7 Signs Your Business Has Outgrown Basic Bookkeeping

7 Signs Your Business Has Outgrown Basic Bookkeeping

When businesses first start, bookkeeping and tax preparation are usually enough to keep finances organized.

But as a company grows, financial complexity grows with it.

Many business owners eventually reach a point where they have accurate financial reports—but still feel uncertain about the decisions they need to make.

If that sounds familiar, your business may have outgrown basic bookkeeping and could benefit from CFO services.

Below are seven common signs that it may be time for more strategic financial leadership.

1. Revenue Is Growing, But Profits Are Unclear

Growth is exciting, but it can also hide financial inefficiencies.

Some businesses reach $1 million or more in revenue yet struggle to answer simple questions like:

• Which services or products are most profitable?

• Are margins improving or shrinking?

• Where are expenses increasing faster than revenue?

A CFO helps analyze financial data and identify where profitability can be improved.

2. Cash Flow Feels Unpredictable

One of the most common frustrations for growing businesses is cash flow uncertainty.

You might be profitable on paper, but still experience:

• Tight cash flow during certain months

• Difficulty predicting future cash balances

• Stress about covering payroll or large expenses

CFO services include cash flow forecasting, which helps business owners anticipate financial needs months in advance.

3. Major Business Decisions Feel Risky

As businesses grow, decisions become larger and more complex.

Examples include:

• Hiring additional employees

• Expanding to a new location

• Investing in equipment or technology

• Raising prices or adjusting services

Without financial forecasting and strategic analysis, these decisions can feel like educated guesses.

A CFO provides financial modeling and projections to guide these choices.

4. Financial Reports Don’t Help You Make Decisions

Many businesses receive monthly financial reports but still struggle to interpret them.

You may receive:

• Profit and loss statements

• Balance sheets

• Expense reports

But still wonder:

• What do these numbers actually mean?

• Are we performing well compared to last year?

• Where should we focus improvement efforts?

A CFO translates financial reports into actionable insights.

5. You Don’t Have a Financial Forecast

Most successful businesses plan ahead operationally—but not financially.

Without forecasting, business owners often operate reactively instead of strategically.

A CFO helps develop:

• Revenue projections

• Expense forecasts

• Cash flow projections

• Scenario planning for growth or downturns

This provides a clear financial roadmap for the future.

6. You’re Preparing for Significant Growth

Rapid growth creates new financial challenges.

Businesses often need to plan for:

• Hiring multiple employees

• Increased inventory or materials

• Larger operating expenses

• Financing or loans

CFO services help ensure that growth happens sustainably and profitably.

7. You Spend Too Much Time Worrying About the Numbers

Many business owners find themselves constantly thinking about financial issues:

• Are we charging enough?

• Can we afford to grow?

• Why does cash feel tight?

• Are we making the right financial decisions?

When financial strategy becomes overwhelming, it’s often a sign that the business needs higher-level financial leadership.

A CFO acts as a trusted advisor who helps bring clarity and confidence to these decisions.

The Difference Between Bookkeeping, Accounting, and CFO Services

Each level of financial support serves a different purpose:

Bookkeeping
Records financial transactions and keeps financial records organized.

Accounting & Tax Preparation
Ensures financial accuracy and compliance with tax laws.

CFO Services
Focus on strategy, forecasting, profitability, and long-term financial planning.

For growing businesses, these services often work together to create a complete financial management system.

CFO Services for Growing Michigan Businesses

Many companies begin exploring CFO services when their revenue reaches $1 million to $5 million per year.

At this stage, financial decisions have a greater impact on the future of the business.

At CB Accounting, we provide outsourced CFO services for Michigan businesses that want to move beyond reactive financial management and build a clear strategy for growth.

Our CFO services can help with:

• Cash flow forecasting

• Profitability analysis

• Financial planning and budgeting

• KPI tracking and performance monitoring

• Strategic financial guidance for major business decisions

Ready to Strengthen Your Financial Strategy?

If your business is growing and you want clearer financial insight, CFO services may be the next step.

📞 Call CB Accounting at 616-802-4212
to discuss how strategic financial guidance can support your company’s growth.

What Are CFO Services — And Does Your Business Need Them?

What Are CFO Services — And Does Your Business Need Them?

As a business owner, you didn’t start your company to spend hours analyzing cash flow, forecasting revenue, or worrying about financial strategy.

But at some point, every growing business needs more than bookkeeping and tax preparation.

That’s where CFO services come in.

At CB Accounting, we provide strategic CFO services to help business owners gain clarity, confidence, and control over their financial future.

What Is a CFO?

A Chief Financial Officer (CFO) is responsible for overseeing a company’s financial strategy. In large corporations, the CFO works alongside the CEO to make major business decisions.

