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An Amazon sellersets up her accounting reports on her computer

A Guide to Tax Savings for Consultants

An Amazon sellersets up her accounting reports on her computer

If you’re living the independent consultant life, you probably think it’s pretty sweet that you don’t have a boss over you, telling you what to do. But aside from your mini-bosses (AKA clients), you still have one more entity to which you report: The IRS. 

The IRS watches consultants closely, and every tax dollar that is owed has to be accounted for. The good news is that the money you spend on your business can often become “yours” again through tax savings.

Here are some tax-saving tips for consulting firms to minimize what they owe to the IRS at the end of the fiscal year.

Internet, Phone, & Business Utilities

Whether you work from a home office or rent a separate building that you commute to, the cash you spend on the necessities of doing business can often be deducted. 

Keep track of your basic operational overhead, including internet costs, your cell phone minutes, electricity bills, and any other utility costs that come about in the normal course of business.

Don’t forget about the software you use. If you have any subscriptions for programs like Microsoft Office or Adobe Suite, they might just be deductible expenses. Although it can be a pain to subscribe for software instead of purchasing it outright, as far as your tax returns are concerned, they’re the gift that keeps on giving!

Office 

Perhaps you have a home office. Congrats! Working from home means your commute is simply a few steps that you can take in your slippers and robe. But is it a source of tax savings?

The IRS lets you deduct the expenses related to this space as long as it is solely used for your consulting duties. For your home office, there are two ways to write off costs for your tax return:

Actual Expense Method 

The total expenses for your office include “direct expenses” for things like supplies and repairs, as well as “indirect expenses,” which might account for portions of your utilities, mortgage, and insurance.

The Simplified Option

Take the standard rate (which is currently set at five dollars) and multiply it by the square footage of your office (as long as it’s less than 300 square feet). If you take this option, you can still write off your office supplies, too!

If you commute to a separate fixed location office, know that you can’t deduct your mileage to and from that office. You can, however, deduct any business insurance you pay, as well as rent or any utility bills.

Entertainment and Meals 

Be prepared to defend your entertainment, travel, and meal expenses to the IRS! They’ll want to ensure that these costs were truly necessary for doing business, like meeting a client at a restaurant to talk shop or taking them to a show. 

Unfortunately, you can’t deduct a meal that came with entertainment, thanks to the Tax Cuts and Jobs Act, unless the meal was a separate expense from the entertainment portion.

You can deduct 100% of your travel fees, airfare, gas, and hotels, while you can also deduct 50% of your meal costs. 

Deducting anything that could (to an outside observer) look like pure fun, rather than work is where you’re going to need impeccable accounting and bookkeeping. It would be wise to keep a journal of your travel activities should the IRS have any questions for you.

Educational Materials and Courses

Whether you’re starting your consulting career right out of school or you’re a lifelong learner, your thirst for knowledge can come with some serious tax savings. 

Education tax credits and the Lifetime Learning Credit can earn you tax breaks if you’re taking courses at a recognized institution of higher learning. If you’re paid for any seminars, lectures, conferences, or even any certifications, write those costs off, too!

Not only can education lower your taxes, but anything that could be considered to be education is most likely deductible, too! 

Your magazine subscriptions and books (related to your industry), as well as research services, allow you to stay on top of the latest developments in your field. 

As a short aside, this is the kind of thing your clients will want to see, too. Positioning yourself as an expert that keeps abreast of trends and news for your area of expertise proves you’re worth your customers’ money and time!

Mileage 

If you take the standard mileage deduction, it does reduce your upfront work when it comes to keeping track of vehicle-related expenses. However, you won’t be able to write off your gas, repairs, maintenance, or insurance. 

If you want to get the biggest possible tax savings, go the extra mile and track your mileage!

Let’s say you choose to keep track of work-related car use. Remember that you can’t deduct mileage to and from your house and your permanent office location, even if you’re meeting with a client. 

You can write off your mileage when you’re commuting to meet clients at other locations, as well as when you run work-related errands. Write down your odometer readings or find an app that lets you track mileage.

Office Supplies 

Look around your desk. That stapler? Those pencils and pens? The paper in the printer? Post-It Notes? Stamps? Write them off! You can also deduct printing services. 

Any consumable materials you use in the course of your work in your office, as long as they are being used for work, count as expenses you can deduct.

Marketing and Advertising 

Building your brand will require getting your name and logo in front of as many eyes as possible. Your web hosting service, graphic design, and any ads you run, regardless of the medium, are deductible expenses. 

Now, if you’re savvy and able to do some of the work yourself, like photoshopping a logo or building your website, unfortunately, you can’t deduct what you would have spent for someone else to do the work for you! 

You might be able to create graphic designs worthy of tens of thousands of dollars, but unless that’s what you spent to have someone else do it, just consider it to be upfront savings, as it’s not a deduction.

Health Insurance 

As an independent consultant, you will have to pay for your own health insurance, but the good news is that it is a deductible cost. All health, dental, and vision coverage you purchase for yourself and your family can be written off. However, if you’re covered under your spouse’s plan, you can’t deduct those costs.

Client Gifts

Write off expenditures of up to $25 for any client gifts. The more clients you have, the more you can give. The more you can give, the more you can write off. 

