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What are the phases of an eCommerce Business? Stage 3: Profits $ 500,000 – $ 1 million (Part 1)

Does this sound like you?

❓ Your online ecommerce business is outpacing your growth projections.
❓ You may have (or be looking to add) multiple employees.
❓ You want strategic advice on how to minimize your taxes before year-end.
❓ You’re aiming to push your sales over \$1 million, seeking efficient technologies and cash-flow forecasting to meet your revenue goals.
❓ Your business is taking over your home, and you’re running out of space.

At this phase in your business growth, take a moment to pause and congratulate yourself.

Yes, you may:

💡 Want to grow your business even more.
💡Have a to-do list longer than a novel.
💡Have more responsibilities and stressors than ever.

But that’s exactly why it’s crucial to stop and recognize how much hard work you’ve invested in building this company from the ground up. If you can’t appreciate your own hard work, why should anyone else?

That being said, you’re likely facing a whole new variety of challenges, from how to save money on taxes to hiring employees to cash-flow forecasting for the next Q4.

“You need to understand your data and keep an eye on key metrics to ensure the numbers are going in the right direction.”

A licensed CPA can become a vital asset to your business’s goals, tax strategy, and financial future.

For a business person, hiring a CPA is like constructing a financial “safety net” and securely placing it beneath your holdings. It’s a form of business insurance you can’t purchase from an insurance company.

But you’re not just gaining procedural and technical knowledge; you’re also expanding your team — the people who have your back when you need financial direction and business advice.

It’s astounding to new entrepreneurs that businesses can be built from the ground up by a small, select number of people.

Having a CPA on your team is invaluable due to their role as both a soundboard and a strategist. Seeking an objective opinion on your business’s state of affairs is one of the best ways to stay grounded and supported as you grow your eCommerce business.

“Look actively for mentors — their advice can be priceless, even for little things like acquiring business licenses. One of the smartest decisions I ever made was finding someone who could show me the ropes.”
– Darren DeMatas, eCommerce CEO’s founder

Even if you’re determined to figure out everything yourself, a CPA advisor can help guide you through uncertainties, complex processes, and maximizing tax deductions without taking away any of your authority over business decisions.

An experienced CPA provides strategic context for your decisions, which remain yours to make, and can significantly impact your financial future.

Why You Need a CPA for Your eCommerce Growth

In addition to having a CPA as a strategic partner, they can help you make sense of numerous complicated processes. Running a successful eCommerce business means tracking your business and personal finances.

Just like your health is checked by a doctor, your assets should be checked for general wellness by a licensed CPA.

Start by determining your net worth and seeing its trend.

Next, calculate your debt-to-income ratio.

Armed with these numbers, you’ve completed the most challenging step.

You can then track your spending and know where your money is going. This way, you’ll know if you’re overspending.

After that, you can set up an emergency fund account and focus on your investment strategy. But first, ensure your financial health is… well, healthy!

Assessing your current wealth is vital for managing your cash flow and helping grow your business.

A CPA advisor can help create a budget for your business and personal finances, determine how much to pay yourself from your company, estimate your income taxes, and identify opportunities for tax-deferred savings to minimize your current year’s tax burden as much as legally possible.

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!

Where’s my IRS tax refund? Reasons Why IRS Isn’t Responding

If you’re still waiting for a tax refund or have tried to contact the IRS directly in 2024, here are six reasons why you might not be getting a response.

Questions You Might Ask

Never got your refund?

There are still 8 million paper IRS tax refunds that haven’t been processed.

Wonder why the IRS hasn’t processed your return?

6 million IRS returns are in suspension status.

Why does it take so long?

With 1.3 million 1040 amended returns unprocessed, the IRS is taking over 20 weeks to respond.

Waiting on your Employer Retention Credit?

2.75 million 941 filings are still awaiting processing.

Responded to the IRS lately?

4.5 million pieces of correspondence are still in the queue.

Tried calling the IRS lately?

Only 10% of IRS phone calls are answered.

Don’t Like IRS Audits?

If you’re tired of the run-around or worried about an IRS audit due to delays, we can help you avoid them. Our expert team of 20 is here to assist you all year long.

Ready to stop the waiting game with the IRS? Contact us now, and let our experts handle it for you. Get your IRS tax refund issues resolved efficiently, avoid unnecessary IRS audits, and get through to IRS phone support.

Licensed CPA Accountant vs. Unlicensed Tax Preparer

Did you know: Anyone with a high school diploma can pay the IRS a small fee and become a “tax expert” filing your income taxes. Are you certain you want to leave your most intimate financial details to someone who has no recourse? You may pay more for a licensed CPA accountant firm, but ‘you get what you pay for.

Here’s a quick breakdown of the differences:

✅ Bachelor’s degree in accounting, plus 150 hours of college hours.

✅ On-the-job experience, signed off by another licensed CPA.

✅ Rigorous CPA exam, expanding 4 parts from financial to legal and tax.

✅ Required understanding of tax codes when preparing tax returns.

✅ Legally represent you before the IRS when issues arise.

✅ State Board recourse if you are not getting communication timely.

✅ Committed to ongoing professional development and ethical conduct.

❌ No formal education.

❌ No experience required to prepare taxes.

❌ No requirement of continuing education to keep up with changing tax laws

❌ Cannot represent you before the IRS.

❌ No ethical or professional oversight.

Investing in a Licensed CPA accountant is Investing in Your Success

Think of a CPA as your financial co-pilot, navigating the complexities of accounting, controller advisory, proactive tax strategies and annual tax preparation.

Engaging with a licensed CPA team of experts certifies your financial life is in great hands. Don’t wait until March to figure out what you should have tax planned for last year.

Contact our team today to get a top-ranked CPA on your team.

Awards

Explore Insogna CPA's awards!

Here, we proudly showcase the accolades and honors bestowed upon us by esteemed organizations and industry leaders. From recognition for our exceptional client service to awards highlighting our innovative solutions, each accolade symbolizes our commitment to excellence and client satisfaction.

Insogna CPA Ranks for 4th Consecutive Year

The companies on this list show a remarkable growth rate across all industries in the Southwest region. Between 2020 and 2022, these 162 private companies had an average growth rate of 135.43 percent; by 2023, they’d also added 17,606 jobs and $14.5 billion to the region’s economy.

Read more here.

Awarded Top 3 Accounting Firms in Austin, Texas

Insogna CPA has been handpicked as a Top-3 Accounting Firm in Austin, Texas, again. That’s the fourth year in a row!

Facing a rigorous 50-Point Inspection, which includes customer reviews, history, complaints, ratings, satisfaction, trust, cost, and general excellence. You deserve only the best.

Read more here.

Hubdoc Top 50 Awardee

They stated, “Insogna CPA leverages an advanced accounting technology stack to help their clients achieve their goals: “With our tech stack of 20 different technologies, we’re able to provide updated financial and reporting information quicker so business owners can act on that information and make real-time decisions,” explains Chase.

Read more here.

Top 18 Best Accountants in Austin for 2021

In October, Insogna CPA was notified of its inclusion in the Expertise.com Best Accountants in Austin list. Out of over 170 accountants ranked for this award, Insogna CPA was nominated via customer referral and was then ranked #18.

Read more here.

Our Expert Software Partners

Certifications and Licenses

401K vs. IRA: Retirement Planning for You & Your eCommerce Business

As an individual and as a business owner, you’re making choices every day that will significantly impact your future, the future of your employees, and the future of your business. When you’re planning for retirement and making decisions about benefits, the same is true. One such choice is which type of plan — 401K vs. IRA — is best for you and your employees.

Sure, both options can certainly build wealth for retirement. But examining details of each plan type — like contribution guidelines and tax treatment — is an important step before making this critical 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.

401K vs. IRA: What’s the Difference?

A common retirement savings plan offered by employers, a 401K plan enables employees to save for retirement. The participant chooses how much they’d like to invest and that money is automatically deducted from the paycheck and transferred to the 401K account.

An IRA is an individual retirement savings account that you can open and manage on your own.

The key differences are that IRAs typically offer more investments, but 401Ks allow you to contribute more each year.

Considerations for an Important Decision: 401K vs. IRA

IRAs are popular with small business owners, but 401K plans can be the right fit for some e-commerce businesses. To make the right choice for you and your business, begin by considering the following:

Contribution guidelines. IRAs cap employee contributions at lower amounts than 401K plans.

401K: In 2022, you can invest up to $20,500 a year in a 401(k), not including any employer match. And for those 50 and over, you can add an additional $6,500 per year.
IRA: The contribution limit for a traditional IRA in 2022 is $6,000. Those 50 and older can tack on an additional $1,000.

Control and investment options. Because an IRA has no plan administrator to choose (and limit) the investment options, participants have more control and more variety when it comes to investment options.

Tax treatment of contributions.

401K: Your contributions lower taxable income in the year they are made.
IRA: Contributions may be deductible.

Employer matching contributions. Both retirement plan options can help your e-commerce business attract and retain the best and brightest employees, but with a 401K plan, you can offer an employer match.

Begin Asking the Right Questions

To optimize your retirement planning while you are building your e-commerce business, you need to understand some complicated issues. These issues involve things like:

Legal and fiduciary requirements
Income break-even points
If and when it makes sense to match employee contributions.
Whether you need a plan administrator
How to rollover a 401K to an IRA

Asking the right questions about your particular situation will be important for you, your employees, and your business. For example, did you know that an individual 401K plan can likely maximize retirement savings if you’re a business owner with no employees other than your spouse?

And, of course, 401Ks and IRAs are not the only options out there…

Based on your cash flow situation, how many employees you have, and a variety of other factors, there may be options you’ve never even considered — like the SEP-IRA. This simplified employee pension plan has generous contribution limits and opens up the potential for tax deferrals.

Dig into Your Wealth-Building Options with the Right CPA Accounting Firm

Whether you’re just getting started or need help optimizing your current strategy, making the right decisions is easier when you have a financial expert on your side.

Building a comfortable future for yourself, your family, and your employees begins with a plan. Our year-round wealth management experts analyze tax structure, risk tolerances, estate considerations, and financial goals to deliver a clear course of action so you can build and protect your wealth.

While many accounting and bookkeepers can take care of your business, they don’t necessarily consider building personal wealth for business owners or employees. Only Insogna CPA looks at you and your business holistically so that you can build wealth while you grow your business.

Get answers to your questions and confidently explore retirement plan options that are right for you, your business, and your employees. Get in touch with us today.

The E-commerce Business Owner’s Guide to Accounting, Tax, and Accumulating Wealth

Unforced Errors – The 8 Most Common IRS Tax Penalties and How to Avoid Them

You know the old line about the inevitability of death and taxes? It’s still true. What isn’t inevitable, however, is the need to pay penalties to the IRS. It happens, but it doesn’t have to, and the main reason that it does is because taxpayers don’t educate themselves about the rules. When you get hit with an IRS penalty, it adds on to a number that you already wish you didn’t have to pay.

To ensure that you get through tax season without unnecessary costs and aggravation, here’s a list of the tax penalties that the IRS most frequently assesses against taxpayers.

The 8 Most Common Tax Penalties Assessed

Penalty for underpaying estimated tax payments
Penalty for taking early withdrawals from tax-advantaged retirement accounts, including IRA accounts and 401(k) accounts
Penalty for taking nonqualified withdrawals from 529 plans, health savings accounts (HSAs), and similar tax-favored accounts
Penalty for failing to take required minimum distributions (RMDs) from tax-favored retirement accounts
Penalty for making excess contributions to IRAs and other tax-favored accounts
Penalty for failing to file, or for filing your required tax return after the designated due date
Penalty for failing to pay your taxes on time
Penalty for filing a substantially incorrect tax return or taking frivolous positions on a return

Let’s take a deep dive into each. The more you know, the better you’ll understand how to avoid these mistakes.

1. Penalty for not making estimated tax payments

Where does your income come from? If you’re a W-2 employee whose employer withholds your federal income tax on your behalf, then estimated tax payments are not something you need to worry about. On the other hand, if you get income from which withholding isn’t deducted, then you are legally obligated to submit estimated quarterly tax. Failure to do so is subject to penalty.

Who has to submit quarterly estimated taxes? You do if you’re a part of the “gig” economy which makes part or all of your income from freelance jobs or independent contracting work, or if you’re a retiree who relies on or derives income from Social Security and your personal savings accounts or other accounts whose withdrawals are taxable (or subject to capital gains). Own a small business? If you’re subject to self-employment tax, then you’re supposed to submit it quarterly. Though this requirement is straightforward, most people start their income journey as W-2 employees: they may have no familiarity with estimated quarterly taxes, or if they do they may not be in the habit of paying it and have forgotten. Whatever the reason, the penalties for failure to make these payments can add up pretty quickly.

The government has set up the quarterly payments so that the IRS Form 1040-ES is marked with four dates throughout the year — April 15th, June 15th, September 15th and January 15th (or the next business day if the 15th falls on weekend or legal holiday) of the year that the year’s tax filing is due. In doing so, they have it set up so that the majority of the taxes that are owed are paid throughout the year, though not on a weekly, biweekly or monthly basis the way that W-2 employees withholding is sent in. Failing to send the monies in for each quarter of 2018 is set to be penalized on an annualized basis of 4 to 5 percent. The best way to avoid the penalty is to pay your taxes on the dates that they’re due, calculating the payments accurately enough to represent either 90 (85% for 2018) percent of the actual amount you end up owing or 100% of the amount that was appropriate from the previous tax year. That 100% of the previous year’s amount is acceptable under what is known as safe-harbor, though for those whose income is more than $150,000, the percentage needed is 110% of the previous year’s income tax. Conversely, those who owe less than $1,000 in annual taxes do not get penalized at all. It is important to note that the penalty percentage has jumped to 6 percent as of the first quarter of 2019.

2. Penalty for taking early withdrawals from tax-advantaged retirement accounts, including IRA accounts and 401(k) accounts

Having a retirement account is a smart thing to do, and it’s something that the government has encouraged by allowing for the creation of special tax-advantaged vehicles. These tax advantages represent a tremendous incentive and benefit, but they come with strings: until you are 59 ½, you are not permitted to take money out of those accounts prior to retirement without having to have to pay a hefty 10% penalty.

