Tax

Many people use a tax professional to prepare their taxes. Anyone who prepares, or assists in preparing, all or substantially all of a federal tax return for compensation is required to have a valid Preparer Tax Identification Number (PTIN). All enrolled agents must also have a valid PTIN.

If you choose to have someone prepare your federal tax return, then you should know who can represent you before the IRS if there is a problem with your return. Here’s what you should know:

Representation rights, also known as practice rights, fall into two categories:

• Unlimited Representation
• Limited Representation

Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include:

• Enrolled agents
• Certified Public Accountants
• Attorneys

Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return. They can do this only before IRS revenue agents, customer service representatives and similar IRS employees. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question.

For returns filed after December 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants. The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.

Other tax return preparers have limited representation rights, but only for returns filed before January 1, 2016. Keep these changes in mind and choose wisely when you select a tax return preparer.

• By Leon Clinton
• August 13, 2019

If you’re conscientious about financial reporting, you may already have a sense of your company’s worth, but in some instances, you might need a formal business valuation, such as:

• Certain transactions: Are you selling your business? Planning an IPO? Need financing?
• Tax purposes: This includes estate planning, stock option distribution, and S Corporation conversions.
• Litigation: Often needed in cases like bankruptcy, divorce, and damage determinations.

There isn’t a single formula for valuing a business, but there are generally accepted measures that will give you a valid assessment of your company’s worth. Here are three tips that you can use to give your business a more accurate valuation.

1. Take a close look at how your business operates. Does it incorporate the most tax-efficient structure? Have sales been lagging or are you selling most of your merchandise to only a few customers? If so, then consider jump-starting your sales effort by bringing in an experienced consultant who can help.

Do you have several products that are not selling well? Maybe it’s time to remove them from your inventory. Redesign your catalog to give it a fresh new look and make a point of discussing any new and exciting product lines with your existing customer base.

It might also be time to give your physical properties a spring cleaning. Even minor upgrades such as a new coat of paint will increase your business valuation.

2. Tangible and intangible assets. Keep in mind that business valuation is not just an exercise in numbers where you subtract your liabilities from your assets, it’s also based on the value of your intangible assets.

It’s easy to figure out the numbers for the value of your real estate and fixtures, but what is your intellectual property worth? Do you hold any patents or trademarks? And what about your business relationships or the reputation you’ve established with existing clients and in the community? Don’t forget about key long-term employees whose in-depth knowledge about your business also adds value to its net worth.

3. Choose your appraisal team carefully. Don’t try to do it yourself by turning to the Internet or reading a few books. You may eventually need to bring in experts like a business broker and an attorney, but your first step should be to contact us. We have the expertise you need to arrive at a fair valuation of your business.

If you need a business valuation for whatever reason, please don’t hesitate to call and speak to a tax and accounting professional who can help.

• By Leon Clinton
• August 9, 2019

Educators can take advantage of tax deductions for qualified out-of-pocket expenses related to their profession such as classroom supplies, training, and travel. As such, as the new school year begins, teachers, administrators, and aides should remember to keep track of education-related expenses that could help reduce the amount of tax owed next spring.

Prior to tax reform, educators could choose one of two methods for deducting qualified expenses: Claiming the Educator Expense Deduction (up to $250) or, for those who itemized their deductions, claiming eligible work-related expenses as a miscellaneous deduction on Schedule A, Itemized Deductions.

Taxpayers should note, however, that under tax reform, miscellaneous itemized deductions are no longer deductible for tax years 2018 through 2025.

Teachers and other educators can also take advantage of various education tax benefits for ongoing educational pursuits such as the Lifetime Learning Credit or, in some instances depending on their circumstances, the American Opportunity Tax Credit.

How the Educator Expense Deduction Works

Educators can deduct up to $250 of unreimbursed business expenses. If both spouses are eligible educators and file a joint return, they may deduct up to $500, but not more than $250 each. The educator expense deduction is available even if an educator doesn’t itemize their deductions. To take advantage of this deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law.

Those who qualify can deduct costs of books, supplies, computer equipment and software, classroom equipment, and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible. Athletic supplies qualify if used for courses in health or physical education.

Keep Good Records

Educators should keep detailed records of qualifying expenses noting the date, amount, and purpose of each purchase. This will help prevent a missed deduction at tax time. Taxpayers should also keep a copy of their tax return for at least three years. Copies of tax returns may be needed for many reasons. A tax transcript summarizes return information and includes adjusted gross income and are available free of charge from the IRS.

Questions about tax deductions for educators?

Don’t hesitate to call if you have any questions about tax deduction available to educators including teachers, administrators, and aides.

• By Leon Clinton
• August 6, 2019