High Net Worth Accounting Tax

Lock In Tax Breaks You Deserve

Tax BreaksIf you run a small business, you already have a full plate. The last thing you need is for the IRS to question any of your business expense deductions. But it could happen. And that’s why having records that prove your expenses is so important. Even deductions for routine business expenses could be disallowed if you don’t have appropriate records.

What Records Are Required?

Except in a few instances, the tax law does not require any special kind of records. You’re free to have a recordkeeping system that is suited to your business, as long as it clearly shows your expenses. In addition to books that allow you to track and summarize your business transactions, you should keep supporting documents, such as:

  • Canceled checks
  • Cash register receipts
  • Credit card sales slips
  • Invoices
  • Account statements

The rules are stricter for travel, entertainment, and transportation expenses. You should retain hotel bills or other documentary evidence (e.g., receipts, canceled checks) for each lodging expense and for any other expense of $75 or more. In addition, you should maintain a diary, log, or account book with the information described below.

Travel. Your records should show the cost of each separate expense for travel, lodging, and meals. For each trip, record your destination, the dates you left and returned, and the number of days spent on business. Also record the business purpose for the expense or the business benefit you gained or expected to gain. Incidental expenses, such as taxi fares, may be totaled in reasonable categories.

Entertainment. Record the date the entertainment took place and the amount of each separate expense, along with the name and address or location of the place of entertainment. Note the business purpose for the expense or the business benefit you gained or expected to gain and the nature of any business discussion or activity that took place. Also list the identities and occupations of the individuals you were entertaining or other information that indicates their business relationship to you.

If the entertainment was directly before or after a business discussion, be sure to indicate the date, place, nature, and duration of the discussion and the individuals who took part in both the discussion and the entertainment activity. For a business meal, you must prove that either you or your employee was present.

Transportation. As with travel and entertainment, you should record the amount and date of each separate expense. Note your business destination and the business purpose for the expense. If you are deducting actual car expenses, you’ll need to record the cost of the car and the date you started using it for business (for depreciation purposes). If you drive the car for both business and personal purposes or claim the standard mileage rate, keep records of the mileage for each business use and the total miles driven during the year.

Don’t Mix Business and Personal Expenses

Things can get tangled if you intermingle business and personal expenses. You can avoid headaches by having a separate business bank account and credit card.

If you want to be more aggressive lowering your tax obligations but stay within the legal limits, call 949-759-5626 and ask for Jerry Morey.

 

Morey & Associates is a Southern California CPA Accounting Firm with offices in Newport Beach and San Clemente CA.  Our clients are located throughout Los Angeles and Orange County.

 

Why Hire a Real Estate CPA Firm

Real Estate - O CtyThe real estate industry is very different from other industries, especially when it comes to accounting and tax issues.

The tax incentives for real estate are very different than other industries.  The timing of expenses, specialized services like cost segregation and 1031 exchanges, debt restructuring and tax deferral strategies can have huge consequences.  For instance, a real estate CPA firm can pull together these strategic pieces that will improve your bottom line that a local generalist can’t replicate.

Second, working with a CPA Firm that works with a wide variety of real estate clients enables them to add more value to your day-to-day business and key business decisions.  If warranted, they can bring specialized services to the table that a local generalist can’t possibly provide.  In other words, working with a CPA Firm that works with the right specialists reduces the risk of making business mistakes, missing key tax incentives, and add value immediately to you.

Third, having a small team of accountants that specializes in real estate accounting reduces your annual costs because their depth of knowledge on the subject matter is deeper and without having to charge you more.

As in any industry, there are economies of scale that can be gleaned by working with a specialist.  It is important to let specialists and experts handle matters that require additional expertise and can save you money.  A real estate business can benefit from specialized services when it comes to tax planning, capital spending, budgeting, accounting and estate planning.

And after you hire the best CPA Firm for your industry, you’ll soon realize how easy they make it appear on the surface.

If you would like to learn more, call 949-759-5626 and ask for Jerry Morey.

 

Morey & Associates is a California CPA Firm providing real estate accounting in Southern and Northern California.  Our founder has been licensed in California for over twenty years.

Foreign Bank Accounting Reporting – FBAR – IRS Priority List

IRSIf you have a foreign bank account that has not been reported to the IRS, then you could be facing serious civil penalties and even criminal penalties. These penalties fall under the Foreign Bank Account Report, FBAR violations.

To illustrate, the IRS Dirty Dozen tax scam list for 2016 clearly illustrates the emphasis placed upon hiding money or foreign bank accounts (see excerpt below).