As important as it is to know about the penalty so that you don’t take money out hastily and without a full understanding of the impact of doing so, but it’s also important to know when you can take the money out without being penalized. You’re permitted to take out up to \$10,000 from and IRA for the purchase of a first home, as well as to pay any uncovered, unreimbursed medical bills that add up to more than ten percent of your adjusted gross income from any retirement plan. If you’ve been out of work and received unemployment compensation for a minimum of 12 weeks, you can take out up to $10,000 from and IRA to pay for your health insurance premiums. Distributions can also be taken from an IRA to pay for qualified higher education expenses, including fees, room and board and of course tuition, all without penalty. And if you’re leaving your job during the same year that you’re turning 55 or older, you can take money out of a 401(k) account from the job that you’re leaving without penalty. The fact that there is no penalty does not negate the income taxes that you would be required to pay on withdrawals from any retirement account.

3. Penalty for taking nonqualified withdrawals from 529 plans, health savings accounts (HSAs), and similar tax-favored accounts

Just as the government works hard to make sure that the retirement accounts they’ve allowed to be tax-advantaged are used as intended, they take a similar approach to other tax-advantaged accounts, penalizing improper use and withdrawals from 529 plans, health savings accounts, and similar vehicles.

529 plans – These plans provide the ability to set aside funds to pay for the cost of college, and were expanded under the recent tax reform act to also allow for funds to grow tax-free for eligible expenses for K-12 education too. Any money that is deposited into a 529 can be withdrawn without penalty as long as the money is going to pay for tuition, books and similar school-related expenses, but if the money is withdrawn for any other purpose, the withdrawn amount is subject to both income taxes on appreciation and a 10% penalty on the entire distribution. One important thing to note: if you have set up a 529 in one child’s name and wanted to use the monies for another child, that is not subject to penalty as long as you change the beneficiary. The same is true for Coverdell ESAs.
Health Savings Accounts (HSAs) – These plans were created to assist with the payment of out-of-pocket healthcare expenses. Money deposited into those accounts can grow to be withdrawn tax free as long as they are used for eligible costs; however, if you’re under the age of 65 and you use any of those funds for nonmedical expenses, the withdrawn amount will be subject to a 20% penalty and will also need to be reported on your tax return as income.

4. Penalty for failing to take required minimum distributions (RMDs) from tax-favored retirement accounts

If you are a person who has been dedicated to putting money into your 401(k), your IRA, or another retirement account, then the idea of taking money out before you feel like you need it will just feel wrong. Unfortunately, the government requires that you do so once you hit a certain age. The IRS’ rules say that once you are 70 ½ you have to take what is known as a required minimum distribution, a percentage that is based on a published table that factors in your life expectancy and how much your account holds. As much as you might want to let your money continue to grow, the government wants to limit the amount of tax-deferred growth that each taxpayer can realize and start claiming its portion of the money you’ve been keeping it from taxing: that’s the reason for the requirement.

No matter how much you’d prefer not to touch your principal, the IRS takes an aggressive approach to make sure that you do so: the penalty for failure to take the amount out on the government timetable is more than significant – it’s 50% of the amount that you were supposed to take out, and if you don’t take out the right amount then you’re going to have to pay half of whatever you should have taken out but didn’t. The annual deadline is December 31st, though for the first year that you owe you have until April 1st to take the withdrawal. Not only do you have to make sure that you make your payment on time, but you have to calculate it correctly, and that can be somewhat complicated because the amount changes each year as your life expectancy and the value of your account shift. The good news is that the bank or investment company where you’re holding your money is generally equipped to assist with the calculation, and can even make things easier by arranging for automatic dispersal. Setting this up makes a lot of sense, as it eliminates the emotional twinge of writing a check and makes sure that it gets done so you can avoid that draconian penalty. However, the IRS does have the power to waive the penalty if you can show reasonable cause for failing to take the distribution and have a made a corrective distribution before applying for a penalty waiver.

5. Penalty for contributing too much to tax-favored accounts

Have you ever heard the phrase “they get you coming and going?” It may have been written for the IRS. Just as you’re learning that they’ll penalize you for not taking out enough money, you find out that they’ll also penalize you for depositing too much. Tax-deferred accounts like IRAs and 401(k)s limit the amount that you can contribute each year, and if you end up putting in too much, you’re going to be hit with a 6% charge. Though that penalty is a significantly lower percentage than is imposed for not taking the annual required minimum distribution, the amount can grow over the years if it isn’t addressed: if you make the mistake of leaving the excess funds in the account, you’ll face the same penalty each year until it’s been withdrawn. That can add up quickly, especially if you aren’t aware of the mistake you made until the government hits you with the penalty several years later.

The solution is to review the amount that you’ve deposited to make sure that there is no overage, and if there is to take it out before the deadline for your tax return. If you’ve filed an extension, then you’ve also extended the deadline for the withdrawal. This penalty applies to all tax-deferred accounts that limit the amount of money you can deposit in a given year.

6. Penalty for failing to file, or for filing your required tax return after the designated due date

The tax deadline is set in stone every year. It’s in the news; it’s on the IRS website and your tax forms. There’s no escaping it, and if you try, then you’re going to get penalized. Some people miss the deadline because they are procrastinators or they just forgot, while others make the mistake of thinking that if they don’t send in paperwork, then they won’t have to pay. Whatever the reason, you’re going to end up getting caught one way or another and having to pay the penalty. Those who run on the idea of “if I don’t send them my name and income then they’ll never know that I owe them money” fail to realize that the entity that provided that income also is required to send in paperwork to the government. When there is no tax return filed to match the tax information filed by your employer or investment, the government is going to begin an audit, and you’ll be in far bigger financial trouble than you would have been if you’d filed a return and let the government know that you couldn’t afford to pay what you owe. Failure to file results in penalties that add up quickly: 4.5% of the tax due will be assessed and added to your tax liability for each month that you’re late, up until you pass the five-month mark and hit the maximum penalty of 22.5%. There is also a minimum penalty amount of smaller of $210 or 100% of your tax due where it greater the percentage amount.

7. Penalty for failing to pay your taxes on time

In all fairness, some people don’t file their tax return because they don’t have the money available to pay what they owe. The truth is that the amount that is penalized for failing to file is much more than what you would be penalized if you did file without paying. Though you’re looking at a penalty one way or another, it makes sense to file, even without sending in the money that you owe.

We’ve already gone over the 4.5% monthly penalty for failure to file, up to a maximum penalty of 22.5%. On top of the failure to file penalty, there is 0.5% penalty per month for failure to pay to bring the total penalty for failing to file and pay for the first five months to 5% per month. However, If you get your paperwork on time without actually sending in a payment, you avoid the 4.5% late filing penalty. Even after the first 5 months, the late payment penalty continues to accrue until the tax is paid. One important thing to remember is that the requirement to pay begins on the tax due date – even if you request an extension for filing your return, the clock starts ticking on the non-payment penalty on the tax deadline date. If you’re at all able to send in money, then do so – even if it’s only a portion of what you owe.

For those who are suffering from financial difficulties, the IRS offers installment arrangements to make things easier. Though penalties are still likely to be tacked on to your tax liability, setting up an arrangement will prevent you from getting into arrears with the government and stop them from initiating a collection action. There are also negotiations available for those who provide proof of their inability to pay. The government is willing to help and does help many taxpayers, offering compromises where appropriate. You’re much better off coming forward, submitting all necessary paperwork on time, and asking for help.

8. Penalty for filing a substantially incorrect tax return or taking frivolous positions on a return

The IRS understands that mistakes happen: people have trouble with mathematical calculations or misunderstand definitions, and when that happens, and they discover the errors, they generally send out a letter notifying the taxpayer of their mistake and are open to hearing explanations. Sometimes they forgive the mistake and allow a correction to be made, and in other cases, they impose a penalty, usually no more than 20% of the underpayment for innocent errors. When the penalty is that high, it’s generally an indication that the government has reason to believe that the mistake represents legal negligence. It can also be a reflection of the magnitude of the underpayment, with larger underpayments resulting in more significant penalties.

However, none of these penalties are as significant as what you will face if the government has reason to believe that your underpayment was intentional.

Purposely understating the information on your tax return to minimize your liability constitutes civil fraud, and subjects you to 75% penalties of the amount that you underpaid. Of course, you will also still be on the hook for the amount that you should have paid in the first place if your tax return had been accurate and reflective of your real income. The IRS has little patience for either fraud or for what they refer to as frivolous tax arguments meant to help people evade paying what they owe. Depending upon the individual situation, some taxpayers are penalized with no concern for the amount that they actually owed, and are required to pay a flat rate of $5,000.

These penalties are what results from civil fraud, but that is not the worst penalty you can face. The IRS has the right to charge a person who perpetrates significant underpayment or tax evasion as a criminal fraud subject to jail time in addition to economic penalties. Where the line between civil tax fraud and criminal tax evasion is drawn is subjective, but assume that when the government can prove that you purposely tried to get out of paying what you owe, you’re going to be held accountable in a way that’s going to hurt. Lying on a return is considered a form of perjury, and there are plenty of tax evaders who have been forced to spend years in jail and to pay hundreds of thousands of dollars in penalties.

IRS Penalties Are A Entirely Preventable Problem

Though the list of penalties provided here is not exhaustive, it gives you a good idea of where you can get into trouble, as well as how to avoid trouble. Learn the requirements, follow them, and when in doubt, seek help. It’s also important to know that if you do get yourself into trouble, you’re much better off facing your situation then trying to pretend they don’t exist. A tax professional will guide you through the process and help you find your best answers.

How an eCommerce CPA Helps Business Owners

Look for a Licensed CPA that gets E-commerce

Hiring the best E-commerce CPA accounting firm to contribute to your team’s success is serious business. It takes time, know-how, and diligence to stay the course to find the right solution for you and your growing eCommerce or online retail business.

Knowing what type of tax strategy, plus putting a plan in place to implement it, is an important step in securing the financial success of your business – and your own personal wealth.

There are three key components of a fuss-free accounting process for e-commerce businesses:

#1. Get a licensed CPA accountant that gets eCommerce.

#2. Use the best-of-breed accounting software and technologies, and implement efficient accounting processes and systems.

#3. Work together with your licensed CPA accountant to help you build wealth with your eCommerce business – no matter the size.

This may sound complicated, but a licensed CPA accounting firm with experience in e-commerce can guide you through these challenges.

Caution: An Unlicensed Accountant May End Up Costing You More

Using an unlicensed accountant who lacks professional experience in e-commerce and taxes can actually end up consuming more of your time and potentially costing you a lot of unnecessary taxes.

Don’t just assume that all accountants know what they are doing. Accountants are human and make mistakes too! A licensed CPA accountant should be checking key performance indicators (KPIs), COGS, inventory assets, Sec179 investments, and estimated taxes. This can help you get an idea if things might be off and provide you with upcoming cash flow estimates.

Making sure your accountant is getting it right, will help you have the peace of mind that everything is running smoothly in your business. And you will have accurate numbers that will help you make better, more informed business decisions.

E-commerce retailing can be a dream way of becoming an entrepreneur. But speaking to a licensed CPA accountant, whether you are about to launch or have been in business for many years, will repay your efforts a thousand-fold in reducing anxiety and getting your accounting and taxes right.

Avoid getting lost in the Amazon Seller digital jungle.

Selling on Amazon is like getting lost in a digital jungle among thousands of other sellers. Amazon’s services do not cover your store’s day-to-day financials and accounting.

When it comes to your finances, ask yourself a few questions:

Are you collecting sales tax from the correct territories?
Have you calculated your Cost of Goods Sold correctly?
Are your books showing you the full financial picture of your business?
Do you really want to do all of this on your own?
Are you keeping proper track of your Amazon seller financial transactions?
Or, are you feeling like you don’t know what you don’t know?

Without solid bookkeeping and accounting, you might find your eCommerce business in some difficulties, especially once tax filing season comes around.

Insogna CPA specializes in eCommerce and Amazon selling accounting services. We don’t need to learn how it works. We can hit the ground running on day one. You can expect fast turnaround times, accurate records, and a true partner to help you through the financial side of your business.

In addition to accurate bookkeeping and accounting records, we also assist you in tax planning and paying the right taxes throughout the year.

With accurate financial statements, you can easily see and match payments, determine extra commissions, know which orders remain unpaid, and more.

Are you making a profit?

Tracking your day-to-day financial transactions is crucial. Without up-to-date accounting, you won’t know whether you’re truly earning a profit or simply making sales. It will also be difficult to gauge the success and viability of your Amazon store.

Make the Right Decisions

Always know where your money is. Documented daily operations assist you in making the right financial decisions as your business grows.

If all you need is your accounting done right, that’s okay. If you want tax planning guidance, payroll assistance, or direction on selling your business, we can help with that too.

Contact Insogna CPA to learn more about how we can help you take your Amazon store to greater heights.

Automated Bookkeeping for eCommerce Sellers

We take your accounting worries away by creating monthly Balance Sheets and Profit & Loss statements you’ll be able to interpret and analyze over time.

Our team reconciles the sales data and organizes in a way that you can track of what’s happened in previous months and predict what your finances should look like.

Be on top of your cash flow and feel prepared for tax season, raising capital, and scaling your business with clean and consistent accounting.

Know your real-time financial situation so you can make data-driven decisions and solve problems proactively instead of reactively.

eCommerce Accounting Channels

We specialize in a variety of eCommerce accounting channels, including:

Multi-sales channel operations
Merchant account reconciliation
Website sales
Amazon

Ebay
Shopify
Retailers
Wholesalers

Let Insogna CPA ease your financial and eCommerce bookkeeping worries. Put your accounting needs in our hands.

Top eCommerce Business Challenges + The Solution

How can you keep up with your eCommerce accounting when you also have partners to meet, logistics to worry about, and a business to run? Then, as your business grows, you’ll have increased compliance requirements, new markets to enter, and compounded tax challenges.

It’s impossible to do it all yourself. And, you’re not alone. Here are the top, four eCommerce business challenges we’ve identified; plus, how to solve them.

Sales Tax Liability—Over the past few years, eCommerce sales tax has gotten more complicated for the eCommerce business owner. Online retailers need to remit tax in nearly every area in which they sell. But, some challenges do it electronically while others require specialized knowledge of tax laws.
Seller Fees—Complex fee structures can be a challenge to track. There can be fees for transactions, listing, order fulfillment, advertising, and more. Without the right tools in place, this could leave you spinning.
Ruinous Records—Disorganized books can cause a lot of problems, such as fraud, deceitful tactics, and internal control nightmares.
Growing Pains and Money Management—With a limited understanding of your company’s profitability and the correct way to manage business finances, you may have a huge hurdle to cross.

