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    Archives for Tax Tips Billings MT

    Audits: Get Through One with the Help of Practical Taxes

    An audit is scary. It’s an intimidating ordeal to experience, especially when you have never experienced one before. Imagine this: you receive the notice that you’ve been audited, and the information comes in a letter, cold and dry, black and white. But it’s not an uncommon experience, and the statistics are that about 1% of all tax payers will undergo an audit each year. That doesn’t sound like a huge number of people, but if you are someone for whom the IRS has deemed necessary to target for an audit, you should remember that your first and most immediate option is to call your experienced accountant at Practical Taxes. 

    The main reason that an IRS audit is incredibly difficult and scary is that, when a person discovers they are being audited, it sounds as if they’ve done something wrong. But it’s very possible that they didn’t do anything wrong at all. The IRS even states that all tax documents are complex, and that the data they contain must be evaluated and sometimes evaluated with close precision to ensure accuracy. 

    If you do discover that you are being audited the first step is to respond to the IRS’s letter. The next step is to contact your tax professional at Practical Taxes. You will need to compile all the necessary documents—everything (that’s why it’s so very important to keep all tax documentation for five years!). Interesting enough is that most audits are completed through the mail. Documents are sent back and forth, etc. Some problems are so small that they can resolved quickly and easily. But make sure before you send anything to the IRS that your accountant at Practical Taxes goes over the documents; you have rights in an audit, and you want to be sure that you have someone who has your interests in mind determine if there are any discrepancies. 

    Don’t go through an audit alone. Practical Taxes is ready to answer your questions, help you review all your tax documents, and hopefully the entire audit process will be made a little bit less scary.

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    In the Midst of Tax Season

    We’re a month or so away from the end of the tax season—yes, there are options for those who need an extension to file their 2018 income tax, and if you have any questions about how to file an extension, then call your tax professional at Practical Taxes—and this last month or so is incredibly hectic for many. Everywhere people are scrambling to gather the necessary materials: tax forms, receipts, mileage records, etc. And while it is a hectic time, try not to worry too much, just call your accountant at Practical Taxes and make an appointment to get those 2018 income tax returns filed. 

    Make sure to gather together everything. If the IRS notices an omission on your 2018 tax returns that benefits them, they’ll likely contact you; if the IRS finds an omission that benefits you, it’s more than likely you’ll never hear about it from them. Look out for yourself; don’t omit anything; an audit is an especially difficult and trying thing to have to go through. Equally so don’t forget that stack of receipts, don’t forget the paperwork sent to you by student loan companies, mortgage companies, etc. 

    Also, due to the recent tax changes, this tax year has been confusing for many. And if you are someone who has always filed his or her own income taxes, and you find yourself struggling to accurately file those 2018 taxes, then call the professionals at Practical Taxes. A qualified, experienced accountant could make all the difference for the 2018 tax season. 

    Remember also that your accountant can go through your taxes and determine the best course of action for the 2019 tax season. If you don’t like what you see after this tax season, then your accountant will be able to advise you on the best course of action going forward. 

    If you do still need to make an appointment with your tax professional at Practical Taxes to file those 2018 taxes, then make sure to call today.

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    Options When You Can’t Pay Taxes

    There are two steadfast rules to know when you are experiencing a financial hardship and are unable to pay your taxes by the deadline. The first rule is that you should get in touch with the IRS immediately; the second is that you should speak with your accountant at Practical Taxes to determine the best course of action going forward. Remember the most pressing business is to notify the IRS, because they have deadlines, and when you cannot meet those deadlines they have policies in place to charge you a penalty or, in the most serious cases, use legal power to enforce the collection of the payment. A financial hardship is nothing to be overly ashamed about; an unexpected financial difficulty can happen to anyone. Here’s a few things you should know if you do have a financial hardship this tax season… 

    The IRS offers ways to pay the tax debt, and the options for payment range from receiving an extension on the payment to entering into a structured payment plan. For the most serious cases, the IRS can offer a deferred payment or even a settlement of the debt, however these are special programs. Your accountant at Practical Taxes can help guide you through the repayment process; you don’t have to face the IRS alone, and your accountant may be able to determine if you qualify for a repayment program that could save you money. Before you enter into a repayment program, determine the amount you can afford to pay each month. 

    Of course, before you determine whether or not you’re able to afford to pay the tax owed, you need to first file your income taxes. Tax Day is quickly approaching; the deadline is only a few short months away. Remember, February and March are busy months at your accountant’s office, and it’s best to make your appointment early: if there are going to be any difficulties in the completion of your income taxes or if you are going to need to enter a repayment or similar IRS special program, then you will have the time to plan.

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    Business Expenses | Accountant Billings MT

    Small Business Tax Write-offs… What Counts and What Doesn’t

    When you travel for work you have expenses; you have to pay for fuel, lodging, food, etc. And most of the time those expenses are, without a doubt, considered tax-deductible expenses. But then there are those trips where you travel and you mix, unavoidably, your business needs with leisure. For an example, say you travel to California for work, but when work has concluded for the day you decide to take in a Dodger’s baseball game—tickets, hotdogs, etc.—and then the next morning you go back to work. What in that scenario is considered tax deductible? Here’s a few tips…

    When you read the above scenario did you think that anything regarding the baseball game could be considered tax deductible? It’s likely given that straightforward scenario that the meal and drinks were absolutely tax deductible—you have to eat when you travel for work, and the IRS can’t determine where you can and can’t eat. Now consider the baseball game tickets. If you are at the ballgame purely for entertainment reasons then it’s likely that you would have a hard time explaining to the IRS why you are deducting those expenses from your income. But if you went to the ballgame to entertain a client then those tickets are likely to be deductible. Most of the time, when you travel for business, your tax deductible expenses are pretty straightforward, and you should never forget to document those expenses on your tax return at the end of the year.

    Did you know that there are no gross income limits to how much a small business owner can deduct? But if you are an employee, and you don’t have your expenses reimbursed by your employer (Hopefully, your expenses for work are always reimbursed by your employer when you travel for work), you should be able to deduct those expenses as itemized miscellaneous deductions.

    If you have any questions about tax write-offs, or how the tax professionals at Practical Taxes can help you and your business succeed, then call today.

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    October 15th is Almost Here! Extension Deadline is Almost Here…

    If you don’t understand the significance of the October 15th extension deadline then chances are you have already filed your 2017 income taxes. But did you know that there are over fourteen million American tax payers who have not yet filed their annual return? It’s true. And while some of those people did not file for an extension, the bulk of that group did. And that deadline will soon be here. What happens if you miss the deadline? The IRS will charge you, monthly, a five-percent penalty until you file your income taxes. The penalty will increase monthly by five-percent, and the penalty will cap out at twenty-five percent. But, if you are owed a tax return by the IRS you owe them nothing. But the later you file the later you’ll get your refund. Bummer.

    If you filed an extension, you made yourself known the IRS. All jokes aside, the IRS is not sifting through the one-hundred forty million tax payers who filed at the tax deadline. They know who you are and they are going to expect you to file your return. And if you need help filing that return—amazingly, only fifty-eight percent of people use a special tax preparer during the tax season, but over eighty-percent hire out for the professional experience of a tax preparer when they’ve requested an extension (oftentimes an extension means that there is a question or difficulty on the return)—remember that Practical Taxes is ready to help you file that return. Don’t let the IRS charge you more than they already plan to. And if you need help in paying any of the 2017 income tax there are options, and your experienced tax preparer at Practical Taxes can advise you as to the best way for you to pay.

    If you have any questions regarding your 2017 tax returns, or if you would like to speak with a tax expert about any other tax question, then make sure to call Practical Taxes today.

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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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    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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    Three Ways to Run a Better Business

    If you are a business owner then you are always on the lookout for how to run a better business. You want to have a clean and fluid business that can operate without you. You want to be able to take a vacation and know that when you return, there won’t be a pile of work for you to get done. But you wonder how can that can even happen? You’re scraping by now and can only dream of those days.

    It all starts with taking small steps. Let your accountant in Billings, MT explain the three steps it takes to run a better business.

    Invest in Your Presence

    There are two different types of marketing out there: branding and marketing. Branding is letting people know who you are; marketing is letting people know what you sell. Many businesses skip the first step, and jump right into the second step.

    Before you can sell a product to your customer, your customer needs to be familiar with your face. Let’s look at it this way. You need life insurance and the only two companies that you can find are MET Life and XYZ Financial. You have seen the Snoopy commercials, you know “Get MET, it Pays”, and you’re familiar with the brand. XYZ Financial says they offer a premium product for 20% less than MET Life offers. Who do you choose? Most people will go with MET because they trust the brand (although they know nothing about the brand other than they have heard the name often).

    As a business owner, you want your name to become a household name (Coca-Cola, Kleenex, Apple, Toyota, etc.). When people already know your name, then they will be more likely to buy your product.

    Sell to Your Customer; Not to You

    A good sales person knows this rule of sales: make it all about the customer. Don’t tell them what you have to offer, tell them how you can solve their problem.

    accountant and payroll services expert in Billingsaccountant and payroll services expert in Billings

    Often we hear sales pitches that go like this: “We have the best product on the market. Through years of research and development, we have developed a product that blows away the competition. Our product is ranked better than 98% of all others out there, and our sales show that we are the best!”

    Nobody cares. The customer wants to hear a pitch like this: “Are you tired of [xyz]? 98% of our customers report that [product name] has helped them. Don’t suffer any more, try us today. If it doesn’t work out, we have a money back guarantee.”

    See the difference? The first pitch is all about how great the product is. The second is all about how the product helps the customer.

    Meet the customer’s needs, and the sale will make itself.

    Get Organized

    One of the biggest business killers is lack of organization. If you want to run a better business, you have to invest time (every single day) into staying organized. Doing so will help ensure that you will remember to reply to all of those emails, return phone calls, and get everything done.

    Look at it like this. Suppose you remain unorganized. Every morning, before you get any work done, you have to spend an hour remembering where you left off the day before, figuring out what project you are working on, and de-cluttering your desk. Now let’s suppose you spend 15 minutes at the end of every day organizing for the following day. Now you have that entire hour at the beginning of the day (when you are fresh and thinking clearly), to get as much accomplished as possible. You can run a better business with ease because you gave yourself a boost.

    Let Practical Taxes help you Run a Better Business

    As a business owner, you have a lot on your plate. You have work to do, prospects to follow up with, and phone calls to return. The last thing that you want to do is worry about your taxes and payroll. Don’t muddle through doing your own taxes, leave them to us!

    We offer affordable tax preparation services here in Billings, MT. We spend our time on your taxes, so you can spend your time learning how to run a better business.