However, if you choose to buy a client a solid rosewood dining table that costs as much as a new car — sorry, you’ll only be able to write off $25 of what you spent! 

Keep in mind that the IRS will frown on you giving multiple $25 gifts to the same client at the same time. These don’t count as separate gifts — they’ll be considered to be one lump expenditure.

Be Your Own Boss (and Spend Less Doing It)

As you try to figure out what is the best business structure for consultants, you might feel alone as you gain your footing. Know that it’s a path that many others have walked before you. The IRS will be watching you closely, but your friends at Xendoo are watching them right back! 

We help consultants every day with bookkeeping and tax preparation services. Going out on your own doesn’t mean going it all alone. Contact us today and give yourself the best start you can as you forge your path to being a successful independent consultant.

A real estate agent holds out the key for his buyer's new home.

7 Tax Tips for Independent Realtors

Editor’s Note: This post was originally published in November 2016 and has been revamped and updated for accuracy and comprehensiveness. 

As a self-employed realtor, you face some unique challenges when tax season comes knocking at your door. Since you don’t have taxes withheld from a regular paycheck, it’s up to you to lessen your tax burden by identifying all of the deductible expenses you incur throughout the year. Without careful planning, the tax bill you face when April rolls around can be quite a shock.

But here’s the good news: there’s probably more you can deduct than you realize! By carefully assessing not only your properties but your business as a whole, you can hold onto more of your hard-earned cash at tax time. The following tax tips for real estate agents are a great place to start looking for valuable deductions.

7 Tax Tips for Real Estate Agents

 

A real estate agent drives his car to a client meeting.

#1 – Mileage & Auto Expenses

Realtors tend to spend a lot of time behind the wheel. The miles you rack up can include getting to appointments, taking clients to see new properties, and staging homes. Don’t also forget to include car maintenance like new tires, tune-ups, and even car washes! At tax preparation time, you will need to determine whether the standard or actual cost deduction will save you the most money.

#2 – Office Space

Whether you pay desk fees under another agent or work from a home office, the IRS allows you to deduct the cost (or a percentage of) your office space. Depending on your situation, this could be a rather significant expense over the course of a year, so you don’t want to miss out on this deduction. 

It’s important to note that you won’t be able to deduct both the desk fees you pay and the space you use at home for an office. Instead, you can only deduct one or the other – whichever is greater. Keep careful records of how much you spend on any office-related rent and purchases, so you have an accurate accounting of this component when it comes time to file.

#3 – Marketing

Business cards, website maintenance, mailers – any method you use to get your name out there is deductible as a business expense. Did you have a new logo designed? Maybe you purchased a mailing list? Those are included, too. 

Unfortunately, many agents simply fail to track these kinds of costs throughout the year. The money just goes out to various vendors and services, and a (digital) paper trail is not kept up. This can be an expensive mistake. Instead, by utilizing online bookkeeping for real estate agents, you can adequately record all marketing expenses along the way, saving them in one central location for use at tax time.

#4 – Supplies & Equipment

Think of all the tools you use to run your business: a nice camera to photograph properties, your computer, lockboxes, and staging decor. Did you buy a new vacuum to clean up that “fixer-upper” you were showing? Work-related cleaning supplies are also deductible! Once you start keeping careful track of everything you purchase, you might be surprised to find how many items fall into this category over the course of a year. 

A man reads a book to help imprve his real estate selling skills.

#5 – Licenses & Fees

As a real estate agent, you are all too familiar with the various fees you pay throughout the year. Fortunately, MLS, brokerage, and legal fees — to name just a few — are all deductible. You can even deduct professional membership fees — just remember that any portion of dues designated for lobbying or political advocacy is not deductible. And don’t forget about your state license renewal.

#6 – Meals & Entertainment

Do you take clients out for lunch after a morning of showing properties? Did you meet up with a prospective business partner for happy hour? Did you cater an open house? If you discussed business before, during, or after the meal, it could be deducted on your tax return. Using the right accounting software will make it much easier to track all of these types of casual expenses throughout the year. 

#7 – Professional Development

Staying at the top of the real estate market in your area means you’re always looking for ways to expand your learning and stay on top of industry trends. Professional development events, along with any trade events, can be deducted. Also, books you purchase or publications you subscribe to can be subtracted from your revenues.

Utilizing the services available from Xendoo can help make tracking all of your business expenses a whole lot easier, so you can spend more time selling and less time worrying about next April. Get started today!

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Sunshine Tax: Taxes for Small Business in Florida

Florida is among the most tax-friendly states in America. If you have a small or midsize business in the state of Florida, you may be shielded from many typical forms of small business taxesBut how can you know which tax laws apply to your business? This post will cover some of the more common tax questions related to taxes for small businesses in Florida.

What Types of Tax Liabilities Are There for Florida Small Businesses?