The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

“Our continued enforcement actions should discourage anyone from trying to illegally hide money and income offshore,” said IRS Commissioner John Koskinen. “We have voluntary options to help taxpayers get their taxes and filing obligations in order.”

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 54,000 disclosures and we have collected more than $8 billion from this initiative alone. The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

The IRS continues to beat this drum more aggressively each year. If you would like to discuss this situation, simply call 949-486-2011 and ask for Jerry Morey, CPA.  

 

Morey & Associates CPA is a Southern California CPA Accounting Firm with offices in Newport Beach and San Clemente.  We work with businesses throughout Los Angeles and Orange County.  For additional expertise, we provide boutique services for dentists, doctorsreal estate accounting and high net worth accounting.

Net Operating Losses Provide Tax Benefits

Net Operating LossFor many businesses, profits vary from year to year. However, with proper planning, even a bad year can be helpful from a tax perspective. Where business deductions exceed gross income, a taxpayer may have a net operating loss (NOL) that can be used to offset income in another tax year, potentially generating a refund of previously paid taxes.

Who May Use an NOL?

NOLs are available to individual business owners, corporations, estates, and trusts. Partnerships and S corporations do not take NOL deductions, though their partners and shareholders may use “passed through” losses on their own returns.

How Is an NOL Applied?

The general rule is that a taxpayer may carry an NOL back two years and forward 20 years, though certain limited exceptions may apply. For example, an individual with an NOL that was caused by a casualty, theft, or disaster may use a three-year carryback period.

In general, the taxpayer will carry back an NOL to the earliest year it can be used and then carry it forward, year by year, until it is used up. The taxpayer may also elect to forego the two-year carryback and carry the loss forward for the 20-year period. However, the general preference is to use an NOL sooner rather than later because a dollar of tax saved today is generally worth more than a dollar saved in the future.

How Is an NOL Calculated?

Calculations of NOLs can be complicated. For example, a noncorporate taxpayer’s NOL is calculated without regard to any personal exemptions or NOLs from other years, and certain deductions for capital losses and nonbusiness items are limited.

If you are tired of overpaying taxes, call 949-759-5626 and ask for Jerry Morey.  Lowering your taxes legally is our specialty.

Office Space Decisions for Small Business Owner

Office SpaceBuy or lease?

It’s a decision many Orange County businesses face. Owning real estate certainly can have advantages, including the opportunity to build equity. But many small businesses in need of space choose the rental route instead.

Cash Flow Considerations

By leasing, a company can avoid taking on debt to acquire a property. Less debt on the balance sheet may allow the company to finance other things, such as receivables or inventory and equipment purchases. And the upfront cash commitment needed to enter a lease agreement may be much lower than the down payment required for a property purchase.

Shopping Tips

If your business is looking around for the right rental location, here are a few suggestions to keep in mind. Not all of these tips are appropriate for all businesses, but some may help you get a lead on a good spot — and a good deal.

  • Find an eager landlord. Rental spots that have been on the market for a while could have some negative features, but they may be worth a look. If you find a location that suits you, you might also find a landlord who is anxious to negotiate.
  • Think about the term. A long-term lease locks in your rental rate — and that can be an advantage if you expect the market to trend upward. But leasing for short periods is often less expensive than leasing for longer periods. If your business is in its formative years, significant changes may lie ahead, so a short-term arrangement could be more practical, too. Adding an “option to renew” clause can help keep your costs down and your options open.
  • Divide and conquer. Could you make do with two smaller spaces instead of one large space? The more flexible you can be, the better your chances of finding a good deal.
  • Check rental comps. Commercial property markets can be very localized. Rents may vary considerably between one locality and another just a few miles away. Unless you’re limited to a specific location, compare rates in several areas.

At Morey & Associates, we help many of our small business clients with the office space decision and help them lower their overall taxes.  If you are struggling with this decision, simply call 949-759-5626 and ask for Jerry Morey.

 

Morey & Associates works with all types of small businesses throughout Orange County to minimize their taxes legally.  We provide additional expertise in real estate accounting, dental practice accounting and high net worth accounting.

Why Foreign Bank Account Violations are Ultra Expensive

Bank AccountIf you have a foreign bank account that has not been reported to the IRS, then you could be facing serious civil penalties and even criminal penalties. These penalties fall under the Foreign Bank Account Report, (FBAR) violations.

