Yes, we are back, rested and ready to hit the road running after a little break over the Holiday season!  To start off the new 2010 tax year, I wanted to cover a topic that will affect most taxpayers in a positive way , the Making Work Pay Tax Credit.

This tax credit is worth up to $400 for each individual taxpayer or up to $800 for married couples who file Married Filing Joint so it’s definitely worth checking out.

How it works:

This credit is 6.2% of a taxpayer’s income which maxes out at $400.  If you are married it works the same way, the credit is 6.2% of the couples total earned income with the maximum credit of $800.

Higher income taxpayers will be subject to the credit phasing out.  A single taxpayer will have their credit reduced by 2% of the amount of Modified Adjusted Gross Income (MAGI) if they make over $74,999 and the credit is completely phased out at $95,000.  If the taxpayers are Married Filing Joint they will have their credit reduced by 2% of the amount of Modified Adjusted Gross Income (MAGI) if they make over $149,999 and the credit is completely phased out at $190,000.

Earned income from wages or self employment taxable income is required for this credit.  However military personal who receive combat pay which is excluded from income are eligible for this credit.

You must be a US Citizen or a resident alien with a valid Social Security number to be eligible for the credit.  Dependents of taxpayers are not eligible for the credit.

Taxpayers who are Social Security recipients, retired railroad workers and disabled veterans are eligible for a 1 time $250 tax credit.  If they also work and meet the thresholds they may qualify for an additional $150 totaling $400 in a tax credit.  Unfortunately, if you received a pension and no earned income (or those who do not receive Social Security, Veterans Affairs or Railroad Retirement Board income), you will not be eligible for the Making Work Pay Credit.

This credit is claimed on Schedule M.

With the recent changes to the federal income tax withholding tables, some tax payers may find that too little was taken out of their paychecks over the tax year.  If you’re not eligible for the Making Work Pay tax credit, this could mean a smaller than usual refund OR you may even end up owing tax. There is special relief that the IRS may grant if an estimated tax penalty applies. If you receive a estimated tax penalty from the IRS you can request a waiver by filing form 2210.

If you are in one of these categories, keep an eye on your withholdings:

• Pensioners
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers without valid Social Security numbers

If you’re still not sure about your qualification for the Making Work Pay tax Credit or if you’ve got questions regarding your estimated tax penalty, I would highly recommend contacting your accounting or tax professional to guide you through this. Tax issues like these can become very complex and may be affected one way or the other by other factors within your financial situation. Most accountants and tax professionals offer a free initial consultation; at that point they can advise you on your options and let you know if they may be able to help you reduce your tax bill.

Make sure you have your “parachute” packed when making the leap from employee to sole proprietor!

This may be your first foray into realms outside of employment with little to no understanding of the tax implications involved in such ventures. Did you know that for most Sole Proprietors as much as 50.3% of every dollar of profit that they make could be owed to the IRS, Social Security and Medicare?

We understand it can be difficult knowing where to turn for accurate advice or information to educate yourself about your new circumstances. Here at Fredrick James Accounting, we embrace the mantra “knowledge is power”. Our focus is the empowerment through education of independent contractors, the self employed and small business owners to be able to make educated decisions regarding their tax liabilities

“I guarantee anyone who takes advantage of this consultation will save $300.00 dollars in taxes at a minimum, if their income is at least $3,000.00 and they follow my instructions, or I will refund their consultation fee.” –Fred Daus, CEO Fredrick James Accounting, Tax & Consulting

Our firm is now offering a 1-hour personal consultation & informative course that can save you a minimum of $300* on your taxes, guaranteed!

New to Self Employment Business Orientation: How To Avoid Tax Problems & Pave The Way To Success.

Get answers to your questions:

Deductions: what is and is not deductible

How much should I set aside for taxes, Medicare & Social Security?

Do I have to pay State Taxes?

Do I need to charge Sales Tax?

Do I have to make quarterly payments?

Do I qualify for the mileage deduction?

What can I do to reduce my tax liability?

One hour of your time will result in big tax benefits as you make every day decisions regarding your side job, self employment or small business. In this personalized, private session with CEO Fred Daus, he will go over the main topics that could affect you, answer any questions that you have and provide you with a business tax reference guide that will help you make good business decisions that will have positive tax results.

Sign up now or call our office at 727-474-0922 for more information!
Click the button to sign up and save at least $300* on your taxes or your money back, guaranteed.

We prefer to provide this service in person, however if you are not in the Tampa Bay area we would be happy to provide your consultation via phone or web meeting. Once notice of payment has been received by our office, we will contact you to schedule your appointment, thank you!

*The New to Self Employment Business Orientation will save you at least $300.00 dollars in taxes, if your income is at least $3,000.00 and you follow the instructions provided, or we will refund your consultation fee.

