June 2021

How to Handle a Taxpayer Identification Verification Request from the IRS

By Office Staff|2021-06-30T12:26:24-07:00June 30, 2021|Categories: Fraud Prevention|Tags: Identity Verification Request, IRS|0 Comments

Receiving an unexpected letter from the Internal Revenue Service (IRS) is seldom a good thing, and when it’s asking you to verify your identity, your brain heats up with red flags, warning sirens, questions, and concerns. Have I fallen victim to identity theft? Is this a phishing scam? Are con artists now posing as IRS agents to get my personal information? What should I do?

First and foremost, don’t panic. Most people’s instinct when they receive such a letter is to click a link (if they received it via email) or visit the website or call the phone number provided in the letter to find out what it’s about. And if the letter is part of a phishing scam, that’s exactly what the con artist wants you to do.

Is This Letter Really From the IRS?

If you received a notice out of the blue from the IRS via email, text, or even through one of your social media accounts, it’s probably not from the IRS. That’s not how they roll. When the IRS needs to contact a taxpayer, they typically do so in the form of a printed letter delivered by the U.S. Postal Service (USPS).

If you received a printed letter in the mail, examine the envelop and letter closely for signs of fraud, including the following: Continue reading… Continue reading… Continue reading…

Making Sense of Employer-Sponsored Retirement Plan Options

By Office Staff|2021-06-22T16:05:40-07:00June 22, 2021|Categories: Business Advice|Tags: 401(k), Defined Benefit Plans, Employer Sponsored Retirement Plan, IRA, Profit Sharing, Roth IRA, SIMPLE IRA, Simplified Employee Pension (SEP)|0 Comments

Establishing a retirement plan for employees can pay off in big ways, and we’re not just talking about the benefits for employees. Small business owners stand to benefit as well.

Small business benefits include:

Retirement plans improve recruitment and retention of better employees. This is especially important now that COVID restrictions are being lifted, and employers are struggling to entice their best employees back into the office.
Employer contributions are tax-deductible.
Assets in the plan grow tax-free.
Plan options are flexible.
Tax credits and other tax relief can help offset costs.

Employee benefits include:

Employee contributions can reduce their taxable income, lowering their taxes.
Contributions and profits grow tax-free until they’re withdrawn.
Contributions can be automated through payroll deductions, making it easier to save for retirement.
Through compounding interest (earning interest on savings and interest), contributions grow faster over time.
Retirement accounts can be carried from one employer to another.
Some employees may be eligible for the saver’s credit — a federal income tax credit on top of the tax deduction already allowed for contributions to a retirement account.
Some plans let employees defer a portion of their compensation into the plan, which can help employees save money on taxes.
Employees have peace of mind knowing that they’re improving their financial security for their future and retirement.

Choosing the Right Retirement Plan to Offer Your Employees

After deciding to offer a plan, you face the challenge of choosing which plan delivers the most bang for the buck — for both you (the business owner) and your employees. Several options are available, which is great, but without knowing the differences, picking a plan can be so overwhelming that you put off the decision indefinitely.

With that in mind, in this post, we describe the most common retirement plan options — from simplest to most complex — and present the key characteristics of each. As a small business owner, you’ll want to adopt a plan that’s tailored specifically to Continue reading… Continue reading… Continue reading…

Recognizing the Tax Risks of Loan Modifications

By Office Staff|2021-06-17T13:23:56-07:00June 17, 2021|Categories: Taxes|Tags: Cancellation of Debt, Loan Modification|0 Comments

Any discussion about the tax risks of loan modifications has to start with the fact that between 2007 and 2010, the United States experienced a subprime mortgage crisis that contributed to a world-wide financial recession that threatened to collapse our economy. In response, the federal government introduced and widely publicized several federal mortgage loan modification programs — each aimed at assisting distressed homeowners by modifying or refinancing mortgage loans that became unaffordable.

If you’re unfamiliar with it, loan modification is the renegotiation of the terms of an existing loan. It may involve a reduction in principal or interest rate, an extension of the length of time for repayment, or a change in loan type (from adjustable rate to a fixed rate, for instance). It can also result in a cancellation of debt (COD) — a situation in which the total amount you pay the lender is less than that required under the original agreement.

From the borrowers’ perspective, a cancellation of debt is a great deal. The only drawback is that the Internal Revenue Service (IRS) is likely to treat the COD as taxable income, which can come as a nasty surprise when tax season hits. Unfortunately, it’s likely to surprise more people this coming tax season because of the increase in loan modifications during the COVID-19 pandemic.

One of our responsibilities here at SWC is to protect our clients from nasty surprises. If you received a 1099-C from your lender or you’ve had a loan modified or are in the process of doing so, we want you to know what to expect and be prepared. One way to do that is by helping you answer common questions like the ones that appear below.

