• Hire Contractors in 2015? The Deadline for 1099s Is February 1, 2016

    12 January 2016
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    If you operate a business and hired an individual (like an independent contractor) who is not an “employee” and you paid him or her $600 or more for the 2015 calendar year, you are required to issue him or her a Form 1099 at the end of the year to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit – or at the very latest, February 1, 2016.

    That is, the due date for mailing the recipient his or her copy of the 1099 that reports 2015 payments is February 1, 2016, while the copy that goes to the IRS is due at the end of February.

    It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later in the year and have the total for the year exceed the $599 limit. As a result, you may have overlooked getting the information from the individual needed to file the 1099s for the year. Therefore, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts. If you have been negligent in the past about having the W-9s completed, it would be a good idea to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you going forward.

    IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the data required to file 1099s for your vendors. It also provides you with verification that you complied with the law in case the vendor gave you incorrect information. We highly recommend that you have a potential vendor complete a Form W-9 prior to engaging in business with them. The W-9 is for your use only and is not submitted to the IRS.

    The penalties for failure to file the required informational returns have been doubled this year and are $250 per informational return. The penalty is reduced to $50 if a correct but late information return is filed not later than the 30th day after the February 29, 2016, required filing date, or it is reduced to $100 for returns filed after the 30th day but no later than August 1, 2016. If you are required to file 250 or more information returns, you must file them electronically.

    In order to avoid a penalty, copies of the 1099s you’ve issued for 2015 need to be sent to the IRS by February 29, 2016. They must be submitted on magnetic media or on optically scannable forms (OCR forms). This firm prepares 1099s for submission to the IRS. This service provides recipient copies and file copies for your records. Use the 1099 worksheet (http://images.client-sites.com/1099-Worksheet.pdf) to provide Dagley & Co. with the information needed to prepare your 1099s.

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  • January 2016 Tax Due Dates for Businesses

    7 January 2016
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    Yesterday, we covered the January 2016 tax due dates for individuals.

    There is only one deadline for business owners to remember: on January 15, your Employer’s Monthly Deposit is due. If you are an employer and the monthly deposit rules apply, January 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for December 2015. This is also the due date for the nonpayroll withholding deposit for December 2015 if the monthly deposit rule applies. Employment tax deposits must be made electronically (no more paper coupons), except employers with a deposit liability under $2,500 for a return period may remit payments quarterly or annually with the return.

    If you are a small- or medium-sized business owner, and you don’t have a CPA lined up for the upcoming tax season, we would love to take you on as a client. Dagley & Co. specializes in businesses like yours, and we have a stellar track record. You can find our information at the bottom of this screen. We look forward to working with you!

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  • How To Launch Your Startup in Eight Steps

    26 December 2015
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    These days, it seems like almost everyone has a startup – and if you have a great business idea, why not join in on the fun? Every year, thousands of entrepreneurs across the nation launch their own business. The internet marketplace makes sales easier than ever. If you’re ready to start your own business, here’s a step-by-step overview of what you need to do to make your vision become a reality.

    1. Start with an Idea and Brainstorm 

    Perhaps you’ve already have zeroed in on a product or service for your new upstart. While having an idea is a good start, it’s important to get your mental muscles turning and brainstorm that idea. Is there a demand for the product or service? Who is your target market? Are there additional related services or products that can be tied into the primary offering? Keep in mind that adjunct services and products are an effective way to increase your bottom line. Thinking about potential problems and having solutions in place will also help your launch run more smoothly. The key takeaway with brainstorming is that it’s a powerful tool which will get you to think critically about your idea.

    1. Draft a Business Plan

    A business plan is the road map of your new business. It defines and clarifies the direction of your business, products or services and a description of your customers. It’s also an effective way to plan for market changes and focuses on your future vision for company goals. When drafting your business plan, be sure to include facts, statistics and figures that support your idea. This will better help attract investors, partners, suppliers and executive level employees for your new venture. The typical business plan averages 15 to 20 pages and includes an overview of the plan, business description, development, competition analysis, management, market strategies and financial information. A business plan is required to secure funding at the start-up phase and your map to the future.