For small and mid-sized businesses, hiring a full-time CFO often isn’t realistic. That’s why many companies turn to outsourced or fractional CFO services—getting executive-level financial expertise without the full-time salary.

What Do CFO Services Include?

CFO services go far beyond preparing financial statements. They focus on strategy, forecasting, and decision-making.

Here are some of the core services we provide:

1. Cash Flow Planning & Management

Cash flow issues are one of the top reasons businesses struggle. We help you:

• Forecast future cash flow

• Identify potential shortfalls before they happen

• Improve timing of receivables and payables

2. Budgeting & Financial Forecasting

We work with you to create:

• Annual budgets

• Rolling forecasts

• Revenue and expense projections

• Scenario planning for growth or downturns

3. Strategic Growth Planning

Thinking about hiring? Expanding? Buying equipment? Raising prices?
We analyze the numbers so you can make confident decisions backed by data.

4. Profitability Analysis

Not all revenue is good revenue. We help you:

• Identify your most profitable services or products

• Analyze margins

• Adjust pricing strategically

5. KPI Tracking & Reporting

We identify the key performance indicators (KPIs) that matter most to your business and provide regular reporting so you always know where you stand.

6. Financial Systems & Process Improvement

Inefficient systems cost money. We help streamline financial processes to improve accuracy and efficiency.

Signs Your Business Might Need CFO Services

You may benefit from CFO support if:

• Revenue is growing, but profits aren’t.

• Cash flow feels unpredictable.

• You’re making big decisions without clear financial insight.

• You want to scale but aren’t sure if you’re financially ready.

• You feel reactive instead of proactive with your finances.

If any of these sound familiar, it may be time to move beyond compliance and into strategy.

CFO Services vs. Bookkeeping & Tax Preparation

Bookkeeping looks backward.
Tax preparation ensures compliance.
CFO services look forward.

While bookkeeping tells you what happened and tax planning minimizes liability, CFO services help you shape what happens next.

Why Outsourced CFO Services Make Sense for Small Businesses

Hiring a full-time CFO can cost six figures annually. Outsourced CFO services provide:

• Executive-level financial strategy

• Objective, data-driven insights

• Flexible engagement options

• Significant cost savings

You get the financial leadership your business needs—without the overhead.

CFO Services in Michigan: Strategic Financial Support for Growing Businesses

If you’re a business owner in Michigan looking for clearer financial direction, outsourced CFO services can be a game changer.

At CB Accounting, we partner with business owners who want more than tax compliance. We help you understand your numbers, improve profitability, and build a strategy for sustainable growth.

Ready to Strengthen Your Financial Strategy?

If you’re ready to move from reactive to proactive financial management, let’s talk.

Schedule a consultation with CB Accounting to learn how our CFO services can help your business grow with confidence.

📞 Call us at 616-802-4212
📅 Schedule a consultation today

2026 Federal Income Tax Deadlines: Business Owners Take Note

As we plan ahead for 2026, here are the key federal filing deadlines to keep on your compliance calendar:

• January 15, 2026 – Q4 2025 Estimated Tax Payment
• March 16, 2026 – S-Corporation & Partnership Returns (Form 1120-S & 1065)
• April 15, 2026 – Individual & C-Corporation Returns
• September 15, 2026 – Extended S-Corp & Partnership Returns
• October 15, 2026 – Extended Individual Returns

Proactive planning prevents last-minute scrambling, penalties, and cash flow surprises. For small and mid-sized businesses, coordinating tax strategy with bookkeeping and advisory services can significantly improve year-round financial clarity.

If you're looking for strategic tax planning and preparation support in West Michigan, CB Accounting is here to help.

📞 616-802-4212

Retirement & Health Savings For The Self-employed

Retirement & Health Savings: Maximizing Contributions for Self‑Employed Business Owners in Michigan

If you’re self‑employed in Michigan, retirement planning and healthcare savings are entirely in your hands. While that can feel overwhelming, it also creates powerful opportunities to reduce taxes and build long‑term wealth when you use the right tools.

Two of the most effective retirement options for self‑employed individuals are the SEP‑IRA and the Solo 401(k). When paired with a Health Savings Account (HSA), these plans can significantly improve both your current tax position and your future financial security.

Let’s break down how these strategies work and how to maximize them.

Why Retirement Planning Matters More When You’re Self‑Employed

Unlike traditional employees, self‑employed business owners don’t have access to employer‑sponsored retirement plans or matching contributions. That means:

• You must proactively set up and fund your own retirement plan

• You’re responsible for understanding contribution limits and deadlines

• Your choices directly impact your tax liability

The upside? Self‑employed retirement plans often allow much higher contributions than standard workplace plans.

