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What are the phases of an eCommerce Business? Stage 2: Profits $100,000 – $500,000

By now, your eCommerce business is likely no longer a side hustle but instead has become a part- or full-time job. And with an increase in sales comes an increase in responsibilities – as well as complexities. The biggest problems you are probably facing are likely the processes and systems that set the foundation for any successful business.

Sure, both options can build wealth for retirement. But understanding the details of each plan type—like contribution guidelines and tax treatment—is crucial before making this important decision.

Keep reading to learn how each type of plan works and what questions to ask, so you can make the best decision and maximize your savings and earnings over time.

Is this you?

❓ Your eCommerce business is expanding rapidly.
❓ Maybe you’ve left your job to focus on your online business full-time.
❓ Your eCommerce business is booming, and keeping up with your back-office work is becoming a bigger time-waster.
❓ You’re considering hiring other people to help you run your business.
❓ Your profit is growing, and you don’t want to pay more taxes to the IRS.

💡 You can see what’s happening in your sales...

And you can track your profits (mostly), but you’re not sure what you don’t know in order to make strategic decisions that will allow you to continue reaching your goals.

Maybe you want to get advice about how your business is doing regularly?

Maybe you want to look forward to Dec 31st, making sure you minimize your taxes as much as legally possible… because this year, you promise not to extend to the Oct 15th extension date and get your taxes done before Q4 begins.

Speaking of Q4, where historically the majority of online sales are made, cash flow is one of your main concerns. Though you’ve considered asking your bank for a loan or line of credit, you’ll need financial statements and documents compiled that are necessary for loan approval. Moreover, tax season is coming up, and you’re concerned that you won’t be prepared to take on yet another task with everything else you have to do daily. You’re not even sure what you can and cannot write off at the end of the tax year.

The building pressure to file your taxes correctly could easily be alleviated by harnessing the knowledge and expertise of a CPA. We can review your year-to-date and determine what can be legally deducted from your taxes, saving you money and also providing some priceless peace of mind. But a CPA’s time, money, and energy-saving abilities extend far beyond tax administration.

There are also sales taxes to consider. Compounding tax concerns is also likely a growing concern over state sales tax rulings and how they apply to your business.

💡“The expansion of eCommerce has generated a series of problems and risks regarding taxation and accounting…”.

And now, with the United States Supreme Court ruling of Wayfair, sales taxes have become more complicated than ever before. In short, you may be finding yourself overwhelmed, overworked, and overburdened.

We can advise you on the confusing sales tax laws and disparate sales laws. “[The accountant] should know the states where his company does business and the related laws for each state.” In 2018, in South Dakota v. Wayfair, Inc., the United States Supreme Court ruled that states may charge sales taxes on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state.

❓ Do you know if you are required to charge sales taxes in all of the jurisdictions you ship to?

❓ Did you know shipping your items into an Amazon warehouse creates Nexus and can qualify you to collect sales tax?

Each state has implemented its own regulations governing this issue, leading to confusion, complexity, and compliance risks. Make sure you’re utilizing the best software to manage this. We can help you interpret jurisdictional sales tax laws so you’re not audited and have to end up paying these sales taxes yourself.

And it’s not just sales taxes that get complex. Your business and personal income taxes are becoming more complex as your business grows too. We can help make sure you’re keeping more of your hard-earned money in your pocket, not overpaying the IRS or state any more than you legally have to.

You also may be considering hiring a contractor or employee as you ramp up Q4 sales.

❓ Does your contractor qualify as an employee, per state labor laws?
❓ Do you have contractor/employment agreements in place?
❓ Have you considered expanded insurance coverage as you look to bring people on to make sure you’re covered?

These are just a few topics we can help advise you with as you grow. Once you start making ‘real’ money, you should invest in solid, accurate, and advisory accounting that can not only keep you in compliance but can help show you how to make more money with less effort.