Florida business owners should be aware of the following:

  • Corporations that do business in Florida must pay a 5.5% income tax
  • Florida has a sales tax rate of 6%
  • S Corporations are exempt from paying state income tax
  • Sole proprietorships, partnerships, and most LLCs are exempt from state income tax
  • Florida residents do not pay a state income tax
  • Business owners should expect to pay federal income tax on business earnings
  • Business conducted in other states may be subject to additional state laws

Because so many businesses are exempt from Florida state income tax, many small business owners can benefit from having their business shielded from traditional tax liabilities.  Below, we’ll go into greater detail regarding the rules for taxes for different types of business entities in the state of Florida.  

What Kinds of Taxes Can an S Corporation Expect to Pay in Florida?

In Florida, S Corporations are not treated as traditional corporations when it comes to taxes. Thus, S Corporations do not pay the state’s 5.5% corporate tax. S Corporations are also exempt from federal income tax.

How is this possible? With an S Corporation, the income earned by the business goes directly to the business owners. The owners are then expected to pay federal income tax based on the income they receive from their company. However, this income is not subject to Florida state tax.

A man and a sketch out a project for their LLC business

How Are Small Business LLCs Taxed in Florida?

An LLC can be classified in one of two ways. Typically, LLCs are designated to be partnerships or disregarded entities. However, in this case, the LLC does not pay Florida income tax simply because it is not classified as a corporation.

However, some LLCs can be classified as incorporated. If they are classified as an incorporated business, the LLC must pay the standard 5.5% Florida state income tax—or at least the 3.3% alternative minimum tax. LLCs classified as corporations will file Form F-1065 if one or more of its owners is a corporation.

The actual business owner does not have to pay tax to the state of Florida for the income they personally receive from the business, except in those cases in which the LLC is incorporated.

How Are Small Business Partnerships in Florida Taxed?

Business partnerships can be classified as general partnerships, limited partnerships (LPs), and limited liability partnerships (LLPs). Regardless of these specific designations, none of these partnerships are required to pay state income tax in Florida.

However, the partners of these businesses are required to pay federal income tax on the money they receive from these businesses, based on standard income tax rates. But because Florida does not tax ordinary income, business owners of partnerships are not required to pay Florida state income tax.

A Florida business owner sits at a table with a pile of tax papers.

What Tax Obligations Are There for Sole Proprietorships in Florida?

Florida treats a sole proprietorship like a partnership. The only difference is that the state looks at the distributed income to one proprietor instead of many partners. Thus, like partnerships, sole proprietorships are shielded from traditional state income tax.

This also means that the proprietor is expected to pay tax on any business income he or she receives, though only to the federal government. Since it is considered to be personal income, the individual does not pay state income taxes.

What If You Have a Multi-State Business? How Are You Taxed?

For most organizations, there are no required taxes for small businesses in Florida. However, if you own a business in Florida but earn money from another state, you are considered to have a nexus in those states. Therefore, in these situations, your business may be subject to the tax laws in those states.

Because different states have different state tax laws, this can be confusing. If you earn money in multiple states, it may be prudent to review nexus rules to see how they may impact your business. 

Let Xendoo Help You

Looking for Florida bookkeeping services? Xendoo can help. We understand the rules regarding taxes for small businesses in Florida and help you keep your books up-to-date. We can even help with Florida tax preparation. When you have questions, contact the experts at Xendoo.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Eight Tax Tips for Restaurant Owners

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

You know that filing taxes can be stressful even in the best of times, but as a restaurant owner, tax time can leave you feeling in the weeds because your deductions are exponentially more complex. Never fear, though, because Xendoo is here to help. If you aren’t yet taking advantage of our full suite of professional business accounting services, here are a few quick restaurant tax tips for filing returns that can help save you some headache and money.

1. Document, Document, Document!

Did we mention that you need to document everything?  One of the best restaurant tax tips is to document and keep every invoice, every check stub, and every e-mail, no matter how inconsequential you might think it is at the time. You just never know when you might need to produce that little receipt during an audit, and running across a receipt might even remind you of something that you almost forgot to deduct. Set up a sound filing system where you can locate any tax documents you might need by vendor or category and keep it up to date.

2. Deduct All Food and Beverage Expenses

Since food cost is almost certainly your largest expense category (with the possible exception of labor), you should be deducting the cost of everything on your menu as an ordinary and necessary cost of doing business. But it’s not just the actual ingredients that you can write off. You can also deduct the cost of preparation materials like fryer oil and condiments, as well as any food that you have to throw out because it’s expired or spoiled. This is one restaurant tax tip that can take the sting out of tossing out old produce.

3. Deduct All Employee Compensation

Payroll is your other big expense category, and it’s deductible as an ordinary and necessary expense because obviously, your business can’t operate without staff. But, again, it’s not just the weekly payroll that you get to deduct. You can also deduct the cost of any employee discounts on meals, paid vacation or sick days, and any dental, vision, health, life, or other types of insurance you might provide for your team members. However, business owners don’t generally get to count salaries or benefits to themselves as deductions because doing so would essentially make any profits from the business tax exempt.

4. Deduct Mileage and Business Travel

Do you or any of your employees drive a personal vehicle as part of the business? Are you maybe making deliveries or picking up supplies? What about to or from training events? If you have any sort of driving directly related to your business, you can deduct that at the current standard mileage rate. But be careful—this is an often-abused deduction, so your documentation of it needs to be meticulously maintained. Driving to and from work doesn’t count as a business expense. Use either a separate ledger or a smartphone app that’s designed to track mileage. Also, if you have overnight travel for training, food shows, conferences, or other business-related events, you can deduct hotel and food expenses, as well.

