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Dependents 101: Who Qualifies? Who Can Be Claimed?

If you are wondering who the IRS qualifies as a dependent, then hopefully this article will clear up any ambiguity. To claim a dependent when you have one is very important, because you get an exemption for that dependent that will reduce your taxable income. And according to the IRS the two types of dependents are qualifying relatives and qualifying children.

A Qualifying Child

For you to claim a child as a dependent then he or she must be either: your child, stepchild, foster child, or half sibling (or the descendant of one of those). The child should have the same residence as the taxpayer; and he or she should have lived with the qualifying tax payer in his or her residence for six months or more. There are exceptions to these rules however, and the exceptions are for children whose parents have divorced, and also include kidnapped children, children who have taken temporary absences, and children who were born or who had died in that year. The child needs to be under the age of nineteen at the end of the taxable year, or, in the case that the child is a student, under the age of twenty-four.

For a taxpayer to claim a qualifying relative, the relative in question must not also be able to be claimed by another taxpayer (cannot be anyone else’s qualifying child). The relative must be related directly to you, and you must provide fifty percent or more of the financial support for that person in that year.

And if you have any questions whether the children or relatives who live with you, or for whom you provide significant financial support either in your residence or at theirs, qualify as dependents, then make an appointment with your accountant at Practical Taxes today. You don’t want any financial surprises come tax season, which, by the way, is only a few short months away. And having the knowledge and experience of a professional tax expert at Practical taxes guiding you, could make all the difference.

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Becoming More Efficient in Your Business

Drucker-portrait-bkt_1014Running a business is all about efficiency. Without certain systems in place, you will never be able to accomplish all that you need to get done. For example, if you simply have too much work to get done, then you will need to hire employees. Of course with those employees comes a whole host of other problems that need to be resolved such as payroll, bookkeeping, and many more. You can do all of those yourself, or you can put a system in place to accomplish those tasks for you. Your payroll services specialist in Billings, Montana explains how.

 

Becoming More Efficient

Peter Drucker, the late business consultant and educator, once said, “Nothing is less productive than to make more efficient what should not be done at all.” These words have never been truer, especially in today’s world where often business owners try to take on everything rather than delegating and simplifying.

Eliminate – There are many things that business owners simply don’t have to do. But for some reason, perhaps it’s because they want to make sure that everything gets done properly, they do them anyway. For instance, there are a lot of business owners out there that feel they need to incorporate every form of marketing available.

So they stress and worry about their radio ads, billboards, TV ads, internet marketing, and social media marketing. In today’s world, they could easily eliminate three or more of those forms of marketing, and still make just as much of an impression on the community.

Delegate – If you have employees, then you are already delegating. Whenever there is a task that can be done by someone else, you can help alleviate some of the stress by delegating that task to someone else.

Most of us delegate already. We ask our connections on Facebook for advice, we have employees help us, and we have our accountant run our payroll and our bookkeeping. Any time that you can have someone else do the work, it is usually better to have them do the work.

Simplify – Sometimes you just need to simplify your work. Instead of having an elaborately designed 10 page color catalog that nobody ever reads, have a 1 page flyer instead. But as we referred to above, if the work doesn’t need to be done, then simplifying isn’t going to make you more efficient.

That is why we always ask first, “can this be eliminated?” and then, “can this be delegated?” and finally, “can this be simplified?”

Practical Taxes Can Help

In your quest for maximum efficiency, Practical Taxes can help alleviate the burden that you feel. If you have employees, and you are still writing paychecks every two weeks, delegate that to us. If you are slogging your way through bookkeeping every months, delegate that to us.

If you are trying to file your taxes quarterly and are frustrated beyond belief, delegate that to us. As a full service accounting firm in Billings, Montana, we can take a lot of the pressure off of you so that you can better run your business.

