Carpenter, Evert & Associates Blog

The Role of Audit Services in Detecting Fraud

Tue, 07 Apr 2026 13:05:29 GMT

Audit services play an important role in helping organizations maintain accurate financial records, strengthen internal controls, and reduce the risk of financial misstatements. As businesses grow and financial activity becomes more complex, the need for structured review and oversight increases. One of the key purposes of audits is to evaluate financial information in a way that helps identify inconsistencies, support transparency, and improve overall financial efficiency. Audit processes are often applied in a structured and methodical way, allowing organizations to maintain consistency across reporting periods and better understand how financial information flows through different parts of the business.

Financial Fraud Contexts Overview

Define Fraud In Business Operations

Fraud refers to intentional actions designed to misrepresent financial information or misuse organizational resources for personal or unauthorized gain. These actions can lead to inaccurate reporting, financial losses, and weakened confidence in business operations. Understanding how fraud can occur is an important step in designing systems that help prevent it. In many organizations, fraud risk is also considered alongside general financial risk, especially when establishing procedures for documentation, approvals, and record-keeping.

Financial Misconduct Types Overview

Detect Misstatement Of Financial Information

Financial misstatement occurs when records are recorded inaccurately, whether through intentional manipulation or improper accounting practices. This can affect how an organization's financial position is understood by internal and external stakeholders. In practice, even small inconsistencies in reporting can create challenges when reviewing financial performance over time, making careful record maintenance an important part of the process. Audit services help organizations review these records in a structured way that supports consistency across reporting periods.

Detect Misuse Of Organizational Assets

Asset misuse involves the improper or unauthorized use of company resources. This may include theft, improper expense reporting, or other actions that reduce the accuracy of financial records and impact organizational resources. Organizations often address these risks by maintaining clear procedures around documentation and approval workflows, which can help reduce uncertainty in how resources are tracked and recorded. Audits also support the review of these processes to ensure financial activity is properly documented.

Audit Fraud Detection Role Overview

Review Financial Records

Audit services involve examining financial statements, accounting records, and supporting documentation to ensure that they accurately reflect an organization's financial activity. This process helps identify inconsistencies and supports more dependable financial reporting. It also provides an opportunity to review how financial information is organized and maintained, which can help improve clarity in record-keeping practices. Audit services often serve as a foundation for evaluating overall financial accuracy.

Evaluate Internal Controls

A key part of audit work includes assessing internal controls, procedures, and systems designed to help ensure financial accuracy and accountability. Strong internal controls help reduce errors and improve consistency in financial processes. These controls are often reviewed in relation to how transactions are processed, approved, and recorded, helping to ensure that financial activity follows established internal procedures. Audits play a central role in evaluating how effectively these controls are operating.

Identify Financial Irregularities

Through structured review procedures, auditors can identify transactions or patterns that may require further review. This helps organizations address potential issues early and maintain accurate financial records. In some cases, these reviews may also highlight areas where additional documentation or clarification could improve overall financial organization. Audits support this process by providing a consistent framework for examining financial data.

Support Financial Accuracy

Audit services contribute to improved financial accuracy by ensuring that records are properly maintained and aligned with established accounting standards. This supports clearer financial reporting and better decision-making. Ongoing review can also help reinforce consistent practices across reporting cycles, making it easier to compare financial information over time. According to the U.S. Bureau of Labor Statistics, employment of accountants and auditors is projected to grow 6% from 2023 to 2033.

Financial Review Planning Process

Plan Financial Review Preparation

Audit engagements begin with planning, which includes defining the scope of work and identifying areas that may require closer review. This helps ensure that financial evaluation is structured and focused on relevant risk areas. Planning also supports a more organized approach to reviewing documentation, which can help streamline the overall process and ensure that key financial areas are appropriately considered. Audit services rely on this planning stage to establish direction for the review.

Examine Financial Data

During the review process, financial records are examined to confirm accuracy and completeness. This may include reviewing transactions, supporting documentation, and accounting records to ensure consistency. The process often involves moving through different layers of financial information to better understand how records connect and how data has been recorded over time. Audits apply this examination to support structured financial review.

Use Analytical Review Methods

Auditors apply analytical review methods to compare financial information and identify unusual trends or inconsistencies. These methods help highlight areas that may require additional attention. Over time, these comparisons can also help establish a broader understanding of financial patterns within an organization, which supports more informed review practices. Audits use these methods to enhance structured evaluation of financial activity.

Report And Communicate Findings

Once the review is complete, findings are documented and communicated to management. This helps ensure that financial issues, if identified, are clearly understood and can be addressed through appropriate actions. The reporting process also serves as a record of the work performed, which can be useful for future reference and ongoing financial review. Audit services help formalize this communication process to support clarity and consistency.

Financial Risk Management Overview

Strengthen Internal Financial Processes

Strong financial processes help organizations maintain accurate records and reduce the likelihood of errors. This includes maintaining clear documentation, consistent accounting practices, and effective oversight of financial activity. When these processes are followed consistently, they can also help improve organization-wide alignment in how financial information is recorded and maintained. Audits often evaluate these processes to support consistency.

Support Risk Awareness

Audit and accounting services also support awareness of financial risk by helping organizations identify areas where improvements may be needed. This can include reviewing financial procedures and evaluating operational efficiency. Over time, this awareness can help organizations become more attentive to areas where additional structure or clarification may be beneficial. Audits contribute to this ongoing evaluation of risk-related factors.

Comprehensive Accounting And Advisory Support

In addition to audits, organizations often rely on broader accounting and advisory support to maintain financial stability. These services may include bookkeeping, financial reporting, budgeting assistance, cash flow management, and financial consultation. Advisory services can also support business planning, cost evaluation, risk awareness, and long-term financial strategy. Each of these areas can contribute to a more structured approach to managing financial operations and maintaining organized financial records.

This combination of accounting and advisory support helps organizations maintain accurate records while also improving overall financial structure and planning. Over time, this integrated approach can support more consistent financial processes and provide additional clarity when evaluating business performance across different periods.

Audit services play an important role in helping organizations maintain accurate financial records, strengthen internal controls, and identify inconsistencies in financial reporting. When supported by broader accounting and advisory services, they contribute to more structured financial processes and clearer overall reporting. To learn more about how these services can support your organization, contact Carpenter, Evert & Associates for additional information on our audit, accounting, tax, and advisory offerings designed to support effective financial management.

What to Expect From Expiring TCJA Provisions

Wed, 25 Mar 2026 16:08:04 GMT

The Tax Cuts and Jobs Act (TCJA) includes several key provisions scheduled to expire, potentially affecting a wide range of taxpayers. Understanding these changes is crucial for making informed financial decisions and planning ahead. Certified public accountants can provide valuable insight into how the expiring provisions may influence your tax situation. By seeking professional guidance, you can better prepare for adjustments and protect your long-term financial interests.

Exploring the TCJA and Its Key Provisions

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, was one of the most significant overhauls of the U.S. tax code in recent history. It introduced a range of tax cuts for individuals and businesses, aiming to stimulate economic growth. However, the legislation was designed with certain temporary measures set to phase out by the end of 2025. According to Thomson Reuters, several provisions of the Tax Cuts and Jobs Act of 2017 are set to expire this year unless Congress takes action to extend or make them permanent.

At its core, the TCJA implemented several key provisions that aimed to simplify the tax code and reduce the overall tax burden. For individuals, this included lowering tax rates across various income brackets and nearly doubling the standard deduction. Businesses benefited from a significant reduction in the corporate tax rate, alongside other incentives like the deduction for qualified business income. These measures were intended to boost consumer spending and incentivize business investment.

The TCJA was crafted with specific durations for many of its provisions, leading to inevitable expirations. While some measures were permanent, others were slated for sunset to comply with budgetary constraints and reconciliation rules. This temporary nature has sparked controversy and criticism, particularly concerning the impact on the federal deficit. Critics argue that the tax cuts disproportionately benefit the wealthy, while proponents contend they foster economic growth.

Identifying Individual Tax Provisions Set to Expire

One of the most prominent changes under the TCJA was the modification of individual tax rates. The act lowered rates for almost every tax bracket, effectively reducing many taxpayers' liabilities. These reductions significantly impacted middle-income individuals, enhancing disposable income and spurring consumer spending. However, these lower rates are among the set of provisions scheduled to expire in 2026, resulting in potential increases in tax liabilities if no legislative intervention occurs. As the sunset date approaches, taxpayers should proactively consult with their certified public accountants to devise effective tax management strategies.

The TCJA also brought about notable changes to the standard deduction, nearly doubling it for individual filers. This adjustment simplified tax filing for millions, reducing the complexity and fostering compliance. While it was a boon for many, the increased deduction is temporary and due to expire. Without Congressional action, taxpayers could see higher taxable income as they revert to pre-2017 deduction levels. To mitigate potential impacts, individuals can explore strategic adjustments to their financial planning, ensuring they maximize benefits while complying with regulations.

The child tax credit saw substantial reforms under the TCJA, increasing from $1,000 to $2,000 per qualifying child, offering marked relief to families. This provision doubled the potential credit amount, making a significant difference in take-home pay for many parents. However, similar to other individual provisions, these enhancements are temporary. The reversion could pose financial challenges for families reliant on these benefits.

Examining Business Tax Provisions and Their Expiration

One of the highlights of the TCJA was the reduction of the corporate tax rate from 35% to 21%, aligning the U.S. with other competitive international tax environments. This reduction was intended to foster corporate investment and repatriation of overseas profits, with mixed results. As the expiration date nears, the possibility of increased rates looms, creating a sense of urgency for businesses to evaluate their tax positions. Many experts suggest that failing to extend this provision could lead to reduced competitiveness for U.S. companies.

The TCJA introduced the deduction for qualified business income, directly benefiting pass-through entities such as S-corporations, partnerships, and sole proprietorships. This provision allowed eligible businesses to deduct up to 20% of their qualified income, effectively reducing their tax burden. However, this deduction is one of the many scheduled to sunset in 2026, unless renewed by legislative action. The expiration of this incentive could impact the cash flow and financial health of these entities.

Changes to depreciation deductions under the TCJA incentivized investments in capital assets by allowing immediate write-offs for qualified property. This bonus depreciation policy supported business expansion, encouraging the purchase of equipment and other assets. The expiration will reduce these benefits, impacting cash flow and investment decisions. Business leaders should review their asset acquisition strategies to maximize current depreciation benefits while planning for future adjustments.

Assessing Potential Economic Impacts After Expiration

The looming expiration of key provisions raises concerns about short-term economic outcomes, including a potential slowdown in growth. As individual tax rates increase and business incentives wane, consumer spending and corporate investments could decline. This contraction might lead to lower GDP growth and reduced job creation, impacting individuals and businesses alike. Addressing these challenges requires policymakers to consider mitigating strategies.

Long-term growth projections deserve careful analysis, as the sunsetting provisions could impact overall economic stability. A reversion to pre-TCJA tax rates may discourage foreign investment and prompt the adoption of tax avoidance strategies. Such changes could reduce productivity gains and slow the economic momentum built since 2017. By engaging in proactive tax planning and collaborating with certified public accountants, stakeholders can develop strategies that promote sustainable growth.

The expiration of TCJA provisions might substantially impact income distribution across socioeconomic groups. The retraction of tax benefits could disproportionately affect middle and lower-income households, diminishing progress made toward income equality. As tax liabilities rise for these groups, disparities between wealth classes could widen, perpetuating economic inequities. Tax policy reforms must consider these nuances to balance fiscal responsibility with social equity.

Implementing Strategies for Individuals and Families

Managing tax brackets is a prudent long-term strategy for individuals seeking to optimize their post-TCJA tax liabilities. With the scheduled expiration of rate reductions, taxpayers may encounter increased liabilities unless they strategically align their income reporting. Adjusting salary distributions, capital gains recognition, and deductions can mitigate the impact of potential bracket changes. Engaging with certified public accountants can provide tailored insights into effective bracket management, ensuring compliance.

Estate planning adjustments are crucial as families contend with sunsetting the TCJA provisions affecting the future of wealth transfers. The increase in the estate tax exemption allowed many families to reduce estate transfer tax liabilities significantly. However, reverting to pre-TCJA thresholds could complicate estate planning and necessitate strategic realignment. Collaborating with estate planning professionals can yield effective solutions, balancing current benefits with future uncertainties.

Optimizing retirement contributions before the TCJA expiration requires individuals to maximize available tax-advantaged accounts and adjust their savings plans. Higher tax rates could alter retirement planning dynamics, potentially affecting long-term financial security. Exploring opportunities to increase contributions to IRAs, 401(k)s, and other retirement accounts can provide immediate tax relief and enhance future financial independence. Consulting with certified public accountants and retirement specialists can offer critical insights and help navigate evolving tax landscapes. Contact Carpenter, Evert & Associates to discuss financial options with a certified public accountant today.

The Future of Bookkeeping Services in the Age of Automation

Wed, 18 Mar 2026 09:02:48 GMT

The advent of automation has ushered in a transformative era for bookkeeping services. Traditionally focused on meticulous data entry and detailed checks, the field is now being revolutionized by technology, offering efficiency and accuracy that were once unattainable. Automation tools streamline cumbersome processes, reduce human error, and free bookkeepers to focus on higher-level analytical and strategic tasks. While these advancements offer substantial benefits, they also present challenges including job displacement, data security, and the evolving role of professionals in the field. Businesses and bookkeeping services must adapt to harness these innovations while ensuring compliance, reliability, and sustainable growth.

Automation and AI Integration in Bookkeeping Services

Artificial intelligence (AI) has become a critical component of modern bookkeeping services, providing capabilities far beyond traditional methods. AI can process vast amounts of financial data rapidly, delivering insights and predictions that improve decision-making. Beyond efficiency, AI enhances accuracy by identifying inconsistencies and anomalies, mitigating fraud and reducing costly errors. By integrating AI into their workflows, bookkeepers can shift from routine tasks to strategic roles, providing more value to businesses through analysis and financial forecasting. The adoption of AI strengthens bookkeeping services’ ability to deliver timely and accurate information, creating a competitive advantage in an increasingly data-driven marketplace.

In addition to processing large datasets, AI enables predictive analytics that can forecast trends in cash flow, expenses, and revenue patterns. By leveraging historical financial data, AI systems can provide actionable insights that guide budgeting, investment planning, and risk management. This predictive capability allows businesses to anticipate potential financial challenges and opportunities before they arise, positioning bookkeeping services as integral partners in strategic decision-making rather than merely administrative support.

Moreover, AI-powered automation facilitates real-time reporting, giving organizations up-to-date insights into their financial health at any moment. This immediacy not only supports rapid responses to business needs but also improves compliance by ensuring that financial statements are consistently accurate and audit-ready. By reducing the time spent on manual reconciliations and error-checking, bookkeepers can focus on interpreting data, advising management, and implementing strategies that drive growth, further enhancing the value of bookkeeping services in the digital era.

Streamlining Processes with Automation Software

Automation software has become indispensable for bookkeeping services, simplifying repetitive tasks such as data entry, reconciliation, and reporting. These tools enhance efficiency, reduce errors, and save significant time, allowing bookkeepers to focus on analytical responsibilities. For instance, automated invoicing ensures consistency and accuracy while freeing staff from manual calculations. Small and medium-sized enterprises benefit greatly, as automation levels the operational playing field with larger corporations. Overall, process automation increases productivity, reduces operational costs, and allows bookkeeping services to expand their scope of advisory and strategic functions.

Beyond streamlining routine tasks, automation software enables real-time data integration across multiple financial platforms. This connectivity allows bookkeeping services to maintain a holistic view of a company’s finances, reducing delays caused by manual consolidation and improving the accuracy of financial reporting. By having instant access to updated data, bookkeepers can identify discrepancies sooner, implement timely corrections, and provide actionable insights that inform strategic business decisions.

