Latest News on Denver Accounting & Taxes

The inventory of homes in Denver is notoriously tight and property values remain high. There aren’t very many steals to be had in the real estate market these days so the profits of buying and flipping homes have come down. With the cost of rents soaring in Denver and all along the Front Range, many have entered into the rental market instead selling the homes.

Buying and quickly selling a home requires the seller to pay a large sum in capital gains on any profits made as well. Renting on the other hand offers the landlord an array of tax deductions so that they can put more money in their wallet vs. sending it to Uncle Sam in April. Our Denver tax consultants are well versed in capital gains, depreciation, and can advise you about the advantages of possibly forming an LLC.

Should You put Your Rental Properties into an LLC?
As with anything, there are plusses and minuses of forming an LLC. Before making a decision one way or another, sit down with one of our tax advisors who will help you weigh the pros and cons of your particular situation. The main advantage of an LLC is asset protection. If your tenant, or one of their guests, decides to sue you, your personal assets are protected. This isn’t failsafe though. For instance, if you do form and LLC be sure to keep your assets separate from your personal funds or someone suing you may be able to claim that it is not a separate entity and you would lose your protection.

The main tax advantage of forming and LLC is that you use what is called pass through taxation. This means that the business itself is not subject to tax but rather the owner will be taxed individually on their income. This avoids double taxation. One of the disadvantages of going the LLC route is that it is not free. There is usually a state fee of between $100-$200 and in some states there is an annual fee as well.

Know the Difference between Repairs and Improvements
Repairs are defined as anything that puts your property back into the same condition while improvements are anything that enhances the property. Repairs can be expensed in the year that they were done. Improvements, on the other hand must be capitalized and the tax advantages will come over time in the form of depreciation.

The Cost of Doing Business
Save those receipts. If you’ve got to drive to and from the property to collect rent, track your mileage, it’s deductible. Any supplies that you have to purchase to keep the property up are also deductible. This can include anything from weed and feed, to wasp spray, to caulk for the shower. If you speak to a lawyer or tax consultant about the property, their fees are deducible as well. These and many other deductions may save you money come tax time so don’t delay talking to a tax advisor.

If you’ve recently entered the real estate investing game be sure to speak to one of our tax advisors. They can help you keep more of the money that you have worked so hard to make and keep you out of any pitfalls that you may not be aware of. Our tax planners can be reached at 303-321-7160.

There are many taxpayers that have to solicit help from a Denver tax specialist after getting that ominous letter of threat from the Internal Revenue Service. Of course, fear will often set in, but don’t freeze up. You cannot ignore this letter, though. You have to deal with it, but not on your own. Some of the fears that you may encounter include:

• Losing your home
• Business closure
• Garnishing of wages

Some of these fears are warranted because the IRS will probably garnish your wages first before going for your home or business. However, with loss of wages, your family will be affected in some way or the other.

The Collection
IRS collection is the power that the Internal Revenue Service has. They have a wide range of available tools and resources to bring tax delinquency into appropriate compliance. The tools and resources used by the IRS are tempered by restrictive rules of what the IRS can and cannot take from the taxpayer. So, there are things that are off limits to the IRS, believe it or not. Let’s look first at what is accessible to the IRS.

The Notice
A Denver accountant will tell you that law protects you from having any surprise action from the IRS. The IRS is required by law to send out a notice prior to enforcing any type of collections. Before the IRs can even confiscate any of your assets, go after your finances, or consider wage garnishment, the IRS has to follow specific Internal Revenue Code by sending out the CP 90 notice, which is known as the ‘Final Notice of Intent to Levy’ as well as a ‘Notice of Your Right to a Hearing.’

The Exceptions
There are a few examples where the IRS does not have to give advanced notice to seize or levy. First is the instance where the IRS thinks that the government will be in jeopardy while collecting taxes and secondly, if it is a case of disqualified employment tax. In jeopardy levy, the taxpayer will often try to move assets out of the country. In some cases, the taxpayer will transfer assets to a third party or conceal the assets from the IRS. The IRS will levy first in these situations and send out the notice after. Employment taxes that are unpaid will cause the taxpayer to be subjected to a levy. If the taxpayer asked for a CDP hearing within a two year time frame while the levy is being served, the IRS does not have to send out a notice.  