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Taxes and Small Business: A Few Things You May Not Know…

A small business is rewarding—especially on day one—but also it can be extremely challenging. And if you are planning to open soon a small business, then you first might want to know your particular business entity. What does this mean? This means that the Government will assess your taxes based on how your particular business chooses to operate. The most common entities recognized by the government are: Sole Proprietorship, Partnership, Corporation, and S Corporation. To break these down further, you should know that Sole Proprietorship means that you and your business are subject to an income tax that is calculated at the individual level; you alone run the business (Many small businesses are recognized by the Government as Sole Proprietorships) and you are also subject to the self-employment tax. Partnership is viewed by the Government as being similar to the Sole-Proprietorship in that the business owners are subject to the tax rate at the individual level, including the self-employment tax. Tax liability for a corporation is more difficult to calculate in that the business (corporation) is taxed at a corporate level, and also shareholders of the corporation are treated as employees, all of whom are subject to payroll tax, similar to how an employee would be taxed on their wages. The S Corporation entity is a corporation that is allowed to be taxed at an individual level, and the shareholders of that corporation are treated as employees to be subject to payroll-type taxes.

There are obvious drawbacks and liabilities to each entity, and if you are considering the structure for a small business idea, then you may first want to assess how you view your business goals and the potential your business has for potential growth. Your tax professional at Practical Taxes is experienced in small business tax and even payroll options for when your business is ready to launch. And if you have any questions as to how Practical Taxes can help your business succeed, then call today.

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2018 Taxes: What Do You Do with The Paperwork?

Don’t fret about an audit, because, for most of us, an audit isn’t an overly scary thing. If you payed your taxes and had the professionals at Practical Taxes help to get your paperwork in order and helped you file that paperwork correctly, by the correct date, you’re probably fine. But still an audit can happen. And it can happen even a year or two after the tax year for which the IRS wishes to audit (Sometimes an audit can come seemingly out of nowhere, a complete surprise). And if you are going to be audited, you will want to be prepared; you will want to be able to show the IRS everything for that particular tax year.

Keep all your receipts from the tax year with your tax paperwork. Oftentimes proof of a particular expense is all the IRS needs to happily close your case and move on. You want every receipt, every scrap of paper that was official evidence that you had an expense pertaining to your tax liability. If you wrote off gas mileage and the like, then make sure to keep that evidence handy as well. Gas logs are invaluable at times like these.

How Long Should I Keep the Records?

The statute of limitations (Admittedly that term sounds too officially criminal, but it just refers to the limit on the span of time for which the law can investigate and then try a person) is different in every state. For most of us it’s important to keep our tax records for five years—longer if you kept tax records for employees.

If you have any questions about dealing with an IRS audit, or if you need accounting help in the coming year—Practical Taxes can help with payroll services, and full service, year-round accounting services—then make sure to call the tax experts at Practical Taxes. Remember, most times an IRS audit is nothing to be worried about, but you can have even more confidence when Practical Taxes guides you through.

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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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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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Time To Start Thinking About Tax Season

Happy Holidays! And, it’s only a few weeks’ time until the New Year begins, and tax season comes into full-swing. Some of you may have undergone some changes this last year, changes that will affect how you file your 2016 taxes. For instance, did you know that if you are married on or before December 31st, 2016, you will file jointly? You will file jointly regardless if you have been single for three-hundred sixty-four days of the year. How then will filing jointly affect your taxes? What if you purchased a home, or had a child? These major events will have impacts on your taxes. Here’s what to expect from these changes during this upcoming tax season.

Filing jointly may affect the tax bracket to which your taxable income is determined. Both you and your spouse may be bumped into a higher tax bracket with the combined income. While this can be seen as a negative, there are a few positives as well. Because you are now married, both of you will be able to now claim the other as an exemption. The deduction is double that of someone filing as single. Children are a major deduction on your taxes. Remember that if you are married, you should have these changes reflected on your W-4.

Also, if you have bought your first home this year that will greatly affect your taxes. Conversely, if you have sold a home in the last year, this will also affect your taxes. The interest you pay on your home can be deducted at tax time.

If you are married, it’s important to determine which deduction—standard vs. itemized—will best suit you at tax time. The standard deduction may be better for those who don’t own their own home, and have very few deductions. However, when you own your own home, deductions such as mortgage interest are valued as higher deductions than what is standard.

We hope you had an excellent 2016, and when you are preparing your 2016 taxes, Practical Taxes will be ready to help you through them.

