Taxation

New Year is around the corner; and in a jiffy, your tax season will be here too!

All you need is a little knowledge and preparation to stay calm and composed when you file for the taxes next year. Whether you are electronically filing your returns or traditionally mailing your paper returns, below are the necessary information that you need to know.

4 THINGS YOU SHOULD START DOING RIGHT NOW TO WELCOME THE TAX SEASON STRESS-FREE

HAVE EVERYTHING ORGANIZED:

Collect all your records well in advance: Do not start filing your return until you have all the necessary papers in hand, which include:

1. Tax Identification Number or Social Security Number: you must have this number for everybody mentioned in your return.
2. Salary/ income statements: Collect all the salary or income certificates before you start filing.
3. Routing numbers: have this 9 digit code right on hand if you would like a direct deposit of the refund.

See what’s changed this year: The Department of Revenue time and again amends the tax rules. Avoid any undesired surprises. Take a look if there’s any changes for this year’s tax filing.

Think about e-filing: it is always best to go e-filing, that is if you qualify. E-fling is highly recommended by the DOR as the processing is much quicker and this means you can also get your refund quicker.

GOING TO MAIL YOUR TAXES? THEN IDENTIFY THE APPROPRIATE FORM:

If you go for mailing your tax papers, it often gets you confused on where to start and how to proceed. Below are some of the most important documents you need:

1. Personal income tax return
2. Business expenses and additional income
3. Fiduciary income tax return
4. Healthcare proof
5. Capital loss and gain, dividends and interests
6. Senior tax credit
7. Royalties & real estate rentals
8. Use of Tax exemption
9. Sale of motor vehicles
10. Amendments after filing.

EXTENSIONS… EXTENSIONS……

We know it sometimes becomes hard to file your tax returns before the deadline. Fret not! You can very well get an extension of 6 months. To do so, you can either choose electronic options or make use of one of the two forms given below:

• Individual resident or nonresident- if you are an individual use Form-4868
• Partnership or Fiduciary- if you are in a partnership, use Form- 8736

*Condition: If you wish to get an extension, you must qualify for the same. That is, you need to pay any tax that you already owe the government.

FIGURE OUT THE RIGHT MAILING ADDRESS FOR THE RESPECTIVE FORMS

If you choose to mail a paper return or make a payment, you must be careful to which address you send them out to. For, the addresses depend on the forms itself.

Call @ +1-860-215-4997 to have a stress-free tax period.

So, HOW CAN YOU PAY LESSER TAX AND SAVE MORE FOR YOUR RETIREMENT?

Have you ever wondered about this? And then thought Super contributions could be the best way to start saving more for retirement rather than paying the humongous amount of tax.

If you have not, think now! For, Super gives you incredible tax benefits.

At some point in time, everyone would ask this one question their accountant which is “How can I save tax?” And the practiced response they get is “Have you ever considered Super contributions?”

Super contributions and Tax benefits:

Super contributions provide you with some uber-cool tax benefits and the best part is your wealth remains undiminished. All you are doing with the super contribution is that you are diverting some of your capital to a super system where it is considered an investment that can be enjoyed when you retire. Simply put, this contributed sum remains yours rather than the government’s.

What exactly is your tax benefit?

Let’s say $200,000 is your income per annum, and you are contributing $10,000 for your personal tax or super contribution.

Have a look at the table below to find the difference between the two:

Difference amount: $2,400.

You can invest the same in your super funds and guess what; the benefits yielded by this investment in future will also be taxed at the rate of 15%. This is way lesser than the non-super investments.

Are there any downsides to this?

Yes, there is. There’s one element that could be a major pitfall to super contributions which is the inaccessibility to super funds until the release conditions are met. Mostly, this condition of release can be met when one reaches the preservation age which is 55. For young people, the dilemma in choosing either super investments or personal tax can be quite annoying.

Are these tax benefits lucrative all the time?

