Individual Tax Archives

Do These 5 Things Before You Start Your Business

June 27, 2019 By JAK + CO.

You’ve finalized your business plan. You’ve acquired capital and assembled a rock-star team. You’ve designed your logo and set up your social media handles. You’re ready to launch your business.

Or, are you?

The thrill of starting a business can be overwhelming. But amid the frenetic joy and anticipation, it’s important to give attention to the less-than-exciting details, too. Here are five things every new business owner should put on their pre-launch to-do list.

1.Gather a team of trusted professionals.

Having the support of professionals keeps you focused on what’s really important—running your business. Consider building a team that includes the following:

Attorney – to assist with required business filings and general legal advice.
CPA – to assist with entity type selection, tax planning and preparation, accounting and bookkeeping, and business advising.
Payroll Provider – to assist with payroll deposits and filing requirements on a monthly, quarterly, and annual basis.

accounting technology solutions st. paul - cpa firm st. paul

Be sure to tap into the expertise of other advisors, too. There are plenty of successful business owners who have gone before you, and they can offer you valuable advice.

2.Determine your business entity structure.

The most common business entities are LLC, S Corporation, and C Corporation. The structure you choose will impact how your income is taxed, how profits are distributed, and the type of personal liabilities you could face. Be sure to think about your business type as well as your long-term goals, as your decision could impact your business for years to come. Your attorney and CPA can provide insight to assist you with entity selection. Once you’ve determined your business entity structure, you’ll likely want to obtain an Employer Identification Number (EIN) from the IRS.

3.Open a business bank account and credit card.

Having a bank account and credit card that you use exclusively for your business helps with accurate recordkeeping and tax reporting. It can also keep you from missing any tax deductions. Plus, requesting that a check be made out to your business instead of your name enhances your credibility as an established business. When you open an account under your business name, the bank will likely require you to have an EIN.

4.Determine a recordkeeping method.

Good recordkeeping is necessary to make sure you’re taking advantage of the tax deductions for which you are eligible and to support what you’re reporting on your tax return. An accounting software such as QuickBooks can help you keep track of expenses, accounts payable, and even your time. An app that tracks your mileage is worthwhile, too.

5.Set aside a portion of your net income to pay your quarterly estimates.

Once you become self-employed, you may no longer have an employer withholding payroll and income taxes on your behalf. To compensate for this, you may have to make quarterly estimated tax payments to the IRS and state taxing authorities—or else be vulnerable to penalties.

Secure the support you need for a successful launch.

Checking these five to-dos off your list can help you start your business on the right foot. We’re here to help, whether it’s outlining tax implications of an entity type or determining the amount you should pay in to the IRS and state each quarter. If you have questions about your next step as a new business owner, please don’t hesitate to give us a call.

3 Must-Have Professionals for Your Estate Planning Team

January 25, 2019 By JAK + CO.

By Cindy McLagan, EA

Estate planning is the process of determining what will happen to your funds, assets, and general finances after your death. While it may not be the most pleasant thing to think about, JAK estate planning services helps ensure your wishes are carried out in the future.

A wise first step is to assemble a team of professionals who can help you through the estate planning process. Here are three must-have professionals for your estate planning team.

Financial advisor

Estate Planning Minneapolis- CPA Firm Minneapolis

It’s likely your family may already have a relationship with a financial advisor. In the context of estate planning, your financial advisor’s role is to recommend and fund your investment, trust, and retirement accounts, as well as to assist in the proper titling of any non-retirement accounts you might own. Your financial advisor will also make sure the beneficiaries and secondary beneficiaries named on your retirement accounts are updated—a critical but often overlooked step. Often, your financial advisor can assist with life insurance, too.

A savvy financial advisor will understand not only how to manage your estate’s finances but also the importance of working closely with the following two professionals.

Estate planning attorney

Your estate planning attorney can create and prepare a will and a trust according to your wishes. In addition, this professional can draw up your durable power of attorney for your health care, verify your property titles, and make sure that assets you own in other states are properly titled. If you own a business, your estate planning attorney can create a legal document that ensures a plan for the succession of your business.

Finally, working with an estate planning attorney to create a will or trust can help your family avoid the hassle of probate court, which is a court that deals with the property and debts of the deceased. But if probate were to become necessary, your estate planning attorney can prepare and file all of the necessary court documents, relieving your executor of this often-stressful task.

Tax professional

Needless to say, the U.S. tax system is very complex, especially when it comes to estate taxes. Although the federal estate tax exemption in 2019 is $11.4 million, many states, including Minnesota, have much smaller exemptions, which could trigger the need for your family to file an estate return. The tax professionals at JAK can assist with this as well as the interpretation of and compliance with tax laws.

A qualified tax professional is able to direct you in a tax efficient manner to accomplish your goals. They also understand that estate planning is about much more than taxes and can use their experience to direct you and your family.