5. Deduct Large Equipment Purchases

Under a 2016 change to the tax code, you can now deduct the total cost of certain equipment purchases up to $500,000 for the year of purchase instead of depreciating equipment over time in the traditional manner. Known as the ‘Section 179 deduction,’ this change is meant to ease the cash flow for small businesses. It covers a wide array of equipment such as computers, office furniture, vehicles, and machinery. That means the new walk-in cooler you just bought because the old one finally bit the dust can start working for you right away.

 

A server pours coffee into mugs.

Photo by Tyler Nix on Unsplash

6. Take Advantage of the Work Opportunity Tax Credit

Many business owners aren’t aware that the tax code rewards employers for hiring people from certain groups that have historically had difficulty finding employment. Known as the Work Opportunity Tax Credit (WOTC), these groups might include military veterans, summer youth employees, long-term unemployment recipients, rehabilitated felons, residents of designated Empowerment Zones, and many others. This restaurant tax tip is an excellent way to save your business some money while contributing to the community through socially responsible hiring practices.

7. Make Use of Enhanced Charitable Deductions

With a handful of exceptions, the IRS allows businesses to deduct donations to §501(c)(3) nonprofit organizations just like individuals do, including some enhanced deductions specifically for restaurants donating food. Take advantage of these types of restaurant tax tips can be a little tricky, though, so you probably want to hire a small business accounting firm like Xendoo to help navigate these waters safely. You can’t deduct staff time or the total fair market value of the food, but these deductions can still help boost your profit margin significantly.

8. Track Employee Tips Meticulously

Reporting credit card tips is pretty easy since they are tracked through the POS system, but cash tips can get messy. It’s the responsibility of servers to report their tips accurately, but if they don’t report cash tips, the IRS will assume an 8% tip rule. In cash sale situations, the business owner’s responsibility is to withhold 8% of the employee’s cash sales as an assumed tip, and liability for failure to do so could land on the employer. It’s a good idea to go over these rules with your team because you also have to file a Form 8027 each year, and the IRS expects to see accurate records, so it’s in everyone’s interest to pay attention to this one.

 

These restaurant tax tips are a good start for any business owner, but bookkeeping for restaurants isn’t for the faint of heart, which is why Xendoo is ready to help with our affordable bookkeeping and accounting services. Instead, it would be best if you spent your time growing your business and let our team of experts lift the tax burden and do what they do best.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Two business woman smile discuss accounting at a desk

Why You Should Hire an Experienced Florida Accountant

As a small business owner, you want to keep your head in the game. After all, you started your business because you’re passionate about the work you do, and you want to connect your products and services to customers.

So why are you trying to juggle your own books?

We understand the pressures that small business owners are experiencing. Handling your own bookkeeping and accounting may seem like an easy corner to cut, but the chances are that you’ll pay for it in one way or another. 

You simply might not be able to give your books the time and attention you need—a problem that can snowball out of control and leave you with a disaster once tax season approaches. There are many online accounting services available. You can’t discount the value and simplicity that these services can offer, but how can you be confident that these services will understand your local business or Florida state law? Unfortunately, accounting software is similarly generic and can only take you so far in navigating the needs of local Florida businesses.

An experienced Florida accountant can help you with more than just the books. So let’s explore the various benefits of hiring a Florida accountant for your business.

A Florida Accountant Can Help with the Legal Structure of Your Business

On paper, businesses are largely defined by their legal structure. A business can be a limited liability company (LLC), a partnership or corporation, or a sole proprietorship. These structures are based on characteristics such as:

  • Liability
  • Taxation
  • Fees and forms
  • Investment needs and opportunities
  • Maintaining operations

When you set up your business, how will you consider these factors? This is where an experienced Florida accountant can really be helpful. Choosing an accountant can help your business to navigate these questions and ensure that your business is optimized according to Florida business law.

A Florida Accountant Can Keep Your Books and Records Up-to-Date and Accurate

Perhaps the most obvious benefit of working with a Florida accountant is that they can keep an eye on your books. Ideally, an experienced accountant will monitor your books all year long (or at least at regular intervals), which is vital when it comes to tax planning.

Two business women discuss Florida tax laws

A Florida Certified Public Accountant Can Help You to Understand Sales Tax Laws

Tax laws are notoriously complicated. Sales tax laws in Florida are no exception. Unless you have a degree in accounting, you could quickly start tearing your hair out trying to stay above board. And if you slip up, your business could face stiff penalties for violating tax laws or failing to meet deadlines for your tax returns. This doesn’t just affect you — it will also affect your staff and your loyal customers.

What about an eCommerce business? Organizations that work with out-of-state customers create a business connection called a “nexus” that requires them to pay sales taxes. An experienced accountant can help you to navigate these twenty-first-century questions and spare you the penalties that might come your way for improper financial reporting. 

This is where Xendoo can be especially helpful. Our online financial experts provide tax services to a variety of businesses, but our real advantage is our understanding of the Florida economic landscape. 

