Business Accountant Austin TX

Taxes on gambling winnings?

Gambling takes many forms, including casino games, horse racing, sportsbook betting, lotto tickets, scratchers, bingo, and more. For most, gambling is a fun, recreational activity. However, many gamblers experience losses exceeding their winnings, and since excess losses aren’t deductible, they often skip reporting altogether, which doesn’t align with tax laws.

🚩 Reporting Winnings and Losses

If your gambling winnings hit certain levels, the government mandates that the gambling establishment collect your Social Security number and report your winnings to Uncle Sam on a Form W-2G. Gambling establishments will issue a Form W-2G if you:

✅ Win $1,200 or more on a slot machine or from bingo.
✅ Win $1,500 or more on a keno jackpot.
✅ Win more than $5,000 in a poker tournament.
✅ Win $600 or more from all other games, but only if the payout is at least 300 times your wager.

Reporting Winnings

Many believe they only need to report winnings that result in a Form W-2G. Unfortunately, the IRS disagrees. Even if your gains can be offset by gambling losses, the IRS expects you to report all gambling winnings, even those below the W-2G threshold, which they will scrutinize during an audit.

Gambling Losses

The good news is that you can deduct gambling losses if you itemize deductions, but only up to the amount of your gambling income. This means you can’t have a net gambling loss on your tax return. If you don’t itemize, you’ll owe taxes on the entire amount of your winnings, even if you incurred a net loss.

📉 Documenting Losses

How do you document gambling losses if audited? Discarded tickets aren’t acceptable documentation. The IRS suggests maintaining a detailed diary of your gambling activities, supplemented by verifiable documentation, including:

1️⃣ Date and type of wager
2️⃣ Name and location of the gambling establishment
3️⃣ Names of people present with you
4️⃣ Amounts won or lost

Save all relevant documentation, including losing tickets, checks, casino credit slips, hotel bills, plane tickets, and entry tickets. Slot clubs may provide records of electronic play, and affidavits from gambling officials can also help. Specific wagering transactions can be supported by:

✅ Keno: Copies of validated tickets.
✅ Slot Machines: Record of winnings by date and time.
✅ Table Games: Table number and casino credit card data.
✅ Bingo: Number of games played, cost, and amounts collected.
✅ Racing: Race details, wagers, and winnings/losses.
✅ Lotteries: Purchase dates, winnings, and losses.

Other Tax Side Effects of Gambling
Gambling income is fully reported as income while losses are itemized deductions, increasing your AGI, which can negatively impact your taxes.

Social Security Income
For those receiving Social Security, whether benefits are taxable depends on your AGI. If your AGI exceeds certain thresholds, up to 85% of Social Security benefits can be taxable.

💊 Health Insurance Subsidies

Under the Affordable Care Act, health insurance subsidies are based on AGI. Gambling winnings can reduce these subsidies, requiring you to pay more for health insurance.

Medicare B and D Premiums
Medicare premiums are based on AGI. High AGI can triple Medicare B premiums and add surcharges to Part D premiums.

Other Limitations
Other tax rules limit benefits based on AGI, such as medical deductions, child and dependent care credits, and the earned income tax credit.

🎯 GAMBLING GOTCHA #1 - Full Winnings Impact AGI

Since you can’t net winnings and losses, the full amount of your winnings adds to your adjusted gross income (AGI), which is used to determine eligibility for other tax benefits. A higher AGI can limit these benefits.

🎯 GAMBLING GOTCHA #2 - Itemizing Deductions

If you don’t itemize deductions, you can’t deduct losses, meaning you’ll pay taxes on all winnings, even if you had a net loss. Recent tax reforms increased standard deductions and limited other itemized deductions, so fewer taxpayers will itemize and more will pay taxes on their winnings.

🎯GAMBLING GOTCHA #3 - Social Security Benefits

If your gambling winnings push your AGI over the threshold, some of your Social Security benefits may become taxable.

🎯GAMBLING GOTCHA #3 - Social Security Benefits

If your gambling winnings push your AGI over the threshold, some of your Social Security benefits may become taxable.

🎯GAMBLING GOTCHA #4 - Insurance Subsidies

Adding gambling income to your AGI can significantly reduce health insurance subsidies, increasing your costs.