SEP‑IRA: Simple and Powerful

A Simplified Employee Pension IRA (SEP‑IRA) is one of the easiest retirement plans to set up and maintain.

Key Features

• Contributions are made by the business

• You can contribute up to 25% of net self‑employment income (after adjustments)

• High annual contribution limits (indexed annually by the IRS)

• Contributions are tax‑deductible to the business

Best For

• Sole proprietors and small businesses

• Business owners with fluctuating income

• Those who want minimal administrative complexity

Things to Consider

• If you have employees, you generally must contribute the same percentage for them

• No employee salary deferrals—only employer contributions

Solo 401(k): Maximum Flexibility & Higher Potential

A Solo 401(k) (also called an Individual 401(k)) is designed for self‑employed individuals with no employees other than a spouse.

Key Features

• You contribute as both employee and employer

• Allows higher total contributions compared to a SEP‑IRA at lower income levels

• Optional Roth contribution feature

• Potential for loan access

Contribution Breakdown

• Employee deferral: You can defer a portion of your income

• Employer contribution: Up to 25% of net self‑employment income

• Combined contributions are capped at the IRS annual limit

Best For

• High‑earning self‑employed professionals

• Business owners focused on aggressive retirement savings

• Those who want Roth flexibility

Things to Consider

• Slightly more administrative responsibility

• Annual filing requirements once assets exceed IRS thresholds

Health Savings Accounts (HSA): The Triple Tax Advantage

If you’re enrolled in a high‑deductible health plan (HDHP), an HSA is one of the most tax‑efficient savings tools available.

Why HSAs Are So Powerful

• Contributions are tax‑deductible

• Growth is tax‑free

• Withdrawals for qualified medical expenses are tax‑free

In retirement, HSAs can be used for:

• Medicare premiums

• Out‑of‑pocket healthcare expenses

• Long‑term care costs

After age 65, non‑medical withdrawals are allowed (subject to income tax, similar to an IRA).

Coordinating Retirement & Health Savings for Maximum Impact

The real magic happens when these strategies work together.

Smart Planning Tips

• Prioritize Solo 401(k) or SEP‑IRA contributions to reduce taxable income

• Fully fund an HSA if eligible

• Time contributions strategically based on cash flow

• Coordinate retirement planning with estimated tax payments

Together, these tools can:

• Lower current‑year tax liability

• Build long‑term, tax‑advantaged wealth

• Reduce healthcare cost risk in retirement

Deadlines You Don’t Want to Miss

• SEP‑IRA: Contributions can typically be made up to the tax filing deadline (including extensions)

• Solo 401(k): Plan must be established by year‑end, though contributions may be made later

• HSA: Contributions usually allowed up to the tax filing deadline

Proper planning ensures you don’t leave tax savings on the table.

Retirement Planning for Michigan Self‑Employed Professionals

Michigan self‑employed business owners face unique challenges, from fluctuating income to complex state and federal tax rules. Strategic retirement and health savings planning can reduce taxable income today while building long‑term financial security.

Whether you operate a sole proprietorship, LLC, or S‑Corporation, choosing the right combination of a SEP‑IRA, Solo 401(k), and HSA can make a meaningful difference in your overall tax strategy.

Work With a Local Michigan Accounting Firm You Can Trust

At CB Accounting, we specialize in self‑employed retirement planning in Michigan. We help business owners:

• Determine whether a SEP‑IRA or Solo 401(k) is the best fit

• Calculate and maximize allowable contributions

• Coordinate retirement contributions with tax planning

• Ensure compliance with IRS and Michigan requirements

If you’re self‑employed and want to lower your tax bill while planning confidently for the future, we’re here to help.

Call CB Accounting today at 616‑802‑4212 or schedule a consultation to review your retirement and health savings strategy.

Planning ahead now can create peace of mind later—for you and your business.

No Tax on Tips February 1, 2026

🇺🇸 No Tax on Tips — What It Is and Why It Matters

A Guide to the New Tax Law from the One Big Beautiful Bill

On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act (often called OBBB or OBBBA), a sweeping federal tax and budget measure that includes a series of high-profile tax cuts and deductions. Among them is the provision popularly known as “No Tax on Tips.” But what does that phrase really mean for working Americans? Let’s break it down.

🧾 What “No Tax on Tips” Actually Is

Contrary to the catchy slogan, this provision doesn’t make tips tax-free in the absolute sense — it creates a new federal income tax deduction for qualifying tip income. That deduction can reduce how much of your tip income is subject to federal income tax, lowering your overall tax bill.

Here’s how it works:

• 🧮 Deduction up to $25,000: Eligible workers can deduct up to $25,000 of reported tip income per year from their federal taxable income.