    1. Fund Your Business

    To turn your dream idea into a viable business, it’s going to take money. There’s no magic bullet here, so you’ll have to explore your resources and determine which one is most attractive. You can opt for a credit line of credit or a bank loan. Just keep in mind that you’ll have to have a solid credit history or existing assets to put up for collateral. Another option is to join a startup incubator. Organizations like Y Combinator not only provide free resources to startups, but seed funding. Some startups find funding from local angel-investor groups. Most metropolitan areas have groups of angel investors who are interested in supporting startups and willing to fund up to millions of dollars for qualified startups. Once of the newest ways to get funding to launch a business is to start a crowdfunding campaign online. Online sites like Kickstarter gives you the opportunity to have folks make pledges for a startup. Other ways to garner monies for your new company include getting a small business grant and asking strategic partners, friends or family members.

    1. Select an Accountant and Attorney 

    Both an accountant and attorney should be on your startup team. Entrepreneurs must keep endless amounts of records for tax and legal purposes. An accountant – such as one from Dagley & Co. – can provide you with a wide range of services through the early stages, including business entity selection, expense tracking, business licenses, financial planning, month-end accounting, tax preparation, an accounting system, W2s and 1099s. Outsourcing with our accounting firm lets you focus on your core business instead of non-core business. Accountants are also essential when it comes to raising funds, structuring deals and financial reporting. An attorney adds value to a startup in a variety of ways. Not only does an attorney assist with entity formation, they help you work with the government, third parties and other company founders. You don’t want to violate any laws, and an attorney will keep you on the right side of the law. They help you draft the proper legal documents to control risk with suppliers, protect intellectual property rights, employees and customers. Plus, they can assist multiple founders of a startup in drafting up agreements that outline the rights and duties of each.

    1. Apply for Tax ID and State Sales Tax Permit

    You’ll need to fill out a tax identification application to get your tax ID. This number identifies your business on all types of documents and registrations. As a matter of fact, most banks will require your tax ID before you can apply for a business loan or set up a business checking account. You can apply for a tax ID at the IRS website. Just print out a copy of the SS-4 form. And if you’re selling any services or products that are subject to sales tax in your state, you must collect that tax from your customers and pay it to the state. It’s important to note that if you have more than one location for your business, you must obtain and display a Sales and Use Tax Permit in each location.

    1. Obtain a Business License

    Your new business needs a business license in order to operate legally, even if you’re operating from home. You can find all the information to do this at the SBA website or your city’s business website. You’ll need to know your business code. Different codes require a specific application process, and each city has its own set of rules and requirements. Generally, you’ll have to provide your federal ID number, type of business, number of employees, business address, contact information and the name of the business owner.

    1. Know the Labor Laws 

    Workers compensation coverage is required for businesses with more than three employees. If you have more than three employees, you’ll need to attain workers compensation on a self-insured basis, through a commercial carrier or through the state Workers Compensation Insurance program. Employers are also required by federal and state laws to display posters in the workplace that inform employees of employer responsibilities and employee rights under labor laws. You can easily attain these posters free from state and federal labor agencies.

    1. Choose a Business Location

    Deciding where to set up shop is a critical business decision. The real estate mantra of “location, location, location” has merit for a successful business venture. You’ll want to ensure that the area has the human resources to meet staffing needs. For example, if your startup is focused on detailed work, you most likely wouldn’t want to choose a rural community for its location. Always investigate the available labor pool in your chosen area. Determine the demographic profile of your location. You’ll need to know who your customers are and their proximity to your location. This is important if you’re a retailer or in some type of service business. If you’re customer base is local, you need to ensure that there is a sufficient percentage of the population that needs your product or services to support your business. The community of the location should also have a stable economic base.

    Launching a new business takes a lot of planning and effort, but it can lead to a very rewarding lifestyle. Follow our steps and you’ll be in good shape to tackle the task. Contact us at Dagley & Co. so we may help you with every step of the process – and your business taxes!

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  • Everything You Need To Know about the Protecting Americans from Tax Hikes (PATH) Act of 2015

    22 December 2015
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    On Friday, Congress reached a bipartisan agreement on tax extenders, named “Protecting Americans from Tax Hikes (PATH) Act of 2015”. Much to everyone’s surprise, some were made permanent while others were only extended for a period of time. Though the PATH act is not perfect, many are touting the act as a win for local economies and working families. Congress also modified several provisions and added new ones to reduce tax fraud.

