Expert Tax Advice for Business Owners from Stephen Wallick & Associates

Expert Tax Advice for Business Owners from Stephen Wallick & Associates

Are you a business owner in Tennessee on the hunt for expert tax advice? With federal and state laws that can change yearly, it's easy to lose track of changes that can affect your business -- meaning any mistakes could cost your wallet. 


Don't let this fear keep you from being successful with your business. Our tax experts are here to help guide you through what can often be a daunting process of understanding the complexities of taxes. 


In this blog post, we will discuss some of the most important tax points for Tennessee business owners.


Tennessee Tax Laws


What taxes are business owners in Tennessee required to pay?

Business owners in Tennessee are required to pay several types of taxes depending on how business profits are assumed. Each business must set up a business income tax liability with the Internal Revenue Service (IRS).


In addition, business owners must pay payroll taxes, unemployment taxes, local business and occupation taxes, state business usage tax in certain situations, and gross receipts taxes in some counties. Business owners should always ensure they are paying the correct amount of taxes to avoid any potential penalties or consequences from the IRS.


Taking advantage of online resources such as e-filing and payment systems or consulting with a professional can help business owners in Tennessee understand their tax responsibilities.


Are all business owners in Tennessee required to pay the same taxes?


Business owners in Tennessee face a complex tax landscape. As with business owners in any other state, business owners in Tennessee must abide by the federal rules set forth by the Internal Revenue Service (IRS). Yet business owners in Tennessee also may be liable for additional taxes depending on their business structure, size of their business, location of the business, and type of income earned from their business.


For example, LLCs are subject to a franchise tax that is based on the amount of net worth of their business; large companies may be required to pay an excise tax; and businesses with employees may be responsible for payroll taxes. While many business taxes remain similar across the state, there is no guarantee that all business owners in Tennessee will pay the same exact taxes.


How can business owners in Tennessee ensure they are paying the correct amount of taxes?

Business owners in Tennessee need to ensure that they are paying the correct amount of taxes in order to stay in compliance with both state and federal laws. Business owners should consult a qualified professional accountant who is highly knowledgeable about filing business tax returns for full accuracy. Doing so will also provide business owners with peace of mind, by knowing their business is securely compliant with all local, state, and federal requirements.


Additionally, business owners should annually review their return calculations and compare them to previous years to ensure no mistakes have been made. With these important steps, business owners in Tennessee can avoid any potential errors or issues with their business tax payments.


Do you have any advice for business owners who are unsure about how to comply with Tennessee's tax laws?

The Internal Revenue Service (IRS) regularly updates its policies and business owners should ensure that their business is compliant with them. Professional advice from an experienced tax lawyer or accountant can help business owners stay abreast of their taxation responsibilities and avoid expensive IRS penalties. Additionally, having experts review invoices, costs, and other business records will also help business owners build an understanding of the applicable tax laws in Tennessee. Adopting these simple measures will make it easier for business owners to remain compliant and guarantee that their business operations are successful.


Deductions and Credits Available To Reduce Tax Liability


What types of deductions and credits are available to business owners?

Business owners in Tennessee can take advantage of a variety of deductions and credits to reduce their business tax burden. Among the business-related credits available are the business investment credit, job tax credit, franchise and excise taxes, business office income tax deduction, qualifying business structure investment credit and the small business program for renewable energy projects.


Business owners should research what type of deductions and credits they can potentially claim as well as understand how to calculate the benefits associated with each option. Since claiming business-related deductions and credits can lower an owner's business tax burden significantly they should take time to explore every possible option available.


Can you take a deduction for the cost of starting your business?

For aspiring business owners, the cost of getting a business up and running can be incredibly overwhelming. There is a silver lining, however, as business expenses incurred during the start-up phase can be tax deductible. This means business owners will have one less expense to worry about as they take their first steps into uncharted waters.


Fortunately, there are multiple options available for business owners to recoup some of the cost of starting up their businesses through taxes. Depending on the specific business and situation, business expenses may include paying professional advisors like accountants or attorneys, office rent and utilities, travel expenses to attend meetings and more. For business owners looking to get started in their business journey with some financial assistance - this is great news!


Are there any credits available for hiring employees?

Business owners in Tennessee can take advantage of several tax credits available for hiring employees. The Reconnecting Communities Tax Credit provides businesses essentially a dollar-for-dollar match when they hire and employ residents from a federally designated redevelopment area.


Additionally, businesses located in eligible rural areas may qualify for the Rural Job Tax Credit, which provides an annual amount of up to $2,400 for each qualifying employee hired. Another valuable credit is the Apprenticeship Program Tax Credit, which allows businesses to receive up to 25 percent of their cost of hiring and training approved registered apprentices. For business considering expansion due to increased market demands or other opportunities, these tax credits offer invaluable incentives to do so in Tennessee.


Can you deduct the cost of doing business travel?

Doing business travel in Tennessee can be a great investment for companies. Not only does it offer an advantage to expand customer relationships and get your brand out there, but businesses can also deduct the cost of doing business travel in Tennessee when filing their taxes. It's important to keep track of all expenses incurred from such travel so that you can maximize your return - rental car fees, hotel cost, etc.