_{Fred Daus is the Chief Executive Officer and founder of Fredrick James Accounting, Tax & Consulting. He is a member of National Society of Accountants and the National Society of Tax Professionals and has been helping clients save money since 2001. Fredrick James is an innovative, full service accounting firm in Clearwater, Florida. Visit our website www.FredrickJames.com or call 727-474-0922 for more information}

Last week I went over the different types of accountancy services generally available to business owners. This week I wanted to follow up with some advice on an even more individual level: finding an accounting professional you can get along with, communicate with and work with. Yes, that’s a big deal.

Choosing the Right Accountant Can Make or Break You

Before I start, I want to clarify that accounting is an investment in your business, rather than an annoying expense. Finding the right accountant who understands your goals and is willing to work with you toward achieving them is worth his weight in gold. You will see a much higher return on your investment through smart tax planning and good financial reports that will help you more easily obtain credit in these credit-strapped times.  Having reconciled financial statement can become the difference between getting the loan you need to grow your business and getting the denial letter.  Those financial statements can also become the difference between negotiating fair market value or losing out because your potential partner did not trust the excel spreadsheets and tax returns that you supplied.  I can go on and on with examples, but the point that I am trying to stress is that your accountant should provide value that will pay for itself in the future.  Financial Statements are just the minimum; there are so many other ways that a good accountant can provide value.

Regardless of which type of service you decide to use, be sure that you get along with your accountant and you can envision yourself working with them for the long haul. It does you no good to hire an accountant or bookkeeping service if you dread each interaction with them. Keep in mind too that it is much harder to change accountants once you’ve already gotten established with one, so definitely pay attention to your first instincts and ask a lot of questions during your consult to evaluate their communication style:  Do they answer your questions or deflect? Do they make sure you understand their explanation or rattle off a bunch of jargon then move on? Do they seem sincere or do you feel like you’re being sized up like a juicy morsel?

While price is always a consideration, your main concern should be on the overall results a firm can deliver as the primary factor in determining which accountant or accounting firm to select.  A good accounting firm should become a valuable asset, providing a range of services designed to help your business grow and become more profitable.

_{Some other things to look for in a good accountant:}

• _{The ability to explain the results of their services in plain English.}
• _{Knowledgeable, professional, personal, helpful, informative and friendly.}
• _{Be able to help you set up your new company in a tax savvy manner, keep track of income, expenses, assets and liabilities, reporting, benchmarking, forecasting, provide tax planning for personal & business income, personal and business finance advice, loan packaging, handle responses to various governmental State & IRS letters, preparing for Audits, business growth consulting, IT consulting, Advertising and Marketing Growth Consulting.}
• _{Able to help you set goals and offer creative business advice that will benefit your company as well as insightful recommendations.}
• _{Be your most trusted business advisor and should be involved in many of your business decisions and ready to advise you from a financial perspective.}
• _{Contact from your accountant throughout the year with proactive advice and recommendations.}
• _{Answers their phone & email messages in a timely manner.}
• _{Refers their clients to other reputable professionals in the finance and legal arena.}
• _{Understands the word “value” which ultimately means superior service, innovative ideas,  forward thinking approaches and a relationship that you can rely on throughout the years.}

Good accountants generally have great reputations and rave reviews from their clients; most of their business comes from client referrals. Talk to your friends and business associates. Ask them about their accountant.

If your accountant is not listening or giving you the right advice, if you’re frustrated, confused and/or annoyed, then you are going to have a very hard time achieving your financial goals and should consider a new accounting relationship.

The best advice I can give you is: give yourself the time to research and meet with several professionals to help you choose the right type of accounting relationship and the right personality fit for you.  Make sure you clearly communicate your expectations and define your roles.  Remember that your accountant is an investment in your business and that your investment in a good accountant will pay off.  Finally, communicate with your accountant as often as possible or at least on a monthly basis.  Your accountant’s knowledge of your industry, tax tips and great advice will pay dividends as your business grows and helps fulfill your goals and dreams.

_{Fred Daus is the Chief Executive Officer and founder of Fredrick James Accounting, Tax & Consulting. He is a member of National Society of Accountants and the National Society of Tax Professionals and has been helping clients save money since 2001. Fredrick James is an innovative, full service accounting firm in Clearwater, Florida. Visit our website www.FredrickJames.com or call 727-474-0922 for more information}

Waiting until tax time to hire your accountant / bookkeper / accounting firm is is akin to waiting until labor begins to choose the doctor who’s going to deliver your baby!

When starting a new business there are many decisions you’ll make that will set the scene for success. One of the most important choices, one that is often left to the last moment (tax time), is hiring your accountant. This is akin to waiting until labor begins to choose a doctor to deliver your baby—not  exactly a good time to be making informed, level-headed choices! And, like pediatric doctors, all accountants are not created equal; they have different specialties, ways of doing business, fees, overall knowledge levels, etc. 

There are the good accountants and the bad accountants just like any other profession. So how do you pick one?