Additionally, automation enhances scalability for bookkeeping services. As businesses grow and transaction volumes increase, automated systems can handle larger datasets without compromising accuracy or speed. This scalability allows bookkeeping services to support expanding companies efficiently, accommodating growth without requiring proportional increases in staff. Consequently, businesses can maintain robust financial management while optimizing costs, making automation a crucial investment for long-term operational success.

Machine Learning and Reducing Human Error

Machine learning algorithms play a pivotal role in safeguarding the integrity of financial records. By analyzing historical data, these systems can identify patterns and detect anomalies that might otherwise go unnoticed. This not only reduces errors but also ensures compliance with regulatory standards and enhances trust with stakeholders. Predictive analytics derived from machine learning enables bookkeepers to anticipate trends and make proactive decisions. The integration of these technologies helps bookkeeping services maintain high-quality standards while reducing the risks associated with manual data processing and oversight.

Moreover, machine learning allows bookkeeping services to continuously improve their processes through adaptive learning. As algorithms process more financial data, they refine their accuracy in detecting irregularities and forecasting trends, becoming increasingly effective over time. This iterative improvement helps bookkeepers identify potential issues before they escalate, optimize cash flow management, and provide more precise financial guidance. By leveraging machine learning, bookkeeping services can offer clients not only reliable record-keeping but also strategic insights that support long-term growth and informed decision-making.

Cloud Computing and Collaborative Bookkeeping

Cloud computing has fundamentally changed the accessibility and scalability of bookkeeping services. Cloud-based platforms allow remote access to financial data, facilitating collaboration across locations and departments. These platforms offer automatic updates, enhanced data security, and scalable storage, making bookkeeping more efficient and flexible. Businesses can now maintain accurate records and share real-time insights with stakeholders regardless of geography. The cloud also strengthens data integrity through encryption and backups, providing reassurance in an era where cybersecurity is paramount. For bookkeeping services, cloud computing enables more agile operations and better client support.

Benefits and Cost Advantages of Automation

Automation delivers tangible advantages to bookkeeping services and their clients, including increased efficiency, cost savings, and accuracy. Routine manual tasks are reduced or eliminated, allowing staff to focus on analytical work and strategic planning. This efficiency accelerates reporting timelines, improves decision-making, and reduces operational expenses. Automation also enhances financial accuracy by consistently applying predefined rules, ensuring reports are reliable for audits and strategic planning. Scalable automated systems allow businesses to grow without compromising performance, while real-time reporting enables immediate visibility into financial status. The combined effect is a more responsive, cost-effective, and reliable bookkeeping service.

Challenges and Evolving Roles of Bookkeepers

Despite these benefits, the rise of automation introduces challenges for bookkeeping services. Initial technology investments can be significant, especially for small businesses, and staff require training to leverage new systems effectively. Data privacy and security are critical considerations, as financial information remains a prime target for cyber threats. Additionally, workforce transitions may occur as automation reduces the need for traditional data entry roles. However, bookkeepers are evolving into analysts, advisors, and strategic collaborators. They work closely with IT and data teams, offering insights that drive business decisions and support technology integration. Freelance and outsourced opportunities are also expanding, allowing bookkeepers to diversify their client base and provide specialized services in an automated environment.

Preparing for the Future

To thrive, bookkeeping services must invest in technology, infrastructure, and workforce development. Emphasizing data security protocols and robust cybersecurity measures is essential to maintain trust and compliance. Businesses should foster a culture of adaptability, encouraging staff to embrace innovation and continuous learning. Collaborating with technology providers ensures seamless integration of tools like AI, machine learning, and cloud platforms into workflows. By proactively adopting these strategies, bookkeeping services can deliver enhanced efficiency, accuracy, and value to clients. Preparing for the future ensures that bookkeepers remain indispensable in a landscape increasingly shaped by automation.

Automation is reshaping bookkeeping services, offering unprecedented efficiency, accuracy, and opportunities for growth. While challenges such as workforce transition, data security, and initial investment require careful management, the potential benefits far outweigh these concerns. According to industry studies, businesses that adopt automation experience significant improvements in productivity and financial insight. To fully leverage these advantages, bookkeeping services must embrace technology, upskill their workforce, and cultivate a culture of innovation. Carpenter, Evert & Associates offers expert bookkeeping services equipped to navigate this new landscape, helping clients maximize efficiency, maintain compliance, and achieve long-term financial success.

Why More Businesses Are Turning to CPAs for Advisory Services

Mon, 01 Dec 2025 16:35:00 GMT

In today's dynamic business environment, organizations are increasingly seeking guidance beyond traditional support. The reliance on certified public accountants (CPAs) for advisory services is one such trend that has been gaining traction. As businesses encounter more complex economic challenges and face stiffer competition, they find themselves in need of experts who can offer not just financial insight but also strategic advice. With their extensive financial knowledge and analytical expertise, CPAs are perfectly positioned to assist companies in navigating these challenges. This article explores why more businesses are turning to CPAs for advisory services and how their role as strategic partners is evolving in the modern market landscape.

Leverage CPAs’ Deep Financial and Industry Expertise

Certified public accountants bring a wealth of financial expertise and industry-specific knowledge that is invaluable to businesses. Their rigorous training and professional certifications prepare them to interpret financial data accurately and provide actionable insights. With a deep understanding of financial statements, cash flow management, and financial forecasting, certified public accountants help organizations make informed decisions. Furthermore, their experience across diverse industries enhances their ability to tailor advice to specific business environments. This broad knowledge base fosters innovative solutions that address industry challenges while capitalizing on opportunities for growth.

Beyond financial acumen, CPAs benefit from continuous professional education, keeping them updated on the latest industry trends and regulatory changes. This positions them as trusted advisors who aren't only adept in traditional accounting but also in offering strategic insights that help businesses stay ahead in competitive markets. For instance, they can advise on mergers and acquisitions with detailed financial due diligence, optimizing transaction outcomes. As rapid technological advancements reshape the corporate landscape, CPAs' industry knowledge becomes increasingly vital. Their ability to foresee potential disruptions and guide businesses through them underscores the integral roles they play as advisors.

According to Gitnux, nearly 50% of certified public accountant firms have adopted cloud-based accounting solutions. This adoption facilitates remote work and real-time collaboration, allowing CPAs to provide timely and up-to-date financial information. As more businesses operate on a global scale, the ability for CPAs to collaborate in real-time from any location further enhances their value. This technological adeptness not only reinforces CPAs' positions as forward-thinking advisors but also strengthens their abilities to support clients’ needs in a digital age. It ensures they can offer precise, timely advice that aligns with the fast-paced nature of modern business operations.

Utilize Advanced Technology for Real-Time Financial Insights

CPAs are increasingly recognized for their contributions to strategic planning and risk management. Through their detailed financial analyses and projections, they help businesses outline realistic objectives and develop long-term strategies to achieve those goals. Their skills extend beyond number-crunching to include evaluating investment opportunities, identifying potential threats, and recommending preventive measures. In doing so, CPAs provide a comprehensive view of the financial landscape, allowing businesses to align their resources and policies effectively. This strategic alignment is crucial for maintaining competitive advantage and ensuring sustainable growth.

Successful risk management is another area where certified public accountants excel, particularly in identifying financial risks that may affect business operations. By evaluating current risk exposures and potential future scenarios, they guide firms in implementing robust control measures. This proactive approach assists businesses in minimizing losses due to unforeseen events or market volatility. Furthermore, CPAs' understanding of industry trends and economic indicators enables them to predict and prepare for external risks. Their contributions to strategic planning and risk management thus empower businesses to navigate uncertainty with confidence and resilience.

Strengthen Strategic Planning and Risk Management Efforts

Navigating the complex web of regulations is a significant challenge for businesses, and CPAs are invaluable allies in this endeavor. Their extensive training in accounting principles and familiarity with tax laws allow them to guide companies through compliance requirements efficiently. By keeping businesses informed about regulatory updates, CPAs help avoid costly penalties and legal issues. They also assist in devising systems and controls to ensure adherence to applicable laws and standards. This proactive approach to regulatory compliance mitigates risks and reinforces organizational credibility.

In addition to compliance, tax optimization is a service where certified public accountants add tremendous value. Their expertise in tax laws enables them to identify opportunities for deductions and credits, ultimately reducing tax liabilities. This strategic tax planning contributes to significant cost savings and enhances profitability. By anticipating legislative changes, CPAs help businesses adapt their tax strategies accordingly, ensuring continued compliance and optimization. Their knowledge of both domestic and international tax regulations is particularly advantageous for companies operating across borders.

Navigate Complex Regulations and Optimize Tax Strategies

One of the most valuable attributes of certified public accountants is their ability to provide objective and unbiased perspectives. Unlike internal stakeholders who may be influenced by organizational politics, CPAs offer impartial advice rooted in data-driven analysis. This objectivity is crucial for making strategic decisions that align with the organization's best interests. When businesses face difficult financial choices, the independent insights provided by CPAs aid in evaluating options without bias, thereby ensuring sound judgment. Their role as a neutral party facilitates clearer decision-making processes across all levels of an organization.

Additionally, CPAs help foster trust among investors and stakeholders by providing transparent financial reporting and independent audits. This accountability is vital for maintaining investor confidence and enhancing the company's reputation. CPAs’ professional oath to uphold ethical standards further reinforces the trust businesses place in their advisory capabilities. By offering candid assessments and truthfully representing financial situations, CPAs ensure organizational transparency. This transparency is essential not just for compliance but also for sustaining stakeholder confidence and achieving long-term success.

Gain Objective, Unbiased Perspectives for Better Decision-Making

Engaging certified public accountants for advisory services is a cost-effective approach for businesses looking to maximize the value of their financial expenditures. By leveraging their expert insights, businesses can avoid unnecessary costs associated with financial missteps or missed opportunities. CPAs provide comprehensive evaluations that outweigh the expense, translating into better resource allocation and efficiency. They also assist businesses in identifying potential cost-cutting measures and optimizing operations without sacrificing quality. These efforts contribute to an overall increase in profitability and financial health.

Moreover, the broad range of services offered by CPAs goes beyond conventional accounting tasks to include advisory roles that drive business growth. Their value-added services cover areas such as market analysis, process improvement, and performance benchmarking. By helping businesses understand industry benchmarks, CPAs create pathways for continuous improvement and competitive differentiation. Their multifaceted expertise allows organizations to unlock new avenues for growth and development. This holistic approach to advisory services maximizes client satisfaction and engagement.

The increasing reliance on certified public accountants for advisory services is a testament to their pivotal role in modern business dynamics. With unparalleled financial expertise, strategic vision, and commitment to ethical standards, CPAs serve as invaluable partners for businesses navigating complex challenges. Their ability to combine traditional accounting tasks with forward-thinking advisory roles positions them as instrumental in driving business success. As the economic climate continues to evolve, CPAs will remain integral in providing the guidance and insights necessary for sound decision-making and sustainable growth. As firms continue to adopt advanced technologies and expand their service offerings, CPAs are set to further strengthen their position as key advisors in the business world. Reach out to Carpenter, Evert & Associates to learn more about our services today!

6 Reasons to Hire a Certified Public Accountant for Your Taxes

Tue, 14 Oct 2025 17:25:00 GMT

A certified public accountant (CPA) undergoes rigorous education and training, equipping them with an in-depth understanding of tax laws. They are well-versed in federal, state, and local tax regulations, which allows them to handle the complexities of the tax system effectively. Their comprehensive knowledge ensures compliance with all legal requirements, minimizing the potential for costly errors or omissions.

CPAs also bring specialized knowledge in areas such as corporate taxation, estate planning, and international tax matters. This is especially important for individuals or businesses with complicated financial situations that require tailored advice. By leveraging a CPA's skills, clients can make sure every potential tax implication is carefully addressed.

Continuous professional education is another hallmark of the profession. CPAs are required to take courses and seminars to keep their knowledge current, staying updated on changes to tax laws and regulations. This commitment to lifelong learning guarantees that clients receive accurate, timely advice to maximize tax savings and maintain compliance.

1. Accuracy and Attention to Detail

CPAs bring a high level of precision to tax preparation, reducing the risk of errors that could trigger IRS scrutiny. They carefully review financial documents and confirm that all information is correctly reported. This meticulous attention to detail gives taxpayers peace of mind knowing their return is both accurate and compliant.

The process followed by a certified public accountant is systematic and thorough. It often involves cross-checking and verifying data to make sure nothing slips through the cracks. This approach helps protect clients from potential penalties while also improving the chances of maximizing eligible deductions.

Their expertise in handling tax records with care ensures filings are error-free and properly documented. By staying organized and diligent, CPAs help maintain good standing with the IRS. This focus not only prevents mistakes but also enhances long-term financial outcomes.

CPAs also utilize advanced tax software and analytical tools that enhance accuracy while reducing human error. These resources allow them to identify discrepancies quickly, spot trends in financial data, and streamline the reporting process. By combining technology with professional judgment, a certified public accountant can deliver highly reliable results that would be difficult for most taxpayers to achieve on their own.

Another advantage of working with CPAs is their ability to recognize inconsistencies before they escalate into larger problems. For example, they may catch missing documentation, incorrect figures, or overlooked forms during the preparation phase. Addressing these issues early prevents unnecessary delays and protects clients from receiving notices or penalties from the IRS. This proactive attention to detail provides both confidence and convenience.

In addition to preparing accurate returns, CPAs often help clients establish better recordkeeping habits for future tax years. They can recommend systems for organizing receipts, categorizing expenses, and tracking deductions throughout the year. This guidance simplifies the process when tax season arrives and reinforces a cycle of accuracy and compliance year after year.

2. Time and Stress Management

For many individuals, handling taxes is overwhelming and time-consuming, especially when financial circumstances are complex. Hiring a certified public accountant allows taxpayers to delegate these responsibilities to a professional, freeing up time to focus on personal or business priorities. This delegation also improves efficiency during filing season.

Tax season often brings significant stress due to confusing forms and strict deadlines. CPAs alleviate this stress by overseeing the process from start to finish, providing reassurance that filings will be accurate and completed on time. Their ability to manage sudden changes in tax details further reduces stress and ensures smooth processing.

By streamlining tax preparation, CPAs make filing less intimidating. Their systematic approach keeps the process organized and manageable, even under tight deadlines. This combination of time savings and reduced stress is one of the strongest arguments for hiring a CPA.

Beyond immediate time and stress relief, working with a certified public accountant fosters long-term confidence in financial management. Clients know that each year their taxes will be handled with professionalism and consistency, reducing the uncertainty that often surrounds filing season. This dependable support not only simplifies annual obligations but also builds a trusted relationship that benefits future planning and decision-making.

3. Deductions and Credits

Another advantage of hiring a certified public accountant is their ability to identify deductions and credits. CPAs thoroughly examine a taxpayer’s financial situation to uncover opportunities that may not be obvious. This can lead to substantial savings by reducing taxable income.

CPAs also guide clients through the sometimes confusing process of applying tax credits. They explain which credits apply, how to claim them, and how they affect overall liability. This level of guidance makes sure taxpayers take full advantage of available opportunities.

In addition, CPAs provide forward-looking advice. They monitor changes in the tax code and proactively suggest strategies to minimize liability in the future. This planning is especially valuable for long-term savings and financial growth.

4. Support During Audits or Inquiries

Few things are more intimidating than facing an IRS audit without professional help. CPAs hold “unlimited representation rights,” which means they can represent clients in audits, appeals, and collections. This gives taxpayers strong advocacy during stressful proceedings.

Preparation is another area where CPAs excel. They gather and organize the required documents, creating reports that demonstrate compliance with tax laws. This preparation helps minimize disputes and simplifies the audit process.

