Google's January 2020 Core Update: Has the Dust Settled?

Posted by Dr-Pete

On January 13th, MozCast measured significant algorithm flux lasting about three days (the dotted line shows the 30-day average prior to the 13th, which is consistent with historical averages) ...

That same day, Google announced the release of a core update dubbed the January 2020 Core Update (in line with their recent naming conventions) ...

On January 16th, Google announced the update was "mostly done," aligning fairly well with the measured temperatures in the graph above. Temperatures settled down after the three-day spike ...

It appears that the dust has mostly settled on the January 2020 Core Update. Interpreting core updates can be challenging, but are there any takeaways we can gather from the data?

How does it compare to other updates?

How did the January 2020 Core Update stack up against recent core updates? The chart below shows the previous four named core updates, back to August 2018 (AKA "Medic") ...

While the January 2020 update wasn't on par with "Medic," it tracks closely to the previous three updates. Note that all of these updates are well above the MozCast average. While not all named updates are measurable, all of the recent core updates have generated substantial ranking flux.

Which verticals were hit hardest?

MozCast is split into 20 verticals, matching Google AdWords categories. It can be tough to interpret single-day movement across categories, since they naturally vary, but here's the data for the range of the update (January 14–16) for the seven categories that topped 100°F on January 14 ...

Health tops the list, consistent with anecdotal evidence from previous core updates. One consistent finding, broadly speaking, is that sites impacted by one core update seem more likely to be impacted by subsequent core updates.

Who won and who lost this time?

Winners/losers analyses can be dangerous, for a few reasons. First, they depend on your particular data set. Second, humans have a knack for seeing patterns that aren't there. It's easy to take a couple of data points and over-generalize. Third, there are many ways to measure changes over time.

We can't entirely fix the first problem — that's the nature of data analysis. For the second problem, we have to trust you, the reader. We can partially address the third problem by making sure we're looking at changes both in absolute and relative terms. For example, knowing a site gained 100% SERP share isn't very interesting if it went from one ranking in our data set to two. So, for both of the following charts, we'll restrict our analysis to subdomains that had at least 25 rankings across MozCast's 10,000 SERPs on January 14th. We'll also display the raw ranking counts for some added perspective.

Here are the top 25 winners by % change over the 3 days of the update. The "Jan 14" and "Jan 16" columns represent the total count of rankings (i.e. SERP share) on those days ...

If you've read about previous core updates, you may see a couple of familiar subdomains, including VeryWellHealth.com and a couple of its cousins. Even at a glance, this list goes well beyond healthcare and represents a healthy mix of verticals and some major players, including Instagram and the Google Play store.

I hate to use the word "losers," and there's no way to tell why any given site gained or lost rankings during this time period (it may not be due to the core update), but I'll present the data as impartially as possible. Here are the 25 sites that lost the most rankings by percentage change ...

Orbitz took heavy losses in our data set, as did the phone number lookup site ZabaSearch. Interestingly, one of the Very Well family of sites (three of which were in our top 25 list) landed in the bottom 25. There are a handful of healthcare sites in the mix, including the reputable Cleveland Clinic (although this appears to be primarily a patient portal).

What can we do about any of this?

Google describes core updates as "significant, broad changes to our search algorithms and systems ... designed to ensure that overall, we’re delivering on our mission to present relevant and authoritative content to searchers." They're quick to say that a core update isn't a penalty and that "there’s nothing wrong with pages that may perform less well." Of course, that's cold comfort if your site was negatively impacted.

We know that content quality matters, but that's a vague concept that can be hard to pin down. If you've taken losses in a core update, it is worth assessing if your content is well matched to the needs of your visitors, including whether it's accurate, up to date, and generally written in a way that demonstrates expertise.

We also know that sites impacted by one core update seem to be more likely to see movement in subsequent core updates. So, if you've been hit in one of the core updates since "Medic," keep your eyes open. This is a work in progress, and Google is making adjustments as they go.

Ultimately, the impact of core updates gives us clues about Google's broader intent and how best to align with that intent. Look at sites that performed well and try to understand how they might be serving their core audiences. If you lost rankings, are they rankings that matter? Was your content really a match to the intent of those searchers?