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    Small Business Smarts

    It’s becoming a popular thing to do: start up a small business, even a “micro” small business (consider the tiny online stores on the Etsy and Ebay websites). And the talk in Government is all about the encouragement of more small business; encourage the working man or woman to set out on their own, get a tax break in the process… And it’s true that owning a small business has considerable benefit to those willing to take on the responsibility: there can be great pride in building a business, pride in ownership, in being your own boss. But there are many overlooked costs and responsibilities that people may not consider when starting out on their own. Here’s a few.

    Wait time and Cost of Licensure, Insurance, Registration…

    Most folks consider the process of licensure when they start up the business, but not everyone considers the cost and scope of insurance; the cost and scope of insuring employees, or the liability of using contractors, operating on their own specialized license, in relation to the liability of the business.


    Sometimes people get into business without any real foundation of the required paperwork—everywhere in business there seems to be paperwork—and to be bogged down and unprepared for the banal methods of paperwork can be costly for your business. You may want to consider hiring an accountant to help with payroll and other accounting jobs; Practical Taxes will ensure your annual tax liability gets handled smoothly. Did you know, for instance, that when you work for yourself there is a self-employment tax? Have you ever considered how much of your precious time will be taken away by employee background checks and payroll?

    Unfortunately, even businesses built with the best of intentions don’t last long without proper financial planning. If you are planning to go into business on your own soon, or if you are still on the fence, considering it, remember that a quality accountant can help your business run smarter and more efficient. If you have any other questions as to how Practical Taxes can help your business, call today.

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    Tax Implications of Selling Your House

    Tax Implications of Selling Your House


    A great way to build wealth is to own a house. Now keep in mind that buying a house ajust because you think it’s the perfect investment is actually not the way to go. A house is a good investment, but there are better ways to invest that will earn a bigger return.

    But what happens when you want to sell your house? Suppose you want something bigger, or maybe smaller. Perhaps you’re sick of maintaining your home and you want to move into a rental. Or you have been transferred out of state for your job. No matter what the reason for selling, there are tax implications of selling your house that you need to be aware of (don’t worry, your accountant in Billings, Montana will know the specifics; you just need to be aware).

    Avoiding Taxes when Selling Your House

    In 1997 the Taxpayer Relief Act was passed. This law provided a big relief to those who were selling their home and making a bit of a profit on it. Before the law was passed you had to reinvest those profits into another home (a bigger home) within a certain time period. Now you get a big break.

    2 of the last 5 – The law states that if you have lived in the house, as your primary residence, for at least two of the last five years, then you can claim the capital gains exclusion when selling your house.

    $250,000 to $500,000 – If you file your taxes as single, then you can profit $250,000 on the sale of your house and not have to pay taxes on the gains. If you are married, then you can profit up to $500,000 on the sale of your house.

    Age is Just a Number – You can claim the capital gains exclusion no matter how old you are. You don’t have to be over 55 to get this.

    Before 1997 it was pretty hard to sell a house, make a profit, and get away without paying the taxes. Now it is pretty easy to sell a house, make a profit, and not have to worry about paying taxes on the gains. But there are times when you still might owe.

    When do You Pay Taxes when Selling Your House?

    Not everyone can get away without paying taxes on the sale of their house. But you almost have to try hard to pay those taxes.

    If you profit more than the exclusion allows, then you will owe taxes when selling your house. But the good news is that you don’t owe taxes on the full amount. For instance, if you are married, and you sold your house and made a profit of $500,100, you would only have to pay taxes on the $100 over the exclusion amount. There is more though. If you make over $200,000 per year, there is a Medicare tax imposed on the gains over and above the exclusion.

    Keep in mind that you can only claim the exclusion for one house at a time. So if you sell your primary residence, you can claim the exclusion. But then if you sell your vacation home, you cannot claim the exclusion (because you weren’t living there for 2 of the last 5 years).

    Taxes when Selling Your House

    Still have questions about the tax implications when selling your house? Contact Practical Taxes today!

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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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    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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    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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    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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    Tax Day has come and gone . . .

    Now that Tax Day is over with, let’s talk about what to do with copies of your old returns. Just because you have dealt with your taxes for the year, you are not completely in the clear. Oftentimes, an audit can come seemingly out of nowhere.

    The IRS may come knocking two years away and you will want to keep your tax returns handy. Although the IRS are not a completely overt threat, it could still happen, to anyone. So, being prepared is paramount in getting through any audit successfully.

    Keep all receipts handy. If the IRS comes around and wants to check your receipts you have the evidence available. If the IRS wants to see mileage logs, etc., have it available. You will want to keep all your credit card receipts, your receipts for charitable donations, your invoices, your proof of payment for those invoices.

    If you own property and have taken out a deduction on your taxes, keep that paperwork even if you have sold the property (also, more paperwork to keep!). If you own a business that requires employees, make sure to keep all evidence, all paperwork and employment tax records, like their W-2’s.

    The IRS will not formulate an audit after the statute of limitations for reporting income has passed (the tiers for statute of limitations vary in accordance with the severity of the possible crime). But it’s good practice to keep returns for years, especially if you were responsible for keeping tax records on old employees.

    Consider keeping all this paperwork in a safe place. A filing cabinet would work well. Separate the paperwork by the years its applicable. Keep the receipts with the receipts, the mortgage paperwork with all other mortgage paperwork, etc. Basically, keep everything organized so that if the worst ever does happen, and the IRS comes a knocking, you will be able to hand them what they need when they need it, and get them out of your hair as quickly as possible.

    If you have any questions as to how to handle your tax returns, 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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    April Is Tax Month!

    On April 18th, the 2016 tax season will come to a close—it’s not necessarily over by any means, but marks the IRS’s filing deadline (yes, there are extensions and other programs that extend out the season). And for many people this time of year is crazy and hectic, and they anxiously crowd into the offices of their favorite accountant to prepare their taxes before the season closes.

    But don’t worry, take breath, there’s still a few weeks. However, while you are remaining calm, it’s important to take stock in whatever it is you plan to report on your 2016 taxes. When people rush they often forget things. It’s not good one way or the other to forget to report something on your taxes. Funny that the IRS will notice an omission benefiting them, but will never contact you on an omission benefiting you.

    So, look out for yourself, and make sure everything gets reported. You don’t want to miss any deduction on your taxes. While we make a big deal over what taxes mean, for most of us, taxes mean a refund, and getting as much money as you are entitled; conversely, for those of you that owe on your taxes, you will want to account for every deduction that could potentially get you to owe less.

    Remember all those charitable contribution, those mileage logs, all the childcare paperwork you have paid out in the last year, etc. Also, for those of you who wait, your accountant may notice your missing something from your file, and, in that event, you will request an extension until the proper paperwork can be supplied, and, for those of you relying on your 2016 tax return, forgetting important paperwork will greatly slow up the process. The IRS claims that, for most people, it takes three weeks and under to receive money via direct deposit.

    Call and make an Appointment!

    If you have yet to schedule a tax preparation appointment, call today, or as soon as possible, to have your taxes prepared by the professionals at Practical Taxes.

    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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    Tax Season Is Upon Us

    2016 is officially over, and that means it’s time to prepare for another tax season! Like it or not there’s only a few months left until the April the 18th deadline, and for most of you there’s so much to prepare.


    For those of you who have a lot of write-offs, those of you with small businesses, etc., January is the time to start getting all of your receipts in order. Make sure that everything is accounted for. If you are missing something, and need to have the filed-proof of something (say an invoice for something work related, etc.) ensure now that you either have appropriately filed away a copy, or, if you have unfortunately lost your copy, you have the time now to find it. This is the time of year to have your vehicle mileage documented orderly if you have yet to do so.


    January the 31st marks the last day at which you should mail your employees W-2 forms. Obviously you will want to mail out any forms on time, because your employees are counting on you for this, but there could also be a penalty charged to your company by the IRS if you do fail to mail out your forms on the 31st of January. Remember, the W-2 form only needs to be postmarked by this date, your employees may not receive it in the mail until a few days after, so, if you are planning to mail the forms at the last minute, it may be wise to explain this to your employees who may be expecting to receive it sooner.

    Make a date with you tax preparer

    Regardless of how difficult your taxes, your accountant is ready to help you through the process. Try and plan an hour or two for one day in the future (or on several days in some cases) to visit your accountant’s office to prepare your taxes. To ensure that you receive the undivided attention of the accountant you want to see, make a reservation. If you are seeing an accountant for the first time, Practical Taxes is here and ready to help you through the process of your 2016 tax returns.

    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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    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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    accountant billings mt

    Reasons Why Small Business Owners Need to Keep Meticulous Records

    Being a small business owner, I get it, there is so much to do and keeping track of records just isn’t at the top of the list. But it should be. Keeping things organized and tracing records can help you in the long run.

    Tax Season Billings MT
    If you keep track of your records and receipts, when it comes to tax season, it will be much easier for you to locate your receipts. It will also help you to get all of the deductions that you are entitled to. The IRS does not accept bank statements. They want the actual receipts to validate your expenses.

    Payroll Management Billings MT
    Keeping your payroll records organized can assist you with tracking your employees. It makes it much easier when it comes to paying your employees. If you aren’t comfortable doing payroll or just don’t have time, Practical Taxes can manage your payroll for you.

    Invoicing Billings MT
    When it comes to invoicing your clients, keeping track of your records will help you to know who has paid and who has not. It can also help you to keep track of projects and to know what money is coming in.

    Trust me when I tell you that spending a few minutes each day on your records will pay off in the long run.  Keeping track of your records will make tax season much easier as well.

    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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    Tax Preparation Billings MT

    Increase Your Income by Earning More on the Side

    Side-Job-300x225There are thousands of people who would like to make more money or save more money. It would allow them to afford the lifestyle that they truly want. But they run into problems, such as they are at the top of where they can get to at work, or they have scrimped and saved and really cannot cut costs anywhere else. They wonder where they should turn. In today’s society, packed with internet bills, cell phone bills, high utility fees, and many other things that cost a lot of money, many people need to pick up some sort of side income. Depending on how you earn the money, there could be tax consequences that you want to address (also where an accountant in Billings, Montana could help you out).


    Getting a Second Job

    To bring in extra cash, most people will get a second job. This could be serving at a bar or a restaurant in the evenings, or working part-time as a cashier at a retail store. There are the goods and the bads that come with this choice.

    The benefits of a second job are that you will have regular hours. That means a steady second paycheck. Also, you will get another paycheck where taxes have been taken out; there will be less to worry about come tax season (on top of that, the employer will pay half of your FICA taxes).

    The downsides, however, are that you are stuck working for someone else. You have to follow their hours, their guidelines, and you are likely to be stuck making close to minimum wage (being a server, however, you could make substantially more because of tips).

    Working on the Side

    Because of the lack of flexibility and the low pay of working a side job, many people choose to follow their passions, and monetize their hobbies or interests. This method takes a little more planning, but the benefits in the long run are a lot better.

