Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Oxford needs his daily nap session
What’s Inside
- Yes! You Owe Tax On That
- Moves to Improve Your Credit Score
- Avoid a Penalty and Tax Surprise when Withdrawing from Retirement Accounts
- February Days
- Office Hours
Yes! You Owe Tax On That!
6 Surprising Taxable Items
If something of value changes hands, you can bet the IRS considers a way to tax it. Here are six taxable items that might surprise you:
Surprise #1: Hidden treasure. In 1964, a married couple discovered $4,467 in a used piano they purchased seven years prior for $15. After reporting this hidden treasure on their 1964 tax return, the couple filed an amended return that removed the $4,467 from their gross income and requested a refund. The couple filed a lawsuit against the IRS when the refund claim was denied. The Tax Court ruled that the hidden treasure should be reported as gross income on the couple’s 1964 tax return, the year when the hidden treasure was found.
Surprise #2: Some scholarships and financial aid. Scholarships and financial aid are top priorities for parents of college-bound children, but be careful — if part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, or aid received in exchange for work (e.g., tutoring or research).
Surprise 3: Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records.
Surprise 4: Unemployment compensation. The IRS confused many by making this compensation tax-free during the COVID-19 pandemic. Unemployment compensation income has since gone back to being taxable.
Surprise 5: Crowdfunding. A popular method to raise money is crowdfunding through websites. Whether or not the funds are taxable depends on two things: your intent for the funds and what the giver receives in return. Generally, funds used for a business purpose are taxable and funds raised to cover a life event are a gift and not taxable to the recipient.
Surprise 6: Cryptocurrency transactions. Cryptocurrencies like Bitcoin are considered property by the IRS. So if you use cryptocurrency, you must keep track of the original cost of the coin and its value when you use it. This information is needed so the tax on your gain or loss can be properly calculated.
When in doubt, it’s a good idea to keep accurate records so your tax liability can be correctly calculated and you don’t get stuck paying more than what’s required. Please call if you have any questions regarding your unique situation.
Moves to Improve Your Credit Score
While your credit score is a three-digit number that’s automatically assigned to you, this is one area of your financial life where you have quite a bit of control. The moves you make or don’t make with your credit can help determine where this score falls at any time, and the impact can be dramatic.
Where good credit, a score of 670 or higher, can mean having access to financing with the best rates and terms, a low credit score can mean paying higher interest rates and more loan fees — or even being denied financing altogether. Bad credit can also mean having trouble getting an apartment or a job if your employer asks to see your credit report for hiring purposes.
The following steps can help you improve your credit this year and beyond:
Set up bills for automatic payments. Because your payment history is the most important factor used to determine credit scores, make every effort to pay bills on time. Set up your bills for automatic payments so they’re paid no matter what, and you can avoid unnecessary credit score damage.
Pay down existing debt. How much you owe in relation to your credit limits is the second most important factor used for credit scores. This means avoiding carrying a balance on your credit cards and never using more than 25% of your credit line or your credit score could be impacted.
Look over your credit reports for errors. Check your credit reports from all three credit bureaus — Experian, Equifax and TransUnion. You can do this once a year for free at AnnualCreditReport.com. If you find any errors or information you don’t recognize, take steps to dispute this information with the credit bureaus.
Build credit with new financial products. If you need to build credit from scratch or repair credit after mistakes made in the past, look for new credit products that are easy to obtain. Your best options are secured credit cards that require a cash deposit as collateral and credit-builder loans.
Use a free app to build credit. You can use a free app like Experian Boost to get credit for payments you’re already making like utility bills, subscription services and even your rent. All you have to do is connect your accounts to this app to have your payments reported to the credit bureaus.
You don’t have to live with a low credit score for another year, especially since so many things can help you improve it. By never missing a payment, paying down debt, checking over your credit reports and getting creative when it comes to building new credit, you can end 2024 in much better shape.
How can we say no to this face!
Avoid a Penalty and Tax Surprise when Withdrawing from Retirement Accounts
Retirement accounts that provide tax breaks have very specific rules that must be followed if you want to enjoy the financial rewards of those tax breaks.
One of these rules defines WHEN you’re allowed to pull money from your retirement accounts. If you pull money too soon, you’re at risk of being levied with a penalty by the IRS. There are several exceptions to this rule, such as paying for qualified higher education expenses or paying for expenses if you become permanently disabled. In general, though, if you withdraw retirement funds before you reach age 59½, you’ll be hit with a 10% penalty in addition to regular income taxes. In the April 2023 court case Magdy A. Ghaly and Laila Ryad v. Commissioner, the taxpayers learned this rule the hard way.
The Facts
In 2018, Mr. Ghaly took two distributions from his retirement account.
Distribution #1: Withdrawal
Mr. Ghaly was laid off from his job, and in 2018, he withdrew money from his retirement account to provide for his family. He requested and received a withdrawal of $71,147 from his retirement account. His retirement company provided him with a Form 1099-R indicating the withdrawal was taxable.
Distribution #2: Deemed Distribution
In 2015, Mr. Ghaly took a loan from his retirement account. Because the loan followed certain IRS-approved guidelines, it was not considered a taxable distribution from his account that year. However, when Mr. Ghaly failed to repay that loan when it came due in 2018, it became a taxable distribution. His retirement company provided him with a 1099-R tax form for the deemed distribution.
Mr. Ghaly had not yet reached age 59½ before either amount was distributed.
The Findings
In an attempt to restore those distributions to his account to avoid both the tax on the distributions and the early withdrawal penalty, he opened two retirement accounts in 2020 and made the maximum contributions allowed for each account.
The Tax Court ruled against the taxpayers, stating that the contributions Mr. Ghaly made in 2020 were irrelevant when determining if his 2018 distributions were taxable. Mr. Ghaly was required to pay income taxes on the amounts withdrawn (to the extent those distributions were taxable) and was assessed an additional 10% early withdrawal penalty.
The Lesson
If you are planning an early withdrawal from a retirement account, understand before making the withdrawal whether the 10% penalty applies to you. In Mr. Ghaly’s case, he could have explored the substantially equal periodic payment exception or withdrawn money penalty free if used as hardship to pay for his health insurance while unemployed. The lesson: please call if you have questions about an early withdrawal you may be planning before you make it!
Oxford Part 3
The universe gives you what you need when you need it.
Using the wrenches, Steve removed the battery from my car and installed the new battery from the homeowner. It fit perfectly and was fully charged! Voila, the car is brought back to life.
The auto parts store is still another 4 miles or so down the road. It is now 9:35 pm and we are running close to the 10 pm closing time for the auto parts store.
So, I begin driving again, however, the car is not running optimally. The dashboard is flickering again, the headlights are dim and there is no real oomph to the car. We are hopeful that the car will make it to the auto store.
Well, again, the car begins to abruptly shut off and on about 3 miles down the road. I again maneuver to the side of the road. The car stops cold and will not restart. Steve gets out and begins the walk to the auto store in the pitch black of the night. I could see him jogging a little. It was freezing cold outside. At some points he was walking quickly. I lost sight of him after awhile and called him on his cell phone. He answered and said he could see the store and quickly hung up. Cell phone reception was not the best.
At 9:52 he walked in the auto store and purchased a battery. He asked the store employees, there were 3 males, if any one of them could give him a lift back to the car, that it was parked just a mile down the road. They refused. One employee looked away, said nothing, and walked into the back. The other 2 employees stated it was against company policy. Steve also asked them if the town had a hotel or if they knew of one nearby. They thought there were 2 hotels but were not sure. It was 10 pm and they closed the store and drove off.
So, Steve began his walk back to the car, with a nearly 50 pound battery on his shoulder. It had gotten colder and darker outside. He kept shifting the battery from one shoulder to the other, it was getting heavy. The walk back was a little slower going. Steve stopped once to call me and tell me he was okay. He said walking with the battery was going to take him awhile to get to the car and not to worry.
As he is walking, a pick-up truck pulls up beside him. The driver is an older lady. She asked if he needed help and Steve began to explain the car saga and that our car is parked off to the side of the road down a way. She said she had noticed the car and thought it was odd place to park. The lady told him to get in the truck and she would take him to his car.
To be continued……….
February Days
Here are some Days to Remember in February!
February 3rd – National The Day The Music Died
This day remembers the unfortunate death of singers Buddy Holly, Ritchie Valens, and J.P. Richardson which inspired the song American Pie by Don McLean released in 1971.
February 9- National Pizza Day
This celebrates on of America’s all-time favorite foods. Whether it is thin crust, Chicago-style, deep dish, or anything in between, pizza is an American favorite.
February 13 – Galentines Day
Galentines day brings women together to celebrate each other every year the day before Valentines day.
February 14th – Valentines Day
The day of love! Grab the flowers, chocolate or a card and surprise the special someone in your life
February 19th – Presidents Day
On the Third Monday in February, the United States celebrates the federal holiday known as Presidents Day.
February 29th – National Leap Day
February 29 (leap day) is only celebrated every 4 years!
Office Hours
Monday – Friday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Just look at this face!!!
What’s Inside
- Tips for a Smooth Tax Season
- Ideas to Help Set Financial Goals
- The Problem with Fakes
- January Days
- Office Hours
Tips for a Smooth Tax Season
With tax season officially underway, here are tips to make filing your return as stress-free as possible:
- Gather your tax information for filing. Items you’ll need include W-2s, 1099s, K-1s and other forms you receive from your business, employers, brokers, banks, and others. If you find any errors, contact the issuer immediately to request a corrected copy.
- Organize your records. Once you’ve started gathering your information, find a place to put all the documents as you receive them, or consider scanning documents to store on your computer. You can also take pictures of the documents with your phone as backup. Missing information is one of the biggest reasons filing a tax return is delayed.
- Create an April 15th reminder. This is the deadline for filing your 2023 individual income tax return, completing gift tax returns, making contributions to a Roth or traditional IRA for 2023, and for paying the first installment of 2024 individual estimated taxes. So create a reminder that works for you.
- Know the deadlines for business returns. If you are a member in a partnership or a shareholder in an S corporation, the deadline for filing these business returns is March 15th. Calendar-year C corporation tax returns are due by April 15th.
- Clean up your auto log. Create and review the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
- Review your child’s income. Your child may be required to file a 2023 income tax return. A 2023 return is generally required if your child has earned more than $13,850, or has investment income such as dividends, interest, or capital gains that total more than $1,250.
- Contribute to your IRA and HSA. You can still make 2023 IRA and HSA contributions through either April 15th or when you file your tax return, whichever date is earlier. The maximum IRA contribution for 2023 is $6,500 ($7,500 if age 50 or older). The maximum HSA contribution is $3,850 for single taxpayers and $7,750 for families.