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10 Resources Where Small Businesses Can Get Free Help With Taxes from a Real Live Person

where to get free tax help

 

Tax season can be stressful for small business owners. There’s all the receipts you need to get together and that’s usually just a slice of the other invoices, documents and data that needs to be corralled and made sense of. Sometimes you just need to talk with someone who knows where a piece or two fits into the bigger puzzle.

If you’re in that position, here’s 10 ways to get free help with taxes from a real live person.

Where to Get Free Tax Help

Get Free Tax Help from H&R Block

What it is: H&R Block has a variety of tax tools and resources available on their website. There’s also a tax preparation tool that walks you through the steps, with live experts standing by to help over the phone.

How it works: Visit H&R Block’s website to find the tax filing tool that is relevant to your business. Actually filing your return does come with a cost, unless you have a very simple return, but help from a tax prep expert is included for free. Simply request a chat or call as you work on your return to get your questions asked.

Where To Find: Just go to H&R Block’s website to get started. The company also has brick and mortar locations around the country, but you’ll likely need to pay for an appointment.

Human Services Agencies

What it is: Human services agencies in different municipalities and locations will offer free tax help from real people for those who meet various income requirements. Not only can they give you free advice, but they may also be able to steer you towards different tax credits.

How it works: Start by finding your local human services agency online. Then you can contact them or make an appointment to discuss any family or personal tax credits that make a difference to your return.

Where to find: Every local service agency has different offerings, so start at this directory or perform an online search specific to your area.

United Way Tax Service

What it is: United Way is a non-profit organization that offers free tax help and filing in many communities around the country.

How it works: Every local office is different, so you’ll need to find your local branch to find a tax professional who can help. In many cases, they’ll offer guidance and help you actually file as well.

Where to find: Start by locating the United Way branch closest to you. You can either do this online or by calling 211.

NATP

What it is: The National Association of Tax Professionals is a comprehensive membership site for accountants and other kinds of tax preparers. It’s a good place to find out who the professionals are in your area since many accountants offer an initial consultation.

How it works: The organization’s website includes a feature that lets you find tax professionals near you. You might have to do some research with this one, since not everyone will necessarily provide a free consultation. But you may be able to get some valuable advice, especially if you’re willing to pay a filing fee.

Where to find: Start with the NATP’s website and then move onto the information about your local tax professionals.

IRS Free File Alliance

What it is: This is a service that is open to all Americans who meet low income requirements, which change from year to year. In 2019, you need to have an adjusted gross income of $69,000 or less. Basically, it’s a group of companies that offer free online filing under the IRS banner.

How it works: You need to go through the free file website to access the company’s platform. You can then search for tax filers who submit their offers to help.

Where to find: Start at the IRS Free File website and then you’ll be able to browse through offers and go directly to the tax pro’s website to finish the process. You can also reach out to the IRS directly for specific questions. Call 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business-related tax questions.

VITA

What it is: The IRS Volunteer Income Tax Assistance program is available to individuals who meet income requirements. It consists of volunteer tax professionals throughout the country who offer their services under the IRS umbrella.

How it works: You go through the IRS to find a volunteer. Then you work with them to get help preparing and even filing your taxes.

Where to find: You can simply enter your location on the IRS website to find a volunteer near you.

TurboTax

What it is: TurboTax is a popular tax filing software that is also available online. There are both free and paid versions to help you prepare your return. Then a real CPA reviews your return for free.

How it works: You simply walk through the process of filling out your own return and submit it. Then a CPA automatically reviews it to make sure you’re not missing anything.

Where to find: Start at TurboTax’s website to find the tax filing solution that works best for you. Then it will walk you through the process of filling out your return.

Taxpayer Advocate Service

What it is: The IRS’s Taxpayer Advocate Service is there to help individuals with tax related issues. They won’t file your form for you. But they can help you with specific questions or issues with your forms.

How it works: The organization’s website offers plenty of resources and answers to questions. And if you don’t see what you’re looking for, you can contact the agency directly.