Businesses looking for bookkeeping in Naples or bookkeeping in Gainesville, for example, can take advantage of our financial expertise and local knowledge.

A Florida Accountant Can Help to Expand Your Business

Are you looking to grow your business? An accountant can help with that, too. Good accountants can distill your financial statements into a digestible summary of your overall cash flow. 

Understanding your company’s financial health can be a great first step to discovering growth opportunities. An accountant can point out ways to leverage your assets so that your business can grow and flourish without sacrificing the organizational strategies necessary for filing taxes.

When certified public accountants handle the books, you can focus on the day-to-day operation of your business.

We Handle the Books; You Handle the Business

Ready to hire an accounting professional for your small business? As you’ve seen, there are many benefits of hiring an accountant. The average base salary for a Florida accountant is over $50,000, plus benefits. Most small businesses simply can’t afford to hire someone for the position. If your company needs bookkeeping services in Orlando, where can you turn?

This is where Xendoo truly shines. With our localized knowledge, we can provide expert  Tampa bookkeeping services as well as almost anywhere in Florida. You won’t have to pay a full-time professional or contract with expensive accounting firms.

Businesses grow when they are well-managed, and an accountant can handle the books while you run the business. When you’re ready to stop juggling the books and get back in business, contact us and see how our online services can help your business to thrive.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

A woman stress bites a pencil going over her Florida business taxes

How to File a Business Tax Extension in Florida

With so many day-to-day responsibilities that go into running a small business, such as inventory accounting, staffing, bookkeeping, and marketing, it can be easy to forget about the tax deadline. Yet, before you know it, their tax deadline came and went. 

Without a filed return, you may be wringing your hands and asking yourself questions on what to do next. Can you even make payments after a down year? Do you have the necessary paperwork? What do you do now that they’ve missed their deadline? Chances are that you are not alone, but don’t panic. Florida allows businesses to file a tax extension, but you can’t wait too long. Putting it off even further could increase your penalties and put you in financial hardship.

We’ll walk you through the process for filing a Florida business tax extension, so you can keep your business moving without the added stress. 

What is the Deadline for the Florida Business Tax Extension?

Different deadlines apply for federal and state taxes. Below are the deadlines for Florida’s state tax extension and the federal tax extension. 

State Tax Extension

Tax returns for Florida businesses are due by May 1 (the 1st day of the 4th month following the end of the taxable year). However, Florida allows for a six-month extension, which would move the new deadline to November 1st.

Federal Tax Extension

2021 tax deadlines have the following due dates:

  • Sole proprietorships and single-owner LLCs: May 17, 2021
  • Partnerships: March 15, 2021
  • S Corporations: March 15, 2021
  • C Corporations: April 15, 2021 

A Florida partnership or business has the option to file for a six-month extension, which would move the deadline to the following dates:

  • Sole proprietorships and single-owner LLCs: November 17, 2021
  • Partnerships: September 15, 2021
  • S Corporations: September 15, 2021
  • C Corporations: October 15, 2021 

Be prepared to pay a deposit for the taxes you owe. You will also be expected to pay your first quarterly taxes for your business on this date.

Image of tax forems 1120 on a desk next to a laptop bag

What Forms Do I Need to File to Apply for a Florida Business Tax Extension?

The form you need will depend on the type of business you’re operating. For the Florida business tax extension, you will first need to complete the form for a federal tax extension:

Please note that if you are filing for a federal tax extension, you must also file for an extension with the state of Florida. However, an approved federal extension will not guarantee an extension with the state.

Can I Pay My Balance When I Submit an Extension?

Businesses will have the option to pay their balance when they file for an extension, but all businesses should be prepared to pay at least a down payment for the taxes that they owe.

How Do I Submit My Forms?

It’s faster and easier to file electronically. Form 7004 can either be submitted electronically to the Florida Department of Revenue through Florida’s “File and Pay” e-service system or through the postal service by mailing your completed form to the following address:

Florida Department of Revenue

5050 W. Tennessee Street

Tallahassee, FL 32399-0135

You do not have to send payment with your tax form, but you should be prepared to pay a deposit, as we already noted. Moreover, you should also account for possible late charges or penalties.

Can I File My Extension Electronically?

You may file Form 7004 through Florida’s “File and Pay” e-service system. Most tax preparation software can interface with this system, though if you have trouble, you may wish to contact your software provider or consider filing on paper.

What Happens if I Don’t Pay My Taxes?

If you pay your taxes late, charges will apply in the amount of 10% of your unpaid taxes. An additional 10% will accrue every month in which your taxes are unpaid, up to a possible penalty of 50% of your total outstanding taxes. Underpaying your taxes could also result in interest being applied, though this number varies.

If you don’t owe Florida taxes, you must still file for this fiscal year. Failing to do so can result in a late charge of $50 per month, up to a possible total of $300.

Can Xendoo Help with My Florida Business Tax Extension?

Our bookkeepers and tax specialists are well versed in Florida small businesses and can ensure that your taxes are filed correctly and on time. Plus, Xendoo’s financial experts can keep your records up to date and accurate, so you aren’t panicking but prepared when tax season comes around. If you’re looking for bookkeeping services in Orlando and the surrounding areas, Xendoo can help you to complete forms, meet deadlines, and more. 