    Here is a look at some of the key provisions included in the legislation that pertain to individuals, small businesses, and certain energy-related provisions:

    INDIVIDUAL PROVISIONS:

    • Child Credit – This credit was made permanent; it provides a $1,000 credit for each dependent child who is under the age of 17 at year’s end, who lived with the taxpayer for over half of the year and who meets the relationship test. The credit phases out for higher-income taxpayers, and a portion of the credit is refundable for lower-income taxpayers. The changes also include program integrity provisions that prohibit an individual from retroactively claiming the child credit by amending a return (or filing an original return if he or she failed to file) for any prior year in which the individual for whom the credit is claimed did not have an ITIN – generally a Social Security number).

    After 2015, when a taxpayer improperly claims the credit, the legislation includes a disallowance period when no credit is allowed. For fraud, the disallowance period is 10 years, and for reckless or intentional disregard of rules and regulations, the disallowance period is 2 years.

    • American Opportunity Credit (AOTC) – This credit, which was due to expire after 2017, has been made permanent. This is a tax credit equal to 40% of the cost of tuition and qualifying expenses for higher education, with a maximum credit of $2,500. The credit applies to 100% of the first $2,000 and 25% of the next $2,000 of qualifying expenses. The credit offsets any tax liability, and 40% of the credit is refundable even if the taxpayer does not have any tax liability. It also phases out between $160,000 and $180,000 for married taxpayers filing jointly and between $80,000 and $90,000 for others – except for married taxpayers filing separately, who get no credit.

    After 2015, when a taxpayer improperly claims the credit, the legislation includes a disallowance period when no credit is allowed. For fraud, the disallowance period is 10 years, and for reckless or intentional disregard of rules and regulations, the disallowance period is 2 years.

    A provision was added that prohibits an individual from retroactively claiming the AOTC by amending a return or filing a late original return for any prior year when the individual or a student for whom the credit is claimed did not have an ITIN (generally a Social Security number).

    • Earned Income Tax Credit (EITC) – The EITC is a refundable credit allowed to certain low-income workers who have W-2 wages and self-employed income. The credit is larger for taxpayers with children. The credit for taxpayers with children is based upon the number of children; those with three or more children receive the highest credit – as much as $6,269 in 2015. The higher credit for three or more children, which was a temporary provision that was set to expire after 2017, has been made permanent.

    The changes also include added program integrity provisions that prohibit an individual from retroactively claiming the AOTC by amending a return (or filing an original return if the individual failed to file) for any prior year in which the individual for whom the credit is claimed did not have an ITIN (generally a Social Security number). The changes also reduced the marriage penalty by increasing the income phase-out for those filing jointly.

