and more of as time goes by. It doesn’t mean having a business that’s in the health industry. Rather, it’s about how you run your business and the way it treats its employees, as well as its customers. A healthy business is a soulful business, that encourages creativity, connection, and big dreams. It cares for its workers and customers and values its purpose.
There are ten signs of a healthy business (actually more, but we’ll settle on ten for now), and we’ve listed them below.
1. A Purpose –
Why are you in the business you’re in? What is your passion, your guiding force? And do those that work with you know the answer to those questions? (The answer should be more than just gaining profits.) Have a Mission for your business that everyone can get behind and work towards to better the world.
2. Clear Vision –
Know what you want to achieve. Have goals, both short and long term, and work diligently towards those goals. Allowing your employees to know those exact goals and how to reach them will help build a healthy working environment and make things move forward more easily.
3. Knowing Your Audience –
Who are you serving? Knowing exactly who your consumers are will create a better understanding of what you should be offering and how you should be offering it. Happy customers are ones that feel respected, which creates happiness in your business and garners more profits.
4. Profits and Value –
Understand what your business is selling (whether that’s products or services). Keep on top of the competition so that you know that your products aren’t being priced at the wrong value. Consistency and professionalism are vital to a healthy business, and a healthy relationship with your customers. It creates credibility and trust.
5. How You Run –
Knowing how your business runs is a very important part of having a healthy business. Be involved in every process, and be aware of the company culture you are building. Customers are more willing to buy into your brand if you’re open about how your business runs and why people are willing to work for your business.
6. Connection and Communication –
Good communication is vital to a strong business. Employees who feel as though they’re heard and understood are better able to connect with each other and yourself, creating an environment that nourishes and creates profits. Strong relationships between staff correlate to a strong relationship with your customers, thus bringing up profits.
7. Create –
Innovation is the key to success, and the key to innovation and creativity is a healthy environment to let it flourish. When you’re creating new and better products or content, you’re setting yourself apart from your competition and building something that much stronger.
8. Your Team –
A team that is strong, both mentally and emotionally, can build a healthy environment. Those that share values, beliefs, and responsibility, are better able to foster a healthy working relationship. Create a team of people that get along, and strengthen that relationship when you can. There’s no reason for people to be stressed at work by having to deal with those they work with. A healthy business has a team that is efficient and positive.
9. Respect –
Respect belongs not only to your company and employees but also to your consumers. Today’s consumers are more and more conscious about social issues, and often times their business goes to those that are respectful of their beliefs. While this can sometimes be dangerous territory to tread, it’s important to be respectful despite personal opinion, while staying true to your own standards. Respect, even in the face of differences, can garner a lot of trust, thus creating a healthier work space.
10. Belief –
If you believe in yourself, your company and your employees, it shows in everything you do and say. Belief garners trust, and trust builds lasting relationships and ideals. Your business should shape your life, and the lives of those that work for and with you. Believing in what you do and who you work with will build your world and your profits.
Your business is as healthy as the effort you put into it. If you’re looking for more information on having a healthy business, feel free to contact us. We’d love to talk it over with you.