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    April 15th Is Tax Day: Information For Anyone Needing An Extension

    It’s that time of year again; April 15th marks the end date to pay 2017 income tax. If you miss this date, you will be subject to a tax penalty—fee. But you do have a chance to file for tax extension, and a tax extension will allow a person a six-month-long period (Given an extension, October 15th will be the new date at which 2017 income tax filing will be due) in which they can file and avoid the tax penalty. You can get the extension on the IRS website here: www.irs.gov. And the deadline to request an extension from the IRS is April 17th, which allows people a few extra days, post Tax Day, to get their income tax affairs in order. There are special rules, however, for individuals who serve abroad in a combat zone or, what the IRS calls, a hazardous duty area. People who live outside the United States are also given certain consideration.

    The form to receive an extension is rather short and simple to complete, and, usually, tax extensions are provided automatically. Also, if you cannot afford to immediately pay your income tax, it’s best to either file on or before Tax Day and then sort out the particulars of the required income tax payment with the IRS—the IRS does offer several payment plans—or file for an extension by the 17th of April. To not have filed your taxes will end up costing you considerably more in the long run than an IRS interest rate or the percentage penalty for a delinquent payment (remember there is no penalty for an extension, as long as the income tax is filed on or before the 15th of October).

    If you have any questions as to how to communicate with the IRS about your financial situation, how to handle an extension, or would like advice on how to get your 2017 income tax filed, and then paid, then call the experts at Practical Taxes today.

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    The Curse of the Lottery Winner

    The Curse of the Lottery Winner

    People dream of winning the lottery. They make big plans on what they would do if they were to win millions of dollars, and they talk about how many people they would help. Of course they complain that the government would take approximately half of their winnings in the form of taxes, but overall they would still be happy with the huge surplus of money that they are left with. So how is it that about 70% of those who win the lottery will go bankrupt?

    The Curse of the Lottery Winner

    Unfortunately a sudden influx of money does nothing to help improve financial sense. So when people suddenly win millions upon millions of dollars, they simply stick with their same foolish spending habits. Only now those habits are at a much larger scale.

    Winning the lottery could help someone out tremendously. And the economic impacts of the lottery can’t be argued with. After all, those who win the lottery spend a considerable amount of it right away. They buy new houses, new cars, give to charities and family members, they pick up the tab at a restaurant… for every customer there. Lottery winners seldom have a problem finding ways to spend their money.

    However, without a set plan on how to spend the money, most will make foolish money mistakes that ultimately reduce them right back to where they were before they won their millions of dollars. If you don’t believe me that winning the lottery brings some unnecessary hardship, check out these 10 people that couldn’t handle their winnings.

    Make a Plan before You Win

    There is really no financially sound reason that you should even try to win the lottery in the first place. In fact, the odds of winning are astronomically high. But you can take this advice and apply it to other financial windfalls like receiving an inheritance, getting a large tax refund, or maybe even an unexpected bonus at work.

    Before any money actually comes in, make a sound plan to use it appropriately. For instance, you might want to pay off all of your debt, buy a new car, give a little to your family members, and take a vacation. Depending on your situation, that should only take up a few hundred thousand of your winnings. After that, invest the rest in a trust, preferably an irrevocable trust that has detailed information about who can take money out and how much they can access.

    Without a plan, we as humans are likely to overspend. Whether it is on ourselves, giving to charities, or all around just wasteful use of money, the lottery winnings will disappear quickly.

    If You’re Lucky

    If you have been lucky enough to win the lottery, you will want to enlist the help of an accountant in Billings, Montana. With the help of Practical Taxes, you can be sure that your money will be put to the best use, and your taxes will be minimized. Have you seen a sudden influx of money? Did that money disappear a lot faster than you care to admit?

    Practical Taxes is a full service accounting firm in Billings, Montana. While tax preparation is a huge part of our business, we also love to help with payroll services. One specialty is online payroll services; no matter what part of the country you live in, we can get your payroll done.

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    IRS

    Have you heard of the phone scam where someone calls and pretends to represent the IRS? The scammers inevitably ask for personal information, and, too often, people willingly give out their personal information, such as their social security number to these scammers. The scammers also ask for money. And, unfortunately, people pay it; or they provide their banking account numbers. It’s estimated that over ten thousand people—more everyday—have been affected by these phone scams; estimated that over fifty-four million dollars has been paid to these scammers. But you should know that there should never be a day where an IRS agent simply calls you up, unannounced, and asks personal questions.