🎯GAMBLING GOTCHA #5 - Online Gambling Accounts with Foreign Companies

If your online gambling account exceeds $10,000 at any time during the year and it’s with a foreign company, you must report it to the Treasury or face penalties.

🎯GAMBLING GOTCHA #6 - Reporting Foreign Accounts

Regardless of winnings or losses, foreign online gambling accounts over $10,000 require filing a FinCEN Form 114 (FBAR). Penalties for non-compliance are severe.

Have questions about gambling and taxes?

Reach out to us for personalized advice and make sure you’re on the right side of the law. Let’s keep those winnings as joyful as they were when you won them!

Why Hiring a Licensed CPA in 2024 is Crucial for Your Business

Take it from a licensed CPA, there are plenty of honest tax preparers out there. However, many are not.

Below are just a few of the fraud-related news stories from recent years about unlicensed tax preparers committing fraud. From all over the country and all walks of life, these “tax preparers” knew what they were doing. Unfortunately, their clients did not.

If you need any more reason to hire a licensed CPA, consider this: when unlicensed preparers make mistakes, you are the one who will pay for it—in fines, back taxes, and possibly an audit. In most cases, they do not sign your tax return; you do. So, unfortunately, there is no recourse for you.

Avoid unscrupulous tax preparers who include errors or false information on a tax return that could leave you open to liability for unpaid taxes, penalties, and interest.

❗Tax Preparers Committed Fraud

“It’s not hard to fall for a fraudster when you’re looking to get your taxes done on the cheap,” says Chase Insogna, CPA and founder of Austin-based Insogna CPA. “Fraudsters say they are registered tax preparers, but the common person may not know the signs to look for.”

The Warning Signs

Here is a list of warning signs to help you spot a fraudster quickly:

⚠️ If you do not see a current registration certificate and proof of business license, walk away.
⚠️ Tax preparers should provide clear information about how much they will charge and provide a receipt.
⚠️ They should also provide you with a required written disclosure and contract.
⚠️ A ghost preparer is a person who prepares your taxes and doesn’t sign the form. This is against Nevada law and the IRS. A ghost preparer is likely unregistered and you won’t see them again. If they don’t sign the form, don’t pay.
⚠️ Claims they are endorsed by the IRS. The IRS does not endorse tax preparers.
⚠️ Doesn’t have a PTIN. Anyone who prepares federal tax returns for a fee is required by the IRS to have an individual Preparer Tax Identification Number (PTIN) and include it on federal returns.
⚠️ Paid tax preparers are required to sign your returns. Beware if they sign it “self-prepared” or use a business label.
⚠️ Beware of tax preparers who base their fee on a percentage of your refund or claim they can obtain larger refunds than competitors. The fee should be based on the complexity of your return, not your refund.
⚠️ Suggests you direct deposit your refund to an outside account

Need a reliable, licensed CPA to handle your taxes?

If you think you’ve been the victim of tax filing fraud, you can file a complaint here. Individuals, sole proprietors, and single-member LLCs can report a tax preparer’s misconduct using Form 14157 and Form 14157-A, which are tax preparer complaint forms.

Reach out to us today and let us safeguard your financial future. Our expertise ensures you stay on the right side of the law and get the most out of your returns. Let’s talk – because your peace of mind is worth it.

Why Switching to Cloud-Based Accounting Makes Good Business

❓ What is Cloud Accounting?

Cloud accounting software is similar to traditional, on-premises accounting software, but it is hosted on remote servers, similar to the SaaS (Software as a Service) business model.

💡 The Old Way

Right now, if you want to manage the financial side of your small business, you probably have to be in your office to do so. You have to be sitting in front of a very specific computer because that’s where you installed your accounting solution in the first place. If you’re at home and need to send an invoice or if you’re out in the field and just collected payment, you have to wait until you get back to the office to reconcile that information.

☁️ Cloud Accounting

With cloud accounting, however, the hardware no longer matters because your accounting software was never installed on it in the first place. It exists on a centralized server that is always connected to the Internet. Because of that, you can access that information from any device with a web connection – be it your laptop while you’re in an airport lounge, your mobile phone while you’re in a client’s office, or your tablet that you keep by your bedside at night. The choice is yours.