Where to find: Visit the Taxpayer Advocate Service’s website to find your local office. Then you can reach out to them directly.

Get Free Tax Help from AARP Foundation

What it is: The AARP Foundation offers free tax assistance to members who qualify. The program operates through an IRS-approved group of volunteers, who AARP can help you easily connect with.

How it works: Go through AARP to find a volunteer in your area. They can then help you fill out your return and submit it to the IRS.

Where to find: Find a volunteer in your area on AARP’s website. Or contact your local AARP office directly.

TCE

What it is: Tax Counseling for the Elderly is a program of volunteers that also operate under the IRS umbrella. They’re normally located at community centers like libraries and schools.

How it works: You search through the IRS to find a program in your area. Services are available to people of all ages. But they specifically focus on those over 60 and those who have to navigate retirement or pension related issues.

Where to find: Start at the IRS website to perform a search. Then you can find a volunteer center in your local community to get help in person.

Image: Depositphotos.com

This article, "10 Resources Where Small Businesses Can Get Free Help With Taxes from a Real Live Person" was first published on Small Business Trends



via Small Business Trends Business Feeds

10 Resources Where Small Businesses Can Get Free Help With Taxes from a Real Live Person

where to get free tax help

 

Tax season can be stressful for small business owners. There’s all the receipts you need to get together and that’s usually just a slice of the other invoices, documents and data that needs to be corralled and made sense of. Sometimes you just need to talk with someone who knows where a piece or two fits into the bigger puzzle.

If you’re in that position, here’s 10 ways to get free help with taxes from a real live person.

Where to Get Free Tax Help

Get Free Tax Help from H&R Block

What it is: H&R Block has a variety of tax tools and resources available on their website. There’s also a tax preparation tool that walks you through the steps, with live experts standing by to help over the phone.

How it works: Visit H&R Block’s website to find the tax filing tool that is relevant to your business. Actually filing your return does come with a cost, unless you have a very simple return, but help from a tax prep expert is included for free. Simply request a chat or call as you work on your return to get your questions asked.

Where To Find: Just go to H&R Block’s website to get started. The company also has brick and mortar locations around the country, but you’ll likely need to pay for an appointment.

Human Services Agencies

What it is: Human services agencies in different municipalities and locations will offer free tax help from real people for those who meet various income requirements. Not only can they give you free advice, but they may also be able to steer you towards different tax credits.

How it works: Start by finding your local human services agency online. Then you can contact them or make an appointment to discuss any family or personal tax credits that make a difference to your return.

Where to find: Every local service agency has different offerings, so start at this directory or perform an online search specific to your area.

United Way Tax Service

What it is: United Way is a non-profit organization that offers free tax help and filing in many communities around the country.

How it works: Every local office is different, so you’ll need to find your local branch to find a tax professional who can help. In many cases, they’ll offer guidance and help you actually file as well.

Where to find: Start by locating the United Way branch closest to you. You can either do this online or by calling 211.

NATP

What it is: The National Association of Tax Professionals is a comprehensive membership site for accountants and other kinds of tax preparers. It’s a good place to find out who the professionals are in your area since many accountants offer an initial consultation.

How it works: The organization’s website includes a feature that lets you find tax professionals near you. You might have to do some research with this one, since not everyone will necessarily provide a free consultation. But you may be able to get some valuable advice, especially if you’re willing to pay a filing fee.

Where to find: Start with the NATP’s website and then move onto the information about your local tax professionals.

IRS Free File Alliance

What it is: This is a service that is open to all Americans who meet low income requirements, which change from year to year. In 2019, you need to have an adjusted gross income of $69,000 or less. Basically, it’s a group of companies that offer free online filing under the IRS banner.

How it works: You need to go through the free file website to access the company’s platform. You can then search for tax filers who submit their offers to help.

Where to find: Start at the IRS Free File website and then you’ll be able to browse through offers and go directly to the tax pro’s website to finish the process. You can also reach out to the IRS directly for specific questions. Call 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business-related tax questions.