When responding to IRS inquiries, CPAs provide accurate and timely answers that protect their clients’ best interests. After an audit, they also advise on necessary adjustments, helping clients avoid similar issues in the future. Their ability to provide ongoing support makes audits far less overwhelming.

5. Long-Term Financial Planning and Advice

Beyond tax season, CPAs are valuable partners in financial planning. They assist with setting long-term goals and developing strategies that align with future aspirations such as retirement, property purchases, or investments. Their input supports financial stability over time.

For retirement and investment planning, CPAs analyze tax implications to make sure contributions and strategies are efficient. Their advice helps clients prepare for the future while reducing unnecessary tax burdens.

Business owners also benefit from their insight. CPAs evaluate financial performance, recommend adjustments, and provide guidance on tax-smart growth strategies. Their continuous assessment of financial health keeps individuals and businesses on track toward meeting financial goals.

6. Trusted Guidance for Taxes and Beyond

According to the National Association of State Boards of Accountancy, CPAs remain one of the most trusted financial professionals due to their strict licensing requirements and continuing education. This trust extends beyond filing taxes, as many individuals and businesses rely on them for ongoing financial decision-making.

By combining technical expertise with long-term planning, CPAs become more than tax preparers—they serve as partners in achieving financial success. Their advice extends into areas such as estate planning, risk management, and strategic investments, helping clients secure a stronger financial future.

Hiring a certified public accountant offers clear benefits, from accuracy in tax filing to long-term financial planning and audit support. Their knowledge, attention to detail, and ability to uncover savings make them an invaluable partner for both individuals and businesses. With their guidance, taxpayers gain peace of mind, reduce stress, and maximize opportunities for growth.

At Carpenter, Evert & Associates, we're committed to helping clients achieve their financial goals while managing their tax obligations with confidence. If you’re ready to experience the difference a CPA can make, reach out to us today and take the next step toward greater financial security.

5 Spend Management Challenges for SMBs and How Your CPA Can Help

Thu, 09 Oct 2025 16:07:00 GMT

Small and medium-sized businesses (SMBs) often face unique challenges when it comes to spend management. Efficient spend management is crucial for maintaining cash flow, optimizing expenses, and ensuring long-term viability. This article explores the primary spend management challenges for SMBs and highlights the ways a Certified Public Accountant (CPA) can help business owners overcome these hurdles. Advanced spend management can transform a business's bottom line by creating opportunities for cost savings and improved budgeting. By leveraging the expertise of a CPA, SMBs can significantly enhance their financial health.

1. Inadequate Budgeting and Forecasting

A significant challenge many SMBs face is inadequate budgeting and forecasting. Often, businesses underestimate the importance of precise budget planning, leading to financial mismanagement. An effective budget acts as a financial roadmap, setting clear financial goals and determining the necessary actions to achieve them. Without accurate forecasting, businesses may find themselves struggling with cash flow gaps, making it difficult to maintain their operations. Engaging a CPA can bridge these gaps by providing expert insights and strategies tailored to the business's financial landscape.

Developing a detailed budget plan is a quintessential part of effective spend management. This involves scrutinizing past financial data and anticipating future financial needs. SMBs should consider market conditions, seasonal trends, and upcoming expenses while crafting their budgets. A robust budget not only aids in allocating resources efficiently but also positions businesses to take advantage of unforeseen opportunities. CPAs are skilled in crafting comprehensive budget plans that are adaptable to changes, helping businesses to maintain flexibility and resilience.

Forecasting cash flow needs is critical for ensuring that businesses can meet their financial obligations. Effective cash flow forecasting involves predicting receipts and disbursements over various time periods. By doing so, businesses can identify potential cash shortages or surpluses in advance, allowing for proactive management decisions. This process can be complex, requiring a nuanced understanding of market dynamics and business cycles. CPAs play a pivotal role in this area by providing in-depth analysis and projections, enabling SMBs to prepare for future financial scenarios confidently.

2. Uncontrolled Operating Expenses

Uncontrolled operating expenses are another significant hurdle for SMBs. Often, businesses have areas of excess spending that go unnoticed until financial issues arise. Identifying these areas requires a thorough examination of expenditures and a commitment to cost optimization. Understanding spending patterns can help businesses allocate resources more efficiently and curtail unnecessary costs. CPAs have the expertise to analyze expense patterns thoroughly and recommend cost-saving strategies tailored to the business's needs.

Implementing cost-control measures can greatly enhance a business's financial performance. SMBs need to adopt methods such as negotiating better terms with suppliers, reducing waste, and optimizing resource utilization. These measures require strategic planning and consistent monitoring to ensure their effectiveness. With a CPA's guidance, businesses can establish robust cost-control practices that align with their financial objectives. CPAs offer valuable insights into best practices and innovative solutions, helping businesses achieve significant cost reductions.

Technological advancements offer SMBs tools to track their expenses efficiently and in real-time. Implementing systems that provide timely financial data can help businesses make informed decisions swiftly. Technology aids in automating repetitive tasks, thus saving time and reducing the risk of errors. Regular audits of these systems ensure their accuracy and reliability. CPAs are adept at integrating technology into financial processes, equipping SMBs with the right tools to manage their operating expenses more effectively.

3. Cash Flow Management Issues

Cash flow issues are a prevalent concern for many SMBs, significantly impacting their ability to sustain operations smoothly. Identifying cash flow patterns is a crucial first step toward managing this issue. By examining trends in revenue and expenditures, businesses can gain insights into their cash flow cycles and periods of high or low liquidity. Proactive cash flow management allows businesses to optimize cash reserves and reduce the likelihood of financial shortfalls. CPAs are instrumental in helping businesses analyze these patterns, providing expert advice on effective cash flow strategies.

Late payments and receivables can disrupt cash flow, creating financial bottlenecks for SMBs. Addressing these issues requires establishing efficient invoicing processes and clear credit policies. Ensuring that payment terms are communicated and enforced minimizes the risk of late payments. Effective management of accounts receivable is vital for maintaining a steady cash flow. CPAs can assist businesses by designing systems that enhance collection processes and reduce the incidence of overdue payments.

Efficient management of payables is equally important in cash flow optimization. Businesses must balance the need to maintain good vendor relationships with the objective of preserving cash reserves. Managing payables involves prioritizing critical payments while negotiating favorable terms for others. Establishing a cash reserve is also essential, serving as a financial buffer during challenging periods. CPAs provide invaluable guidance in these areas, ensuring that businesses maintain liquidity and financial stability amidst changing circumstances.

4. Invoice and Billing Challenges

Effective management of invoices and billing processes is critical for SMB financial health. Streamlining the invoicing process can prevent delays and errors, ultimately enhancing cash flow. Adopting systematic billing practices ensures that invoices are generated and delivered promptly. Delays often arise from manual processes, which can be mitigated by automating routine tasks. CPAs provide strategies to streamline billing procedures, thus minimizing latency and errors in the invoicing cycle.

Ensuring timely billing is essential for maintaining cash flow, yet many SMBs struggle with this aspect. A proactive approach to billing, including regular follow-ups and timely reminders, can significantly reduce the incidence of late payments. Leveraging software solutions can expedite the billing cycle, providing businesses with more control over their revenues. Automating billing and collection systems not only enhances efficiency but also improves accuracy, leading to better financial outcomes. CPAs play a key role in integrating these systems into existing business frameworks, facilitating smooth transitions and improved billing processes.

Invoice discrepancies can lead to conflicts and delays in payment receipt, affecting business relationships and cash flow. Mitigating these discrepancies involves double-checking data entries and ensuring that invoices are clear and detailed. A CPA can assist in developing processes that minimize errors and clarify invoice terms, reducing the potential for disputes. According to CPA.com, while 72% of SMBs want spend management services, only 34% of accounting firms currently offer them, highlighting the critical need for CPA involvement. CPAs help businesses establish consistency in their invoicing practices, enhancing their client relationships and financial stability.

5. Vendor and Supplier Management

Strong vendor relationships are vital for optimizing supply chain efficiencies and negotiating favorable terms. Building trust with vendors can lead to cost savings through bulk purchasing and discounts. It also enhances the flexibility and reliability of the supply chain, allowing businesses to respond more effectively to market demands. A CPA can provide strategic insights into how to manage supplier dynamics, ensuring that vendor agreements are mutually beneficial. CPAs help businesses craft strategies that prioritize long-term partnerships and financial advantages.

Evaluating supplier contracts is crucial for ensuring that terms are competitive and align with the business's financial objectives. Businesses must scrutinize contract terms to identify opportunities for improvement or renegotiation. A thorough evaluation can uncover areas where costs can be reduced or payment terms improved, impacting overall spend management positively. CPAs are experienced in contract analysis and can offer recommendations that strengthen vendor relationships while managing costs effectively. Their expertise ensures that contracts contribute to sustainable financial management.

Through strategic insights and expert advice, CPAs empower SMBs to achieve financial health and sustainable growth. Engaging a CPA isn't just about managing spending; it's about building a foundation for long-term success and resilience in ever-changing business environments. Connect with Carpenter, Evert & Associates today to learn more about how our experienced team can help.

How a Tax Service Can Help You Stay Ahead of Tax Changes and Laws

Mon, 04 Aug 2025 18:13:00 GMT

As a small business owner, staying ahead of tax changes and laws is essential to maintaining a healthy financial future. With constantly evolving tax regulations, it can be challenging to keep track of everything. This is where a professional tax service, such as a CPA, becomes invaluable. A CPA can offer you expert guidance and ensure that you remain compliant while maximizing your business’s tax benefits.

Staying Updated on New Tax Laws

Tax laws are continually evolving, and it can be difficult for small business owners to keep up with these changes on their own. A tax service can help you navigate new tax regulations, providing timely updates on any changes that may impact your business. A CPA can advise on new credits, deductions, or tax obligations that you might not be aware of. Their expertise will help prevent costly errors that could arise from missing important changes in tax laws.

Planning for Tax Season

Tax season can be overwhelming for small business owners, especially if you're not prepared for potential changes in tax laws. With a professional tax service by your side, you can plan ahead for upcoming tax seasons. A CPA can assist in forecasting your tax liabilities based on any recent law changes and help you adjust your business practices to minimize your tax burden. By planning strategically, you can avoid surprises and position your business for long-term financial success.

Ensuring Long-Term Financial Health

In addition to staying compliant with tax laws, a tax service can help you manage your business’s finances for the long term. By offering advice on tax strategies, savings, and business deductions, a CPA can help you make informed decisions that positively impact your business’s financial future. According to Reuters, the National Federation of Independent Business reported that its Small Business Optimism Index rose to 105.1 in December 2024, the highest level since October 2018, showcasing the importance of staying proactive in managing finances.

Staying ahead of tax changes and laws is critical to the success of your small business. A tax service provides the necessary expertise and up-to-date information to ensure your business remains compliant and financially sound. By working with a CPA , you can navigate the complexities of tax regulations, plan effectively for tax season, and secure your business’s long-term success. Don’t wait for tax issues to arise—partner with a tax service to stay ahead of the curve. Want to make sure your taxes are done the right way? Call Carpenter, Evert & Associates to learn more about our services.

Should You Hire A Tax Accountant Online or In-Person?

Fri, 02 May 2025 15:49:00 GMT

As tax season looms closer, small business owners and individuals alike face the crucial decision of how best to manage their tax obligations: should they hire an online tax accountant or opt for the traditional in-person approach? Each option presents its own set of advantages and potential drawbacks, varying from convenience and cost to personal interaction and security. Understanding these factors is essential in making an informed decision that best suits your needs.

Offer Convenience

One of the primary benefits of hiring an online tax accountant is the convenience it offers. Without needing to schedule in-person meetings, business owners can easily communicate with their accountant via email or video calls from the comfort of their office or home. This model is especially appealing to the tech-savvy generation and those who travel frequently. According to Truelist.com, 89% of small business owners would work with online business accountants, indicating a strong preference for the flexibility and efficiency that online services provide.

Provide Personalized Experience

On the other hand, hiring an in-person tax accountant can provide a more personalized experience. For individuals who prefer face-to-face interactions, being able to discuss complex tax issues in person can enhance clarity and trust. In-person meetings allow for a deeper relationship to develop, which can benefit clients looking for tailored advice and guidance throughout the year, not just during tax season. Furthermore, some people feel more secure discussing confidential financial matters in person, alleviating any concerns about data privacy.

Consider Cost

Cost considerations can also influence the decision between online and in-person accountants. Generally, online tax services might offer more competitive pricing due to lower overhead costs. This is attractive to budget-conscious small business owners looking to maximize their resources. However, some may argue that the potential savings could be offset by the greater depth of services and advice that an in-person accountant might provide, which could result in better financial positioning in the long run.

Choosing between an online or in-person tax accountant depends largely on your individual preferences, business needs, and financial considerations. By weighing the importance of convenience, personal interaction, cost, and security, you can make a decision that aligns with your circumstances and goals. Ultimately, whether online or in-person, the key is to find a reliable and experienced accountant who can effectively manage your tax obligations. If you're looking for a tax accountant, don't hesitate to contact Carpenter, Evert & Associates today!

Why Your Small Business Would Benefit From a Certified Public Accountant

Tue, 11 Mar 2025 13:24:00 GMT

Starting a small business is a thrilling endeavor filled with dreams of growth and success. However, managing the financial aspects can be one of the most daunting tasks for entrepreneurs. This is where a Certified Public Accountant (CPA) can bring their expertise to the table. By leveraging the skills of a CPA, your small business not only ensures compliance and accuracy in financial reporting but also gains a significant edge in strategic planning and decision-making.

Ensuring Compliance and Tax Efficiency

One of the primary advantages of hiring a CPA is their expertise in maintaining accounting integrity and ensuring compliance with the latest tax laws and regulations. A CPA can help you navigate the complexities of tax filing, helping you to minimize liabilities and operate within the bounds of the law. This not only saves your business from potential legal troubles but also optimizes your tax expenditure, leaving more room for reinvestment into your business.

Data-Driven Financial Insights

Moreover, CPAs bring unparalleled financial analysis capabilities to your small business. They have the skills to provide data-driven insights that can guide critical business decisions. According to Statista, the revenue generated by accounting services in the United States reached 145.7 billion U.S. dollars in 2023, highlighting the growing reliance on professional accounting services. With a CPA, your business can tap into this wealth of analysis, providing clear, actionable insights that drive sustainable growth.

Strategic Business Planning

Beyond the numbers, CPAs play a crucial role as strategic advisors. They help in crafting business strategies that are informed by financial realities, ensuring that your plans are achievable and aligned with your financial goals. By developing a deeper understanding of your financial position, a CPA can help set realistic budgets, forecast future trends, and even uncover new growth opportunities that you might not have considered before.

In conclusion, partnering with a Certified Public Accountant offers numerous benefits that extend far beyond basic bookkeeping. From ensuring tax compliance to providing strategic financial insights, a CPA is an invaluable asset to any small business looking to thrive in today's competitive environment. Investing in a CPA ultimately empowers your business to make informed decisions, ensuring a stable and prosperous future. Call us at Carpenter, Evert & Associates today to get started.

What to Look For When Choosing a Business Tax Accountant

Fri, 27 Dec 2024 18:50:00 GMT

Finding the right business tax accountant is essential for any company that wants to navigate complex financial landscapes and stay ahead of its competitors. Selecting a professional who truly understands your business can lead to better financial decisions, more accurate tax filings, and improved long-term growth. According to Forbes, an accountant’s rate can range from below $37 to more than $400 per hour, so it’s worth taking the time to find someone who offers real value.

Relevant Experience

Experience is often the first thing to consider. Does the accountant have a track record of working with businesses similar in size, industry, or structure to yours? An accountant who’s handled scenarios like multi-state operations, international transactions, or complex employee benefit plans will be better equipped to guide you through challenging financial situations. Asking about client examples or references can help gauge the depth of their expertise.