• 📅 Applies to tips earned 2025–2028: The deduction is temporary — it’s effective for tax years 2025 through 2028 unless future laws extend it.

• 📊 Phase-out for higher earners: The benefit begins to phase out for single taxpayers with modified adjusted gross income (MAGI) over about $150,000 and married couples over $300,000.

• 📄 Reported tips only: To qualify, tips must be reported on official tax forms such as W-2s, 1099 forms, or Form 4137. Employers must report the amount of cash tips and the occupation to the IRS.

🍽️ Who Benefits from the Deduction

This deduction applies to workers in occupations that customarily and regularly receive tips — think restaurant servers, bartenders, taxi & rideshare drivers, hairstylists, and similar service roles. The U.S. Treasury and IRS have issued guidance with a list of eligible jobs.

For many tip-dependent workers, this could increase take-home pay, providing an extra boost during tax filing season or throughout the year. Some estimates suggest the average tax advantage for tipped workers could be significant — often described as a meaningful although modest benefit compared to their overall income.

💡 What It Doesn’t Change

It’s important to understand what no tax on tips does not do:

• ⚠️ Tips are still reported income: You still must report tip income — the deduction just reduces your taxable income.

• 💼 Payroll taxes still apply: Tips are still subject to Social Security and Medicare payroll taxes (FICA), and you may owe state income tax on tips depending on where you live.

📊 Beyond the Numbers — Policy and Debate

The “No Tax on Tips” provision has been a topic of debate:

• 📈 Proponents argue it helps lower-income and middle-income service workers by retaining more of their hard-earned money.

• 🧠 Critics say that because it’s temporary and limited — and because state and payroll taxes still apply — the benefit is smaller in practice than the slogan implies. Some also argue it isn’t the best way to support low-wage workers compared to wage reforms or earned income enhancements.

✨ In Summary

The “No Tax on Tips” law — part of the One Big Beautiful Bill Act — creates a federal income tax deduction for qualified tips, giving many service workers the chance to lower their taxable income by up to $25,000 per year through 2028. While this doesn’t eliminate all taxes on tips, it does represent one of the more talked-about tax changes in the 2025 legislative landscape.

Ways to Maximize Your Refund

Ways to Maximize the Benefits of a Refund

Three of every four Americans got a refund check last year according to IRS statistics. With a little planning, you can maximize the benefit of your refund. Here are some ideas:

Pay off debt. If you have debt, a great spending priority can be to reduce or eliminate it. This is especially true if you have any credit card debt. With rate increases, credit card interest can cripple you financially. Start by paying down debts with the highest interest rates and work your way down the list until you bring your debt burden down to a manageable level.

Save for retirement. Saving for retirement works like debt, but in reverse. The longer you set aside money for retirement, the more time you give the power of compound earnings to work for you. This money can even continue working for you long after you retire. Consider depositing some or all of your refund check into a Traditional or Roth IRA. You can contribute a total of $7,000 to an IRA for tax year 2025, or $8,000 if you're 50 years old or older. For 2026, the limits increase to $7,500 for those under age 50, and $8,600 for those age 50 or older.

Save for a home. Home ownership is a source of wealth and stability for many Americans. If you don't own a home yet, consider building up a down payment fund using some of your refund. If you already own a home, consider using your refund to start paying your mortgage off early. This is especially important if you have a recent mortgage with higher interest rates.

Invest in yourself. Sometimes the best investment isn't financial, but personal. If there's a course of study or conference that would improve your skills or knowledge, that could be a wise use of your money in the long run.

Give some of it away. Helping people, and being able to deduct gifts and charity from your next tax return, isn't the only benefit of giving to a good cause.

Ways to Maximize Your Refund

The following paragraphs are taken from the National Federation of Independent Business for the benefit of your knowledge. Look at their website for more information at nfib.com

“The centerpiece of the pro-small business tax changes is Section 199A, the 20% Small Business Deduction. Approximately 75% of NFIB members are organized as pass-throughs (S corporations, LLCs, sole proprietorships, or partnerships), not as C corporations.

Pass-through business owners  – regardless of the type of business they own – can claim up to a 20% tax deduction on their share of the business’ income up to $182,100 for individual filers and $364,200 for those filing jointly in tax year 2023. For tax year 2024, business income up to $191,950 (individual) or $383,900 (joint) is eligible for the full 20% Small Business Deduction. For small business owners whose qualified business income exceeds these thresholds, the deduction may be subject to limitations. For certain service businesses, the deduction phases out over $50,000 (individual filers) and $100,000 (joint filers) of taxable income. If your business is not a specified services business, you can still benefit from the deduction if your business is employee intensive, or you make capital expenditures.