Xendoo offers tax and bookkeeping services all over Florida, including:

When you need help, we’re only a click away. Reach out to our team today!

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

How to Change from an LLC to an S Corporation

Remember back when you had to decide on a name to register your new business, forming a limited liability company—LLC? Now your small business has grown up thanks to your hard work and dedication. You may have outgrown your current legal status and it’s time to change from an LLC to S Corp to gain additional tax benefits that you’ve earned! Since determining the status of your business is important to its success and potential, we’ll break it down for you.

What is an S Corporation?

Define and describe what it is. Describe how S Corps. Are better for small businesses

Under “S” corporation status, the small business owner’s income, losses, deductions, and credits “flow through” to you and are reported on your personal tax returns and assessed at your individual income tax rate. S Corp status is great for small businesses because you have the LLC protection from losses beyond your capital investments, while still providing you with the flow-through taxation.

How is an LLC Different from an S Corporation?

As an LLC owner, you could lose everything you have invested in the business, but your personal home, bank account, and other assets are protected. The main differences between an LLC and an S Corp are:

  • An S Corporation isn’t a business entity like an LLC—it’s an elected tax status.
  • LLC owners must pay self-employment taxes for all income. S corp owners may pay less on this tax, provided they pay themselves a “reasonable salary.”
  • LLCs can have an unlimited number of members, while S Corps are limited to 100 shareholders.

A small business team discusses changing from an LLC to an S Corp

Why you should consider changing from an LLC to an S Corp

Here are three great reasons to change from an LLC to an S Corp:

Self-employment taxes

S Corp distributions aren’t subject to FICA/self-employment taxes. This is one strategic way to minimize self-employment taxes, making it a great business structure for consultants, sole-proprietors, and more. If you have an S-Corporation and are active in the business, you must pay yourself a market-rate salary for your work The IRS won’t let you pay yourself entirely in distributions to avoid self-employment tax.

Tax-preferred retirement savings 

You can contribute more to retirement accounts with an S Corp than an LLC because with an S Corp you can set up a Solo 401(k) in addition to a Roth IRA.

Easier to scale

S Corps allows for a smoother transition from a C Corp. Stockholders are required to report their percentage of the profit/loss whether or not they actually receive that money as a distribution. If you own 100 percent of an S Corp and it makes X dollars in profit, you can keep that money in the business to make purchases next year. You are still required to report the profit on your individual tax return. If you anticipate keeping a significant amount of money in the business, you may be better off as a C Corporation.

How do I change from an LLC to an S Corporation?

If you decide to change from an LLC to an S Corp for federal tax purposes, you can simply make an election for the LLC to be taxed as an S Corporation. All you need to do is fill out a form and send it to the IRS. Once the LLC is classified for federal tax purposes as a Corporation, it can file Form 2553 to be taxed as an S Corporation.

With this approach, you don’t change the actual entity type, only the federal tax classification. Even though the IRS classifies the LLC as S Corp, it is still an LLC and may be taxed as such by the state where it is formed.

To change the actual entity structure you must formally change the LLC to an S Corporation with the formation state. If the simple conversion process is not allowed by the formation state, then you can do the following: 

  • send the IRS a letter informing them of the structural change
  • choose to be an S Corporation by filling out IRS Form 2553
  • cancel the LLC while filing with the state for a new corporation

Is Switching from LLC to an S corp right for my business?

When you’re ready to change from an LLC to S Corp, we recommend that you consult an accountant or tax preparation services to make sure there are no mistakes that could cause you to lose your money-saving tax status. Your Xendoo team of small business accounting experts can help you find the right solutions for your small business, and take the hassles of tax prep and filing off your shoulders. Whether it’s the 1120S,  1120, or 1065,  Xendoo’s CPAs will file the right return for you, right on time.

With bookkeeping, tax consulting, and tax filing all under one roof, your U.S.-based Xendoo financial team is here to answer all your questions and to file your business and personal taxes. We’ll do what we do best — and let you get back to doing what you do best to make your business a success. Sign up today.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

eCommerce Trend Report: 2020 Recap & 2021 Forecasts

Editor’s Note: This post was originally published in March 2020 and has been updated for accuracy and comprehensiveness.

For all the challenges the economy faced in 2020, it may come as something of a surprise that overall domestic retail sales saw their highest rate of growth in over two decades during 2020. What probably isn’t much of a surprise to anyone who has been paying attention is that that strong growth was driven entirely by eCommerce trends in 2020, with online sales accounting for 101% of that growth. 

The COVID-19 pandemic drove more and more shoppers to online retailers in lieu of brick-and-mortar stores, and the good news is that that movement shows no sign of slowing down in the eCommerce trends for 2021. The bad news is that sales tax compliance continues to be a thorny issue for online retailers as they struggle to keep up with state regulations. Figures represent US domestic sales unless specifically noted as global figures.