Professional Associations

Membership in reputable organizations can signal a commitment to ethics, standards, and ongoing education. For instance, the American Institute of Certified Public Accountants (AICPA) requires its members to adhere to a strict code of professional conduct and encourages continuous learning to stay updated with the latest regulations. Choosing a business tax accountant who is an AICPA member means you’re working with someone dedicated to maintaining top-tier professional standards.

Broad Range of Services

A quality business tax accountant should offer more than just assistance with filing returns. Look for a professional who can provide forecasting and projections, so you can anticipate future earnings and expenses. They should also assist with budgeting strategies and tax planning, ensuring that your company optimizes deductions and minimizes liabilities over the long term. Another valuable service is handling employee benefit plan taxes, where the accountant can help manage compliance and ensure that your benefit offerings remain both attractive and compliant. By working with a team that offers several services, you'll have the help you need, when you need it.

Selecting the right business tax accountant will not only help you meet your immediate tax obligations but also set you up for ongoing success. At Carpenter, Evert & Associates, we pride ourselves on our extensive experience, professional affiliations, and diverse service offerings — all designed to support your financial health and propel your business forward. Ready to get started with our services? Give us a call today, and our team will be more than happy to assist!

What Does a Certified Public Accountant Do?

Wed, 06 Nov 2024 13:23:00 GMT

When it comes to managing finances, whether for a business or an individual, Certified Public Accountants (CPAs) play a vital role. These financial professionals provide a range of accounting services, ensuring accuracy and compliance while helping their clients make informed financial decisions. In this article, we will explore the key responsibilities of CPAs and understand why their role is indispensable in today’s financial landscape.

Financial Statement Preparation and Review

One of the primary functions of a certified public accountant is to prepare and review financial statements. These documents provide a clear view of an organization’s financial health, enabling stakeholders to make critical decisions. CPAs use their expertise to ensure that these statements comply with Generally Accepted Accounting Principles (GAAP), offering a true and fair view of an organization's financial position. The role of a certified public accountant is invaluable in guiding companies and individuals toward sound financial practices through accurate record-keeping and compliance.

Tax Preparation and Planning

Another essential responsibility of certified public accountants is tax preparation and planning. They help businesses and individuals comply with tax laws and regulations, minimizing tax liabilities and maximizing returns. This involves staying current with ever-changing tax laws, providing clients with advice on tax-efficient strategies, and preparing tax returns that accurately reflect a client’s financial situation. Working with a certified public accountant can lead to significant tax savings and optimized financial planning.

Audit and Assurance Services

Certified public accountants also offer audit and assurance services, which are crucial for validating the accuracy of financial records. According to the U.S. Bureau of Labor Statistics, employment of accountants and auditors is projected to grow 4% from 2022 to 2032, highlighting the growing need for these services. They conduct thorough examinations of financial records and internal controls, ensuring compliance with laws and regulations. This not only helps in identifying areas for improvement but also provides assurance to stakeholders about the integrity of financial reports.

Certified public accountants serve as indispensable advisors in the realms of accounting, tax preparation, and auditing. Their expertise ensures that financial records are accurate and compliant, fostering trust and transparency. The guidance of a certified public accountant offers peace of mind and a clear path forward in today’s complex financial world. Contact Carpenter, Evert & Associates to work with an expert team.

How a CPA Firm Can Help You File Taxes for Your Business

Tue, 09 Jul 2024 15:26:00 GMT

All businesses must pay local, state, and federal taxes. Those taxes are a significant factor in whether a business succeeds or fails. Unfortunately, most business owners are relative amateurs when handling business taxes. A CPA firm can help take the pain out of tax filings by managing your tax information, compiling your taxes, and helping you pay them on time. You can focus on business while the accounting firm helps you in the following ways.

Eliminate Filing Errors

Running a successful business is a lot of work, which makes it easy to fall behind on business tax filings and make filing errors without the help of a CPA firm. According to CBS News, about 5% of taxpayers annually fail to file their taxes, often due to being overwhelmed by the complexity of tax preparation. An accounting firm can ensure your business taxes are documented, supported, and filed accurately to prevent any unpleasant surprises down the road.

Maximize Eligible Deductions and Credits

Businesses earn tax deductions and credits just like individual tax filers often do. Your CPA can track what qualifies for a tax deduction or credit and ensure your business benefits from its maximum potential tax credits and deductions. The lower your business’ tax bill, the larger your profit margins are throughout the year. The CPA can also help you understand how future expenditures might affect your annual tax bill based on current tax laws.

Ensure Legal Compliance

Business tax laws have different reporting requirements and filing deadlines than individual tax filers. Your CPA can ensure you make those mandatory filings on time with proper documentation to prevent fines, late fees, and tax liabilities. Local, state, and federal tax laws undergo constant change, and your accounting firm should stay informed on all changes that affect your business taxes, so you only file fully legal tax documents and your business abides by all applicable tax laws.

Keep You Accountable All Year

A business needs a dedicated CPA firm that's available throughout the year to help with your tax questions and filings. A CPA removes any doubt about your commercial tax obligations and when you need to file and pay your taxes. A dedicated CPA is a terrific business asset that helps make your business taxes less burdensome.

We can help take the sting out of annual tax filings and help you focus on running a successful business when you call to schedule a free consultation with an experienced CPA at our firm. Call Carpenter, Evert & Associates as soon as possible!

What Business Owners Need to Learn From Their Accountants

Thu, 02 May 2024 14:19:00 GMT

Success in the business world is equal parts luck and planning but also requires a little help from business tax accountants. After all, if you can't afford to pay your taxes, how long are you really going to stay in business? You must ask the right questions including the following six queries.

1. Which Records Do I Need?

All businesses keep financial and inventory records. Thankfully, your accountant can help you decide which you need. These include tax returns, financial statements, balance sheets, general ledgers, and other important paperwork.

2. Can You Help Me in Tax Season?

March through April is often a chaotic time for many companies, especially those without an accountant. Ask what your team can do for you, including preparing your statements and avoiding audits. Get audit protection, too. You'll be glad you made this investment.

3. How Can I Avoid Bankruptcy?

Now, we're not saying that working with business tax accountants automatically protects you from bankruptcy. After all, according to the Administrative Office of the U.S. Courts, 2022 alone saw 387,721 bankruptcy filings. That said, protecting yourself with a financial professional can minimize your risk.

4. Am I Getting All My Deductions?

Deductions help keep businesses afloat by minimizing potential tax hits. What exactly can you deduct, though? There's the challenge: not everybody understands this point! Typically, you can deduct any expenses you use for business, including vehicles, offices, and equipment. Ask your professional whether your organization would qualify as being tax-exempt, too.

5. When Should I Pay Estimated Taxes?

We understand how it can feel like paying taxes is constant and overwhelming. That doesn't mean you have to get caught unprepared, though. Planning out payments like dividends, gains from stock sales, self-employment income, and interest earnings with your accountant can keep you safe.

6. What Can I Do to Make More Money?

Like every business owner, you're likely looking to maximize your profits and increase your annual revenue. Thankfully, a professional accountant can help you figure out ways to streamline your operation and make more money. Typically, it requires adjusting your budget, making smart investments, and working to cut down on unnecessary expenses.

No matter what kind of company you own or what size it is, you should find expert business tax accountants who can help you. Doing so helps keep your company well protected from tax dangers. Contact our team at Carpenter, Evert & Associates today. We are always standing by to help you with whatever you need!

4 Myths About Accountants

Fri, 01 Mar 2024 04:04:00 GMT

Working with a certified public accountant can help businesses and private citizens take care of their finances in powerful ways. However, accountants suffer from a pretty weird array of misconceptions and myths that simply boggle the mind. Here are four of the oddest we've ever come across. Some might seem to make sense at first but typically don't if you think a little deeper.

1. Accountants Don't Make Good Money

2. Accountants Aren't Necessary for Small Businesses

3. Accountants Have a Boring Job

4. Accountants Are for Businesses Only

There's a unique misconception about accountants in some circles. Some say that they don't make a lot of money, while others say they make a lot. Well, according to the U.S. Bureau of Labor Statistics, accountants and auditors make a median annual of $78,000. That's a very solid income, especially because there's room for growth in this industry, such as becoming a senior accountant.

Have you ever heard a friend say that they don't need a certified public accountant for their small, one-person business? Well, that misconception could cost them a lot of money come tax season. That's because an accountant can better track their expenses and ensure they're properly handled. Without expert help, there's a real risk that your business could suffer financially.

We get that it might seem boring to track numbers and do math all day. But accountants love this kind of work and were trained to handle it with aplomb! Many accountants truly love their work and find it fascinating to explore finances. Some even get to travel extensively with their bosses, depending on their business. How much fun is that?

Here's another misconception that we kind of understand. The average person probably doesn't think that they need an accountant to track their day-to-day earnings and expenses. However, that's simply not the case these days. The world of investments, stocks, bonds, and much more, are all very confusing. Trying to handle them all yourself may result in some problems.

Hopefully, a better understanding of these myths can help you choose the best certified public accountant for your business needs. However, remember that even the average person can benefit from an accountant. Please don't hesitate to contact Carpenter, Evert & Associates to learn more about the unique ways that we can ensure your home's accounts are properly balanced.

What Questions Should I Ask My Accountant?

Thu, 28 Dec 2023 19:04:00 GMT

Running your small business involves a lot of moving parts. The financial health of your business is by far the most important, though. It's crucial to ask your accountant questions so that you have a solid understanding of your financial obligations as a business. According to the U.S. Bureau of Labor Statistics, approximately 1.4 million accountants and auditors are in the United States. Professional accountants can help your business stay on track with financial monitoring and services. Let's look at some of the questions you should be asking your accountant.

What Records Should I Maintain?

Hiring an accountant for your business can be very beneficial in terms of time management. Your accountant will know the paperwork required to ensure a smooth tax season. It can be very frustrating and anxiety-inducing when you cannot locate an important invoice or insurance document. By discussing this with your accountant, they can inform you of the paperwork needed to ensure a hassle-free tax season.

What Are My Tax Obligations?

Small businesses cannot afford to make costly tax errors. It is crucial to have a business tax accountant who can identify your tax obligations and ensure that no major mistakes are made. Moreover, your accountant can help you take advantage of valuable tax breaks that you might miss out on otherwise. Never hesitate to ask your accountant about these.

What's My Tax Strategy?

It's important to consult your accountant about tax strategies, planning, forecasting, and projections. They are experts in this area and can help you manage your financial obligations. While you focus on the day-to-day operations of your business, your tax accountant can give you peace of mind by handling this side of things. However, it's always wise to understand your tax strategy and how it fits into your overall financial plan. Your accountant can help you with this.

Running a business can be overwhelming. Let professional accountants handle your finances so you can focus on the rest. If you're unsure what questions to ask when speaking with your accountant, consider the few mentioned in this blog. If you're looking for professional accountant services, please reach out to our team of certified public accountants at Carpenter, Evert & Associates today. We will be happy to help you with your accounting needs.

How to Be Better Prepared for Next Year's Tax Season

Mon, 06 Nov 2023 20:53:00 GMT

Tax season is one of the most stressful times of the year. This is particularly true if you're a small business owner. According to Nationwide, these businesses pay an average federal tax rate of about 19.8%. However, being prepared can help you lower your tax rate more than you realize. Here are a few ways to ensure you're ready for next year.

Donate Early

Donating to charity is good for your heart, other people, and tax breaks. You can deduct specific donations, like clothing, but you must be able to verify said donations. Take pictures of items donated and save receipts. When donating cash, always get documented evidence that you've done so. Then, put all your charity receipts for the year in a folder to hand over to your tax accountants.

Save Receipts

No one remembers what they bought in February. However, you need to know those things for tax season. Save receipts for every business purchase you make. That includes laptops, business equipment, or even printer paper. Then, hand all the receipts to tax accountants to deduct as much as possible.

Practice Record Keeping

Keeping donation receipts and purchase receipts are both great ideas, but you must do a lot more than that. You should keep records of everything that is spent. Work with tax accountants to learn what you can deduct and keep track of it all year. Businesses can deduct business expenses. Homeowners can deduct energy-efficient appliances, repairs, and other costs. People can often deduct things like medical and childcare expenses.

Plan for Tax Payments

If you must pay taxes at the end of the year, then planning ahead is crucial. It can be overwhelming to find out you owe thousands and only have a few bucks in your bank account. Instead, set aside money weekly or monthly. Put this money in a separate savings account if necessary. Then, when tax season comes around, you won't be stressed about how much you owe in federal taxes.

Read Tax Laws

Tax laws change every year. You may qualify for deductions next year that you didn't the previous year. Take the time to read tax laws and pay attention to the news regarding changes to make sure you get every deduction possible. Tax accountants are always up-to-date on the latest changes. We can help you maximize your deductions to reduce your tax liability.

Don't get caught off guard by tax season again. Minimize the yearly stress by taking action early and getting in contact with tax experts. Reach out to the professionals at Carpenter, Evert & Associates today to learn more about our services.

How Often Should You Meet With Your Accountant?

Mon, 03 Jul 2023 15:25:00 GMT

There are a lot of things that go into running a business, especially a small one. Making sure that you do your finances properly is a very important one. That's why 71% of small businesses outsource this work to certified public accounts, according to GoRemotely. This leads to the question: how often should you meet with your accountant?

Meet at Least Four Times a Year

Businesses, especially small ones, should see certified public accountants at least once a quarter. A better strategy would be to talk with them at least once a month. Technology has made it easy to do things like have video sessions to have brief face-to-face conversations.

Why Meet This Often?

The thinking behind this advice is that just meeting once a year won't let certified public accountants get to know their clients enough. They won't get a clear picture of what kind of transactions their clients do on a regular basis. If they communicate at least four times a year, if not monthly, then they will have a much better chance of gaining a better understanding.

How It Can Help You

The more certified public accountants get a feel for their clients and have regular conversations with them, the more they can possibly anticipate any upcoming issues and take care of them. They can be much more proactive than reactive, which can wind up saving everyone a lot of money in the long run. Accountants can also make recommendations based on what they learn.

They could also wind up giving the businesses they represent more support if there happens to be a crisis of any kind. This includes having budget review sessions, preparing financial forecasts, and listening to any ideas that their clients might have.

These are just a few of the things that certified public accountants can do for their clients, whether they are working with individuals or businesses. Both sides should always have a line of communication open. Either side should contact each other the very second that they have a question. Doing that can prevent a lot of problems in both the present and the future and also keep those businesses from having to pay more than they have to. Are you looking for an accountant to help with your business finances? Contact Carpenter, Evert & Associates today.

4 Important Things to Give Your CPA

Tue, 25 Apr 2023 17:44:00 GMT

There's no need to stress over finances when you hire a professional to handle things. Using a CPA year-round can help you keep your finances in check and get the right tax breaks and deductions you may miss on your own. Read on to learn about how to prepare for your CPA visit.

1. Real Estate Documents

Your real estate holdings can impact your tax return. So, whether you own residential or commercial property, bring documentation that shows what you're paying in terms of mortgage or leases. If you own a vacation property or rentals that generate income, there are deductions that you'll qualify for. You should have something that accounts for any repairs or updates that you made on these properties as well.

2. Wage Statements

Do you work for an employer and get a W2, or are you a contractor or freelancer? Depending on how you make your income, you may have different documents to present. Many freelancers or sole proprietors may get 1099 documents from each client. If you work for an employer, be sure to bring your W2 to show what you earned that year.

3. Business Expense Receipts

Whether you're a freelancer or own a corporation, you can get deductions back for any business-related expenses throughout the year. However, it should be clear that these expenses were related to your business and not personal ventures. Save receipts from business lunches, related trips, or mileage used to travel between jobs and gigs. If you bought new equipment for your business, such as a computer, phone, camera, or photocopier, make sure you account for that as well. Companies under S Corps or C Corps may have more complex documentation to show the CPA. According to the National Federation of Independent Business, businesses making less than $5 million may use cash accounting rather than the more complicated accrual method.