More than 81% of small business owners believe the 20% Small Business Deduction is important to the health of their business. However, without additional congressional action, this important small business provision is scheduled to expire after 2025 alongside other helpful tax benefits. Read more about the Small Business Deduction here.”

The Main Street Tax Certainty Act makes this critical deduction permanent. Please ask your Representative or Senators to co-sponsor this crucial legislation and be an advocate for small business tax relief.

Clues You are About to be Scammed

Clues You are About to be Scammed

Mention the word IRS and everyone's blood pressure tends to go up a bit. Unfortunately, thieves know this too and often use the IRS as a threat to get you to fall for their latest scam.

Every year the IRS mentions their dirty dozen tax scams and repeatedly tries to keep us all on alert. A review of recent alerts outlines some common traits of these scams. By being aware of them, you increase the chances of discovering the newest threat, even before anyone becomes a victim. Here are some common traits:

Personal information is always the target. Scammers are always going to ask for personal information. This is typically your Social Security number, your age, address, and birth date.

Getting your ID is a bonus. Thieves would love a copy of your passport or driver's license. This ID is often required to prove your identity. So a common tax scam is to tell you that you have unclaimed refunds and must prove your ID to get the unclaimed money.

The more significant the threat, the more likely the scam. Threatening arrest, levy of your bank accounts, or sending the sheriff or police to your residence or business are great ways to intimidate. The IRS does not work this way.

The wording doesn't seem right. If you see an IRS notice with title case or mixed fonts, or perhaps the margins don't look right, these are all signals that the notice may be fraudulent.

Demands for payment. Demands for payment of any kind over the phone or via email is not how payments to the IRS are made. All payments are paid to the U.S. Treasury. So that request for your credit card number is a clear scam attempt.

Your best defense against scams is to be wary and alert. When in doubt, go to www.irs.gov and contact the agency along with your tax professional. This is the best way to get independent confirmation of any claims being made on your tax record.

Ideas for a Great Refund

Ideas for a Great Refund

Three of every four Americans got a refund check last year according to IRS statistics. With a little planning, you can maximize the benefit of your refund. Here are some ideas:

Pay off debt. If you have debt, a great spending priority can be to reduce or eliminate it. This is especially true if you have any credit card debt. With rate increases, credit card interest can cripple you financially. Start by paying down debts with the highest interest rates and work your way down the list until you bring your debt burden down to a manageable level.

Save for retirement. Saving for retirement works like debt, but in reverse. The longer you set aside money for retirement, the more time you give the power of compound earnings to work for you. This money can even continue working for you long after you retire. Consider depositing some or all of your refund check into a Traditional or Roth IRA. You can contribute a total of $7,000 to an IRA in 2024, or $8,000 if you're 50 years old or older.

Save for a home. Home ownership is a source of wealth and stability for many Americans. If you don't own a home yet, consider building up a down payment fund using some of your refund. If you already own a home, consider using your refund to start paying your mortgage off early. This is especially important if you have a recent mortgage with higher interest rates.

Invest in yourself. Sometimes the best investment isn't financial, but personal. If there's a course of study or conference that would improve your skills or knowledge, that could be a wise use of your money in the long run.

Give some of it away. Helping people, and being able to deduct gifts and charity from your next tax return, isn't the only benefit of giving to a good cause.

Annual Tax Quiz - Is It Taxable?

Annual Tax Quiz - Is It Taxable?

The IRS seems to always have a surprise up its sleeve for the unsuspecting taxpayer. Here's a fun True or False quiz to test your knowledge of what's taxable. Enjoy!

• If a thief steals someone’s property, he owes tax on the value of the stolen property.

• True. But don't expect the person whose property was stolen to issue a Form 1099. Tax instructions tell you to list this as stolen property on your tax return. This part of the tax code is what famously put gangster Al Capone behind bars.

• Scholarships are never taxable.

• False. If you get scholarship money to cover tuition, fees and books, you pay no taxes. But if your scholarship also covers room and board, travel and other expenses, that portion of the award is taxable. Students who get financial aid in exchange for work must also pay tax on that money even if they use it to pay tuition.

• Minor gambling winnings are not taxable.

• False. When lady luck smiles on you, the tax collector typically doesn’t. While virtually all gambling winnings are deemed taxable income, not all winnings are reported to the IRS. The IRS requires reporting of winnings at various thresholds depending on the game: $1,200 or more from bingo or slot machines, or more than $5,000, minus the wager, from a poker tournament. If reported, the payer will issue you a Form W-2G and report what you won to the IRS. The practical nature of keeping track of and claiming this minor income is a different matter entirely.

• If you lose your job and start collecting unemployment benefits, the IRS will cut you a tax break.