    • Teachers’ $250 Above-the-Line Deduction – This provision, which was available from 2002 through 2014, allows teachers and other eligible educators (levels kindergarten through grade 12) to take an above-the-line deduction of up to $250 for unreimbursed expenses incurred as part of their educational work. This deduction has been made permanent and modified by adjusting the $250 for inflation in years after 2015. In addition, professional development expenses were added to the qualified expenses allowed as part of the $250 deduction.
    • Transit Pass & Parking Fringe Benefit Parity – From 2010 through 2014, the monthly exclusion amount for employer-paid transit passes and qualified parking were temporarily the same. The parity of these two fringe benefits has been made permanent. Thus, for 2015 they will both be $250.
    • Optional Deduction of State and Local General Sales Taxes – Since 2004, taxpayers who itemized their deductions have had the option to deduct the Larger of (1) state and local income tax paid during the year, or (2) state and local sales tax paid during the year. This provision, which had been previously extended through 2014, provides the greatest benefit to those taxpayers who reside in a state that has no income tax (which include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming). This election has been made permanent.
    • Above-the-Line Deduction for Qualified Tuition and Related Expenses – This above-the-line deduction for qualified higher education tuition and related expenses had been available from 2002 through 2014. The deduction includes adjusted gross income (AGI) limitations; it is not allowed for joint filers with an AGI of $160,000 or more ($85,000 for other filing statuses). This deduction has been retroactively extended through 2016.
    • Tax-Free IRA Distributions For Charitable Purposes – This provision was temporarily added in 2004 and originally expired in 2011; it was not extended until late in the year during the years 2012, 2013 and 2014, thus limiting its application in those three years. The provision allows taxpayers age 70.5 and over to directly transfer (not rolled over) funds from their IRA accounts to a qualified charity. The distribution is not taxable, but it does count toward the individuals’ required minimum distribution (RMD) for the year. The maximum allowable transfer is $100,000 per year. No charitable deduction is allowed, as the distribution is not taxable. This provision has been made permanent; it provides four potential tax advantages:
    1. The distribution is not included in income, thus lowering the taxpayer’s AGI, which in turn helps to avoid various AGI phase-outs and limitations.
    2. Keeping the AGI lower also helps to minimize the amount of Social Security income that is subject to tax for some taxpayers.
    3. Taxpayers using the standard deduction cannot get a charitable deduction, but they are essentially deducting the charitable deduction from their gross income when making contributions this way.
    4. The transferred distribution counts towards the taxpayer’s RMD for the year.
    • Discharge of Qualified Principal Residence Indebtedness – When an individual loses his or her home to foreclosure, abandonment or short sale or has a portion of his or her loan forgiven under the HAMP mortgage reduction plan, that person generally will end up with cancellation of debt (COD) income. COD income is taxable unless the taxpayer can exclude it. A taxpayer can exclude the COD income in the extent that he or she is insolvent (with debts exceeding assets immediately before the event occurs) using the insolvency exclusion.

    Due to the housing market crash, in 2007, Congress added the qualified principal residence COD exclusion, which allowed taxpayers to exclude COD income to the extent that it was discharged acquisition debt. Acquisition debt is debt originally incurred to acquire a home or substantially improve it – not debt used for other purposes, which is called equity debt. However, equity debt is deemed to be discharged first, thus limiting the exclusion when both equity and acquisition debt are involved in the transaction.

    The qualified principal residence COD exclusion had been previously extended but had expired at the end of 2014. This exclusion has been retroactively extended through 2016 (a two-year extension).

    • Mortgage Insurance Premiums – For tax years 2007 through 2014, taxpayers could deduct (as an itemized deduction) the cost of premiums for qualified mortgage insurance on a qualified personal residence (first or second home). To be deductible, the premiums must have been related to acquisition debt incurred after Dec. 31, 2006. However, this deduction phases out for higher-income taxpayers (generally those whose AGI exceeds $100,000). This provision, which had expired after 2014, has been retroactively extended through 2016, a two-year extension.

    BUSINESS PROVISIONS:

    • Research Credit – Tax law provides a tax credit of up to 20% of qualified expenditures for businesses that develop, design or improve products, processes, techniques, formulas or software (and similar activities). The credit has been available off and on since 1981 without being made permanent. It had been extended several times but had expired at the end of 2014. This credit has been retroactively made permanent. In addition, it is not a tax preference for small businesses.
    • 100% Exclusion of Gain – Certain Small Business Stock – Previously, for stock issued after September 27, 2010, and before January 1, 2015, non-corporate taxpayers could exclude 100% of any gain realized on the sale or exchange of “qualified small business stock” held for more than 5 years. In addition, there was no alternative minimum tax (AMT) preference when the exclusion percentage was 100%. Generally, the term “qualified small business” means any domestic C corporation with assets of $50 million or less. This provision has been made permanent.
    • Differential Wage Payment Credit – Through 2014, eligible small business employers – generally those that have an average of fewer than 50 employees and that pay a individual called into active duty military service all or part of the wages that they would have otherwise received from the employer – can claim a credit. This differential wage payment credit is equal to 20% of up to $20,000 of differential pay made to an employee during the tax year. This credit has been retroactively made permanent; for years after 2015, the credit will apply to any size employer.
    • Work Opportunity Tax Credit (WOTC) – Through 2014, employers could elect to claim a WOTC for up to 40% of employees’ first-year wages for hiring workers from targeted groups – not exceeding wages of $6,000 (a maximum credit of $2,400). First-year wages are wages paid during the tax year for work performed during the one-year period beginning on the date when the employee begins work for the employer. This credit has been retroactively extended for five years through 2019; it applies to veterans and non-veterans and adds qualified long-term unemployment recipients to the list of targeted groups for years after 2015.
    • Section 179 Election – Since 2003, the Section 179 election has been temporarily increased from its statutory limit of $25,000 to between $100,000 and $500,000. Since 2010, the expense cap has been $500,000 (or $250,000 on a married-filing-separate tax return), and the investment limit has been $2 million. However, the last extension expired after 2014; without an extension, the cap would have returned to the statutory $25,000 limit in 2015. The statutory expensing limit of $500,000 and the $2 million investment limit have both been made permanent.