    The best part about starting your own side business is that you get to set your hours. You work when you want to, and as much as you want to. So if you only have a few hours per week, you don’t have to rearrange your entire schedule just to bring in some extra money. Another positive aspect is that you get to set your own rates. With proper marketing, and if you have the skills, you can make substantially more than minimum wage.

    The biggest drawback of earning income on the side like this is that you will have to pay all of the taxes. Next tax season you will have a bigger tax bill that may drop your tax refund into the negatives. This is especially true because you will be paying ALL of the 15.3% into your FICA taxes (working for someone else, half of this is covered). Combine that with the fact that you have to find all of your own clients, and many people are deterred from this option (even though you can make a lot more, it is quite a bit harder).

    Using an Accountant in Billings, Montana

    If you hire an accountant in Billings, Montana, you will be able to take a lot of the worry away from your side business. Here at Practical Taxes, we know the tax laws, and if you are starting your own side business we can work with you to get the most deductions possible (and help to offset those taxes that you have to pay).

    If you are interested in making more money on the side, consider starting a little side business (often called a side hustle). You will be happy that you did, and the extra income can go a long ways.

    Practical Taxes knows all the current tax laws and can help you with your business needs including business planning, accounting, tax preparation, and more.

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    tax services billings mt

    Tax Day 2016

    As most of you already now, tax day is just a week away. For those of you who have yet to file, we understand the stress and the pressure of getting it done soon. However, for those of you under a serious time crunch, there are ways in which you can extend your tax deadlines—however this does not get you out of paying your taxes in a timely manner, it only gives you a little breathing room to get everything in order. Your accountant can help you to file an extension if you are going to need one. You can also find this information on the IRS website. The extension is merely a six-month time leniency in which a person may get together their returns.


    If a person cannot afford to pay their taxes immediately, the IRS does have payment plans. Taxes wont be forgiven when someone participates in this plan, but like most things involving debt, the IRS will accept payment for a predetermined period of time during which the amount owed in tax is entirely paid. These payment plans can extend up to seventy-two months, although if you find yourself having to use these payment plans, you may want to consult with your accountant to prepare a plan for the next year. There is also a plan which the IRS labels the offer-in-compromise, which states that qualified, struggling tax payers may settle their tax debt for less money then they actually owe. This plan is beneficial to some, although it’s only for qualified persons, and your accountant can determine—if this is something in which you’ll need to participate—if you qualify.

    Tax day is stressful, and your accountant understands that. If your one of the many who are struggling under either a time constraint or you’re struggling with financial concerns, make sure to call your accountant so that you may benefit from these IRS programs. If you are ready to get your taxes done and you have the time between now and tax day, call your accountant and get your 2015 taxes behind you.

    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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    Why You Should Not Do Taxes Yourself

    Tax season is here, and the April 15th deadline is quickly approaching. And, with all of the services out there for tax help, and the few Do-it-yourselfers, tax time can be confusing. For some, taxes are easy: there’s one source of income; there are no significant gains from other businesses; it’s not a small business—the person is under the umbrella of someone else’s business, and they just have one W-2 to record for the year. For others, taxes cause stress and anxiety, and for those that suffer from the tax-season-blues it may be time to find yourself a qualified, experienced accountant, if you don’t already have one.


    The reasons to have an accountant are numerous. Let’s consider first the small business, and we’ll be looking at one of the major reasons hiring an accountant is helpful: exemptions and deductions. As you negotiate your business throughout the year, you’ll have plenty of expenses that you will decrease your taxable income. And, for new clients, an experienced accountant could also help the business owner to effectively plan future expenses, resulting in a beneficial relationship between the business owner and their accountant.

    Also, those of you that have undergone a major life-change in the last year, it may be time to visit an accountant. Consider a marriage, or the addition of a child, or, you bought your first home sometime in the previous year and you’re unsure how all of these things will reflect on your taxes. An experienced accountant is ready for any questions you may have.

    No one wants to pay more then they should on tax day. While it’s important to pay our taxes, for the average American, every single dime saved from hours of hard work is important. So, understanding that an accountant does cost money, an accountant will also help you to save money by reflecting your possible reductions that decrease the amount you pay in taxes. And, an accountant’s fees are also tax deductible, so it’s a win, win, regardless of how you look at it. This tax season consider hiring an experienced accountant to help you through this chaotic time, it may help you to save more money then you thought possible.

    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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    Know Your Business Tax Filing Deadline

    What’s your Company’s Business Tax Filing Deadline?

    When it comes to tax planning, it’s never too early to start, or too late to plan. January is almost over, so it might make more sense to look back so you can learn from what happened last tax season, and make better plans for the current year. On the other hand, there’s no harm in trying to come up with some last-minute maneuvers (just legal ones) that can help reduce the sting of taxes. But it all has to be done before your business tax filing deadline.


    File on Time

    If you have been in business for a while, you might be used to following tax filing deadlines that have been in effect for some time for businesses following a calendar year; that’s March 15 for S Corporations and C Corporations, and April 15 for Partnerships. Due to a recent bill passed by Congress and signed into law by President Barack Obama, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, some tax filing due dates have been adjusted, particularly for those in business.

    Starting this year, the business tax filing deadline for Partnerships (Form 1065) has been moved one month early, from April 15 to March 15. The filing deadline for C Corporations (Form 1120), on the other hand, has been moved one month later, from March 15 to April 15. The filing deadline for S Corporations (Form 1120S) remains unchanged at March 15.

    To avoid being slapped with unnecessary fines and penalties, make sure you adhere to the new business tax filing deadline.

    Apply for an Extension if Needed

    While some tax filing due dates have changed, the prerogative to ask for an extension hasn’t. So if you are not yet fully prepared to file on your original due date, take advantage of the special consideration being given by the IRS and apply for a 6-month extension (Form 7004) not later than your original due date. For example, a request for extension should be filed by a C Corporation on or before April 15.

    Based on the revised due dates, extension deadlines are as follows: September 15 for Partnerships and S Corporations; October 15 for C Corporations.

    Don’t worry, Practical Taxes can help you submit the tax filing extension if you need more time.

    Review your Deductions

    Based on Section 179 of the Internal Revenue Code, you can opt to recover the entire cost or part of the cost of certain qualifying property by deducting it in the year you used it for your business. Starting from 2014, that’s a deduction of up to $500,000 from eligible business expenses such as office furniture and fixtures, business machinery and equipment, computers, software, and many other depreciable properties.

    If your business is involved in one of the following industries: architectural and engineering services, construction, film production, or manufacturing, then it might serve you well to look into Section 199 of the IRS Code. Basically, this allows you to deduct up to 9% of your income that is directly derived from qualifying activities related to manufacturing done on U.S. soil.

    If you use your home or part of it for your business, make sure you do not forget to take advantage of what is known as the home-office deduction. Based on the simplified version, you can deduct up to $5.00 per square foot (up to 300 square feet) for a maximum deduction of $1,500.00.

    Practical Taxes Does Business Tax Filing

    As a business owner, you have a lot on your plate. You have to worry about the ins and outs of running a business, worry about employees, worry about the bottom line, and make sure everything is going well with the business. The last thing you want to worry about is whether or not your taxes were done right.

    Practical Taxes has you covered. We will prepare your taxes, make sure everything is filed, and ensure that you are getting the largest refund possible.

    Give us a call at 406-894-2050 to schedule an appointment.


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    Estate Taxes vs. Inheritance Taxes

    castle-780982_1920-300x225Estate taxes are often referred to as death taxes. It seems that no matter what is going on, the government wants to get a piece of the pie. So when you pass away, if you have a large enough estate, there may be taxes that are owed. On top of that, there are inheritance taxes to be worried about. So how do you know the difference, how much you will owe, and what to plan for? Keep reading as Practical Taxes, your accountant in Billings, explains the difference between estate taxes, inheritance taxes, and who needs to worry about them.


    Federal Estate Taxes

    A few years ago, understanding estate taxes was a pain. There was a set amount that would be excluded, and that number stayed the same for a decade. After 10 years it needed to be adjusted for inflation, but congress was trying to decide what to do. There was a fear that it would reset, and anyone that died during the reset period would be subject to massive taxes.

    Fortunately that has been figured out, and the estate tax exclusion now adjusts annually. For tax year 2015, your assets can total $5.43 million before you owe taxes. That means if your assets total $5.45 million, you only owe federal estate taxes on $20,000. Current estate tax rates are between 35% and 45% depending on your situation.

    If you are fortunate to have an estate larger than the exclusion, and thus you will have to worry about the taxes, pay attention to the name of the tax. Estate taxes are paid by the estate before money is distributed to the heirs. The government doesn’t care if those assets are tied up in real estate either. The estate will have to raise the money any way possible to pay the tax.

    State Inheritance Taxes

    Fortunately there are only 15 states (and D.C.) that have an inheritance tax. Montana is not one of them. But in case you have two residences, pay attention.

    State inheritance tax varies by state. There are different exclusions, different tax rates, and different provisions. Since Montana isn’t included, we won’t go into any details; but we can discuss it with you if your situation calls for it.

    Just as estate taxes are paid by the estate, inheritance taxes are paid by the heir.

    How to Avoid Estate Taxes

    There are a couple of ways to avoid estate taxes. One involves reducing the size of your estate, the other actually involves increasing the size.

    Reducing the size of your estate – The only true way to completely avoid estate taxes is to have an estate smaller than the exclusion of $5.43 million. However, rapidly reducing your estate is tough since you can only give away a certain amount every year. You can give $14,000 each year to anyone and avoid gift taxes.   So if you have 10 grandkids, you can move $140,000 out to UGMA or UTMA accounts. You can move money out by donating to charity, or setting up an ILIT.

    Increasing the size of your estate – Moving money into an ILIT will actually increase the size of your estate. Let’s suppose your estate is worth $6 million. You start an ILIT (the trust owns the insurance, the estate is the beneficiary) and give the trust $14,000 per year to pay the premiums. Suppose the death benefit is $4 million, your estate (at the time of your death) will be worth $10 million. The benefit here is that even though you owe taxes on the additional value; it is all paid with liquid money that comes from the life insurance.

    Let Practical Taxes Help with Your Estate Planning

    If you have estate planning needs, Practical Taxes can help. We can work closely with your attorney, your financial advisor, and you to draw up these plans. We will help you plan for your estate taxes, or help you avoid them if we can legally make it happen.

    If you don’t have estate tax issues, we offer affordable tax preparation services in Billings. Give us a call at 406-894-2050 to learn more and to schedule your appointment.


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    Rising Interest Rates Can Affect Your Taxes

    Interest-Rates-300x212A few times every year the Fed gathers together. There are rumors that run rampant throughout the finance world that they are raising interest rates this time. So far every meeting has adjourned and the decision has been to leave interest rates alone. But they can’t stay down forever.