VITA

What it is: The IRS Volunteer Income Tax Assistance program is available to individuals who meet income requirements. It consists of volunteer tax professionals throughout the country who offer their services under the IRS umbrella.

How it works: You go through the IRS to find a volunteer. Then you work with them to get help preparing and even filing your taxes.

Where to find: You can simply enter your location on the IRS website to find a volunteer near you.

TurboTax

What it is: TurboTax is a popular tax filing software that is also available online. There are both free and paid versions to help you prepare your return. Then a real CPA reviews your return for free.

How it works: You simply walk through the process of filling out your own return and submit it. Then a CPA automatically reviews it to make sure you’re not missing anything.

Where to find: Start at TurboTax’s website to find the tax filing solution that works best for you. Then it will walk you through the process of filling out your return.

Taxpayer Advocate Service

What it is: The IRS’s Taxpayer Advocate Service is there to help individuals with tax related issues. They won’t file your form for you. But they can help you with specific questions or issues with your forms.

How it works: The organization’s website offers plenty of resources and answers to questions. And if you don’t see what you’re looking for, you can contact the agency directly.

Where to find: Visit the Taxpayer Advocate Service’s website to find your local office. Then you can reach out to them directly.

Get Free Tax Help from AARP Foundation

What it is: The AARP Foundation offers free tax assistance to members who qualify. The program operates through an IRS-approved group of volunteers, who AARP can help you easily connect with.

How it works: Go through AARP to find a volunteer in your area. They can then help you fill out your return and submit it to the IRS.

Where to find: Find a volunteer in your area on AARP’s website. Or contact your local AARP office directly.

TCE

What it is: Tax Counseling for the Elderly is a program of volunteers that also operate under the IRS umbrella. They’re normally located at community centers like libraries and schools.

How it works: You search through the IRS to find a program in your area. Services are available to people of all ages. But they specifically focus on those over 60 and those who have to navigate retirement or pension related issues.

Where to find: Start at the IRS website to perform a search. Then you can find a volunteer center in your local community to get help in person.

Image: Depositphotos.com

This article, "10 Resources Where Small Businesses Can Get Free Help With Taxes from a Real Live Person" was first published on Small Business Trends



RSS Business Feeds

Some Californians are Fighting AB5

what is AB5

The gig economy has upended the way people work, and policymakers are grappling on how to address this change. California is tackling the issue with Assembly Bill 5 or as it is commonly known AB5.

However, not all is going according to plan because US District Judge Roger Benitez in San Diego has temporarily blocked AB5. Why, because the law would impact around 70,000 independent truckers resulting in irreparable harm if their employers have to claim them as salaried employees.

The request comes from the California Trucking Association, but it is not the only organization. Two national groups representing photographers and freelancers also filed a suit. The American Society of Journalists and Authors and the National Press Photographers Association say the law affects free speech and media.

And as more gig workers realize the implication of this law in California, there is no doubt more suits are on the way.

What is AB5?

This law makes it much harder for companies to classify workers as independent contractors. And if they are not independent contractors, they are employees. This, in turn, makes it much more expensive for companies running gig workers to stay in business.

After all, they are established with independent contractors in mind as their business model. And the impact goes beyond drivers for Uber and Lyft. Gig workers now encompass everything from accountants to truck drivers, plumbers, electricians and many other industries.

This type of work is allowing people to start side hustles and earn money. If the platforms that serve them hire them as employees, they have to find another solution.

The law went into effect on Jan. 1, 2020. But it is important to note the Department of Labor (DOL) said gig workers are independent contractors and not employees in an opinion letter in 2019.

The Challenges Companies are Facing

When a business hires you to work for them, you can be an employee or a contractor. As an independent contractor, you can accept or reject jobs as you like, set your own rates and do the work how you see fit. If the job is done, you get paid and all is well.

If you are an employee the company that hired you makes all the decisions for you. Furthermore, the company has to follow labor laws such as minimum wage, unemployment insurance and injury funds. This in part is responsible for many traditional businesses shifting to independent contractors to reduce labor costs. Considering the savings can amount to as much as 30%, there is an incentive to use contractors.