    The application of the Section 179 election to “off-the-shelf” computer software, qualified leasehold improvements, qualified restaurant property and qualified retail improvements has also been made permanent.

    • Leasehold and Retail Improvements and Restaurant Property – The class life for qualified leasehold and retail Improvements and restaurant property had been temporarily included in the 15-year depreciation class life, as opposed to the 31-year category. Qualified leasehold and retail Improvements and restaurant property have been retroactively and permanently included in the 15-year MACRS class life.
    • Bonus Depreciation – As a means of stimulating the economy, a 50 percent bonus depreciation was temporarily implemented in 2008 and subsequently extended through 2014. For the period between September 8, 2010, and before January 1, 2012, it was even boosted to 100 percent. Bonus depreciation applies to personal tangible property placed in service during the year for which the original use began with the taxpayer.

    The 50% bonus depreciation has been extended for 2 years (through 2016) for property placed in service before January 1, 2017. This generally applies to property with a class life of 20 years or less, to qualified leasehold improvements and to certain plants bearing fruits and nuts that are planted or grafted before January 1, 2020.

    • Enhanced First-Year Depreciation for Autos and TrucksThis is the so-called “luxury limit” on the deprecation deduction of passenger automobiles and light trucks used for business. For such vehicles placed in service in 2015, the limits are $3,160 and $3,460, respectively. In the past, the bonus depreciation had increased the first-year luxury limits by $8,000. Under the new law, the bonus depreciation applicable to luxury vehicles will be phased out through 2019. Thus, the luxury auto rates will be increased by the following bonus depreciation rates: $8,000 for 2015 through 2017, $6,000 for 2018 and $4,800 for 2019.

    ENERGY PROVISIONS:

    • Residential Energy (Efficient) Property Credit – From 2006 through 2014, a nonrefundable credit had been available for qualified improvements to make the taxpayer’s existing primary home more energy efficient. Qualified improvements generally included insulation, storm windows and doors certain types of energy-efficient roofing materials, and energy-efficient air conditioning and hot-water systems. The credit was equal to 10% of the improvement’s cost (not including installation), with a lifetime credit of $500. The credit has been retroactively extended through 2016 (two years).
    • Credit for Fuel-Cell Vehicles – Through 2014, a taxpayer could claim a credit for vehicles fueled by chemically combining oxygen with hydrogen to create electricity. Generally, the credit was $4,000 for vehicles weighing 8,500 pounds or less (and up to $40,000 for heavier vehicles, depending on their weight). An additional $1,000 to $4,000 credit was available for cars and light trucks to the extent that their fuel economy exceeded the 2002 base fuel economy set forth in the Internal Revenue Code. This credit has been retroactively extended for two years through 2016.

     

    If you have questions related to these or other, less commonly encountered provisions of the new law (Protecting Americans from Tax Hikes Act of 2015), please get in touch with us at Dagley & Co. Benefiting from these provisions for 2015 will require taking action before year’s end, so please call if you need assistance.

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  • Are You and Your Business at Risk for a Trust Fund Penalty?

    15 December 2015
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    Don’t even think about keeping those withheld amounts for your company!

    Hold on, this article is not about silver spooned “trust fund babies,” but something entirely different. When an employer withholds Social Security and income taxes from an employee, those funds are the property of the government, and the employer must hold those funds in “trust” until the funds are turned over to the government. Failure to do so could lead to the so-called trust fund penalty, which is equal to 100% of the withholding from the employees’ wages. The penalty applies to any willful failure to collect, account for and pay over Social Security and income taxes required to be withheld from employee wages.