    When interest rates start to rise, they can have some drastic effects on your taxes. Just how drastic? Read on to learn more about how rising interest rates can affect you.

    Interest Rates and You

    Every financial transaction that you make is affected by interest rates. From the cost of goods, to how much you earn on your investments, to how much you pay when you carry a balance on your credit card. For the consumer in debt, low interest rates are good. It means you get cheaper credit. For those who have a lot of investments, a higher is better. But if interest rates rise too fast, it can have some severe problems.

    Most people think of interest rates and how they affect their loans. If interest rates drop, they can refinance and get a better deal on their loans. That means if you’re stuck paying 6% interest on your mortgage, and the Fed lowers interest rates another time, then you might be able to refinance at 4%. Over the life of the loan, that extra 2% can mean many thousands of dollars.

    Interest rates also affect how much you earn when you put your money into savings. If interest rates are high, then you get a better return (many accounts were yielding 5 or 6% before the recession in 2008). That meant your money would grow a lot faster.

    Investments in bonds are tied very closely to interest rates. Bonds are in essence giving a loan to a company. Suppose you buy a $1,000 bond with a coupon of 5% (basically it pays 5% interest). Every year the company gives you $50, and at the end of the term (usually 10, 20 or 30 years), you get your $1,000 back. If interest rates drop, and the company can now sell bonds for 3% interest, they will cancel your bond, pay you $1,000, and then sell a new bond to someone for cheaper. The bond market is much more complex than that, but you get the idea.

    Investments in the stock market are also tied to interest rates, albeit a little more indirectly. If interest rates go up, stocks that pay dividends know that their dividends are going to have to go up in order to stay competitive. This means that the value of the stock itself will drop a little bit.

    Rising Interest Rates and Your Taxes

    There’s a quick rundown on how rates affect your investments, savings, and loans. But how do they affect your taxes?

    Let’s look at each of those components and see.

    Mortgage interest is tax deductible (to a certain amount). That means if you have an adjustable rate mortgage, you are probably paying really low interest right now. If interest rates go up, you will end up paying more in interest on your loan, and you will be able to deduct more off your taxes. Likewise if you take out a new loan, a rising interest rates will mean a larger tax deduction.

    Interest earned on a savings account is taxable income. Let’s suppose you are currently earning .5% on $25,000 of savings. That brings in a whopping $125 per year. In a 25% tax bracket you’re looking at roughly $25 in taxes. Rising interest rates make that go up, and if your account starts earning 3.5% interest, you are now getting $875 each year in interest. That same tax bracket means you owe $175 in taxes.

    If you have a bond that is paying a lower interest rate than what the market says it should, the value of the bond is going to go down. So if you try to sell your $1,000 bond on the open market, you may only get $850 for it because people know they can get a higher interest rate by paying full price. If you paid $1,000 for a bond, and you sold it for $850, you can deduct $150 from your taxes. Likewise, if you invest in a new bond, all interest is taxable (for corporate bonds at least).

    Dividends collected from stocks are taxable. The more the stock pays out the more you pay in taxes. That one is pretty simple.

    Practical Taxes is your Affordable Tax Preparer in Billings

    Here at Practical Taxes we want to make sure that you know about your taxes. We will prepare your tax return, but we will also give you pointers on how you can lower your tax bill next year. Tax preparation is our specialty, but get in touch with us for all your accounting and bookkeeping needs. Just call 406-894-2050.

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    Four Summer Tax Moves to Improve Your 2015 Taxes



    Summer is well underway, the year is half over, and you are enjoying the long days and warm weather. Tax season is months away, and you are likely not even beginning to think about your taxes yet. But now is the perfect time to reassess your tax situation in order to ensure that you will not owe exorbitant amounts to the IRS next year. Your payroll expert and Billings, Montana accountant explains 4 quick ways that you can make your taxes more favorable come next spring.


    Summer Tax Move: Adjust Your Tax Withholdings

    Your 2014 taxes turned out just fine, but perhaps next year you would like to get a refund that is slightly larger. Or maybe you ended up owing money on your 2014 taxes and you’d like to avoid that uncomfortable situation in the future. Fortunately, it’s not too late to adjust your withholdings.

    If you are an employee, you likely remember filling out a W4 when you were first hired on. Did you know that you can change those forms at any point throughout the year? Simply talk with your human resources department (or your payroll services provider) and ask that your withholdings be updated. You can specify a smaller number (any number 0 or greater; the higher the number the less is withheld). If you’re already at 0, then you can specify an additional dollar amount to be withheld from each paycheck.

    Many people will tell you that you should shoot to have a $0 refund, but really it is in your best interest to have a larger refund.

    Summer Tax Move: Save Summer Camp Receipts

    If you have a child, and you enrolled him or her in summer camp, keep those receipts! Did you know that the IRS views summer camp as a form of day care? You can deduct up to 35% of your summer camp costs claiming the Child and Dependent Care Credit.

    In addition to summer camp, if you’re doing any charity work this summer, like traveling across the state to help rebuild a school, church, or other non-profit, you can deduct 14 cents for every mile you drive.

    Summer Tax Move: Increase Retirement Savings

    The vast majority of Americans are woefully behind on their retirement savings. They really need to ramp things up in order to meet their goals. You don’t have to be one of those that are behind on their savings.

    If your company allows it, boost your savings by 2% this summer. You probably won’t even notice the change in your paycheck, but when it comes time to retire you will be far better off. Next summer, do the same thing.

    For those who are maxed out at work, or can’t change contributions mid-year, start putting more into your Roth or Traditional IRA. You can put aside up to $5,500 this year. If you have maxed those out as well, then consider permanent life insurance, or a non-qualified investment plan.

    Summer Tax Move: Increase Your Charitable Giving

    The standard deduction for 2015 is $6,300 for a single person, $12,600 for a married couple. If you feel you will be coming close to that amount, then you should up your charitable contribution to get a bigger deduction.

    You can start simple by giving $50 every two weeks to your favorite charity, and then boost those deduction amounts by doing some summer cleaning. Clear out your closets and garages; anything you haven’t used in a long time, give it away. Be sure to get receipts!

    Practical Taxes Can Help

    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 406-894-2050 to learn more.

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    4 Tax and Monetary Changes in 2015 You May Have Missed

    taxesTax code, investment laws, and savings programs change every year. If you aren’t keeping up, you may be missing out on some important changes that can have a dramatic impact on your finances. Most of us know about the big changes, like the tax implications of the Affordable Care Act. But there are a lot of smaller changes that don’t get as much press. Here are 4 of those changes that went into effect this year. Your payroll services expert in Billings, MT explains how they can make a huge difference on your finances.



    Retirement Plan Limits Increase by $500

    If you think that you have maxed out your 401(k) or 403(b) plan, you might want to look again. In 2014 the contribution limit was set at $17,500 with a $5,550 catch up for those who are aged 50 and above. Those limits have changed and you can now put in $18,000 and catch up an additional $6,000 if you are over 50 years old. The best part is that any money you put aside won’t be taxed until you take it out.

    For those who don’t have access to a 401(k) or 403(b), but you do have a different employer sponsored plan, there is still good news. The limits on nearly all of the employer sponsored plans are increasing by $500-$1,000. The bad news: IRA’s are still at the $5,500 they were at last year.

    Standard Deduction Increases by $100

    When you file your taxes you get the choice of itemizing your deductions, or taking the standard deduction. Depending on your living situation, how much you give away throughout the year, and other factors, you may benefit from one or the other.

    For those who don’t have a lot of deductions throughout the year, there is good news. They get an extra $100 ($200 if married) to write off. This brings the deduction up to $6,300 for a single filer, and $12,600 for a married couple.

    Social Security Recipients Get a Raise

    If you collect social security, you can rejoice… sort of. Your cost of living increase bumps up your benefit by 1.7%. For the average recipient that means $22 extra per month. Not a lot, but can make a big difference to those who have this as their only source of income.

    Since the Social Security program is running out of money, or at least that’s what many believe, they need to bring in some extra cash. The upper limit on what is taxable for social security has also increased by 1.3% going from $117,000 to $118,500.

    Obamacare Penalty Will Double

    The Affordable Care Act was signed into law a few years ago now. But only last year was the penalty enforced for not having insurance. Last year it was just 1% of your income, or $95 (whichever is greater). Considering that most people make over $9,500 per year, the penalty is essentially 1% of your income.

    In 2015, that penalty bumps up to 2%, or $325 (whichever is greater). Again, most people make more than $16,250, so that penalty is essentially 2% of your income.

    If you make $50,000 per year, you will owe $1,000 in penalties if you don’t have insurance. It’s still cheaper than buying insurance, but why take that risk?

    Practical Taxes is Up To Date on the Laws

    Here at Practical Taxes we are a full services accounting firm in Billings, Montana. That means we have to stay up-to-date on these tax laws, and that means you get the benefit of our knowledge. Whether you are looking for someone to help with quarterly tax filings, yearly tax preparations, payroll services, or business consultation, we are here to help. Give us a call at 406-894-2050 to make an appointment today.

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    Managing Money after Marriage

    Marriage-300x200Getting married is a huge step for everyone. Not only are you combining your two lives legally, which means that you are now sharing just about everything, you are also combining your financial lives. Even if you maintain separate checking accounts (some argue this is a bad idea, but it has helped save countless marriages by eliminating fights over money), your financial lives will be severely intertwined and changed forever. If you are planning to get married soon, or looking toward the future as to what marriage will bring, your accountant in Billings, Montana helps you be aware of what to expect.


    Dual Incomes After Marriage

    There is a term you may have heard. And most likely you have heard it used inappropriately. That term is dink, which stands for Dual Income No Kids. Even if you are young, fresh out of college, and not making a lot of money, two incomes is better than one. As a married couple your expenses don’t increase that much, but the money coming in doubles. Before kids enter the picture, now is the time to really get things on track financially (because after kids come then you are in a whole new financial category).

    With two incomes you will want to make sure that your emergency fund is sufficient. This means having enough to cover a few months of living expenses if you were to suddenly find yourself unemployed. It also means having a bit extra so when, or if, you decide to have children you have enough to pay for their hospital bills when they’re born.

    Two incomes means really plugging away at your retirement funds as well. When you are young, and time is on your side, is when you need to stuff as much money into your IRA’s as possible. A few years now are worth a whole lot more than a lot of years later.

    But two incomes will also mean that you are pushed into a new tax bracket.

    Married Couple Taxes

    Suppose you were married on January 1st 2015; your taxes for all of 2015 would be as a married couple. If you were married on May 1st 2015; your taxes for all of 2015 would be as a married couple. If you were married on December 29th 2015; your taxes for all of 2015 would be as a married couple. You get the point, no matter when you were married, for tax purposes you were married the entire year.

