Tag: tips

What Qualifies As A Donation On Your Taxes

The IRS defines a charitable contribution as “a donation or gift to, or for the use of, a qualified organization.” You must abide by certain rules to claim charitable donations on your taxes legitimately. Do you know the tips for handling donations on your taxes?

 

You must abide by certain rules to claim charitable donations on your taxes legitimately.
You must abide by certain rules to claim charitable donations on your taxes legitimately.

 

Charitable Contributions what Are They?

Donations include property such as vehicles, household items, clothing, land and cash contributions.  You can only deduct the fair market value (FMV) of any property you donate.

How Do You Determine The Fair Market Value?

Fair market value includes donations of noncash property of items like clothes, household items, land and cars additionally stocks may qualify. The FMV comes down to the price the item you are donating and how much it would sell for on the open market.

Do Your Expenses Qualify as a Charitable Tax Deductions?

You can claim a tax deduction for expenses you acquire:

  • To cover a live-in student who is sponsored by a qualified organization.
  • Out of pocket while serving as a volunteer for a qualified organization.

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.
For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

Which Organizations Qualify to Receive Charitable Contributions?

The government allows the following types of establishments qualified to take tax-deductible donations:

  • Religious (such as churches, mosques, synagogues and temples)
  • Literary
  • Educational (such as nonprofit schools)
  • Charitable (such as American Red Cross, Boys and Girls Club of America, Goodwill, Salvation Army and United Way)
  • Those working to prevent cruelty to children or animals
  • Scientific
  • Federal, state and local governments (for contributions intended for public purposes)

These Charitable Contributions Are Not Tax Deductible?

As a general rule, donations to individuals, political organizations and candidates for public office are not tax deductible. The same goes for gifts of money or property given to:

  • Homeowners associations
  • Sports clubs
  • Chambers of commerce
  • Civic leagues
  • Social clubs
  • Labor unions
  • Civic leagues

How Can I Be Sure I’m Donating to a Tax-Exempt Organization?

The easiest way to confirm that you are donating to a tax-exempt organization is to ask the organization directly for proof of their tax-exempt status. You also can search for charities using the Exempt Organizations Select Check tool or confirm tax-exempt status by calling the IRS at (877) 829-5500.

Cash Donations Receipts To Keep

If you donate by check, cash or some other monetary gift, you must provide written communication such as a bank record, payroll deduction records or written acknowledgement from the tax-exempt organization with your tax return. This written proof must include:

  • The name of the organization.
  • The date you made the contribution.
  • The amount of your contribution.

 

The amount of your contribution.
The amount of your contribution.

 

If you still have questions about what is a taxable donation or what constitutes a taxable donation please contact Donohoo Accounting at 513 528 3982.  We specialize in helping small businesses with all you taxable needs.

Are Your Business Receipts Audit Ready?

Do you often ignore or say too quickly “No” when asked whether you want a receipt?  Not small-business owners. Knowledgeable business owners just know how to keep receipts. If they don’t, their tax return could be at risk. The question is: Are your business receipts audit ready?

  1. TAKE NOTICE

The first mindset to get into (especially if you’re trying to prepare your receipts for taxes) is creating a tiny note of the business purpose on the receipt. Whether or not you inscribe directly or put aside time at the top of the day, week, or once a large amount of buying has been completed (say at the end of a business trip for example), you’ll need the purchases to be recent enough in your mind that you will remember to label them properly.

Be sure that you create the note because this one thing which will permit you to classify the expense later. Merely writing “lunch” might not be enough to jog your memory if you’re audited a year or two later.

  1. CLASSIFY

Now that you’ve taken note of all these numbers, the next step is following and organizing it, so you can put the receipts into specific classifications. This will make tax time a breeze and permit you to refer back to any receipts without having to look through tons of files.

Here are some samples of common classifications for tax-deductible purchases:

  • Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance
Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

  • Travel: there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses
there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

  • Entertainment and Meals: These items may be examined thoroughly by the IRS so be sure these items get listed correctly such as from a business trip.

 

  • Legal and Professional Fees: attorney’s fees, accountant’s fees, other professional consultants’ fees directly related to your business.

 

  • Indemnification: may include business liability insurance premiums, property insurance premiums, disability premiums, workers’ compensation premiums for employees.

 

  • Professional Dues and Licenses: may include franchise fees, professional license fees, business licenses.

 

  • In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.
In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

  1. BE THOROUGH

A crucial step is organizing your receipts and being thorough with your method. Attempt to keep expenses separated by paying with a “business only” designated credit card or bank account when possible and avoid paying in hard cash.

Over time you may find better and newer apps to help manage your receipts but remember to keep using the same classifying process.  By keeping your method, you will be consistent in your receipts collecting and keeping all the overall information easily acceptable to you and your accountant

Duane Donohoo being self-employed himself understands the challenges of owning a small business. He understands the burden the IRS can be to a small business or individual. It was this experience that relates to his self-employment clients and individual clients. Call today (513-528-3982) for a free consultation to find out how Donohoo Accounting Services, Inc. can serve you.