But in the end, it’s exactly that – a choice, and one that should not be made lightly. If you really want to know why you should migrate to cloud accounting, or even if you should do so at all, you’ll need to keep a few key things in mind.

❓Why Businesses Should Consider Cloud Accounting

Once you’ve learned as much as you can about what cloud accounting can do, it’s time to move into the realm of figuring out exactly what it can do for you. The question of whether or not this is the right move for you to take is ultimately one that you and you alone can make. By examining the subject from the perspective of both positives and negatives, you’ll be in a better position to make the right decision for your own goals at exactly the right time.

💡 The Advantages of Cloud Accounting for Most Businesses

For starters, the good.

The cloud is a major advantage to businesses that are just starting out, providing the flexibility to manage accounts from anywhere, anytime. All you need is a mobile device, an Internet connection, and the right piece of accounting software. You can manage the entire financial side of your business just as effectively while you’re stuck in traffic as you can behind your desk.

Cloud accounting is also great for collaboration. Multiple users can have access as needed from any location, and they can communicate and work together to stay on the same page in terms of financial activity. The same is true if you’re working with a dedicated accountant. The cloud can give them real-time visibility into your business for a level of insight they just wouldn’t have through other means.

Another major benefit of cloud accounting is that the types of software you’ll be using can typically be easily integrated with other aspects of your infrastructure. In the past, you were likely dealing with silos that hampered productivity. Now, with everything in the cloud, data can be shared freely and information is available in an instant – perfect for breaking down those silos once and for all.

🚩 The Disadvantages of Cloud Accounting

Now, none of this is to say that the cloud has NO disadvantages – far from it.

To begin with, the actual process of moving from your existing system into the cloud will hardly be as simple as flipping a light switch. If you’re staying with software from the same company, that’s one thing. If you’re not, you’ll need to prepare your data so that it can be seamlessly integrated into the new system. This won’t necessarily be the most challenging task you’ll ever face as an entrepreneur, but it certainly won’t happen overnight either.

You also have to think about whether or not you’re comfortable with the fact that you’re giving up a certain level of control over your data to a third party. All of your financial information will no longer be stored on a hard drive in your office – it will be on a server that could be halfway around the country (or the world). If your provider gets hacked, you get hacked. If your provider is disconnected, you’re disconnected. If your third-party vendor isn’t in compliance with any industry-specific regulations that you have to adhere to, guess what – neither are you.

All of these are challenges that can certainly be addressed, but they also represent a significant change from the way you’re probably used to doing things. Again, this is not a decision that anyone else but you can make. Most small business owners in particular will absolutely benefit from the advantages that cloud accounting brings with it… but some won’t.

Don’t look at cloud computing as a solution in search of a problem. You’ll know when it’s time to make the jump by recognizing a number of real problems that you’re facing that cloud accounting represents the perfect solution to.

✅ Best Practices for Migrating to Cloud Accounting

Once you have decided that the time is right to make the jump into the world of cloud accounting, there are a few key steps that you can start taking today to help make the process go as smoothly as possible.

✅ First, shop around.

Not all cloud accounting software is created equally. Make a list of all the things that you can’t do today that you want to be able to do in the cloud or all of the things that you CAN do today but that will hopefully be BETTER in the cloud, and keep that list handy while you search for a new solution. Once you’ve picked the right option, spend some time getting used to it before implementation. Watch online videos, consult with an accounting pro, ask questions, etc. Only once you’re certain that you know how to use your new cloud software properly should you proceed.

✅ Next, prepare your existing data,

the process of which will vary based on the aforementioned factors. If you do happen to be transitioning over to a brand-new piece of software, make a list of all the data that must make the transition so that you can keep things as organized and focused as possible.

Automate some of the process.

When it comes to entering data into your new system, you may be able to automate some, or even all, of the process, depending on the solutions you’re dealing with. This can definitely help speed the process along as much as possible. But a word to the wise – always be sure to back up all of your existing data in a secure, recoverable way BEFORE the process starts. If something goes wrong, if you make a mistake, or if a catastrophe happens, you want to be able to rest easy knowing that nothing has been lost.