• False. The IRS considers unemployment income to be a replacement for your regular income, and is therefore taxable. (During the pandemic, the IRS was legislated to make this unemployment tax-free, but this was only for a limited time.) The good news is that not all states do the same.

• If someone forgives an amount of money that you owe them, you typically have to pay taxes on that amount.

• True. Debt cancelled or otherwise discharged for less than what you owe – credit cards, mortgages, loans and so on – is generally taxable income per the IRS. Exceptions can include student loans, debts discharged in bankruptcy, or amounts in specific mortgage foreclosures as defined in a special tax law. The creditor may send you a federal Form 1099-C in the amount of the cancelled debt, which means the money also gets reported to IRS.

• An agreement between two small businesses to get free hair cuts in exchange for mowing a lawn is not taxable.

• False. When you exchange services in lieu of cash in a formal arrangement, the fair market value of the goods and services are fully taxable. You should get an IRS Form 1099-B or the like showing the value of cash, property, services, credits or other items that you received from the barter. On the positive side, any expenses you incurred to hold up your end of a deal are typically deductible as a business expense.

7 Tips for Small Business Accounting Success

7 Tips for Small Business Accounting Success

Keeping your company books in order can be a challenge. The following tips, though, can help set your accounting system up for success.

1. Separate business expenses from personal expenses. Keeping your business expenses separate gives the IRS one less reason to deny legitimate business expenses, as the IRS is quick to toss valid tax deductions if personal expenses are co-mingled in your business account.

2. Keep your books current. Setting a goal of having all business transactions recorded by the end of every week can help you accurately record on a timely basis. It is also easier to record one week of transactions at a time, rather than waiting until you have one month’s worth (or more!) of transactions to record.

3. Accurately record capital assets. Because capital assets provide long-term value, they are entered on the balance sheet and depreciated over multiple years. So it is important to understand when a purchase is a capitalized item and record it properly. In addition, you will need to keep a copy of the invoice available for the life of the asset to help prove a gain or loss when you sell or dispose of it. Consider reviewing large purchases once a month to ensure that a capital asset wasn’t accidentally recorded as an expense and keep a file of the invoice and asset id.

4. Perform monthly reconciliations. When you receive your monthly bank statements, ensure they are reconciled to your books within one week, as reconciliations often identify inaccurate transactions. Performing timely reconciliations can help you identify anything that may be amiss as soon as possible.

5. Accurately record sales taxes. Sales tax that your business receives when a customer makes a purchase is recorded as a liability since it is the state's money, not yours. Conversely, sales tax that your business pays when making a purchase is booked as an expense.

6. Save proper documentation. In addition to saving invoices and receipts for sales and purchases, also save documentation that supports all adjustments or journal entries recorded in your accounting system.

7. Delegate your accounting tasks. Many entrepreneurs start their business for reasons other than spending hours working on their books. So ask for help. Partnering with an expert to handle your bookkeeping needs can free you up to use your expertise where it’s needed the most — running and growing your business.

Avoid a Penalty and Tax Surprise when Withdrawing from Retirement Accounts

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!

IRS Identity Theft Season Begins Now

IRS Identity Theft Season Begins Now

Each year thieves try to steal billions in federal withholdings by stealing your identity. As the IRS focuses more attention on this quickly growing problem, now is the time of year to be extra vigilant.

Early tax filing season is the worst time

Your federal tax account at the IRS currently has plenty of money withheld from your paycheck during the course of the year. Until you file your tax return, the IRS is not sure if it needs to pay some of it back to you in the form of a refund.

Thieves know this too, and will try to file a fraudulent tax return before you have time to submit your own. When thieves file early, they can steal some of your withholdings and be long gone by the time you file your own tax return.

What you can do

1. Beat them to the punch. The sooner you file your tax return, the less likely a thief will beat you to your refund.

2. Get an Identity Protection PIN. All taxpayers who can verify their identity can get an Identity Protection PIN (IP PIN) from the IRS. The IP PIN is a six-digit code known only to you and the IRS that helps prevent identity thieves from filing fraudulent tax returns. If you want an IP PIN, visit irs.gov/IPPIN.

3. Check your credit reports. See if there is any suspicious activity on your accounts and on your credit reports.

4. Protect your ID. Be suspicious. Never give out your Social Security Number, do not leave your credit card unattended, never give ID information to someone who calls you, use the password function on your phone, be aware of strange mail, and shred important documents. Your best defense to IRS ID theft is to use best practices to protect your information.

The IRS is becoming better at spotting fakes

If the IRS suspects something is wrong with your filed tax return they will send you a notice. If this happens to you:

• Respond immediately. Get the direct contact information from the IRS website and let them know that you have a possible identity theft problem.

