Why Keep Personal and Business Finances Separate from Each Other?

If you happen to be in start-up mode you probably haven’t given much attention to the importance of keeping your personal and business finances separate from each other. This blog is certainly not limited just to start-ups, but also includes ill-informed businesses that are beyond the start-up phase of maturity.

Keeping your personal and business finances separate is more than just a “nice thing.” Experience has shown how messy it is to unravel co-mingled finances when forced to do so to satisfy legal requirements such as preparing your tax return or when the IRS comes knocking on the door to do an audit or when lenders request financial reports before approving any cash infusion that you need for your business to survive.

Furthermore, you may have to provide evidence to the IRS that your business is not a sham but is indeed a credible, ongoing concern. Co-mingled finances only go to show a lack of credibility that the numbers you report “might” be inaccurate.

Not a good thing.

Check out: Tax Services in Arizona, Accounting Services Arizona

The following items describe some of the things that you, the business owner, can do to help present your business in the most credible and  favorable light.

The first two points, as neatly summed up by American Express, touch on checking accounts and credit card strategy:

• Set up separate checking accounts. If you have separate checking accounts and you are diligent about drawing on the right account at the right time, come tax time, all you have to do is review your bank statements for a clear picture. If you can manage to only use your business debit card and avoid cash, you may even be able to do your taxes and other financial reporting straight off your bank statements.
• Get a credit card for the business. A business credit card will help you build up a credit history for your business separate from your personal credit history. More importantly, your credit card is one of the likeliest places for your finances to get muddled. Separate credit cards means that even if there's something a little out of reach of your business' current budget, you won't be tempted to use your own credit card.
• Keep your accountant informed. Quickbooks  recommends the following: ask your accountant about making quarterly estimated tax payments to the IRS and your state treasury. If you do end up mixing personal and business finances, such as using your personal funds to invest in your company or purchase something for your company, always ask your accountant how to record the investment in your bookkeeping program.
• Use accounting software. As noted by WAHM, one of the most important reasons to use accounting software in your small home business (any business for that matter) is to help keep separate business and personal finances for tax purposes. When you work at home and report your own income to the IRS, statistically, there is a higher chance of audit. Completely separating the income will help you when filing your taxes, so as to prevent any issues if an audit arises.

Conclusion

Besides reducing legal liability, as Fund Box recommends, keeping your business finances separate makes recordkeeping easier, which helps you manage your taxes and business bills more efficiently. And if you need additional help, the IRS website has hundreds of resources explaining what business and personal records you should keep, how long you should keep them, what forms you need to file and more.

To know more visit: https://www.compasspointcpa.com

Benefits of hiring Tax and Accounting Services by Small Companies

Irrespective of the size of the business, tax and accounting services can simplify a lot of official work and synchronise working without much hassle. If you are a tax paying citizen of Arizona or any other country in the world, it definitely helps when you engage a professional tax services in Arizona. Let us see what are the benefits of hiring tax and accounting services companies.

1. Give enough time to employees: When you are a small organisation, then definitely you do not have enough resources to run various departments. By hiring a tax and accounting services professional, you can ensure that talents of other employees are harnessed in the right direction as they have enough time in hand.

Not Double Checking Everything

1. Accounts are accurate: Professionals know their work and promise accuracy in accounts. This is the biggest advantage of working with professional tax and accounting consultants. There is absolutely no need to verify accounts and do multiple checking of data entered in the log book. Accounting Services Arizona

1. Updated: Another major benefit is these professionals maintain an updated tax and accounting book. This is particularly helpful as there is frequent change in tax rules and laws and it is not necessary that we as individuals or small entrepreneurs are aware of everything. A professional can guide entrepreneurs about tax obligations and how to control finances in accordance with company laws regarding taxation. Tax Services in Arizona

1. Financial Planning:Accounting firms foresee future liabilities that can fall on a company or an individual, hence, they prepare a financial flowchart which can reap benefits for the company in the long run and they do not fail to pay tax by the due date or period.

1. Accountability: When you have hired athorough professional and a firm who believes in maintaining the reputation of their client, then you would never land up in a problem. You should hire a firm who promises accountability.

Contact us for Tax and Accounting Services Arizona


If you wish to know more, leave a comment in the box below.

Ten Things You Need to Know About Passport Restrictions on Delinquent Taxpayers​​

Since 2015, when the Fixing American’s Surface Transportation Act was passed by Congress, world travelers who owe the IRS money have found that it’s no fun to owe a tax debt. In fact, it can ground any and all international travel plans indefinitely.


As noted by Jim Buttonow of Accounting Today:

…FAST Act is Section 7345 of the Internal Revenue Code, which requires the IRS to provide information to the U.S. State Department about people who owe “seriously delinquent tax debt.” Then, the State Department can deny, revoke or limit the ability of these individuals to use their passports – until they are back in good standing with the IRS.