For many small businesses, using independent contractors has become part of their daily operations. And with AB5 in place, it means they might have to downsize and, in some cases, close their operations entirely.

This is forcing businesses to fight back, with the big companies in Silicone Valley taking the lead.

Fighting Back

When the San Diego federal judge issued his injunction against AB5, he said it was in the public interest. In California alone 1.5 million workers are affected with this law, both directly and indirectly.

Uber and Postmates have filed a suit to block AB5 arguing it violates federal and state constitutional guarantees of equal protection and due process. Uber is trying to link the lawsuit with that of the photographers and journalist associations to make their case stronger.

However, more Blue states are taking the lead of California and starting a process to change existing laws. New Jersey Governor, Phil Murphy has already signed a package of bills into law. New York and Illinois have similar bills in the works.

But if the lawsuits keep piling up, states should take a wait and see approach until things settle down in California. After all, tens of millions of people are now working as independent contractors in the U.S. and around the world.

Image: Depositphotos.com

This article, "Some Californians are Fighting AB5" was first published on Small Business Trends



RSS Business Feeds

Some Californians are Fighting AB5

what is AB5

The gig economy has upended the way people work, and policymakers are grappling on how to address this change. California is tackling the issue with Assembly Bill 5 or as it is commonly known AB5.

However, not all is going according to plan because US District Judge Roger Benitez in San Diego has temporarily blocked AB5. Why, because the law would impact around 70,000 independent truckers resulting in irreparable harm if their employers have to claim them as salaried employees.

The request comes from the California Trucking Association, but it is not the only organization. Two national groups representing photographers and freelancers also filed a suit. The American Society of Journalists and Authors and the National Press Photographers Association say the law affects free speech and media.

And as more gig workers realize the implication of this law in California, there is no doubt more suits are on the way.

What is AB5?

This law makes it much harder for companies to classify workers as independent contractors. And if they are not independent contractors, they are employees. This, in turn, makes it much more expensive for companies running gig workers to stay in business.

After all, they are established with independent contractors in mind as their business model. And the impact goes beyond drivers for Uber and Lyft. Gig workers now encompass everything from accountants to truck drivers, plumbers, electricians and many other industries.

This type of work is allowing people to start side hustles and earn money. If the platforms that serve them hire them as employees, they have to find another solution.

The law went into effect on Jan. 1, 2020. But it is important to note the Department of Labor (DOL) said gig workers are independent contractors and not employees in an opinion letter in 2019.

The Challenges Companies are Facing

When a business hires you to work for them, you can be an employee or a contractor. As an independent contractor, you can accept or reject jobs as you like, set your own rates and do the work how you see fit. If the job is done, you get paid and all is well.

If you are an employee the company that hired you makes all the decisions for you. Furthermore, the company has to follow labor laws such as minimum wage, unemployment insurance and injury funds. This in part is responsible for many traditional businesses shifting to independent contractors to reduce labor costs. Considering the savings can amount to as much as 30%, there is an incentive to use contractors.

For many small businesses, using independent contractors has become part of their daily operations. And with AB5 in place, it means they might have to downsize and, in some cases, close their operations entirely.

This is forcing businesses to fight back, with the big companies in Silicone Valley taking the lead.

Fighting Back

When the San Diego federal judge issued his injunction against AB5, he said it was in the public interest. In California alone 1.5 million workers are affected with this law, both directly and indirectly.

Uber and Postmates have filed a suit to block AB5 arguing it violates federal and state constitutional guarantees of equal protection and due process. Uber is trying to link the lawsuit with that of the photographers and journalist associations to make their case stronger.

However, more Blue states are taking the lead of California and starting a process to change existing laws. New Jersey Governor, Phil Murphy has already signed a package of bills into law. New York and Illinois have similar bills in the works.

But if the lawsuits keep piling up, states should take a wait and see approach until things settle down in California. After all, tens of millions of people are now working as independent contractors in the U.S. and around the world.