4. Recent Tax Return

You may not always need your most recent tax return, but it can speed up the process for the next one or other financial services you may need. If your accountant has access to your old return, it'll be easier to input the same information into the new one unless things have changed drastically.

Finances can be stressful for everyone. The more prepared you are, the easier the process will be. Keep a professional CPA who knows what they're doing on deck so that you don't have to worry about making mistakes with your finances. Call Carpenter, Evert & Associates so we can assist you year-round.

Cash Accounting vs The Accrual Method

Tue, 27 Dec 2022 15:10:00 GMT

If you own a business, you likely know how important accounting systems are for your financial records. How you approach accounting can impact your taxes, your financial reports, and even your profitability. There are generally two different approaches accountants use for businesses. One is cash basis accounting. The other is the accrual method. Both approaches have their own advantages and disadvantages. Deciding which is right for your business depends on your unique needs and goals. Each method could be right for some businesses and not right for others. Below is some information on each accounting approach so you can determine which is right for your business.

Cash Accounting Method

In cash accounting, revenue is recorded when it is received. Similarly, expenses are recorded when they are actually paid. Transactions are recorded based on the actual exchange of money. That may seem like common sense, but that's actually not how transactions are recorded in accrual accounting. One of the biggest benefits of cash accounting is that it's much simpler to implement than accrual accounting. According to the National Federation of Independent Business, businesses making less than $5 million may use cash accounting rather than the more complicated accrual method. That's an important benefit for smaller companies. It also offers a clearer view into cash management and allows businesses to better manage their cash on hand.

Accrual Accounting Method

In accrual accounting, transactions are recorded when the sale is incurred, even if money is not exchanged at that time. This is common in businesses where services are invoiced at a later date or when sales are made on credit. Accrual accounting is more complicated than cash accounting but it's actually the more common of the two systems, especially among larger businesses. Accrual accounting is popular because it offers flexibility and potential tax savings. Businesses that use accrual accounting can take advantage of depreciation, which is not available for companies that use cash accounting.

Which Is Better?

The answer as to which type of accounting method is better isn't easy to answer. It depends on your business. If you're a smaller business that is transactional, cash may be better. That's especially true if you need to know your cash on a frequent basis. Accrual is better for larger companies, for those that want to take advantage of depreciation, and for those that make sales based on credit.

Talk to accountants in your area to better understand the two systems and determine which is right for you. An accountant can help you get the right system in place. Reach out to us today at Carpenter, Evert & Associates for more information.

How Much Does the Average Small Business Pay in Taxes?

Tue, 25 Oct 2022 15:21:00 GMT

One of the main concerns of small business owners is taking good care of their business finances. However, it can be overwhelming to deal with all of their financial responsibilities, like calculating taxes. Taxes are complicated, and not everyone can calculate their tax liability or income tax rate correctly. If you're a small business owner and want to learn more about your business tax rate, please consider the following.

Small Business Taxes

According to Nationwide, small businesses pay an average federal tax rate of 19.8%, but most small businesses pay a different tax rate depending on their entities. For example, a sole proprietorship pays around 13%, but a partnership pays about 23.6%. If you're a new business owner trying to sort out your taxes, we highly recommend hiring professional business tax accountants to ensure you end up paying the correct amount.

Business Tax Services

Business tax accountants play a crucial role in any business as they do everything related to taxes. Forget about calculating your business tax liability, tax rates, income tax, and tax deductions. Business tax accountants maintain all the tax bookkeeping while you focus on your business. With the help of an accountant, you can save money without worrying about mistakes related to payroll or taxes.

Other Types of Taxes

Business owners sometimes forget about the numerous taxes they might have to pay. For example, if you own a commercial property, you need to pay a property tax to the state. There are a lot of elements to consider while paying taxes, which is why you need the professional help of an accountant. Business taxes are a responsibility that can't be ignored, and it's crucial to know when and how to pay them. Although many business owners deliver their taxes just before the Internal Revenue Service (IRS) deadline, others pay on an ongoing basis. A professional accountant will ensure you pay your taxes on time to avoid any issues with the IRS.

To keep your small business running smoothly, don't hesitate to contact professional business tax accountants. If you want your business to succeed, it's best to enlist the help of those with the necessary knowledge and experience. Give us a call at Carpenter, Evert & Associates today to get started with our services! We'd love to be of assistance.

Reasons to Only Work with Certified Public Accountants

Wed, 01 Jun 2022 20:04:00 GMT

The majority of small companies outsource their accounting services to CPA firms, especially when it comes to tax preparation. In fact, according to Go Remotely, the most common accounting service outsourced by small businesses is tax preparation, accounting for 71% of all small businesses.

The use of certified public accountants by small businesses results from several factors such as the number of employees, whether a company is home-based, and the nature of an industry. Here's why you should only work with certified public accountants .

Accuracy and Reliability

Many small businesses have a turnover rate of employees due to low pay and poor working conditions. This affects the accuracy and reliability of financial records, which results in a high level of unaccounted income or expenses. An accountant's work is not only limited to calculating taxes. They take care of all the financial aspects related to the business, including accounts receivable, expense accounts, and a paycheck.

Tax Preparation

An accountant's work starts with preparing tax returns. It also involves preparing payroll and accounting sheets for every employee and daily taking care of business statements (including bank statements). In addition, certified public accountants also help their customers find deductions or credits that businesses could use for tax purposes.

Cost Savings

Outsourcing accountants can save small businesses on their yearly spending regarding accounting and tax preparation services. Moreover, a CPA firm can improve its accuracy rate compared to an individual accountant's. They also know how to work with complicated tax laws and regulations, which generally cannot be done by other people.

Professionalism

Although it may be tempting to outsource accounting services (or your whole business), accounting is a professional field where experience and education are significant. You cannot simply delegate someone with accounting skills to do your job. CPA firms are one of the few companies that provide professional services leading to professionalism.

Certified public accountants are vital to the success of your small business since they help you save time and money and improve the quality of your business. As such, small businesses should only work with CPA firms that are reliable, professional, and knowledgeable on how to make their business a success.

Do you want to incorporate the best certified public accountants for your company? Call us today! We are a group of certified public accountants ready to serve your business needs. Please don't hesitate to give us a call or email for more information.

6 Ways a CPA Can Help a Small Business

Wed, 06 Apr 2022 12:15:00 GMT

As a small business owner, you have a lot on your plate. You need to wear many hats and juggle multiple tasks simultaneously in order to keep your business running smoothly. But even if you're doing everything yourself, there are certain things you can't afford to ignore - like bookkeeping and tax preparation. That's where a CPA comes in. Here are six ways a CPA can help a small business.

1. Save Money on Taxes

Business tax accounting can be complicated, and if you're not an expert, you could be missing out on deductions and credits that could save you a lot of money. A CPA can help you maximize your deductions and ensure you're taking advantage of all the tax breaks available to small businesses.

2. Stay Organized

If you're not used to keeping track of business expenses, it can be easy to let things slide. If you don't have good record keeping, it will be difficult to prepare your taxes or apply for business loans. A CPA can help you set up a system for tracking expenses and income so you can stay organized throughout the year.

3. Make Strategic Decisions

A CPA can offer valuable insights into your business finances, which can help you make strategic decisions about where to allocate your resources. They can also help you create financial projections to plan for future growth.

4. Prepare for an Audit

If your business is selected for an audit, a CPA can represent you during the audit and help you resolve any issues that come up. They can also help you avoid an audit in the first place by making sure your books are in order, and your tax returns are accurate. As a small business owner, never take business tax accounting lightly because the IRS can come after you for any discrepancies.

5. Get a Small Business Loan

If you're looking for financing to grow your business, a CPA can help you prepare the necessary financial statements and projections required by lenders. They can also offer advice on which type of loan would be best for your business.

6. Close Out Your Books and Create Financial Reports

A CPA can help you close out your books and prepare financial reports at the end of the year. These reports can be useful for tax preparation, applying for business loans, or simply tracking your business's progress over time.

According to GoRemotely, 36% of small businesses feel they don't have enough time, 32% feel they don't get enough direction from their accountants, 29% believe their accountants don't help them enough, and 23.6% feel they are not taught enough. That's why it's so important to find a CPA that you trust and that you feel is invested in your business. Do your research and take your time finding the right CPA for you. It will be worth it in the long run. Looking for someone to help you with business tax accounting? Call us today!

6 Benefits of Hiring a Certified Public Accountant

Tue, 01 Feb 2022 13:53:00 GMT

When it comes to running a business, there are a lot of important decisions to make. One of the most important is whether or not to hire a certified public accountant (CPA). CPAs can provide a wide range of services to help businesses save money and operate more efficiently. Here are six benefits of hiring a CPA.

1. Audit for Compliance

In the United States, the IRS requires that all businesses keep records. These must be stored to show how much money a business made and spent each year. If a CPA is hired, they will ensure that these records are being accurately kept so that you don't have to worry about losing out on possible deductions or having your tax return rejected.

2. Maximize Tax Deductions

According to Go Remotely, small business owners are split on whether accountants can do more to decrease their taxes, 14% believe they can do more, 62% think they are doing all they can, and 24% are undecided. Regardless of the category you fall into, you know a certified public accountant is your best bet at maximizing the deductions available to you.

3. Prepare for Audits

One of the risks of running a business is being audited by the IRS. When this happens, a CPA will help you prepare for it. They will advise you on protecting your finances and limiting your liability. A CPA can also represent you before an audit takes place so that you don't have to worry about making a mistake that might cost you money.

4. Protect Your Business from Liabilities

A CPA knows the ins and outs of tax law and will be able to help minimize any chance you have of getting sued or losing an audit. This knowledge can also help businesses avoid other types of legal trouble.

5. Budgeting Helps Save Money

CPAs are the best when it comes to budgeting. A CPA will help you create budgets that show how much can be spent on different aspects of your business, including labor costs and supplies. This information can help businesses operate more efficiently.

6. Financial Compliance with State and Federal Law

Businesses are expected to abide by state and federal laws. A CPA is well aware of all the laws that pertain to business, including financial law. They can help you create a compliance program that helps you avoid liability or fines for violations.

There are many benefits that come with hiring a certified public accountant. If any one of these benefits is important to you, call us today. Our certified public accountants have a wide range of experience and expertise that can help you run your business more efficiently.

How You Know It's Time to Hire a CPA Firm

Wed, 22 Dec 2021 16:27:00 GMT

CPA firms provide many benefits to companies that utilize them, including a broad range of unique financial support elements and a better understanding of your economic situation. But do you truly need one of these teams on your side? Here are a few situations in which you need a CPA.

You Work For Yourself

A large number of self-employed people use a CPA to take care of their tax needs. According to Go Remotely, around 71% of all small companies work with an outside company to handle this step. After all, you have duties you need to take care of for your business, focusing on those. Outsourcing to a CPA helps you to focus more on your important tasks and keeps your business focused and effective.

Something Big Happened to You

Are you getting married or divorced and expect a huge financial change? Or are you buying a new home, investing in real estate property, moving to a new state, or coming into a lot of money? CPA firms can help you out here. These professionals will ensure that you get the financial support you need and minimize the potential risk of losing cash or experiencing other concerning issues.

You Have Several Foreign Accounts or Investments

If you actively trade stocks or invest in foreign accounts around the world, a CPA can help you. The unique financial elements that occur throughout these investments can be hard to figure out if you don't understand the unique laws and financial aspects throughout the world. They'll help to balance your financial situation and make sure you follow all legal records properly and safely.

Your Rent Property to Others

Do you own rental property, such as a house or commercial facility, that you rent to others? A CPA can help you by creating a balanced rental and investment plan. For example, they can highlight how much money you need to charge to make a profit, as well as how much you can afford to spend on upgrading the property for your clients. This help can provide major benefits.

As you can see, CPA firms provide a broad range of benefits that make them worth your consideration. You may also want to work with a CPA if you're planning to get into personal investments or expand your portfolio. In this way, you can avoid common financial and investment mistakes.

Business Auto Tax Deduction Strategies

Fri, 13 Aug 2021 21:56:00 GMT

Carpenter Evert & Associates Has Info To Consider Before Buying A Vehicle

Business Auto Deduction Strategies
Since the passing of the Tax Cuts and Jobs Act on December 22, 2017 small business owners have been eligible for higher annual depreciation deductions and bonus depreciation. You can also now convert a personal vehicle to business and depreciate it going forward.
Annual limits for depreciation are as follows:
1st Year - $10,100 ($18,100 with bonus depreciation if you buy a new or used vehicle) 2nd Year - $16,100 3rd Year - $9,700 4th and following Years - $5,760
Through the end of 2022 you can take bonus depreciation that allows for 100% write off of the cost of a new or used vehicle placed into service and used 50% or more for the business.
Leased vehicles
When you lease a vehicle you will deduct the actual expenses including the lease payment multiplied by the business use percentage. Monthly payments are typically lower on a luxury car when it is leased then when it is owned. You have to be careful though that you don’t drive more miles than annual amount covered under the lease because any excess you will have to pay for when you return the vehicle at the end of the lease period.
Mileage method versus actual expense method
There are two options business owners must choose from to document and utilize when writing off auto deductions.
Standard Mileage Rate – in 2021 you can deduct $0.56 for every business mile you drive.
Actual Expenses – the alternative to the mileage method is the actual expense method. You have to determine the actual costs to operate the vehicle for the portion of the overall use of the car that is business use. Applicable expenses include gas, oil, tires, repairs and maintenance, insurance, registration and depreciation or lease payments.
In order to use the standard mileage rate for a car you own you must choose the standard mileage rate method for the first year it is available for use in your business. For a leased car you have to use the standard mileage rate method for the entire lease period if you choose it.
Here’s a few things to consider on whether you should deduct actual expenses or mileage:
If you are going to put on significant business miles, and the car is a lower purchase cost than the Mileage Method is the right choice.

If you’re NOT going to have a lot of business miles, and it’s an average-cost vehicle used exclusively or primarily for business, then you will lean towards the Actual Method .
If you’re NOT going to have a lot of business miles, and it’s a more expensive car used exclusively or primarily for business, you should consider leasing and the Actual Method . You’ll have lower monthly payments making it a better economic decision.
If you are going to drive relatively few miles and it’s a lower-cost vehicle used primarily or exclusively for business, the Actual Method is still the better choice because the miles won’t give you the benefit compared to taking some type of depreciation.
If you are going to use your car part-time for business because you have a day job, you will typically use theMileage Method . The reason for using the mileage method is that you have to show at least 50% business use in order to utilize the actual method.
If you are going to buy a SUV or truck that weighs 6,000lb or more, you will generally lean towards the Actual Method because you are going to have a lower MPG pushing up your actual costs and bonus depreciation is 100 percent. In other words, you can possibly write off the entire vehicle in the first year.

Deciding whether to take the actual expense method or the standard mileage rate method is going to be vary on many factors. Talking to your CPA or tax advisor before buying a new to you vehicle is always wise so that you can be proactive in determining the best strategy for you.

What actions to take if the IRS sends you a letter

Tue, 29 Jun 2021 08:00:00 GMT

Should the IRS contact you by mail, Carpenter Evert & Associates can advise you

First and foremost - if you receive a letter from the IRS - don’t ignore it and don’t panic. Open the letter and read it carefully. If the IRS has changed the tax return you should compare the information provided in the notice to the original return. If you agree with the correction the next step is to follow the instructions in the letter. If you don’t agree or need to respond to the notice do this in a timely manner in order to minimize additional interest and penalty charges and to preserve your appeal rights. If you owe money it is important to pay as soon as you are able. If you require a payment plan you can go to https://www.irs.gov/payments for further information on payment options.