While these types of deductions are limited for individuals, businesses have much more latitude when it comes to this kind of deduction. You'll need to make sure you keep good records and use the right methods when reporting these expenses on your taxes, but you could see a significant benefit by adding them up at the end of the year.


How do I claim the home office deduction?


Claiming the home office tax deduction in Tennessee is an important step to ensure your business takes full advantage of all available tax benefits. For Tennesseans, this federal tax deduction can mean significant savings on their taxes. To be eligible for the home office deduction, you must use the space as an organized workspace for regular and exclusive business operations, such as meeting clients or using a computer.


Additionally, your business must pay rent or own the home being used and comply with other specific requirements set forth by the IRS. Taking the time to review these guidelines carefully will help maximize the tax savings that come with claiming the home office deduction in Tennessee.


Businesses should make sure they are keeping track of all their expenses, as these can also be deducted from taxes

Tennessee offers many potential deductions for business owners in order to reduce the amount of taxes they owe. Some common deductions include any fees related to the operation of the business such as start-up costs, advertising fees, labor or material expenses; employee expense reimbursement; supplies used in the course of running the business; and meals and entertainment associated with company activities like conferences or client meetings. Keeping track of these expenses throughout the year can go a long way towards reducing your tax burden at the end of it.


Consulting With an Accountant or Tax Specialist 

It is wise to consult with a professional when preparing taxes - an accountant or tax specialist can truly save you money. Not only can they help ensure the accuracy of your returns, they also understand the often confusing details of current tax laws and credits available. With the right expert on your side, essential deductions won’t be overlooked and tax breaks utilized to the fullest extent. In addition, mistakes will be avoided, improving the likelihood of receiving any refunds quickly instead of being flagged for further examination. Consulting with a professional before filing is key in ensuring your maximum return.


About Stephen Wallick & Associates

Analyzing your business and your unique financial structure, we provide full-service accounting including Tax Preparation, IRS Issue resolution, Small Business Services, Payroll Services, and Tax Planning. We provide these services to businesses and individuals throughout the United States.


Stephen Wallick & Associates serves individuals and businesses in Middle Tennessee. Our tax specialists are Enrolled Agents with the IRS and can help you with even the most complex tax situation. We have offices in Dickson and Chattanooga, TN.


At Stephen Wallick and Associates we enjoy building personal relationships with our clients. We believe that we can better serve you and more effectively resolve your issues if we get to know you and your situation. Call today to discuss your accounting needs.

Expert Tax Advice for Business Owners from Stephen Wallick & Associates

By Stephen Wallick • 01 Feb, 2023
Expert Tax Advice for Business Owners from Stephen Wallick & Associates

New Office Opening in Chattanooga: Jonah Wallick to Lead Tax Services for Local Businesses

By Stephen Wallick • 20 Jan, 2023
New Branch of Stephen Wallick & Associates in Chattanooga, TN

Getting Ready To File Your Taxes in 2023

By Stephen Wallick • 18 Jan, 2023
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!

How Do Unpaid Taxes Affect Your Credit Score?

20 Oct, 2021
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.

Why You Should Never, Ever Pay Early (With One Exception)

19 Oct, 2021
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. 

Credit Myths and Misconceptions

19 Oct, 2021
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.

4 Steps to Take When You Get an IRS Notice

19 Oct, 2021
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.

How Can I Get Rid of a Federal Tax Lien?

19 Oct, 2021
 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.

Enrolled Agent vs. CPA for IRS Tax Issues

19 Oct, 2021
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 .

Protecting Yourself From Tax Collection Scammers

19 Oct, 2021
There’s no shortage of frauds and scams out there, especially those designed to steal your payment information or passwords. Taxes are a prime target, with criminals well aware that the IRS collects information that could be used to steal your identity. With just a Social Security number and your contact information, a criminal could apply for a credit card on your behalf. Realizing the dangers these threats pose, the IRS has taken measures to protect taxpayers, but there are still things you, the consumer, need to do to keep yourself safe from scammers. Here are a few tips to help you get started. Know How to the IRS Communicates The IRS makes clear that it will not call, text, email, or use social media to communicate with taxpayers. If you get any correspondence from the IRS, it will come in the mail, on IRS letterhead. And even then, you should contact the IRS at 800-829-1040 between 7 a.m. and 7 p.m. if you have questions about the mailing you’ve received. There are rare instances where the IRS may call or show up at your home, but at that point you’ll have received multiple notices in the mail about the issue. Be Careful How You File With e-filing having overtaken paper-based filing, more taxpayers than ever are using online sites to submit their taxes. You probably have heard some of the most popular online tax preparation services, but scammers can easily set up a website, copying the design of the original site, and trick taxpayers into providing their information. If you do use an online service, make sure you go directly to the site itself rather than clicking on a link in an email. Avoid Tax Resolution Fees If you’re in hot water with the IRS, it can be tempting to consider those services that promise to resolve all your problems. Unfortunately, these services also often charge exorbitant fees. Many of the services they offer are things you can do yourself, such as setting up installments or making an Offer in Compromise. The IRS provides information on all of this on its website , but you can also ask your own tax preparer to explain your options and help you navigate the process. Tax collectors don’t limit their scams to tax season, so be sure to be on alert year-round. If you do suspect someone has tried to scam you, report it to the IRS as soon as possible so they can keep an eye on your account and take measures to protect others.
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