First, it is important to determine if you are required to report your foreign bank account. It comes down to being able to say yes to the following four questions:

  • You are now a US citizen or permanent resident or have been in the last six years.
  • You have had a foreign bank account for a year or longer since 2008.
  • Your balances in all of your foreign accounts exceed $10K
  • You have not reported the account through the FBAR paperwork to the IRS.

The civil penalties for not filing the FBAR will be the greater of 50% of your bank account or $100K. The IRS has also indicated that it is willing to charge these penalties cumulatively for up to four or even six years.

This means that you can be charged these penalties for each year you have had the foreign bank account and not reported it to the IRS regardless of the fact that the penalties may well out pace the actual dollar amount in your account.

In addition to expensive civil penalties, you can also face criminal penalties. If the IRS determines that you willfully knew that you should have filed a FBAR and didn’t, they can charge you under FBAR violation laws as well as normal criminal tax prosecution laws.

A criminal prosecution typically occurs when a person has a large amount of taxable income in their foreign bank account that has not been claimed on their tax return.

A tax accountant or tax attorney can walk you through your options if you find yourself in this situation, as the IRS does offer voluntary disclosure programs, but even with taking advantage of one of these programs, you will still suffer the sting of IRS penalties.

If you are tired of overpaying taxes and would like to lower your tax compliance risk, call 949-759-5626 and ask for Jerry Morey.

 

Morey & Associates is a Orange County CPA Accounting Firm with offices in Newport Beach and San Clemente.  We service High Net Worth clients and small businesses.  We also provide additional expertise for real estate accounting, dental practice accounting, and medical practice accounting.

Most Hated Tax in Orange County CA – AMT

The AMT, also known as the alternative minimum tax, is one of the most hated taxes in the United States and for good reason. For those individuals above a certain threshold of taxable income, or corporations, trusts, and estates, the AMT creates a higher tax burden beyond that imposed on those that fall under the threshold.

AMT 2The alternative minimum tax was first originated with the thought that those individuals and corporations in the higher tax bracket were able to find and utilize large tax breaks that the middle class could not. It was decided that the AMT would ensure that those with the highest incomes would pay a minimum tax rate regardless of the tax breaks and loopholes they may have available to them.

The current AMT was enacted in 1982 and is applied to all taxable income when an individual or entity’s taxable income falls above a pre-determined level. In 2013, that level was tied to inflation, or CPI rates.

As it stands now, the alternative minimum tax rates are 26 and 28%, and to determine whether or not you are subject to regular tax rates or the AMT rates, you would be required to calculate your taxes twice. This can become problematic as the AMT does not allow the same deductions as the regular tax does, so your adjusted income levels will be different.

The bottom line is you will be required to pay the higher of the two rates. It can become quite complicated to determine if you are subject to the AMT as well as what deductions are allowed and which are not. Often, the best course of action is to contact a qualified tax accountant to walk you through the process.

The AMT is hated for good reason. It’s complicated and some would say creates a separate class of citizens that is being penalized for their financial success.

If you are tired of overpaying taxes, call 949-759-5626 and ask for Jerry Morey.  Our CPA Firm is designed to lower your tax bill within the legal limits.

 

Morey & Associates is a California CPA Accounting Firm serving small business owners and high net worth individuals throughout Orange County and Los Angeles.

3 Tasks Entrepreneurs are Better Outsourcing

OutsourceAs a business owner, it can be difficult to delegate important tasks. When you complete them yourself, you know they will be done correctly and in a timely manner. Even so, if you want your business to grow, and keep expenses low, there are three tasks that you should consider outsourcing.

 

Website and Graphic Design

By outsourcing your website and graphic design, you will have access to an expert in the field, on demand. The person or company you outsource to will have the equipment, experience, training and knowledge to provide you with design concepts that would otherwise be beyond your reach.

You will also receive a professional product which is doubly important as your website is your online business card. This is one area that you want and need a professional’s assistance.

Payroll

As your company grows, the complexities of your payroll grow as well. In addition to saving time and money, payroll is one area of your business that the government takes great interest in. Payroll specialists make it their job to stay current in government regulations which means they will keep you and your company compliant.

In addition, payroll companies can provide you and your employees with an added layer of security. This can reduce the risk of embezzlement, identity theft, and interference, by an employee, with company records for financial gain.

Accounting and Tax Returns

Much like payroll, your accounting and tax returns are not an area of your business where you can afford errors. Without specialized tax knowledge, you run the risk of missing deductions leading to paying higher taxes than necessary or to making errors that result in penalties.

