There’s one thing that some people fear more than anything else – a trip to the dentist. It’s the fear of what you could find out and the awful feeling of having your teeth scraped or worse learning you might need a tooth pulled or a dreaded root canal. At the same time we’re all conditioned to believe that seeing your dentist is a twice a year ordeal as proper dental care requires two yearly cleanings. We also dread having our dentist ask us “do you brush twice a day?” or my favorite “do you floss?”. Most of us know the answer to both is “No” but we lie hoping the dentist won’t find out.

Now I know what you’re thinking – what does this have to do with taxes? The answer: everything!

Unlike your dentist most people are conditioned to see their tax professional just once a year. Some will even go years without seeing us with the hope that they won’t need that major tax procedure. I liken it to those who avoid the dentist for years because they still have all of their teeth. The difference between us and your dentist though is there’s no physical pain and our job is to do quite the opposite: make you feel as little pain as possible. At the same time if we are doing our job right we make sure you keep more of your hard earned money. The dentist on the other hand needs to make sure you keep your teeth and sometimes doing this requires you paying a lot more money for their services, not once will a dentist tell you “hey I know a way you can keep more of your hard earned money.”

With that said you still pay us for what we do and sometimes you pay us more than what you would pay your dentist for even the most extreme procedure(think full set of Hollywood quality veneers). The difference being that those celebrity quality veneers will only make you FEEL like a million bucks while a comprehensive “Hollywood quality” tax planning strategy could actually NET you a million bucks in money that would have otherwise been wasted on taxes. Extreme example, I know, but you get the point. Even a basic cleaning costs over $100 and most employer sponsored dental insurance plans will cover this, however, if you look at your premiums you usually pay more than that over the course of the year for the hope that you are covered for the major procedure that could inevitably come up. I once looked at that and saw that the maximum amount covered was about $1500, hardly enough for a big procedure such as a crown, bridge or root canal, all of which cost in the $3000+ range depending on the dentist you see.

Some of the pain of going to the dentist can be seen in reasons you avoid coming to us, your tax professional- here’s 2 examples similar to dental pain(cavities and root canals):

Cavities- those things you can see but don’t decide to do anything about.

This could be something as simple as running a business and not knowing how it is set up or having a retirement plan and not knowing if you have an IRA or 401(k).

Root canal – the deeper issues that don’t manifest itself until there is pain and you need a costly procedure.

This would be the business setup as an improper structure and costing you more in taxes than it saves or a retirement account that is infested with hidden taxes you were unaware of when you opened it.

In conclusion, I hope that you realize that we’re out to help you and at the very least you need to treat us like your dentist and plan for twice a year checkups if not once a quarter. Just like the dentist those checkups are necessary and usually come with a small upfront cost, but unlike the dentist our goal is to give you tax savings or just piece of mind that you’re protected from the dreaded IRS. So don’t wait until the equivalent of a cavity or root canal, get ahead of the game, keep your tax situation pearly white and feel like a million bucks.

Who knows, we might even save you that amount of money so you can spend it on what you really want even if it’s not a Hollywood set of veneers maybe it is a dream family vacation, that hot new sports car you’ve been eying or just a sizable donation to your favorite charitable cause(which would also be a nice tax deduction as well). Bottom line, please plan to see us more than once a year and you won’t regret it.

There’s never a perfect time to start your own business. One of our biggest obstacles is knowing all the legal red tape in actually starting one. In my professional experience I see this as the #1 reason that prevents 1000’s of would be entrepreneurs from taking the leap.

I’d like to start this discussion with a quote by Michael Corleone from The Godfather, Part II: “Keep your friends close, but keep your enemies closer”. Now I don’t necessarily consider the IRS the enemy, however, remaining compliant with their strict guidelines is a daily challenge that I deal with in my business.

Add to that all the free resources they provide, I feelt they make it easier for people to do MY business themselves. That business would be saving you money on your taxes and doing it legally.

As a business owner the most important question you need to ask is “What is MY business?” and you need to find the answer to that before you can succeed.

With that said, much like this website itself, I know through the power of Google I can learn everything I need to design my own website. I also know other facets of web design such as updates, maintenance and optimization for search engine traffic. In fact, I even did that when I started. Why do I mention this? Because that is not MY business. I took time and effort to do something that an expert should have been doing which also took time away from my business, saving people money on their taxes and doing it legally.