• File an Identity Theft Affidavit (IRS Form 14039). This will record your problem with the IRS and they will take extra steps to ensure your account activity is coming from you and not the ID thief.

• File a police report.

• Contact the credit bureaus.

Having your tax withholding stolen and then needing to unravel this problem within the IRS is a major hassle. Try to stay vigilant and know that there are steps to help protect your tax records. Thankfully, if the IRS pays out a refund to someone stealing your identity, they are on the hook for this loss, not you.

Make Filing Your Business's Tax Return Smooth Sailing With These Tips

Make Filing Your Business's Tax Return Smooth Sailing With These Tips

Consider these suggestions for helping to make tax season smooth sailing this year for your small business:

• Reconcile your bank accounts. Preparing an accurate tax return starts with accurate books. Reconciling your bank accounts is the first step in this process. Consider it the cornerstone on which you build your financials and your tax return. Up-to-date cash accounts will also give you confidence that you’re not over-reporting (or under-reporting!) income on your tax return.

• Organize those nasty credit card statements. If you use credit cards for your business, develop an expense report for each statement. The report should recap the credit card bill and place the transactions in the correct expense accounts. Attach actual copies of the expenses with the credit card statement. You will need this to support audits for both income tax and sales tax. Use this exercise to show you are only including business-related expenses by reimbursing your business for any personal use of the card.

• Reconcile accounts payable. One of the first tax deadlines for many businesses is issuing 1099 forms to vendors and contractors at the end of January. Get your accounts payable and cash disbursements up-to-date so you have an accurate account of which vendors you paid.

• Get your information reporting in order. Now identify anyone you paid during the year that will need a 1099. Look for vendors that are not incorporated like consultants or those in the gig economy. And don't forget your attorneys. You will need names, addresses, identification numbers (like Social Security numbers) and amounts billed. Send out W-9s as soon as possible to request missing information.

• File employee-related tax forms. File all necessary W-2 and W-3 forms, along with the applicable federal and state payroll returns (Forms 940 and 941). Do this as soon as possible in January to allow time to identify any potential problems.

• Compile a list of major purchases. Prepare a list of any major purchases you made during 2023. Once the list is created, find detailed invoices that support the purchase and create a fixed asset file. This spending documentation will be needed to determine if you wish to depreciate the purchase over time, take advantage of bonus depreciation, or immediately expense the purchase using code section 179. Your choices create a great tax planning tool.

Should you need help, please reach out for assistance.

Tips for a Smooth Tax Season

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.

Delay of New Tax Reporting Rules Could Cause Confusion

Delay of New Tax Reporting Rules Could Cause Confusion

Because of a late-breaking change by the IRS in November, you may still receive an unfamiliar tax form that may need to be reported on your business’s 2023 tax return.

Here’s what you need to know about this change and how it could affect you and your business.

Background

Credit card and electronic payment processing companies use Form 1099-K to provide information to the IRS about payments they’ve made to you if certain thresholds are met.

Under the old rules, the payment processing companies would only provide payment information to the IRS if you exceeded both $20,000 in payments AND 200 or more total transactions during a year for that particular processor.

Starting with the 2022 tax year, this $20,000 threshold was lowered to $600, while the 200 transaction criteria was eliminated.

After receiving feedback on how burdensome this new law was going to be for millions of taxpayers and business owners, the IRS in late 2022 delayed the implementation of the new $600 threshold until 2023.

The IRS in November of this year again delayed the implementation of the $600 threshold, this time with plans to use 2024 as a transition year with a $5,000 threshold before eventually enforcing the $600 threshold in 2025 or a later year.

What you should do

If you receive one or more Form 1099-Ks (even if you’re not supposed to!) here are some steps to consider:

• Save the form. If you receive a 1099-K, save the form! You will need to account for this information on your tax return or face the possibility of the activity triggering a correspondence audit from the IRS.

• It’s a business transaction. If you receive the form due to activity on sites like Amazon, Etsy, or you are reselling tickets or taking rent payments, you are considered to be in business in the eyes of the IRS, even if you lost money on a transaction.

• Capture relevant expenses. While the revenue reported on Form 1099-K must be reported on your tax return, remember that you can also include any related expenses to reduce reportable income. If you do have expenses to report, you’ll likely need to fill out Schedule C on your tax return.

• Stay organized. If you receive any Form 1099-Ks, your tax return will now be more complex. But you can help by staying organized with great documentation to explain exactly what the income was that you received from third-party payment platforms.

Ensure Your Donations Pass the IRS Test

Ensure Your Donations Pass the IRS Test

Here's a handy checklist to make sure your donations comply with IRS rules

Charitable contributions may come to mind as you look for different ways to lower your 2023 tax bill before the end of the year, as donations are a great way to give to a deserving charity while giving back to you in the form of a tax deduction.