Image: Depositphotos.com

This article, "Some Californians are Fighting AB5" was first published on Small Business Trends



via Small Business Trends Business Feeds

Top 20 Small Business Tax Mistakes

Top 20 Small Business Tax Mistakes

Filing a tax return for your business each year is something you must do. But you don’t want to make mistakes that can result in higher taxes than you really owe, draw IRS attention to your return, or cost you interest and penalties. Here are 20 mistakes to avoid:

Tax Mistakes

1. Misreporting Income

Income may be reported to you (and to the IRS) on information returns, such as Form 1099-MISC showing nonemployee compensation for 2019 (or 1099-NEC after 2019) if you’re an independent contractor or Form 1099-K showing credit card and certain other transactions, regardless of your entity type (e.g., sole proprietorship, C corporation) if you have a certain amount of transactions. IRS computers see what’s been reported to you, so it’s essential that you pick up the information correctly. If the forms are wrong and you can’t get the sender to correct them, report the wrong amount with a proper adjustment, and then attach an explanation to your return so you’re only taxed on the correct amount.

2. Failing to Report Income

If you barter for business goods and services, the transaction is taxable to you. This is so whether you trade one-on-one or go through a barter exchange. Similarly, if you use virtual currency to pay or get paid for goods and services, you also have to report the transactions appropriately. The IRS is looking closely at virtual currency transactions.

3. Overreporting Income

If you sell inventory items, you must factor in the cost of goods sold so that you don’t pay tax on the gross receipts from sales. Your income is only the difference between what you get for an item and what it cost you (based on how you value your inventory).

4. Not Applying the Limitation on Deducting Meals

Only 50% of certain business meals are deductible. Even though wining and dining a customer or paying for your own meals while out of town on business is a legitimate business expense, you can only deduct half of the cost.

5. Mixing Personal and Business Finances

If you don’t separate them, it’s all too easy to overlook a business deduction or erroneously treat personal income as business revenue. Keep a separate business bank account and use a separate business credit card to ensure you keep business income and expenses clear.

6. Not having a Mileage Record

If you use your personal vehicle for business driving, you are required to keep certain records. If you don’t, your deduction for business driving is lost. Recordkeeping requirements for this are in IRS Publication 463.

7. Thinking the Home Office Deduction is an Audit Red Flag

This is a common belief that probably should be dispelled. If you work from home and are eligible for the home office deduction, take it. Find information about the home office deduction from the IRS./p>

8. Tax Mistakes from Overlooking Pre-opening Expenses

If this is your first year in business, you may be able to take a deduction for startup costs incurred before you opened your doors. This can be as much as $5,000 in your first year, with excess costs deducted ratably over 15 years. Special rules apply if total startup costs exceed $50,000.

9. Not Utilizing Retirement Plans

Contributions from qualified plans cut your current tax bill while saving for the future. There are numerous retirement plan choices. For example, if you don’t yet have a plan, you can set up a SEP by the extended due date of your return and contribute to it for the year of that return. What’s more, you may even qualify for a tax credit for starting a plan.

10. Failing to Keep Basis Records

Business losses that pass through to partners and S corporation shareholders can be claimed on their personal returns only up to certain basis amounts. For example, an S corporation owner’s loss deduction is limited to basis in stock and loans he/she made to the corporation. Without such records, losses are lost. Similarly, gain on the sale of business property is not the amount of proceeds received; it’s the difference between those proceeds and the basis in the property. Basis is usually the cost of acquiring the property, reduced by depreciation and increased by capital improvements.

11. Overlooking Carryovers

Some business write-offs from prior years may have been limited then but deductible now. Check for carryovers of: net operating losses, capital losses, investment interest, the home office deduction, and the general business credit.

12. Not Obtaining Acknowledgments for Charitable Contributions

If you donate $250 or more, you must have a written acknowledgment in order to take a deduction. If you didn’t receive one, ask for it before you file your return.

13. Underpaying Estimated Taxes

If you are required to pay estimated taxes, be sure to factor in all of the taxes besides income tax. This includes self-employment tax if you’re subject to it and additional Medicare taxes (0.9% tax on earned income and 3.8% on net investment income). You usually can’t wait until you file your return to pay your taxes. Underpaying estimated taxes can trigger a tax penalty.