- Calculate your estimated tax if you need to extend. If you file an extension, you’ll want to do a quick calculation to estimate your 2023 tax liability. If you owe Uncle Sam any money, you’ll need to write a check by April 15th even if you do extend.
Ideas to Help Set Financial Goals
With the new year underway, it may be time to come up with a list of goals and that could make 2024 the most financially rewarding year for your entire family. Your motivation can be nearly anything, from saving for retirement or paying for college. Consider these resolutions that can also provide a financial boost:
- Declutter for cash. Go through every room of the house as a family and collect items that nobody uses or needs anymore. Sell these items through sales platforms, then use the cash to pay down debt or add to your emergency fund.
- Work together to reduce food waste. With inflation running high over the last few years and grocery prices on the rise, everyone in the family can to do their part to reduce food spending. This means creating meal plans and shopping for groceries based on those plans, but it also means eating leftovers and cooking more at home instead of dining out.
- Set up automatic savings. Setting up automatic savings is another great way to make progress toward financial goals. You can set up your bank account to automatically transfer money to a dedicated savings account on a certain day each month, or on each payday.
- Save for something fun. Set a family savings goal for something to work toward, whether that’s saving for a family vacation or the building cash to purchase a backyard playground. Having a goal can help family members part with items they don’t need but can sell, or to cut their spending to help reach a common goal.
- Develop investing basics. Set up online access for your own retirement accounts or taxable investment accounts so you can show your family the power of compound interest firsthand. You can even consider setting up investments for your kids. If they have earned income, for example, they can start investing with a Roth IRA.
Financial goals can be a family affair if everyone in your crew understands what you’re working toward and what’s at stake. By keeping communication open and getting your entire family on the same page, you can all work together toward the lifestyle you want.
I wonder what Oxford is thinking about
The Problem with Fakes
Protect yourself from modern-day counterfeiters
Finding brand name products at a great price can leave you feeling like you won the lottery, but there are hidden dangers that come into play if the goods aren’t what they seem.
Here are some commonly counterfeited items and what you need to know to protect yourself.
Commonly Counterfeited Items:
- Currency. The U.S. Treasury estimates that there are nearly $9 million of counterfeit bills in circulation. While creating an excellent counterfeit $100 bill would seem difficult, criminals can trick you if you aren’t paying attention.
- Shoes & Clothing. Manufacturing a low-quality knock-off and slapping a brand name label on a shirt or a pair of shoes is a tale as old as time. It’s much harder to spot a fake through online pictures and videos than seeing and touching it in person.
- Collectibles. Watches, coins, jewelry and artwork are often faked and sold for far less than anyone should believe.
- Electronics. As technology continues to evolve, so does the ease of assembling electronics. Using cheap components and labor, companies can slap together their version of the real thing. This process cuts corners and sometimes skirts safety procedures that can lead to knock-off electronic products that can pose a hazard to your health.
- Replacement parts. Fake parts are common within the electronics and auto repair industries and are especially difficult to spot. Unfortunately, parts not produced by the original manufacturer often fail to meet their operational specifications.
How to Protect Yourself
Knowing that counterfeit items are out there is the first step to avoiding them altogether. These additional tips can help you avoid fakes and the damage they cause:
- Know the real thing. The best way to spot a fake is to know the real thing inside and out. In the case of currency, the new $100 bills have plenty of watermarks, different textures and a security ribbon that make it difficult to fake. For products, do your research to know the characteristics of the legitimate item before you buy. Clues often come from irregularities in logos, colors and packaging.
- Buy from authorized retailers. Shopping around for the lowest price is a wise practice. Automatically going with the cheapest option is not. If your purchase is important, stick to an authorized retailer or reputable vendor.
- Research, research, research. The more you know the product, the less likely you will be tricked. Look at products from local stores and read through reviews of online vendors. Conduct research on scams and common tricks used by counterfeiters. Be wary of reviews from the website you are thinking about making the purchase from. Instead, conduct a web search of both the product and the vendor to see what people have to say.
- Trust your gut. Remember that something that seems too good to be true probably is. If you believe an item is probably counterfeit based on the price of the item or the person/website selling it, you’re probably right.
Oxford Part 2
Oxford Part 2
The car abruptly shut off perfectly in the nearest parking space at the convenience store. Steve went into the store and explained everything to the clerk about what was happening with the car. She tells him the closest auto parts store is about 8 miles down the road.
Steve hopped back into the car, quickest I’ve seen him move in a long time to check his phone for the auto parts store hours. The auto parts store closes at 10 pm. its 9:20 pm.
After a few attempts, I am able to restart the car. All the warning indicators were lit on the dashboard. Lights came up that I never knew existed. Looked like Christmas lights. The headlights were extremely dim. The road had no street lights. We were in Amish country. So no one was on the road at night either. All the farms were dark. It was not the best driving conditions.
About 4 miles down the road the car begins to slow down and the steering wheel just locks up. I was able to get the over to the side of the “road”. Actually, it turned out to be a homeowner’s front yard. At this point the road and the grass looked the same.
Fortunately, the homeowner pulled into their driveway just after I parked my car in her yard. She and her friend immediately came running over to our car and asked if they could help. Steve explained what was going on with the car. The woman who owned the home immediately jumped into action. Crawled under the hood, disconnected the battery and checked the alternator. Then she tried to jump the battery. No luck. So, her husband comes wandering out of the house with a battery he just happened to have in his garage.
Steve needed a wrench to take the old battery out of the car. So he asks me if I have any in my car. I said sure do, they are in a basket in the back of the car. He is not thrilled, he pulls out many items from the basket, paper towels, wipes, anti-freeze, and shopping bags. I tell him keep looking there are two wrenches. My dad gave them to me a few years ago and said someday I may need to use them.
Guess what, in the bottom of the basket are the two wrenches and they were the perfect size to take out the battery.
To be Continued…
January Days
Here are some Days to Remember in January!
January 1st – New Years Day
Happy New Year!
January 10th – Houseplant Appreciation Day
National Houseplant Appreciation Day serves as a reminder to give your houseplants a little extra attention and to show the benefits houseplants have. Houseplants can boost productivity, reduce anxiety, reduce air pollutants, and improve humidity in your home.
January 15th – Martin Luther King Jr Day
On the third Monday in January, Martin Luther King Jr Day honors the American clergyman, activist, and Civil Rights Movement leader. He is best known for his role in advancing civil rights using nonviolent civil disobedience.
January 20th – National Cheese Lover’s Day
On National Cheese Lover’s Day, don’t feel bleu, throw a feta or act capriciously. January 20th is a gouda day to kummin over and have some cheddar or asiago or fontina!
January 24th – National Compliment Day
This is a wonderful way to brighten someone’s day or give credit for a job well done!
January 31th – Inspire Your Heart With Art Day
Of the broad spectrum of art created in the world, the pieces that move us to tears or cause us to burst out into joyous laughter remain with us for a lifetime. Whether we are touched by music or see into an artists soul through their work, art has the power to change us, to inspire our hearts.
Office Hours
Monday – Friday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Oxford is showing us how he staying warm this winter
What’s Inside
- Year-End Tax Cutting Moves to Consider
- Ingredients of a Successful Business Partnership
- Watch Out For Those Unexpected Tax Surprises!
- December Days
Year-End Tax Cutting Moves to Consider
Here are moves you can make to reduce your taxable income. But the year is quickly coming to a close, so plan accordingly.
- Max out pre-tax retirement savings. The deadline to contribute to a 401(k) plan to get a 2023 taxable income reduction is December 31st. So if your employer’s plan allows it, consider making a last-minute lump sum contribution. For 2023, you can contribute up to $22,500 to a 401(k), plus another $7,500 if you’re age 50 or older. Even better, you have until April 15, 2024, to contribute up to $6,500 into a traditional IRA. And as long as your income does not exceed phaseout limits, you can reduce your taxable income on your 2023 tax return.
- Convert to a Roth IRA. Consider converting some or all of your traditional IRA, SEP IRA, or SIMPLE IRA into a Roth IRA. Although you pay income tax on the amount of the Roth conversion the year it is made, subsequent growth is tax-free in a Roth IRA, and withdrawals from the account are 100% tax-free after five years from the date of the conversion.
- Tax loss harvesting. If you own stock outside a tax-deferred retirement plan, you can sell your under-performing stocks by December 31st and use these losses to reduce any taxable capital gains. If your net capital losses exceed your gains, you can net up to $3,000 against other income such as wages. Losses over $3,000 can be used in future years.
- Selling appreciated assets. Consider selling appreciated assets in the tax year that helps you the most. While this strategy may be hard to accomplish this late in the year, it is still worthy of consideration. To do this, estimate your current year’s taxable income and compare it to next year’s projected income. Then sell the appreciated asset in the year that will yield the lowest tax. Remember to account for the 3.8% net investment income tax in your estimates.
- Review health spending accounts. If you participate in a Health Savings Account (HSA), try to maximize your annual contribution to reduce your taxable income. Remember, these funds allow you to pay for qualified health expenses with pre-tax dollars. More importantly, unlike Flexible Spending Accounts (FSA), you can carry over all unused funds into future years. If you do have an FSA, you can carry forward a maximum of $610 from 2023 into 2024 if your plan allows this. The deadline for contributing to your Health Savings Account (HSA) and still getting a deduction for the 2023 tax year is April 15, 2024. The maximum contribution for 2023 is $3,850 if single and $7,750 for married couples. If you’re age 55 or older, you can add $1,000 to your HSA contribution.
While the year is quickly coming to an end, there is still time to reduce your 2023 tax liability, but only if you act now.
Ingredients of a Successful Business Partnership
Like a bundle of sticks, good business partners support each other and are less likely to crack under strain together than on their own. In fact, companies with multiple owners have a stronger chance of surviving their first five years than sole proprietorships, according to U.S. Small Business Administration data.
Yet sole proprietorships are more common than partnerships, making up more than 70 percent of all businesses. That’s because while good partnerships are strong, they can be a challenge to successfully get off the ground. Here are some of the ingredients that good business partnerships require:
- A shared vision. Business partnerships need a shared vision. If there are differences in vision, make an honest effort to find common ground. If you want to start a restaurant, and your partner envisions a fine dining experience with French cuisine while you want an American bistro, you’re going to be disagreeing over everything from pricing and marketing to hiring and décor.
- Compatible strengths. Different people bring different skills and personalities to a business. There is no stronger glue to hold a business partnership together than when partners need and rely on each other’s abilities. Suppose one person is great at accounting and inventory management, and another is a natural at sales and marketing. Each is free to focus on what they are good at and can appreciate that their partner will pick up the slack in the areas where they are weak.