Retain a copy of the letter with your tax records. All tax records should be kept a minimum of seven (7) years. Remember that the IRS will not contact you over social media or by text message. The first contact from the IRS is usually by mail. For further information on IRS notices go to https://www.irs.gov/individuals/understanding‐your‐irs‐notice‐or‐letter

You can also let the professionals at CEA assist you with understanding an IRS notice. Give us a call.

Where Is My Refund?

Tue, 29 Jun 2021 08:00:00 GMT

Carpenter Evert & Associates answers the question everyone has this time of year

You’ve done the work and filed your taxes. Now you want to know where your refund is and when will it hit your bank account? Taxpayers can start checking the status of your refund about 24 hours after filing electronically. Go to www.irs.gov/refunds

The safest and quickest way to complete your taxes and receive your refund is to file electronically. Most refunds are issued within 21 days, but it can take longer if there are errors in the return or if it is incomplete. A great way to guarantee your return has no errors is to hire a CPA. Hiring a CPA is an affordable way to ensure you get the forms filed out correctly and you receive all deductions that apply to you; achieving the optimum outcome on your taxes.

The tax deadline for individuals has been extended to May, 17, 2021. It is not too late to contact us and have one of our Partners take a look at your taxes.

Paycheck Protection Program (PPP) Update

Tue, 29 Jun 2021 07:59:00 GMT

Important Update For Businesses Enrolled In This Program

In late November, the IRS issued guidance which stated that businesses can’t deduct expenses (payroll, rent, utilities, etc.) funded with money from a forgiven Paycheck Protection Program (PPP) loan. This is a complete departure from the original CARES Act legislation which specifically stated that the forgiveness of a PPP loan would not be treated as taxable income. Unless Congress steps in to solve this before year-end or in early 2021, businesses who received PPP loans will have additional net income on their 2020 filings. Additionally, if a business reasonably believes they met the criteria for forgiveness at the end of 2020, but ends up being denied forgiveness in a later year or the taxpayer decides not to apply for forgiveness then the IRS gives the taxpayer three options. Option (1) claim the deduction on their 2020 tax return if it is filed timely; option (2) claim the deductions in an amended tax return for 2020 or option (3) claim the deductions in the tax return for the later year in which it becomes clear that the loan will not be forgiven.
As things stand today, businesses should plan to file their 2020 return without claiming deduction for expenses paid for with the PPP loan. If there is a more favorable decision made by Congress at a later date then an amended return and request for refund can be submitted.
We will be reaching out to businesses that we know have obtained PPP Loans to talk through strategies for year-end planning, but feel free to reach out in the meantime with questions.

Should You Take The Standard Deduction Or Itemize?

Tue, 29 Jun 2021 07:59:00 GMT

Carpenter Evert & Associates offers helpful tips for tax season

An important question to ask your tax preparer or accountant is, “Should I take the standard deduction amount or itemize my deductions?” Taking the standard deduction is quicker and easier; but if you kept good records of your deductions and know they exceed the standard deduction you should itemize.
New for 2020 - cash donations of up to $300 are deductible without having to itemize thanks to the Coronavirus aid, Relief and Economic Security Act. This allows for taxpayers to claim a deduction of up to $300 for cash donations made to charity during 2020.
The amount of the standardized deduction changes every year and varies based on the filing status. If you are 65 or older at December 31, 2020 you may qualify for a higher standard deduction.
If you think you have more deductions than the standard deduction then you can itemize your deductions by filing a Schedule A, Form 1040 Itemized Deductions or Form 1040-SR for Seniors. Once you add up your deductions ask your tax preparer or accountant to review both options to get you the best result. You can always check out the definitions and amounts on the IRS Website.

Beware of Phishing Scams

Tue, 29 Jun 2021 07:59:00 GMT

Carpenter Evert & Associates Encourages Everyone To Be Careful

Phishing scams are becoming more and more sophisticated. We know that entities can be targeted as well as individuals. Fake and fraudulent emails coming in may look legit in every way; but when someone is asking for instant money through wire transfers or visa gift cards please be on the alert. The safest way is to verify the request with a simple additional step – Reach out to the vender and/or source of the email and ask them if they made such a request. It is important to create a new string of communication – start with a quick call to your vendor and/or client before processing payment.
The important thing to remember is when in doubt check it out with the vendor and/or client so that you do not end up with a monetary loss from one of these sophisticated scams.

CARES Act - How It Will Affect Your 2020 Taxes

Tue, 29 Jun 2021 07:59:00 GMT

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted to help individuals and businesses through the financial hardships caused by COVID-19. Below is a summary of the most significant tax provisions.

Individual Provisions:

Recovery Rebates

The CARES Act created a tax credit for individual taxpayers against taxes owed in 2020 and authorizes an advance payment (rebate) of the credit to taxpayers immediately. Your 2020 income will determine how much you were supposed to receive, and any excess will be charged against your 2020 tax liability. If the amount you received was greater than your 2020 income indicates you should’ve received, you will not have to repay any amount of your stimulus check. Adults who were dependents in 2019, but are filing individually in 2020, will also be eligible to receive the proper amount of rebate on their 2020 tax return.

Charitable Contributions

You can deduct up to $300 of charitable contributions above the line, even if you’re taking the standard deduction. This means that your AGI can be reduced by $300 for qualified charitable contributions. Also, taxpayers who choose to itemize can take up to 100% of their AGI as a deduction from charitable contributions, rather than the standard 60%. Keep in mind that these new incentives only apply to contributions to public charities and not to supporting organizations or public charities that sponsor donor advised funds.

Penalty-Free Withdrawals from Qualified Retirement Plans

The CARES Act relaxes the rules on withdrawals from qualified retirement plans. Eligible taxpayers may take up to $100,000 of “coronavirus-related distribution” per taxpayer. The bill allows taxpayers to forgo the 10% penalty on early withdrawal from a qualified retirement account. Taxpayers can then elect to either pay taxes over three years, or defer the taxes completely for up to three years.

Waiver of Minimum Distributions from Defined Contribution Plans

Required minimum distributions for defined contribution plans such as 401(k)s and IRAs are waived for 2020, even for those not affected by the coronavirus.

On June 23, 2020 the IRS in Notice 2020-51 announced that any individual that previously took a required minimum distribution (RMD) in 2020 from his or her traditional IRA and/or qualified retirement account now has the opportunity to rollover those funds back into a retirement account. Affected individuals now have until August 31, 2020 to perform a rollover and return any unwanted 2020 RMDs into their traditional IRAs or qualified retirement accounts.

Business Provisions:

Modification of Net Operating Losses (NOLs)

The CARES Act reinstated the Net Operating Loss carryback rule that was eliminated in the Tax Cuts and Jobs Act. Taxpayers may choose to carryback NOLs up to 5 years prior for 2018, 2019, and 2020 taxes. Owners of pass-through entities are no longer subject to excess business losses for 2018, 2019 and 2020.

Business Interest Deduction

The Tax Cuts and Jobs Act had limited the deductibility of business interest to 30% of taxable income. Under the Cares Act the allowance deduction has been increased to 50%.

Qualified Improvement Property

A major drafting error of the Tax Cuts and Jobs Act related to Qualified Improvement Property (QIP) was corrected with the passage of the CARES Act. Qualified Improvement Property consists of “any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in services after the date such building was first placed in service.” The TCJA failed to classify QIP as 15-year property under MACRS or 20-year property under ADS and instead was depreciated as 39-year property and 40-year property under MACRS and ADS, respectively. It also prevented QIP from being eligible for 100% bonus depreciation. The correction can be applied retroactively to January 1, 2018.

Starting a Nonprofit

Tue, 29 Jun 2021 07:59:00 GMT

Click here for useful information on starting a nonprofit

https://www.minnesotanonprofits.org/resources-tools/starting-a-nonprofit

Economic Stimulus Bill: Benefits for Small Businesses and Employees

Tue, 29 Jun 2021 07:59:00 GMT

Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that government passed last week includes a provision for small businesses, including non-profit organizations, with less than 500 employees to receive loans of up to 2.5 times of average monthly payroll. All or a portion of these loans may be forgivable. Borrowers are eligible for loan forgiveness equal to the sum spent on qualifying expenses during the 8 week period after the loan is originated. Qualifying expenses are all payroll related costs (wages, payroll taxes and benefits including retirement), rent or mortgage payments and utilities.
To qualify for forgiveness, employers need to maintain their level of employment before the crisis started or else the amount of forgiveness is reduced. Because many businesses have already begun to furlough employees, there is a special provision that allows them to qualify for forgiveness by hiring those employees back.
These loans are given without personal guarantees and your current cash position or other assets are not a determining factor. Instead, you simply need to make a number of good faith certifications including that your organization needs this loan to support your ongoing operation due to the current economic conditions.
The current expectation is that by Friday April 3rd nearly all banks will have received the guidelines on this program so the process can begin. This is a quickly changing set of circumstances and we will continue to update you as things become clearer. There are other provisions of the CARES Act that could also be applicable to your company. As your business advisor, we are ready to assist you as you maneuver through this process as well as any other decisions you are encountering in this environment. Do not hesitate to reach out to us.

Are You Ready for the New Minnesota Wage Theft Law Recordkeeping Requirements In Effect July 1, 2019?

Tue, 29 Jun 2021 07:59:00 GMT

By Corie J. Anderson on July 1, 2019 POSTED IN RECORDKEEPING

Effective today, Minnesota employers must follow the new so-called “Wage Theft Law” (it is actually just a bunch of amendments to existing law). This is primarily a change in recordkeeping and employee notices, creating an administrative burden likely to cause many in HR to want to raise the white surrender flag. While I’m not a big fan of government model documents, like the FMLA paperwork, this is another document that I do think employers will benefit from using the model notice – you can get it here . But beware – even though the State is providing this notice, it notes the notice must be completed “properly”. In other words, make sure you dot your “i’s”, cross your “t’s”, and fill in all the blanks with the correct information. The new employee notice must be provided to all new hires as of today, July 1, 2019 and a copy must be kept in the employee’s personnel file. Also, employers must be prepared to provide the information to the Minnesota Department of Labor and Industry (MNDOLI) within 72 hours of demand.
Employee Notice – Possible Pitfalls – What Can Go Wrong?

Make sure all the blanks are completed, even write “N/A” if, for example, the employee does not have a different mailing address. This confirms you read and answered the question.
Make sure the information is correct – if they negotiate for a different wage rate at the last minute, be sure it is in there at the right rate.
Leave benefits available – be sure to clarify when benefits start (when the employee is eligible).
Deductions – list everything you can think of since this says “may”. For example – consider including “usual and customary taxes and withholding and authorized deductions”.
BE SURE IT IS SIGNED by BOTH the employer and the employee (I cannot tell you how many non-compete agreements I see that do not have the employer’s signature).
Keep the second page with the notice to confirm they were provided the notice in multiple languages.
As the information changes (i.e. rates of pay, deductions, vacation time, etc.) new notice must be given. And yes, it is going to be an administrative nightmare. Every time something on the form changes, the employee needs a new notice. Best practices (if possible) would be to have the employee sign the notice.

Earnings Statements – New Information Required – Check With Your Payroll Provider Information provided on employee’s payroll (pay stubs or earnings statements) must now include the following information – your payroll provider should be aware:

Employee’s rates of pay and basis for such rates (i.e per hour, shift, day, week, salary, piece, commission or other method).
Allowances claimed for permitted meals and lodging.
Employer’s telephone contact information.
Physical address of employer’s main office or principal place of business and mailing address (if different).
Unchanged (you should already be providing):
Name
Wages paid (gross and net after deductions)
Hours Worked
Deductions made
Benefits accrued
Pay period start and end date
Employer’s legal and operating name

Other Records that Must Now Be Kept By Employers:

Hours worked each work day and workweek – including, for all employees paid at a piece rate, the number of pieces completed at each piece rate.
A list of personnel policies with brief descriptions of each, including the date provided (suggest a list of documents and having the employee sign it – consider attaching your handbook’s table of contents).
A copy of the new notice that is required to be provided and signed by each employee at the start of employment and a copy of any written changes to the notice that were provided to each employee.

Remedies and Penalties for Noncompliance Are No Joke:

If the employer’s records do not provide sufficient information for MNDOLI to determine the exact amount of back wages due – the Department may decide for you the wages due based on the evidence provided.
Employers have a “substantive right” to the payment of commissions and wages, and to be paid on a regular payday.
Employers cannot retaliate against an employee for exercising their substantive rights.
The Department has enforcement authority to enter and inspect records, and interview non-management employees in private (without an employer representative).
The Department can order an employer to pay a penalty for each day payment is not made in compliance with an order.
Many other penalties… (see the summary here ).
Criminal sanctions for wage theft – up to 20 years imprisonment and a fine of up to $100,000 if value of wages stolen is more than $35,000. The lesser criminal sanctions is imprisonment not more than 1 year and fine of not more than $3,000 for wage theft more than $500 but less than $,1000. The rest is somewhere in between.

In all, the changes are designed to give employees clear information up front about their wages and deductions. However, in reality, it’s just creating a lot more paperwork for HR and potential penalties and fines for not having kept the proper information (think about technical I-9 violations – they add up quick!).
Tags: employee notice , Minnesota , MNDOLI , recordkeeping , Wage Theft

Minnesota Wage Theft Bill Goes into Effect on July 1st, 2019

Tue, 29 Jun 2021 07:59:00 GMT

Written by Kristy Fahland

Starting July 1, 2019, Minnesota law will impose new recordkeeping requirements for employers, require that employers provide written wage related information to newly hired employees, and change pre-existing law as to the payment of final wages and commissions to terminated employees. Criminal penalties for intentional wage theft are available effective August 1, 2019. Key provisions of the new law are as follows:
Notice to Newly Hired Employees Employers are required to provide a written notice to all newly hired employees including:

Employment status and whether the employee is exempt from minimum wage, overtime and other state wage and hour laws, and on what basis;
Regularly scheduled paydays and the number of days in the pay period;
The date the employee will receive the first payment of wages earned;
The employee’s rate or rates of pay and the basis thereof (including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method and the specific application of any additional rates);
Allowances, if any, that may be claimed for permitted meals and lodging;
Provision of paid vacation, sick time or other paid time off and how the time off will accrue as well as terms of its use;
A list of deductions that may be made from the employee’s pay;
The Employer’s legal name and operating name, as well as the employer’s physical main office address or principal place of business, mailing address (if different), and telephone number.

The notice must include a statement that it may be requested by the employee in another language, and must be signed by the employee and maintained by the employer. The Department of Labor has issued a sample notice available on its website. The form must be updated anytime the information on the form changes (ie: change in compensation).
New Earning Statement Requirements In addition to all previously required information, employers must now also include the following on their earnings statements (paystubs):

Employee’s rate or rates of pay and the basis thereof, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method;
Allowances claimed for permitted meals and lodging;
The employer’s physical office address or principal place of business and a mailing address (if different), along with the employer’s phone number.