This goes beyond basic transactional accounting and payroll work. We can help you to utilize cloud-based accounting solutions to organize, sync, and analyze your data for advisory and strategizing with you to meet your goals.

Ready to take your eCommerce business to the next level? 🚀

At this point in your business’s growth, a CPA can not only ensure that your taxes are filed correctly and timely – and that you’re paying as little as legally possible – but can also add enormous advisory value as your strategic partner.

Contact us today to schedule a personalized consultation. Let’s strategize together to keep your profits growing and your stress levels low.

Amend Tax Return: Do I need to file one?

The most recent data from the IRS on individual tax returns indicates that out of 131 million returns filed, about 5 million were expected to be amended. This comes to less than 4 percent, but that projection still affects a significant number of taxpayers. Filing an amended tax return can be a hassle that you definitely want to avoid if possible. But there are some situations where you’ll have to do so, and it’s prudent to seek out the help of a tax advisor who can guide you through the process.

Depending on your income and filing status, you’ll generally either pay 0%, 15%, or 20% on your long-term gains. The 0% long-term capital gains tax rate applies if your taxable income is \$0 to \$44,625 (single filers) or \$0 to \$89,250 (married filing jointly).

There’s no avoiding this disclosure or payment of associated taxes—regardless of whether you receive a 1099-K, 1099-B, or 1099-MISC from a crypto exchange. Take the necessary steps to ensure you aren’t paying too little or too much. Start by reviewing how the IRS defines and taxes cryptocurrency.

Here are 5 reasons why you may need to file an amended tax return:

1️⃣ You made a math or data entry mistake and didn’t realize it until after you submitted your tax return.

For example, you added up your charitable deductions, and after filing your return, you realize you added them up incorrectly, and the difference was sizeable. Filing an amended return can correct that math error and get a refund.

Perhaps you were entering your gross income from your self-employed business into your software while it was late and you were tired, and you inadvertently transposed the numbers and entered the gross income as $78,000 when it was really $87,000. You will need an amended return to correct that error.

However, you would not usually amend a return if you incorrectly entered W-2 income since the IRS receives a copy of the W-2 and will compare it with what you reported. If there was an error, they will automatically make a correction and send you a bill or a refund, as the case might be. The IRS website instructs taxpayers not to amend a return in such a situation.

The statute of limitations for refunds is three years from the due date of the tax return. If the IRS has not automatically made the correction and you have a refund coming, don’t let the statute of limitations expire before filing an amended return. That holds true for any situation where an amended return will result in a refund.

2️⃣ You used an incorrect filing status.

Single parents, caregivers of elderly parents, and recently married or divorced people often make the mistake of using “Single” status when it’s the wrong one. “Heads of Household” miss out on crucial tax benefits, while married people will generally need to use “Married Filing Separately” if they don’t wish to file a joint return with their spouse. Because filing status affects so many elements of your tax return, you need to file an amended return to pay additional taxes you owe or receive a refund once the correct one is used.

3️⃣ You didn’t realize that there was a tax benefit you qualified for, and you’d like to claim it now.

There are many frequently overlooked tax benefits a tax professional would be aware of that the average DIY person wouldn’t, such as the ability for most individuals and small business owners to make pension and profit-sharing contributions in a new year before the tax-filing deadline and still have it count for the current filing season.

This also works in reverse in that people accidentally claim benefits they weren’t actually entitled to. Often, the best way to know for sure is to consult a tax professional.

4️⃣ You had investing activities that affect your tax return.

Typically, you don’t realize a capital gain or loss until you actually sell an asset. But if securities become worthless, this results in a capital loss that needs to be reported the year it was deemed worthless, and not the year you discovered the fact. If this security was deemed worthless a long time ago, you may have to amend prior year returns to account for the capital loss.

This can be significant since you are limited to deducting $3,000 in capital losses from all of your other income and resulting in capital loss carryovers that last several years. If you have any other investment losses that were forgotten or miscalculated on your original tax return, filing an amended return is the next logical step to ensure your carryovers are done correctly for future tax returns.