Now don’t get me wrong, without a website marketing my services and people knowing who I am I would not be able to do my business. I also learned something valuable from going to countless business networking events. There I heard people go on and on about how to network and build relationships. This is also vital to building a successful business. I tried to do it myself. This again took time away from my business, saving people money on their taxes and doing it legally.

Do you see a common theme here?

In addition to the fear of the legal unknowns you’ve probably had other reservations. Common ones are “it’s too expensive to start a business”, “what if nobody wants to buy what I’m selling”, “will people try to take advantage of me”, etc, etc.

Bottom line: you WANT to start a business. You HAVE the resources out there to do everything yourself(and can probably save money in the process), however, does this take away from your business’ key objective? To serve a need!

Now this need can come in many shapes and sizes from the most noble “I want to start a non-profit to help the most dire in need” to the most vain “I want to use the vices/insecurities of others as a means to get the money I need to buy a fancy house/car/boat/airplane”.

Whatever that need is unless YOUR business IS saving people money on taxes and doing it legally then having an expert whose success or failure depends on “saving YOU money on taxes and doing it LEGALLY” is worth the minimal investment in their services.

If you’re worried about the cost of a good income tax professional here is a free resource to get you started: Starting A Business This Summer? Here’s Five Tax Tips. After checking it out and you’re ready to start a business or even grow an existing one come talk to us so we can make sure you save money on taxes and do it legally:

Also, here’s a great video from the IRS regarding their free resources:

Now in closing, back to why I used that quote above: Professional Ethics!

The code of ethics I adhere to as someone who saves people money on taxes and does it legally requires: “Enrolled agents, enrolled retirement plan agents, or registered tax return preparers, in describing their professional designation, may not utilize the term “certified” or imply an employer/employee relationship with the Internal Revenue Service.”

This means that even though my work depends on the IRS and complying with their rules and regulations, I am in no way in an “employer/employee relationship” with them. As such I need to see them as Michael Corleone saw the rival families. He was good at his business(organized crime), however, I can assure you while I can take a valuable lesson in his business strategy I would go out of business very quickly if I tried to do HIS business especially since it’s the antithesis of mine.

So I ask one last time, what is YOUR business?

When you’re ready to get the answers please call us at 623-240-9545 or shoot us an email through our Contact page(please note I have a service that filters any spam and I know a solicitation when I see it so it goes straight to the delete box. If this is your intention in contacting us please don’t waste your time or mine).

Newsflash “we are available YEAR-ROUND to help with your taxes”. Please don’t limit yourself to thinking we are only here from January through April to assist with your tax pain. In the past we have focused on compliance and we have done an exceptional job given our year over year growth. That said, we feel that compliance and complacency is not enough. The tax laws are always changing and as part of our commitment to you, our loyal clients, we will be reaching out to you in the coming weeks.

What’s the plan?

Did you owe or get a refund last year?

If you owed, it might be as simple as adjusting your with-holdings(a little more from your checks means a lot less come tax time). If you’re used to getting a refund we can also adjust with-holdings so you have more of your money to spend or save throughout the year. Did you know your tax refund is essentially an interest-free loan to the US government?

Do you own a business or are you planning to start one?

This is where we can really flex our “tax muscles” and lift you above your tax pain! With a full-on tax plan we can assure you that you will keep more of your hard earned money to spend as you please(hopefully to reinvest in the growth of your business though) versus again giving the US government more of your hard earned money than they need.

Are you satisfied with our services?

If so, the best way to say thanks is to let your friends know. You can be THEIR hero! What better way to help your friends and family than sharing your greatest resource, your tax pro who helps you keep more of your hard-earned money so you can do the things you love with the people that matter. Wouldn’t it be great if everyone you cared about could do the same?

Was there something we did not provide?

We know nobody’s perfect and the best of us succeed in our adjustments to adversity. We thank you for the opportunity to have served you in the past and want to do what we can to make things right. At the same time our service is not for everyone and if you decide for any reason that we’re not a good fit we can help you to find the right tax professional for your particular needs.

So like the song goes “Get ready, ’cause here we come!” Looking forward to knocking out your tax problems and helping you to move forward in your success and prosperity!

We all know the famous tag-line “there’s an app for that”, but in this day and age it seems that apps themselves have evolved from just games and time-savers to ways for anyone to make money on the side(some of which can actually become full-on business ventures that replace your job). They come in all shapes and sizes from ride-sharing(examples Uber and Lyft) to home-sharing(examples AirBnB and VRBO) to getting a handyman to do chores around the house(example: Takl).