    A recent report issued by the Treasury Inspector General for Tax Administration has made recommendations to the IRS for timely assessing and collecting the responsible person penalty, and the IRS is adopting the recommendations. The government has always been very aggressive about collecting trust fund penalties and will pursue collecting the penalty from the “responsible person.” This is where you may be at risk.

    The IRS broadly defines a “responsible person” to include corporate officers, directors, and shareholders under a duty to collect and pay the tax as well as a partnership’s partners, or any employee of the business under such a duty.

    So if you are a person with the power to see that the taxes are paid, you may be responsible. Frequently more than one person is a responsible person, and each one is at risk for the entire penalty. Even though you may not be directly involved with the withholding process, if you discover that trust funds that are due to the government are instead being used to pay a business creditor, you become a “responsible person.” You always have to keep in mind that the trust fund money belongs to the government, and bowing to business pressures to pay bills or obtain supplies instead of transmitting the withheld taxes to the government will be viewed as willful (bad) behavior for purposes of the penalty.

    Unlike some other types of penalties, there are no acceptable excuses for failure to withhold the required payroll taxes or for borrowing withheld amounts to pay other expenses. Even if you have a payroll company collecting and paying over the withholding, and that firm should go belly up, or someone in that firm absconds with the trust finds, guess who is still responsible for paying the government? The responsible person at the business, of course!

    Don’t fall victim to the penalty by allowing a partner or corporate superior to persuade you not to withhold or timely pay over the trust funds to the government. If you are interested in discussing your potential risks and exposure to this penalty, please get in touch with us at Dagley & Co.

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  • December 2015 Tax Due Dates for Business Owners

    9 December 2015
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    December 2015

    Yesterday, we went over the December 2015 tax due dates for individuals. Those of you who read our blog regularly know that we usually follow up with tax due dates for business owners, and voila, here we go:

    December 1 – Employers

    During December, ask employees whose withholding allowances will be different in 2016 to fill out a new Form W4 or Form W4 (SP).

    December 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in November.

    December 15 – Nonpayroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in November.

    December 15 – Corporations

    The fourth installment of estimated tax for 2015 calendar year corporations is due.

    December 31 – Last Day to Set Up a Keogh Account for 2015

    If you are self-employed, December 31 is the last day to set up a Keogh Retirement Account if you plan to make a 2015 Contribution. If the institution where you plan to set up the account will not be open for business on the 31st, you will need to establish the plan before the 31st. Note: there are other options such as SEP plans that can be set up after the close of the year. Please call the office to discuss your options.

    December 31 – Where did the time go?! It’s the last day of the year!

    This is your last call to make financial moves that can affect your tax year. If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st. Please set up an appointment with Dagley & Co. before this day so we can get you all squared away in time.

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  • Save on Black Friday: Hire Dagley & Company!

    27 November 2015
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    On this hot, hot hot shopping and sales weekend, you may be looking everywhere for the best Black Friday and Small Business Saturday deals. There’s another way to save yourself a lot of money – potentially thousands of dollars – and that is by hiring an accountant from Dagley & Company to do the taxes of you, your family, and/or your small business.

    For starters, our founder, Dan Dagley, has an exceptional track record with taxes and clients. He was a top-10 CPA with TurboTax’s Pro program, which is currently undergoing a makeover. You can read hundreds of his glowing reviews on our testimonials page. If you miss this TurboTax Pro service, Dagley & Company can help fill your need. Get started by getting in touch with us; you’ll find our contact information at the bottom of this screen.

    If you’re one of those people who has never filed for taxes and hasn’t heard from the IRS, then it’s probably because you’re leaving money on the table. Each year, the IRS reports about $1 billion in unclaimed refunds for individuals who did not file a tax return – and about half of them are for amounts greater than $600! You could literally turn a profit simply by dropping us an email, so what are you waiting for?

    Many people are handy at filing their own taxes, but our clients who decide to pivot to our team are consistently amazed at the money they save. It’s unlikely that you know all of the tax credits and benefits you are entitled to! There are credits for those who generate their own renewable energy, there are credits for those paying for education, there are credits for those who are taking care of elderly/disabled relatives, there are tax deductions for start-up businesses, and so many more. Let us sit down with you to see just how much of your own money you’re entitled to keep this year.