14. Not Claiming the Qualified Business Income Deduction

This personal deduction (also called the Section 199A deduction) for owners of pass-through entities is based on business income. It’s not a business deduction, but it’s a valuable way to reduce tax liability.

15. Fudging Worker Classification

Don’t duck employer tax obligations by labeling employees as independent contractors when they’re under your control. The IRS is continually on the lookout for this mistake, and it can cost you dearly.

16. Failing to File on a Time

Watch the filing due date. If you can’t file on time for any reason, just ask for a filing extension. You don’t have to give a reason for needing more time to complete your return. Just be sure that you then file by the extended due date.

17. Failing to Attach Required Forms, Schedules, or Election Statements

Your return isn’t complete unless you include all of the paperwork required. For example, if you rely on an IRS de minimis safe harbor to deduct capital items rather than capitalizing them, you need to attach an election statement referring to the safe harbor to make it valid.

18. Not Understanding the Differences in Federal and State Tax Rules

Some tax breaks on federal returns are limited or barred for state income tax purposes. For example, a number of states have different rules when it comes to the Section 179 deduction and bonus depreciation.

19. Not Staying Up on Tax Developments

Changes in the tax law may entitle you to new tax breaks on your current return. They can even entitle you to a refund if you submit an amended return. For example, dozens of tax breaks that expired at the end of 2017 have been retroactively extended for 2018 (plus 2019 and 2020). Learn which ones may apply to you and whether you want to file for a refund.

20. Tax Mistakes Because of Not Disclosing Everything to your CPA

Things happen and the IRS may disallow deductions or otherwise change what you owe in taxes. It likely will also impose an accuracy-related penalty that can only be avoided for reasonable cause. One way to do this is to show you relied on a tax professional, but you must have disclosed all relevant information to this person to have any chance of avoiding the penalty.

Image: Depositphotos.com

This article, "Top 20 Small Business Tax Mistakes" was first published on Small Business Trends



RSS Business Feeds

Top 20 Small Business Tax Mistakes

Top 20 Small Business Tax Mistakes

Filing a tax return for your business each year is something you must do. But you don’t want to make mistakes that can result in higher taxes than you really owe, draw IRS attention to your return, or cost you interest and penalties. Here are 20 mistakes to avoid:

Tax Mistakes

1. Misreporting Income

Income may be reported to you (and to the IRS) on information returns, such as Form 1099-MISC showing nonemployee compensation for 2019 (or 1099-NEC after 2019) if you’re an independent contractor or Form 1099-K showing credit card and certain other transactions, regardless of your entity type (e.g., sole proprietorship, C corporation) if you have a certain amount of transactions. IRS computers see what’s been reported to you, so it’s essential that you pick up the information correctly. If the forms are wrong and you can’t get the sender to correct them, report the wrong amount with a proper adjustment, and then attach an explanation to your return so you’re only taxed on the correct amount.

2. Failing to Report Income

If you barter for business goods and services, the transaction is taxable to you. This is so whether you trade one-on-one or go through a barter exchange. Similarly, if you use virtual currency to pay or get paid for goods and services, you also have to report the transactions appropriately. The IRS is looking closely at virtual currency transactions.

3. Overreporting Income

If you sell inventory items, you must factor in the cost of goods sold so that you don’t pay tax on the gross receipts from sales. Your income is only the difference between what you get for an item and what it cost you (based on how you value your inventory).

4. Not Applying the Limitation on Deducting Meals

Only 50% of certain business meals are deductible. Even though wining and dining a customer or paying for your own meals while out of town on business is a legitimate business expense, you can only deduct half of the cost.

5. Mixing Personal and Business Finances

If you don’t separate them, it’s all too easy to overlook a business deduction or erroneously treat personal income as business revenue. Keep a separate business bank account and use a separate business credit card to ensure you keep business income and expenses clear.