    The IRS will make initial contact via the good old USPS. If they are requesting money, they will send to you in the mail a bill, requesting payment. The bill will look like any other bill you would receive in the mail; however, it will be from the IRS. There will be directions in the bill as to how to proceed to pay the bill or how to contact the IRS with any questions you may have; it will be simple and to the point. The IRS may notify you of a possible attempt to contact you via telephone—possibly even request a face-to-face meeting—but, when they do call, they won’t request that you tell them all your personal information. Remember, the IRS already has a lot of your personal information, and they won’t ask you for your social security number over the phone; they won’t ask you to tell them your bank routing codes, or your checking account number; they won’t ask you to pay your bill over the phone, and they won’t initially demand a payment—remember that you have rights, too, and one of those rights is to appeal. And they won’t threaten to have you arrested by the local police if you don’t pay.

    Call Practical Taxes for all your tax needs.

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    Tax Bill

    Unless you have been hiding under a rock, or you pay as little attention to the news as possible, you would have heard that our Government—in particular the Republican Party in the Senate—is attempting a massive tax reform. It’s interesting and a little unsettling—the bill passed in the Senate, late at night, just hours after the almost 500-page document—parts of which were edited in pen and scribbled on the margins (taxes are a hotly contested and divisive topic right now!)—was given out to members of the Senate But this is the politics of tax reform. And what does the tax bill, at least at it stands today, mean for the rest of us?

    Ok, let’s only scrape the surface of this, focusing only on how a possible tax reform could affect the average person’s taxes. Regardless of the politics behind tax legislation—these days politics are a very, very divisive topic—remember that these numbers will likely—most definitely—change, at least somewhat, and nothing here is completely definitive (nor is it a sure thing) as this bill has only been voted on, and passed, in the Senate; but, the statistics, at least so far, are interesting to dissect. First, earners from across the board, including people who make only ten-thousand dollars every year on up to people making over a million dollars a year could see a possible tax cut in the first year that this bill gets enacted—2019. A good percentage of the people who make over forty-thousand dollars annually on up to over a million will see a tax cut—not everyone, but a good percentage. But—and here is where the legislation gets tricky—by the year 2027, those tax cuts, especially for the people earning under one-hundred-thousand dollars every year, don’t exist, and these people will be required to pay in on their taxes.

    No, the current discussion of tax reform will not affect this year’s taxes, which are coming up fast. Make sure to make your appointment with Practical Taxes and forego the anxieties involved with the tax season.

     

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    Child Tax Credit

    Let’s discuss the Child Tax Credit. It’s a tax credit, taken annually, by people with children. The credit does not apply to everyone, however, and there are limitations and rules that govern when it can be used. Here are a few reasons why the Child Tax Credit might be a big advantage for your family.

    The amount of the Child Tax Credit is one-thousand dollars per qualifying child. That means if you have three children who qualify for the Child Tax Credit, then you will get one-thousand dollars for each of the qualifying children. The child needs to be under the age of seventeen to qualify (sixteen and under).

    To claim the child, you will need to have a legal parental relationship with the child. This relationship includes: son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece or nephew. Brother, sister, etc., applies only in the case that the child meets the requirements for financial support. In order for the child to meet the financial criteria, the child cannot have provided more than half of their own support—the bulk of the financial responsibilities should fall on the parent.

    There are also citizen and resident requirement to meet when claiming this credit. The child must be a citizen of the United States, a U.S. National, or a legal resident alien. The child needs to have lived in your household, in your care, for half the year. There are some exceptions to this requirement, however they don’t apply to everyone, and should be discussed with your tax preparer.

    It’s for reasons such as these that hiring a tax preparer, come tax season, is important. Your relationship with your child may not be black and white. You might not know if your child qualifies for the credit or not. A qualified, professional tax preparer can help you through the process; they can make sure you get each and every dollar back on your taxes. Remember, if you make a mistake on your taxes, the IRS may audit you to get every last penny, but they won’t be banging on your door ready to hand you back money you’ve already paid. Don’t leave money behind.

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    Bookkeeping

    Bookkeeping is vital to any business. Everything a business does financially should be recorded for official record. Tax records, financial statements, receipts of purchase, and ledgers should be organized and stored. Record keeping is vital to business success, and here are a few reasons why.

