Why a CPA Should Always Be Your First Hire

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Hiring Employees

Hiring employees can be super exciting, especially for a new business owner. Being able to hire extra help not only shows that your business is growing; it also shows that your business is in a position to provide extra income to someone else’s life.

Most employers engage in lengthy discussions about the order in which positions should be filled. Some employers automatically assume an operations manager is the first hire you should make; in point of fact, a CPA is actually the first person you should hire, and if financial resources permit, hire a CPA as soon as you can.

Hiring a CPA as your first hire will not only benefit you as the owner but will also benefit future employees by making sure that your company is in strong financial condition. This will enable you to pay your employees a competitive market wage and improve retention.

Additionally, hiring a CPA can help you flesh through inventory data or any data that your company relies on in order to be able to sustain itself. Most people think of CPAs as only being able to handle finances, when in fact, CPAs have the capabilities to analyze most types of numerical data that may or may not impact your business.

Still not convinced a CPA should be your first hire? Does your business want to make money? If you answered yes, our case has been proven.

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Why You Should Never Be Your Own Accountant

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Hiring an Accountant

If you’re a business owner in any capacity and you haven’t hired an accountant, you probably know by now that you desperately need to. Perhaps you don’t want to spend the money just yet, or perhaps you don’t really understand what an accountant can do, or maybe, just maybe, you’re being stubborn.

Whatever the case may be, you should never be your own accountant, and here’s why:

You’ll Mess Things Up

Whether you know it or not, if you choose to be your own accountant with no previous experience in accounting or finance you’re destined to mess things up in one way or another. As opposed to delaying the inevitable, avoid the inevitable entirely and hire an accountant.

You Could End Up in Jail

While this may seem extreme, if you mess things up specifically on your taxes you could put yourself at risk of having to go to jail. Is a jail sentence more important to you than hiring an accountant to do the hard work for you?

You Don’t Know What You’re Doing

Most people never want to admit that they have no idea what they’re doing. When it comes to accounting, don’t feel ashamed: most people who aren’t accountants don’t know what they’re doing. That’s why hiring an accountant is a wise policy; an accountant can help guide you through everything you don’t know how to do.

You Actually Want To Make Money

Do you actually want to make money? Seriously? As the saying goes, it takes money to make money; however, if you don’t know how much money to spend from day to day or what you need to cut out of your budget, you’ll never be able to reach the financial goals you dream of.

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Five Unexpected Ways a CPA Can Rescue Your Business

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CPAs

If your business has ever been in an inescapable bind you know firsthand that you can’t always do everything by yourself. Sometimes you need to enlist the help of others. While a CPA can’t save you from everything, he or she can help you avoid some of the more difficult pitfalls your business can encounter.

Here are just a few ways a CPA can rescue your business:

CPAs Can Help Your Business Save Money

Whether you believe it or not, CPAs can help you save a significant amount of money. They will do this by seeing where you spend the majority of your money and how to eliminate those bad spending habits when possible.

CPAs Can Help Your Business Spend Money

If you have trouble spending money, surprisingly a CPA can help you with that too. They are equipped with the necessary tools to make sure you spend money in the areas which will benefit your business the most.

CPAs Can Automate Your Finances

We waste both time and money when we do our finances manually. While automating your finances may make you as though you have less control, you’re actually increasing your control. The more you automate your bills, the quicker you will be able to gain financial freedom.

CPAs Can Give Your Business a Financial Plan

Do you have specific goals you wish to attain as a business? Are there things you want to accomplish but feel as if you can’t because of your finances? This is where a CPA can step in and come to your rescue. CPAs can offer a financial plan based on the goals you wish to accomplish.

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What to Look for in a CPA

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CPA Questions

Looking for a CPA can be a daunting task, as many prospective clients are largely unfamiliar with exactly what a CPA can offer. We’ve compiled a short list of tips to help you find the right CPA for your needs, including some questions to ask both yourself and your potential CPA.

Credentials

Are you hiring a CPA, or a general accountant? There’s nothing particularly wrong about hiring one versus the other, so long as you know what services to expect in return for payment.

Referrals

Would someone recommend this CPA to you? Who are their other clients? Are most of their clients returning clients? How long have they had most of their regular clients? These are all questions you might consider asking your CPA before employing their services.

Availability

Is this CPA’s availability consistent with your needs (not all are available year-round)?

Advice

Is this CPA capable and willing to offer creative business advice?