With your busy schedule, the thought of trying to handle complex business accounting on your own can be overwhelming. That’s why Insogna CPA works with you to help you grow your business.

Take advantage of our expertise rather than spending time looking, hiring, and maintaining an in-house accounting team. Give us a call today.

Accounting Experts For eCommerce Sellers

Stressed out? We help eCommerce and online sellers to drive profitable results by taking the bookkeeping headache away.

We understand your challenges. That’s why we focus on using our eCommerce accounting experience to help you and your business to reach their full potential.

Avoid taking a reactive approach to your bookkeeping by trying to fix problems after they’ve happened. Our team helps you make the most of your data by preventing financial mistakes without the stress of trying to manage them yourself. We help sellers like you with:

Automated bookkeeping
Amazon accounting
Sales tax
Payroll
401(k) and IRA planning
Advising on strategic business decisions

Take back your time and grow your wealth with customized, monthly business accounting solutions tailored to your needs.

Grow smarter with the perfect fit. Smarter technologies. Seamless processes. Everything you need to streamline your back-office.

Avoid the bookkeeping headaches. Work with a team that knows eCommerce, like Insogna CPA, inside and out. Give us a call today.

eCommerce Business Stages – Profits $1 million+ continued

Doing omnichannel marketing may also have you looking to expand into the global marketplace. Content personalization, omnichannel marketing, expansion into the global marketplace, automation, and so on. “At this level, you need a combination of resources to run your business most effectively” (Scharf, 2018).

Where do you go from here?

Outsourcing may be required for global expansion operations, and having a strong CPA team helping strategize on the financial impacts of expansion is critical here. This is where a fractional CFO can help.

Your accounting team is checking all your numbers regularly, and in most cases at this level in real-time. Your virtual controller is helping forecast and plan. And now your fractional CFO will help ensure that every financial box is being checked when expanding into omnichannel and international sales. “In the past, complicated taxes and high shipping costs have made expanding sales overseas a major challenge for SMBs, but new technology has lowered the barriers for small businesses looking to take advantage of untapped markets” (D’Angelo, 2018).”

Technology, as a whole, will be central to your eCommerce business’ growth and progress. From accounting to inventory to sales to taxes, you’ll want a strategy making sure all of these systems are talking with one-another and creating as much automated efficiency to keep any unnecessary human interaction out as much as possible. “The Shopify/ReCharge combination for subscription recurring billing comes to mind. These services work great together, but they become questionable as massive growth occurs. This is mainly due to the two components not being able to pass data back and forth in real-time, making manual data entry and reporting a bottleneck for scaling” (Hubbard, 2020). As your business has now experienced massive growth, you may need to take a closer look at the technological foundation that supports your company’s processes and creates your customers’ experiences.

Doing a thorough overhaul of your technology systems and network processes may feel like a tedious task, but it’s one that is well worth pursuing.

First, it’s essential that your software is not only providing the best possible consumer experience on the front-end, but also that the back-end systems are accessible and collaborative. Your business process commerce architecture is an essential tool that will help your team communicate better, work more efficiently, and stay agile in their actions to meeting your businesses goals.

Second, refining your tech stack is a great way to increase performance and multiply profit margins. Doing this will also allow your CPA team to perform more tasks through software automation and review more data accessed in real-time, enhancing your business’ operational capabilities and doubling down on your financial health. “Be diligent with these details because they are what can make or break you” (Thomason, 2020).

"Outstanding service, knowledge and support. I would highly recommend this firm to anyone for personal or business tax or financial assistance. A big differentiated benefit they offer over others is they run everything digitally, so there are no more physical papers to deal with - yeah!! Great job Insogna - hope I get more opportunities to work with you and recommend others do also."

Jerome H. Client

With your plan to continue scaling your business, you’ll need to invest time, people, and resources into researching new and upcoming technologies to support your growth. “A focus on scalability means investing in the business’ overall commerce architecture, the ecosystem of software components that are used to operate the business. This includes the e-commerce platform, CMS, ERP, CRM, OMS, PIM, marketing suites, analytics and reporting, etc.” (Hubbard, 2020). A valuable CPA team can help advise on your tech-stack so that you’re creating as much technological efficiency as possible at this level. Streamlining at this level will only make your life easier, and can cause your personal wealth to move into ‘auto-pilot’ mode, as you breeze past your projected annual profits.

Depending on your goals, your Phase 4 will look different. You may be intent on maintaining your lifestyle, determined to grow by a marginal amount each year, or focused on continued expansion by accelerating into omnichannel eCommerce sales. An experienced CPA team of advisors, coaches and strategizers that are working together to help you achieve your goals is an invaluable piece of the eCommerce selling puzzle, one that exists solely so that you can do your job better.

Whichever Phase you find your business in today, don’t put your success in the hands of unlicensed ‘Craigslist’ bookkeepers.

Get a CPA firm aligned with your vision who charges a fixed monthly price for all of your anticipated CPA needs, and who provides you with unlimited communication and access. Insogna CPA’s team of experts is here to help you when you’re ready.

eCommerce Business Stages – Profits $1 million+

You are now truly running an enterprise. You’re managing people, not just products. You’re selling on multiple channels, or considering doing so. You have more processes than you know what to do with, and they all must be able to communicate effectively with one another to efficiently get results that help you make strategic decisions.

Does this sound like you?

Your online business is seriously successful.
You have staff working for you, and your HR needs are growing.
You want strategic advice on how to grow and keep your wealth.
Your commercial space needs are growing.
You’re paying more taxes than ever and want to know how to pay less.
You’re thinking about expanding sales channels.

Your vision for your business stretches out in front of you now, expanding and multiplying towards the horizon. Your day at work is long, and your work day is even longer. You feel like you can’t work at the rate necessary to keep up with your growth of your business. But you also are finding it difficult to relinquish control and delegate, at least for right now, as you are just beginning the process of hiring adequate personnel to staff your blooming eCommerce company.

Your business has outgrown your home, and you likely have commercial space or are in the market for more space as you grow. And you have been able to fund the business, but additional capital is needed to get your business to that next level and you’re not sure where to begin. Your hopes are high, your energy is high, but your profits are not (yet) as high as you’d like them to be, and you can feel the pressure.

“An established business has proven itself in terms of being able to survive in a competitive marketplace, but that competition doesn’t go away as a business evolves” (Hubbard, 2020). Now is not the time to rest…at least, not yet. You must continue innovating, continue creating efficiencies, and continue forecasting your financial needs in real-time in order to reach a place of comfortable sustainability. This is where a valuable advisory CPA can help.

Our philosophy with our clients has always been to have an annual retirement contribution strategy, and let their businesses’ value be a ‘bonus’ when sold in the future. This way, over the course of many years, the business owner has accumulated a large savings balance and growing recurring dividends so the business owner can retire when they want – not based on when the business can be sold and the value they hope to get for their years of hard work. – Chase Insogna, President of Insogna CPA

The first step to growing any business successfully is people. Making the right hires that help take your business from ‘y’ to ‘z’ is critical as you only have enough bandwidth for existing tasks in a 24-hour work day. And while working 24/7 is sustainable for a while, burn-out can set in, and worsen your health. Outsourcing these days is easy with today’s technology.

Hiring the right CPA firm team of experts can be helpful taking care of your accounting, payroll, virtual controller, fractional CFO, and tax strategist needs.

An immediate benefit of hiring a CPA team is that you will have an entire accounting department at your disposal for ongoing expertise. “For about the same price as hiring a bookkeeper, you can pay for a fraction of [the total cost] to get an entire accounting department to support you the way your business should be supported.” (Scharf, 2018)

Apart from using different devices, another reality of marketing today is that prospects might have to use channels such as social media, email, phone, and others during interactions with your business. With omnichannel marketing, you can integrate all these interactions together so that you can deliver your brand messages to prospects. Furthermore, it helps you to reduce friction during the buying process and increase conversions. According to Invesp, companies with omnichannel customer engagement strategies retain 89% of their customers while companies without omnichannel customer engagement strategies only retain 33%.

— Bullock (2020)

"I first started working with the team for my small business--they were the only accounting firm who explained things to me in a straightforward way. We had them handle our personal taxes as well and were very pleased with the service we received. We've now kept them as our accountants through closing my small business, changing jobs, hiring different nannies, and moving across the country. Straightforward pricing and a responsive group who clearly know their stuff!"

Maggie J. Client

Instead of outsourcing your accounting needs to multiple people in multiple roles, hiring an entire accounting department means that communication will be efficient and effective, and all of the important players in your financial sphere will be able to actually talk to one-another. This increased efficiency internally helps with your overall goals – business and personal – as each person in the CPA firm is familiar with your business, financial forecasts, and work internally together to help reach your goals with you. Outsourcing to the right CPA team can help focus more of your efforts on continuing to build your successful eCommerce business and put more time back on your schedule for things you love – outside of work.

Now that your business is established, you likely find yourself with the ability to build your personal wealth and meet your future retirement goals. The majority of business owners we initially meet with do not have any plan for retirement, other than continuing to invest in their business. We find this strategy horribly mis-directed. A business owner rarely gets all of the blood, sweat and tears when they look for a buyer on the cusp of (or ready for) retirement.

Where you decide to invest your hard-earned profits is something that your accounting team can help advise you with. “Whether you’re planning out how you’ll spend a loan or how you’ll spend your monthly operating expenses budget, getting a handle on your cash flow is something you need to do before you make any big investment decisions” (Odjick, 2020). Your CPA will quickly be able to tell you what your current available cash flow looks like, and how far you can potentially stretch it to meet your goals.

Another area of significant interest at this stage of your growing business is potentially omnichannel marketing as you expand from one selling platform to two or many…

keep reading…

eCommerce Business Stages – Profits $500,000 to $1 million Part 2

Remember that business plan from Phase 1?

This is the perfect phase in your growing eCommerce business to assess cash-flow forecasts to plan for your business goals as you move into becoming a $1M+ online seller. This is where you show your current financial state, which helps with securing funding (if needed) and getting that commercial space you have your eye on — because your house simply cannot take another delivery.

After you’ve acquired commercial space, you’re likely looking to hire additional people, if you haven’t already staffed up running out of your home.
Have you considered employment/ contractor agreements?
Benefits to keep talent motivated and working with your business?
Additional insurance needs?

These are all questions as you staff up from 2-10+ people helping you run your growing eCommerce business. There’s no better person than your CPA to advise you on how to go about setting up payroll — in a way that will allow you to expand without cutting corners or neglecting to follow employer regulations.

Tax strategy is another vital ongoing advisory service that your CPA can help with, as your profits are increasing rapidly.

A CPA also knows what kind of deductions you are able to take as a small business owner and is able to maximize those deductions for you, minimizing the overall amount you have to pay on taxes.

Without professional, on-going, forward-looking support, you can end up paying more taxes than you legally need too.

One great way that a CPA sets you up for success in this regard is to forecast cash-flow and determine estimated taxes to pay, deferred retirement options and personal wealth growth.

Speaking of strategy, strategic planning is the highest leverage benefit that a CPA will bring to your business at this phase of your business’ growth.

“In this third stage of the e-commerce lifecycle, the attempts to reinvigorate your company’s momentum and growth should always be strategic.”

This is an area that CPAs are experts in, and you want a CPA who knows your eCommerce business.

Depending on what your strategy is, or what direction your business is moving in, your CPA will make both short- and long-term predictions about your eCommerce future.

He or she will also provide advice specific to the Phase your business is in now, as well as the Phase(s) you want to reach. CPAs can also provide you with a general managerial accounting background, plus access to quantitative data that you need in order to make well-informed business decisions. This may include, but is not limited to setting profitability goals, creating acquisition strategies, and developing risk management processes.

As your business grows and you begin to move into Phase 4, a qualified and professional CPA team of experts will provide you with insight and wisdom that will be invaluable to your company’s goals. Statista predicted that retail eCommerce sales will hit \$4.2 trillion in 2020, up from \$3.5 trillion in 2019.

If your goal is to continue growing your e-commerce business into Phase 4, then you’re probably already looking for advisory and strategy help.

The right CPA firm is an invaluable expert to have on your advisory team that can help advise, coach and strategize with you, helping reach your goals.

For sellers with profits of $1 million+.

eCommerce Business Stages – Profits $500,000 to $1 million

Does this sound like you?

Your online business is outpacing your growth projections.
You may have (or be looking to add) multiple employees.
You want strategic advice on how to minimize your taxes before year end.
You may be interested in growing sales over \$1m and looking for efficient technologies and cash-flow forecasting to meet your revenue goals.
Your business is taking over your home and you’re running out of space.

At this phase in your business’ growth, you should take the time to pause and congratulate yourself.

Yes you may:

Want to grow your business even more
Have a to-do list that is the length of a novel
Have more responsibilities and stressors than ever

But that’s exactly why it’s so important that you stop to recognize how much hard work you’ve invested in building this company from the ground up. If you can’t appreciate your own hard work, why should anyone else?

That being said, you’re probably facing a whole new variety of issues, from how to save money on your taxes, to hiring employees, to cash-flow forecasting for the next Q4.

“You need to understand your data and keep an eye on key metrics to ensure the numbers are going in the right direction”.

A licensed CPA can help and become a truly integral asset to your businesses’ goals, your tax strategy, and your financial future.

For a business person, the opportunity to hire a CPA is kind of like being offered the opportunity to construct a financial “safety net” and place it securely beneath your holdings. It’s a form of business insurance that you can’t purchase from an insurance company.

But you’re not just gaining a procedural and technical knowledge base; you’re also expanding your “team” — you know, the people who have your back when you need financial direction and business advice.

It’s astounding sometimes, to new entrepreneurs, that businesses can, and often are, built from the ground up by a very small, select number of people.

The reason you want a CPA to be one of those people is because of the value they bring to the table as a sound board as well as a strategist. And seeking out an objective opinion on your business’ state of affairs is one of the best ways to stay grounded and feel supported as you continue growing your eCommerce business.

"Look actively for mentors -- their advice can be priceless, even for little things like acquiring business licenses. One of the smartest decisions I ever made was finding someone who could show me the ropes."