The following 10 Q & A points about the FAST Act, also from Buttonow’s report linked above, are quoted and summarized in a more abbreviated form so that you can quickly digest the main points of how the FAST Act could affect you if you owe taxes:

1. What is the new passport-restriction program (IRC Section 7345)?

IRC Section 7345 requires the IRS to identify and “certify” individuals who have “seriously delinquent tax debt,” and provide this certification to the State Department. In turn, the State Department can essentially limit or completely stop the individual’s travel plans outside the US until the would-be traveler gets into good standing with the IRS.

2. Why did Congress create passport restrictions?

In 2011, the Government Accountability Office issued a report that examined the potential for using passports to increase tax-debt collection. The report found that 224,000 people who owed collectively more $5.8 billion in unpaid federal taxes received passports in 2008.
The report recommended that Congress enable a more coordinated effort between the IRS and State Department to go after these unpaid taxes, using passports as leverage. The report received a lot of national press, and the link between federal tax debt collection and passports became law in 2015.

Check out: Tax Services in Northern Arizona

3. Who is Affected?

The passport restriction will affect people who travel internationally and owe seriously delinquent tax debt. This includes people with passports and those applying for or renewing passports.

Who is an individual with seriously delinquent tax debt? Section 7345 defines this person as owing a legally enforceable tax liability of more than $50,000 (unpaid taxes, penalties and interest combined), with:

• A lien filed, and all administrative remedies for lien relief have lapsed or been denied;
• or, a levy issued.

There are certain exceptions. The IRS won’t consider people in the following situations to be individuals with seriously delinquent tax debt, because these people are in good standing with the IRS:

• People who are in an IRS installment agreement to pay their taxes.
• People who have settled their debt through an offer in compromise or Justice Department agreement. 
• People who appeal a levy through an IRS collection due process hearing. 
• People who request innocent spouse relief (Form 8857). 

Based on this list of exceptions, the way to avoid being certified by the IRS as an individual with seriously delinquent tax debt is to get into an agreement with the IRS to pay the balance.

4. What will happen to the person who owes seriously delinquent tax debt?

Before the State Department revokes a passport, the State Department may limit the passport so that the individual can only travel back to the United States. It’s unclear how the State Department will use its discretion on limiting and revoking passports.

5. How can taxpayers get their passport restrictions lifted?

To get out of the passport restriction, individuals must get back into good standing with the IRS. For most taxpayers, that will mean paying the entire tax bill or, more likely, setting up an installment agreement with the IRS.

6. Can taxpayers just pay the balance to under $50,000 to remove the certification and passport restrictions?

The short answer from the IRS is no. Just reducing the amount under $50,000 will not decertify the taxpayer.

7. Can taxpayers appeal their seriously delinquent tax debt certification?

Under Section 7345(e), taxpayers can appeal their status in federal district court or U.S. Tax Court. But the taxpayers’ passports will remain restricted while they appeal. For taxpayers who are surprised by their passport restrictions when they try to travel, the best way to expedite travel is to obtain a quick installment agreement.

8. What if taxpayers don’t think they owe the tax?

To get immediate relief, the only quick option is for taxpayers to pay the balance, or more likely, set up an installment agreement, and contest the tax later with the IRS.

9. Is there an expedited process to remove passport restrictions?

Right now, there’s no provision to expedite removal of passport restrictions after a taxpayer gets in good standing with the IRS. As the law is implemented, look for the IRS and the State Department to develop expedited procedures to relieve taxpayer burden.

10. What can a seriously delinquent tax debtor do to avoid passport restrictions?

Basically, taxpayers can avoid passport restrictions by meeting an exception outlined above – all of which mean getting into good standing with the IRS.

As Buttonow makes clear in his report: don’t assume it’s safe to make travel plans if you owe taxes. There are problematic ramifications of not being in good standing with the IRS when you intend to use your passport to travel outside the country.

For this reason, we highly recommend you meet with your CPA as part of your pre-trip planning process to put in place payment arrangements with the IRS sufficiently in advance of taking your trip.


To know more visit: https://www.compasspointcpa.com

Benefits of hiring Tax and Accounting Services by Small Companies

Irrespective of the size of the business, tax and accounting services can simplify a lot of official work and synchronise working without much hassle. If you are a tax paying citizen of Arizona or any other country in the world, it definitely helps when you engage a professional tax services in Arizona. Let us see what are the benefits of hiring tax and accounting services companies.

1.      Give enough time to employees: When you are a small organisation, then definitely you do not have enough resources to run various departments. By hiring a tax and accounting services professional, you can ensure that talents of other employees are harnessed in the right direction as they have enough time in hand.

2.      Accounts are accurate: Professionals know their work and promise accuracy in accounts. This is the biggest advantage of working with professional tax and accounting consultants. There is absolutely no need to verify accounts and do multiple checking of data entered in the log book. Accounting Services Arizona

3.      Updated: Another major benefit is these professionals maintain an updated tax and accounting book. This is particularly helpful as there is frequent change in tax rules and laws and it is not necessary that we as individuals or small entrepreneurs are aware of everything. A professional can guide entrepreneurs about tax obligations and how to control finances in accordance with company laws regarding taxation. Tax Services in Arizona

4.      Financial Planning:Accounting firms foresee future liabilities that can fall on a company or an individual, hence, they prepare a financial flowchart which can reap benefits for the company in the long run and they do not fail to pay tax by the due date or period.