New Policy/Handbook Recordkeeping Requirements Employers are required to maintain records of all personnel policies provided to employees along with a brief description of the policies and the date they were given to employees. These records must be kept for three years for most employers.
Changes to Employee Payment Requirements Employers are required to pay all wages, now including all salary, earnings and gratuities, at least once every 31 days, and all commissions earned by an employee at least once every three months. Upon termination, all commissions must be paid to employees within 10 days. Additionally, penalties for failing to timely pay wages upon termination have been increased.
The legislature also approved criminal penalties for intentional wage theft where there has been a proven intent to defraud.
To ensure compliance with the new law, employers should review and update their hiring documents, earnings statements, company handbooks or other policy documents as well as any compensation and/or commission practices. Employers should create a form and process for providing wage notices, and updated those notices at the required times. As the Department of Labor has strongly encouraged employers to provide the written notice to current employees as well, employers should consider this suggestion. Employers should also ensure policy documents and handbooks, along with signature pages, are maintained, update their document retention policies to reflect these new obligations, make any necessary changes to their earning statements and review pay practices and commission plans. The changes and requirements of the new bill are a good opportunity for employers to review a number of items including their commission policies and employee classifications. Employers may also need to contact their outside providers, including payroll processing companies, to ensure compliance with the new requirements.
If you have questions or concerns about these new changes, or would like to discuss ways to review and evaluate your current employment practices, please contact Kristy Fahland .
Messerli Kramer’s experienced employment law attorneys are available to assist employers in navigating a variety of employment law issues and would be honored to help you.
Learn More about Messerli Kramer’s Attorneys
Kristy A. Fahland

Don't Get Scammed! How The IRS Contacts You

Tue, 29 Jun 2021 07:59:00 GMT

In the heart of tax season, Carpenter Evert & Associates want you to be careful

The IRS will not initiate a conversation with a taxpayer by email, text messages or social media channels and request personal or financial information. You know the IRS is contacting you if you receive a letter in the mail. On rare occasion the IRS may call; but you as the taxpayer have the right to verify that call. Never give out personal or financial information over the phone.

People always need to stay a step ahead and be alert to scammers posing as the IRS to steal personal information. Practicing good cybersecurity habits by securing computers, phones, and internet access is vital. Safeguard and protect your personal information by never giving it out unless the site or financial transaction has been verified as reputable and encrypted. Use strong passwords that are at least 10 to 12 characters long and have a number and special character included. Avoid phishing scams which is the easiest way for criminals to steal your personal information; they simply ask for it. Be aware that an unsolicited email with a request to download an attachment or click on a URL can appear to come from a bank, credit card company or co-worker; if it looks suspicious question it. Never open an attachment or click on a URL that you are not expecting or that looks a bit off. It is most likely a phishing scheme. Use security software to protect your computer from viruses, Trojans, and spyware. Never download “security” software from a pop up ad. Reputable security software companies do not advertise in this manner.

How to know it is the IRS contacting you?

The IRS initiates most conversations through regular mail delivered by the United States Postal Service. There are times when an IRS agent will call or come to a home/business; for an overdue tax bill, secure a delinquent tax return or employment tax payment, or to tour a business as part of an audit or investigation. Even in these rare instances the taxpayer will generally first receive letters in the mail from the IRS.

The IRS will not call to demand immediate payment over the phone.

The IRS will not demand that you pay taxes without the opportunity to question or appeal the amount they say you owe.

The IRS will not threaten to bring in local police, immigration officers or other law enforcement to have you arrested for not paying.

The IRS cannot revoke your driver’s license, business license or immigration status.

These threats are common tactics scammers use to trick victims into paying them. Remember to stay alert to tax scams and phishing emails.

Tax Tips For The 2021 Season

Tue, 29 Jun 2021 07:59:00 GMT

Important Reminders For Filing Your Taxes

The best way to speed up your refund is to file electronically and use direct deposit. If you owe money, the fastest way to pay is also through direct withdraw.

If you received the maximum amount for the economic impact stimulus payment, you do not need to include this information on your return. The advance payments received separately are not taxable and do not reduce your refund amount. The individual who did not receive their stimulus payment or only partial payment might be eligible to claim the Recovery Rebate Credit on their 2020 return. Be sure to include this information to your preparer.

The Filing season for individual returns begins on February 12th.

The first week of March tax refunds will begin reaching those who file electronically with direct deposit as long as there are no issues with their tax returns.

April 15th is the deadline to file your 2020 return or to file an extension.

October 15th is the deadline to file your return if you requested an extension.

Donor Advised Funds with Kari Aanestad & Jon Pratt

Tue, 29 Jun 2021 07:58:00 GMT

Next in Nonprofits 122 - May 7, 2019

https://www.nextinnonprofits.com/2019/05/donor-advised-funds-2019/

Why Is My Tax Refund Lower This Year?

Tue, 29 Jun 2021 07:58:00 GMT

KARE 11 - Author: Heidi Wigdahl February 12, 2019

MINNEAPOLIS, Minnesota — Your tax refund might be lower this year than you expected.
According to the Internal Revenue Service, early numbers show the average refund this year is down 8.4 percent, going from $2,035 to $1,865.
It's the first tax season since President Donald Trump signed the Tax Cuts and Jobs Act in 2017.
"The government automatically adjusted the tax tables for withholding and they did it because there was a reduction in tax rates, increased standard deduction, and so there was speculation that people would have a lower tax bill overall," said Steve Warren, a certified public accountant and senior manager at Schechter Dokken Kanter in Minneapolis.
Warren said while some people may see a lower refund or actually owe taxes, it doesn't necessarily mean they're getting less overall.
Warren said those lower withholdings meant more money in people's paychecks throughout the year.
According to the Tax Policy Center, more than 80 percent of Americans will pay less in taxes overall.
The Treasury Department tweeted out Monday that the refunds are consistent with 2017 levels and down slightly from 2018 based on a "small initial sample from only a few days of data."
According to the IRS, they've received more than 16 million tax returns so far— down 12 percent from this same time period in 2018.
Taxpayers may also be affected by the change in standard deductions. The Tax Cuts and Jobs Act also nearly doubled the standard deduction for 2018. For married couples filing jointly, it's $24,000.
"You either take a standard deduction or, if higher, you take all the deductions like charity, real estate taxes, and things like that, and you take the higher of the two," Warren said. "So now for many of those people, the federal return is simpler for 2018... there were a lot of changes though that are going to make it harder to reach that threshold."
Warren said the people most impacted by the tax changes are real estate and business owners.
Another change is a $10,000 cap on deductions for state and local taxes.
"Taxes are now capped at $10,000. So you take your real estate taxes, your state income taxes, your auto tabs, however much it ends up being where before you could deduct all of it, now it's capped at 10. So a lot of people are going to be taking the standard deduction who used to itemize," Warren explained.
Warren said this change has a greater impact on people in high-tax states, like Minnesota.
It also gets more complicated for Minnesotans because the state did not conform with the federal tax laws.
"What they're doing for 2018 only is allowing tax payers to take the standard deduction on their federal return but still itemize their deductions on their Minnesota income tax return," Warren said. "If you exceed that $13,000 threshold in itemized deductions, then you actually will want to itemize."
Warren said that could be a problem for tax payers who thought because they were taking the standard deduction on their federal tax returns, that they didn't need to keep track of their expenses for their state income tax return.
For taxpayers who haven't filed yet, Warren said there are still ways to save money.
"If you have these items available you can still through mid-April, April 15, contribute to a health savings account, a deductible IRA, or maybe a retirement plan like a SEP IRA or a simple IRA for a business. All those things can still be done to reduce your taxes on your 2018 income tax return," Warren said.
If you're not happy with your refund, Warren said change your withholdings by contacting a CPA to do a tax projection or the IRS has an online calculator .

What to look for when filing your taxes this year

Tue, 29 Jun 2021 07:58:00 GMT

By Iris Perez, Fox 9

POSTED FEB 19 2019 09:58PM CST UPDATED FEB 20 2019 04:25AM CST (FOX 9) - Reduced returns, extensions, and extra fees - they're all things we don't want you to be surprised by if you haven't done your taxes yet.
“The federal law change is the biggest change that we’ve had in federal tax law in 30 years,” said Michael Crabtree, a certified public accountant at Boulay Partners.
Crabtree confirms there's a reason CPAs say this tax season is a bear.
“For Minnesota tax payers, it's really heightened by the fact that Minnesota didn't change its law,” he said.
A lockstep bill went through the Legislature, but was vetoed by former Governor Mark Dayton. Stuck with a set of old laws for state taxes and a set of new laws for federal taxes, it puts Minnesotans in a pickle.
“It’s been extremely frustrating for us because there’s just so much extra work to do,” said Crabtree.
With federal limits on what you can itemize, Doug McDonald, a CPA and partner at Abdo, Eick and Meyers, says this may be the last year you can write off certain expenses.
“Business expenses you can deduct, but employee business expenses, if you’re an employee and you have unreimbursed expenses correct, you won’t be able to deduct those in 2019,” he said.
You can still deduct things like mortgage interest, real estate tax and charitable contributions to an extent.
“The hard part is are you going to get a benefit from trying to deduct all of these?” said McDonald.
With the average refund down more than eight percent you can also brace for a smaller check. While all tax payments are due on April 15, don't be shocked if you have to file an extension. Finally, you may hit the lint in your pocket just to file that return. It’s a fee that this time next year may not qualify as a write off.
“Most cases we’re going to have to charge our clients more because it costs more to do all this extra work – nobody likes that,” Crabtree said.
Employees with unreimbursed expenses will still want to do those calculations this year to see if it makes a difference on your Minnesota returns. Anyone with a small business or rental property will want to take advantage of deductions. Next year's return is expected to be simpler, since Minnesotans will be filing under one method, instead of two.

Survey Says: 2018 Minnesota Nonprofit CFO Survey Highlights, Trends

Tue, 29 Jun 2021 07:57:00 GMT

Written by Kate Barr of propel nonprofits January 23, 2019

About this time last year, we partnered with the Minnesota Council of Nonprofits (MCN) to survey nonprofit finance leaders across the state, including finance directors, CFOs, and others in the role of financial management. We wanted their perspectives on the current financial condition of their organizations, their financial management practices and policies, and the people working in nonprofit finance.
We were pleased to receive responses from almost 250 financial leaders from nonprofits of all sizes, fields of service, and geographic service areas in Minnesota. We worked closely with MCN’s executive director Jon Pratt and director of advancement Kari Aanestad to analyze and make meaning of the responses. In reviewing the survey results , there’s some valuable information to be gleaned. One surprise, in fact, was the similarity of responses from nonprofits with different budget sizes. There were also some responses that indicate areas that need attention. The questions and data are illuminating; here are a few highlights:

CFOs feel good about 2017, a little less so about 2018 . On the whole, nonprofit financial leaders of all budget sizes and service sector felt good about their organization’s financial health in 2017. However, respondents were feeling less confident heading into 2018, with more projecting to break-even or even reflect deficits.
Stability of roles. At a time when we’ve been hearing about a lot of changes in the sector, notably at leadership levels, it was encouraging to see financial leaders report stability in their organization.
An understanding of finance as key to mission. A large majority of respondents said the financial leader is present at board meetings and that this role is always or usually involved in strategy discussions and decision-making. These both indicate an understanding that finance is part of strategy and is critical to mission effectiveness.
Financial leadership can be learned. We’ve long believed that financial leaders can come from any background. The survey responses proved this to be true; a full 20% of those responding said they “happened to be at the organization and were assigned financial duties.” While the majority did have an accounting, finance, or business degree, we also saw backgrounds in biology, sociology, English, and political science, to name a few.
The sector is getting more sophisticated. It was particularly affirming to review the responses to two questions that were a bit of a trend indicator, since both had been asked in the 1994 and 2000 nonprofit sector surveys. They asked respondents to select a) a statement best describing the financial condition and b) the overall vitality of their nonprofits. We saw a continued increase in financial leaders who say their organization is financially healthy and not presently vulnerable. Likewise, a majority of financial leaders feel their nonprofits are operating smoothly and are well positioned to meet challenges ahead, up from previous surveys. These trends show the sector is steadily gaining financial sophistication, management, and leadership.

Nonprofit CFO comparative responses, Page 7 of report

Areas worth attention:

Unrealistic expectations of board members’ financial knowledge. It was great to see a that majority of respondents regularly present financial information to the board. However, over a third indicated there is an “expectation that board members are knowledgeable coming into the organization” when asked how the board is educated on interpreting and understanding the nonprofit’s financial information. We know this is rarely the case; whether a board member is a community member or banker, we cannot expect them to know our unique financial picture without some board development and training.
It’s still hard to build a cash reserve, especially if you rely on government funding. Over a quarter of nonprofits reported more than 6 months cash on hand and over half had a reserve fund . However, that number is far lower for organizations that count on government contracts for more than 50% of their revenue. This makes sense given the reimbursement nature of the government-funded nonprofit model but becomes troubling in the case of a multi-week government shutdown, for example, since the major benefit of that model is reliability.

Overall, this survey provides valuable information and insights about the current conditions, practices, and people in the sector. We’re grateful to MCN for all their work in pulling this together, as well as to those who took the time to share information. We deeply value financial leadership, including an openness to share insights for the benefit of the sector. This information helps us be responsive to sector needs and ultimately, makes all of us better financial leaders. Be sure to check out the full CFO survey report here . Also note: nearly 40% of respondents said they attend the Finance and Sustainability Conference to stay up-to-date – mark your calendar for April 11.

Qualified business income deduction regs. and other guidance issued

Tue, 29 Jun 2021 07:52:00 GMT

By Sally P. Schreiber, J.D.; Paul Bonner; and Alistair M. Nevius, J.D.