Well, a good place to start is understanding the different types of accountants that are available to you and what they do. Here is a list of the 5 most commonly found styles of accounting:

Family, friend or someone who does it on the side (Moonlighter). Their fee structure is generally free or a very low cost. We all know this type of accountant in one way or another. This type of accountant generally has a very big heart, the best intentions and wants to help in any way they can. While the moonlighting accountant can generally perform the basics of accounting and taxes, depending on their experience, this accountant generally lacks the qualifications on the performance side of the job.

Pros: Little to no cost.

Cons: You get what you pay for. If you are not paying anything or you are not paying much at all there tends to be less of an incentive to finish the project or get you the reports you need on a timely basis when it’s late at night or the weekend and the moonlighting accountant has other obligations. This type of accountant, while having a big heart and some good advice, more than likely could end up costing your business 5-10 times in tax and other consequences than the investment that you would have made in a Qualified and Reputable Accounting Firm.

Bookkeeping Services. Bookkeeping by definition is the practice or profession of recording the accounts and transactions of a person, business or entity. The process of bookkeeping is mechanical in nature and is generally performed by a person who possesses knowledge of the Income Statement and general knowledge pertaining to the Accounts Receivable and Accounts Payable portion of the Balance Sheet. Sometimes this type of service may boast the term ‘full-charge bookkeeping’ which includes the compiling of the transactions into the accounts and preparing financial reports.

Pros: The fee structure is very low and bookkeepers can be very helpful and insightful in determining the profitability of your company.

Cons: A bookkeeping service is generally very limited in the scope of accounting and payroll and often does not have an in depth knowledge of tax preparation or tax law.  While the price point of this service is relatively low, the need for a tax accountant is a must for a business choosing to go with a bookkeeping service.

The small accounting practice who generally comprises of a single accountant who hires help on a seasonal basis or has an assistant (One Person Office).

Pros: The fee structure is often low since the owner/accountant produces most of the services for the client. The smaller firm practitioner generally specializes in small business and is knowledgeable, to some extent, in your particular type of business. They are familiar with the local regulations and taxes, they offer in house bookkeeping and payroll, and they also have tax knowledge to help you grow your business in a manner that will help you avoid over taxation of your business.  The small accounting practice can be a good starting point for personal taxes, a home business or a small family business.

Cons: While the price point of this option can also be low, the one person office generally has inconsistent office hours, client service and performance due to the majority of work being done by the busy owner-accountant or seasonal/part time staff.  The small accounting practice is not recommended for growing business’s that will need additional services that the accountant does not offer in the years to come because changing accounting relationships midstream can often have disastrous consequences for a growing business.

The qualified and reputable accounting firm (Accounting Firm) generally has several full time staff comprising of administrative professionals, accounting professionals ranging from tax accountants, public accountants, CPA’s, EA’s and business consultants that offer a range of expertise from information technology, finance, international business to marketing and advertising advisory services.

Pros: The fee structure is moderate and is usually based on the different levels of services provided. An accounting firm generally has an experienced owner or partners who are motivated and has grown the accounting business over the years, has earned a good reputation in their community and are committed to client service. The owner or partners manage their book of business and their primary job is client service, overseeing their staff, reviewing staff work, consulting, networking in the community and other management duties in the firm. This type of firm often offers a broad range of services from personal, business and not for profit tax, accounting, bookkeeping, payroll, forecasts, projections, audit/review, attestation services, loan packaging, budgeting, personal financial services and various high end consulting services.  The accounting firm also tends to have reputable professional affiliates that it can refer its clients to when needed.  The accounting firm has a lot to offer for personal and small/medium business clients and is thought of as the best value for the money paid.

Cons: Many times this type of firm does not have experts in all areas of business and the use of outside consultants may be necessary in some circumstances.  Also, the business may not have the resources needed to perform larger projects that big business’s demand such as audits and various consulting engagements.

The larger qualified and reputable accounting firm (Regional and National CPA Firms) generally has hundreds to thousands of full time staff comprising of administrative professionals, accounting professionals; tax accountants, public accountants, CPA’s, EA’s and business consultants that range in areas of expertise from information technology, finance, international business to marketing and advertising advisory services.

Pros: The partners manage their book of business and their primary job is client service, overseeing their management staff, reviewing management staff work as well as other partners work, consulting, networking in the community and other management duties in the firm. This type of firm often offers a very broad range of services from personal, business and not for profit tax, accounting, bookkeeping, payroll, forecasts, projections, audit/review, attestation services, loan packaging, budgeting, personal financial services, high end consulting services and very specialized niche services. The regional and national CPA firms have a lot to offer to any person or business who requires a firm with extensive knowledge capital and deep resources.

Cons: The fee structure is generally the most expensive of all your choices, due to their national and international recognition and because they are subject to peer reviews, additional insurance costs, capital outlays and other costs.

There is a lot to choose from out there in your search for an accounting professional and, as you can see, knowing what you need from your accountant is the first step in the process. One size does not fit all.

Next week I’ll follow up with a few more suggestions for things to consider that might help you find the right accountancy service for your business.

Have you ever had a bad, or a stellar, experience with an accountant, firm or bookkeeping service? Share your story in our comments section and help other readers learn what to look for.