Consumer Migration to E-commerce

Overall retail sales in 2020 topped $4.04 trillion, representing a 6.9% increase over 2019 sales of $3.78 trillion. That was driven by a massive 44% increase in online shopping, nearly three times the previous record eCommerce year-over-year growth in 2019 of 15.1%. A significant portion of that increase was due to first-time online shoppers, as well. E-commerce market penetration leaped from 15.8% in 2019 to 21.3%, representing a sharp increase from its previous trend of 1-2% growth per year. In 2020, eCommerce transformed from being a convenient alternative to brick-and-mortar stores for some consumers to an essential part of daily life in an age of pandemic.

A person checks his phone for sales during Black Friday

Holiday Shopping

Following along with the overall trend toward online shopping, domestic holiday shopping showed similar rates of year-over-year growth. Out of $861 billion spent online in 2020, over $200 billion of sales occurred during the holiday shopping months of November and December. 

  • Thanksgiving Day online sales rose 21.5% to $5.1 billion 
  • Black Friday online sales rose 21.5% to $9 billion
  • Cyber Monday online sales rose 15% to $10.8 billion
  • Total Cyber-week domestic online sales reached $60 billion 

Hottest E-commerce Segments in 2021

Fashion and online apparel remained the largest segment of online shopping globally in 2020, followed by toys and electronics. 

  • Online apparel sales rose 15% to $760 billion globally, projected to reach $1 trillion by 2025
  • Toys rose 12% to $590 billion in global online sales, projected to reach $766 billion by 2025
  • Consumer electronics saw $542 billion in global online sales, a 28% increase over 2019.
  • Food and personal care items came in fourth at $468 billion
  • Furniture and household appliances totaled $362 billion globally.

Largest Retailers

Unsurprisingly, Amazon retained its throne as the undisputed king of online retailers, with a whopping 38% of all domestic sales, down slightly from its 2019 share of 43.8% share in 2019. Other online retailers like Walmart and Target managed to chip away at Amazon’s lead, but are still behind by a wide margin. 

  • Amazon – 38%
  • Walmart – 5.3%
  • eBay – 4.7% 
  • Apple – 3.7%
  • Home Depot – 1.7%

Smartphone Sales

Smartphones continued to increase in popularity as a platform for online shopping, representing 54% of online sales in 2020 and projected to reach 73% in 2021. 79% of smartphone owners have made at least one online purchase with the device, and 80% of smartphone owners have used a smartphone to look up product information or reviews while shopping in a traditional brick-and-mortar store. It’s clear that the prevalence of smartphones will continue to be a driving force in eCommerce for the foreseeable future. 

A man pays for an item using his digital wallet on his phone

Trends to Watch

Whether you have something like a Shopify store or sell through your own website, it’s imperative to stay on top of technology and predict online consumer product trends so that you can stay one step ahead of the competition. To that end, we’ve identified some eCommerce future trends that are definitely worth keeping an eye on in 2021.

BOPIS (Buy Online, Pick-Up In-Store) and Curbside Pickup

This was the trend that dominated much of 2020 because it combined the convenience of online shopping with the immediacy of in-store shopping. While some shoppers will revert to in-store shopping, this trend is here to stay.

Augmented Reality (AR)

Augmented reality emerged as a player in eCommerce in 2020, with, for example, some furniture retailers allowing consumers to upload a photo of their living room and see how a particular piece would look in it.

Digital Wallets & One-Touch Purchase

Many consumers have been hesitant to make the move to online shopping due to concerns about fraud, while others were put off by the inconvenience of having to enter a credit card number. Digital wallets like ApplePay and GooglePay have alleviated many of those concerns by making secure one-touch purchases from smartphones. However, most security concerns are pushed to the wayside for convenience, and this eCommerce trend is probably here to stay. 

Cryptocurrencies

Although controversial and not widely adopted currently, cryptocurrencies are poised to become a force in eCommerce in the not-too-distant future. Because Bitcoin is both a currency and a payment processor, it can facilitate secure transactions across borders at transaction fees of 1%, as opposed to the typical 2-3% merchant fees charged by credit card processors. Some large online retailers like Overstock.com already accept Bitcoin.

More Sales Tax Headaches

In response to declining state sales tax revenues from the move to online shopping, the US Supreme Court ruled in South Dakota v. Wayfair (2018) that each state had the power to individually tax online retailers to create a replacement revenue stream. Online retailers must now monitor and comply with 50 different sets of sales tax laws, creating an enormous amount of accounting overhead. 

This is yet one more reason to outsource your bookkeeping service and accounting to a professional firm like Xendoo as a cost-effective solution to this regulatory nightmare. Sales tax processing is just one of the many affordable services available in Xendoo’s suite of small business offerings. Xendoo can also make sure that you are getting all the eCommerce tax deductions that you are entitled to as an online retailer.

It’s clear that eCommerce will only continue to grow by leaps and bounds in the years to come. Consumers were already growing accustomed to the convenience of online shopping, and the COVID-19 pandemic was the impetus that pushed many holdouts to take the plunge. Many retailers struggle to understand emerging technologies and keep pace. The retailers that don’t will be left behind in the wake of those who do. Staying on top of technology and eCommerce trends is critical to success in retail in 2021. 

Experience the Xendoo difference with a one-month free trial.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

5 Things Small Business Needs to Know About the New Tax Reform Law

The good news: lower tax rates. The bad news: fewer deductions.