✅ Continuous Improvement

Continue to look for opportunities for improvement on an ongoing basis. Once you’ve put a little distance between yourself and your implementation process, ask yourself questions like:

What went well? What didn’t go so well? Why did these things happen?
Which features am I actually using versus the ones that I thought I was going to use but didn’t? Why?
Where am I struggling?
In what ways did I make real, tangible gains in terms of efficiency? How do I push these even farther?
What do I like and dislike overall?

✅ Cloud accounting is not just a trend

The fact of the matter is that cloud computing certainly isn’t going away anytime soon. Forbes estimates that between 60 and 70% of all software, services, and technology will be primarily cloud-based by as soon as 2024.

✅ Begin the process to move your business to cloud accounting on your own terms

There will definitely come a day in the not-too-distant future when you’re going to have to make the jump into cloud computing whether you’re ready to do so or not. It is in your own best interest to begin that process as soon as you’re comfortable, so at the very least you can do so on your own terms.

Need help? 👋

Ready to make the leap to a cloud-based accounting system? We’re here to guide you through every step of the process. Let’s transform your accounting experience together – contact us today to get started!

Why Should Small Business Owners Consider PEO in 2024

Whether you’re a business owner, high-level executive, or investor, you know that every cent counts. As you scale operations, your Human Resources (HR) needs will grow exponentially. Instead of adding new staff or departments to the payroll, what if you could outsource these functions to a specialized expert? Enter the professional employer organization (PEO).

❓What is a PEO?

A professional employer organization – or PEO – allows business owners to outsource key HR duties, ensuring compliance with federal and state employment laws, including:

✅ Payroll
✅ Benefits
✅ Training
✅ Compliance

💡Benefits of Using a PEO

When businesses partner with a PEO, they reap various benefits, including time savings, cost savings, a competitive edge, improved tracking and administrative functions, access to strong benefits packages, streamlined employee onboarding, and guidance with government compliance.

💡 Time Savings
Business leaders can focus on daily operations and high-value tasks instead of worrying about HR functions.

💡 Cost Savings
One of the main reasons companies turn to PEOs is the significant cost savings that outsourcing provides. Direct savings come from reducing HR department headcount and software expenditures.

💡 Competitive Edge
It takes a talented team to stay ahead of the competition, but hiring can be costly. PEOs typically employ experienced recruitment experts. PEO clients have an 11%-20% lower turnover rate than their non-PEO counterparts.

💡 Improved Tracking and Administrative Functions
PEOs conduct in-depth HR assessments to minimize risk and maximize growth and development.

💡 Access to Strong Benefits Packages
PEOs help businesses provide employees with competitive benefits like medical, dental, vision, and 401(k) retirement plans, essential for attracting and retaining top talent.

💡 Streamlined Employee Onboarding
PEOs use integrated HR technology to ensure easy access to compliant new-hire paperwork and keep track of employee data.

💡 Guidance with Government Compliance
No business wants fines for non-compliance with employment laws. PEOs offer valuable advice on federal, state, and local regulations, helping companies develop solutions for any issues that arise.

🚩 Common PEO Myths

🚩 Myth #1: Business owners who partner with PEOs lose control over their business.
Truth: Owners and managers gain a strategic partner who takes charge of HR responsibilities to ensure improved efficiency, practices, and strategies.

🚩 Myth #2: A PEO has the authority to hire and fire client employees.
Truth: While PEOs help find job candidates, the decision to hire remains with the owner and the company. Talent management duties stay with the owner, who must notify the PEO of changes for HR documentation updates.

🚩 Myth #3: My business is too small (or too big) for a PEO.
Truth: Companies of all sizes benefit from PEO partnerships. The average PEO client has 22 employees, but PEOs serve a wide range of clients, from start-ups with one employee to larger businesses with over 1,000 workers.

❓Why a PEO Might be a Good Fit for You

If you’re a growing business looking to scale operations while maintaining a realistic budget, a PEO is a perfect fit. Here are some signs it’s time to partner with a PEO:

1️⃣ Surprise issues arise from incomplete employee paperwork;
2️⃣ Competitors poach your employees with better benefit packages;
3️⃣ New employees miss out on benefits enrollment;
4️⃣ Your company faces fines for compliance violations;
5️⃣ Employees quit on short notice;
6️⃣ You’re too swamped with HR duties to focus on your company’s big picture;
7️⃣ Payroll duties are overwhelming your staff.