    Audit

    No one likes an audit. But the more prepared you are for an audit the better. If you have all of your financial documents in one place, an audit goes quick and easy. Oftentimes, what gets audited are small discrepancies that diligent bookkeeping can, hopefully, clear up easily. An audit takes your attention away from your business, and causes unneeded anxieties and stress. If you do get audited, the IRS will request all of your applicable records, so make sure that you have everything ready to show them.

    Deductions

    Tax deductions are important. At tax time, it’s important that every dollar your business spends, gets noted at the end of the year. Each and every dollar counts. This applies to businesses as much as it does to individuals. Keep track of every receipt! If the IRS ever questions an expense, you will have the evidence to back it up!

    Tax Time!

    At tax time, you will have all the required paperwork ready. If your books are well kept, up to date, then everything at tax time should go quick and easy. You don’t want to have to scramble at the end of the year for all of you tax documents.

    If you have any questions as to how to keep diligent books, or would like the assistance of a qualified accounting and tax professional, then Practical Taxes is here to help. At the end of the day, wouldn’t it be nice to have someone qualified have your back? Wouldn’t it be beneficial at the end of the year to have your business in the hands of the reliable services of a tax professional who understands your business’s needs? Practical Taxes is ready to help, and can customize accounting services to fit all your needs. Call today to schedule an appointment.

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    Marketing

    If you own a small business, you know just how important the standard tax write-off is. What you may not know is that marketing costs are win-win write-offs for every small business. Every small business needs to standout, meaning that every small business should be doing everything in their power to get out their name and then to keep their name in their local community (or local online community—i.e. Etsy). And the expense that comes from marketing a business is directly related to a future write-off on your taxes. Now, this isn’t to say that everything you do will lead to a write-off. The IRS believes that all tax write-offs should be reasonable in amount, and directly related to your business (How it’s related could bristle the hairs on the back of an IRS agent’s neck). Here are few ways to market your business that make for simple, straight-forward write-offs at the end of the tax season.

    A new or up-to-date website

    The rules and designs of the web change almost monthly. Google has new rules for keeping websites at the top of search engines, and customers have come to expect proficient designs that are easy to navigate. So, hiring someone (or, if you yourself have the spare time and experience) to update your website, add to its design, or shake things up. If there are any fees involved to host the website through a third party, these may also be accounted for. Also adding premium services so that your website runs smooth and efficient.

    The Google Search Words Campaign

    Many businesses spend exorbitant amounts on google ad-words, search terms. These can add up quickly. At the end of every month google should provide you with a receipt from the month’s transactions—this data is also included in your Google analytics package, however, just to be safe, don’t wait until tax season to save this data, in case anything were to happen.

    Flyers

    A marketing flyer is still be an effective marketing strategy in the digital age. Or a personalized Christmas card from your business to your customers at Christmas. Oftentimes, things like flyers, cards, and letters are easily deductible. Keep every receipt!

    If you need advice as to which potential deductions will benefit your business, Practical Taxes is here and ready to help.

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    Tax Implications of Selling Savings Bonds

    Savings bonds are largely a financial tool of the past. 20 or 30 years ago well intending grandparents would purchase a bond for their new grandkids. Over the next few decades those bonds would grow and eventually mature. At that point they are cashed out and the grandchild would be able to use them for college expenses, a down payment on a house, or whatever else they thought necessary. Today, however, buying those bonds isn’t nearly as popular in part due to the low interest rates.

    Regardless of who is, or isn’t buying bonds today, there are many of them that are maturing. So what happens when your savings bond matures? What are the tax implications of cashing in a savings bond? Your accountant in Billings, Montana can help you know the options.

    What Happens When a Bond Matures?

    Savings bonds have changed some over the years. There are two basic types: those that are purchased at face value and pay interest once or twice per year, and those that are purchased at a discounted value but grow to full value when they mature. Depending on what type you have determines what happens when they mature.

    If you have an older bond you most likely are dealing with one that was purchased at a discount and matures for full value. If you have this type of bond, and it has reached its maturity date, then it doesn’t do any good to keep it around any longer. You should cash it in since it is no longer appreciating or earning interest.

    What are the Tax Implications of Selling a Savings Bond?

    Since the savings bond was purchased for less than it is worth, there will be some gains. But are these taxed? The bottom line is: maybe.

    Interest earned on savings bonds is subject to federal income tax, but it’s not subject to state tax. To complicate matters more, you may not have to pay federal income tax on your bond’s interest if you use the money for higher education purposes.