    For those in a lower tax bracket (that is the 10% or 15% brackets) the incomes are basically double. For instance, as a single person you are taxed 15% on earnings between $9,226 and $37,450. For a married couple filing jointly, you are taxed 15% on earnings between $18,452 and $74,900. However, once you move into the 25% bracket, that is when things start to change a little.

    Add into the mix that if you have substantial deductions, but your spouse doesn’t, then it may be better to be married filing separately. If you work, but your spouse doesn’t, then there is always the head of household status. If you have a lot of deductions, then you could push yourself into a lower bracket. The bottom line is that as your income increases, your taxes become more complicated; especially with a spouse and a family. It’s a good time to hire an accountant to do your tax preparation.

    Practical Taxes

    We are a full service accounting firm in Billings, MT. We understand that marriage causes a lot of different financial changes, and money can end up causing a divorce. Instead of fighting over money, be prepared for what is to come, and let us handle your taxes so you can eliminate stress from your lives.

    Practical Taxes can handle all of your accounting needs including tax preparation, payroll services, bookkeeping, and more. Call us today to learn how we can help you 406-894-2050.

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    Should You Keep Your Mortgage for Tax Purposes?

    mortgage_rate-300x284If you study personal finance at all, you will find conflicting accounts of whether or not you should pay off your mortgage. Some say to get out of debt as quickly as possible, and that means pay extra on your mortgage. Others say that since you can deduct mortgage interest from your taxes that you shouldn’t pay off your mortgage as quickly as possible. But how does it actually work out? Your accountant in Billings, MT looks at the numbers and helps you decide what is in your best interest.






    How Much Interest Your Pay

    The decision to pay your mortgage off early or to keep it around for the tax deduction, all depends on how much interest you actually pay. So we will look at two scenarios in order to determine if it makes more sense to pay off your mortgage early or just let it run its course.

    In our first scenario we are buying a new house. Our total mortgaged amount is $200,000 and we got a good deal at 4% interest on a 30 year fixed rate mortgage. For ease of calculations our first payment was on January 1st of the year. Over the course of 12 months we make payments totaling $11,457 of which $3,522 is principal, and $7,935 is interest (keep in mind every payment more goes toward principal and less toward interest).

    If we itemize our deductions, which means we have to come up with $4,465 for a married couple (to put us over the standard deduction), then paying on this mortgage will save us $1,983 off our taxes (assuming a 25% tax rate).

    In our second scenario we are an existing homeowner. We have a loan with the same terms, but there is only $100,000 left on the mortgage. Over the course of 12 months we still make payments totaling $11,457, but this time $7,572 goes to principal and $3,885 is interest.

    Assuming we still itemize, and have $8,515 of other deductions, then we can save on our taxes with paying our mortgage. But now those savings are only $971.25.

    Now here is the situation: in scenario #1 you spend $7,935 to save $1,983. In scenario #2 you spend $3,885 in order to save $971.25. In other words, you spend a dollar to save a quarter. Unless you need that itemization to push you up and over the standard deduction, it doesn’t make a lot of sense to keep your mortgage around for the tax deduction. You can calculate your mortgage and amortization over at Bankrate.com.

    Other Factors to Consider Regarding your Mortgage

    However, there are several other factors that play into the keep-it or pay-it-off decision.

    First of all, can you even afford it? If you don’t have an emergency fund, and you are skimping on your retirement fund, then you are better off keeping the mortgage. Use those extra payments to boost your other accounts before trying to pay off your mortgage early.

    Liquid money is always better. Having your net worth tied up in your house is almost never a good idea. If you need cash, you will have to sell the house or take out an expensive home equity loan. Unless you have other resources, you might not want so much money tied up in the house.

    Finally, you could likely get a better rate by investing the money. If you have a 4% interest rate, your after-tax savings rate is 3%. Over the long term, your investments should make far more than that. Why give up an 8% return in order to get a 3% return?

    There is a lot that goes into the decision to pay off your mortgage. If you are simply keeping it around for the tax benefits, then you are actually losing money (pay $1 to save $.25). But if you are keeping it around because you don’t have other resources, and you have the discipline to invest it elsewhere, then it makes a lot of sense to keep the mortgage around.

    Practical Taxes is a full service accounting firm in Billings, Montana. If you have a mortgage and other deductible expenses, we can make sure to get you the biggest refund available. If you are a business owner and need other services like monthly accounting, payroll services, or more, then let us know and we can help you out. Call 406-894-2050 to learn more.

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    Three Essential Business Skills to Success

    Business-Taxes-300x199As a business owner you know the struggles. You understand the hard parts of running a business, and you understand the joys of running a business. If you find that you are struggling more often than not, you might need to take a step back and look at your leadership, managerial, and entrepreneur skills. There is a good chance that you are tackling your business from the wrong angle, and you have forgotten to apply these three essential skills as a business owner. Keep reading as your accountant in Billings, MT explains those skills.



    Essential Business Skill: Sales

    Mark Cuban once said, “In business you’re always selling – to your prospects, investors, and employees.” But what do those sales skills look like? They’re dramatically different from being a salesman.

    Sales skills could be reworded as people skills. As a business owner, you constantly have to know how to interact with people. But at the same time, you constantly need to be sharing your vision and your passion with those people. That is where your interactions become sales interactions.

    When you are first starting out on your business venture, you have to have the skills needed to sell your idea to your investors. Whether you are getting money from individuals, venture capitalists, or the bank, you have to sell your idea.

    When you are running your business you have to sell to your prospects. They need to know why your product or service will make their life better. At the same time, you have to keep your employees passionate about your business. You must sell them on the dream.

    Even when things are looking great, you have to keep selling. Employees will turnover; you have to sell the new ones. Prospects come and go; you have to sell to stay alive. A new opportunity may pop up; you have to sell to see the dream become reality.

    Selling is instilling your passion into others.

    Essential Business Skill: Planning

    If you want to run a successful business, you have to start with a business plan. No matter what people say, a business without a plan will not know how to overcome obstacles when they come up. It all starts with setting goals.

    Before you launch your business, before you register your business name, before you even think about opening a store, you have to have goals. As humans we are fickle. When we don’t have goals to meet, we don’t do anything. Without a goal for your business, personal, and financial life, you will just keep floundering along.

    After defining your goals, you need to get an idea together that will help you meet those goals. This business plan should include everything you can possibly think of. You need to make a plan to meet those goals, but you also need a plan of what you will do if you don’t meet those goals. You need a plan of what to do if you exceed your goals. You need a plan of how to overcome the hard obstacles, and a plan of what to do when obstacles present themselves that you couldn’t even imagine.

    By making a plan, you will make your business life so much easier.

    Essential Business Skill: Focus

    There is not a successful business owner out there that isn’t laser focused on their business. We have all met the two types of business owners: the one that is keenly aware of his business and knows exactly what needs done to make it succeed, and the one that is trying to run a hundred directions at once and is always frazzled.

    Your focus on your business is what sets you apart from the wannabes. You know your business and what needs done. What that means is that you don’t worry about aspects of your business that someone else can handle. Payroll services? Let your accountant in Billings, Montana do that. IT work? Hire a specialist to be on-call for your computer needs. Website development? There are a lot of website builders out there and others who can optimize your website. The list could continue, but the bottom line is that you focus on your business, let others focus on their business, and work together to benefit everyone.

    By being laser focused on your business, and letting others take care of items outside your area of expertise, you can grow substantially.

    Practical Taxes is a full service accounting firm in Billings, MT. We can help you with many of those items that fall outside of your area of expertise, like payroll services, bookkeeping, and more. By letting us handle the things you are not familiar with, you will have more time to grow your business.

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    Filing Your Taxes Late, is it Worth it?

    File-your-Taxes-Late-300x220With only 2 days until your taxes must be completed and submitted, there is a good chance that you might not be able to get around to filing on time. Don’t worry; you do have some options here. But keep in mind that filing your taxes late should not be one of those options. Your accountant in Billings, Montana looks at what happens if you file late, and what you should do to avoid filing late.

    Filing your Taxes Late

    If you absolutely must file your taxes past the April 15th deadline, then you should file them as soon as you can to avoid racking up late fees, interest, and other penalties. The IRS wants your tax return, and they will accept late tax returns no matter when those returns come in. Keep in mind that most people get a tax refund, if you simply don’t do your taxes, you risk forfeiting that refund.

    The good news is that if you are eligible to receive a tax refund, there is no penalty for filing your taxes late. But the longer you wait without claiming that refund, the longer the government gets your money and doesn’t owe you any interest; your 2014 taxes must be filed by April 15th 2018 or that refund is forfeited to the US Treasury.

    The bad news is if you owe money on your taxes. Now there are two different fees here, a failure-to-file fee and a failure-to-pay fee. They are vastly different.

    Let’s suppose that you owe $1,000 on your taxes.

    If you don’t file your taxes on time, you are going to be hit with a failure-to-file fee. This fee is 5% of the amount that you owe on your taxes, every single month. So in our scenario if you file 1 day late, or 30 days late, you owe an additional $50. That amount caps off at 25%, but you will still be hit with the failure-to-pay penalty.

    If you file your taxes, but you can’t afford to pay what you owe (and if you didn’t set up a payment plan) the IRS will still ding you. This ding isn’t nearly as bad as simply not filing though and comes in at a mere .5% per month interest. So if you miss paying by up to a month, you owe an additional $5 for our situation. This amount will cap off at 22.5%.

    There are some other increases, maximums, and scenarios and those will vary depending on your situation, but the bottom line is this: if you owe money, and you fail to file your taxes, you can expect to pay an additional 5% each month until things are paid off.

    Don’t File Your Taxes Late

    You still have plenty of time to file your taxes if you do them yourself (TurboTax offers a free online program if you meet the qualifications), or you can always file an extension. Learn more about how to file an extension on your tax return.

    Give us a call at 406-894-2050  to see if your accountant in Billings, Montana can still squeeze you in before the deadline (chances are slim, but we can help file that extension).

    Practical Taxes is a full service accounting firm in Billings, Montana. Like all accountants our crunch time is the first few months of the year, but after tax season is over we don’t close up shop. Throughout the year we are available for business consulting, payroll services, and multiple other accounting needs.

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    Minimizing Your Taxes When Giving to Charity

    Giving To Charity Is More Than Just Giving Cash

    IRA-300x199Most people give to charities for two reasons. They love what that charity is doing, and they want to get a deduction on their taxes. Whether they give to a church, a group, or any other 501(c)(3), they will be able to write off what they donate to that group. What many people don’t realize is that the IRS allows donations to be made over and above cash donations. In fact, you can give anything of value and write it off on your taxes. Your accountant in Billings, Montana explains method that lets both you, and the charity of your choice, come out ahead.