Is My Cancelled Debt Taxable? Answer These Four Questions

According to the IRS, “In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable, and you must report the canceled debt on your tax return for the year the cancellation occurs.”

On its surface, that seems simple enough, but when you start digging into the details, determining whether a certain loan modification generated a taxable cancellation of debt (COD) can be challenging. If you renegotiated the terms of a loan, you can determine whether it resulted in taxable COD income by answering these four questions: Continue reading… Continue reading… Continue reading…

Midyear Tax Planning Tips for Individuals and Businesses

By Office Staff|2021-06-09T14:26:33-07:00June 9, 2021|Categories: Taxes|Tags: Child Tax Credits, Employee Retention Credit, Estimated Taxes, Investment Income, Mid-Year Meeting|0 Comments

If you’re waiting until around the 15th of March — or worse yet, April — to save on your taxes, you’re waiting too long. Sure, you can use certain approaches to trim your taxes when completing your annual tax returns, but the bigger savings come from what you do in the months and years prior to filing.

And with recent changes in the balance of power in Washington, D.C., a little mid-year tax planning is sure to help you avoid some nasty surprises in the Aprils to come. President Biden has released a plan that, if enacted, will result in higher tax rates for certain individual and corporate taxpayers. Only time will tell what will ultimately happen. We’re keeping an eye out for any new tax legislation and will alert you when changes occur. But now is a good time to review your finances, so that if any changes to tax laws do take effect, you’ll be better prepared to act.

In this post, we cover several tax-planning approaches you’ll want to consider now — midway in the year — whether you’re an individual taxpayer or a small-business owner.

SWC Client Reminder: It’s time to schedule your complimentary 2021 Mid-year Tax Planning and Financial Strategy Meeting. Visit www.SteesWalker.com and click on the Contact link at the top of page, followed by the “Schedule Your Appointment Online” button on the next page.

Tax-Planning Strategies for Individual Taxpayers

First, consider some tax-planning approaches for yourself as an individual taxpayer. From revisiting your tax withholding or estimated tax payments and taking advantage of lower tax rates on investment income, to timing your investment gains and losses and taking advantage of expanded credits for kids, there are several strategies you may want to consider.

First up, let’s have another look at your tax withholding and estimated tax payments: Continue reading… Continue reading… Continue reading…

How to Grow Your Business: 4 Surefire Methods

By Office Staff|2021-06-03T15:26:10-07:00June 3, 2021|Categories: Business Advice|Tags: Business Growth, Lead Scoring, Mission Statement, Pricing, Sales System, Unique Core Differentiator|0 Comments

Congratulations! You have built and launched a business. You’re a member of a very select group of individuals. According to the U.S. Bureau of Labor Statistics, of the approximate 209 million working-age people in the U.S., only about 10 percent are self-employed, which includes four percent who own their own business and have employees working for them.

If your business is more than a year old, you’ve crossed a major threshold — more than a fifth of new businesses close after their first year in operation. By the fifth year, the failure rate hits 50 percent.

The main cause of new business failures? Cash flow — more cash flowing out than flowing in. Some of that is due to poor money management, but part is also due to slow or non-existent growth, or even a decline in sales and revenue. Strong growth can drive success even when a business isn’t careful about spending.

The problem is that while entrepreneurs are often superstars when it comes to starting a business, they’re often lousy at managing and growing a business. They may not even be aware of the four ways to grow a business and increase its value.

The 4 Ways to Grow a Business

You can find all sorts of ways to grow a business, but they all boil down to the following four:

Increase your number of good customers.
Increase repeat sales.
Increase average sales value.
Make each business process more effective.

Yes, that’s it. Four ways to grow your business.

If you’re thinking we missed one — cutting costs — technically speaking, that won’t grow your business. Cutting costs increases profitability, but not revenue. It improves the value of your business only if you reinvest the savings toward growing your business in one of the four ways mentioned above. Instead, if you look at costs through the lens of making your business processes more effective, your focus will be to make sure that every dollar of cost becomes an investment. And investments, not costs, generate returns!

In this post, we bring you up to speed on these four fundamental ways to grow your business and introduce you to a few common approaches for each. We don’t go into detail because every business and business owner/manager is different. We can take a deeper dive and explore specific techniques when we meet with you personally to discuss your business.

Method 1: Increase Your Number of Good Customers

Customer acquisition is where most business owners initially focus on growth. It’s known as the “front end” of marketing because it’s about identifying and connecting directly with prospective customers.

While your business has many techniques available for winning new customers, here we focus on the five biggies: Continue reading… Continue reading… Continue reading…