Alternative Tax Fact #3: When “free” is just another word for up-sell
Posted: 17 Feb 2017 09:43 AM PST
[Alternative Tax Facts #3]
TurboTax always boasts about being free. They call it AbsoluteZero. But once you’ve started your return, it doesn’t take long for them to try to push you into something much more expensive. And they do it in a very clever way, too.
For example, there’s something called “Plus” that costs $29.99. It shows up only after you’ve started your “free” return. It’s not on the TurboTax homepage and we couldn’t find it on the product comparison chart either.
Plus gets you features such as phone support and 24/7 tax return access — things you get from TaxAct for free.
Because Plus isn’t listed on the TurboTax website, you may think you have to upgrade to the Deluxe product to get those same features. Deluxe costs $34.99 for a federal return – an extra $36.99 to file your state taxes. A filer who isn’t aware Plus is available could easily over pay by more than 40 bucks to file a simple return.
Three methods of Determining Reasonable compensation
1. Cost Approach
2. Market Approach
3. Income Approach
Eight Accounting To Do’s before year end
As the owner of a small business you can avoid the kinds of errors that carry implications for your company’s reputation and bottom line by making a year-end accounting checklist. The repercussions of not having up-to-date books or a plan to file taxes -- correctly and on time -- may hinder growth. Plus, if your company reports payroll taxes or contractor 1099s, you may face costly penalties for not meeting requirements. That’s why establishing solid year-end procedures is so important.
No matter what industry you are in, including these eight items in your end-of-the-year rundown keeps your books in order and makes your visit to your bookkeeper quicker and usually less costly.
1. Keep internal operations on point. Double-check the internal controls you already have in place, and -- if necessary -- create fail-safe procedures. These controls include maintenance of accurate financial records, fraud prevention and early embezzlement detection.
2. Keep payroll compliance top of mind. Get employees their W-2 forms no later than January 31, and include accrued bonuses or special gifts.
3. Collect accounts receivable. A strong push to collect as much as possible and clean up reconciliation issues will help you maintain better control over your company’s cash flow. Expediting payments -- before taxes are due will help.
4. Mind the GAAP (generally accepted accounting principles). If you are not sure whether you are running GAAP compliant books speak with a professional as early as possible. This is another area that, if monitored, can save valuable time and money.
5. Send out 1099s. You can save yourself some trouble by collecting W-9s along the way and sending out 1099s early. Failure to send these documents out results in a $250 fine, so don’t delay: 1099s must go to recipients on or before January 31 and to the IRS on or before February 28 (or March 31 if you file electronically).
6. Plan for income tax. Identify tax needs and engage with a tax pro in order to minimize your payments and capture potential savings.
7. Ensure you have the cash for the following year. Get with your stakeholders and compile a budget for the year. Involve investors and anybody else to make sure you are well prepared or well organized for something that is going to happen.
8. Assess the years’ performance and plans for the new year. Review the year’s performance and assess the results against your intended goals and milestones. Look at your figures as a barometer upon which to judge the coming year’s objectives.
All emerging companies want to grow, but too many don’t establish the procedures necessary to make growth happen. If you take action before the end of the year, you can tick these concerns off your checklist and be prepared when taxes come due.
Things You Can Learn from Your Tax Return
1. The reality of your refund
Every year, nearly eight out of ten American tax filers receive a federal tax refund, according to the IRS, the average amount paid is close to $3,000. Many of those Americans are elated to see that money hit their bank accounts as they already have big plans to spend it.
However, for most of those same Americans, receiving that refund means they had about $3,000 too much withheld from their paychecks throughout the year.
Think about it. A tax refund is a refund of your own hard-earned money. It’s not a gift or an extra paycheck from the government. In fact, it’s quite the opposite.
Receiving a tax refund means you made an interest-free loan to the government. That means you had less money during the year to pay off debts, afford those pesky car repairs, make home improvements or to stash away in your retirement fund or your kid’s college savings account.
So, how do you make sure the right amount is being withheld? File a new Form W-4 with your employer. Your employer deducts taxes based on the number of allowances you claim on your W-4.
Therefore, adjusting your withholdings to better match your tax situation as soon as you can
help you avoid temporarily giving it up to the IRS.
2. Tax bills happen
If you had to pay a significant tax bill after you filed your tax return, you have the opposite problem as someone who received a refund.
Owing money is always stressful, but when other people are talking about their big refunds, you start to question what went wrong.
Luckily, there’s a solution to help avoid this unhappy fate next year. Simply file a new Form W-4 with your employer and increase the amount of federal income tax withheld by decreasing the number of allowances.
3. How to pay less tax
After you file your tax return, it’s easy to only focus on the amount of money you owe or the amount you’re getting back in a refund. However, that’s not the whole picture.
Take a look at your return and add together your total taxes. Don’t forget to include Social Security, state income taxes and property taxes.
Knowing how much you pay can be a surprise and serve as a great motivator to learn ways to reduce your tax bill.
Set aside a few minutes to dive into the numbers. Find out if there any other deductions you could take advantage of to help reduce your taxable income.
Should you consider itemizing your deductions next year, or does taking the standard deduction benefit you the most?
4. Tax benefit leftovers
If you entered deductions when you prepared your tax return, check your return to make sure you were able to take the full deduction this tax year.