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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What if We Told You that You Can Save $1,000 Easily?

Saving money doesn’t have to be painful. In fact, by making some very slight lifestyle tweaks you can save a significant amount of money. The key is to make the adjustments small enough so that you don’t even notice them; cut expenses on the things you hate paying for (like car insurance and cell phone bills). Then live more comfortably knowing that you’re money isn’t going to things that don’t bring you enjoyment. Here are 12 ideas from your Aurora accountant to get you started. If you then think of 3 more you will be well on your way to financial freedom.

Skip Eating Out for Lunch

Instead of dining out every day of the week when the noon meal rolls around, do it just once a week, then brown bag home-prepared food for the rest of your work days.

Just Drink Water

Aside from the fact that water is the healthy, staying away from flavored drinks and pop will help you save quite a bit of money. Drinking a pop per day can add up to over $350 per year.

Goodbye Car Wash

Rather than bringing your car to the car wash, why not make washing the car an additional chore? If you have kids, sign them up and make car washing a weekly family chore. If you have to, you can bring your car to the car wash just once a month, instead of once a week.

Groom your dog.

You love your pet, right? So show him/her by personally washing your pet instead of taking him/her to the groomer every time. If nothing else you can increase the time between grooming.

Brew Coffee at Home

We all know how easy and convenient it is to buy ready-made coffee from those coffee shops that are just everywhere. You can choose to continue with this coffee-buying attitude or you can try brewing your own coffee for a change, and for the better. Sure, you can treat yourself occasionally but if you’re determined to save up, you’ll be surprised at how much you can save by making your own coffee.

Get Your News Online

Are you still subscribed to the local newspaper? If yes, consider discontinuing your subscription and catch up on local, international and all kinds of news online instead.

Do Your Own Nails

Rather than paying someone else to do your nails for you every time, learn to do it yourself and save some bucks in the process.

Exercise for Free

Still paying for gym membership? Time to drop it and exercise on your own. There are so many articles and videos about exercise. Take some time to go over those that relate to the type of exercise you have in mind, then get work out your body based on the information you got.

Go Generic

When you experience some minor but common discomforts like headaches or migraines, you don’t always need to buy name brand medicine. If it’s just a simple headache, a generic aspirin can likely make the pain go away just as well as a branded aspirin. Some generic products are just as good as their brand name counterparts, but others (usually foods) aren’t quite up to snuff.

Negotiate your Car Insurance

Car insurance is one of those things that you have to pay for. If you want the luxury of driving a vehicle, you have to maintain insurance in case something bad happens. But how many of us have taken the time to actually go over our insurance lately? There is a good chance that you are overpaying your premiums. A 30 minute phone call with your agent could save you hundreds, maybe even thousands of dollars per year.

Downgrade your Cell Service

Do you really need that $90 monthly cellphone service? Are you able to use it up or is part of it always getting wasted because your phone usage doesn’t really go that high? Maybe it’s time you reviewed your phone consumption and get a lower plan — one that actually fits your cellphone habits. Most major carriers have switched to plans based on data usage. It’s as simple as a 15 minute call to save $30 per month.

Find other ways to relax.

Getting a massage is always a treat. But do you really have to do it every week? There are many other ways to relax. Find a relaxation technique that you can do for free. From healthy eating, to exercising at home, there are ways to relax without expense.

Bonus: Cut the Cable

With so many online streaming options for television, do you need to be paying $60 per month for TV that is turned off most of the day? Cut back to Netflix and Hulu and you could save $40/month. That’s an instant savings of $480 per year by getting rid of something you’re not using anyway.

Practical Taxes is Here to Help

We want to make sure that you are financially healthy. By offering our online tax preparation services to the Aurora, Colorado area, we are helping thousands of people to be able to afford the services of an accountant, and ultimately get a bigger refund than they would have on their own. That refund can help jump start your emergency fund, bolster your retirement savings, or let you splurge on one of the things above that we just told you to cut out.