The IRS, however, can be quick to disallow charitable contributions without proper documentation. Here are 6 things you need to do to ensure your charitable donation will be tax deductible.

1. Confirm eligibility of charity. Only donations to qualified charitable organizations registered with the IRS are tax-deductible. You can confirm an organization qualifies by calling the IRS at (877) 829-5500 or visit www.irs.gov and click on the charities and non-profits tab.

2. Ensure you can itemize. You must itemize your deductions using Schedule A in order to take a deduction for a contribution. For 2023, you need to have at least $13,850 worth of deductions to itemize ($27,700 if married). If you're going to itemize your return to take advantage of charitable deductions, it also makes sense to look for other itemized deductions. These include state and local taxes, real estate taxes, home mortgage interest and eligible medical expenses over a certain threshold. If your deductions are not going to exceed these thresholds, delay your deductions until next year and bundle two or more years of contributions into one year.

3. Get receipts. Get receipts for your deductible contributions. Receipts are not filed with your tax return but must be kept with your tax records. You must get the receipt at the time of the donation or the IRS may not allow the deduction.

4. Pay attention to the calendar. Contributions are deductible in the year they are made. To be deductible in 2023, contributions must be made by Dec. 31st. Contributions made by credit card are deductible even if you don’t pay off the charge until the following year, as long as the contribution is reported on your credit card statement by Dec. 31. Similarly, contribution checks written before Dec. 31 are deductible in the year written, even if the check is not cashed until the following year.

5. Be extra careful with noncash donations. You can make a contribution of clothing or other items around your home you no longer use. If you decide to make one of these noncash contributions, it's up to you to determine the value of the contribution. Many charities provide a donation value guide to help you determine the value of your contribution. Your donated items must be in good or better condition and you should receive a receipt from the charitable organization for your donations. If your noncash contributions are greater than $500, you must file Form 8283 to provide additional information to the IRS. For noncash donations greater than $5,000, you must also get an independent appraisal to certify the value of the items.

6. Keep track of mileage. If you drive for charitable purposes, this mileage can be deducted on Schedule A. For example, miles driven to deliver meals to the elderly, to be a volunteer coach or to transport others to and from a charitable event, can be deducted at a rate of 14 cents per mile. A log of the mileage must be maintained to substantiate your charitable driving.

Remember, charitable giving can be a valuable tax deduction — but only if you take the right steps.

The temperature isn’t the only thing falling this time of year.

Your 2023 tax bill can also be falling with a little bit of proactive planning, but time is running out!

To help you make the most of potential tax saving moves before the end of the year, this month's newsletter features several year-end tax cutting ideas.

Also have fun with the entire family by testing your holiday knowledge with our annual trivia quiz! Also learn about tax surprises to watch out for, and some key ingredients to be mindful of if you’re a part of a business partnership.

Please feel free to forward this newsletter to someone who may be interested in a topic and call with any questions you may have.

News Letter and Quiz

Here are some tips that should trigger you to conduct a full tax planning session to ensure your tax bill next year is not higher than it needs to be.

1. You owed tax last year. If you have not adjusted your withholdings, you could be in for a big tax bill. Time to take a look and plan accordingly.

2. Your household income changes dramatically. Whether higher OR lower, a change in income will impact your taxes, especially if it impacts availability of deductions or credits.

3. You are getting married or divorced. Married filing joint brings benefits and tax surprises. So does the impact of being single once again.

4. You have kids attending college next year. There are a number of tax programs that can help.

5. You have a small business. There are depreciation benefits plus the qualified business income deduction to consider. Plus you will need to understand the flow through impact your business profits will have on your personal tax return.

6. You plan on selling investments. Capital Gains tax rates can now range from 0% to 37% (depending on long or short term gains and your income level).

7. There are changes in your employer provided benefits. These changes could impact your taxable income this year.

8. You buy, sell or go through home foreclosure. There are tax benefits AND tax surprises when you buy or sell a home. A planful approach can make all the difference.

9. You have major medical expenses. The threshold for itemizing medical deductions is 7.5%. This means to itemize these expenses, they must exceed 7.5% of your income. But with proper planning, there are other ways to pay these expenses with pre-tax money!

10. You recently lost or changed jobs. Federal unemployment benefits are taxable and need to be accounted for in your tax plan.

11. Your estate has not been reviewed in the past 12 months. New gift tax and estate tax laws make 2023 a key year for an estate tax review.

12. You have a new child or dependent. These treasures bring joy AND a different tax obligation!

Accounting may seem like an investment in the beginning but we have been able to save our clients so much more over time.

And on top of that we have been able to give our clients peace of mind so they can focus on their business.