Month: December 2018

Taxpayers should be aware of a new round of fraudulent emails that impersonate the IRS and use tax transcripts as bait to entice users to open documents containing malware. The scam is especially problematic for businesses whose employees might open the emails infected with malware as it can spread throughout the network and may take months to remove.

This well-known malware, which is called Emotet, typ[ically tricks people into opening infected documents by posing as specific banks and financial institutions. However, in the past few weeks, the scam has masqueraded as the IRS, pretending to be from “IRS Online.” Many of these malicious Emotet emails were recently forwarded to phishing@irs.gov.

The scam email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.” The exact wording often changes with each version of the malware.

Taxpayers should remember that the IRS does not send unsolicited emails to the public, nor would it email a sensitive document such as a tax transcript (a summary of a tax return). Taxpayers receiving a suspicious email are urged not to open the email or the attachment. If using a personal computer, delete or forward the scam email to phishing@irs.gov. If you see these types of emails when using an employer’s computer, notify your company’s internet technology (IT) department immediately.

In July, the United States Computer Emergency Readiness Team (US-CERT) issued a warning in July about earlier versions of the Emotet, which it has called one of the most costly and destructive malware affecting the private and public sectors.

• By Leon Clinton
• December 16, 2018

If you have children, you may be able to reduce your tax bill using these tax credits and deductions.

1. Child Tax Credit: You may be able to take this credit on your tax return for each of your children under age 17. Qualifying dependents must have a valid Social Security Number. This credit is refundable, which means you may a refund even if you don’t owe any tax.
2. Credit for Other Dependents: This is a new tax credit under tax reform and is available for dependents for whom taxpayers cannot claim the Child Tax Credit. These dependents may include dependent children who are age 17 or older at the end of 2018 or parents or other qualifying relatives supported by the taxpayer. This credit is nonrefundable.
3. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child under age 13 while you work or look for work. To claim this credit you will need to accurately track your child care expenses.
4. Earned Income Tax Credit: The EITC is a benefit for certain people who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.
5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt a child.
6. Coverdell Education Savings Account: This savings account is used to pay qualified expenses at an eligible educational institution, which starting in 2018, includes primary and secondary schools as well as colleges and vocational schools. Contributions are not deductible; however, qualified distributions generally are tax-free.
7. Higher Education Tax Credits: Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credits are education tax credits that reduce your federal income tax dollar for dollar, unlike a deduction, which reduces your taxable income.
8. Student Loan Interest: You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.

As you can see, having children can impact your tax situation in multiple ways. Make sure that you’re taking advantage of credits and deductions you’re entitled to by speaking to a tax professional today.

• By Leon Clinton
• December 13, 2018

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are five budget-related errors commonly made by small businesses and some tips for avoiding them.

1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want to achieve in your business.
2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
3. Forgetting about Tax Obligations. While your financial statements may seem adequate, don’t forget to set aside enough money for tax (e.g., payroll and sales and use taxes) owed to state, local, and federal entities. Don’t make the mistake of thinking this is “money in the bank” and use it to pay for expenses you can’t afford or worse, including it in next year’s budget and later finding out that you don’t have the cash to pay for your tax obligations.
4. Assuming Revenue Equals Positive Cash Flow. Revenue on the books doesn’t always equate to cash in hand. Just because you’ve closed the deal, it may be a long time before you are paid for your services and the money is in your bank account. Easier said than done, perhaps, but don’t spend money that you don’t have.
5. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you spent, and then adjust your budget accordingly.

Please call if you need assistance in setting up a budget to meet your business financial goals.

• By Leon Clinton
• December 11, 2018