January 22, 2019
On Friday, the IRS released guidance on a large number of Sec. 199A issues, including the eagerly awaited final Sec. 199A regulations (in an as-yet-unnumbered Treasury decision ). The IRS also issued new proposed regulations on how to treat previously suspended losses and how to determine the deduction for taxpayers that hold interests in regulated investment companies (RICs), charitable remainder trusts (CRTs), and split-interest trusts. The guidance also includes a notice that provides a safe-harbor rule for rental real estate businesses and a revenue procedure on calculating W-2 wages.
Sec. 199A allows taxpayers to deduction up to 20% of qualified business income (QBI) from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust, or estate. The Sec. 199A deduction can be taken by individuals and by some estates and trusts. The deduction is not available for wage income or for business income earned through a C corporation.
The deduction is generally available to taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. The deduction is generally equal to the lesser of 20% of the taxpayer’s QBI plus 20% of the taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income, or 20% of taxable income minus net capital gains. Deductions for taxpayers above the $157,500/$315,000 thresholds may be limited; the application of those limits is described in the regulations. These amounts are inflation-adjusted. (For more on the deduction, see “ Understanding the New Sec. 199A Business Income Deduction ,” The Tax Adviser , April 2018).
Final regulations
The IRS noted that the final regulations had been modified somewhat from the proposed regulations issued last August (REG-107892-18) as a result of comments it received and testimony at a public hearing it held. The final regulations apply to tax years ending after their publication in the Federal Register (they have so far only been posted on the IRS website); however, taxpayers may rely on the proposed regulations for tax years ending in 2018.
The final regulations focus on determining the amount of Sec. 199A deduction. They also cover determining when to treat two or more trusts as a single trust for purposes of Subchapter J (governing estates, trusts, beneficiaries, and decedents).
The IRS says it received approximately 335 comments on the proposed regulations. The final regulations contain modifications based on some of those comments, and the IRS says it is continuing to study some comments it received that were beyond the scope of the proposed regulations.
Net capital gain: First, the IRS noted that it had not defined “net capital gain” in the proposed regulations and that a number of commenters had requested a definition. The final regulations, however, reject one comment suggesting that net capital gain exclude qualified dividends. Instead, the regulations define net capital gain for purposes of Sec. 199A as net capital gain under Sec. 1222(11) (the excess of net long-term capital gain for the tax year over the net short-term capital loss for that year) plus qualified dividend income as defined in Sec. 1(h)(11)(B).
Relevant passthrough entities: The proposed regulations define a relevant passthrough entity (RPE) as a partnership (other than a PTP) or an S corporation that is owned, directly or indirectly, by at least one individual, estate, or trust. A trust or estate is treated as an RPE to the extent it passes through QBI, W-2 wages, unadjusted basis immediately before acquisition (UBIA) of qualified property, qualified REIT dividends, or qualified PTP income. The final regulations expand this definition by providing that other passthrough entities, including common trust funds described in Temp. Regs. Sec. 1.6032-T and religious or apostolic organizations described in Sec. 501(d), are also treated as relevant passthrough entities if the entity files a Form 1065, U.S. Return of Partnership Income , and is owned, directly or indirectly, by at least one individual, estate, or trust. It declined to treat RICs as RPEs, however, because they are C corporations.
Trade or business: After considering all relevant comments, the final regulations retain and slightly reword the proposed regulations’ definition of a trade or business. Specifically, for purposes of Sec. 199A, Regs. Sec. 1.199A-1(b)(14) defines a trade or business as a trade or business under Sec. 162 other than the trade or business of performing services as an employee. The IRS again rejected suggestions that the IRS use the Sec. 469 passive activity rules, explaining that whether a trade or business exists is a different determination than that applied to the passive loss rules.
Under the rules, the rental or licensing of tangible or intangible property to a related trade or business is treated as a trade or business if the rental or licensing activity and the other trade or business are commonly controlled under Regs. Sec. 1.199A-4(b)(1)(i). This rule also allows taxpayers to aggregate their trades or businesses with the leasing or licensing of the associated rental or intangible property if all of the requirements of Regs. Sec. 1.199A-4 are met.
One commenter suggested the rule apply to situations in which the rental or licensing is to a commonly controlled C corporation. Another commenter suggested that the rule in the proposed regulations could allow passive leasing and licensing-type activities to benefit from Sec. 199A even if the counterparty is not an individual or an RPE. The commenter recommended that the exception be limited to scenarios in which the related party is an individual or an RPE and that the term related party be defined with reference to existing attribution rules under Sec. 267, 707, or 414. The final regulations clarify these rules by adopting these recommendations and limiting this special rule to situations in which the related party is an individual or an RPE.
Commenters also asked the IRS to provide safe harbors or factors for determining how to delineate separate trades or businesses conducted within one entity and when an entity’s combined activities should constitute a single trade or business, but the IRS declined to provide this guidance.
The IRS warns that taxpayers should report items consistently. For example, the IRS says that taxpayers who treat a rental activity as a trade or business for purposes of Sec. 199A should also comply with the Form 1099 information-reporting requirements under Sec. 6041.
The final regulations also provide computational rules. The final regulations clarify the proposed regulations by providing that for taxpayers with taxable income within the phase-in range, QBI from a specified service trade or business (SSTB) must be reduced by the applicable percentage before the application of the netting and carryover rules described in Regs. Sec. 1.199A1(d)(2)(iii)(A). The final regulations also clarify that the SSTB limitations also apply to qualified income received by an individual from a PTP.
Disregarded entities: The proposed regulations did not address the treatment of disregarded entities. The final regulations provide that an entity with a single owner that is treated as disregarded as an entity separate from its owner under Regs. Sec. 301.7701-3 is disregarded for Sec. 199A purposes. Accordingly, trades or businesses conducted by a disregarded entity are treated as conducted directly by the owner of the entity.
Share of UBIA property: The final regulations modify the proposed regulations with regard to the allocation to partners of the UBIA of qualified property. In the proposed regulations, in the case of a partnership with qualified property that does not produce tax depreciation during the year, each partner’s share of the UBIA of qualified property would be based on how gain would be allocated to the partners pursuant to Secs. 704(b) and 704(c) if the qualified property were sold in a hypothetical transaction for cash equal to the fair market value of the qualified property. The IRS adopted a commenter’s suggestion that for partnerships, only Sec. 704(b), not Sec. 704(c), should apply to determine each partner’s share of the UBIA of qualified property. Thus, the final regulations state that each partner’s share of the UBIA of qualified property is determined in accordance with how depreciation would be allocated for Sec. 704(b) book purposes under Regs. Sec. 1.704-1(b)(2)(iv)(g) on the last day of the tax year.
Under the final regulations, for an S corporation’s qualified property, each shareholder’s share of UBIA of qualified property is a share of the unadjusted basis proportionate to the ratio of shares in the S corporation held by the shareholder on the last day of the tax year over the total issued and outstanding shares of the S corporation.
Basis for contributed property: Another change in response to comments was for a basis rule for property contributed to a partnership in a Sec. 721 transaction or to an S corporation in a Sec. 351 transaction that the property should retain its basis. Therefore, Regs. Sec. 1.199A-2(c)(3)(iv) provides that, solely for Sec. 199A purposes, if qualified property is acquired in a transaction described in Sec. 168(i)(7)(B), the transferee’s UBIA in the qualified property is the same as the transferor’s UBIA in the property, decreased by the amount of money received by the transferee in the transaction or increased by the amount of money paid by the transferee to acquire the property in the transaction.
Similarly, the final rules clarify how to determine the UBIA of replacement property under Sec. 1031 or 1033 in response to comments. They also explain how Sec. 743(b) basis adjustments for partnerships should be treated for UBIA but also request further comments on Sec. 743(b) adjustments.
Aggregating trades or businesses: The IRS declined to adopt most of the comments it received on aggregating trades or businesses, but it did permit an RPE to aggregate trades or businesses it operates directly or through lower-tier RPEs. The resulting aggregation must be reported by the RPE and by all owners of the RPE. An individual or upper-tier RPE may not separate the aggregated trade or business of a lower-tier RPE but instead must maintain the lower-tier RPE’s aggregation. An individual or upper-tier RPE may aggregate additional trades or businesses with the lower-tier RPE’s aggregation if the rules of Regs. Sec. 1.199A-4 are otherwise satisfied.
The IRS also chose to permit taxpayers who have not reported businesses as aggregated on a tax return to choose later to aggregate businesses on a future tax return. However, taxpayers cannot aggregate businesses on an amended return because that would permit taxpayers the benefit of hindsight. Because many taxpayers were not aware of the aggregation rule, though, for 2018, they may report an aggregation on an amended return.
Performing services as an employee: The final regulations, like the proposed regulations, include a presumption that an individual who was previously treated as an employee and is subsequently treated as an independent contractor while performing substantially the same services for the same employer or a related person will be presumed to still be in the trade or business of performing services as an employee for purposes of Sec. 199A. However, in response to comments, the final regulations were modified to include a three-year lookback rule for this presumption. The individual can rebut the presumption by showing records that corroborate the individual’s status as a nonemployee.
Specified service trades or businesses: A large part of the preamble to the final regulations was devoted to comments received on SSTBs. Apart from a few clarifications in the definitions, the final regulations did not adopt these comments.
Proposed regulations
At the same time as it released the final regulations, the IRS also released new proposed regulations ( REG-134652-18 ) treating certain issues not addressed in the proposed regulations issued in August 2018, specifically: (1) the treatment under Sec. 199A of previously suspended losses, (2) “Sec. 199A dividends” paid by a RIC, and (3) the treatment of amounts received from split-interest trusts and CRTs.
Previously suspended losses: The proposed regulations amend Prop. Regs. Sec. 1.199A-3(b)(1)(iv) to provide that previously disallowed, suspended, limited, or carried over losses (including under Secs. 465, 469, 704(b), and 1366(b) and only for disallowance, etc., years ending after Jan. 1, 2018) are taken into account for QBI purposes on a first-in, first-out basis and are treated as from a separate trade or business. To the extent that losses relate to a PTP, they must be treated as losses from a separate PTP. In addition, the attributes of these losses with respect to Sec. 199A are determined according to the year incurred.
Sec. 199A dividends by RICs: In redesignated Prop. Regs. Sec. 1.199A-3(d), the IRS proposed that RICs under Sec. 852(b) may pay Sec. 199A dividends, defined as any dividend that a RIC pays to its shareholders and reports as such in written statements to its shareholders. The rules under which a RIC would compute and report Sec. 199A dividends are based on the rules for capital gain dividends in Sec. 852(b)(3) and exempt interest dividends in Sec. 852(b)(5). The amount of a RIC’s Sec. 199A dividends for a tax year would be limited to the excess of the RIC’s qualified REIT dividends for the tax year over allocable expenses.
Split-interest trusts and CRTs: These proposed regulations redesignate Prop. Regs. Sec. 1.199A-6(d)(3)(iii) to state that a trust with substantially separate and independent shares and multiple beneficiaries is treated as a single trust for determining the application of the threshold amount under Sec. 199A(e)(2). In addition, new Prop. Regs. Sec. 1.199A-6(d)(v) provides that in the case of a CRT, any taxable recipient of a unitrust or annuity amount from a trust must determine and apply the recipient’s own Sec. 199A threshold amount, taking into account any annuity or unitrust amounts received from the trust. These recipients may take into account any included QBI, qualified REIT dividends, or qualified PTP income so distributed for purposes of determining their own QBI deduction.
PTPs: The IRS reserved for further study and comment the treatment of qualified PTP income in qualified Sec. 199A dividends distributed by RICs, noting several technical and administrative problems of their proper characterization with respect to recipients.
These proposed regulations are effective when adopted as final, but the IRS stated that taxpayers may rely on them in the interim.
Calculating W-2 wages
Rev. Proc. 2019-11 provides guidance on how to calculate W-2 wages for purposes of Sec. 199A. Sec. 199A(b)(2) uses W-2 wages to limit the amount of a taxpayer’s Sec. 199A deduction in certain situations. Sec. 199A(b)(4) defines W-2 wages to mean amounts described in Secs. 6051(a)(3) (generally remuneration paid for services paid by an employee to an employer) and 6051(a)(8) (elective deferrals and deferred compensation) paid by a person claiming the deduction with respect to employment of employees by that person during the year. W-2 wages does not include any amount that is not properly allocable to QBI under Sec. 199A(c)(1) or any amount not properly included in a return filed with the Social Security Administration (SSA) on or before the 60th day after the due date for the return.
The revenue procedure provides three methods for calculating W-2 wages: the unmodified box method, the modified box 1 method, and the tracking changes method. The IRS cautions that using one of these methods does not necessarily calculate the W-2 wages that are properly allocable to QBI and eligible for use in computing the Sec. 199A limitations. After using the revenue procedure to calculate W-2 wages, the taxpayer must then determine the extent to which they are properly allocable to QBI. The IRS also cautions that the revenue procedure cannot be used for determining if amounts are wages for employment tax purposes.
The unmodified box method described in the revenue procedure involves taking, without modification, the lesser of (1) the total entries in box 1 (wages, tips, and other compensation) of all Forms W-2, Wage and Tax Statement , filed by the taxpayer with the SSA or (2) the total entries in box 5 (Medicare wages and tips) of all Forms W-2 filed by the taxpayer with the SSA.
The modified box 1 method involves making modifications to the total entries in box 1 of all Forms W-2 filed by the taxpayer with the SSA by subtracting amounts that are not wages for federal income tax withholding purposes (such as supplemental unemployment compensation benefits) and adding the total amounts of various elective deferrals that are reported in box 12.
Under the tracking wages method, the taxpayer tracks total wages subject to federal income tax withholding and elective deferrals reported in box 12.
Rental real estate activities
Many of the comments the IRS received regarding the proposed regulations dealt with the question of when rental activity qualifies as a trade or business. Therefore, in Notice 2019-07 , the IRS has issued a proposed revenue procedure that would provide a safe harbor for taxpayers.
Under the proposed safe harbor, a “rental real estate enterprise” would be treated as a trade or business for purposes of Sec. 199A if at least 250 hours of services are performed each tax year with respect to the enterprise. The IRS says this includes services performed by owners, employees, and independent contractors and time spent on maintenance, repairs, rent collection, payment of expenses, provision of services to tenants, and efforts to rent the property. However, hours spent in the owner’s capacity as an investor, such as arranging financing, procuring property, reviewing financial statements or reports on operations, and traveling to and from the real estate will not be considered hours of service with respect to the enterprise.
A rental real estate enterprise is defined, for purposes of the safe harbor, as an interest in real property held for the production of rents. A rental real estate enterprise may consist of multiple properties. The interest must be held directly or through a disregarded entity. Taxpayers either must treat each property held for the production of rents as a separate enterprise or must treat all similar properties held for the production of rents as a single enterprise. Commercial and residential real estate cannot be combined in the same enterprise.
The proposed safe harbor would require that separate books and records be maintained for the rental real estate enterprise. Property leased under a triple net lease or used by the taxpayer (including an owner or beneficiary of a relevant passthrough entity) as a residence for any part of the year under Sec. 280A would not be eligible under the proposed safe harbor.
AICPA webcast
On Jan. 23, from 1 to 3 p.m. ET, the AICPA will present a comprehensive overview of the final IRS guidance. The webcast will review the issues that the final regulations modify and explain, including expansion of the aggregation rules, clarification around rental real estate activities, examples, and more. Don’t miss this opportunity to understand the final regulations before helping your clients with this new area of the tax law. Click here to learn more.
— Sally Schreiber , J.D, ( Sally.Schreiber@aicpa-cima.com ) and Paul Bonner ( Paul.Bonner@aicpa-cima.com ) are JofAsenior editors. Alistair Nevius , J.D., ( Alistair.Nevius@aicpa-cima.com ) is the JofA’s editor-in-chief, tax.

IRS waives penalty for many whose tax withholding & estimated tax payments fell short in 2018

Tue, 29 Jun 2021 07:47:00 GMT

IR-2019-03, January 16, 2019

WASHINGTON — The Internal Revenue Service announced today that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is generally waiving the penalty for any taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty.

The waiver computation announced today will be integrated into commercially-available tax software and reflected in the forthcoming revision of Form 2210 and instructions.

This relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017.

“We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld,” said IRS Commissioner Chuck Rettig. “We urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

The updated federal tax withholding tables, released in early 2018, largely reflected the lower tax rates and the increased standard deduction brought about by the new law. This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks.

However, the withholding tables couldn’t fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions. As a result, some taxpayers could have paid too little tax during the year, if they did not submit a properly-revised W-4 withholding form to their employer or increase their estimated tax payments. The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “ Paycheck Checkup ” to avoid a situation where they had too much or too little tax withheld when they file their tax returns.

Although most 2018 tax filers are still expected to get refunds, some taxpayers will unexpectedly owe additional tax when they file their returns.

Additional Information

Because the U.S. tax system is pay-as-you-go, taxpayers are required, by law, to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.

Usually, a penalty applies at tax filing if too little is paid during the year. Normally, the penalty would not apply for 2018 if tax payments during the year met one of the following tests:

The person’s tax payments were at least 90 percent of the tax liability for 2018 or
The person’s tax payments were at least 100 percent of the prior year’s tax liability, in this case from 2017. However, the 100 percent threshold is increased to 110 percent if a taxpayer’s adjusted gross income is more than $150,000, or $75,000 if married and filing a separate return.

For waiver purposes only, today’s relief lowers the 90 percent threshold to 85 percent. This means that a taxpayer will not owe a penalty if they paid at least 85 percent of their total 2018 tax liability. If the taxpayer paid less than 85 percent, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold. For further details, see Notice 2019-11 , posted today on IRS.gov.

Like last year, the IRS urges everyone to check their withholding for 2019. This is especially important for anyone now facing an unexpected tax bill when they file. This is also an important step for those who made withholding adjustments in 2018 or had a major life change to ensure the right tax is still being withheld. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

To help taxpayers get their withholding right in 2019, an updated version of the agency’s online Withholding Calculator is now available on IRS.gov. With tax season starting Jan. 28, the IRS reminds taxpayers it’s never too early to get ready for the tax-filing season ahead. While it’s a good idea any year, starting early in 2019 is particularly important as most tax filers adjust to the revised tax rates, deductions and credits.

Although the IRS won’t begin processing 2018 returns until Jan. 28, software companies and tax professionals will be accepting and preparing returns before that date. Free File is also now available.

The IRS also reminds taxpayers there are two useful resources for anyone interested in learning more about tax reform. They are Publication 5307 , Tax Reform: Basics for Individuals and Families, and Publication 5318 , Tax Reform What’s New for Your Business. For other tips and resources, visit IRS.gov/taxreform or check out the Get Ready page on IRS.gov.