Darren DeMatas eCommerce CEO’s founder

Even if you’re determined to figure out everything for yourself, having a CPA advisor to help guide you through uncertainty, complex processes and maximizing tax deductions doesn’t mean you’re giving up any of your authority over your business decisions.

An experienced CPA can simply provide strategic context for those decisions, ones which are still yours to make, and can have a significant impact on your financial future.

In addition to having a CPA in your corner as a strategic partner, there are a number of other complicated processes that a CPA can help you make sense of. When you’re running a successful eCommerce business, you need to track your business finances, as well as your own personal finances.

Just like your own health can be checked by a doctor, your personal and professional assets can be checked for general wellness by a licensed CPA.

The first thing you’ll want to do is determine your net worth, and see which way it’s trending.

Next, calculate your debt-to-income.

Once you’re armed with these numbers, you’ve completed the most painful step in the process.

You can then track what you’re spending as well as where your money is going. Then you’ll know if you’re spending more than you should be.

After that, you’ll be prepared to set up an emergency fund account and then focus on your investment strategy. But first, ensure your financial health is… well, healthy!

Assessing your current wealth is a vital step towards becoming more well-informed about how to manage your cash flow that helps grow your business.

A CPA advisor can help you to create a budget for your business and personal finances, figure out how much to pay yourself from your company, estimate your income taxes, and how much is available for potential tax deferred savings to minimize your current year tax burden as much as legally possible.

Keep reading…

Insogna CPA 3-Time INC. Award Winner

Insogna CPA Receives Award: Recognized as No. 129 on Inc. Magazine’s Fastest-Growing Private Companies in the Southwest Region

Companies on the 2022 Inc. 5000 Regionals Southwest list had an average growth rate of 154% percent.

Austin, TX, March 15, 2022 – Inc. magazine today revealed that Insogna CPA is No. 129 on its third annual Inc. 5000 Regionals Southwest list. It is the most prestigious ranking of the fastest-growing private companies based in Arizona, New Mexico, Oklahoma, and Texas. Born of the annual Inc. 5000 franchise, this regional list represents a unique look at the most successful companies within the Southwest region economy’s most dynamic segment–its independent small businesses.

“We are excited to be recognized, for the 3rd year in a row, by Inc. Magazine,” said Chase Insogna, Founder and President of Insogna CPA. “Our experienced team of professionals work diligently to serve our valued customers every day. This dedication to delivering great customer experiences has led to significant year-over-year growth at Insogna CPA,” he continued. “We are extremely proud of our team’s success and look forward to continue providing ongoing financial expertise to our valued customers.”

The companies on this list show a remarkable rate of growth across all industries in the Southwest region. Between 2018 and 2020, these 141 private companies had an average growth rate of 154% percent and, in 2020 alone, they added 10,563 jobs and nearly $10.9 billion to the Southwest region’s economy. Companies based in the Austin, Texas, Scottsdale, Arizona, and Fort Worth, Texas, areas had the highest growth rate overall.

Complete results of the Inc. 5000 Regionals Southwest, including company profiles and an interactive database that can be sorted by industry, metro area, and other criteria, can be found here.

“This year’s Inc. 5000 Regional winners represent one of the most exceptional and exciting lists of America’s off-the-charts growth companies. They’re disrupters and job creators, and all delivered an outsize impact on the economy. Remember their names and follow their lead. These are the companies you’ll be hearing about for years to come,” says Scott Omelianuk, editor-in-chief of Inc.

Award Methodology

The 2022 Inc. 5000 Regionals are ranked according to percentage revenue growth when comparing 2018 and 2020. To qualify, companies must have been founded and generating revenue by March 31, 2018. They had to be U.S.-based, privately held, for-profit, and independent—not subsidiaries or divisions of other companies—as of December 31, 2019. (Since then, a number of companies on the list have gone public or been acquired.) The minimum revenue required for 2018 is $100,000; the minimum for 2020 is $1 million. The rigorous selection process ensures that only the most dynamic and rapidly growing companies are recognized, reflecting the vibrant entrepreneurial landscape across various industries and regions of the United States. As always, Inc. reserves the right to decline applicants for subjective reasons.

About Inc. Media

The world’s most trusted business-media brand, Inc. offers entrepreneurs the knowledge, tools, connections, and community to build great companies. Its award-winning multiplatform content reaches more than 50 million people each month across a variety of channels including websites, newsletters, social media, podcasts, and print. Its prestigious Inc. 5000 list, produced every year since 1982, analyzes company data to recognize the fastest-growing privately held businesses in the United States. The global recognition that comes with inclusion in the 5000 gives the founders of the best businesses an opportunity to engage with an exclusive community of their peers and the credibility that helps them drive sales and recruit talent.

The associated Inc. 5000 Conference is part of a highly acclaimed portfolio of bespoke events produced by Inc. For more information, visit www.inc.com.

eCommerce Business Stages – Profits Under $100,000

You’ve decided to take the leap and start an eCommerce business. Congrats!

You’re thinking about selling online.
You’ve started dipping your toes into online selling.
Your online selling business is taking off after your first “big” month and your profit is trending over \$30,000 this year.

This is the start of your hard work and investment into building this business to reach your goals. It’s time to nail down the big ideas, strategize over your growth targets, and develop a well, thought-out business plan. It’s time to clear out that storage shed or guest bedroom and begin accumulating stock. It’s time to take action so that you can live out your dream of building your own successful eCommerce business.

In the early days, you’ve probably done some homework and figured out what’s important: marketing your products, determining what capital to use to start, and getting those first sales in the door, especially during the fourth quarter. Achieving these three goals is usually crucial to kick-starting your success. You are likely doing all of your own sourcing, buying, pricing, and listing online, as well as managing fulfillment (or maybe utilizing a co-packer), customer service, inventory management, and sales taxes….and that is before you even think about completing all of the back-office tasks, such as accounting, inventory count and how to minimize your taxes.

Accounting 101

Getting accounting set up from the beginning is crucial with your eCommerce business, because the more this step is delayed into Phase 2 (or worse, Phase 3), the more mountainous the amount of work required to clean this information up – as well as the significant cleanup costs that come with this project work. And have you considered how you’ll provide your lender with financial statements if you’re seeking financing or a mortgage?

Accounting is not just syncing and categorizing your transactions. Are you properly recording gross revenues? Most merchants only sync net amounts to your books. If you value your time and would rather automate as much accounting work as possible, the costs easily outweigh focusing more of your attention on selling more of your products online. Maybe you manufacture or assemble your own products. What about recording COGS from inventory to match your revenues? Or maybe you’re reselling products by arbitraging? With all of the platform fees, do you have any easy way to determine true net profitability per product sold, with overhead included?

Then there is your business’ structure to consider. Many start out as a DBA (Doing-Business-As) with their county registration. Just remember this does not protect your business name with your state, so if you are building a brand or storefront name, it is possible someone could register this too and easily compete against you – or worse, legally claim your brand name. And if you’re selling on Amazon and/or other platforms, changing your business name and EIN# can potentially cause you to lose all of your reviews, causing you to start from scratch again (from a marketing viewpoint). So, setting up an LLC is likely beneficial in most cases when starting out. We can help advise on the best structure for tax strategy planning so you can maximize your tax savings with your eCommerce business.

"Insogna CPA has done our Amazon Business taxes for the last two years. They are the best accounting team that we have worked with to date and we plan to be long-term clients. Excellent staff who truly care about satisfaction and diligence. Great for All Amazon Sellers."

Nick Ehle

Owner

You may be selling through eBay, the Amazon Marketplace , Etsy, and/or perhaps your own website.

Your customers have mostly stumbled upon you or found you through word-of-mouth, and you wish you could focus more of your time and efforts on marketing and growing, instead of worrying about educating yourself in legal and CPA stuff. Expertise is developed over many years in business. So, the value you pay to a professional will help you alleviate any unnecessary time figuring this out for yourself and hoping you made the right decisions. The potential of losing your customers is a real concern. We have seen this before, where someone quickly set up shop on a marketplace and did not think through the long-term consequences, such as their business evolves.

Choosing the right legal structure (LLC or Inc) is not only important for liability protection and taxes but is also very important to set up when initially creating your Amazon store online.

In order to sell on Amazon, for example, you are best off having an Employer Identification Number (EIN) rather than using your Social Security Number as a DBA (doing-business-as) entity. Setting up your entity from the start is recommended because switching after you are already established on selling platforms can be very costly and time-consuming. These small details are exactly what an experienced CPA can help advise you with, and why many eCommerce business owners look to partner with a CPA early in their business growth.

Though you want a CPA who can deliver the best advice to your business, you’re also probably working with a limited budget – and are interested in getting the most bang for your buck. That’s why it’s essential that you join forces with a licensed professional, like us, from the beginning to avoid costly ‘catch-up work’ in the future as you grow.

There is a host of what we like to refer to as “craigslist bookkeepers” out there; people who advertise their services as though they are a professional, but do not actually hold a license. They also cannot provide you with the state board protections that a licensed CPA can, the same protections that provide greater transparency and allow you to trust that your information will not just ‘disappear’ one day when you are not able to get a hold of your ‘craigslist bookkeeper.’ If you decide to spend your hard-earned money on professional services, be certain that you’re getting the best professionally trusted advice and expertise.

Keep reading…

eCommerce Business Stages – Profits Under $100,000 Part 2

Not sure if someone is a CPA?

Just search your state board of public accountancy and look up the person’s name. Most people who advertise themselves as “accountants” or “bookkeepers” are not usually licensed CPAs providing you with greater transparent protections.

A reliable, knowledgeable CPA is just one part of the equation; the other part is making sure your CPA understands eCommerce and its nuances. “Firms that can provide a differentiated value – beyond traditional compliance services – will have the upper hand as the industry continues to revolutionize.” The kind of CPA you’re searching for should have the same priority as you: helping you reach your goals.

Getting Started

The first item on your agenda is to create a solid business plan. The U.S. Small Business Administration (SBA) agrees: “A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business.”

Moreover, your business plan is the initial document you can introduce to your CPA. A comprehensive traditional business plan usually includes the following sections:

• Executive summary

• Company description

• Market analysis

• Organization and management

• Service or product line

• Funding requests

• Financial projections

But, hey, let’s be honest—how many people actually do one of these business plans before starting a business? We’d say we’ve met very few in all of our years starting businesses who actually had one of these things. The most important is keeping an updated cash-flow forecast.

So, while it’s a good idea to have a plan, putting all of this work together is not necessarily needed to get your first online sale. Sometimes eCommerce businesses just happen. You buy some products, list them online for sale, and — boom! You’re now a business making money. Just don’t forget to now also get a CPA.

Also, don’t forget about taking advantage of a third-party application that will help you to manage your multiple online selling channels; again, this is an area that we can direct you through. Many eCommerce businesses move quickly through the four growth phases, and you’ll want to be in the best position to succeed as your business expands and your needs increase.

For sellers with profits of $100,000 – $500,000

Record-Breaking Tax Refunds by Insogna CPA

The entire Team at Insogna CPA is excited to announce we helped our clients grow their revenues totaling $2,357,000 in 2019. This is from all returns prepared as of Dec 31, 2020.

A special thank you to all of our valued clients. We are excited to continue working with you, year-over-year, and looking forward to a successful 2021!!

Record Breaking Revenues 2021

The entire Team at Insogna CPA is excited to announce we helped our clients grow their revenues totaling $215,464,385 in 2021.

A special thank you to all of our valued clients. We are excited to continue working with you, year-over-year, and looking forward to a successful 2022!!

Senior Care Costs and Financial Resources for Texas

Did you know that twelve percent of Texans are over the age of 65?

While longevity is a wonderful byproduct of our modern society, the downside is that age often arrives at a cost. Declining health often means that seniors require daily support; from meal preparation to hygiene and medical nursing care. These necessities quickly become expensive. In the state of Texas, there are options for seniors in need of care, as well as financial resources and options the family may need to consider.

In-home Care

Sometimes, an elderly family member may need someone to shop, cook meals, and do some light house cleaning chores. If cooking has become an issue, there is a Texas outpost of the national Meals on Wheels organization, providing food to seniors for little or no cost.

If you are comfortable having an outsider visit an elderly family member in their home, there are many in-home care services available from agencies and franchises, as well as from individuals. Several national resources are also available, such as Care.com and visitingangels.com, but there are local and county options as well. Costs can vary widely and payment is either by the hour or a day-rate. There are also local and state agencies that provide some limited financial and services support. Details on those programs are available on the Texas Health and Human Services (HHS) website. If the senior owns his/her home but is running low on cash, looking into a reverse mortgage may provide the needed cash for services while allowing them to remain in the home.

Assisted Living and Nursing Home Care

The inability to cook meals or travel to the store, a pharmacy, or a doctor without assistance is relatively easy to remedy with piecemeal service options, from ride-share and UBER to delivery services. However, if your elderly family member has a deteriorating medical condition, such as Alzheimer’s, dementia, or physical impairment such as onset Parkinson’s, or blindness, being alone may no longer be an option. If a live-in caregiver is not an option, he/she may not be able to remain in their home. If this situation develops, it may be time to investigate an assisted-living or nursing home alternative.

If the individual is still relatively ambulatory and possesses strong cognitive powers, moving to an assisted living situation can be an ideal solution. Assisted living facilities offer both single and shared living quarters and provide meals and activities that are ideal for someone who would benefit from social interaction. They are expensive, unfortunately. In Texas, costs for assisted living facilities range from $4,000, to as much as $10,000, a month or more. Of course, amenities vary widely as well.

Facilities are licensed. There is also a nonprofit organization, Assistedliving.org that may be a useful guide to the cost, location, and quality of Texas providers. Again, they may range in cost from high $3,000 to $10,000/month. Most assisted living facilities offer step-up care options or can refer you to comparable facilities when your senior needs nursing care, or memory care support.

Costs associated with a nursing or assisted living facility vary. However, the senior’s assets, including a home (unless alternative asset planning has been undertaken years in advance), will be drawn down to pay the monthly costs. There are often entry fees or deposits of thousands of dollars that may or may not be drawn upon for monthly expenses. While room and board, including meals, may be part of the monthly cost, other incidentals, such as hair salon services, cable, and turn-down services, may cost extra.

Finally, if a senior has spent down their assets and requires nursing home care, it is never too early to visit Medicaid options. Medicaid is both a Federal and State-run program. There are nursing facilities in the state that accept Medicaid-eligible seniors, but space is often limited. There are many asset limitations for Medicaid and the paperwork could take weeks, perhaps months to complete.