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Property Taxes

Property Tax

Property taxes are beneficial because they support many of our community’s public services. Property taxes can support schools, police and fire, parks services, and street maintenance.  But, because most people pay different, varying sums in property tax, it can be confusing to know if you are paying your fair share, or too much.  The following is the how/why of property taxes.

Tax Assessments

Tax assessments are the basis for all property tax. These assessments are based on how much a home is worth. Usually, the higher a home’s value, the higher it’s property taxes. This is something to consider if you are planning to trade-up for a new home, know your property taxes will likely be assessed at a higher rate, because the new home possesses a greater value. This could also be true of the neighborhood, if the other houses in the neighborhood are considered to have considerable value. That value will likely be figured into the assessment of your new home (even in the case of buying a less expensive home in a neighborhood). The reasons for this is that a tax assessment is conducted by an assessor who groups together comparable homes, comparing all the home’s in the value range, and comes up with a tax figure that they determine to best assesses the home’s value. It’s a process akin to a home appraisal, however everything, including neighborhood, etc. is put into consideration.

Appeal your Property Tax Rate

It’s not unheard of to appeal your property tax rate. There’s formal processes for those folks thinking that the assessor may have missed something in determining a home’s value. Reasons for appeal are varied, but the most common could include: incorrect assessments of the home’s square footage, missing something like an addition, or possibly even incorrectly determining the number of bedrooms within the home. It’s times like these your accountant is ready to help you get through the appeal process. You can hire also a home appraiser, who may come in, and do a private assessment as to a home’s value.

If you find yourself struggling with property taxes, or just have tax questions in general, give us a call 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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How Saving Energy can save you on your Taxes

In the current wake of drought, the dire predictions of global warming, and the ever-expanding population, the talk of energy efficiency is becoming more prevalent.  There are no immediate answers yet, however what we do know is that many of our appliances, our vehicles, etc. directly contribute to green house gas emissions.  Newer appliances, however, are being built to perform to higher standards of energy efficiency.

How Saving Energy can save you on your Taxes

Everything from washers and dryers, water heaters, kitchen appliances, etc. each year seem to supersede the appliances that came before.  To install new appliances throughout the home, however, is expensive, although it will help to lower the cost of a homeowner’s energy bills.  The government offers the Residential Energy Efficient Property Tax Credit, and the Nonbusiness Energy Property Tax Credit.

How Saving Energy can save you on your Taxes

Residential Energy Efficient Tax Credit

The Residential Energy Efficient Property Tax Credit involves modifications to one’s home that are considered energy efficient.  These updates include the use of solar, wind, geothermal, and, in some cases, fuel-cell technology.  To qualify for the upgrades, upgrades need to be in direct use with the home. The electricity generated from solar power should be responsible for powering the home.  The credit to be issued at tax time is the equivalent of 30% of the cost of the improvement—this includes the cost of installation, which for items like solar panels can be quite costly.

Nonbusiness Energy Property Tax Credit

This is where some of your appliance purchases, etc. can qualify for tax credits.  This could include everything from new home insulation to a new electric water heater.  However, there are qualification requirements for the appliances. While these are not often advertised by companies, you may call the companies themselves and ask if they are participating, and, if so, with which models.  The recouped costs of the tax credit is 10%, or, if you have already participated in this tax credit, $500 for all the years combined.

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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Practical Taxes Heights Location

895 Main St. Unit #5
Billings, MT 59105
Telephone: 406-969-2760

(Tax Season Hours)
Monday – Friday: 9 AM – 5 PM
Saturday: 9 AM – 5 PM
Sunday: Closed

(Non-Tax Season Hours)
Monday – Thursday: 9 AM – 4 PM
Friday: 9 AM – Noon
Saturday & Sunday: Closed

Practical Taxes Westend Location

2201 Grand Avenue
Billings, MT 59102
Telephone: 406-894-2050

(Tax Season Hours)
Monday – Thursday: 9 AM – 6 PM
Friday: 9 AM – 5 PM
Saturday: Noon – 5 PM
Sunday: Closed

(Non-Tax Season Hours)
Monday – Thursday: 9 AM – 4 PM
Friday: 9 AM – Noon
Saturday & Sunday: Closed

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