One of the main benefits of outsourcing any task is that while you may pay more per hour for the task to be completed, you will save much more money, in the long run, than if you hired a full-time employee when you take into consideration salary, benefits, taxes, health insurance, as well as the overhead to provide space for the employee to work. In the end, outsourcing can be a cost efficient way to expand your business.

 

If you are interested in outsourcing payroll and/or outsourced accounting, then call 949-759-5626 and ask for Jerry Morey.  Our initial consultation is free.

 

Morey and Associates is an Orange County California CPA Accounting Firm.  We service small businesses and high net worth individuals throughout Orange County and have convenient offices in Newport Beach and San Clemente.

Tax Treatment for Bitcoin Payments

BitcoinIf you’ve paid attention to the news the last few years, you will have heard of Bitcoins. In fact, you may even have considered accepting them as payment for services or product sales. Before you do, you’ll want to make sure you have an understanding of how the IRS treats Bitcoin payments.

First, it’s important to be aware of the fact that the IRS does not consider Bitcoins, which are virtual currency, as a legitimate state-backed currency. Instead, they see Bitcoins as property.

This means that the tax rules that apply to property transactions will also apply to payments received in Bitcoins. When a person, or business acquires property, they are required to record the fair market value of the property. This will become the owner’s basis for the property.

Once the property is sold or exchanged, if the fair market value of the property has increased, then the owner will have a taxable gain. On the other hand, if it has decreased in value, the owner will have a loss.

This means that if a business owner sells a product today and receives Bitcoins worth $100 but then converts them to dollars next week and the value has increased to $120, they will have a gain of $20 that will be taxed as capital gains.

This becomes even more complicated when multiple Bitcoin transactions take place. Each transaction needs to be tracked separately and each will have its own gain or loss depending on the current valuation of Bitcoins when they are converted to dollars.  The amount of paperwork and record-keeping becomes significant.

There are a couple of workarounds for this. First, each transaction can be converted to dollars immediately. Secondly, there are now Bitcoin merchant service providers that will deal with all of the backend record-keeping that is necessary. This allows businesses to accept Bitcoins without ever actually dealing with them.

The IRS ruling treating Bitcoins as property turned the Bitcoin world and those who want to accept them on their heads, but technology and even the IRS will eventually catch up to the new reality of virtual currencies, but it may take awhile.

If you are tired of paying too much in taxes, call 949-759-5626 and ask for Jerry Morey.

 

Morey and Associates is a Southern California CPA Firm with offices in Newport Beach and San Clemente.  We service all types of businesses and high net worth individuals.  We also have additional expertise with real estate accounting, dental accounting and medical practice accounting.

 

Section 179 Tax Deduction for Orange County Businesses

Section 179 allows a business to deduct the total cost for qualified leased, financed, or purchased equipment in the year it was purchased instead of depreciating the cost over the life of the equipment. Typically, however, Congress waits until after the first of the year to renew this section which can hurt small business owners and manufacturers as well as farmers, dentists, and medical providers.

Very often, Congress doesn’t get around to renewing tax breaks, such as Section 179, until well after the end of the year. Then they make it retroactive. This creates all sorts of issues for businesses who attempt to plan purchases with tax breaks in mind. Often, small businesses will miss out on the tax altogether.

Section 179 2While tax breaks such as Section 179 are typically renewed each year, it isn’t a given. That means businesses as well as farmers and even those in the medical profession won’t know if they are allowed to deduct $25,000 or $500,000. The final approved amount depends on whether or not the larger deductions are renewed. If not, the limit reverts to the original $25,000.

This can make a buying decisions difficult. For example if a farmer needs to buy a new combine, the farmer is looking at an investment of up to half a million dollars. If Section 179 isn’t renewed at the higher levels, this investment may need to be reconsidered. The same goes for medical or manufacturing equipment.

Still, for a small business, even the limit of $25,000 can make a tremendous difference. As off-the-shelf software also qualifies for this deduction, a small business could update their software to enhance efficiency therefore increasing their bottom line.

Tax planning is a critical component of a successful company. That’s why it is so important for Congress to act quickly and in a timely manner, so small businesses can plan for the next year while they still have the time to implement smart decisions. Small businesses are the backbone of this county and do drive the economy, and Congress shouldn’t forget that.

If you are seeking to lower your taxes legally, Morey and Associates can help.  Simply call 949-759-5626 and ask for Jerry Morey.

Morey and Associates is a California CPA Accounting firm with two convenient offices, Newport Beach and San Clemente.  For additional expertise, Morey and Associates provides boutique accounting services for real estate accounting and medical practice accounting.