Expert Tax Advice for Business Owners from Stephen Wallick & Associates

New Branch of Stephen Wallick & Associates in Chattanooga, TN

Preparing for filing your 2022 Tax Return Soon businesses and individuals everywhere will be turning their attention to filing 2022 taxes. As an individual or business owner in Tennessee, it's important that you get organized early in order to ensure your filings are in order and on time. Preparing ahead of time can help you minimize stress surrounding tax season, as well as make sure that no deadlines are missed – or worse, that penalties for late payments or incomplete documents aren’t incurred. Benefits of Filing Taxes Early Filing your taxes early can be beneficial for many reasons but most importantly it gives you more time to review your return and double-check everything before submitting it. Additionally, filing sooner rather than later may provide an opportunity for faster refunds if applicable or could give you access to other incentives or benefits depending on the type of deductions or credits taken during the year. Ultimately though, no matter when you decide to file just be sure that it is done by a professional so that there are no issues down the road! Here we’ll look at nine ways to start preparing for 2022 taxes now so you can relax come April 15th!

Your credit score after unpaid taxes Even after you have paid the IRS, your credit record is still damaged to the point that everything except cash purchases costs you more. Believe it or not, Federal Tax Liens show on your credit record even after they are released. This means they still hurt your credit score It’s true that they will issue a release that you can have posted to the credit record that shows the tax has been paid, but because you have had a lien in the past your credit score is much lower than it should be. There is another procedure that can even remove all references to the lien from your credit report once we have satisfied the outstanding tax liability. Credit scores usually improve dramatically. Many taxpayers have been able to have IRS reduce the penalties. For taxpayers who don’t file an Offer In Compromise – We can help with a request to the IRS to Abate the IRS penalties for “Reasonable Cause.” This can be as simple as explaining to the IRS that your basement flooded. It’s a great way to drastically reduce the total amount you owe the IRS. Many taxpayers use our firm to keep the IRS away from them and their families. Most of our clients never meet or speak with the IRS. We make the IRS call us, so our clients can go to work and carry on a normal life. If you are looking for a solution to your tax problems and want to get your life back, contact your Middle Tennessee tax resolution experts . We specializes in ending the misery that comes along with your IRS problems.

Much has been written about the struggles business owners face to get paid on time, and how to get clients who are dragging their feet to pay up. Clients stalling on payments, combined with unexpected expenses, can put your business in a cash flow crunch. As the owner of a small business, you probably have experienced watching the mailbox each day for a payment that’s overdue, even as you pay your own bills and invoices upon receipt. If so, what I’m about to tell you may seem stingy, scrimpy, or downright tight: Never pay early. You won’t always have control over when you get paid, but you do have some leeway when it comes to when you pay your own bills. Apart from the fact that you are a nice person and may feel a need to make people happy, why would you pay early? What benefits are being derived? The harsh reality is that unless there is a clear, compelling reason for making early payments to anyone (cash discounts, pricing discounts, special delivery arrangements), DO NOT do it . Hold on to your cash as long as you possible can by closely managing accounts payable. Hold on to your cash. Take as long as you possibly can to pay your company’s bills without incurring late fees or impacting your ability to operate. Having said that, carefully manage your communications and relationships with your vendors. Normally, your vendors will have terms established for the payment of their invoices presented for the delivery of their respective products or services. In order to maximize cash flow, you should attempt to extend the payment a minimum of a week or two beyond those established terms. So here’s the ONE Exception… Certainly, if sufficient cash is available to meet the other obligations of your company, you should take full advantage of any and all cash discount opportunities. The relative returns from cash discounts are usually quite significant and are well worth the extra effort required to manage shorter payment timeframes. For example , assume a vendor offers a 2% cash discount for payments received within 10 days as opposed to the normal 30-day terms, and your company’s standard payment cycle would dictate that payment be made in 40 to 45 days. By making the payment within the discount terms you are losing the use of the funds at least 30 days sooner than would otherwise be the case. However, your company realizes a 2% return for the use of those funds over the one-month period, the equivalent of a 24% annual return (2% x 12 months). There are very few investment opportunities that offer such attractive returns with the certainty of a cash discount. This is obviously one of the clear and compelling reasons for paying early. Consult an experienced Enrolled Agent for more advice regarding your small business expenses. 