    Giving to Charity by Donating Securities

    Many of us have investments. They are set up in order to grow faster than inflation so that when it comes time to retire (or to use those investments for their desired goal), we have far more than if we had simply put the money into a basic savings account.

    The problem arises, however, when it comes time to withdraw those funds. Unless the money is in a Roth IRA, there will likely be large capital gains on the account. This means that you may have to pay a considerable sum in taxes before you can donate the money. Let’s take a look at the math.

    Suppose you invest $10,000 and over the next 10 years that grows to $100,000. You don’t need the money, and you have a charity that could use it. So you cash in your investment. Unfortunately there is $90,000 worth of growth; resulting in about $13,500 in capital gains taxes (at 15%, your tax rate may vary). So you really can only give your charity $86,500. There is a better way.

    You can donate $100,000 worth of stock (or other securities) to that charity, even if there are significant gains in the account. Here is where it gets good.

    When the securities change hands, the cost basis doesn’t go with them. So even though you only paid $10,000, the new basis is $100,000. Your charity can sell the investment, and not worry about any taxes on it. You get to write off the full $100,000; they get to keep the full $100,000.

    In our first scenario, you get to write off $86,500 on your taxes, helping you save $21,625 (minus the $13,500 you have to spend you have a net tax savings of $8,125). In our second scenario you write off $100,000 helping you save $25,000 off your taxes. These, of course, are assuming a 25% tax bracket.

    Keep in mind there are some limitations on this method. You can read all about those limitations on the IRS website. Of course, you probably don’t want to spend your time doing that, so when tax season is approaching, you can just ask your accountant in Billings, Montana what to do.

    Practical Taxes

    Practical Taxes is a full service accounting firm in Billings, Montana. Tax season is drawing to a close, but it is never too early to start preparing for next year’s taxes. If you have accounting needs, including tax preparation, online payroll services, business consultation, or the like, schedule an appointment by calling 406-894-2050.

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    How to File Your Tax Extension

    tax extensionTax season is starting to wind down. With just a few more weeks left to get you taxes prepared by the April 15th deadline, you may be wondering if you will have time to get the done. Fortunately, the IRS is lenient enough to let you file later. But you have to let them know that you will be filing later in the year. Today your accountant in Billings, Montana tells you what you need to know about filing an extension on your taxes.




    Your Liability Doesn’t Get a Break

    By filing an extension on your taxes, you are able to put off the actual filing until October 15th. However, that does not mean that any taxes that you owe get to be put off until October 15th.

    If you believe that you will owe on your taxes, you need to estimate the amount that you will owe and send that payment by the April 15th deadline. But there are some caveats to this.

    Pay Too Little – If the IRS thinks that you are paying too little, for instance if you try to send $25, they may deny your request for extension.

    Don’t Pay Enough – If you don’t pay at least 90% of what you end up owing, you will have to pay interest on the remaining amount. For instance, you pay $1,000 but it turns out you owe $2,000, then you owe .5% interest on the extra $1,000 every month until you file (in this case about $5 per month).

    How to File Your Tax Extension

    If you know that you won’t be able to have an accountant in Billings, Montana help you file your taxes before the April 15th deadline, you can file for a tax extension on your own. Then at any point before October 15th you can enlist our the help  to finish things up. There are two ways to file that extension.

    E-File with the IRS

    The IRS provides some software if you meet the income limits. They allow you to file all of your taxes online yourself through their partner site E-File.com (not to be confused with the for-profit website efile.com).

    On that site you can begin your tax return, and then select “file an extension” to automatically file your tax extension.

    Paper File with the IRS

    Some people prefer to simply fill out a paper form rather than create yet another online account. To do so you just have to print off the e-file application by following the link.

    It’s as easy as filling in the boxes and then mailing it in.

    Pay Your Tax Bill

    Even if you have no idea what your tax liability will be, you need to pay something. If you made $100,000 last year, and you didn’t pay any estimated taxes throughout the year, you can expect your liability will be around $25,000. Try to get as close to that as possible.

    Because there are some complications that arise, it is probably best to get your taxes started with your accountant in Billings, Montana. Have him file the tax extension. And then work with him in a couple of months to get everything finalized.

    Your Accountant in Billings, Montana Can Help!

    If you are struggling to get everything together for your taxes, don’t worry! Make an appointment  to get your taxes done, and you will get top of the line service that helps walk you through the steps to filing your tax extension and paying at least some of your liability so you don’t get hit with late payment penalties. Set up your appointment today by calling 406-894-2050 today.

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    Understand how Your Health Savings Account (HSA) will be Taxed

    Health-Savings-Account-244x300HSA Health Savings AccountLet’s face it, health costs are skyrocketing. They increase far faster than inflation, and to offset the costs, health insurance companies have to charge more or drastically increase deductibles. For those who have their own insurance, and they have to have a plan that has a high deductible, there are options. A Health Savings Account (HSA) might help you to pay for your health bills, and be able to deduct the costs off your insurance. Here is how they work.




    Qualifying for an HSA

    There is really only one requirement for you to be able to utilize an HSA: you have to have an individual insurance policy with a deductible of at least $1,300 (for a single person policy) or $2,600 (for a family policy). If you meet that requirement (for calendar year 2015, these number adjust every year), then you can open an HSA through your local bank and start funding it. There are some rules on how much you can put into your HSA though.

    Your HSA will have an annual contribution limit of $3,350 for a single person policy, or $6,650 for a family plan. This means that every year you can put as much as you want into your HSA, as long as you don’t go over the contribution limit.

    How to Use an HSA

    The nice part about money in your HSA is that it never expires. There are some plans, like employer flex plans, that are use-it-or-lose-it. With those plans you have to use all of the money in your account, or it will expire at the end of the year (meaning you will essentially give the money back to your employer or insurance company that manages the plan).

    In order to avoid a 20% penalty, you must use your HSA money for qualified medical expenses. These expenses include items such as prescription medication, hospital co-pays, hospital payments until your deductible is met, and a few others. What is not included, however, are insurance premiums.

    Many people choose to use their HSA in this manner: They receive a bill from the hospital for $500. They go to their bank and transfer $500 into their HSA, and then write a check to the hospital out of their HSA account. That way they don’t have money tied up in the HSA account that isn’t being used for anything.

    Tax Consequences of an HSA

    Here’s the best part about the HSA. Any money that goes into your account is completely tax deductible. It helps to give you a little break on your taxes by providing just one more write-off. It’s money that was going to be spent anyway, so you might as well get to see a tax deduction from it.

    HSA’s earn a small amount of interest. Any interest added to the HSA is tax-free. You never have to pay a dime in taxes on that money (unless it goes to something other than a qualified medical expense).

    Even if you start a new job and no longer have the high deductible insurance policy, you can still use your HSA (you simply can’t add to it any longer).

    Practical Taxes Can Help

    Here at Practical Taxes we can help you get the taxes side of your HSA sorted out. It is up to you, however, to get the account set up. Your accountant in Billings, Montana can’t set up the HSA for you.

    A+ does more than just taxes though! We are a full service accounting firm in Billings, Montana. We can help with payroll services, business consultation, and much more! Any of your accounting needs can be handled through us, and that frees up a lot of your time. Call 406-894-2050 to learn more.

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    5 Smart Ideas for Your Tax Refund

    Taxes3-300x224 We are in the middle of tax season. If you have already done your taxes, and you’re sitting on a nice tax refund check, then congrats! If you have yet to do your taxes, call us today to set up your appointment with an accountant in Billings, Montana.

    Most people will get a refund. Many people will blow that refund on something frivolous. Before you head out the door and start buying rounds at your favorite watering hole, take some time to realize that this is not free money. It is money that you have earned throughout the year. Also take some time to read these tips that will help you be wealthier in 2015 than you were in prior years.


    Tax Refund Tip 1: Pay Down Debt

    I have yet to talk with someone that loves being in debt. Many people appreciate being able to take out a loan to buy those things that they can’t afford to pay for with cash, but most people hate debt and want to be out of debt as soon as possible.

    Your tax refund will help you pay down your debt saving you a lot of money in interest charges over the next 5, 10, or 30 years. Every dollar you pay down now, is a dollar that is not accumulating interest charges.

    Tax Refund Tip 2: Invest in Your Future

    There has been a lot of talk recently about the future of Social Security. While it would be nearly impossible to absolutely wipe out the program, the reality is that it likely won’t be paying out quite as much in the future as it does now. But keep in mind that the program was never intended to pay for your entire retirement anyway.

    You need some outside investments to help boost your retirement income and allow you to live the lifestyle you want. Investing at least part of your tax refund will help to get you there.

    Tax Refund Tip 3: Give to Charity

    Millions of people right here in the US are not as well off as you are. That means they could use a helping hand. You don’t have to give your entire tax refund away, but a small portion will help to go a long way. Before you give a charity your money, be sure to check them on Charity Navigator to make sure the money goes to the program and not to the CEO’s paycheck.

    Tax Refund Tip 4: Save Your Money

    This is different than investing. We all know the importance of having an emergency fund, yet the majority of people don’t have one. Why? Because they feel they need it all at once or nothing at all. Well with your tax refund you can fund your emergency fund all at once. Just remember that when money goes into the emergency fund it only comes out for emergencies.

    Tax Refund Tip 5: Spend it on Yourself

    You may be thinking, “Didn’t you just say not to spend your tax refund?” Yes, I said not to spend all of it frivolously. After you have paid down some debt, invested in your future, donated to charity, and boosted your emergency fund, there will be something left over. Even if it’s only $50 or $100, go buy yourself something nice, take your loved ones out to dinner, or buy 100 burgers off the McDonald’s Value Menu if that’s what makes you happy. You earned the money, so spend it on something that makes you happy.

    Getting your taxes done by an accountant in Billings, Montana like Mike will let you get that refund back in your pocket quickly. Call 406-894-2050 to set up your appointment today!

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    Are Long Term Care Insurance Premiums Tax Deductible?

    Nursing-Home-300x225People are living longer than ever. That’s not to say we are any healthier than in the past, but rather modern medicine is helping to keep us alive much longer than it used to. Because of this longevity, insurance companies have started to offer an insurance that protects against the high costs of nursing home stays. Long term care insurance is a hot item for those in their 50’s who have significant assets that they want to protect against Medicaid. But there may be a silver lining to the high expenses of long term care premiums.




    The Average Cost of Long Term Care

    Long term care, most people know it as a nursing home or assisted living stay, costs a significant amount of money. How much depends greatly on not only the nursing facility, but also on where that facility is located. In Billings, Montana, a nursing home stay will cost quite a bit less than a nursing home stay in Miami, Florida.

    For those who live in Billings, Montana, you can expect to pay around $200 per day for your stay in a nursing home. This comes out to about $6,000 per month, or around $72,000 per year. While that may not sound like a whole lot, keep in mind that your spouse will still have living expenses as well. And keep in mind that long term care expenses are going up at about 5% per year; significantly faster than inflation.