Although you won’t be filing a tax return based on the new law until 2019, you will have to abide by its provisions starting right now. Here’s an overview of the top 5 changes that could significantly affect your small business operations.

1. Lower tax rates.

Pass-through entities (S corporations, LLCs, sole proprietorships, and partnerships): This means that the net income from your business is “passed through” to your personal tax return. Until now, this income was taxed at the same rate that individuals pay. Under the new law, you can take a 20% deduction on that income. There are some exceptions, though, such as most service businesses whose taxable income exceeds $157,500 for single filers and $315,000 for joint filers.

C corporations: Until now, there was a graduated tax structure, up to 35% of income. All that has been replaced by a flat rate of 21% for all C corporations.

2. Higher bonus depreciation.

Over the past several years, it seems like the rules changed every year for what percentage of “up-front” depreciation you could deduct on equipment or real estate purchased for your business, rather than writing it off over a period of years. This may make not only figuring your tax, but also tax planning for capital expenditures, pretty tricky. For your 2017 return (which you’ll be filing this year), bonus depreciation is 50%. Starting with your 2018 return, it’s 100%; and it will then be phased out completely over the next 5 years.

What’s more, this deduction can now be applied to “used” as well as new items, as long as they comply with the other terms of the provision.

3. Expanded availability of cash accounting.

Cash accounting means that a company records income and expenses when they’re received or paid. With accrual accounting, a more complex system, income, and expenses are recorded when they are owed. Under the old tax laws, a business couldn’t use cash accounting if its annual gross receipts averaged $5 million or more for the prior 3 years. That ceiling has been raised to $25 million. This should simplify things especially for businesses that carry inventory.

4. Fewer deductions and credits.

We’ve listed a few of the ones most often claimed by small businesses:

  • Business interest expenses: Reduced to 30% of taxable income. However, this rule doesn’t apply to businesses with an average annual gross income of $25 million or less.
  • Entertainment expenses associated with the conduct of business: Repealed.
  • Transportation fringe benefits (mass transit passes, parking privileges, etc.): Repealed. However, if you continue to provide this benefit, it will be tax-free for your employees.
  • Per diem rates at which you reimburse your employees for business travel expenses: No change.
  • On-site eating facilities: Reduced from 100% to 50%. However, if you continue to provide this benefit, it will be tax-free for your employees.
  • Domestic property activities (Section 199): Repealed.
  • Net operating losses: You can no longer carry them back for 2 years, but the 20-year limit on carrying them forward is eliminated. You can deduct up to 80% of taxable income.
  • Paid family or medical leave: There’s a new credit ranging from 12.5% to 25%, depending on the amount you paid your employee.
  • Business property costs (Section 179): A bit of good news is that the amount you can deduct has doubled from $500,000 to $1 million; of course, that amount can’t be more than your income. And the phaseout ceiling has increased from $2 million to $2.5 million

5. Higher contribution caps for retirement plans.

If you offer a retirement savings plan to your employees, the amount you and they can contribute may have been increased.

  • 401(k), 403(b) or 457: Increased from $18,000 to $18,500. The maximum for participants over the age of 50 making “catch-up” contributions has also increased, from $24,000 to $24,500.
  • IRA and Roth IRA: No change, $5,500 for those up to age 49 and $6,500 for ages 50 and up.

Xendoo stands ready to help you sort out these complex new tax provisions, and take full advantage of the breaks they offer to small businesses. The time to start planning is now!

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

5 Simple Business Tax Steps to Take Before December 31

In just a couple of weeks, the tax year will come to an end. So this is your last chance to make the moves that will maximize your 2017 return’s accuracy and minimize the taxes you owe.

1. Consider new equipment purchases.

You might be thinking you’ll wait until the first quarter of 2018 because cash flow will be better then. Think again: buying before year-end lets you use Section 179 or other tax benefits and take some of the purchase prices from the money that would otherwise have gone to the IRS.

2. Determine your tax bracket.

Review your 2017 profits with your CPA to figure out exactly what percentage rate you will be taxed at. Once you know that amount, you can more easily manage cash flow, plan for the first quarter of 2018, and make informed decisions about such expenditures as employee holiday bonuses or leasehold improvements.

3. Check personal credit cards for business expenses.

Situations where you can’t pay with the company card happen to every business owner. So you give the supplier your personal card. And in the fast pace of daily operations, it’s easy to forget to reimburse yourself for those expenditures. Now is the time to move that money where it belongs.

4. Pay state tax now.

If you pay your state tax in 2017, you can take it as a deduction on your 2017 return.

5. Do a year-end inventory reconciliation.

Why pay tax on merchandise that’s unsellable, or just plain not there? Your reconciliation should account for spoilage, shrinkage, returns, and out-of-date products.

Bonus tip: Utilize Xendoo’s catch up services.

Xendoo understands that, as a small business owner, you wear many hats and have next to no time to keep on top of accounting and bookkeeping. You may have been behind for years, yet we can usually bring your financials up to date in a week. It’s that easy to start the new year with peace of mind about the state of your business … not to mention the tax savings we just might find!

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.