The Tax Benefits of Showing a Loss

Tax Benefits  pic

Tax Benefits
Image: thebalance.com

As head of the team of professionals at ADVISORY GROUP ASSOCIATES’ Tax & Advisory firms, Frank L. Zerjav Sr., CPA, guides a respected St. Louis County, Missouri, with clients nationwide that for over 40 years of trust offers a broad spectrum of professional accounting, compliance, tax & advisory services to Individuals, Investors, professionals, business and real estate owners. In their complimentary monthly electronic newsletter to subscribers the TAX TIPS NEWSLINE which provides comprehensive and timely insight on a wide range of taxation issues including federal and state incentives and current issues, Frank Zerjav, CPA, and the team recently highlighted strategies for Individuals or businesses that show a loss.

Business or Investment losses, in which income is exceeded by deductions, present a number of tax benefits that can also improve cash flow dynamics. This has to do with the way in which a Net Operating Loss (NOL) within a tax year results in a deduction that is carried back two years and carried forward 20 years. The carry-back element typically results in an instant refund of federal and state income taxes paid during the two years prior.

In certain cases where the NOL carry-back would not generate a significant tax refund, or the money is not immediately needed, it may be advantageous to waive the two-year carry-back and carry the NOL forward. Given the complexity of the subject, it makes sense to seek out the guidance of a knowledgeable tax advisor. The ADVISORY GROUP ASSOCIATES’ Tax & Advisory firms offer an initial complimentary consultation to help identify proven tax-smart strategies, options and solutions that deliver real value for the professional services needed based upon the particular situation of any taxpayer.

For more information, answers to questions or concerns, do not hesitate to contact a Professional Tax Advisor by calling toll free (888) 809-9595 or visit their recently launched website: www.advisorygroupassociates.com

WHAT YOU NEED TO KNOW ABOUT IRS FORMS 1099

WHAT YOU NEED TO KNOW ABOUT IRS FORMS 1099It’s that time of year again, when IRS Forms 1099 arrive. Perhaps no one likes IRS Forms 1099 except the IRS. The agency loves them, because they allow for the easy computer matching of Form 1099 data against tax returns. Businesses may not like sending the forms out, but there are penalties for failing to issue them.  Besides, no one wants trouble from the IRS. So as all the forms descend this time of year, here are things to know about Forms 1099:

  • Better to give than to receive. Generally, businesses must issue the forms to any payee (other than a corporation) who receives $600 or more during the year. That’s just the basic threshold rule, but there are many exceptions. That’s why you probably get a Form 1099 for every bank account you have, even if you earned only $10 of interest income.
  • Report every 1099. The key to Forms 1099 is IRS’s matching. Every Form 1099 includes the payer’s employer identification number and the payee’s Social Security number. The IRS matches Forms 1099 with the payee’s tax return. If you disagree with the information on the form but can’t convince the payer you’re right, explain it on your tax return. If you receive a Form 1099, you can’t just ignore it, because the IRS won’t.
  • There are many varieties. There’s a 1099-TNT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and payouts from your individual retirement accounts; 1099-B for broker transactions and barter exchanges; 1099-S for real estate transactions, etc.  There are many categories, but the Form 1099-MISC (for miscellaneous) seems to prompt the most questions and covers the biggest territory.
  • Timing is everything. Businesses must now send out Forms 1099 by Jan. 31 for the prior calendar year. However, don’t assume you’re off the hook for reporting income if you don’t receive a Form 1099 by February or even March. There are penalties on companies that issue Forms 1099 late, but some come as late as April or May when you may have already filed your return. Even if you never receive a Form 1099, if you receive income, you must report it. You don’t need a 1099 to report income received.
  • Beware changed addresses. The information will be reported to the IRS based on your Social Security number regardless of whether you receive the form. Update your address directly with payers, as well as putting a forwarding order in with the U.S. Post Office. You’ll want to see any forms the IRS sees.
  • The IRS gets them, too. Any Form 1099 sent to you also goes to the IRS. The deadline is Jan. 31 for mailing some Forms 1099 to taxpayers, but the payer generally has until the end of February to send all its Forms 1099 to the IRS. This year (2017, for 2016 payments), the IRS has moved up the filing date for Forms 1099-MISC reporting non-employee compensation in box 7.  The reporting date to the IRS will now be the same as the due date for the forms to be issued to recipients, January 31.
  • Report errors immediately. If there is an error on a Form 1099 tell the payer immediately. There may be time for the payer to correct it before sending it to the IRS. If the payer has already dispatched the incorrect form to the IRS, ask the payer to send in a corrected form (document this request in writing).
  • IRS Notices. If you forget to report a Form 1099, the IRS will send you a computer-generated letter billing you for the taxes (CP2000 Notice).
  • Don’t ask. Keeping payers advised of your current address is a good idea, as is reporting errors to payers. In some cases, if you are missing an IRS Form 1099, you may want to keep quiet. If you are expecting a Form 1099, you know about the income, so just report that amount on your tax return. IRS computers have no problem with that. If you call or write the payer and raise the issue, you may end up with two of them, one issued in the ordinary course (even if it never got to you), and one issued because you called.