The Five Most Important Pieces of Advice from Your Accountant

Follow These Five Accounting Tips That Could Save Your Business Time, Money, and Aggravation

Financial advice persists everywhere we turn: On the Internet, the radio, TV, and in your email and snail mail boxes. But what is often overlooked is some basic accounting advice that not only could save you or your company from difficulties associated with being audited but also save you time, money, and aggravation in the long run. Whether your business already has an accountant or you’re looking to hire one, follow these five important pieces of accounting advice.

 

  1. Be (or Get) Organized

The simplest and perhaps most important advice an accountant can give you is to stay organized. You’ve heard that there are “pilers and filers” when it comes to being organized. That may be true, but whatever your method, know where your documents are when you need them or if they are called for by the IRS. The better organized your papers and electronic files are, the less likely you’ll have trouble in your financial matters whether they be tax-oriented or not.

 

The simplest and perhaps most important advice an accountant can give you is to stay organized.
The simplest and perhaps most important advice an accountant can give you is to stay organized.

 

  1. Keep Business Expenses Separate

An important part of being organized is to properly categorize your expenses as business or personal. Be sure to keep business expenses separate – don’t tell yourself it’s OK to blur the line or to “fudge” it. If or when you have an audit – internal or external – questions will assuredly arise about any questionable business expenses that may in fact be personal. Keeping business and personal expenses separate, too, will ensure that you don’t accidentally pay for a business expense out of your personal funds without reimbursement. Some accountants like to say, “If you want to reduce your business expenses, reduce your personal expenses.” That’s an indirect way of saying keep them separate.

 

An important part of being organized is to properly categorize your expenses as business or personal.
An important part of being organized is to properly categorize your expenses as business or personal.

 

  1. Document Business Expenses

While you’re keeping your business expenses separate from those that are personal, be sure to create – and maintain – a paper trail on your business expenses. Of course, many of those expense records may also be in electronic form, but you get the idea. The more documentation you keep on your business expenses, the better. Simply stated, for each expense, document and be able to answer these questions:

  • Who incurred the expense?
  • What was purchased?
  • Where was the purchase made?
  • When did the transaction take place?
  • Why was the item or service needed? and
  • How much did it cost?

 

  1. Do an Internal Audit

When your documents are in order, you’ve successfully separated your personal and business expenses, and you have your expenses documented, you’ll have little to worry about when you’re audited. And the best way to get ready for an IRS audit is to perform an internal audit. When your accountant conducts an internal audit, you may feel like your business is being turned inside out. It is, and that’s OK. Better to turn your business inside out and make corrections to your financial records on an internal audit than to have to answer to Uncle Sam in the form of a penalty.

 

  1. File and Pay Taxes

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time. Just at the federal level, there are at least five forms of tax that apply to businesses. They are: Income tax, estimated tax, self-employment tax, employment taxes (Social Security, Medicare, federal income tax withholding, and federal unemployment tax), and excise tax. These are in addition to any state and local taxes, which vary according to the location of your business. Financial penalties for failure to file, failure to pay, failure to pay estimated tax, and dishonored check/payment (“bounce”) have the potential to cause a significant financial setback to your business or even cause it to close. Having an excellent accountant on staff – or contracting with an accounting firm – to meet your tax filing and payment deadlines is even better than doing it yourself.

 

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.
Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.

 

Donohoo Accounting Services is a professional accounting services provider, dedicated to helping our clients overcome the challenges and burdens that small businesses face. To learn more about how Donohoo Accounting can help your business prosper, call us today at 513-528-3982 for a free consultation.

4 Actionable Tips for Using Your Tax Refund This Year

Even though getting your tax refund can feel like hitting a mini lottery, it’s important to remember that this payment is your money. As a result, the last thing you want is to let it flow out of your bank account just as quickly as it arrives. If you’ve had that experience in the past, the good news is you can do things differently this year. To help you make the most of every dollar that you receive, here are 4 actionable tips for using your tax refund this year.

  1. Make Payments Towards Debt

People from all walks of life struggle with managing debt. What often starts off as a small amount can spiral into a snowball that just keeps rolling in the wrong direction. What makes debt so problematic is that you’re not just dealing with the initial amount. Instead, interest is what really gets people in bad situations.

Because debt can choke someone’s personal finances, using your tax refund to pay off some or all of your debt is an amazing choice. If you’re trying to decide the specific debt to pay towards, the one with the highest interest rate is almost always the best choice.

  1. Prepare for An Emergency

Whether you have been able to stay out of debt or used previous tax refunds to pay it off, anyone who doesn’t have this burden can intelligently use their refund in a number of ways. A great option is to build up your personal or family emergency fund. Having a meaningful amount of money that’s easily accessible but off limits except for an emergency can give you a lot of peace of mind.

  1. Improve Your Home

Let’s say you’re already debt-free and have a comfortable emergency fund built up. One option to consider for your refund is improving your home. As long as you do your research and choose a project with a strong ROI, you’ll be adding to the long-term value of what is likely your largest asset.

  1. Other Investments

The other really good option that’s available for leveraging your tax refund is investing the money. Just keep in mind that even though highly speculative investments like cryptocurrency can seem enticing, they come with an incredible amount of downside risk. Investing your money in a more conservative option and letting it grow for the foreseeable future will likely yield the best return.

If you want to get your tax return filed so that you can get your refund and put it to good use, Donohoo Accounting Services can take of this process for you. All you need to do is call us at (513) 528-3982 to set up an appointment.