    For bonds that accumulate interest year after year, you have to report that interest when you earn it. Most often you will get a 1099-INT from the brokerage through which you made the purchase. For bonds that mature at a higher value than for which they were sold, you report that interest when you take possession of the money.

    Confused on How Savings Bonds Work?

    Savings bonds have a few moving parts, they currently pay low interest (around .1%) and don’t offer substantial tax benefits. So why do people purchase them? Really the only reason is that they are putting their faith in the US government rather than a financial institution. But that low interest rate has made them significantly less popular than other financial vehicles like CD’s, investments, money market accounts, and corporate bonds.

    If you have savings bonds, and you are confused on what to do, your accountant in Billings, Montana can help you figure everything out. Taxes are likely due on them, so make an appointment today!

    Practical Taxes is a full service accounting firm in Billings, Montana. We can help with all of your tax preparation needs as well as online payroll services, business consultation, and much more!

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    Payroll Services

    Did you know that it’s becoming ever-more popular to outsource payroll to an accountant service? It’s true, payroll is the number one thing businesses will outsource. There are many reasons including, cost, productivity, accountability, legality, and service.

    Cost
    Small businesses can absolutely save money by outsourcing payroll. Add up those hours spent on payroll and then calculate the costs to the company. Most times—especially for small businesses where each minute of the day could be filled with some type of progressive work—the outsourcing of payroll is considerably less than the cost of doing it internally. Oftentimes this is because accountants oftentimes use more sophisticated software than a typical small business, and accountants have the job streamlined.

    Productivity
    If you own a small business you will grow to appreciate the freedom that freeing up internal sources from the job of payroll will provide. You get to focus on the job you want to do, which is especially important for new businesses, not yet established—in today’s world the percentage of new businesses that fail is staggering.

    Accountability
    Did you know that a high percentage of small business pay a penalty to the IRS every year for improperly filed payroll taxes? Hiring an accountant at Practical Taxes makes sense, when you consider that they understand the ins and the outs of current tax policy. This also goes hand in hand with legal compliance. Because a payroll service like Practical Taxes is going to understand the continually shifting laws and obligations involving payroll.

    Service
    In today’s modern world you can find just about anything on the internet—including a payroll service! Regardless of how reputable companies are, isn’t it best to have an accounting service such as Practical Taxes with whom you can work, face to face in some cases, and trust all that important paperwork and sensitive documents to a responsible face. If you have any questions as to how Practical Taxes can help your business grow and succeed, be it with the outsourcing of payroll or the general everyday management of your business, call today.

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    Get an Accountant

    Did you know most, over two thirds, of all small businesses fail within the first eighteen months? Why do you suppose they failed? Were they just not good at their jobs? Did the economy take a sudden and incredible dive? Most often the answer is that the business was not managed well financially, from the start. That’s not to say it’s the same for all businesses, but that’s the most common reason.

    And, knowing that, so many small businesses still rely on internet software to manage their financials and to do their taxes. Now, it’s important to document everything, to document every penny that either comes or goes out of your business, but, it’s equally important to have guidance on how, in the scheme of things, those pennies are being spent.

    If you have a small business deductions on your taxes count. You need them. And you need to maximize every single deduction. At the end of the tax year, you don’t want any money left on the table. Equally important is the accountant, when a business gets audited. And businesses with extensive write-offs are likely targets.

    It’s not that you’ve done anything wrong, it’s that the IRS needs to make sure you’re doing everything right. And, while an accountant doesn’t “get you out of the audit”, you can be assured that he or she knows the ins and outs of your yearly finances, and can help you through the process.

    Maybe the most important reason of all to hire an accountant is that they take some of the work off your hands. If you’re running a small business, you’re going to be busy running a small business. The time they take off your hands may be equal to the cost of hiring an accountant. You, the business owner, can maintain focus and determination in your daily goals, while your accountant ensures that some of the financial details are handled appropriately and professionally.

    If you would like to speak with someone about setting yourself up with an accountant, for your small business, then call Practical Taxes today.

    Practical Taxes

    Practical Taxes is a full service accounting firm in Billings, Montana. We can help you get the most from your taxes, and make sure that you will get the maximum refund every year. But we don’t just do taxes! We can help with your bookkeeping, payroll, bank reconciliation, budgeting, and more. Give us a call at 406-894-2090 to learn more.

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