For more information, contact by phone or email

(314) 205-9595 or toll free 888-809-9595

INFO@ADVISORYGROUPASSOCIATES.COM

ADVISORY GROUP ASSOCIATES’ Tax & Advisory firms.

Trusted Advisors & devoted professional experts providing tax, accounting, compliance and business solutions.

Our Mission:   Sharing Solutions that deliver real value.

Businesses Should Not Mistake Profit for Cash Flow

 

Profit, Cash Flow pic

Profit, Cash Flow
Image: investopedia.com

The recipient of an MBA from St. Louis University, Frank L. Zerjav Sr., CPA, is the founder and CEO of Advisory Group Associates’ Tax & Advisory firms. From his CPA office in the Westport area of St. Louis County, Mo. Frank Zerjav advises clients on the management of income and cash flow.

The two terms are common in financial discussions, but they do not mean the same thing, and substituting one term for the other can cause a great deal of confusion. The reason is the accrual system of accounting.

The accrual system requires income and expenses to be accounted for when they are incurred, and that is not necessarily when the cash was actually received or paid. For example, on an income statement, credit sales are used to calculate profit, even when no cash has been received for the sales. For an item such as prepaid rent, when a business pays rent in advance, it does not include the prepaid rent in the income statement. In this case, the expense has not yet been incurred, even though the cash has left the business.

Because of these types of differences, a business can post huge profits while struggling with the necessary cash flow to pay for daily operation. Cash flow management focuses purely on actual cash moving in and out of the business and is necessary to avoid problems. Businesses must always distinguish between reported profits and actual cash in hand.

Donor-Advised Funds

Donor-Advised Funds pic

Donor-Advised Funds
Image: forbes.com

As founder of Advisory Group Associates’ Tax & Advisory firms, Frank L. Zerjav, Sr., CPA, shares solutions that deliver real value to clients located nationwide from offices located in St. Louis County, Missouri. Frank L. Zerjav, Sr., CPA, assists business and real estate owners, Professionals, Investors, entrepreneurs and individuals in a full range of professional tax and strategic tax and business advisory & planning services.

For many people of wealth, one of the most gratifying aspects of an extensive asset portfolio is the opportunity to support their favorite charities. However, charitable giving traditionally has one major drawback: once the funds have been donated, the donor has no further say in their use.

This has changed in recent years with the emergence of donor-advised funds, which reached a contribution total of $12.5 billion nationwide in 2016. In most cases, this vehicle begins with $5,000 or more placed into a fund managed by a respected financial institution.

Next, a qualified charitable organization is selected to receive the funds. The donor retains a certain amount of control on how the money is utilized, which helps assure the donor that the donations are going toward the intended use. One important caveat is that those who set up donor-advised funds cannot, by law, benefit from the donations they make.