5️⃣ You received tax forms after filing your tax return.

If you were due a W-2 or 1099 Form, you might not receive it when you’re initially preparing your taxes. It could be a surprise corrected form or the payer was just late sending it to you. But if you already filed your tax return, then got additional forms later on, amending your tax return becomes inevitable.

Amending your tax return can be a cumbersome process, especially if you’re self-employed and/or have a great deal of investing activity. Asking a tax professional to assist you with filing amended returns can eliminate the headaches that come with the process. Many even offer a free review of self-prepared returns and ask the right questions to determine if it’s worth it to amend this year’s return and any prior years. You may also have to amend your state tax return(s), which can grow more complex if your residency is or was multistate.

Need Help with Amending Your Tax Return?

Don’t stress about it alone. Speak with our friendly tax professionals who are here to make the process smooth and hassle-free. Contact us today and let’s get your tax return back on track!

How to Calculate Crypto Income Tax: 2024 IRS Rules

Did you sell or exchange any cryptocurrency during 2023? If so, you must disclose this information when you file your personal taxes this year, and you must pay cryptocurrency taxes. Federal tax Forms 1040 and 1040-SR specifically ask whether you sold, received, sent, exchanged, or otherwise gained any financial interest in a virtual currency at any time. The form requires you to check “Yes” or “No.”

Depending on your crypto income and filing status, you’ll generally either pay 0%, 15%, or 20% on your long-term gains. The 0% long-term capital gains tax rate applies if your taxable income is $0 to $44,625 (single filers) or $0 to $89,250 (married filing jointly).

How the IRS Defines Cryptocurrency 🪙

For federal tax purposes, digital assets are treated as property. General tax principles applicable to property transactions apply to transactions using digital assets. You may be required to report your digital asset activity on your tax return. For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets.

❓ How the IRS Taxes Cryptocurrency

You’re required to pay taxes on crypto. Taxes are due when you sell, trade, or dispose of cryptocurrency in any way and recognize a gain. For example, if you buy \$1,000 of crypto and sell it later for \$1,500, you would need to report and pay taxes on the profit of \$500. If you dispose of cryptocurrency and recognize a loss, you can deduct that from your taxes.

Buying crypto on its own isn’t a taxable event. You can buy and hold cryptocurrency without any taxes, even if the value increases. There needs to be a taxable event first, such as selling cryptocurrency.

Cryptocurrency Capital Gains📈 & Losses 📉

To the IRS, your cryptocurrency properties are capital assets. The IRS taxes any profit you make when you sell your Ethereum, Bitcoin, or another cryptocurrency. This includes purchases you make with your virtual currency if the value exceeds the amount you paid initially. Essentially, the IRS says if you’re selling your cryptocurrency at a profit—the goods or services you receive are merely an exchange for the convertible virtual currency.

Both your annual income and the length of time you’ve held your virtual currency affect your capital gains tax rate. If you’ve held your cryptocurrency for less than one year, it is a short-term gain and you will pay taxes at your normal rate. However, if you’ve held it for more than a year and your income meets eligibility requirements, you may pay a lower rate on your long-term capital gain.

Alternatively, your cryptocurrency may have lost value. If that’s the case, you suffer a capital loss when you exchange it for less than you paid for it. This loss may help reduce any personal taxes you owe.

Cryptocurreny Income 💸

When you mine cryptocurrency or receive it as payments, perks, or bonuses for work you’ve performed or goods you’ve sold, it’s treated as taxable income. The amount is equal to the market rate value on the date you received it. You pay the same tax rate you would on your other income. If you then sell or otherwise transfer that cryptocurrency at a profit, you’ll owe capital gains on that increased value.

⚠️ Avoid Overpaying or Underpaying Crypto Income Taxes

Keep detailed records of all your cryptocurrency transactions. This will make things easier when it comes time to pay your personal taxes. There are excellent software tools that can help you stay on top of these record-keeping tasks. Remember that you are likely to pay a lower tax rate on long-term capital gains, so it may be smart to hold on to your cryptocurrency for at least 12 months. Offsetting gains with losses is another viable option.