- Defined roles and limitations. Before going into business, outline who will have what responsibilities. Agree on which things need consensus and which do not. Having this understanding up front will help resolve future disagreements. Outlining the limits of each person’s role not only avoids conflict, it also identifies where you need to hire outside expertise to fill a skill gap in your partnership.
- A conflict resolution strategy. Conflict is bound to arise even if the fundamentals of your partnership are strong. Set up a routine for resolving conflicts. Start with a schedule for frequent communication between partners. Allow each person to discuss issues without judgment. If compromise is still difficult after a discussion, it helps to have someone who can be a neutral arbiter, such as a trusted employee or consultant.
- A goal-setting system. Create a system to set individual goals as well as business goals. Regularly meet together and set your goals, the steps needed to achieve them, who needs to take the next action step, and the expected date of completion.
- An exit strategy. It’s often easier to get into business with a partner than to exit when it isn’t working out. Create a buy-sell agreement at the start of your business relationship that outlines how you’ll exit the business and create a fair valuation system to pay the exiting owner. Neither the selling partner nor the buying partner want to feel taken advantage of during an ownership transition.
Watch Out For These Unexpected Tax Surprises!
No one likes surprises from the IRS, but they do occasionally happen. Here are some examples of tax situations you could find yourself in and what to do about them.
- Kids getting older tax surprise. Your children are a wonderful tax deduction if they meet certain qualifications. But as they get older, many child-related deductions fall off and create an unexpected tax bill. And it doesn’t happen all at once.
As an example, one of the largest tax deductions your children can provide you is via the child tax credit. If they are under age 17 on December 31st and meet several other qualifications, you could get up to $2,000 for that child on that year’s tax return. But you’ll lose this deduction the year they turn 17. If their 17th birthday occurs in 2023, you can’t claim them for the child tax credit when you file your 2023 tax return in 2024, resulting in $2,000 more in taxes you’ll need to pay.
- Limited losses tax surprise. If you sell stock, cryptocurrency or any other asset at a loss of $5,000, for example, you can match this up with another asset you sell at a $5,000 gain and – presto! You won’t have to pay taxes on that $5,000 gain because the $5,000 loss cancels it out. But what if you don’t have another asset that you sold at a gain? In this example, the most you can deduct on your tax return is $3,000 (the remaining loss can be carried forward to subsequent years).
Herein lies the tax surprise. If you have more than $3,000 in losses from selling assets, and you don’t have a corresponding amount of gains from selling assets, you’re limited to the $3,000 loss. So if you have a big loss from selling an asset in 2023, and no large gains from selling other assets to use as an offset, you can only deduct $3,000 of your loss on your 2023 tax return.
Other: Getting a letter from the IRS surprise. Official tax forms such as W-2s and 1099s are mailed to both you and the IRS. If the figures on your income tax return do not match those in the hands of the IRS, you will get a letter from the IRS saying that you’re being audited. These audits are now done by mail and are commonly known as correspondence a
Assuming you already know you received all your 1099s and W-2s and confirmed their accuracy, verify the information in the IRS letter with your records. Believe it or not, the IRS sometimes makes mistakes! It is always best to call our office immediately.
Oxford
Part One
We have had many comments on the name “Oxford” and how unusual a name it is. As always, there is a story.
Steve tried to find a bulldog locally but was not successful. The closest bulldog pup was located in Lebanon Pennsylvania. His original plan was to drive up, get the pup and come back and surprise me. Well, that is at least a 14 hour round trip journey. He figured I would not buy that he was playing golf that whole time. Just for the record, he has played golf for 14 hours in day!
So, he called me into his office on a Thursday afternoon and showed me a video of 5 puppies on the internet. I was stunned to say the least. I asked him if he was sure he wanted to do this and repeatedly the answer was a resounding, “yes!”
He said if we leave tomorrow morning we could be there in the afternoon and have pup. I replied if we leave now we can have by a pup by Friday morning.
As you guessed, we packed quickly and left for Pennsylvania, that Thursday afternoon. The plan was to drive 6 hours, get a hotel and see the pups early Friday morning.
Life had other plans for the Merritt’s……..
The drive was smooth and fairly uneventful until we were near the Pennsylvania border. The car began to act odd. I was driving and the car would seem to cutoff while cruising along at 60 mph. The computer map screen on the dashboard would go dark and then repopulate with the map. About the third time this happened we decided to pull off on the nearest exit. It was approximately 9:15pm, dark and it was getting chilly.
We coast down the exit as the car had shut off completely while exiting the ramp. It restarted and we pulled into gas station convenience store parking lot.
To be Continued…
December Days
Here are some Days to Remember in December!
December 4th – Wildlife Conservation Day
Wildlife Conservation Day seeks to spread awareness about preserving and protecting the natural world and its inhabitants. Additionally, the observance strives to put an end to wildlife crime and supporting the Endangered Species Act.
December 12th – Gingerbread House Day
This day recognizes a family tradition for many around the country. Gather the family together, bake up some gingerbread, and start building and decorating your very own gingerbread house.
December 15th- Ugly Christmas Sweater Day
This celebration gives holiday lovers worldwide a chance to wear their ugly Christmas sweaters!
December 18th – Twins Day
National twins day celebrates all the siblings who enjoy the unique connection because they share a birthday.
December 25th – Christmas Day
Merry Christmas! Our office is closed December 25th and 26th
December 31st – Universal Hour of Peace
From 11:30 p.m. on December 31st to 12:30 a.m. on January 1st each year Universal Hour of Peace hopes to take a step toward a war-free world. This day encourages the promotion of peaceful activities.
Office Hours
Monday – Friday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
What’s Inside
- Spend Less with These 5 Money Tips
- Year-End Tax Planning Tips for Your Business
- Tax Planning: Now More Important Than Ever
- November Days
Spend Less with these 5 Money Tips
Government data shows that record inflation from the last few years started to slow down throughout 2023, but much of the damage has already been done. Every bill we pay and purchase we make costs more now, from insurance to clothing, and groceries to household supplies. Here are some tips to spend less to help offset the effect from these now permanently higher prices
- Pay down high-interest debt. You can start spending less money today by paying down high-interest debt. Data from the Federal Reserve shows people who don’t pay off their credit card balance each month pay an average interest rate of 22.16%. For a monthly credit card payment of $75, this interest expense costs you $17 a month, or just over $200 a year.
- Revisit your subscriptions. Write down how many monthly subscriptions you’re paying for, then add up the monthly cost. Then ask yourself the following questions: Can you do without some of these subscriptions? Can you cut the cost of some of these subscriptions? Are there some with overlapping benefits? Maybe you’ll discover a subscription you completely forgot about. You don’t have to cancel all of them, but getting rid of just a few can help you spend less each month.
- Shop around for insurance. Loyalty to an insurance company doesn’t always pay off. Consider shopping around and comparing rates for homeowners’, auto, & umbrella insurance, along with other insurance coverage you may have.
- Eat at home. Limit how often you dine out or stop for take-out. Your wallet will thank you! According to data from the Bureau of Labor Statistics, overall food spending was up 12.7% in 2022, partly driven by a 20% increase in food spending away from home.
- Start using a budget. Finally, spend less by creating a written monthly budget and sticking to it. Find a budgeting app that you like the look and feel of, then create a budget within that app to help you decide how much to spend each month in various categories. Once the budget has been created, be sure to keep it updated throughout the month, instead of waiting until the last week to get it up-to-date.
The cost of everything may have skyrocketed, but you still have at least some control over where your money goes each month. Consider these steps to cut your spending, and you may be surprised at how much you save.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
Year-End Tax Planning Tips for Your Business
As 2023 winds down, here are some ideas to help you prepare for filing your upcoming tax return:
- Informational returns. Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TINs) for each of these vendors if you have not already done so.
- Shifting income and expenses. Consider accelerating income, or deferring earnings, based on profit projections.
- Be prepared to receive a Form 1099-K. You may receive a Form 1099-K from each payment processor from whom you receive $600 or more in payments. In addition to credit card companies and banks, payment processors can include Amazon, Etsy, PayPal, Venmo and Apple Pay. You’ll need to include the 1099-K on your tax return.
- Categorize income and expenses. The best way to prepare for receiving a 1099-K is to organize your records by major categories of income, expenses and fixed asset purchases. If your accounting records are accurate, then any tax form, including a 1099-K, should be easy to tie out to your books.
- Separation of expenses. Review business accounts to ensure personal expenses are not present. Reimburse the business for any expenses discovered during this review.
- Create expense reports. Having expense reports with supporting invoices and business credit card statements with corresponding invoices will help substantiate your deductions in the event of an audit.
- Fixed asset planning. Section 179 or bonus depreciation expensing versus traditional depreciation is a great planning tool. If using Section 179, the qualified assets must be placed in service prior to year-end.
Leveraging business meals. Business meals with clients or customers are 50% deductible. Retain the necessary receipts and documentation that note when the meal took place, who attended and the business purpose on each receipt.
- Charitable opportunities. Consider any last-minute deductible charitable giving including long-term capital gain stocks.
- Cell phone record review. Review your telephone records for qualified business use. While expensing a single landline out of a home office can be difficult to deduct, cell phone use can be documented and deducted for business purposes.
- Inventory review. Review your inventory for proper counts and remove obsolete or worthless products. Keep track of the obsolete and worthless amounts for a potential deduction.
- Review your receivables. Focus on collection activities and review your uncollectible accounts for possible write-offs.
- Review your estimated tax payments. Recap your year-to-date estimated tax payments and compare them to your forecast of full year earnings. Then make your 2023 4th quarter estimated tax payment by January 16, 2024.
Happy Halloween from Stephen Merritt, CPA, P.C.
Tax Planning: Now More Important Than Ever
November Days
Here are some Days to Remember in November!
November 5th– National Donut Day
Stop at your favorite donut shop and indulge in a fresh donut or try making your own!
November 9th– World Adoption Day
World Adoption Day encourages adoptees to share their stories. Its also a day for adoptive parents to connect with others and reflect upon their adoption journey.
November 11th– Veterans Day
Veterans Day on November 11th honors military veterans who served in the United States Armed Forces. Thank you for your service! – Stephen Merritt, CPA Office
November 14th– World Diabetes Day
World Diabetes Day raises awareness and provides education concerning a disease that affects over 400 million adults internationally. Learn more about both Type 1 and Type 2 diabetes and how to prevent it by visiting www.worlddiabetes.org.
November 23rd– Thanksgiving
On the fourth thanksgiving of November, people in the United States celebrate Thanksgiving, a national holiday honoring the early settlers and Native Americans who came together to have a historic harvest feast. What are you thankful for?