    Finally, Dagley & Company is about as convenient as it gets. Yes, we are located in Washington, D.C., but we serve clients all over the United States, as well as a few scattered all over the globe. Best case scenario for you and us is you keep good records on Quickbooks or another digital program, and we can help you file the most accurate, succinct tax forms you’ve ever seen. Whether you prefer email or a personal phone call, we’re here to work with you to save you time and money.

    We hope this has helped you make a decision about the best way to file your taxes – and happy shopping on this Black Friday!

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  • How To Claim a Disaster Loss On Your Taxes

    18 November 2015
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    It’s been a wild year, weather-wise! With flooding on the East Coast and the wild fires and draught in the West, we have had a number of presidentially declared disaster areas this year. If you were an unlucky victim and suffered a loss as a result of a casualty, your luck may change as you may be able to recoup a portion of that loss through a tax deduction. If the casualty occurred within a federally declared disaster area, you can elect to claim the loss in one of two years: the tax year in which the loss occurred or the immediately preceding year.

    By taking the deduction for a 2015 disaster area loss on the prior year (2014) return, you may be able to get a refund from the IRS before you even file your tax return for 2015, the loss year. You have until the unextended due date of the 2015 return to file an amended 2014 return to claim the disaster loss. Before making the decision to claim the loss in 2014, you should consider which year’s return would produce the greater tax benefit, as opposed to your desire for a quicker refund.

    If you elect to claim the loss on either your 2014 original or amended return, you can generally expect to receive the refund within a matter of weeks, which can help to pay some of your repair costs.

    If the casualty loss, net of insurance reimbursement, is extensive enough to offset all of the income on the return, whether the loss is claimed on the 2014 or 2015 return, and results in negative income, you may have what is referred to as a net operating loss (NOL). When there is an NOL, the unused loss can be carried back two years and then carried forward until it is all used up (but not more 20 years), or you can elect to only carry the unused loss forward.

    Determining the more beneficial year in which to claim the loss requires a careful evaluation of your entire tax picture for both years, including filing status, amount of income and other deductions, and the applicable tax rates. The analysis should also consider the effect of a potential NOL.

    Ordinarily, casualty losses are deductible only to the extent they exceed $100 plus 10% of your adjusted gross income (AGI). Thus, a year with a larger amount of AGI will cut into your allowable loss deduction and can be a factor when choosing which year to claim the loss.

    For verification purposes, keep copies of local newspaper articles and/or photos that will help prove that your loss was caused by the specific disaster.

    As strange as it may seem, a casualty might actually result in a gain. This sometimes occurs when insurance proceeds exceed the tax basis of the destroyed property. When a gain materializes, there are ways to exclude or postpone the tax on the gain.

    If you need further information on casualty and disaster losses, your particular options for claiming the loss, or if you wish to amend your 2014 return to claim your 2015 loss, please get in touch with us at Dagley & Co.

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  • Dagley & Co’s Six Best Practices in Billings and Collections

    5 November 2015
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    Have a small business? One area where you can improve cash flow is in billings and collections. Getting paid late can often hurt a business, and there are ways to get paid faster so you can keep growing. Here are six best practices that can make a real difference in your cash balance at the end of every month.

    1. Get it right.

    One legitimate reason for nonpayment is a confusing or inaccurate invoice. Make sure your invoices spell out in clear, plain English what was purchased, the price, when payment is due, the customer’s PO number, when it was shipped, to where it was shipped, and any tracking number. We highly recommend QuickBooks for all of our clients for easy invoicing and payments.

    You may also want to tighten your sales process. Don’t start work without a formal PO from your business customers—many companies won’t pay against a verbal PO. When you receive a PO, make sure that it matches your quotation. Companies often put their payment terms on their paperwork, so if your customer tries to play this game, resolve any discrepancies before you start work.

    Finally, make certain every shipment and invoice is 100% correct. Set up processes to assure the customer gets exactly what was ordered and that invoices are equally accurate.

    2. Get it out.

    See that four-day-old pile of shipping papers waiting to be invoiced? That’s a pile of cash you can’t collect.