There’s a ton of information out there and most of it is wrong. There’s information about how your credit score is calculated and even worse… how it is impacted by you simply being a consumer.  Let’s look a few of these and try to dispel them Your score drops if you check your own credit . This widespread credit misconception fools a lot of people, but viewing your own report and score is counted as a “soft inquiry” and doesn’t change the score one way or another. “Hard inquiries” by a lender or creditor, such as those resulting from your applying for credit, can slightly lower your credit score. If you’re shopping for a loan and concerned about harm to your score, know that multiple loan inquiries within a period of a few weeks are usually treated as a single inquiry to minimize impact. It helps to close old accounts . This credit myth advocates closing old and inactive accounts to hike up your score. However, this might inadvertently have the opposite affect and lower your credit score because now the credit history appears shorter. If you don’t trust yourself to put a card away in a safe place and not use it, then consider canceling newer accounts. Paying off a negative record means it’s taken off your credit report . Generally, negative records, such as collection accounts and late payments, will remain on your credit reports for up to seven years from the date of first delinquency. Paying off the account sooner doesn’t mean it’s deleted from your credit report; instead it’s listed as “paid.” Of course, it’s smart to pay your debts, both to reduce the total amount of debt you owe and to show your willingness to repay your obligations but expect the negative record to have some effect until it is purged from your report. Co-signing doesn’t mean you’re responsible for the account . Regardless of this credit myth, if you open an account jointly or co-sign a loan, you will be held legally responsible for the account. Activity on the joint account is displayed on the credit reports of both account holders. If you co-sign for a friend’s auto loan and that person doesn’t make the payments, your credit profile will be hurt and vice versa. The only way to end the dual liability is to have one party refinance the loan or persuade the creditor to formally take you off the account. Paying off a debt boosts your score by 50 points . Contrary to this credit myth, credit reporting agencies companies determine your credit score via a complex algorithm that uses hundreds of factors and values to calculate it. It’s almost impossible to calculate the difference in points changing one factor might make. It’s wise to pay your bills on time, work to lower your debts and ask that any inaccuracies be corrected. A proven record of sound financial behavior and time will have the most significant impact on your score. No matter what your score is, the smartest thing you can do with respect to your credit is simple, keep a strong record of on-time payments, keep your credit card balances below 40% of your credit limit, and make sure that the items on your credit score are correct. Anything and everything else is too hard to manage. Consult an experienced Enrolled Agent for more tips on how to repair your credit score.

Few things can be as intimidating as that letter from the IRS. In many cases, though, those notices are just meant to clear up some missing information. Although there’s no need to panic, it is important to respond as quickly as possible to avoid accruing costly penalties . How you respond to the letter depends on the type of letter you received. You may be notified that you have a balance due, or you may simply need to answer a couple of questions. Here are a few steps to take after that IRS notice appears in your mailbox. Make Sure It’s Legitimate Fraud has become an increasing problem for the IRS. If you’re being asked to remit payment, check out the IRS’s instructions on remitting payment . Your check will be made out to the United States Treasury, and the IRS won’t demand payment immediately without allowing you the option to appeal. If you have any doubts about a notice you’ve received, call the IRS at 800-829-1040 to verify its legitimacy. Comply with the Request The best thing about an IRS notice is that it usually tells you exactly what you need to do next. If you agree with what they’re requesting, you’ll merely need to comply. This means if you owe money, you’ll remit a check to the address on the notice. Make sure you keep a copy of the notice with your tax records. Work Out a Payment Plan The IRS is aware that not everyone can afford to pay an unexpected tax bill. There are a variety of payment options available, including short-term and long term plans that let you pay in a series of installments. You’ll have to qualify for the plan and pay a setup fee, but you can get the process started by applying online. Dispute the Request Don’t assume that the information you’re getting from the IRS is correct. Check your own files and, if you find a discrepancy, file an appeal. Information on your right to appeal should be on the notice you receive, but you’ll send your request in writing to the address on your notice. A written notice from the IRS is nothing to fear. The agency occasionally needs to communicate with taxpayers to clear up questions or resolve underpayments. As long as you follow the instructions on the letter and check your own records to make sure the notice is correct, you should be able to resolve the matter to everyone’s satisfaction.