November 24th– Black Friday
The day after Thanksgiving has become known as Black Friday and is considered the official kick-off for holiday shopping. Retailers across the country slash prices, offer doorbuster deals on popular big ticket items, and often open in the wee hours of the morning to extend early bird specials.
Office Hours
Monday – Thursday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
GRRRRR Louis has his Sunday game face on!
What’s Inside
- The Trouble With 0% Financing
- Your Home is a Bundle of Tax Benefits
- Take a Look at Better Savings Rates
- Get to Know the New Employees at Stephen Merritt’s CPA Office!
- September Days
- Office Hours
The Trouble With 0% Financing
Companies want to make it easy to buy their big ticket items, especially at times of economic uncertainty. A popular technique is to offer 0% financing when you buy furniture, electronics and other household items. You can also take matters into your own hands with a credit card that offers 0% APR on purchases, balances transferred to the card, or both.
While paying for goods and services with 0% interest may sound appealing, there are risks you’ll face that you should be aware of before you take this step.
What’s hiding behind 0% financing:
Here are some of the potential problems hiding behind these 0% financing offers:
- Special financing offers make it easier to overspend. Psychology Today reported that credit card use can easily result in overspending, and the same is true for loans. The key is to understand the monthly payments you are committing to, and ensuring you can handle them. At the same time, try to assess your purchase decision. Would you buy this item if the 0% offer was not available?
- Some 0% APR offers come with deferred interest. Hidden in the fine print of some 0% interest offers may lurk deferred interest charges. This means that while you’re enjoying monthly payments with no interest, the interest charge accrues over time. If you miss a payment, have a late payment or haven’t paid off the loan by the end of the 0% offer period, the accrued interest gets added to your unpaid balance. The key is to precisely understand what happens if you miss a payment or don’t follow the 0% offer exactly as written…before you take the 0% offer.
- The 0% offer may be impacting the price. Remember, money has value and someone is paying the interest cost of the 0% financing. Usually the merchant is hiding the cost inside the price you are paying for the item.
What you can do:
Go New York Giants!Before considering a 0% interest financing offer on your next purchase, do this:
- Save up for large ticket purchases. Instead of financing items and ensuring you have even more bills to pay each month, start saving for pricier purchases on a regular basis. Even better, leverage the value of your savings within higher interest savings account options that are now in excess of 4 percent.
- Turn on your negotiating switch. Whenever you see a 0% offer, there should be a discount available to you for paying upfront. Someone is paying the interest and it is probably going to be you if the financing cost is built into the price you are paying.
- Pay on time! Finally, if you do think the 0% option is a deal for you… set up auto payments. Most of these deals are unforgiving and punitive if you miss a payment, so automate them to avoid this possibility.
Your Home is a Bundle of Tax Benefits
There are many tax benefits built into home ownership. Here is a review of the most common.
- The home gain exclusion. When you sell an asset for a profit, it creates a taxable event. If the asset, though, is your primary residence, you can exclude up to $250,000 ($500,000 if married filing jointly) of these gains. Special rules do apply, but this is a major tax benefit of home ownership.
- How to take advantage: You must live in your house for at least 2 of the previous 5 years to qualify for the home gain exclusion. Start planning now if you think you’ll be selling your house in the near future so you can qualify for this tax break.
- Itemized deductions. Mortgage interest and property taxes are two deductions you can claim as a homeowner. The interest is deductible on the first $750,000 associated with loans secured by your primary and secondary residences ($1 million for mortgages underwritten prior to 2018), while up to $10,000 of property taxes may be deducted. You may also deduct points paid as an itemized deduction over the life of your mortgage.
- How to take advantage: You need to itemize your deductions to take advantage of these tax breaks. Consider bunching your mortgage interest and property taxes with other itemized deductions such as charitable contributions, taxes and excess medical expenses to try and exceed the standard deduction for your filing status.
Your house is a great place to control the amount of tax you owe, but only if you know the rules and can apply these rules to your situation. Use this information as a starting point to see if there are ways to leverage your home’s tax benefits.
Take a Look at Better Savings Rates
A silver lining to continued interest rate hikes by the Federal Reserve is being able to earn more interest on cash stashed in your savings accounts. How much interest, exactly, you can earn depends on where you do your banking. Consider these tips to earn as much interest as you can, even if it means opening a new account:
Earn a bank bonus. Some banks offer a bonus if you meet specific requirements, such as depositing a minimum amount or setting up direct deposit. These bonuses can give you an incentive to try a new bank while padding your savings with a few extra hundred dollars.
Look beyond your local bank. If you want to earn enough interest on your savings to keep up with inflation, look beyond your local bank to the range of online banks offering much higher interest rates. For example, Chase banking customers are currently earning 0.01% on their savings, while those who save with UFB Direct are earning 5.06% APY with no monthly maintenance fees or minimum balance requirements.
Take advantage of new banking tools. Bankrate.com shows approximately 60% of consumers are very or somewhat interested in using a digital bank in the coming year. This is partly due to the digitization of nearly all other aspects of our lives, but it’s also due to convenient online tools like mobile check deposit, virtual account management and bill pay features.
Watch out for fees. Take note that many of the best bank accounts with great rates don’t charge monthly maintenance fees or any hidden fees. However, you’ll want to read over the fine print for accounts you’re considering so you know for sure. This is especially true with CD’s at some banks that tease with high interest rates, but hide the 1% to 3% penalties of your balance for early withdrawal.
Stability is important. When making a banking move, double check to ensure your deposits are FDIC insured. But even if insured, you still should check the press for any indication of deposit risk at your chosen bank. And if your current bank is still offering low interest rates, it may be subject to deposit flight limits that may create difficulty removing your funds. So while your money is insured, it may be hard to withdraw should this happen.
Today’s interest rates can be a boon for your finances, but you’ll need to put in some work up front to find the best bank for your particular situation. Shop around for a new bank and look for ways to get ahead, either through banking bonuses, great rates or both. The time and effort you spend will be worth it in the end!
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
Get to know the New Employees at Stephen Merritt’s CPA Office!
Louis needs his beauty sleep.
What is your favorite color?
Jakob: Green, emerald or forest green
Corawin: Pink and Green
Amy: Pink and Blue
Sydney: Purple
What is your favorite movie/ TV show?
Jakob: Jacobs Ladder and Futurama
Corawin: The Princess Bride and Lost + Little women (Korean drama) Very good!
Amy: Ferris Bueller’s Day Off – other 80’s movies (Breakfast Club, Pretty in Pink, and St. Elmo’s Fire)
Sydney: Stand By Me and The Vampire Diaries
What is your favorite song at the moment?
Jakob: Funk in the Hole by Roy Ayers
Corawin: Advice For The Young at Heart by Tears For Fears (It was my wedding song!)
Amy:A Sky Full of Stars by Coldplay
Sydney: Angry by The Rolling Stones
What is your favorite holiday and why?
Jakob: Christmas, for family tradition and being close with loved ones
Corawin: Any time I get to spend time with my family, but especially Halloween because my dad goes all out! Plus I got married the week before:)
Amy: Halloween- I love clever and creative costumes.. but I hate being scared!
Sydney: Thanksgiving because all the food (DUHH) but also spending quality time with my family and my boyfriends family
What is your favorite thing about working at the Stephen Merritt CPA Office?
Jakob: The comradery of everyone and the conversation’s at lunch
Corawin: Learning new things, working in a quiet but fun environment and seeing my family everyday (Jakob) and watching him grow!
Amy: The team vibe- everyone is working toward the common goal of doing the very best for our clients and teammates
Sydney: Louis and the family lunch we have everyday:)
September Days
Here are some Days to Remember in September!
September 1st – College Colors Day
Calling all college students, family, friends, fans and alumni! On the Friday before Labor Day, wear your team colors to celebrate your team spirit. Help carry on the traditions by singing along and wearing your team’s color!
September 4th- Labor Day
Every September on the first Monday, Labor Day recognizes men and women who build this country. From the beginning, this country has relied on its workforce for its infrastructure. We salute the American workforce!
Go New York Giants!
September 7th- Football Season
Clear your Sunday schedule! American football started in 1929 and gained popularity in the late 1930s starting with 8 teams. With the NFL growing and stabilizing, the NFL is worth 91 billion dollars and has 32 teams in 2023!
September 9th- 9/11 Remembrance Day
We Remember.
On September 11th, 2001, nearly 3,000 people passed away by the attack on the twin towers. We take this day to dedicate it to those who risked and lost their lives trying to help save people. Even the search and rescue animals who participated. We Remember.
September 19th- Voter Registration Day
Make your vote count! This day helps to ensure eligible voters register in their districts each year. Having awareness provides valuable information for each state.
September 22/23- First Day Of Fall
Que the best time of year! with the autumnal equinox marking the end of summer and the beginning of fall.
September 30th- National Love People Day
A day to love EVERYONE!
Unconditionally
Office Hours
Monday – Thursday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
My humans took me to the beach!
What’s Inside
JULY
- Understanding Goodwill in Accounting
- Hidden Costs Of Employee Turnover
AUGUST
- Building a Resilient Supply Chain In Your Business
- Navigating the Gig Economy: Tax Challenges
- July and August Days
- Office Hours
JULY
Understanding Goodwill in Accounting
You might know the word “goodwill” as the name of a local charity where you can drop off household items you no longer need. It might also be something that’s talked about at church. But in accounting circles, goodwill is something completely different.
Goodwill is an account on the balance sheet of certain businesses. It falls into the category of assets, and specifically, it’s an intangible asset. An intangible asset is something that is not physical. Examples of other intangible assets are copyrights, patents, and trademarks.
Goodwill arises when one company purchases another. When a company pays more for the company that it is acquiring, the difference is booked as goodwill. Goodwill represents the extra value that the acquisition provides for the purchasing company.
When one company buys another, the assets and liabilities of the acquired company are taken over by the purchasing company. They are recorded on the purchasing company’s books at their fair value. The balancing entry between the fair value of the assets and liabilities purchased and the purchase price is booked to the goodwill account.
What could lead a company to pay more for another company? Things that are not on the balance sheet but are valued could include a solid customer base, great employees, brand reputation, the company name and what it means, technology owned by the company, and a great reputation for customer service.
Normally, an intangible asset like goodwill would be amortized, but it is not. Amortization is when a portion of the asset is expensed each year. A patent, for example, is amortized over its useful life, not to exceed 20 years. Amortization is comparable to depreciation. Some physical assets are depreciated, while some intangible assets are amortized.
Before 2001, goodwill was amortized for up to 40 years, but the accounting rules have changed to something less arbitrary. Goodwill must be checked each year for “impairment.”