Of course, financial planning today often includes consideration for older parents and relatives that may need assistance—both physically and financially—beyond their means. Talking to your accountant and estate planner is a good first step in discovering what options and resources will be needed in advance of when your senior needs a helping hand.

Please do not hesitate to reach out to Insogna CPA for more information or a discussion on this matter.

Insogna CPA Amongst Top 18 Best Accountants in Austin for 2021

“Our goal is to connect people with the best local experts. We scored Austin Accountants on more than 25 variables across five categories, and analyzed the results to give you a hand-picked list of the best.” the Expertise website states.

Selection Criteria

Availablity
Qualifications
Reputation
Experience
Professionalism

It’s an honor to be named among the winners and receive a score of A+ for reputation and professionalism,” commented Chase Insogna, CPA, and managing partner. ” We truly love helping our communities members and providing the best services we can to clients.”

Availablity
Qualifications
Reputation
Experience
Professionalism

Our Other Awards

The Buzz About QSB Stock

With so many promising companies in the early stages of development, QSB stock gives everyday investors the chance to support the businesses they believe will be the next successful venture. With the attractive business tax benefits of qualified small business stock (QSBS) adding to the allure of investing in startups, QSBS is fast becoming a popular option for private shareholders looking to invest in shares with low minimum investment requirements.

For those who are not yet familiar with QSBS, it is helpful to understand what it is and what QSBS offers so you, too, can reap the benefits.

Breaking Down QSB Stock

Qualified small business stock (QSBS) refers to shares of stocks from qualified small businesses in the United States as defined under 1202 of the Internal Revenue Code. It is stock purchased from qualified small businesses after August 10, 1993. QSBS comes from any active domestic C corporation with assets valued at its original cost not exceeding $50 million soon after the stock issuance.

Qualified Small Business Eligibility Provisions

Qualified small businesses that may sell QSB stocks can include organizations in industries such as retail, manufacturing, and technology. It excludes hospitality, professional services (law, healthcare, architecture), agriculture, mining, and finance (banking and insurance). The companies, to be eligible, must use at least 80 percent of their assets actively in one or more of the qualified businesses and remain as a C corporation for the investor’s withholding period of the QSB.

QSB Tax Benefits

People who invest in QSBS can enjoy the following benefits:

100-percent exclusion from U.S. federal capital gains tax
100-percent exclusion from the AMT (alternative minimum tax)
100-percent exclusion from the 3.8 percent NIIT (net investment income tax)

However, for QSB stock issued before September 28, 2010, section 1202 gives a lower percentage tax exclusion, usually 50 or 75 percent. There is also a 28 percent tax rate for gain not excluded and subject to the NIIT.

Gain Exclusion Limitation

The tax savings under Section 1202 provide a generous limitation to the amount of gain from QSBS each taxpayer and issuer can exclude Section 1202 limits savings from business taxes of individuals to greater than:

$10 million, or $5 million for married couples who are filing separately.
Ten times the taxpayer’s combined basis in the amount of QSBS sold during the taxable year.

QSB Tax Exemption Eligibility Requirements

For individuals to claim the business tax benefits from a QSBS, they must meet the following requirements.

The investor should be an individual, not a corporation.
The investor should be US citizens or non-United States citizens living in the US.
The investor must have purchased the stock directly from the company and not in a secondary market such as the New York Stock Exchange (NYSE) or NASDAQ.
The investor must hold the QSBS for at least five years before selling and must have purchased the stock with either property, cash, or as a payment for service rendered. However, if the investor wants to sell the QSB stock before the required five-year holding period, the investor may avoid paying tax by investing the profit from the sale into another QSB stock granting the investor has held the QSB stock traded for over six months. If the QSBS meets these requirements, the investor has 60 days to complete the rollover into another QSB stock.
The C corporation that issued the stock must use 80 percent of its assets in qualified trades of businesses.

Insogna CPA will ensure that you get maximum benefits from your QSB stock. Contact our team of wealth building experts today to get started!

INSOGNA CPA Ranks No. 126 on Inc. Magazine’s List of the Fastest-Growing Private Companies in Texas

Companies on the 2021 Inc. 5000 Regionals: Texas list employed more than 44,000 people.

Austin, TX, March 16, 2021 – Inc. magazine today revealed that Insogna CPA is No. 126 on its second annual Inc. 5000 Regionals: Texas list, the most prestigious ranking of the fastest-growing Texas-based private companies. Born of the annual Inc. 5000 franchise, this regional list represents a unique look at the most successful companies within the Texas economy’s most dynamic segment—its independent small businesses.

“We are excited to be recognized, for the 2nd year in a row, by Inc. Magazine”, said Chase Insogna, Founder and President of Insogna CPA. Our experienced team of professionals work diligently to serve our valued customers every day. This dedication to delivering great customer experiences has led to significant year-over-year growth at Insogna CPA”, he continued. “We are extremely proud of our team’s success and look forward to continue providing ongoing financial expertise to our valued customers.”

The companies on this list show stunning rates of growth across all industries in Texas. Between 2017 and 2019, these 250 private companies had an average growth rate of 210 percent and, in 2019 alone, they employed more than 44,000 people and added more than $9 billion to the Texas economy. Companies based in the largest metro areas—Dallas, Houston, and Austin—brought in the highest revenue overall.

Complete results of the Inc. 5000 Regionals: Texas, including company profiles and an interactive database that can be sorted by industry, metro area, and other criteria, can be found at https://www.inc.com/inc5000/regionals/texas.

“This list proves the power of companies in Texas no matter the industry,” says Inc. editor-in-chief Scott Omelianuk. “The impressive revenues and growth rates prove the insight and diligence of CEOs and that these businesses are here to stay.”

More about Inc. and the Inc. 5000 Regionals

Methodology

The 2021 Inc. 5000 Regionals are ranked according to percentage revenue growth when comparing 2017 and 2019. To qualify, companies must have been founded and generating revenue by March 31, 2017. They had to be U.S.-based, privately held, for profit, and independent—not subsidiaries or divisions of other companies—as of December 31, 2019. (Since then, a number of companies on the list have gone public or been acquired.) The minimum revenue required for 2017 is $100,000; the minimum for 2019 is $1 million. As always, Inc. reserves the right to decline applicants for subjective reasons.

About Inc. Media

The world’s most trusted business-media brand, Inc. offers entrepreneurs the knowledge, tools, connections, and community to build great companies. Its award-winning multiplatform content reaches more than 50 million people each month across a variety of channels including websites, newsletters, social media, podcasts, and print. Its prestigious Inc. 5000 list, produced every year since 1982, analyzes company data to recognize the fastest-growing privately held businesses in the United States. The global recognition that comes with inclusion in the 5000 gives the founders of the best businesses an opportunity to engage with an exclusive community of their peers, and the credibility that helps them drive sales and recruit talent. The associated Inc. 5000 Conference is part of a highly acclaimed portfolio of bespoke events produced by Inc. For more information, visit www.inc.com.

A Guide to Sales Tax for Online Sellers

Sales tax is not a cut and dry subject; on the contrary, it has a lot of moving parts. When it comes to sales tax for online sellers, however, things can get even more complicated.

Different states require a different tax on different items, and policies are always changing and adapting. Furthermore, within a state, there may be regions where sales tax rules vary from one state to another. Not taking the time to understand this can have serious repercussions, and potentially unnecessary cash out of your pocket.

Know Your State’s Laws

One of the tricky things about sales tax is the fact that individual states are permitted to set their own—there is no such thing as a national sales tax. This means that states are allowed to select which items to tax and how much tax to charge.

Furthermore, many states allow local areas to set their sales tax independent of the state. While it’s impossible to list each of the sales tax jurisdictions differing sales tax regulations, the main takeaway is that it’s important to research your state and region’s sales tax rules as there may be a considerable variation that you aren’t already familiar with.

Know Your Company’s Obligations

Online Sellers and local retailers in the USA are only required to collect sales tax when they have ‘Nexus’ in that state. A Nexus means a significant presence and refers to factors such as a physical location, personnel, affiliates, or other business activities.

You also need to know what items are taxable and which ones aren’t. While most states tax items such as clothing, textbooks, and groceries, others do not. This means that online Sellers and local retailers in different states or in different state localities can have different combinations of sales tax requirements.

Understand Filing Frequency

After you determine whether or not you have Nexus in a state you will need to register for a sales tax permit. When you do this, your state will inform you of your filing frequency. This means the frequency for filing your tax returns.

Typically the filing frequency will be monthly, quarterly, semi-annually, or annually. The frequency will be determined by the size of your Nexus and state’s rules. The more tax revenue you generate in a state, the more frequently it will be collected, as a general rule. The money is used for local infrastructure, so states would prefer that it be active instead of sitting in an account.

Avoid Fines and Penalties

Due to the variation in state sales tax, it can be easy to make an honest mistake. The two most common mistakes businesses make are not collecting sales tax when they should be, and not paying these taxes ontime. Once you realize how complex the process is, it’s not surprising why these mistakes are made.

Sales tax is due in some states on the 20th of the month. In other states, it’s due on the 15th, or the 23rd. Depending on your state it’s easy to get the dates mixed up. It’s also easy to confuse the amount of sales tax to pay as an online seller.

Mistakes like these can result in penalties and extra interest. However, if something falls through the cracks it’s always worth discussing this with your state’s tax authority as some are willing to waive innocent mistakes.

Know the Standards and Guidelines

Sales tax policy is always changing, so you need to stay up-to-date. In some cases, the sales tax rate changes, at other times, it’s the filing frequency. Sometimes a state will start taxing an item it didn’t tax before or reduce the number of items taxed.

When it comes to online sales tax, the policy is even more varied. Current guidelines say that sales tax should be paid at the point of sale, which means the buyer/end user. At present, this is the case, but it is subject to change at any point.

Hire a CPA

Outsourcing these complex tasks to a Certified Public Accountant (CPAs), especially when utilizing technology to streamline the calculation of your sales tax and whether Nexus is applicable or not, will save you time and money so you can focus on growing your business.

A CPA has the professional experience needed to organize your sales tax and ensure you pay the right amount at the right times. With so many moving parts when it comes to selling online, it is worth investing a little in a CPA to ensure you’re compliant and avoid penalties. Having professional help will ensure you are collecting from your customer and remitting the correct sales tax to the State, and avoid this money coming out of your own pocket.

Sales tax got you scratching your head? Avoid paying sales taxes out of your own pocket. Contact Insogna CPA today for ongoing accounting advisory.

Protecting Yourself from Scams, ID Theft and Cyber Criminals

Article Highlights:

ID Theft
What’s in Your Wallet or Purse
Phony E-mail
Pop-up Ads
Only Access Secure
Websites
Avoid Phishing Scams
Security Software
Educate Children
Passwords
Phony Charities
Impersonating the IRS
Back Up Files
If It Is Too Good to Be True

As much as the Internet has changed our lives for the good, it has also opened us up to threats from crooks from all over the world. They are smart and always coming up with a new trick to separate you from your hard-earned dollars or with an illegal way to use your stolen ID. They apply for loans and credit cards with stolen IDs, file fraudulent tax returns, make purchases with stolen credit card info, and tap into your bank account with stolen account information, and the list goes on. As a result, everyone needs to be very careful and mindful of the tricks used by these scammers to not end up becoming a victim.

This office is committed to using safeguards that protect your information from data theft. To further protect your identity, you can also take steps to stop thieves. This article looks at a variety of tricks and schemes crooks use to dupe individuals, along with actions you can take to avoid being scammed, keep your computer secure, avoid phishing and malware, and protect your personal information.

ID Theft – The primary information ID thieves are looking for is your name, Social Security number, and birth date. So, constantly be aware of where you use that information, and always question anyone's need for it when they ask. The fewer institutions that have your ID information, the lower the chances your data will be hacked. Treat personal information like cash – don't hand it out to just anyone. Social Security numbers, credit card numbers, and bank and even utility account numbers can be used to help steal a person's money or open new accounts. Every time you receive a request for personal information, you should think about whether the request is truly necessary. Scammers will do everything they can to appear trustworthy and legitimate.

Stolen IDs are also frequently used by cyber thieves to file fraudulent tax returns in your name, to take advantage of refundable tax credits such as the earned income tax credit, the child tax credit and the American Opportunity Education Credit, leaving you to deal with the IRS's identity theft protocol.

What's in Your Wallet or Purse– What is in your wallet or purse can make a big difference if it is stolen. Besides the credit cards and whatever cash or valuables you might be carrying, you also need to be concerned about your identity being stolen, which is a far more serious problem. Think about it: your driver's license has 2 of the 3 keys to your identity. And if you also carry your Social Security card, bingo! An identity thief then has all the information needed.

Phony E-mail – Be aware that an unsolicited e-mail with a request to download an attachment or click on a URL could appear to be from someone you know, such as a friend, work colleague or tax professional. It could be that their e-mail has been hacked and someone else is sending the e-mail, hoping to trick you into some scam. Be alert for suspicious wording or content, and don't click on any embedded links or attachments if there is any doubt.

Pop-up Ads – Don't assume Internet advertisements, pop-up ads, or e-mails are from reputable companies. If an ad or offer looks too good to be true, it most likely is not true. Take a moment to check out the company behind it. Type the company or product's name into a search engine with terms like “review,” “complaint” or “scam.”

Only Access Secure Websites – Only provide personal information over reputable, encrypted websites. Shopping or banking online should be done only on sites that use encryption. People should look for “https” at the beginning of a Web address (the “s” stands for “secure”) and be sure “https” is on every page of the site.

Avoid Phishing Scams – The easiest way for criminals to steal sensitive data is simply to ask for it. Learn to recognize phishing e-mails, calls or texts from crooks that pose as familiar organizations such as banks, credit card companies or even the IRS. These ruses generally urge taxpayers to give up sensitive data such as passwords, Social Security numbers and bank account or credit card numbers. They are called phishing scams because they attempt to lure the receiver into taking the bait.

For example, you might get an e-mail disguised as being from your credit card company asking you to verify your password. Companies will never do that because only you have that information, which is why you have to change it if you forget it.

Security Software – It is good practice to use security software. An anti-malware program should provide protection from viruses, Trojans, spyware and adware.

Set security software to update automatically so it can be upgraded as threats emerge. Also, make sure the security software is on at all times. Invest in encryption software to ensure data at rest is protected from unauthorized access by hackers or identity thieves.