    To protect against this loss of wealth in our golden years, insurance companies offer long term care insurance. The protection levels vary, and there are different coverages that offer inflation protection or the right to buy more insurance later in life. For good coverage, an individual in his or her 50’s can expect to pay around $2,500 – $5,000 per year for this insurance. But there is good news.

    Can You Deduct Long Term Care Insurance Premiums?

    The answer to whether or not you can deduct your long term care insurance premiums from your taxes is: maybe. It all depends on your income.

    LTCi premiums are considered a medical expense. Medical expenses are deductible from your insurance if those expenses exceed 10% of your income (7.5% if you are age 65 or older). So in order to deduct your LTCi premiums, they need to push you over that 10% threshold. Every situation is different, so you should talk with your accountant in Billings, Montana.

    Practical Taxes Has Answers

    If you are unsure of your tax situation, if you are unsure if it is deductible, if you are unsure if you want to tackle your taxes again this year, then you need to hire an accountant in Billings, Montana. The good news is that Practical Taxes, a full service accounting firm in Billings, Montana, has one of the most affordable accountants around. You will get professional service, and still pay less than the firms that are only here for a few months out of the year.

    Practical Taxes does more than just tax returns. We can help with business consulting, payroll services, and more.

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    Is Disability Income Taxable?


    Most people think that they will never become disabled. However, statistics show that one out of every four twenty year olds will become disabled before they retire. That means 25% of people will have a sickness or injury that is so severe that they won’t be able to work. Social Security may provide some disability benefits, but most people will have to rely on a personal or work provided disability policy in order to make ends meet. Your accountant in Billings, Montana can help you determine if those benefits are taxable.




    What Type of Disability Insurance do You Have?

    Not all disability insurance policies are created equal. Therefore, they are not all taxed the same either. There are three basic types of disability policies out there.

    Social Security – The same program that will (hopefully) help provide retirement benefits also provides benefits to those who become disabled before they retire. The application process is cumbersome, and proving disability can be a chore.

    Employer Benefit – Many jobs have disability insurance as an employer benefit. Part of your paycheck is the fact that if you are disabled, then you can file a disability claim through whomever the employer has purchased their group plan. These policies generally only cover about 60% of wages.

    Personal Benefit – A personal disability insurance policy can be added to the employer policy to bring a person up to nearly 100% of pre-disability wages. For example, a person makes $1,000 per month. The employer plan covers $600 of that wage. The individual can buy an additional policy to cover the other $400 (or more than likely it would be about $350 in benefit).

    How are Disability Benefits Taxed?

    The different disability policies will be taxed differently. It all depends on how the policy is provided.

    Social Security benefits may be taxed depending on what your income is. If you are married and filing jointly, your benefits and your spouse’s income can total no more than $32,000 per year. If it goes over that amount, then your benefits, or some of your benefits, are subject to tax.

    Employer sponsored benefits are almost always taxed. So if you have a group disability plan, you likely only have 60% of your wages covered. Take away another 20% in taxes, and you are left with less than half of what you were making before disability.

    Individual disability benefits are almost never taxed. This is why it is important to bulk up your coverage instead of just relying on employer sponsored benefits. Think of it this way: you paid for your individual policy with money that you already paid tax on. The benefit is therefore not taxed. You received the group policy and did not pay tax on the money used to buy that policy. The benefit is therefore taxed.

    Speak with Your Accountant in Billings, Montana

    If you are collecting disability benefits, whether from Social Security, a group policy, an individual policy, or a combination of any of those, you should have an accountant in Billings, Montana do your taxes. Disability benefits can become tricky and confusing. Instead of trying to navigate them yourself, leave it up to the professionals.

    Here at Practical Taxes we know and understand taxes. We also do everything else that a full service accounting firm does from online payroll services to business consultation to everything in between. Call 406-894-2050 to set up your appointment today!

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    Tax Implications of Selling Savings Bonds

    Savings-Bond-300x214Savings 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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    Taxation of an Annuity

    Annuity-300x225Currently, because the federal funds interest rate is rather low, annuities are not very popular investment options. They have their time and place, and there are still a lot of people that like to use them. But it is important to know how they will be taxed before you jump right in and start to accumulate money with an annuity. Your accountant in Billings, Montana will certainly help you with these taxes, but this way you can be prepared before you enter his office.




    Phases of an Annuity

    Before talking about the taxes, we need to understand the different phases of the annuity. Since this is a complex financial product, it has a lot of different working parts. There are essentially two phases to an annuity.

    The accumulation phase is when you are still contributing money into the account. This can be done by moving over a few hundred dollars per month, or in larger sums at the end of every year, or even in lump sums. In fact, many people opt for a very short accumulation phase, and they move their entire pension or 401(k) into an annuity when they retire.

    The annuitization phase, more commonly called the payout phase, is after you are done putting money into the account, and now you are pulling it out. Based on your age and life expectancy (and a variety of other factors) the annuity company will pay you a set amount every month for the rest of your life (or until the specified period has ended). This is where taxes can be a little tricky.

    Taxation of an Annuity

    Annuities can be held within an IRA, or they can be considered non-qualified accounts. To make matters simpler, we will assume we are dealing with a non-qualified annuity.

    Over your working career, you put money into this annuity. That money will have already been taxed. However, there will be growth in the annuity that is not taxed until you pull the money out. But there is no way to designate which money is going in, and which is coming out, so some special accounting needs to be done.

    Let’s suppose that you put in $150,000 into your annuity, and when you annuitize it, the value is $200,000. That means 75% of the money has already been subjected to tax. So when the money comes out of the annuity, only 25% is subject to further taxation.

    The concept is pretty simple, but it can get even more complicated when it comes time. Instead of worrying about what will be taxed and what will not be taxed, talk with Mike, an accountant in Billings, Montana. He has the knowledge needed to prepare your taxes no matter where the income comes from.

    Practical Taxes is a full service accounting firm in Billings, Montana. We specialize in nationwide online payroll, tax preparation, business consulting and more. If you have an accounting need, we can handle that need!

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    Five Important Taxes You Must Know About as a Business Owner

    Business-Taxes-300x199Business owners are in the unique position to be able to earn their own living, help the local economy, and provide jobs for others. What this means is that they also have a great deal of responsibility when it comes time to do their taxes. In fact, those taxes can be downright confusing, especially for the new business owner that is used to just filling out a quick tax return every spring. As a business owner, you need to at least have an understanding of these five important tax concepts, and then you still will likely want to enlist the help of an accountant in Billings, Montana.


    Income Tax

    There are various forms of taxation depending on which business model you choose. A partnership will be taxed differently than an LLC; an LLC will be taxed differently than an S Corp; an S Corp will be taxed differently than a sole proprietorship. Understanding your business model, and how your income taxes need to be paid, can save you a lot of trouble when your tax return needs to be filed.

    Self-Employment Tax

    If you are an employee, then your employer will take care of half of your FICA taxes. However, when you are self employed, you are responsible to pay all of those taxes. Now there are some variations depending on how much you earn, how your business is structured, and a variety of other factors. The bottom line is that if you are self employed, you can expect to pay an additional tax.

    Estimated Tax Payments

    Most income tax is paid as you go. For instance, an employee has taxes withheld from his or her paycheck. However, if you are self employed, then you will likely need to pay estimated taxes throughout the year. These quarterly filings will help reduce a large tax burden come spring; failing to file adequately and in a timely manner could result in penalties from the IRS.

    Employment Taxes

    With employees there are even more taxes that you have to know and worry about. You must still tend to your own tax situation, but now you also need to pay half of your employees Social Security and Medicare taxes (FICA taxes), you have to calculate out income tax withholdings, and there is also unemployment taxes to take into consideration.

    Excise Tax

    There are some businesses that must pay what is called an excise tax. This tax applies primarily to industries that manufacture certain goods. The issue at hand is that these industries have the potential to do a lot of environmental damage, and the tax helps to offset cleanup costs. For instance, transportation of oil or gasoline may be subject to excise tax.

    There is a lot to know and understand about taxes when you are a business owner. That is precisely why many people will choose not to worry about the taxes, and enlist the help of an accountant in Billings, Montana instead. They can focus on running their business, and leave the number crunching to the professionals.

    Here at Practical Taxes we can handle your business taxes, personal taxes, payroll services, and anything else that has to do with business and accounting.

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    Tax Implications of Refinancing Your Home

    Refinance-300x200Recently the government announced that the premiums on FHA loans would be cut by half a percentage point. While that doesn’t seem like a big deal, it can mean the difference of hundreds or thousands of dollars each and every year that you have a loan on your house. To take advantage of this millions of people are refinancing their homes, causing the biggest gains in mortgage applications in six years. If you do decide to refinance, how does that affect your taxes? Are there tax implications, good or bad, for refinancing your home?



    Tax Breaks for a Refinance

    The answer is not a straight, “Yes, refinance and collect on all of these great tax benefits!” Instead there are benefits to buying a home or refinancing your home. Here are just a few of the tax implications.

    Prepaid Interest – In order to drop your interest even lower, you can prepay some of it. What means is that a large portion of your closing costs go toward this prepaid interest, as a result your monthly payments are lower. The good news is that prepaid interest is deductible from your taxes.

    Property Tax – If you are refinancing, then you have already paid your property taxes. If you are buying a new home, you will likely need to pay some of the property taxes. This payment is likely to be wrapped up into your closing costs, or settlement fees. Property taxes can be deducted from your income taxes.

    Mortgage Interest – Every year that you pay on your mortgage, you can write off the interest charges. However, if you refinance, you are going to be paying less in interest charges than before. This means that each year you will have less that you can write off, and you may need to start donating money elsewhere in order to keep your deductions above the standard deduction rate.

    PMI – If you buy a house and your loan covers more than 80% of the value of the house, you will likely need to pay for private mortgage insurance. This protects the lender in case you default on your loan. The good news is that PMI payments are deductible. The bad news is that it’s an extra $60 – $150 per month that you get no benefit out of. A refinance could help you drop the PMI which saves you money, but also reduces your deductions.

    Buying or Refinancing Your Home

    Buying a house is likely the biggest financial commitment that you will ever make. The government has made the burden a little easier by offering a variety of tax deductions and breaks for those who are home buyers or refinances. As an accountant in Billings, Montana Practical Taxes knows and understands all of the tax implications of buying or refinancing a home. It may be in your best interest to have him do your taxes this year.

    Practical Taxes is a full service accounting firm in Billings, Montana. If you need tax preparation work, nationwide online payroll services, business consulting services, or more, we can handle all of your needs!