Goodwill impairment happens when the value of the acquisition declines after it has been purchased. One of the most famous impairments write-downs occurred right after this new accounting rule was implemented. In 2002, $54.2 billion in impairment costs was reported for the AOL Time Warner, Inc. merger.
More recently, in 2020, a few of the largest impairment write-downs included companies, such as Baker Hughes, Berkshire Hathaway, and ATT, due to the latter’s acquisition of DirecTV in earlier years. In 2022, impairment write-downs included Teladoc Health and Comcast. Covid-19 was in part responsible for a large number of impairment write-downs in recent years.
If impairment is required to be booked, the journal entry will look like this:
Debit Impairment Expense (increases expenses and therefore reduces profits)
Credit Goodwill (reduces the asset amount)
If your company has acquired other companies and you have a goodwill account on your balance sheet, you can work with your accountant to determine how to check for impairment and if you are required to correct your books.
JULY
The Hidden Costs of Employee Turnover and How to Reduce Them
Is high employee turnover an issue in your company? If so, you may already realize how costly it is. It affects your bottom line and cuts into your profits. Or maybe, it’s so bad that it’s turning your profits into losses. The question is, are you doing everything you can to reduce the costs associated with the turnover?
The Costs
To control the costs, first, we must know what they are. Only then can we tackle them. Here’s a list of the most common costs associated with employee turnover.
- Hiring costs
- Advertising costs
- Time spent screening resumes, scheduling interviews, and interviewing candidates
- Background check costs
- Signing bonus, if any
- Time spent setting up the new employees in payroll, IT, HR, completing forms, setting up equipment, generating badges, and more.
- Training costs
- Time spent training the new employee
- Costs of any required training courses on safety, sexual harassment, timesheet, and other required onboarding training, etc.
- Costs of mistakes made by new employees
- Productivity losses while new employee gets up to speed
- Extra supervisory costs monitoring new employee
- Vacancy losses
- Costs of overtime while other employees cover vacant shifts
- Productivity losses while the job is vacant
- Disruption of peers, including fears of them being next if it was an involuntary termination
How to Reduce Turnover Costs
Here are some ideas for reducing or avoiding these costs before they occur.
1. Create a positive culture. If your workplace is a positive, nurturing place to be, people may be more likely to stay. Create a place where employees can become good friends. That way, they are less likely to leave.
2. Review your pay package. Pay slightly more than your competitors. Or provide above-average benefits for your employees. Include perks that are less expensive, yet valuable to employees.
3. Consider overstaffing. This puts less pressure on all of your employees.
4. Automate and streamline your hiring process. This can keep hiring costs down when you do need to hire.
5. Create a healthy work environment. Listen to your employees and make sure their needs are being met so they can do the best job possible for your business. Provide them with the tools they need to do their job well.
6. Hire slow, fire fast. If you do have a worker who is dragging the entire team down, get rid of them fast.
7. Train your first-line supervisors and managers to be excellent bosses. People skills and supervisory skills do not normally come naturally but can be learned. Many voluntary terminations occur because people dislike their boss.
8. Be consistent with raises and performance reviews. Employees expect annual raises in most industries, even if it’s just a cost-of-living adjustment. Let employees know how they are doing on a regular basis, and formalize the process at least annually.
9. Conduct exit interviews. Find out why people are leaving by conducting exit interviews. You may have to dig deep to find out the real reason, as most people don’t want to burn their references. Take action if it’s something in your control.
10. Delegate projects. Keep the job interesting for employees by delegating low-risk projects that are fun for them to do.
11. Communicate purpose. Help employees understand the importance of the job they do, and help them connect to the deeper meaning of their job and its place in the world.
Many of these ideas have costs associated with them. Your accountant can help you do a cost-benefit analysis to determine the specific costs and if the benefits will outweigh the costs. Then you can create a plan to tackle and reduce the high, hidden costs of employee turnover in your business.
Louis soaking up the sun
AUGUST
Building a Resilient Supply Chain in Your Business
Supply chain breakdowns continue to stymie small businesses, causing them to lose sales and profits. Whether your business has been affected or not by supply chain delays and shortages, it’s a good idea to take steps to make your supply chain as resilient as possible.
Your supply chain starts with the acquisition of materials that go into what you sell. It includes the production of your products and services. And it doesn’t end until the customer receives the product or service you offer, as well as any help they need to consume your product.
Here is a process to help you evaluate your supply chain and improve its resilience, to avoid future bumps in the road.
Start with an Inventory of Your Suppliers
To evaluate your supply chain, a good place to start is to make a list of vendors. An easy way to get this vendor list is from your accounting system. Make lists from your list:
- Primary vendors that are crucial to your business. This includes vendors from which you purchase goods for resale, and can also be vendors such as your online shopping cart because if it goes down, you lose sales. These are you, mission-critical vendors.
- Secondary vendors that provide support indirectly, such as maintenance to machines you use or vendors that provide human resource benefits. Your business won’t be terribly disrupted if something happened to these vendors.
Once you’ve made your lists, let’s focus on your primary vendors first. If this list is large, you may want to further prioritize it by sorting the vendors you are most dependent on to the top of the list.
Contingency Planning
For each vendor on your primary list, do some research to find alternatives. You want to develop a deep bench of suppliers who can support your business. If one supplier has trouble meeting your orders, you will be more prepared and can consider switching. You’ll need to develop relationships with these alternate vendors, and perhaps even use them a time or two to test the relationship.
Many factors can go into selecting alternate vendors: price, quality, service, delivery time, shipping costs and methods, country of origin, location of warehouses, troubleshooting effectiveness, and much more. You know your industry best and what you need, so you can develop a table of criteria to evaluate potential new vendors. The ultimate goal is to have backup plans all along your supply chain.
Once you’ve gone through your primary list, you can start on the secondary vendors.
Purchasing Department
Large companies have entire purchasing departments to do this kind of work. If your business is small, you may be able to delegate portions of the list to trusted and well-trained employees. Know this type of work can take a long time. It will also be changing as new vendors spring up and older vendors retire or go out of business.
Internal Operations Including Selling and Distribution
Now that you’ve taken care of your suppliers, the next big step in supply chain efficiency is to standardize your operations. Take a look at your internal operational processes to ensure they are as efficient as possible. Create policies and procedures to ensure quality and customer satisfaction.
This includes reviewing the production process as well as selling and distribution, all the way to customer service. You may have covered this while you assessed your vendor list, but if not, you can do it now.
One example is how you get your product or service to your customers. Be sure there is an alternate method in case your primary distribution method breaks down.
Again, this is a marathon, not a sprint. Take your time to do this project right, and it will benefit you for years to come.
Risk versus Reward
In some cases, it may simply not be cost-effective to have a fully developed contingency solution. It may be more cost-effective to take the loss if it happens. You’ll want to evaluate the circumstances and come up with the right solution that works for your business.
Take the time you need to improve your supply chain resilience, and your business will be more valuable and more profitable for it.
AUGUST
Navigating the Gig Economy: Tax Challenges
Navigating the Gig Economy: Tax Challenges for Workers and Businesses
The gig economy refers to a labor market characterized by short-term contracts or freelance work as opposed to permanent jobs. It encompasses a wide range of industries, from ride-sharing and food delivery services to freelance writing and graphic design. Instead of being classified as traditional employees, many workers in the gig economy are considered independent contractors or self-employed individuals.
Tax Challenges for Independent Contractors
As an independent contractor, one of the primary challenges is managing taxes. Unlike employees who receive a regular paycheck with taxes withheld by their employers, independent contractors are responsible for calculating and paying their own taxes. This means that they need to set aside a portion of their earnings to cover income taxes, as well as self-employment taxes (which is the equivalent of Social Security and Medicare taxes withheld and paid by an employer).
Moreover, independent contractors may not have access to the same tax benefits as employees. For example, they may not be eligible for certain deductions, such as those related to employee benefits, health insurance premiums, or retirement plans. This can make it more difficult for independent contractors to reduce their taxable income and overall tax liability.
Another complication for independent contractors is deducting business expenses. In traditional employment, employees may be able to get pre-tax reimbursement/deductions for certain work-related expenses, such as transportation costs or home office expenses. However, independent contractors must carefully track and document their business-related expenses to claim deductions against their contractor income.
Common business expenses that independent contractors may incur include equipment or tools, software subscriptions, licensing costs, marketing expenses, and professional development costs. Keeping detailed records of these expenses is essential for accurately reporting deductions and minimizing taxable income.
Tax Challenges for Businesses
On the flip side, businesses that hire independent contractors also face tax challenges in the gig economy. When companies hire employees, they are typically responsible for withholding and remitting payroll taxes on behalf of their workers. However, when they engage independent contractors, the tax obligations differ.
Businesses that hire independent contractors are not generally required to withhold payroll taxes for them. Instead, independent contractors are responsible for reporting and paying their own self-employment taxes, which include Social Security and Medicare taxes. However, in some cases, businesses are required to comply with backup withholding rules when independent contractors provide the wrong Taxpayer Identification Number (TIN) or incorrectly report income on a tax return, which means that the business must withhold a certain percentage from all future payments to that contractor and deposit the withholdings directly with the IRS. Furthermore, misclassifying employees as independent contractors can lead to severe tax consequences and potential legal issues for businesses – IRS can assess back payroll taxes for payments that are later deemed as wages, and there can be legal ramifications for not providing certain benefits to those who are truly employees but being disguised as independent contractors. Therefore, businesses must ensure compliance with tax rules and laws surrounding worker classification.
Tax Compliance and Future Considerations
To navigate the tax challenges in the gig economy, both workers and businesses should prioritize tax compliance and proactive planning. Independent contractors should set aside a portion of their earnings to cover taxes and consult with tax professionals or use tax software to ensure accurate reporting. Keeping organized records of business expenses is crucial for maximizing deductions and reducing taxable income.
Businesses, on the other hand, should carefully review worker classification to ensure compliance with tax laws. Consulting with legal and tax professionals can help businesses determine whether a worker should be treated as an employee or an independent contractor. This can help avoid potentially costly penalties and liabilities associated with misclassification.
POV: louis is waiting kindly for you to hand him a treat
July and August Days
Here are some Days to Remember in July and August!
July 4th- The 4th of July
A time for grilling and drinking something cold! July celebrated the Declaration of Independence by the Continental Congress on July 4, 1776.
July 15th- Pet fire Safety Day
Pets are family!!! Put tips into practice and have a fire drill plan ready if disaster strikes. Your fur babies will love you for it.
July 24th- International Self Care Day
July 24th promotes self-care as a vital foundation of health. Taking care of yourself includes your whole self: physically, mentally and emotionally. Do something nice for yourself today!