 If you owe money to the IRS, the agency can eventually levy a federal tax lien on your home or personal property. When you try to sell the asset, the IRS will collect its money before you get your share. In many cases, though, you’ll have trouble making that sale as long as the lien exists on it, forcing you to try to get the lien removed beforehand. Getting a lien removed isn’t always easy, but it can be done, provided you have the money to clear things up. Resolving Your Tax Issue The first step toward having a federal tax lien removed is to pay the IRS what you owe. If you believe that the finding was in error, you can go through the appeals process, but this can take time. If you owe the debt, you may be able to work out a payment arrangement , but you’ll still have to pay off the entire amount before the lien is released. The good news is, you can possibly resolve this by filing Form 12277 to request withdrawal of the lien, which will allow you to have it pulled while you’re making payments on it. Removing a Lien on Your Home Once your debt is paid in full, the IRS should file a Certificate of Release of Federal Tax Lien with the authority that holds the lien. After a short time has passed, you should follow up with the appropriate authorities to make sure the lien is no longer on your property. If you’re selling your house, the title company will perform this search before the sale can go through, so it’s important to make sure it’s been cleared before putting your property on the market. Clean Up Your Credit Unfortunately, your property isn’t the only thing you have to worry about. A tax lien can damage your credit score. Paying it off doesn’t always clear that up, either. It’s important to pull a copy of your credit report at least 30 days after you’ve paid off your tax debt to make sure it’s been removed. If not, you should be able to contact the credit bureau in question and dispute the listing . A tax lien can be a temporary setback, but as long as you know the steps to take, you can have it resolved. If you believe the lien is in error, it may help to work with a tax professional to discuss what options you have. You may be able to work with the IRS to resolve any misunderstanding that might have led to the lien.

When you get one of those pesky IRS notices in the mail, your first response may be to panic. One quick call to your tax preparer, though, and you’ll likely get the peace of mind you need. A large part of that peace of mind comes from knowing you’re in good hands with your tax preparer, particularly if you see either CPA or EA after that professional’s name. But while you may be familiar with Certified Professional Accountant, EA may be new to you. An IRS Enrolled Agent is licensed by the federal government to represent taxpayers in front of the IRS. A CPA, on the other hand, is licensed at the state level. Both types of professionals can stand in front of the IRS on a taxpayer’s behalf, but the requirements and type of licensing set them apart. Requirements for EAs vs. CPAs To become licensed as a CPA, an accountant gets a college education, then passes the four-part Uniform Certified Public Accountant Examination , administered by the state. Although there are plenty of CPAs who practice tax law, landing that credential doesn’t necessarily mean they will. CPAs often focus on business auditing and bookkeeping. An IRS Enrolled Agent passes a three-part test called the Special Enrollment Examination , which focuses on tax laws and issues. An EA doesn’t necessarily have an accounting background and may simply focus on tax preparation. Some IRS EAs will also develop a legal specialty, which comes in handy when navigating complicated tax laws. Tax Problems and Representation If you’re ever subjected to an audit, it’s important to make sure you have either a CPA or EA to represent you. In many cases, your representative will merely need to help you gather the documentation necessary to answer the IRS’s questions. However, if it comes down to an audit, either a CPA or EA will have the expertise necessary to stand in front of the IRS. One benefit of working with an EA, though, is that your professional can represent you in a court of law in any state. This is because this tax person is licensed by the federal government. A tax attorney, on the other hand, is licensed only to practice law in that state. A CPA is a great help when it comes to accounting and bookkeeping, but an EA is better once a person’s taxes get to the auditing phase. When it comes to filing your taxes, it’s important to know you’re working with the right person. While a CPA is great for bookkeeping and business auditing, the best person to represent you if you find yourself in an auditing situation is an enrolled agent, at which point the tax specialty comes in handy. For a free consultation, please visit my online calendar .