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    Ways to Earn Tax Advantaged or Tax Free Income

    Investing-300x199Have you ever wondered how the super rich can get away with earning millions of dollars, but they hardly pay anything in taxes? They aren’t cheating or breaking the law, those who earn that much are at a high risk of being audited. Instead, they are taking advantage of a system that is put in place for everyone to use, but most choose not to. There are a number of ways to earn reduced tax or tax free income, and if you make use of these methods, hiring an accountant in Billings, Montana to prepare your tax return will be a no brainer.



    Municipal Bonds Provide Tax Free Income

    In order to raise money to pay for large ticket items, local governments issue what are called municipal bonds (for instance, when Dehler Park was built in Billings, a large portion was funded through bonds). These bonds are exempt from federal income taxes, and often they are exempt from state and local taxes as well (usually the caveat is that you must live in the area).

    The trade-off, however, is that municipal bonds don’t pay nearly as much interest as a corporate bond. Suppose a low-risk corporate bond (one issued by General Electric for example) is paying 6% interest, then a municipal bond may only be paying 3% or 4%. That is the price to pay for something safe and tax free.

    Suppose you buy $10,000 worth of bonds that will mature in 15 years and they have a 4% yield on them. Now there is a lot that goes into bonds about par value, and buying at a discount, and all of that. So let’s just say you paid a flat $10k. Every year (usually distributed quarterly), you will earn $400 from the interest on the bond. You keep 100% of that, it is all tax free income. At the end of 15 years you get your $10,000 back as well.

    Invest Outside of your IRA For Tax Advantaged Income

    Many people have been told to invest in an IRA since that is the best tax advantaged vehicle you can get. But there are times when you will want to invest in a non-qualified account (qualified means tax advantaged, non-qualified means your earnings are taxed). The math works like this if you are in the 25% tax bracket:

    Suppose you invest $100 in your IRA. Suppose it grows to $200 and then you withdraw it. You then pay taxes. Total taxes paid: $50.

    Now let’s suppose you put $100 into some stocks. After it has been in more than one year, it grows to $200, so you take it out. You owe 15% capital gains tax on the growth, and you already paid 25% tax on the initial money. Total taxes paid: $40.

    Now this isn’t tax free income, but it is tax advantaged. Sometimes it makes more sense to invest outside of your IRA than to invest inside of it (however, if you have access to a Roth IRA, then it is best to max that out before trying this method).

    Other Tax Free Income

    There are some other ways to earn tax free income, or at least reduced tax income. Your accountant in Billings, Montana can help you with those ways. When you call Practical Taxes to set up your tax return preparation, keep these methods in mind. When you visit with Mike, then you can discuss their feasibility with him.

    Practical Taxes is a full service accounting firm in Billings, Montana. That means we do everything that an accountant does including payroll, online payroll, tax preparation, business consulting, and much more.

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    5 Sources of Taxable Income You May Not Know About

    Taxable-Income-300x199As we enter the new year, taxes are on many people’s minds. Some may be excited because they know they will be getting a larger refund this year, others may be worried because they haven’t adequately prepared and didn’t start a file for 2014 taxes when the 2013 taxes were finished. If you are like most people, then you probably have a general idea of where your taxes are going, but there are a few sources of income that you might forget about when getting your return in order.



    Social Security can be Taxable Income

    For most people, the benefit that they receive from Social Security will not be taxable. However, there are instances can cause your benefit to taxed. If your only income was from Social Security, you likely don’t have to worry, but if you have other income (even if it is tax-exempt) you could owe taxes on your benefit. The baseline income that would make your benefit taxable is $25,000 for an individual and $32,000 for a married couple. An accountant in Billings, Montana can help you determine if your benefit is taxable.

    Gambling Winnings are Taxable Income

    If you spent a couple dollars on a scratch ticket, and you won $5, you technically need to report the difference on your taxes. Most people will report other sizeable winnings, though, because in order to collect the price they generally have to fill out a tax form. If you won a large prize, you can expect to receive a W-2G form to report your winnings. Keep in mind that you can deduct gambling losses (they cannot, however, exceed the amount that you won).

    Punitive Damages are Taxable Income

    If you were involved in a lawsuit last year, and you were awarded a settlement that goes over and above compensation for damages, then you will likely owe taxes on the amount you received. This includes punitive damages, monetary compensation for injury to your reputation, compensation for emotional damages, and other similar incomes.

    Forgiven Debt can be Taxable Income

    Have you ever owed a large amount of money? Suppose you owed on a credit card, and in the terms of settling the debt some of it was forgiven. The portion that was forgiven may be counted as taxable income by the IRS. Keep in mind that houses are excluded from this; you need to work with an accountant at A+ Accounting and Consulting in Billings, Montana if you have had debt forgiven.

    Scholarships may be Taxable Income

    The cost of college is going up rapidly. Since many people cannot afford to attend, they apply for scholarships to help cover expenses. If those scholarships are used to pay tuition, books, and supplies, then they likely won’t be taxed. But if they are used to pay for room and board, they could be.

    Unless you have a single W-2 with no other earnings and you will only be claiming the standard deduction, you would likely be better off working with an accountant in Billings, Montana like Practical Taxes. With all of the unusual taxable incomes out there, as well as a number of deductions that you might not be aware of, you will save yourself a lot of headaches by letting a professional take care of your tax return.

    From bank reconciliation, to online payroll, to tax preparation, Practical Taxes can do it all. We are a full service accounting firm in Billings, Montana.

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    Maximize Your Taxes with Student Loans

    Student Loans It’s very easy to see how rapidly the costs of higher education are increasing. But that shouldn’t deter you from seeking an education. There are a number of benefits to completing your degree, and even if you have to take out student loans in order to make it happen you can still benefit. Here is some of the quick math when it comes to taking out student loans and how that will help you with your taxes next time you file.




    Costs of Higher Education

    Education can be incredibly expensive if you let it. However, there are ways to get a degree without paying outrageous prices. Even if you attend a private university, where the costs are the highest, you can still get by with very few loans if you get to know the right people. Here is what it looks like for an education per year:

    • Private University/College: $30,000
    • State Schools – Resident: $8,900
    • State Schools – Non-resident: $22,200

    Now keep in mind these are national averages, so wherever you live those could be vastly different. But suffice to say that the costs of tuition and fees (not to mention room and board) range from $35,600 to $120,000 for a four year degree (assuming no cost increases during your tenure). That is a lot of money to owe when you get done; and there is no guarantee of a job. But that’s another topic for another time.

    Paying Back Your Loans

    Currently interest rates on your loans are fairly low. For undergrad degrees, the rate (until July 1st when it readjusts) is 4.66%. Even though this is a pretty low interest rate, it also means that you will be paying back quite a bit over the next 20 years.

    • $35,600 loan: Your monthly payments will be $228.31, and pay a total of $19,194 in interest.
    • $120,000 loan: Your monthly payments will be $769.58, and pay a total of $64,700 in interest.

    That is a lot of money to pay back over the next 20 years. So how does one justify taking out a loan?

    Incomes With and Without a Degree

    There are a lot of variables that go into determining income. For instance, there are a number of very high paying jobs that do not require a degree at all. And there are some jobs that require a degree, but pay hardly anything. When you take everything into account, we can determine the average incomes for various educational levels (statistics are for the year 2012).

    • Average annual income with a Bachelor’s Degree: $46,900
    • Average annual income with a high school education: $30,000

    Let’s suppose that you go to a state school and get out with just $35,600 in loans, and you are able to land a good job right away. You will be making an additional $16,900 over your peers that have just a high school education. How does that look for the next 20 years (ignoring raises and promotions)?

    • High school education: $600,000
    • College Degree: $932,000

    Even after you deduct the cost of the education ($35,600) and the interest that you paid ($19,194), you have still made $877,206; or $277,206 more than if you had skipped the degree. Factor in raises and promotions that allow you a larger income over those who did not get the degree and you have an even greater advantage.

    Using Student Loans

    Getting your degree without the help of parents, scholarships, or other means is still possible with student loans. The good news is that the interest that you pay on those loans is tax deductible. This means that while you are repaying those loans you get to experience a lower tax bill because of your write-offs.

    If you are in need of simple tax preparation services, we can help you maximize the deductions available for student loans and others.   Practical Taxes is a full service accounting firm with services ranging from payroll, to business planning, to tax needs.

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    Overpaying Your Taxes May Be a Good Thing

    Large bills fanned out and held in hand

    Large bills fanned out and held in hand

    If you follow any personal finance blogs, you will probably notice that a lot of them tout the advice to “stop giving the government an interest free loan!” This advice is based on the fact that the average income tax refund is around $3,000. When we overpay our taxes, we let the government keep that loan, but they never pay us interest. Sounds like a bad deal doesn’t it? It might not be so bad.


    More in the Paycheck

    The idea is to reduce your withholdings in order to keep more money in each paycheck. Let’s suppose you were to accurately estimate your taxes so that when you filed your return, your refund was $0. Based on the average refund amount, you will have around $115 extra dollars in your paycheck every two weeks.

    Now suppose that you did have the discipline to actually save that $115. You put it into a savings account and let it grow earning you interest all year long. At the end of the year you would have less than $3,030. Based on current interest rates of around 1%, your hard work and discipline would net you less than $30.

    Of course, most people won’t have the discipline to save the $115 from each paycheck.

    A Bigger Tax Refund

    On the other hand, let’s suppose you didn’t worry about estimating your taxes so precisely. After you file your taxes you get a refund of around $3,000. You rejoice that you have some money back, and you dump $2,700 into a savings account and then splurge the other $300 on buying something nice for yourself.

    At the end of the year you have $2,700 in your savings.

    Which Would You Rather Have?

    Most people, if they have the extra $115 in their paycheck will spend that $115. They will see the extra money and think they can stay for that extra drink at the bar. They will go out to eat one more time this month. They will buy a new pair of shoes or a new coat. Now there is nothing wrong with those things, but if your “refund” is being spent on them, it defeats the purpose of taking a bigger paycheck in order to save more.

    The reason is that psychologically we see the money coming in differently. When it comes in slowly, as part of our paycheck, we think of it as money that we earned and we can splurge on whatever we want. We also don’t see the harm in small purchases of $20 or $25. However, when it comes in as a big chunk, it’s seen as a windfall. Even though $2000 all at once is the same as one hundred $20 purchases, it feels different. We are more inclined to save large chunks of money than to spend them.

    So if you are trying to minimize the size of your tax refund by taking more in every paycheck, you may be setting yourself up to spend more money than if you were to let the government hang on to your money “interest free.”

    Hire an Accountant for Maximum Refund

    Practical Taxes can help you get the most out of your taxes. We know tax laws. By hiring him to do your taxes you free up your time, make sure they are done right, and most likely your refund will be larger than if you try to do your taxes on your own (even after paying the modest accountant bill). Contact Practical Taxes today to learn more about what we can do for you.

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