You should never download “security” software from a pop-up ad. A pervasive ploy is a pop-up ad that indicates it has detected a virus on your computer. Don't fall for it. The download most likely will install some type of malware. Reputable security software companies do not advertise in this manner.

Educate Children – Today's children are probably more adept at using the Internet than their parents but are not mindful of the hazards. Educate your children about not giving out or posting online their Social Security numbers or birth dates. It may also be appropriate not to allow them to use a device that contains sensitive information such as tax returns, financial links, etc. It is not uncommon for crooks to use children's IDs to file fraudulent tax returns. Also, block your children from freely downloading apps to their mobile devices without parental supervision.

Taxpayers have reported an increase in e-file problems because their children's SSNs have already been used in a previously e-filed return, which results in the e-filed return being rejected.

Passwords – Use strong passwords. The longer the password, the tougher it will be to crack. Most sites require a minimum of eight characters, with at least one number and one character. Many sources suggest using at least 10 characters; 12 is ideal for most home users. Mix letters, numbers and special characters. Try to be unpredictable – don't use names, birthdates or common words. Don't use the same password for many accounts, and don't share them on the phone, in texts or by e-mail. Consider using a passphrase versus a password. And remember, legitimate companies will not send messages asking for passwords.

Phony Charities – The fraudsters pop up whenever there are natural disasters, such as earthquakes or floods, trying to coax you into making donations that will go into the scammer's pockets and not to helping the victims of the disaster. They use the phone, mail, e-mail, websites and social networking sites to perpetrate their crimes. The following are some tips to avoid fraudulent fundraisers:

Donate to known and trusted charities. Be on the alert for charities that seem to have sprung up overnight in connection with current events. Ask if a caller is a paid fundraiser, who he/she works for and what percentages of the donation go to the charity and to the fundraiser. If any clear answers are not provided, consider donating to a different organization. Don't give out personal or financial information—including a credit card or bank account number—unless the charity is known and reputable. You might end up donating more than you had planned on. Never send cash. The organization may never receive the donation, and there won't be a record for tax purposes. Never wire money to a charity. It's like sending cash. If a donation request comes from a group claiming to help a local community agency (such as local police or firefighters), ask the people at the local agency if they have heard of the group and are getting financial support. Verify the charity – Check out the charity with the Better Business Bureau (BBB), Wise Giving Alliance, Charity Navigator, CharityWatch or IRS.gov.

Impersonating the IRS – Thieves will try to impersonate the IRS in an attempt to frighten you into making a quick payment, without checking on the validity of you owing any taxes.

The very first thing you should be aware of is that the IRS never initiates contact in any other way than by U.S. mail. So, if you receive an e-mail or a phone call out of the blue with no prior contact, then it is a scam. DO NOT RESPOND to the e-mail or open any links included in the e-mail. If it is a phone call, simply HANG UP.

Additionally, it is important for taxpayers to know that the IRS:

Never asks for credit card, debit card or prepaid card information over the telephone. Never insists that taxpayers use a specific payment method to pay tax obligations. Never requests immediate payment over the telephone. Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement action involving IRS tax liens or levies. Some scammers even threaten immediate arrest if the payment is not made immediately – don't be bullied by these criminals.

When in question, never make tax payments or provide any information without calling this office first.

Back Up Files – No system is completely secure. Back up important files, including federal and state tax returns, business books and records, financials and other sensitive data onto remote storage, a removable disc or a back-up drive.

If It Is Too Good to Be True, It Probably Isn't – Many e-mail scams are based around supposed foreign lotto winnings, foreign inheritances and foreign quick-buck investment schemes. Don't let the lure of the dollar signs cloud your better judgement. The only one that makes out in these instances is the cyber crook.

Please call this office if you have any questions.

Gift and Estate Tax Primer

Article Highlights:

Exemptions from Gift and Estate Taxes
Annual Gift-Tax Exemption
Gifts for Medical Expenses and Tuition
Lifetime Exemption from Gift and Estate Taxes
Spousal Exclusion Portability
Qualified Tuition Programs
Basis of Gifts

The tax code places limits on the amounts that individuals can gift to others (as money or property) without paying taxes. This is meant to keep individuals from using gifts to avoid the estate tax that is imposed upon inherited assets. This can be a significant issue for family-operated businesses when the business owner dies; such businesses often have to be sold to pay the resulting inheritance (estate) taxes. This is, in large part, why high-net-worth individuals invest in estate planning.

Exemptions – Current tax law provides both an annual gift-tax exemption and a lifetime unified exemption for the gift and estate taxes. Because the lifetime exemption is unified, gifts that exceed the annual gift-tax exemption reduce the amount that the giver can later exclude for estate-tax purposes.

Annual Gift-Tax Exemption – This inflation-adjusted exemption is $15,000 for 2018 and 2019 (up from $14,000 for 2013–2017). Thus, an individual can give $15,000 each to an unlimited number of other individuals (not necessarily relatives) without any tax ramifications. When a gift exceeds the \$15,000 limit, the individual must file a Form 709 Gift Tax Return. However, unlimited amounts may be transferred between spouses without the need to file such a return – unless the spouse is not a U.S. citizen. Gifts to noncitizen spouses are eligible for an annual gift-tax exclusion of up to $155,000 in 2019 (up from $152,000 in 2018).

Example: Jack has four adult children. In 2019, he can give each child $15,000 ($60,000 total) without reducing his lifetime unified exemption or having to file a gift tax return. Jack’s spouse can also give $15,000 to each child without reducing either spouse’s lifetime unified exemption. If each child is married, then Jack and his wife can each also give \$15,000 to each of the children’s spouses (raising the total to \$60,000 given to each couple) without reducing their lifetime unified tax exemptions. The gift recipients are not required to report the gifts as taxable income and do not even have to declare that they received the gifts on their income tax returns.

If any individual gift exceeds the annual gift-tax exemption, the giver must file a Form 709 Gift Tax Return. However, the giver pays no tax until the total amount of gifts in excess of the annual exemption exceeds the amount of the lifetime unified exemption. The government uses Form 709 to keep track of how much of the lifetime unified exemption that an individual has used prior to that person’s death. If the individual exceeds the lifetime unified exemption, then the excess is taxed; the current rate is 40%.

All gifts to the same person during a calendar year count toward the annual exemption. Thus, in the example above, If Jack gives one of his children a check for $15,000 on January 1, any other gifts that Jack makes to that child during the year, including birthday or Christmas gifts, would mean that Jack would have to file a Form 709.

Gifts for Medical Expenses and Tuition – An often-overlooked provision of the tax code allows for nontaxable gifts in addition to the annual gif-tax exclusion; these gifts must pay for medical or education expenses. Such gifts can be significant; they include

Tuition payments made directly to an educational institution (whether a college or a private primary or secondary school) on the donee’s behalf – but not payments for books or room and board – and
Payments made directly to any person or entity who provides medical care for the done.

In both cases, it is critical that the payments be made directly to the educational institution or health care provider. Reimbursements to the donee do not qualify.

Lifetime Exemption from Gift and Estate Taxes – The gift and estate taxes have been the subject of considerable political bickering over the past few years. Some want to abolish this tax, but there has not been sufficient support in Congress to actually do that; instead, the inflation-adjusted lifetime exemption amount has been increasingly annually. In 2019, the lifetime unified exemption is $11.4 million per person. By comparison, in 2017 (prior to the recent tax reform), the lifetime unified exemption was $5.49 million. The lifetime exemption for the gift and estate taxes has not always been unified; in 2006, the estate exclusion was $2 million, and the gift exclusion was $1 million. The tax rates for amounts beyond the limit have varied from a high of 46% in 2006 to a low of 0% in 2010. The 0% rate only lasted for one year before jumping to 35% for a couple of years and then settling at the current rate of 40%. This history is important because the exemptions can change significantly at Congress’s whim – particularly based on the party that holds the majority.

Spousal Exclusion Portability – When one member of a married couple passes away, the surviving member receives an unlimited estate-tax deduction; thus, no estate tax is levied in this case. However, as a result, the value of the surviving spouse’s estate doubles, and there is no benefit from the deceased spouse’s lifetime unified tax exemption. For this reason, the tax code permits the executor of the deceased spouse’s estate (often, the surviving spouse) to transfer any of the deceased person’s unused exclusion to the surviving spouse. Unfortunately, this requires filing a Form 706 Estate Tax Return for the deceased spouse, even if such a return would not otherwise be required. This form is complicated and expensive to prepare, as it requires an inventory with valuations of all of the decedent’s assets. As a result, many executors of relatively small estates skip this step. As discussed earlier, the lifetime exemption can change at the whim of Congress, so failing to take advantage of this exclusion’s portability could have significant tax ramifications.

Qualified Tuition Programs – Any discussion of the gift and estate taxes needs to include a mention of qualified tuition programs (commonly referred to as Sec 529 plans, after the tax-code section that authorizes them). These plans are funded with nondeductible contributions, but they provide tax-free accumulation if the funds are used for a child’s postsecondary education (as well as, in many states, up to $10,000 of primary or secondary tuition per year). Contributions to these plans, like any other gift, are subject to the annual gift-tax exclusion. Of course, these plans offer tax-free accumulation, so it is best to contribute funds as soon as possible.

Under a special provision of the tax code, in a given year, an individual can contribute up to 5 times the annual gift-tax exclusion amount to a qualified tuition account and can then treat the contribution as having been made ratably over a five-year period that starts in the calendar year of the contribution. However, the donor then cannot make any further contributions during that five-year period.

Basis of Gifts – Basis is the term for the value of an asset; it is used to determine the profit when an asset is sold. The basis of a gift is the same for the giver and the recipient, but this amount is not used for gift-tax purposes; instead, the fair market value is used.

Example: In 2019, Pete gifts shares of stock to his daughter. Pete purchased the shares for $6,000 (his basis), and they were worth $22,000 in fair market value when he gifted them to his daughter. Their value at the time of the gift is used to determine whether the gift exceeds the annual gift-tax exclusion. Because the gift’s value ($22,000) is greater than the $15,000 exclusion, Pete will have to file a Form 709 Gift Tax Return to report the gift; he also must reduce his lifetime exemption by $7,000 ($22,000 – $15,000). His daughter’s basis is also equal to the asset’s original value ($6,000); when she sells the shares, her taxable gain will be the difference between the sale price and $6,000. Thus, Pete has effectively transferred the tax on the stock’s appreciated value to his daughter.

If Pete’s daughter instead inherited the shares upon Pete’s death, her basis would be the fair market value of the stock at that time ($22,000) is she sold them for $22,000 she would have no taxable gain.

This is only an overview of the tax law regarding gifts and estates; please contact us for further details or to get advice for your specific situation.

What Are the Differences Between an IRS Tax Lien and a Tax Levy?

If you’re reading this, the chances are high that you’re one of the many, many people who have received a notice from the Internal Revenue Service. Some level of correspondence with the IRS is natural ‒ particularly leading up to and in the immediate aftermath of tax season. But if you’ve received notification that the government is about to file a tax lien or tax levy against you, suddenly you’re talking about an entirely different ballgame.

But the most important thing you can do at this point is stay calm. Yes, both of these notices mean that your financial situation has just gotten significantly more complicated. But you do have rights in each scenario that you would do well to protect at all costs.

What Is an IRS Tax Lien?

An IRS tax lien is a very specific type of claim that the government (in this case, the Internal Revenue Service) makes on your property. That property can include but is not limited to real estate and other types of assets. Typically, this is something that occurs when you’re past due on your income taxes and you’ve failed to make proper arrangements to get yourself back up to date again.

A tax lien can affect you in a number of different ways, all of which are less than ideal. Even though tax liens no longer appear on your credit report, your credit rating will still suffer ‒ thus harming your ability to get a loan or secure new credit for your business. Tax liens also usually appear during title searches, which can impact your ability to sell your house or refinance the mortgage you already have.

What Is an IRS Tax Levy?

A tax lien is essentially the first part in a two-step process. That second step takes the form of a tax levy, which involves the actual seizure of the property in question in an effort to pay the tax money you owe. Via a tax levy, the IRS can do everything from garnish your wages, seize assets like real estate or even take control of your bank accounts to get their money.

At the very least, you’re likely to go through wage garnishment ‒ meaning that you’ll be taking home far less money at the end of the week in your paycheck. A 21-day hold might be placed on your bank account in an effort to encourage you to “work things out,” and if you don’t, they may even try to seize your home as a last resort.

Luckily, there are a few things that the IRS CAN’T seize even by way of a tax levy. These include things like unemployment benefits, certain pension benefits, disability payments, workers’ compensation and others.

What Can I Do About Them?

Thankfully, even in the unfortunate event of a lien or levy, you do still have some options available to you.

More than anything, if you CAN pay your tax bill, you SHOULD pay your tax bill. If necessary, get on an IRS payment plan to help you get back up to date. Yes, your past due balance will continue to accrue both interest and penalties until you’ve paid it off. But the choice between paying interest and losing your house isn’t really a choice at all.

It’s also important for you to actively work to protect your rights if you feel it necessary to do so. After receiving either a lien or a levy notice, you can always file an appeal with the IRS Office of Appeals if you feel you’re being treated unfairly. It is within your right to ask for a conference with the IRS agent’s manager so that your case can be reviewed by a fresh set of eyes. If nothing else, this is a great way to make sure that your side of the story is known.

You can also apply for a Withdrawal of the Notice of Federal Tax Lien, which will remove the public notice of a tax lien filing. If the IRS has notified you that any of your property is about to be seized, you can file something called a Certificate of Discharge. This will remove the property in question from the effects of the tax lien, allowing you to sell something like your home (or another asset) without worrying.

All of this can be confusing and stressful. Working with a seasoned tax professional can take negotiating with the IRS off your hands.

A Government Shutdown Isn’t Going to Save You from an IRS Audit

Yes, it's true that we're just coming out of the longest government shutdown in the history of the United States. It will take many government agencies – including the Internal Revenue Service – a significant period of time to get back up to speed. But if you think that all this means that the chances of your getting audited are lower than ever, you're going to want to think again.

According to one recent study, the IRS audited about 0.6 percent of individual tax returns in 2016, which means that your chances of getting that unfortunate letter in the mail were about one in 160. When you expand the definition of a traditional audit to include all of the other types of notices that you may receive to re-examine your taxes or provide backup documentation, for example, that number jumps to about 6.2 percent— or roughly one in 16.