The Seizure
Therefore, if you have received a notice from the IRS that you owe taxes, there is no immediate surprise threat to you as long as you follow the right protocol. It is highly recommended that when filing your taxes, you use a Denver tax preparation service. In doing so, you will have access to professionals that understand IRS audits. If you ignore it, the IRS can seize:

• Hard assets like homes, vehicles, and personal belongings
• Soft assets like retirement savings, bank accounts, and employment wages

Off Limits
If there are assets with no equity, the IRS cannot seize. For example, if you have a home, the equity has to be more than the mortgage balance and the cost to sell the home. Other items off limits to the government are:

• Essential clothing
• Trade tools
• Worker’s compensation
• Unemployment and veteran’s disability benefits
• SSI benefits
• Public assistance benefits
• Court ordered child support income

Don’t carry the burden of an IRS notice when you can contact the experts at Bloch, Rothman and Associates. We will help you to construct a plan on how to handle your IRS audit. For a confidential consultation, call us at 303-321-7160.

If you haven’t yet filed your tax return, it’s not too late to do so. Filing your tax return can seem daunting if you’re self-employed, particularly if you’re trying to figure out what you can write off, and if you can claim any other credits. If you had a company job where taxes were automatically deducted, plus you worked from home and received a 1099, things can be even more confusing. Luckily, you can consult a Denver tax specialist if you feel too overwhelmed. Here are some tips for filing taxes if you’re self-employed - even if you go to a professional accountant, you can make sure you have this information with you for your appointment to make things go more smoothly.

• W-2s and 1099s: This may seem obvious, but it is important to make sure that you attach all of your relevant documents to your tax return. The IRS won’t take your word for what you did and did not pay, and if you don’t attach all the documents for the income and taxes paid that you claim, they will send your return back or put it on hold until they receive these documents.
  • Each document needs to be attached to the form you are submitting. Whether you have six 1099s or one, three W-2s or none, make sure you attach each one to your tax form with the correct tax form(s).
• Taxes Paid vs. Taxes Owed: If you had a W-2 where taxes were automatically deducted, you may not owe any taxes even if you were self-employed and are subject to self-employment tax.
  • When filling out your 1040, make sure that you include your 1099 income, and calculate the amount of total tax you paid through your W-2 to figure out if you will get a refund or not.
  • Even if you are still due a refund, make sure you fill out the correct form for self-employment tax and attach it to your 1040. If you skip this step, the IRS will place your refund on hold and send you a letter requesting the supporting document.
• Possible Deductions: You can write off different things that are relevant to your self-employment. The type of work you do as an independent contractor determines what costs you can and cannot write off.
  • If you work from home primarily on your computer, you can write off the cost of a new computer, the cost of any required software for your job, and the cost of your antivirus software. Consult your accountant to see if you can write off other costs, such as computer repairs, if you had any.
  • If you do a lot of traveling for your independent contractor position, you can write off the cost of gas, airline travel if relevant to your work, hotel costs if they were work-related, and other travel expenses.
  • If you are a travel writer/blogger, where you rely on your laptop as well as need to travel, a professional will be able to determine how much of your costs you can write off.
  • TIP: Be careful of writing off too many things if you make a lot of money working from home, because it can increase your chances of an audit, particularly if you file your own taxes. Read our blog post 4 Things to Know about IRS Audits and Your Denver Tax Return for more information on tax auditing.
• Claiming Other Credits: There are plenty of credits out there that you may be able to claim that may make your amount of taxes owed smaller. This would be especially useful if your only income is from independent contracting or other self-employment. Make sure if you are filing your own taxes that you are certain you are not breaking any rules when claiming credits. Carefully read the IRS instruction sheets for each credit as well as the instructions for filling out the appropriate tax form, like the 1040.
  • Education Credits - There are several education credits available to full-time students. There are significant differences between them all, so make sure you choose the correct one, or the one that is most likely to get you a sizable deduction provided you meet the criteria for more than one. For example, one is dedicated to student loan interest, while others are based on cost of tuition. If financial aid is covering your school costs, make sure you read the fine print to see if you can claim the credit based on student loans vs. out of pocket costs.
  • Earned Income Credit - The EIC is based on your total income. There is some extra math involved to figure out if you can claim this credit to get a deduction. Make sure you do the math correctly and come to an accurate deduction amount, because errors that the IRS has to fix will delay your refund.

TIP: Save all the receipts for what you think may be relevant write-offs, even if you are unsure.

If all of this information is making your head spin, contact us at Bloch, Rothman & Associates. We employ some of the top professional accountants in the area, all of which are certified experts in the field. We want to help you get a great refund, or at the least, make sure you’re not overpaying the IRS if you still owe some taxes at the end of the day. Call us at 303-321-7160 to see what we can do for you, and we’ll schedule you for an appointment at a time that works for you.