August 17th- National Thrift Shop Day
Get your thrift on! If you need to redecorate, change your style, expand your music or library, the thrift store is the perfect place to do that! Thrift stores are budget friendly and have unique pieces everyone can enjoy.
August 26th- National Dog Day
Celebrate your fur baby! August 26th encourages dogs of ALL breeds be considered for adoption. No matter the breed, a dog is a man’s best friend.
August 30th- National Beach Day
Celebrating national beach day helps promote the opportunity to help keep those relaxing places clean.
Office Hours
Monday – Thursday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Louis needs his daily nap
What’s Inside
- 5 Ways to an Accountant’s Heart
- Get to know the Stephen Merritt, CPA Office
- May Days
- After Tax Season Office Hours
5 Ways To An Accountant’s Heart
In the last few years, the shortage of accounting professionals has grown tremendously, and many business owners are struggling to find reputable, quality accounting services. Prices for accounting services may have gone up due to this supply/demand imbalance, and they will keep going up for years to come– due to the shortage of accounting graduates and the overall pipeline. It makes sense to explore how to work better with your accountant as they become more and more scarce and in demand.
A Successful Partnership
Intuit conducted a survey in October 2022 which found tremendous benefits to the accountant-business owner relationship:
- Nine out of ten small businesses with an accountant or bookkeeper say they contribute to the business’s success.
- More than eight out of ten business owners say accounting professionals helped them reduce the impact of inflation on their business.
- More than 80 percent of business owners say their accountant helps them make better use of technology.
- More than 98 percent of business owners say they are more confident in their business because of their accountants.
- Small business owners overwhelmingly say their accountants save them time and money.
There’s no doubt that the relationship between a business owner and their accountant is of utmost importance to your business. Here are five ways to work even better with your accountant so that you can both benefit from this important business relationship.
Reduce your accountant’s administrative time.
There is a lot of paperwork when it comes to accounting and tax work, and administrative work goes hand in hand with that paperwork. When you can reduce the administrative work, your accountant can focus more on planning and advisory work, which is more valuable to your business. Here are a couple of tips.
- When sending paper information to your accountant, scan it in and convert it to PDF instead. Then upload it to your secure portal.
- When sending digital information, convert images to PDF files when possible. Images can’t easily be converted to text as PDFs can.
- Instead of sending multiple files, combine PDFs into one image so they are in the same document.
- Use a client portal instead of email if a client portal is provided.
Spend time understanding your accounting and tax reports.
A little education can go a long way. Learning a bit about finances and accounting can help you become a much better business owner. Your accountant may have suggestions on the best source for this or they may have videos they have produced themselves.
Honesty is paramount.
It’s critical that there is trust and complete honesty on both sides of the relationship. Your accountant may have earned a CPA or Enrolled Agent or other certifications that took years to acquire. Their license is in peril if anything is not above board. You might be surprised to learn that there are potentially many penalties and jail time for the accountant as well as the client if fraud or other criminal acts are discovered.
One example of something you can do to ensure your accountant’s trust is in tax preparation: clients should complete the tax organizer in full when the tax preparer sends it, even though it is a pain to do so. If a piece of information is missing, or you decide it’s not important but the government feels it is, that omission can spell the beginning of trouble for both you and your tax preparer.
Be mindful in communications.
Good communication is an essential part of the accountant-client relationship. A great client will take the time to read any emails or correspondence and answer all the questions in the email (not just the first one!).
Both you and your accountant may have preferred ways of communicating, among the choices of text, voice, and email. Keep in mind your accountant has a higher duty to protect your private information. Text and unencrypted email can be problematic for them, depending on the type of information to be conveyed.
To save time and reduce interruptions, keep a notes file on your desktop, and add any non-urgent questions to your list. That way, you can cover a lot of ground when you meet periodically. It’s a better use of both of your time. Of course, if you have urgent questions, feel free to contact your accountant at any time.
Vet any advice you hear.
Be wary of unsolicited advice as well as tips you might see on social media. They can be uneducated and worst case, downright fraudulent. One of the biggest problems today is ERC mills: companies that have sprung up to help small businesses claim the Employee Retention Credit from 2020 and 2021. Most of these companies are not following IRS guidelines and do not have the proper credentials to evaluate the tax law properly.
Social media sources can be quite unreliable as well. TikTok has some outrageous financial claims regarding the choice of business entity, so please do not act on this advice until you speak with a qualified accounting or tax professional.
Try these tips to build better rapport with your accountant, and your business will blossom as well.
Throwback Louis Pic!
Get to know the Stephen Merritt, CPA Office
What is one of your favorite movies?
Louis: Scooby-Doo (2002)
Steve: Butch Cassidy & The Sundance Kid
Barb: The Blues Brothers (with Belushi & Aykroyd)
Jelynne: 50 First Dates
Ann: The Goonies
Vic: Young Frankenstein
Vikkie: Star Wars Episode 3: Revenge of the Sith
What is a favorite song of yours?
Louis: Who Let the Dogs Out by The Baha Men
Steve: Along the Watchtower
Barb: Take on Me by A-ha – actually any 80’s music
Jelynne: Old love songs – Diary by Bread
Ann: Enter Sandman by Metallica
Vic: Texas Flood by Stevie Ray Vaughan
Vikkie: Cupid by FIFTY FIFTY
What is your favorite kind of cuisine?
Louis: Farmer’s Dog – no dry kibble!
Steve: Meat & Potatoes
Barb: Italian
Jelynne: Italian
Ann: Italian
Vic: Asian – all kinds, they aren’t all the same!
Vikkie: Mexican & Tex-Mex
What is your favorite holiday?
Louis: International Dog Day
Steve: Thanksgiving
Barb: Halloween
Jelynne: Thanksgiving
Ann: Christmas
Vic: Any Monday holiday that the office is closed
Vikkie: Pedro Pascal’s Birthday
How do you like to relax after a workday?
Louis: Watching The Incredible Dr. Pol and taking a nap
Steve: Chill at home
Barb: Walk on the beach
Jelynne: Read or watch TV
Ann: Take a walk with my dog
Vic: Whiskey & TV
Vikkie: Play World of Warcraft
POV: Louis wants treats
May Days
Here are some Days to Remember in May!
May – Monthly Awareness
Here are just some few things that are observed monthly in May:
Asian American & Pacific Islander Month
Mental Health Awareness Month
Jewish American Heritage Month
Military Appreciation Month
May 4th – Star Wars Day
“May the 4th be with you”
May 4th is an informal commemorative day to celebrate Star Wars! Take the day to watch your favorite Star Wars Movie, TV Show, or read some Star Wars books!
What is your favorite piece of Star Wars media?
I love the Clone Wars and Bad Batch animated series – Vikkie 🙂
May 5th – Cinco de Mayo
Cinco de Mayo (May 5th) is a yearly celebration which commemorates the anniversary of Mexico’s victory over the Second French Empire at the Battle of Puebla in 1862. In the U.S. the holiday is widely interpreted as a celebration of Mexican culture and heritage.
May 14th – Mother’s Day
Don’t forget to treat the maternal figure in your life and show them how much you appreciate everything they do!
May 20th – Armed Forces Day
Frist established in 1949, Armed Forces Day is a day to celebrate and thank the women and men who serve in the U.S. Military.
May 29th – Memorial Day
Originally called Decoration Day, Memorial Day is a day to honor the brave people who have fallen while serving in the U.S. Military.
Office Hours
After Tax Season Hours:
Monday – Thursday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Louis Throwback!
What’s Inside
- What Income Are You Required to Pay Tax On?
- Cool Tech: Drones
- April Days
- Office Hours
What Income Are You Required to Pay Tax On?
In general, income can be received in three ways – money, services, and property – and IRS requires you to declare most of this income on your tax return. Income is taxable unless specifically exempted by law, and in some cases, even nontaxable income must be disclosed on your tax return.
Taxable Income
Typically, the following types of income are required to be declared on your tax return, and you must pay tax on them:
- Wages
- Salaries
- Commissions
- Strike pay
- Rental income
- Alimony (for divorces finalized before 2019)
- Royalty payments
- Gains on stock sales
- Dividend and interest income
- Self-employment/business income
Keep in mind that there are other forms of compensation that may be taxable, including fringe benefits or stock options. Fringe benefits are part of your income unless they are specifically excluded by law – or, if you pay fair market value for them. You do not need to be an employee of the provider of such a benefit to be a recipient, and if you perform the services for which a fringe benefit is being provided, you are the recipient and required to report/pay tax on it as applicable, even if it is given to another person and not you (for example, a family member). Examples could include:
- A company-paid offsite gym membership
- A company vehicle that can be used personally
- Holiday gifts from an employer in the form of cash or gift certificates
- Company-paid tuition exceeding a certain amount
- Employer-paid group life insurance over a certain amount
Nontaxable Income
The following types of income are usually deemed nontaxable by IRS and aren’t required to be reported on your tax return:
- Inheritances and bequests
- Cash rebates
- Alimony payments (for divorces finalized after 2018)
- Child support payments
- Most healthcare benefits
- Money that is reimbursed from qualifying adoptions
- Welfare payments
Other Considerations
- There are some types of income that may or may not be taxable, or may be partially taxable. Examples include proceeds from cashing in a life insurance policy or money from a qualified scholarship, depending on how it was used. Income from retirement accounts may also fall into this category. Consult with your tax professional to determine how much of such income should be included on your tax return, if any.
- Certain types of income may not be readily identified as taxable, but are generally required to be included on your return. Examples include: the fair-market value of property received for your services; disability retirement or sickness/injury payments from an employer-paid plan; property and services for which you bartered; money/income from offshore accounts; or canceled/forgiven debt.
- IRS rules state that you are taxed on all income available to you, regardless of whether it is actually in your possession. For example, if a check is received by or made available to you before the end of the tax year, but you do not cash or deposit the check until the next year, the income was “constructively received” before year-end and, therefore, is taxable in that year.
- If you have a contract with a third party (agent) to receive income on your behalf, the income is considered received by you (and therefore taxable) in the year the agent received it.
- If you receive payment for future services to be provided, the income is generally included in income/subject to tax in the year you receive it. An exception to this is if you report on an accrual basis of accounting – consult with your tax professional for more information.
- Note that in some cases, the tax treatment of certain income for State purposes is not consistent with Federal tax law. For example, while alimony is no longer reportable on Federal returns for divorces finalized after 2018, California still requires such income to be included on the state tax return. Check with your tax professional to learn more about federal and State tax law differences.
For more information, please refer to IRS Publication 525, Taxable and Nontaxable Income: 2022 Publication 525 (irs.gov)
Louis is feeling very kawaii
Cool Tech: Drones
Drones were considered fun when they first came out, but they are far from toys. Drones have surprising benefits with extremely high return on investment to certain business owners.