Did you that there’s even one where you can make extra money renting out your personal vehicle? It’s called Turo and I know it very well as I used it to rent my dream car, a Porsche 911 C2S:

Much like my favorite car company Porsche, the economy itself, is evolving(Read: Formula E: Porsche to enter team in 2019, ending Le Mans involvement). Now I know some will say “but hasn’t the 911 had the same exterior design for over 50yrs?” And yes, you would be correct. The 911 is the embodiment of what your mom used to always say “beauty is on the inside” and Porsche engineers have made thousands of improvements on the driving experience over the years that your average Joe won’t see and won’t believe until you actually drive one.

This leads me back to the topic at hand “experience”. It seems with this shared economy anyone with a smart-phone or a computer can sell an experience. Whether it’s a room to stay on a long trip through California(I did this recently), a ride to the airport(also did recently) or as evidenced above, a thrill ride in a dream car.

With all of this though there’s that dreaded consequence – TAXES.

All of this IS income and don’t fool yourself into thinking otherwise! Even worse so it’s that awful type of income that is paid on the dreaded Form 1099 Misc where none of your taxes are withheld(vs. your employer who is nice enough to pay half of your FICA taxes and with-holds the rest as well as allows you to with-hold state and federal income taxes as well).

In addition since most payment is done by credit / debit nowadays if you have your own account like Square Register, Paypal or a bank merchant account you will get a 1099-K form for all of those transactions. (Don’t forget that any cash received is also reportable, you don’t want to be like Nick’s Roast Beef, a staple in the Boston area and example of a successful “mom and pop” that was targeted by the big, bad IRS because they thought cash was not reportable and had to go through an expensive and stressful audit which included an indictment on 17 federal crimes!)

Some feel a 1099 is preferred as you can quote “deduct everything”, but WARNING – YOU CAN’T! Please don’t make the mistake of listening to what your friend who rents his house out on AirBnB, drives for Lyft, rents his second car on Turo and does household chores on Takl does because he supposedly pays no taxes as this poses the obvious question: “Where will he be when you get audited?”

Additionally, to that “CPA”(a loose term in the “shared economy” that seems to be what everyone uses for their “tax preparer” when in reality it’s a specific term for an actual license granted at the state level to accountants who meet specific requirements and NOT all tax preparers are CPAs, then again, not all CPAs do taxes either) who says “don’t worry, you can deduct all of this” please do yourself a favor and RUN: Far and Fast! Back to good old mom, “if it’s too good to be true, it probably is!”

Being paid on a 1099 for sharing your home, giving someone a ride, doing a chore around the house or even renting out your car is just like any other business – some items are deductible and some aren’t. To truly know what is you need the help of a tax professional.

I hope you enjoyed this article or were at least informed, either way please share your opinion in the comments section below.

Finally, if you are benefiting from the shared economy and want to know how it affects your taxes, even if you’re only doing it on the side of a well-paying W2 day job please call us at 623-240-9545 or email at info@jeffersonfranklintax.com and we’ll make sure you stay ahead of the game in the new economy!

In today’s economy the question of “Am I an employee or independent contractor?” comes up quite frequently. This is also true for employers themselves as there are several types of tax that an employer must pay if the people performing work for them are deemed employees as opposed to an independent contractor.

Such examples are Social Security and Medicare Tax(FICA), Federal/State Unemployment Tax(FUTA) and Worker’s Compensation coverage. Additionally, a reason for employers’ motivation to mis-classify an employee is the compliance requirement for offering fringe benefits. At the end of the day a mis-classification can cost an employer – BIG TIME.

Under IRC 3509 if an independent contractor is deemed an employee the employer is subject to not only paying the employment taxes, but an additional 1.5% of the wages paid plus 20% of the employer’s share of FICA taxes(7.65% of wages paid).

An example of penalties assessed can be seen with a mis-classified contractor being deemed an employee who was paid $40,000 in 1 year. In addition to having to pay the employer’s share of FICA(7.65% or $3,060) and FUTA(0.6% or $42) the additional taxes of 1.5%($600) and 20% of the FICA($612) are assessed for a grand total of $4314.

For the employee themselves there’s the added pain of not having taxes with-held and having to pay both Federal and State(if applicable, remember, 7 states do not have an income tax) as well as their share of FICA.

The next question that arises is – why on Earth would an employee want to be paid on a 1099?