Can My Business Benefit from a PEO Partnership?

Curious if a PEO is the right move for your business? Let’s discuss how Insogna CPA can help you streamline HR tasks and boost your company’s growth. Reach out today, and let’s explore how we can make your life as a business owner a whole lot easier.

Let’s chat about how we can enhance your employee experience and give you more time to focus on what you love about your business!

Employee Bonuses: The Tax Implications of Paying Bonuses to Employees in 2024

Bonuses are taxed differently as “Supplemental Wages”. A bonus is always a welcome bump in pay, but it’s taxed differently from regular income.

Instead of adding it to your ordinary income and taxing it at your top marginal tax rate, the IRS considers bonuses to be “supplemental wages” and levies a flat 22 percent federal withholding rate, unless your employer pays bonuses alongside regular wages. Then, the tax withholding on your bonus is calculated at your regular income tax rate, which is based on your tax bracket.

When taxed this way, your initial tax withholding is higher. In general, bonuses of any kind, including signing bonuses and severance pay, fit into the supplemental wages category.

What Does the IRS Consider to be "Supplemental Wages"?

Other examples of supplemental wages include:

✅ Accumulated sick leave
✅ Certain commissions
✅ Overtime pay
✅ Prizes and awards
✅ Back pay
✅ Reported tips
✅ Retroactive pay increase
✅ Payments for nondeductible moving expenses
✅ Specific forms of equity compensation (like restricted stock units and exercises of non-qualified stock options)

Employee Achievement Awards - The Exception to the Supplemental Wages Rules

The IRS will expect its cut of any bonus you receive, whether it’s in cash, gift cards, a vacation, or other benefits. The exception to this rule is if your bonus can qualify as an employee achievement award.

You might be able to avoid paying federal income taxes under the following conditions:

💡 The award isn’t cash, a cash equivalent (such as a gift card or money order), tickets to events, vacations, stocks, bonds, or other prohibited items.
💡 The award is tangible personal property.
💡 The total value of the award doesn’t exceed $1,600.

📜 Tax withholdings aren’t the end of the story.

The method used to calculate the federal withholding on your bonus can have a big impact on your take-home pay. Still, you won’t know how much you actually owe the IRS until you file your tax return the following year.

📉 Reducing the Risk of Owing the IRS Money

You can reduce the risk of owing the IRS money by reviewing your W-4 withholdings. The IRS Tax Withholding Estimator is a good place to start. Also, if you receive a large bonus or your financial circumstances change, it may be best to talk to us for advice.

💵 Lowering Your Tax Withholding on Bonuses

Want to lower the amount of taxes withheld from your bonus? Consider paying a bonus separately from a regular paycheck. From there you can see if you should calculate its tax withholding at the 22 percent flat rate the IRS allows for supplemental wages.

Need help? 👋

As a small business owner, understanding the tax implications of employee bonuses is crucial. Need help navigating these waters? Schedule a chat with us today, and let’s make sure your bonuses benefit both your team and your bottom line.

Virtual CFO Services for Your Business

Plan with a purpose. Make decisions with confidence.

❓ How are we different?

We are a licensed CPA firm in TX. Why does that matter? Anyone can call themselves a “virtual CFO” without ever being a CPA or formally trained in Accounting. Non-licensed individuals have no regulation, professional liability, or obligation to protect your data.

Our virtual CFO services solve this dilemma by providing strategic financial accounting and planning through a fractional CFO role. For a fraction of the cost of a full-time hire, you’ll be backed by our financial expertise to make key business growth decisions.

❓Why choose Insogna CPA?

Our firm not only offers virtual CFO services for small businesses but also seamlessly integrates other accounting and tax needs. Everything is communicated under one umbrella to maximize efficiency and minimize taxes as much as legally possible.

Learn more about leveraging virtual CFO in your company.

Elevate Your Business Today!

Discover how virtual CFO services can elevate your small business. Reach out to us today and let’s start planning for a brighter financial future together.