A drone is a robot that can fly and that is controlled by a remote device. The technology includes GPS (global positioning system) and built-in sensors. There are many benefits to using drones:
- They can go places where it might be dangerous for employees to access, improving employee safety.
- They increase efficiency and productivity while decreasing workload and costs.
- They can improve accuracy.
A drone can be used in the following ways:
- To gather information for pricing estimates, such as roof repair
- To inspect items, such as a tree’s disease progression
- To monitor systems or the status of certain items, such as landfill fire risks
- To photograph items from an aerial view
There are many industries that have begun to routinely use drones, such as:
- Forestry
- Agriculture
- Construction
- Waste Management
- Environmental
- Disaster Relief Services
- Photographers
- Real Estate
- Advertising
- Event Planning
- Highways, Traffic, and Road Safety
Rules for Drones
Before you fly your new drone, there are rules you’ll need to follow. The FAA (Federal Aviation Administration) has put into place the rules for flying drones safely. There may also be rules passed at the state and local levels that you’ll need to check on.
When using drones for commercial purposes, you’ll need to register your drone, familiarize yourself with the operating rules for your type of drone, and pass a pilot’s test. Find out more here: https://www.faa.gov/uas
Cost of Drones
Drones can cost anywhere from $50 to $25,000 and more. A beginner recreational drone can cost under $100, while a beginner commercial drone can range from $300 to $500. A commercial drone typical starts at a $1,000 price tag. Drone prices will vary depending on their size, features, and intended usage.
If your industry is one that is adopting drones, it might be a good time to start researching them for your business.
Louis has his head in the stars
April Days
Here are some Days to Remember in April!
April – Monthly Awareness
Here are just some few things that are observed monthly in April:
Autism Awareness Month
Alcohol Awareness Month
ASPCA Month
April 7th – Good Friday
Good Friday falls on the Friday before Easter, and this year will be on April 7th. Good Friday is, for many, an intensely personal day of prayer and devotion.
April 9th – Easter
East falls on the first Sunday after the full moon that occurs on or after the spring equinox. It celebrates the resurrection of Jesus Christ.
April 15th – National Anime Day
Anime has grown in popularity over the past few decades and National Anime Day is celebrated by anime fans worldwide. Celebrate today by cosplaying your favorite anime character, reading manga, or watching your favorite or a new anime!
My favorites are Jujutsu Kaisen, Wotakoi: Love is Hard for Otaku, Fruits Basket, Buddy Daddies, & Demon Slayer – Vikkie 🙂
April 18th – Tax Day
April 18, 2023 is the day Individual Taxes are due this year! Tax Day was first introduced in 1913, when the Sixteenth Amendment was ratified.
April 22nd – Earth Day
Earth Day has been celebrated by billions of people around the globe for the past 50 years by promoting awareness for the health of our environment.
Some ways to help support your environment and celebrate Earth Day:
Support your native pollinators, clean up litter in your area, use native plants and wildflowers in your gardens, Reduce Reuse Recycle.
We only have one Earth.
Office Hours
Tax Season Hours Begin January 2, 2023
Monday – Friday
8 AM to 5 PM
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
Louis Throwback!
What’s Inside
- IMPORTANT: YOUR TAX INFORMATION & THE EMAIL SUBJECT LINE
- Income Tax Deductions vs. Tax Credits: Which One is Better?
- Knowledge Panels
- February Days
- Office Hours
- 2023 Office Food Tournament
IMPORTANT: YOUR TAX INFORMATION & THE EMAIL SUBJECT LINE
When emailing our office your tax information, please include your name (last, first) and the year 2022 in the subject line of the email.
EXAMPLE:
Subject: DOE, JANE 2022 – TAX INFO
This is to help prevent your important tax emails from being filtered into our junk/spam folders.
We greatly appreciate your cooperation regarding this matter!
Income Tax Deductions vs. Tax Credits
Which One Is Better?
While a deduction can reduce the amount of taxable income, credits can directly reduce the amount of tax owed, so they offer a greater tax benefit. Sometimes, credits can be refundable, which means that they might generate a refund for you even when you don’t owe tax. Below are some examples of different types of credits and deductions available for individual taxpayers. Keep in mind that each credit and/or deduction has specific criteria that need to be met in order to qualify.
Credits for Individuals
- Child Tax Credit
- Dependent Care Credit
- Earned Income Tax Credit
- Adoption Credit
- Saver’s Credit
- Foreign Tax Credit
- Excess Social Security and RRTA tax withheld
- Credit for Tax on Undistributed Capital Gain
- Credit for Prior Year Minimum Tax
- Residential Energy Credits
- Plug-in Electric Drive Vehicle Credit
- Premium Tax Credit (marketplace health care insurance credit)
- American Opportunity Credit and Lifetime Learning Credit
If you feel you might qualify for one of these credits, be sure to ask your tax preparer about them.
Deductions for Individuals
The IRS provides each taxpayer with a standard deduction that reduces their adjusted gross income so they pay less tax. The amounts change each year, and are determined by filing status. In the 2022 tax year, here is a sampling of the standard deduction amounts.
Single Married Filing Separately $12, 950
Married Filing Jointly; Qualifying Widow(er) $25,900
Head of Household $19,400
Most taxpayers take the standard deduction, but the law allows you to take more if you have more qualifying deductions than the limits above. These are called itemized deductions and can include personal property tax, real estate tax, sales tax, charitable contributions, gambling losses, interest expense, home mortgage interest paid, and moving expenses, to name a few.
Students and teachers may be able to take education deductions, which include student loan interest paid, work-related educational expenses, and educational expenses paid by a teacher.
Self-employed individuals can claim work-related deductions related to business expenses, business use of car, and business use of home on Schedule C.
Health care deductions, such as medical and dental expenses or Health Savings Account (HSA) contributions can be deductible to those who participate in these plans.
For investors, deductions may include sale of home, Individual Retirement Arrangement (IRA) contributions, capital losses, bad debts, qualified opportunity zone investments, and debt forgiveness.
If you’d like to study deductions and credits on your own, the IRS website is a wealth of knowledge. If you don’t want to do that, you can always ask your tax professional. Filling out your tax organizer in a complete and thorough manner is the very first step to helping your tax pro identify the plethora of credits and deductions you may qualify for.
Knowledge Panels
Are you looking for new ideas to market your business? If so, knowledge panels might be something to consider. Most people haven’t heard of them, but they are widely used in search results every day.
Knowledge panels are an invention from Google. They are the information panels that appear on the bottom right corner of your search results when you search for certain people or brands. They are different from the business profiles provided by Google Business Profile.
Knowledge panels display information that Google has collected in its Knowledge Graph, which is one of Google’s information databases. Search for your favorite author or your Congressperson, and you will be able to see an example of a knowledge panel. Famous historical figures and extremely popular entertainers may have more of an entire page displaying all of the information about them, but there will typically also be a right column of text (you may have to scroll a bit to see it), which is the knowledge panel.
How can you use knowledge panels in your business? When your leadership or brand is represented by a knowledge panel, it brings instant credibility to your organization. It boosts reputation and helps to build trust with all stakeholders. It increases your firm’s visibility.
Who typically has a knowledge panel? If you are an author of a book that has a formal ISBN (International Standard Book Number), you will automatically get one. If you are a leader of certain organizations, you will also get one. If your brand is well-known, it will have a knowledge panel.
You can’t create a knowledge panel, but you can claim it once it appears. Google determines who receives a knowledge panel. But you can “lobby” for one, and there are marketers you can hire to help you execute the steps it takes to get one. The main thing is to be active and visible online.
If you already have a knowledge panel, there are procedures documented on Google Help that you can follow to claim it. You can also make edit suggestions and submit them to Google. You can’t directly edit your knowledge panel; Google has final control over what is displayed.
Hopefully, you are now more aware of knowledge panels and how they can help your business become more visible.
February Days
Here are some Days to Remember in February!
February – Monthly Awareness
Here are just some few things that are observed monthly in February:
American Heart Month
Black History Month
National Cancer Prevention Month
February 1st – Imbolc
Imbolc welcomes the first wave of spring and honors the Celtic Goddess Brigid. Brigid was evoked in fertility blessings and oversaw poetry, crafts and prophecy and was considered on the most powerful Celtic Gods. Some ways to celebrate Imbolc:
Feasts and Fire: Imbolc is a time of feasting, and fire recognizes the returning power of the sun
Spring clean your home
Visit a stream or river
February 2nd – Groundhog Day
Groundhog Day is when we ask are we in for six more weeks of Winter. Only Groundhog Punxsutawney Phil knows the answer! This holiday is derived from a Dutch superstition too!
2023 Results: Punxsutawney Phil predicts 6 more weeks of winter!
February 14th – Valentine’s Day
Valentine’s Day is a day to shower your significant other with love and tokens of your affection! Take the day to show each other how much you care for one another!
February 21st – Mardi Gras
Mardi Gras is French for “Fat Tuesday” to reflect the practice of eating rich, fatty foods before the ritual fasting of the Lenten season. This celebration goes on in many parts of the world in various forms.
February 27th – National Pokémon Day
Gotta Catch Em’ All
Pokémon Red and Green was first released in Japan in 1996 and was later animated into a T.V. series in Japan in 1997. Cards then came out in 1998, creating one of the biggest fads of the 1990s.
What’s your favorite Pokémon?
My favorite are Vaporeon, Bulbasaur, and Sprigatito! – Vikkie
Office Hours
Tax Season Hours Begin January 2, 2023
Monday – Friday
8 AM to 5 PM
2023 Stephen Merritt CPA Food Tournament
Last year, the Stephen Merritt CPA office did a Brownie Tournament during the tax season and it was a hit!
This year, we’ve decided to do another food based bracket style tournament!
So what food will our office be trying this year?
*Drum Roll*
Mac and Cheese!!
We’ll be trying and comparing a variety of box and homemade mac & cheese, so stay tuned!
Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462
Your monthly news & updates
What’s Inside
- The Inflation Reduction Act: Electric Vehicle Credits
- 10 Ways to Slow Down in Business (and Why You’d Want to)
- January Days
- Office Hours
- COVID-19
The Inflation Reduction Act: Electric Vehicle Credits
Are you considering buying an electric vehicle in 2023? The rules have recently changed, due to the passage of the Inflation Reduction Act of 2022 (the “Act”) in the summer of 2022. This bill included a range of new tax rules addressing various areas, and one of its significant goals was to address climate change and jump-start clean energy production. In this article, we’ll specifically cover the portion of the bill that includes updates to the electric vehicle credits available.