Responsiveness

Hiring a CPA doesn’t grant you 24/7 access to them, but you should be able to get a sense of how quickly they will normally respond to your questions or emails. Do they have a response timeframe? Can you call during normal business hours and speak to your accountant? What kind of services require a formal appointment?

Transparency

Make sure your CPA is completely transparent about rates: are they going to charge you an hourly rate to respond to an email or take a 2-minute phone call? Ask up front: if they seem hesitant to give you a clear answer, you might consider looking elsewhere.

Honesty

Understand that a CPA provides a service, and one of those services is *not* to make an otherwise bleak financial situation look better. A CPA is not a money fairy: if you haven’t been honest with yourself about your earnings and expenditures, you might not like the numbers at the end of the day.

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Three Tax Tips for Airbnb Rentals

If you own an Airbnb rental, the way you pay taxes is a bit different. You can be a private homeowner, but when you list the home on Airbnb as a vacation rental, or a single room alone, you must claim any income made. In this article we will cover some of the basics of Airbnb ownership from a tax perspective.airbnbpic

14-Day Rule

If you do not rent your property for more than 14 days out of an entire tax year, you do not have to claim the income on taxes. If you use the rental yourself for 14 days or 10-percent of the days it is available for rent, you do not have to claim taxes on the short-term rental.

Record Business Expenses

If you spend money on repairing or improving the rental, you can claim some of those expenses as business expenses. This helps reduce your tax liability. It is important to view the rules regarding what is tax deductible for Airbnb rental owners.

Mortgage Interest on Rented Rooms Only

If you rent a room and not the whole home for 14-days or more, you only pay taxes on the rental income from that room. You will also only be able to deduct business expenses for amounts spent on that room. Mortgage interest and property taxes are 100-percent deductible.

Closing Thoughts

Rather than attempting to figure the taxes on your Airbnb rental out by yourself, hire an accountant to do it for you. Your accountant will separate expenses and determine which credits or deductions you qualify for. This helps prevent mistakes and audits.

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Three Ways to Reduce your 401(k) Taxes

Income tax is charged on 401(k) withdrawals. If you withdraw early, you are also subject to a 10-percent penalty. You could end up paying 43-percent income tax or more. You can use a few tricks to reduce your 401(k) tax liability, and those are explained below.401kChalkboard

Net Unrealized Appreciation

If you have stocks or investments, you can claim capital gains tax instead of paying income tax on the company stock amount by putting that money into a taxable account. If you choose not to claim capitals gains tax, you will be responsible for paying income tax on original purchase prices of stock. This results in paying more tax.

Still Working Exception

When you have any kind of 401(k), you have to take required minimum distributions (RMDs). The first is at age 70 ½. You can get around having to take the RMDs with your current employer if you are still working.

If you own a business, owning 5-percent of the company or more negates this exception.

Sell Underperforming Securities

Selling underperforming securities is known as tax-loss harvesting. Losses can offset some or all of your tax liability. Proving the loss is not difficult, and can often be done without the assistance of a tax preparation specialist.

Final Thoughts

These are just a few of the ways that you can reduce your 401(k) taxes. If you have not made any investments, it is a good idea to do so as it can help you reduce your tax liability. Make sure that you are taking necessary withdrawals at the proper intervals to prevent extra penalties.

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Three Tax Deductions for Mortgage Interest

Being a homeowner allows you to qualify for deductions on your mortgage interest. Take advantage of this opportunity if you’ve purchased a house or pay interest on mobile homes, condos, or other places of residence.TaxDeductionPic

Property Tax

Putting money into your home allows you to treat the purchase as a future investment. Having “imputed rent” can be omitted from your taxable income. In this situation, it allows the taxpayer to be both a landlord and renter with the responsibilities of each.

Mortgage Interest

Itemizing deductions may allow taxpayers to reduce taxed capital by deducting interest paid on their place of residence. This deduction is limited to the interest on debt acquired to purchase a residence. Homeowners may also deduct interest paid toward home equity regardless of borrowed funds.

Selling Your Residence

If the taxpayer has lived in a residence for over two out of the last five years, the property is considered their primary residence. And if they have not gained any capital gains on their home they may sell the house and exclude the profit from their taxable income. In normal situations, taxpayers would generally have to record and submit the profit made from selling their goods, but in this situation the homeowner is exempt.

Conclusion

Finding deductions to use toward your homeownership can seem overwhelming. Finding the right tax deduction that fits your type of residence is vital to making the most out of your tax return.