If you’ve invested in or otherwise received cryptocurrency, contact Insogna CPA to ensure that you’re not over or underpaying your taxes. We also recommend using advanced software tools to combine your virtual wallets for IRS tax reporting.

Stay ahead of the crypto game!

Ensure your crypto income tax is handled correctly. Contact us today to schedule a consultation with a tax advisor. Let us help you navigate the complexities of quarterly tax filing and optimize your cryptocurrency tax strategy.

Discover 5 Tax Credits Every Small Business Owner Can Claim in 2024

Running a business comes with many financial responsibilities, and paying taxes is a significant one. While it might seem like a hefty expense, with a proper tax strategy, it can also be one of the best ways to save money. Knowing which tax credits your small business can claim could be a game-changer.

A licensed, Certified Public Accountant (CPA) can help you find legal ways to reduce the amount you pay in taxes each year, often through tax credits. Tax credits allow businesses to subtract a certain amount of money from the income taxes they owe.Especially in times of economic uncertainty, tax credits for small businesses are crucial.

Here are five tax credits your small business can claim this year:

1. Paid Family and Medical Leave Credit

This credit encourages small businesses to offer paid leave for reasons like the birth of a child or a family health emergency. Business owners must have a written policy that meets IRS requirements. They can then claim a credit based on the percentage of wages paid to employees on leave. The credit amount is calculated according to IRS guidelines on Form 8994.

2. Alternative Fuel and Motor Vehicle Credits

Businesses involved in the production or use of alternative fuels can claim this credit. It supports the shift from imported oil to other fuels. If your business qualifies, you can claim refunds for alcohol, biodiesel, renewable diesel, or alternative fuels. Additionally, businesses can claim up to $8,000 for purchasing alternative fuel vehicles, excluding electric and hybrid ones.

3. Disabled Access Credit

Making your business accessible to individuals with disabilities can be costly, but it brings benefits. Small businesses with fewer than 30 employees or less than \$1 million in annual revenue can claim up to 50% of the costs for disabled access. This incentive not only helps accommodate a wider range of customers but also enhances company culture and reputation.

4. Empowerment Zone and Renewal Community Employment Credit

If you hire employees living in low-income areas, you could be eligible for this credit. It encourages businesses to hire from empowerment zones, offering a credit of up to 20% of the first \$15,000 in wages paid to qualifying employees. This credit aims to diversify staff and support community development.

5. New Markets Credit

This credit rewards businesses for investing in community development enterprises (CDEs) and community development financial institutions (CDFIs). If your business invests in organizations that support low-income communities, you can claim tax credits. Projects must be in areas with a 20% poverty rate to qualify. Use Form 8874 to apply and ensure you benefit as much as possible.

These tax credits can significantly boost your business’s savings. Review your possible tax credits annually, as your eligibility might change. A CPA can help you prepare and implement a tax strategy to maximize your tax credits and save your business as much money as possible.

Curious about how these tax credits can benefit your business? Call us today and let’s chat about crafting a tax strategy that fits your unique needs.

2024 Legal Tax Tips: 5 Ways to Reduce Your Tax Bill

Tax bills can be stressful, and it may be tempting to procrastinate—don’t give in to that temptation. By thinking ahead and working with an expert, you can turn the hassle of doing your taxes into an opportunity to keep some of your hard-earned income in your pocket where it belongs. Tax professionals – like the experts at Insogna CPA – can help you minimize your taxes as much as legally possible.

Here are 5 smart ways you can reduce your tax bill this year:

1. Contribute To A Pre-Tax Retirement Account

Contributions to retirement accounts like the traditional 401(k) and IRA are some of the simplest ways to reduce your tax bill. These contributions are deducted from your taxable income, reducing the overall amount of federal tax you owe. Plus, if you maximize any available employer-matching options, you’re making a serious investment in your future with those tax-deferred dollars.