5.      Accountability: When you have hired athorough professional and a firm who believes in maintaining the reputation of their client, then you would never land up in a problem. You should hire a firm who promises accountability.

Contact us for Tax and Accounting Services Arizona

If you wish to know more, leave a comment in the box below. 

Benefits of hiring Tax and Accounting Services by Small Companies

Irrespective of the size of the business, tax and accounting services can simplify a lot of official work and synchronise working without much hassle. If you are a tax paying citizen of Arizona or any other country in the world, it definitely helps when you engage a professional tax services in Arizona. Let us see what are the benefits of hiring tax and accounting services companies.

1.      Give enough time to employees: When you are a small organisation, then definitely you do not have enough resources to run various departments. By hiring a tax and accounting services professional, you can ensure that talents of other employees are harnessed in the right direction as they have enough time in hand.

2.      Accounts are accurate: Professionals know their work and promise accuracy in accounts. This is the biggest advantage of working with professional tax and accounting consultants. There is absolutely no need to verify accounts and do multiple checking of data entered in the log book. Accounting Services Arizona

3.      Updated: Another major benefit is these professionals maintain an updated tax and accounting book. This is particularly helpful as there is frequent change in tax rules and laws and it is not necessary that we as individuals or small entrepreneurs are aware of everything. A professional can guide entrepreneurs about tax obligations and how to control finances in accordance with company laws regarding taxation. Tax Services in Arizona

4.      Financial Planning:Accounting firms foresee future liabilities that can fall on a company or an individual, hence, they prepare a financial flowchart which can reap benefits for the company in the long run and they do not fail to pay tax by the due date or period.

5.      Accountability: When you have hired athorough professional and a firm who believes in maintaining the reputation of their client, then you would never land up in a problem. You should hire a firm who promises accountability.

Contact us for Tax and Accounting Services Arizona

If you wish to know more, leave a comment in the box below. 

Bankruptcy Overview

It’s no wonder that the word “bankruptcy” sends shivers down the backs of debtors who have hit hard financial times. Despite the system’s intent that bankruptcy works as a mechanism for giving the debtor a chance for a fresh start, the ramifications of declaring bankruptcy are far reaching and drastic, to say the least.

Debtors facing foreclosure or excessive debts are too often under the misconception that declaring bankruptcy is the perfect solution to these problems.

There are good reasons to look at the alternatives: bankruptcy stays put on your credit record for quite a long time, and it makes advancing in life incredibly difficult. In addition, as noted by Investopedia, the updated bankruptcy law, passed in 2005, includes severe restrictions that make it more complicated to file for bankruptcy.

In a recent article by Carrie Smith of The Simple Dollar, Smith notes that Chapter 7 and Chapter 13 are the two main types of bankruptcy available for most debtors:

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Chapter 7 is often referred to as “liquidation” bankruptcy because it will discharge most of your unsecured debt, including personal loans and credit cards. You’ll be required to pass a “means test,” have a certain amount of income, and may be forced to sell any non-exempt assets. For the most part, however, Chapter 7 filers are able to keep most of their assets. The entire process for this lasts about three or four months.

Chapter 13, however, works differently and is known as the “reorganization” bankruptcy. As Smith notes:

This option will set you up on a repayment plan and force you to pay back your creditors over time. No property is required to be liquidated in the process, but it may take three to five years to finalize everything. To become eligible for this type of bankruptcy, you need to have regular income to make the required monthly payments.

Another option, Chapter 11, has a repayment plan involved that is similar to Chapter 13, except it only applies to specific creditors, not everyone. It doesn’t completely reset your debt, in other words, and allow you to begin fresh as Chapter 7 or as Chapter 13 sometimes does.

Chapter 12, one more option, is only available to farmers and fishermen.

Money Management offers these observations about the different kinds:

While bankruptcy does serve to help you obtain a fresh start with your debts, there are some ramifications to filing for bankruptcy. For example, Chapter 7 bankruptcy remains on your credit report for ten years, although that does not necessarily mean you won’t be approved for any credit before then.

As Smith from The Simple Dollar notes, bankruptcy is not necessarily the cure-all for your financial challenges. In addition, not every debt you have will necessarily be eligible for discharge. For example, bankruptcy will not help you deal with owed back taxes or child support. And before even considering bankruptcy, it is wiser to exhaust every other possible option you have to resolve your debt problems.

Conclusion: Don’t Rush Into the Process, If You Can Help It

There are good reasons to not rush into the decision to declare bankruptcy:

• The odds may work out against you with bad credit in your name
• Filing for bankruptcy has become complex as well as costly owing to the 2005 bankruptcy laws.

For this reason, always consult with a trustworthy bankruptcy attorney before filing becomes necessary. Ultimately, making the right move in the right situation can provide you with a needed respite from anxiety and debt.

To know more visit: Professional Tax And Accounting Services Arizona, Tax Services in Northern Arizona