6. Not having a Mileage Record

If you use your personal vehicle for business driving, you are required to keep certain records. If you don’t, your deduction for business driving is lost. Recordkeeping requirements for this are in IRS Publication 463.

7. Thinking the Home Office Deduction is an Audit Red Flag

This is a common belief that probably should be dispelled. If you work from home and are eligible for the home office deduction, take it. Find information about the home office deduction from the IRS./p>

8. Tax Mistakes from Overlooking Pre-opening Expenses

If this is your first year in business, you may be able to take a deduction for startup costs incurred before you opened your doors. This can be as much as $5,000 in your first year, with excess costs deducted ratably over 15 years. Special rules apply if total startup costs exceed $50,000.

9. Not Utilizing Retirement Plans

Contributions from qualified plans cut your current tax bill while saving for the future. There are numerous retirement plan choices. For example, if you don’t yet have a plan, you can set up a SEP by the extended due date of your return and contribute to it for the year of that return. What’s more, you may even qualify for a tax credit for starting a plan.

10. Failing to Keep Basis Records

Business losses that pass through to partners and S corporation shareholders can be claimed on their personal returns only up to certain basis amounts. For example, an S corporation owner’s loss deduction is limited to basis in stock and loans he/she made to the corporation. Without such records, losses are lost. Similarly, gain on the sale of business property is not the amount of proceeds received; it’s the difference between those proceeds and the basis in the property. Basis is usually the cost of acquiring the property, reduced by depreciation and increased by capital improvements.

11. Overlooking Carryovers

Some business write-offs from prior years may have been limited then but deductible now. Check for carryovers of: net operating losses, capital losses, investment interest, the home office deduction, and the general business credit.

12. Not Obtaining Acknowledgments for Charitable Contributions

If you donate $250 or more, you must have a written acknowledgment in order to take a deduction. If you didn’t receive one, ask for it before you file your return.

13. Underpaying Estimated Taxes

If you are required to pay estimated taxes, be sure to factor in all of the taxes besides income tax. This includes self-employment tax if you’re subject to it and additional Medicare taxes (0.9% tax on earned income and 3.8% on net investment income). You usually can’t wait until you file your return to pay your taxes. Underpaying estimated taxes can trigger a tax penalty.

14. Not Claiming the Qualified Business Income Deduction

This personal deduction (also called the Section 199A deduction) for owners of pass-through entities is based on business income. It’s not a business deduction, but it’s a valuable way to reduce tax liability.

15. Fudging Worker Classification

Don’t duck employer tax obligations by labeling employees as independent contractors when they’re under your control. The IRS is continually on the lookout for this mistake, and it can cost you dearly.

16. Failing to File on a Time

Watch the filing due date. If you can’t file on time for any reason, just ask for a filing extension. You don’t have to give a reason for needing more time to complete your return. Just be sure that you then file by the extended due date.

17. Failing to Attach Required Forms, Schedules, or Election Statements

Your return isn’t complete unless you include all of the paperwork required. For example, if you rely on an IRS de minimis safe harbor to deduct capital items rather than capitalizing them, you need to attach an election statement referring to the safe harbor to make it valid.

18. Not Understanding the Differences in Federal and State Tax Rules

Some tax breaks on federal returns are limited or barred for state income tax purposes. For example, a number of states have different rules when it comes to the Section 179 deduction and bonus depreciation.

19. Not Staying Up on Tax Developments

Changes in the tax law may entitle you to new tax breaks on your current return. They can even entitle you to a refund if you submit an amended return. For example, dozens of tax breaks that expired at the end of 2017 have been retroactively extended for 2018 (plus 2019 and 2020). Learn which ones may apply to you and whether you want to file for a refund.

20. Tax Mistakes Because of Not Disclosing Everything to your CPA

Things happen and the IRS may disallow deductions or otherwise change what you owe in taxes. It likely will also impose an accuracy-related penalty that can only be avoided for reasonable cause. One way to do this is to show you relied on a tax professional, but you must have disclosed all relevant information to this person to have any chance of avoiding the penalty.

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This article, "Top 20 Small Business Tax Mistakes" was first published on Small Business Trends



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