Denver is an amazing place for a startup to grow and prosper into a large-scale operation. Small business owners are used to wearing many hats from helping customers, to marketing, to billing and purchasing, to sweeping up at night. Many think that hiring a professional accountant or bookkeeper is only a corporation or large business would do. It’s true that there are many tasks that a software program like QuickBooks can help with, but a full fledged accountant can do so much more than get your taxes done on time, they can actually help your business grow at a more rapid rate.

We're Number Geeks
You may groan every time you have to sit down and figure out a profit and loss statement, but we don’t. Not just producing spending reports, but quantifying and extrapolating data are the thing that accountants thrive on. By bringing this data to life, we can help track spending trends, spot money saving opportunities, and possibly more efficient ways of doing things.

You Need A Plan
It is estimated that 8 out of 10 businesses fail and only about 50% of small businesses survive more than 4 or 5 years. Many businesses start with a solid idea, but end up failing in the end because they lack a plan for growth and sustainability. A good accountant will not just gather financial data, but use it to help you see the bigger picture and create financial forecasts, set goals, and budgets, creating a roadmap to success.

They don’t Fear the Taxman
Tax season for small businesses isn’t just in April; it’s a year-round endeavor. Payroll tax, sales tax, property tax, it’s a full time job in itself. You may be losing money every month by not taking advantage of deductions you don’t realize you’re eligible for. The tax code is several thousand pages and changes every year. It’s a reality that businesses do get audited, but we will make sure that your documentation will be well organized and we will be there to guide you through this stressful process. Once you’ve been through an audit and your business practices have been found to be sound, chances of being audited a second time will be drastically lower.

Opportunities for Saving Money are Everywhere
We have a wide breadth of experience in all types of industries. We have seen systems that may have worked well for others that may be just the thing to save you money and help your organization run smoother. We may also be able to offer supply chain suggestions or broker negotiations that will grow your bottom line. Often business owners just continue to do what works because they are too busy to look for better alternatives and take an, “if it ain’t broke, don’t fix it” approach. The benefit of looking at a P and L with a fresh perspective cannot be overstated.

Another of the top reasons that businesses fail is that they lose touch with the needs and wants of their customers. By letting us take over the far reaching duties of bookkeeping and accounting you can get back to what you do best and what you likely got into your business for, taking care of your customers. Call us at 303-321-7160 and let’s start charting your plan for success today.

The weather is warming up, which means it’s time for spring projects. If you’ve got a home improvement list a mile long, don’t forget to save your receipts. They may save you some money come tax time. Feel free to call our tax professionals before you get started on your project. They can give you some guidance on what may or may not be deductible.

Financing
As you probably already know, mortgage insurance and interest are tax deductible. Instead of using a credit card, or unsecured loan to finance your project, get a home equity line of credit, second mortgage, or refinance your first one. Some home improvement suppliers or services will try to lure you into using their financing by tempting you with a 0% introductory deal. Be aware that if you don’t pay the entire balance off by the end of the stated period, interest will be charged from the beginning of the loan. If you qualify for a zero-interest offer, secure a home equity line of credit first, take advantage of the zero interest period to pay off as much as possible, and then transfer to the home equity loan where all your interest will at least be tax deductible.

Plan for the Long Run
If you do any upgrades to your home such as, new bathroom, new deck, landscaping, or any electrical updating, you won’t get any tax deductions now but it could save you money down the road. If you decide to sell your home you must pay capital gains on any profits you make. Any expenses that you incur doing upgrades to your home, decreases your profit, thereby lowering the amount of taxes you will pay on your home profit.

Save Money on Utilities and Taxes Too
The government is offering all kinds of credits and deductions for home improvements that are kind to the earth. If you install any energy generating systems, such as solar panels, wind turbines, or fuel cells, you can receive a 30% credit for the cost of the system, including labor and installation. Improvements that add to energy efficiency, such as insulation, exterior doors, windows, and certain roofing items, may also be tax deductible. Saving energy with more efficient water heaters and furnaces not only takes a bite out of your energy bill, but your tax bill as well. Energy Star is a program started by the EPA that helps consumers identify which products are energy efficient. You can find a comprehensive list on their website.

Work From Home and Deduct the Space
If you add on a space to your home that is specifically dedicated to a work space, it is tax deductible. You can deduct the material costs as well as the labor. You can also depreciate this space annually. If you make any additions to an existing space to make it into a home office, this is also eligible for this deduction. For instance, if you add shelves and a work table to a spare bedroom, the improvement costs are deductible and the space is depreciable.  

Let Uncle Sam foot some of the bill on your home improvement projects! Give us a call today at 303-321-7160 and we can help you get every dollar that you are entitled to. If you have any big changes coming up such as a marriage, a child starting college, you’re buying or selling a home, or if you’re doing a remodel, speak to one of our Denver tax planners first.