So not only were your chances of getting audited always higher than you thought, but a government shutdown isn't going to prevent this particular train from running on time. There are a few common IRS audit red flags in particular that you’ll want to know more about as April approaches once again.

The Dreaded Math Errors

A lot of people don’t realize just how much of the IRS’s own processes are automated. When you file your income tax return, that information gets entered into a computer, and a lot of the processing is done before a human ever looks at it — if one ever comes into contact with your return at all.

Therefore, one of the major red flags that will certainly trigger an audit are math errors, because a computer doesn’t care whether the government was shut down or not. A math error is a math error, and if you make one (or multiple), it’ll send up a red flag within the IRS’s system, and an automated notice will likely be issued as a result.

How You Make Your Money

The people who work for the IRS aren’t amateurs; they know that certain types of industries feature more instances of unreported cash earnings than others. This is why another one of the major red flags that could see you on the receiving end of an IRS audit has to do with the industry you’re operating in to begin with.

If you work in the restaurant industry where cash tips are common, for example, you are probably always going to garner more attention from IRS professionals than someone who may have a more rigid salary. Simply being a part of these types of industries automatically raises your odds of being audited, and no government shutdown is going to change that.

Earned Income Tax Credit Audits

In 2018, the IRS actually came right out and admitted that people who claim the Earned Income Tax Credit are twice as likely to be audited than those who don’t. A large part of this comes down to the fact that people sometimes take this credit who shouldn’t, and it costs the United States government about $10 billion per year.

At this point, it’s important to note that taking this credit intentionally when you shouldn’t is fraud, and that is not a situation you want to find yourself in. If you can prove that you took the credit by accident, you don’t necessarily have anything to worry about. But you’ll likely still be audited, and you’re certainly going to have some explaining to do.

Large Charitable Contributions

Finally, one of the biggest red flags that the IRS always looks for when determining whom to audit ultimately comes down, not to charitable contributions as a concept, but to significantly large contributions under peculiar circumstances.

When viewing charitable contributions, the IRS always looks at the amount you gave relative to the overall amount you made during a year. The IRS definitely knows, on average, how much people in certain income brackets are likely to donate. Sure, there are always special circumstances – but if you give two years’ worth of donations in a single year in an effort to maximize the deduction you can take, you’re almost always going to attract the type of attention you don’t necessarily want.

Provided that you’ve got the documentation to back up your donations, you have absolutely nothing to worry about. But a lot of people try to game the system by saying that they gave X amount of dollars in one year when they really gave that money over the last few years, and that is something the IRS will try to put a stop to.

An audit isn’t necessarily a bad thing, especially if you have the documentation to support every move you made and why it was the right one for you at the moment. But again, don’t assume that the government shutdown means that your chances of an IRS audit are practically zero. They never were, but they certainly aren’t now, which is why you’ll always want to make sure that you’ve crossed your T’s and dotted your I’s before you submit your tax return information this year.

Don’t Be a Victim of Cybercrooks

Article Highlights:

What They Are After
Email Attachments or Links
Emails from the IRS
Detecting Phony Email Addresses
Embedded Hyperlinks
Security Software
Strong Passwords
IRS Phone Calls
Educate the Elderly
Too Good to Be True

Well, here it is: 2019. The holiday season is over, and the season for preparing tax returns is about to begin. But unfortunately, it is also the season for scammers who are out to steal your identity, swindle you out of your money and even file tax returns in your name. All of this can make you poorer, ruin your credit rating, cause financial havoc, and cost you hours upon hours of time trying to straighten out the messes caused by cybercrooks.

The best way to prevent your ID from being stolen, your computer from being hacked, or yourself from being tricked by some clever schemer is not to take their bait. These schemers will target you in a number of ways, including through email, regular mail and phone. Each one will try to scare you, appeal to your greedy side or trick you into allowing access to your electronic devices.

The most common way for cybercriminals to steal money, bank account information, passwords, credit cards and Social Security numbers is to simply ask for them in an unsuspecting way.

Here are a few steps you can take to protect against phishing and other email scams:

Be vigilant and skeptical. Never open a link or attachment from an unknown or suspicious source. Even if the email is from a known source, the recipient should approach it with caution. Cybercrooks are good at acting like trusted businesses, friends, family and even the IRS.
Emails and other electronic contact from the IRS. If you should receive an email claiming to be from the IRS or directing you to an IRS web site, you should know that the IRS never initiates contact via email. This includes asking for information via text messages and social media channels. The first thing you should do is contact this office. But above all, DO NOT reply to the message, open any attachments (which may contain malicious code that will infect your computer), or click on any links in a suspicious email or phishing website and enter your confidential information. The IRS never asks for detailed personal and financial information like PINs, passwords, or similar secret access information for credit cards, banks, or other financial accounts.The address of the official IRS website is www.irs.gov. Do not be misled by sites claiming to be the IRS but ending in .com, .net, .org, or anything other than .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the site.
Double check the email address. Thieves may have compromised a friend’s email address. They might also be spoofing the address with a slight change in text, such as by using narne@example.com instead of name@example.com. Merely changing the “m” to an “r” and “n” can trick people.
Remember that the IRS doesn’t initiate spontaneous contact with taxpayers by phone or email to ask for personal or financial information. The IRS does not call taxpayers with aggressive threats of lawsuits or arrests. It is a common tactic for criminals to call, acting as an IRS agent to try collecting a tax bill and threatening to arrest you or have your home seized for payment. These same individuals will sometimes ask you to make payments using a gift card, which the IRS would never do.
Don’t click on hyperlinks in suspicious emails. It is common practice for cyber crooks to send out emails asking you to click on an embedded link to update your password or other sensitive information. Legitimate firms would not do that, so be safe and ignore and then delete the email. If the email is from a business or person you deal with and you are concerned, contact the business directly, either through its main webpage or by phone. Also remember that no legitimate business or organization will ask for sensitive financial information by email. Another trick cybercrooks employ is to hack into a friend’s emails and then send you messages asking you to click on an embedded link in the email, which can end up installing malware on your computer.
Use security software to protect against malware and viruses found in phishing emails. Some security software can help identify suspicious websites that are used by cybercriminals as well as detect malware on your computer.
Use strong passwords to protect online accounts. Experts recommend the use of a passphrase, instead of a password, with a minimum of 10 digits, including letters, numbers, and special characters. But don’t use a family name or birth date, as cybercriminals may already have that information and will try it.
Use multi-factor authentication when offered. Two-factor authentication means that in addition to entering a username and password, the user must enter a security code. This code is usually sent as a text to the user’s mobile phone. Even if a thief manages to steal usernames and passwords, it’s unlikely the crook would also have a victim’s phone.
Communication from the IRS. If you receive a phone call, fax, or letter from an individual claiming to be from the IRS, you should immediately contact this office before providing any information. You should do this whether you suspect the contact is legitimate or not. You can also contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you.
Educate the elderly. The elderly are frequent victims of scammers. If you have elderly family members or friends, take the time to sit down with them and educate them about scammers, email phishing and the like.
Too good to be true. One of the tactics used by scammers is fooling you into thinking that you won a foreign lottery or have received a foreign inheritance and that you need to send money before the funds can be transferred. Remember the old adage: “If it is too good to be true, it probably isn’t true.”
Report phishing scams. Should you receive a suspicious email, you can help the government fight the cybercrooks by forwarding it to phishing@irs.gov.

Our modern means of communication have provided opportunities for cybercrooks to scam you, which is a growing problem. You have to be vigilant and always keep your guard up. Don’t take their bait.

Always contact this office if you receive any communications from the IRS or state tax authorities. Be extra cautious with emails, phone calls, or mail. If you have questions related to phishing or ID theft, please call.

Reasons Why Your Business Needs an Employee Identification Number

Entrepreneurs often shrug off the idea of obtaining an employee identification number, or EIN, believing that their small business really doesn't need one. Though there are some cases where a solo business can get away with merely utilizing the business owner's Social Security Number, doing so is not necessarily the best idea, even if you don't have plans to hire employees in the future. In almost all instances, having an EIN is a good idea. It provides many benefits that go beyond facilitating the payment of employees.

Using an EIN Instead of Your Social Security Number Protects Your Personal Information

One of the top benefits offered by an Employee Identification Number is that it can help protect your personal identity. Though you still need to protect your EIN and shouldn't share it without being certain of how it will be applied, using it for your business means that your personal information will have less exposure. Government forms and documents require an identifier, and the EIN (which is issued by the IRS) can be used on all of these instead of the Social Security Number. Though you can still suffer significant damage if your EIN is stolen, the information that is limited to your business is less sensitive than the information that is connected with your Social Security Number. Both require vigilant protection.

If You're Going to Incorporate, You Need an EIN

Immediately incorporating your business makes it into a separate entity, and as such, it needs its own form of identification, especially if you're going to have employees. Even if you're considering yourself an employee, you will need to pay yourself a salary, and that means that you will need to collect payroll tax and take other steps that keep you in step with the IRS requirements. This is true whether your entity is established as a corporation, an LLC, and especially as a partnership, as you can't use two Social Security numbers for filing financial papers.

The EIN Has Multiple Applications

Having an Employer Identification Number has long-term benefits that go far beyond its initial issuance. In addition to facilitating payroll, it can also be used to apply for all types of credit accounts and bank accounts needed by entities including general partnerships, LLCs, S corporations and sole proprietorship. You'll need to have that number available for filing to change your business' entity, for filing your tax returns every year, for setting up financial instruments such as profit-sharing plans, pensions, and retirement plans, and more.

Every business is different, and though we encourage all business owners to give serious consideration to obtaining an Employer Identification Number, we know that it may not apply to your situation. Please call this office if have questions related to an Employer Identification Number and your particular circumstances.

Getting the W-4 Right Is Important

Article Highlights:

W-4 Complications
Working Spouse
Adjusting Refund
Other Income and Tax Issues

As they do at the beginning of every year, employers will be requesting employees to complete the IRS Form W-4. Its purpose is to provide employers with the information they need to determine the amount of federal income taxes to withhold from an employee’s paycheck. So, it is very important that the form be completed correctly.

The problem is that as simple as the form looks, getting those entries on the form to produce the desired withholding amount can be tricky. The passage of the tax reform added additional complications, and the IRS has delayed a major revision of the W-4 until the 2020 tax year. In the meantime, taxpayers must get along as best they can using the old version of the W-4.

Even though the W-4 form itself appears to be simple, the instructions come with an extensive worksheet, which may or may not produce the desired results. In addition, there are other issues to consider, such as:

Perhaps you desire to have a substantial refund when your taxes are completed next year. This generally requires custom W-4 adjustments, to produce excessive withholding. Keep in mind: when you have a large refund, you have provided Uncle Sam with an interest-free loan.
Your spouse may also work, and your combined incomes may put you in a higher tax bracket. Although the IRS provides a special worksheet for married taxpayers if both spouses work, it may not always provide the desired results.
In addition to payroll income, you may also have self-employment income, which is subject to both income tax and self-employment, and so you may require a combination of payroll withholding and estimated tax payments, adding additional complications to the W-4.
These are just the tip of the iceberg, as there may be investment income or losses, business losses, tax credits, special deductions and loss carryovers, just to name a few more situations that could impact your tax prepayments and withholding for the year.

If you are concerned about getting your withholding correct, please contact this office. We can project your 2019 tax liability and complete your W-4 after taking into account multiple employments, a working spouse, self-employment income and other tax issues unique to your specific tax situation.

Hubdoc Top 50 Award

We are excited to announce that we have been selected as one of Hubdoc's Top 50 Cloud Accountants of 2018 in North America!

They stated, “Insogna CPA leverages an advanced accounting technology stack to help their clients achieve their goals: “With our tech stack of 20 different technologies, we're able to provide updated financial and reporting information quicker so business owners can act on that information and make real-time decisions,” explains Chase. Moreover, they also lead by example and adopt cloud technology at their own firm, enabling employees to achieve work-life balance and reach their own firm's goals. Congrats, Chase and team!”

View the entire announcement here.

Do I Qualify for an IRS Offer in Compromise?

If you’re facing outstanding tax debt that you cannot pay, you may want to consider looking into an Offer in Compromise from the IRS. Specifically, an Offer in Compromise is an option offered from the IRS to qualifying individuals that allows them to settle tax debt for less than what they actually owe.

Unfortunately, there seem to be a lot of misunderstandings about Offers in Compromise; many people falsely believe that these are seldom accepted by the IRS. In reality, it is estimated that the current acceptance rate is over 40%, with the average dollar amount of a settlement reaching more than $10,000.

How to Know if You Qualify

Generally, there are three factors that are considered by the IRS when somebody applies for an Offer in Compromise. Most commonly, the IRS must have a belief that you will not be able to pay your tax debt off at any point in the near future. This means that your financial situation is probably not going to improve anytime soon and that the IRS would not likely be successful in forcing collections on you.

At the end of the day, the IRS needs to believe they are getting a fair deal – so if you have any potential to pay your debt at any point in the near future, you may not qualify.

You might also qualify for an Offer in Compromise if there is doubt as to your actual tax liability; if you have documentation proving that you owe less in taxes than the IRS believes to be true, or if an assessor has made a mistake on your reporting, you may be more likely to have an Offer in Compromise accepted by the IRS.

Finally, if paying your tax bill would create a significant financial hardship, you may also qualify for an Offer in Compromise. Of course, proving financial hardship can sometimes be a challenge.

In addition to all of these considerations, there are several other eligibility requirements that you must meet in order to qualify for an Offer in Compromise:

You must pay the application fee
You must have filed all of your required tax returns
You cannot be going through a bankruptcy at the time of filing
You must submit all required documentation

What to Expect From the Process

One of the most complicated aspects of going through the application process for an IRS Offer in Compromise is filling out and submitting all the required paperwork. There are several documents you may need to complete to even be considered for an Offer in Compromise, including:

IRS Form 433-A – this form requires information on your assets, liabilities, expenses, and income to determine your Reasonable Collection Potential.
IRS Form 433-B – this form needs to be filled out for businesses applying for an Offer in Compromise.
IRS Form 656 – use this form to apply for an Offer in Compromise so long as there are no doubts as to your tax liability.
IRS Form 656-L – use this form to apply if you are disputing your tax liability to the IRS.