Simple – they can deduct work related expenses they wouldn’t otherwise be able to while being paid on a W2.

Back to our example of a worker being paid $40,000 for the year vs. contractor netting $40,000 in gross income to $30,000(75% of gross which would be the result of a lot of unreimbursed expenses- i.e. vehicle costs, cellphone/internet, etc) the difference is as follows:

Employee pays – $4824($3988 Fed + $950 AZ) or $5406($3988 Fed + $1418 IL)

Contractor pays – $6970($2165 Fed + $4239 SE Taxes + $566 AZ) or $7368($2165 Fed + $4239 SE Taxes + $964 IL)

As you can see having to pay the full amount of your own FICA taxes(known as Self-Employment Taxes) makes a huge difference and can be quite painful when you find out that balance due in April(while your employee friends are going on fancy vacations or buying new electronics with their large refund checks).

At least when you are an employee your employer normally has the Federal and State income withheld so come tax time you are usually looking at a small balance owed or even a refund. This does not even take into account under-payment penalties that would be assessed in addition to those balances above if you did not make estimated payments through-out the year.

Since taxes are such an individual situation with many variables it is best to talk to your income tax professional to find out 1) are you an employee or contractor?, 2) what tax strategies can you incorporate to keep more of your hard-earned money?

This goes for employers as well, as evidenced by the excess costs that can be assessed if you mis-classify your employees as contractors.

If you want to avoid the pain of excess taxes and penalties, please give us a call at 623-240-9545 and we will provide you with the relief you need!

I just saved myself money by doing my own taxes. Why do I need you when there is free online software X or even a mobile app that’ll do it and even GUARANTEES it is correct?

You’re right that doing a tax return has become so easy even a neanderthal can do it. You know the ad or there’s one about how you don’t have to be a genius to do your own taxes. So what’s the point of going to a professional? The point is doing your own taxes may be easy, but doing them RIGHT is a whole other story. Just in our own experience we have seen mass marketed free-mium services(you know the ones that say it’s free only to end up charging you a small fee in the end) do the following:

-“double dip” deductions – meaning place deductions that should have only gone on a Schedule A on both Schedule A AND another schedule that did not even apply to the client’s return.

-take a business loss for property that was not even owned by the client’s small beauty care business NOR was it even eligible for a loss on the personal level.

In both cases the client or prospective client saved a few hundred dollars in tax prep fees but ended up costing themselves thousands in taxes and penalties when the IRS came and challenged those so-called “100% accuracy guarantee” self-prepared returns. Even worse than the thousands of dollars owed is the fear and pain of getting those pesky letters from the IRS and not knowing why they were even sent in the first place or what they actually mean. And what happens with that so-called guarantee? They just tell you that it was your input error that caused the problem and you’re on your own. I mean the software did ITS job and made the calculations, even supposedly asked you all the right questions, but YOU still did it wrong and that’s what they emphasize when you go back to them for help on that “guarantee”.

This is why it PAYS to have a professional do your taxes right the first time. As the saying goes “pay a little more now or pay a whole lot more later.” If you want to know if you’re really costing yourself thousands versus savings hundreds please give us a call and we’ll be your financial and tax pain relief.

With the end of the tax season coming on Tuesday April 18th, 2017(normally it is April 15th) a recurring theme has been “I’ll just put it on extension”, but what does this really mean?

Filing an extension, which is commonly done with IRS Form 4868 – Application For Automatic Extension of Time To File US Individual Income Tax Return, is only a 6 month extension on filing and will only prevent “late filing” penalties until the extension date, normally, October 15th.

What this does NOT do is prevent “late payment” penalties from accruing. The good news is late filing penalties accrue at a rate 10x what late payment penalties accrue(5% for each month or part of a month for late filing vs. 0.5% for each month or part of a month for late payment) so by filing an extension you are saving yourself from substantial penalties. In both cases the max amount is 25% of the unpaid balance.

Finally, here’s a great article from the IRS website which explains late filing and late payment fees. In fact, if you do a direct debit from your account you can pay online for free through IRS Direct Pay, however, if you need to use a credit card there are services such as Drake PayTax which charges a 1.85% fee for credit card transactions and a flat fee of $2.85 for debit card transactions. Please note both services are only for FEDERAL and do not cover any state balances owed.

If you have any questions or would like to speak with one of our income tax professionals, please call us at 623-240-9545 or shoot us an email through our contact form.