2. Claim Your Business Deductions

If you own your business, there are many tax deductions available to you. Leaving these deductions unclaimed is like leaving money on the table. You might be surprised at what you can deduct—utilities, wages, employee benefit programs, and advertising are all options. Work with your advisor to ensure you have taken advantage of every deduction you are eligible to claim.

3. Check for Earned Income Tax Credit (EITC) Eligibility

The Earned Income Tax Credit is a benefit for those with lower or moderate income and may reduce the amount of tax you owe—especially for families with children. The exact amount varies based on your income, marital status, and number of children, but if you qualify, you could see a significant reduction in your tax bill, and in some cases, an increased refund. Check to see if you qualify.

4. Charitable Contributions

Another popular way to reduce your tax bill is to donate to recognized charities. Depending on the amount you donate, you’ll need to demonstrate proof of your charitable donation with either a receipt or a written acknowledgment from the organization. Despite the hassle of record-keeping, these donations can add up and save you a bundle come tax time.

5. Collaborate With A Tax Professional

For complex tax returns, there’s no substitute for working with a professional. Free software can help if your taxes are simple, but if you own a business, are self-employed, or have significant assets, you’ll want an expert’s help. A qualified tax professional like a CPA will stay up to date with changing tax laws and help you make the most of your income, assets, and overall financial situation.

Let’s Cut That Tax Bill Together!

This list isn’t exhaustive, but it gives you an idea of what’s possible. Partnering with an experienced CPA firm like Insogna CPA means working hand-in-hand to legally minimize your taxes. Don’t wait around—waiting too long risks leaving money on the table or incurring penalties from the IRS.

Ready to save? Contact us today and let’s get started!

What is the NEW FinCEN’s Reporting Rule: Things Your LLC/INC Needs to Know

Hey there, business owners!

Your friendly Insogna CPA team here, bringing you the latest on FinCEN’s new rule that’s set to impact your business.

This isn’t just another update; it’s a crucial federal requirement for your LLC or INC. Miss it, and you could face some serious penalties!

So, let’s break it down…

⭐ The Star of the Show - FinCEN’s Reporting Rule

Starting January 1, 2024, FinCEN’s Beneficial Ownership Information Reporting Rule comes into effect. This rule ensures transparency in business ownership by requiring companies to report key information to the U.S. Government.

Think of it like a guest list for an exclusive event – the government wants to know who the real power players are in your business.

Meet the VIPs

👉 Beneficial Owners: These are individuals owning or controlling at least 25% of your company or holding significant influence behind the scenes.
👉 Company Applicants: These are the folks who got your company up and running – the ones who handled the paperwork (like us at Insogna CPA, if we’re assisting you).

Key Dates - Mark Your Calendar

✅ Already in Business? If your company was established before January 1, 2024, your deadline is January 1, 2025, to file your first report.
✅ Starting Fresh? Companies formed on or after January 1, 2024, have a 30-day window post-registration to complete their reporting.

Who Needs to Report?

Not every company will be required to report. There’s a specific list of who must comply and who’s exempt. Check out the FinCEN guide to see if your company is on the list.

⚠️ Consequences of Missing the Deadline

This is serious. Missing your reporting deadline or providing false information can lead to hefty fines or even imprisonment. FinCEN isn’t messing around.

❓How to File Your Report

Starting January 1, 2024, all reports must be filed through FinCEN’s secure electronic system. They promise a smooth process (fingers crossed!).

Need More Info?

For all the details, visit www.fincen.gov/boi

Got Questions or Need Help Filing?

Hey, we get it – this stuff can be confusing and time-consuming. Don’t stress. At Insogna CPA, we’re here to guide you through every step.

Whether you need help filing or just have a few questions, give us a call. We’ll make sure your business stays compliant, so you can focus on what you do best. Let’s tackle this together!