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Three Things You Didn’t Know About Roth IRAs

A Roth Individual Retirement Account (IRA) allows a taxpayer to set aside post-tax income up to a specified amount each year. Any earnings the person makes sits in a retirement account until the taxpayer reaches the appropriate age of 59 ½. However, there are many advantages to Roth IRAs which taxpayers are unaware of.RothIRAScrabble

Inheriting Tax-Free Income

Taxpayers with large amounts in their IRA account can leave heirs tax-free income that they can inherit. Paying taxes on your income now can leave your children with income for the rest of their lives. Not all of the money from your account needs to be withdrawn after you hit retirement.

Contributing After 70

With a traditional IRA taxpayers are forced to stop contributing to the account after they hit 70 ½. After this point any income they make is taxed normally. A Roth IRA has no minimum distribution requirements, meaning that you can continue to contribute for as long as you wish.

Withdrawing Contributions Early

Everyone says that you’re not allowed to touch the money in your Roth IRA until 59 ½. What most people don’t know is that applies to your earnings and not contributions. You can take out your contributions as an emergency fund without penalties but your earnings will take a huge hit.

Conclusion

Having a Roth IRA has many hidden rewards that most taxpayers are unaware of. Taking advantage of withdrawing early contributions, continuing to contribute after 70, and leaving your heirs tax-free income are all unseen secret advantages within your Roth IRA.

 

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Tax Beneficial Investment Opportunities to Think About

With tax season around every corner, feeling the need to complete your taxes can be a daunting and tedious task. However, this is a huge opportunity to cultivate investments and find openings to devote capital so that your tax return can be improved.StockMarketScrabble

IRA and 401k

The simplest and most upfront way to reduce your taxable income is to take advantage of your tax-deferred retirement accounts. Contributing to your Traditional IRA or 401k account is a good way to put aside money to increase your long-term investment. Remember that most companies and organizations will match your 401k deposit.

Municipal Bonds

Under present federal income tax rules, interest received from investing in municipal bonds is free from any federal tax rates. This means you can increase your income without increasing your income tax. Municipals bonds are debt securities issued by the government to receive financial capital toward their budget and are used on community projects such as building schools, roads, and sewer systems.

ETFs

Exchange-traded funds (ETFs) are low cost alternatives to mutual funds. ETFs still track indexes, have a limited portfolio turnover, and are capital gain distributors to investors. Taxes from gains on ETFs are due when the investor sells the funds. This gives them a significant advantage to tax-deferral over mutual funds.

Conclusion

Getting through your taxes can be troublesome, but using the opportunity to invest is one you can’t pass up. Use your tax return to cultivate your capital and create financially stable prospects for your future.

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Does a Home Foreclosure Impact Personal Income Taxes?

A foreclosure is a traumatic event that no one should have to go through. However, if you are facing foreclosure or a foreclosure has already been initiated, you need to know how this incident is going to affect your personal income taxes.ForeclosureScrabble

You May Not Have To Pay Taxes on the Canceled Debt

When you foreclose on a home, it is considered a canceled debt. The canceled debt is considered to be income. However, you may not be required to pay taxes on this income. Under the Mortgage Debt Relief Act, if you meet certain qualifications, you may not have to pay taxes on this canceled debt. This act was extended to include foreclosures up until 2014. So you may still have to pay taxes on the canceled debt if your foreclosure happened after 2014. Check with your accountant or tax professional about this issue.

What Are The Requirements For The Mortgage Debt Relief Act?

Here are two requirements for the Mortgage Debt Relief Act. The property must have been your primary residence, so this wouldn’t apply to investment properties or vacation homes. And the amount of debt excluded had to be less than $2 million.

What If I Don’t Qualify For The Mortgage Debt Relief Act?

If you do not qualify for the Mortgage Debt Relief Act, you may have to pay the taxes on the canceled debt since it would be considered income. If you were personally liable for the entire mortgage, then you will have to report this on your taxes as ordinary income.

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  • Huddleston Tax CPAs / Huddleston Tax CPAs – Shoreline, WA
    Certified Public Accountants Focused on Small Business
    18208 66th Avenue NE, Suite 102 Kenmore, WA 98028
    425-483-6600

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, offer in compromise debt relief, and business valuation services for small business.

    We serve: Federal Way, Des Moines, Kent, Auburn, and communities throughout WA and beyond. Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.