Briefly put, no. These tax benefits are not applicable to everyone. For people with income below $18,200 will be worse as the 15% contributions are exponentially higher than the 0% personal tax. For people with income between $18,200 and $37,000 have only a slight difference between the contributions rate and the tax rates. For people with income over $180,000 have very good advantages of choosing super contributions over personal taxes.

Things to bear in mind:

You need to be watchful about the amount you invest in super contributions. You need to ensure that your investments do not exceed the concessional contributions cap to avoid any repercussions.

You also need to pay attention on where you make the investment. Check whether contributions go to funds that yield good returns and has reasonable fees. Bear in mind, a tax saving can be easily destroyed by the poor performance of the fund.

Ergo, it is always good to do a little research and get some professional guidance before you decide anything in this regard.

Call at +1-860-215-4997 to explore more about how Velan can help you.

Are you a single owner or an active member of an LLC (Limited Liability Company)? Are you looking to transform your company to a multi-member LLC?  Whatever it is, you will have some questions on the tax part of your business.

Below are a few things you need to know as an LLC owner:

Tax laws for LLC- Basic:

Firstly, it is very important to know the way in which an LLC is structured as stated by the tax law. Corporation and LLC are very different in terms of taxation. An LLC is not considered and taxed as a separate business unit and all the profits & losses go to each member of the company. The members of LLC must file their profits and losses on their personal tax returns, like any other owners of the partnership. The business doesn’t need to pay the federal taxes. This rule is not applicable in all the states, though; there are a few states who want LLCs to pay taxes annually.

Based on the number of members in an LLC, the Internal Revenue Service will consider the business as a sole proprietorship or partnership. But in some cases, the LLCs would automatically be classified as corporations by the tax laws and be taxed. Those companies that are not classified automatically can the business entity they would like. In order to do that, the company must file Form 8832.

Single Member LLCs and their taxes:

If you operate a single member LLC, the Internal Revenue Service would consider your business as a sole proprietorship (except if you choose to be the corporation). In this case, you will have to file all the profits and losses in your personal tax returns on attaching Schedule C and report it with 1040 tax return.

Read on to know more about when you must be filing using EIN (Employer Identification Number) and when you must be using your social security number.

Multi-member LLCs and their taxes:

If there are multiple owners in your LLC, the Internal Revenue Service will consider it as the partnership (except if you want it to be considered as the corporation). Similar to the single owner, the business doesn’t pay the taxes, but each owner of the business has to divide the profits and  pay the tax on attaching Schedule E.

You would have to file the Form 1065 with the Internal Revenue Service. This form would aid them  in determining if each member is reporting the correct profit amount. The company must also provide each partner with a report mentioning their share of income, deductions, and credits. The individual member should then report the same on their personal tax returns.

You will have to request “special allocation” from the Internal Revenue Service if the LLC does split the profits and losses in a way that doesn’t match the individual’s percentage interests. And this is something you must consult with a tax lawyer or an accountant.

Paying the Estimated Taxes

The LLC members and owners are considered to be self-employed, and hence they are subjected to file and pay the estimated amount of tax to the IRS and the state tax office quarterly.

If your LLC is a multi-member one and the owner is not active in the company that is if they have invested in the company but doesn’t participate in the operations, then the owner might be an exempt from paying the federal taxes for self-employment. Your tax lawyer or accountant will be able to tell you if your business meets the requirements for the same.

Tax for sales

Sales tax is something imposed by the local and state governments on the point- of- purchase. The buyer pays at the time of purchase and you [small business owner] will assess, collect, and pass the tax to the concerned authorities within the time period recommended. The laws and rates for the taxes will vary depending on the state; this leads to disarray particularly if you have customers in over 1 state.

State Taxes

If you run an LLC, you will have to pay to the state like you do to the IRS. Some states charge the LLC based on the income, apart from the income tax paid by the member. Other states charge the LLC an annual fee that is not related to the income; this is also known as the franchise tax, renewal or registration fee. It is ideal to check the laws in your state before forming an LLC.

Contact at +1-860-215-4997 for consultation.