In addition to completing these official forms as part of the application process, you will also need to provide some documentation, such as:

health care statements
bank and credit card statements
investment information
proof of living expenses
car loan, mortgage, and similar loan statements
copies of related tax returns

Working With a Tax Professional Can Help

As you can probably see, the process of determining your eligibility and applying for an Offer in Compromise with the IRS can be quite time consuming and complex. This is where it can be helpful to consult with a tax professional for assistance. A qualified and experienced tax professional will be able to assess your current tax situation and give you a better idea as to whether or not going through the Offer in Compromise application process is worth your time and efforts.

If so, he or she will also be able to assist you with the application process, ensuring that you’re filling out the correct forms and that you submit all required documentation as well. This can increase your chances of reaching a successful offer with the IRS and take a lot of the stress and burden off your chest.

Even if you don’t qualify for an Offer in Compromise, your tax professional may be able to assist you in figuring out other alternatives for making your tax payment more financially manageable for you. This might include options to work out a payment/installment program with the IRS, among other options.

The Bottom Line

Overall, getting an Offer in Compromise accepted by the IRS is nearly a 50/50 shot – but if you meet the eligibility requirements and take the time to correctly submit all paperwork and documentation, your chances of reaching an offer are high. And the best way to get the help you need in gathering this documentation and submitting this paperwork is to consult with an experienced tax professional, so reach out to yours today. If you don’t already have a tax professional that you can turn to, schedule a consultation with one at your earliest convenience to get the ball rolling.

Most Common Types of IRS Tax Problems

Receiving notification from the Internal Revenue Service that there’s some kind of problem is one of the most bone-chilling situations an American taxpayer can experience. Just receiving an envelope with a return address from the IRS can strike fear. There are many different reasons that the IRS might reach out, but some are more common than others.

Here are the top issues that would cause a taxpayer to hear from the IRS or require you to resolve an issue:

An Error On Your Tax Return – Nobody’s perfect, and filling out tax returns is not an easy thing. If you’ve made a mistake, whether it’s something simple like filing status or number of dependents or something bigger like total income or incorrectly claiming a deduction, if you discover it on your own, all you need to do is file an amended return using form 1040X, the Amended Individual Income Tax Return. If the mistake means that you owe more money, quickly submitting the amount that you owe will help you avoid having to pay too much in penalties or interest. It’s not at all unusual for the IRS to discover mistakes – especially math mistakes – and they will generally notify you that they have made corrections on your behalf.
Mismatched/Underreported Income – Along the lines of the mistakes referenced above, there is a specific form that the IRS will send you if they determine that the amount of income you report on your tax return is different from what has been reported by employers. That form is the CP2000 Notice, and the agency will send it to you, notifying you of the corrected amount, should they review your return and feel that it is appropriate.
Failure to File a Tax Return – Filing a tax return isn’t necessarily required if you don’t owe money or if you’re owed a tax refund, but it’s not a good idea. Failing to file a return when you’re owed a refund puts you at risk of losing out on receiving the money you’ve owed – you have just three years to amend the problem if you want to get your money. For those who are in arrears to the IRS, there is a significant negative outcome to failing to file a return, including having to pay a “failure to fee” penalty that can go as high as 25 percent of your unpaid tax bill: 5 percent of the amount you owe, plus interest, will be charged for each month for up to five months
You Owe the IRS for Taxes Not Paid – When the IRS calculates that you have not paid them the full amount that you owe, they will send you notification of what they believe the difference is via form CP14.
You Owe the IRS Penalties and Fees – When you don’t pay your taxes or you fail to file a return, the IRS will notify you that you owe them penalties, and possibly interest.
You Owe the IRS But Can’t Afford to Pay – There are many taxpayers who find themselves facing a tax bill that they are simply unable to pay all at once. If you fall into this category, the IRS does offer the option of paying in installments. To request this type of payment plan, contact the agency. If even paying in small increments is outside of your ability, you may be able to negotiate a reduced tax bill through what is called an Offer in Compromise.
Tax Debt Resulting in Tax Levy – If you are unable or unwilling to satisfy your tax debt, the IRS may opt for a tax levy, which is the legal seizure of your property in lieu of payment. A tax levy can take the form of real property such as real estate, your vehicle or personal property, or your wages, the money in your bank accounts or your financial accounts. Notification that a levy is being issued against you comes via either notice LT11, CP504, CP90, or CP91.
Notification that A Tax Lien Has Been Filed – If you have failed to pay your tax debt, the IRS may take action to protect its own interests ahead of other creditors by filing a tax lien. This comes in the form of Letter 3172, which will be sent to both you and your other creditors to let them know of the government’s claim against your financial assets, personal property and real estate. By sending this letter out, the government ensures that it will benefit from the liquidation of any of your property in order to satisfy the amount that it is owed. Once a lien has been placed on your property, it is extremely difficult to get out of until you’ve paid up.

A notification from the IRS is not something to be ignored. The best step is to take a deep breath, read the notice carefully, and if needed, contact our office for assistance.

Do You Own a Specified Service Trade or Business? If So, Your 20% Flow-Through Tax Deduction May Be Limited

Article Highlights:

20% Flow-Through Deduction
Qualified Trade or Business
Specified Service Trade or Business
Deduction Table
Listing of Service Businesses

As part of its recent tax reform, Congress included a new 20% deduction of pass-through income for trades or businesses other than C-corporations. This pass-through income is referred to as qualified business income (QBI); for trades or businesses, it generally includes bottom-line profits, and for S-corporations and partnerships, it includes K-1 flow-through income. This new law was added as tax code section 199A, so the deduction is often referred to as the 199A deduction.

Congress added this deduction to benefit sole proprietors, partners, and S-corporation shareholders (among others); the goal is to allow for benefits equivalent to the substantial tax-rate cut that the same reform provided to C-corporations. However, this new deduction is not applied uniformly to all types of trades and businesses, for which there are two categories:

qualified trades or businesses (QTBs) and
specified service trades or businesses (SSTBs).

This deduction is limited by the taxpayer’s filing status and 1040 taxable income, and it differs depending on whether the business is a QTB or a SSTB. Although the main purposes of this article are to define SSTBs and to describe how they are taxed differently from QTBs, if one is to understand why an SSTB may not qualify for the deduction, whereas a QTB might qualify, it is necessary to first understand the basic differences between the deductions for SSTBs and QTBs.

Apparently, Congress considered the income from service businesses to be akin to wages and didn’t want taxpayers who provide services to have the benefit of the 20% deduction instead of paying taxes on that income as ordinary wages. This change was primarily aimed at deterring high-income people from becoming independent contractors or setting up pass-through businesses so that they could turn their wages into business income and get the 20% deduction. The result is a phase-out of the deduction for high-income taxpayers who have income from SSTBs.

The table below provides an overview of the tax treatment for each type of business. As you will note, the SSTB deduction phases out for higher levels of 1040 taxable income, but the QTB deduction does not. This type of phase-out is called a wage limitation.

Example of How to Use the Table: Two married people who are filing jointly have 1040 taxable income (before the 199A deduction) of $469,000; they also have a SSTB. They would first select the box with their filing status (“Married Filing a Joint Return”), then move to the right to the correct range of 1040 taxable income (which is the adjusted gross income after removing either the standard deduction or the itemized deductions; in this case, “Greater than $415,000”), and finally follow that column down to the cell aligned with the correct type of business (“SSTB”). In this case, the trade or business does not qualify for the 199A deduction.

Specified Service Trades or Businesses (SSTBs)

The IRS describes SSTBs as being in the following fields:

Health – The health category includes the provision of services by physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and similar health care professionals who provide medical services directly to patients. However, this excludes the provision of services that are not directly related to a medical field, even when those services purportedly relate to the health of the service recipient. For example, this category excludes the operation of health clubs or spas that provide physical exercise or conditioning; health-related payment processing; or the research, testing, manufacture, and/or sales of pharmaceuticals or medical devices.
Law – The law category refers to the provision of services by lawyers, paralegals, legal arbitrators, mediators, and similar professionals in their capacities as such. The category excludes the provision of services that do not require skills unique to the field of law, such as the printing, delivery, and stenography services provided to lawyers.
Accounting – The accounting category includes the provision of services by accountants, enrolled agents, tax-return preparers, financial auditors, and similar professionals in their capacities as such. This category is not limited to services that require state licensure as a certified public accountant. This category also excludes payment processing and billing analysis.
Actuarial Science – The actuarial science category refers to the provision of services by actuaries and similar professionals in their capacities as such. This category only includes the services provided by analysts, economists, mathematicians, and statisticians if they are engaged in analyzing or assessing financial costs due to risk or uncertainty.
Performing Arts – The performing arts category includes the performance of services by individuals who participate in the creation of the performing arts, including actors, singers, musicians, entertainers, directors, and similar professionals in their capacities as such. It excludes services that do not require skills that are unique to the creation of performing arts, such as the maintenance and operation of equipment or facilities. Similarly, the dissemination of video or audio of performing-arts events to the public is not considered to be a service in the performing arts.
Athletics – The athletics category refers to the performance of services by individuals who participate in athletic competitions, including athletes, coaches, and team managers in sports such as baseball, basketball, football, soccer, hockey, martial arts, boxing, bowling, tennis, golf, skiing, snowboarding, track and field, billiards, and racing. This category excludes the provision of services that do not require skills that are unique to athletic competition, such as the maintenance and operation of equipment or facilities for use in athletic events. It also excludes the provision of services by persons who disseminate video or audio of athletic events to the public.
Consulting – The consulting category refers to the provision of professional advice and counsel to clients to assist them in achieving goals and solving problems. Consulting professionals include lobbyists and similar professionals, but this category focuses on their capacities as such and excludes the minor consulting that accompanies the sale of a product. A trade or businesses cannot be an SSTP if less than 10% of its gross receipts are from consulting (or 5% if the company’s gross receipts are greater than \$25 million).
Financial services – The category of financial services applies to services that are typically performed by financial advisors and investment bankers, including the following financial services: managing wealth; advising clients with respect to their finances; developing retirement and wealth-transition plans; providing advisory and other services regarding valuations, mergers, acquisitions, dispositions, and restructurings (including in title 11 bankruptcies and similar cases); and raising financial capital through underwriting or by acting as a client’s agent in the issuance of securities. This includes the services provided by financial advisors, investment bankers, wealth planners, retirement advisors, and similar professionals but excludes banking services such as deposit-taking or loan-making.
Brokerage Services – The brokerage services category includes services in which a person arranges transactions between a buyer and a seller with respect to securities and in exchange for a commission or fee. This includes services provided by stock brokers and similar professionals but excludes services provided by real estate or insurance agents and brokers.
Reputation or Skill – The original legislation’s list of SSTBs included trades or businesses for which the principal asset was the reputation or skill of one or more of employees or owners. However, it was unclear if this meant, for example, that a self-employed plumber who provided his skill to the business would be eligible for the 199A deduction. The taxpayer-friendly interpretation of these tax regulations has generally defined “reputation and skill” to mean:

(1) The receipt of income in exchange for endorsing products or services for which the individual provides endorsement services;

(2) The receipt of licensing income in exchange for the use of an individual’s image, likeness, name, signature, voice, trademark, or any other symbol associated with that individual’s identity; or

(3) The receipt of appearance fees or income (including fees or income paid to reality performers who appear as themselves on television, social media, or other forums; radio, television, and other media hosts; and video game players).

The amount of pass-through deduction that is ultimately available due to an SSTB is entirely dependent upon the taxpayer’s 1040 taxable income. Thus, in some cases, pension contributions and the expensing of business assets can lower a taxpayer’s taxable income enough that he or she benefits from an increase in the pass-through deduction. In this scenario, married couples who are not living in community-property states could benefit from filing separately rather than jointly.

If you have questions related to whether your business qualifies for this new deduction, whether it is classified as an SSTB, or how SSTB income fits into your overall tax picture, please give this office a call.

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Why You Need a CPA for Your eCommerce Growth

Is this you?

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

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

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

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

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.

2️⃣ You used an incorrect filing status.

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

4️⃣ You had investing activities that affect your tax return.

5️⃣ You received tax forms after filing your tax return.

Need Help with Amending Your Tax Return?

❓ How the IRS Taxes Cryptocurrency

Cryptocurrency Capital Gains📈 & Losses 📉

Cryptocurreny Income 💸

⚠️ Avoid Overpaying or Underpaying Crypto Income Taxes

Stay ahead of the crypto game!

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

1. Paid Family and Medical Leave Credit

2. Alternative Fuel and Motor Vehicle Credits

3. Disabled Access Credit

4. Empowerment Zone and Renewal Community Employment Credit

5. New Markets Credit

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

1. Contribute To A Pre-Tax Retirement Account

2. Claim Your Business Deductions

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

4. Charitable Contributions

5. Collaborate With A Tax Professional

Let’s Cut That Tax Bill Together!

Hey there, business owners!

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

Meet the VIPs

Key Dates - Mark Your Calendar

Who Needs to Report?

⚠️ Consequences of Missing the Deadline

❓How to File Your Report

Need More Info?

Got Questions or Need Help Filing?

If you’re still waiting for a tax refund or have tried to contact the IRS directly in 2024, here are six reasons why you might not be getting a response.

Questions You Might Ask

Never got your refund?

Wonder why the IRS hasn’t processed your return?

Why does it take so long?

Waiting on your Employer Retention Credit?

Responded to the IRS lately?

Tried calling the IRS lately?

Don’t Like IRS Audits?

Here’s a quick breakdown of the differences:

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401K vs. IRA: Retirement Planning for You & Your eCommerce Business​

401K vs. IRA: What’s the Difference?​

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The 8 Most Common Tax Penalties Assessed

1. Penalty for not making estimated tax payments

2. Penalty for taking early withdrawals from tax-advantaged retirement accounts, including IRA accounts and 401(k) accounts

3. Penalty for taking nonqualified withdrawals from 529 plans, health savings accounts (HSAs), and similar tax-favored accounts

4. Penalty for failing to take required minimum distributions (RMDs) from tax-favored retirement accounts

5. Penalty for contributing too much to tax-favored accounts

6. Penalty for failing to file, or for filing your required tax return after the designated due date

7. Penalty for failing to pay your taxes on time

8. Penalty for filing a substantially incorrect tax return or taking frivolous positions on a return

IRS Penalties Are A Entirely Preventable Problem

Look for a Licensed CPA that gets E-commerce

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