    Set a goal to issue all invoices within one working day of the ship date or completion of work. If your team struggles to meet this, give them the tools and/or manpower to make it happen. And if an invoice gets held up internally, make sure your supervision is immediately notified so the problem can be quickly resolved.

    To further speed payments, try to invoice your customers by email. Some won’t accept emailed invoices, but getting even a portion of your billing done electronically will help overall cash flow.

    3. Get it to the right person.

    How many times has one of your employees called about a past-due payment and been told “we didn’t receive your invoice” or “that needs to be approved by the department manager”? It’s another game, one that can take weeks to play out. As part of getting an accurate customer PO, make sure your sales staff gets a valid address for invoicing.

    Large sales deserve special attention. Where applicable, have your salesperson get the contact information for the customer employee that will approve payment. This might be a department or plant manager and maybe even the business owner. Also get the contact information for the customer’s finance-side people (accounting manager, accounts payable clerk), who will cut and approve the check. When your invoice goes out, make sure they all get a copy.

    4. Get it sooner.

    Offer a discount for early payment—for example, 2% off for payment within 10 days. Not all of your customers will take advantage of this, but it’s a great way to pull cash in.

    5. Get friendly.

    The best way to get paid on time is to build a positive working relationship with your customer before the money is due.

    Have your salesperson call his or her customer contacts shortly after the invoice goes out. Confirm the product has been received or affirm that your assignment is now complete. Ask them if they’re satisfied with your work, what you can do better to improve, and if they’ve received your invoice. This communicates (in a nice way) that it’s time to start the payment process. If these calls uncover problems, it’s an opportunity to address them on the spot as opposed to when payment is past due.

    Your employee responsible for collections should also make a call—in this case, to the customer’s finance-side people. Your employee should confirm the receipt of your invoice, remind them of any discounts for early payment, and check whether there are any administrative problems with the document. They should not ask for a payment date. If possible, they should also try to get to know their counterparts. A simple “How’s the weather where you are?” is a great opening that can lead to a long conversations about, well, everything. Your customer’s payables team can be your best friend later in the collections process, but it won’t happen if you have not built a working relationship.

    There’s one other person who needs to get friendly: you, the business owner or general manager. As your company develops large customers make sure you get to know your customer counterparts. A phone call from you asking “How’s my team doing?” is a great way to initiate a conversation and assure customer satisfaction. For very large projects, make a face-to-face visit. It will pay off later. If the time comes when a payment problem needs to be escalated, you will have an established relationship on which to call.

    6. Make it fun.

    Some companies take the “get friendly” notion to the next level. From putting silly “Thank You!” notes on their invoices, to handing out promotional swag, to sending little stuffed animals for on-time payment, it’s amazing how these goofy gimmicks can change the atmosphere around the collection process.

    You want your customer to smile and shake his head as he signs the check to pay your bill. And if the day comes when your customer needs to decide whom to pay and whom to put off, chances are he will pay you first.

    In Closing

    What about the actual collections process? Good companies contact their customers if a payment is more than five working days late. You should do the same.

    What’s different is that you’ve laid the foundation for a successful endgame. Any excuses for non-payment have been addressed. Your people know whom to call, and you have working contacts who will give you straight answers. Above all, you’ve strengthened the relationship with your customer and have built a basis for future business.

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  • November 2015 Business Due Dates

    1 November 2015
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    It’s hard to believe the end of 2015 is near! Before we list out the tax due dates for businesses, we want to take a moment to remind you to set up a meeting or a phone call with a member of our team at Dagley & Co. so you can get your 2015 taxes squared away. Still not convinced? Read our hundreds of testimonials, compiled by TurboTax from real clients over the last few years.

    November 2 – Social Security, Medicare and Withheld

    Income Tax File Form 941 for the third quarter of 2015. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until November 10 to file the return.

    November 2 – Certain Small Employers

    Deposit any undeposited tax if your tax liability is $2,500 or more for 2015, but less than $2,500 for the third quarter.

    November 2 – Federal Unemployment Tax

    Deposit the tax owed through September if more than $500.

    November 10 -Social Security, Medicare and Withheld Income Tax

    File Form 941 for the third quarter of 2015. This due date applies only if you deposited the tax for the quarter in full and on time.

    November 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in October.

    November 15 – Nonpayroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in October.

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