Under the Act, existing electric vehicle (EV) credits have been expanded and modified. Although credits of up to $7,500 on the purchase of a new EV have been available for several years (with some limitations), the existing rules have been changed to make them more available to middle income taxpayers while also ramping up domestic manufacturing of EVs and their related components such as batteries.
Overall, there are now three EV tax credits available:
1. [Revised] IRC 30D qualified plug-in vehicle credit, renamed to the clean vehicle credit
The maximum credit remains at $7,500; however, there are income limits for qualifying automobiles placed in service after December 31, 2022.
Any vehicle placed in service after August 16, 2022 must have final assembly in North America in order to qualify (with a transition rule for any contracts entered into between January 1, 2022 and August 15, 2022).
After 2023, taxpayers can elect to transfer their credit to treat it as a payment to the dealer.
When purchasing an EV, be sure to request for your salesperson to give you the necessary tax information you need! For some manufacturers, the assembly location may vary depending on the specific vehicle and trim, and for that reason, it’s advised to ask the salesperson for the VIN of the car that you plan to purchase.
The Department of Energy has provided a VIN lookup tool that can be used to verify this information for a particular vehicle. Consumers can refer to a list published by to determine which models have final assembly in North America:
https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit
2. [New] IRC 25E previously-owned clean vehicle credit
A credit is now available for used EVs. Previously-owned clean vehicles placed in service after December 31, 2022 and before January 1, 2033 may qualify for the credit.
The credit is a nonrefundable credit equal to the lesser of $4,000 or 30% of the vehicle sale price.
There is also an income limit to qualify for this credit (with much lower limits than the 30D credit), and the sale price must be $25,000 or less.
3. [New] IRC 45W qualified commercial clean vehicle credit
This credit is available for commercial clean vehicles placed in service after December 31, 2022 and before January 1, 2033. The credit is 15% of the vehicle’s basis but increases to 30% for a vehicle not powered by a gasoline or diesel combustion engine, and it cannot exceed $40,000 (with other possible limitations).
There is no income limitation to claim it, but there are other requirements regarding the vehicle type and type of clean energy used. A taxpayer cannot claim the credit for a vehicle for which the taxpayer received the IRC 30D credit (#1).
Check with your tax professional to learn more about the new/revised electric vehicle credits and how they impact your specific tax situation.
10 Ways to Slow Down in Business
(and Why You’d Want to)
Sometimes we just need to slow down. It could be our body telling us it needs a break. It could be our mind experiencing the first signs of burnout. Even if you own your own business, you are subject to burnout, especially if you are a people pleaser or say “yes” to everyone!
But how do we do that? It might have been so long since we’ve changed our pace, we don’t know where to begin. Here are some tips on the best ways to slow down in business.
1. Eliminate wasted time.
Take a deep look at your to-do list. Identify one task that you’ve always done that adds nothing to your business. Does it really need to be done? Try to find tasks that don’t make any sense to do any more that you’re still doing just because you’ve always done it.
You should be able to free up a lot of time! For now, use it to slow down. Take a nap, call a friend, visit your employees with no agenda and really listen, take a walk and smell the roses, or simply hug your child.
2. Get off electronics.
A friend recently suffered from a concussion and her doctor told her to stay off electronics to help her brain heal faster. She limited herself to one hour a day for two months. What would you do if you had to stay off electronics? My friend read all the paperbacks she had that she hadn’t gotten to (for 15 years), cooked more, went shopping for things she had wanted for years, took walks, and learned a new language.
If you spend any time on social media, eliminating it even partially can be a huge pickup in time. Getting off electronics and using that time to get back into nature is healing for everyone.
3. Get enough sleep.
If you are sleep-deprived, everything takes longer. Slowing down and getting enough sleep each night can make you more productive, reducing your work hours. Plus, you just feel more refreshed.
4. Gain a new perspective.
Slowing down your normal routine can help you gain perspective. You might have been fighting fires in the trenches for so long, you’ve forgotten why you’re in business to begin with. Take time to re-connect with your mission, vision, and purpose. Make sure your employees understand their grander goals as well.
5. Avoid multi-tasking.
Almost everyone thinks they are good at multi-tasking, but it turns out science says only a minority percentage of people can really multi-task effectively. Become self-aware of your own habits related to multi-tasking. Do things take longer when you multi-task? Do you make mistakes you have to go back and correct when you multi-task? If so, you may be in the majority of people who simply shouldn’t do it.
6. Stop worrying about billable hours (for service businesses) – at least for a while.
If you are really fixated on billable hours, you may need to just let them go for a while until you can get your perspective back. There is more to life and business than billable hours.
7. Re-connect with your business community.
If there has been no time to connect with your co-owners, customers, and employees, slowing down can provide that time. The most important thing is to simply show up and listen. You will learn a lot!
8. Make time for strategy.
If your business is headed in the wrong direction, that is the ultimate time-waster! Slowing down allows you to re-visit your strategy, making sure you are working on the right projects, that you have the right company culture, and that your business goals are in alignment with your big-picture purpose.
9. Do nothing.
It’s really okay to do nothing when you’re the business owner. You need time to come up with ideas, think about the hard issues, and even daydream. You have to stop working in the business so you can work on the business.
10. Get better at managing distractions.
If you get interrupted every five minutes, you will be drained of energy at the end of your work day. Get smart about managing interruptions so you can be more productive. This will free up more time for you to take breaks and slow your pace during your workday.
Try at least a few of these ideas to slow down before your mind or your body insist on it.
January Days
Here are some Days to Remember in January!
January – Monthly Awareness
Here are just some few things that are observed monthly in January:
National Blood Donor Month
Cervical Health Awareness Month
Mental Wellness Month
Poverty Awareness Month
January 1st – New Year’s Day
A time of optimism, planning, and resolutions! Every New Year’s there’s a feeling of change: more rest, better eating habits, more exercise, new place or new job. Take a moment to get ready for the new year and set some goals for yourself!
January 16th – Martin Luther King, Jr. Day
Every year, the third Monday in January is when we observe Martin Luther King Jr. Day and reflect on the work done for racial equality. Martin Luther King, Jr. was an influential civil rights leader – his life and achievements are remembered and celebrated on this day.
January 22 – Chinese Lunar New Year
This year is the Year of the Rabbit, more specifically the Water Rabbit. The sign of the Rabbit is a symbol of longevity, peace, and prosperity. People born in a year of the Rabbit are believed to be vigilant, witty, quick-minded, and ingenious. 2023 is predicted to be a year of hope.
Rabbit Years: 1939, 1951, 1963, 1975, 1987, 1999, 2011, 2023
January 26 – National Spouses Day
Other than Valentine’s Day, this is the only worldwide holiday that gives couples a chance to spoil each other. It’s a chance to celebrate your spouse and show them they are appreciated.
January 30 – National Croissant Day
The croissant originated in Austria, known as “kipferls”. A baker named August Zang had a patisserie in Paris where he made kipferl. His Parisian version though was made flakier and Parisians began to call them croissants due to the crescent shapes.
Louis has some solid New Year’s resolutions
Office Hours
Tax Season Hours Begin January 2, 2023
Monday – Friday
8 AM to 5 PM
Coronavirus Disease (COVID-19)
Stephen Merritt, CPA, P.C. understands the challenge the impact COVID-19 has on our community.
Fully-Vaccinated individuals are not required to wear a mask while in our office.
Unvaccinated or not Fully-Vaccinated individuals must wear masks and follow COVID-19 protocol, such as social distancing, while in our office to stop the spread of COVID-19.
Tax documents may be mailed, FAXed, emailed, uploaded to client portal, or dropped off.
Final Returns can be picked up or mailed out.
As always, please call, we are happy to assist.
Stay safe and healthy!
Important Articles in November’s News include Year End Planning for 2017. Uncertainty Hampers 2017 Year End Tax Planning, Year-End Planning for Investors and Retirement, Year-End Tax Planning for Charitable Donations, Year-End Business Tax Planning and more.
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Read October’s CPA and Accounting News on articles such as Preparing Your Kids for Financial Independence, New IRS Ruling May Rescue Estate Plans, Tax Court Approves 100% Business Meal Deduction and more
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Our September newsletter includes information on Ginnie Mae Funds for Retirement, Why Tax Credits Beat Tax Deductions, R&D Tax Credits for Small Companies and more
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Our August newsletter includes Rising College Costs, Start FAFSA Planning Early, Outlining the Trump Tax Plan, Comparing Small Business Plans and more.
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Check out our July newsletter for informative articles on Calculating Your Retirement Needs, Taxable Vs. Tax-Deferred Accounts, How Small Businesses Benefit from Giving Back and more.
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Read our June tax newsletter for helpful information on The Third Best Investment You Can Make, Prenups Can Serve Many Purposes, and Solo 401(k) Plans for Companies Without Employees.
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Read May’s newsletter for important information on Tax-Wise Portfolio Rebalancing, Social Security Strategies That Still Work, a SIMPLE Retirement Plan and our Tax Calendar for May/June.
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Dealing With an IRS Audit ~ IRS data indicates that fewer than 1% of all individual income tax returns are audited each year. However, some taxpayers are more vulnerable than others. Find out in this month’s newsletter if you’re one of the few likely to face more scrutiny.
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Playing Defense as Stock Prices Soar – As of this writing, major U.S. stock market indexes are at or near record highs. This bullish run might continue…or it might end with a severe slide. Here are some strategies to consider. Read this and more in our March Newsletter.
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After-Tax Dollars in Traditional IRAs – Problems can arise for people who hold nondeductible dollars in their IRAs when they take distributions. Unless they’re careful, they may pay tax twice on the same dollars. Learn more in this month’s newsletter.
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Be Cautious With Hard-to-Value IRAs – A new year begins with celebrations, resolutions, and dual IRA opportunities. Most workers have until April 18, 2017 (April 19 in some states), to contribute to an IRA for 2016. At the same time, contributions to 2017 IRAs are now permitted. Learn more in this month’s newsletter.
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Seeking a Stable Retirement – An increasing number of retirees are living until their late 80s, 90s, and into triple figures these days. Running short of money may become a concern without a true pension to supplement Social Security. Learn more in this month’s newsletter.
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Year-End Tax Planning ~ The Protecting Americans from Tax Hikes (PATH) Act of 2015 was signed into law late last year, not only renewing some expired benefits but making them permanent. Learn more in this month’s newsletter, plus tips on year end tax planning for deductions, retirement, businesses and more.
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Financial Steps to Take after a Child is Born, Taxes on Investing in Gold, Investing in Wellness Programs for Employees and more in our October Newsletter.
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If you invest in a Target Date Fund or if you’re considering one, you should know what’s inside the package, so you can decide on an appropriate strategy going forward. Plus, Retirement Portfolios, Setting Paid Time-Off Policies for Employees and more.
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