Tax professionals are also one of the critical professionals who will guide the personal representative or executor of an estate with closing responsibilities such as obtaining a federal ID number, setting up an estate account, tax filings and paying the final distributions to beneficiaries.

It’s never too early to build your estate planning team.

If you haven’t started the estate planning process, consider reaching out to a financial advisor, an estate planning attorney, and a tax professional as soon as possible. Although their roles may overlap in some areas, it’s in your best interest to enlist all three in order to get the most accurate and up-to-date information and advice. Working together and with you, these professionals can help to clarify and facilitate your estate planning wishes, giving you and your family peace of mind for the future.

If you have questions about estate tax planning, feel free to give us a call. Our Twin Cities based estate planning specialists are here to answer any questions you have. We also work closely with many financial advisors and estate planning attorneys and would be happy to provide a referral if needed.

Meet Our Newest Accountants

December 19, 2018 By JAK + CO.

There’s a lot going on at JAK as we head into a new year. One item on our to-do list we’re particularly excited about is to “introduce our newest staff accountants.” Yes, that’s right—within the past few months, we’ve added three new members to our tax and accounting team. Read on to get acquainted with Scott Litchy, Sara Tomee, and Ricky Herrera.

Scott Litchy | Staff Accountant | JAK + Co. — **Scott Litchy**

Scott is a former collegiate baseball player who’s always been one of those “numbers guys.” Fun fact: he used to love helping his dad with the family’s taxes, even as a youngster. Since joining JAK, Scott has felt right at home helping clients with the numbers behind their businesses. When he’s not playing amateur baseball or watching sports, he loves being outdoors with family and friends.

Sara Tomee | Staff Accountant | JAK + Co. — **Sara Tomee**

Sara describes accounting as “the language of business.” She sees her role as a translator—one who can help clients better understand the financial aspects of their businesses. Born in Thailand, Sara now considers Minnesota home. She particularly enjoys the many opportunities for biking,camping, and canoeing the Land of 10,000 Lakes provides.

Ricky Herrera | Staff Accountant | JAK + Co. — **Ricky Herrera**

A Los Angeles native, Ricky is known for his sunny disposition and glass-half-full approach—in addition to his accounting skills. If a business owner is grappling with a tax or business snafu, he’s quick to find a solution. Inspired by their recent West-to-Midwest road trip, he and his girlfriend love seeing new sights, often with five terrier mixes in tow!

At your service

Scott, Sara, Ricky and the entire JAK team would love to help you make 2019 a year for the books. To learn more about our Twin Cities based CPA firm, our team, or our work with individuals and businesses like yours, please give us a call today.

Supporting you with a strong tax and accounting team
As you well know, hiring talented people is critical to delivering exceptional service. We’re excited the skills and experience each of these individuals bring to our clients. As you look ahead into 2019, know there’s a strong team at JAK ready to support you. Whether it’s complying with the new revenue recognition standard, or maintaining your job schedule ,or understanding tax reform, we can help you spend less time dealing with the numbers—and more time focused on projects.

4 Things Every Taxpayer Should Know About Estimated Income Taxes

November 12, 2018 By JAK + CO.

By Chris Bertz, CPA, MBT

The IRS requires individuals who earn income that is not subject to withholding, such as earnings from sole proprietors, partnerships and S-corps, interest, dividends, rents, and alimony, to pay quarterly estimated tax payments, also known as “estimates.” If these payments are on your to-do list, here are a few things you should know:

How are estimated tax payments calculated?

The easiest way to calculate estimates is to follow the “safe-harbor” rule. Safe-harbor requires your current year tax payments to be at least 100 or 110 percent of last year’s taxes, depending on your income. This involves looking at your prior year tax liability, reducing it by your withholding, and dividing the remainder by four. The result will loosely equal your quarterly estimate payment. This approach is considered “safe” because it calculates your payment based upon statute.

If you do not follow the safe-harbor rule, you project your income and pay estimates based on 90 percent of your current year projected tax. Although this process is more complicated, it is useful if your income varies or is less than the previous year’s.

What happens if you don’t pay your estimated tax payments?

If you don’t pay your estimates, the IRS will levy an underpayment penalty, which is currently 5 percent. However, if you must take money out of a high rate of return investment or strap your business for cash to pay your estimates, it might make more sense to forgo paying estimates and pay the relatively mild penalty.

How has the recent tax reform impacted estimated tax payments?

The changes brought about by the Tax Cuts and Jobs Act (TCJA) lowered the withholding on wages. Because of this, many taxpayers may be under-withheld for 2018.

How can my tax advisor help?

Changes in your business could significantly impact your estimated tax payments, so it’s important to keep your tax advisor in the loop. For instance, if your 2017 revenue was especially high due to a few large projects, it might mean that your 2018 income will be lower. Basing your 2018 estimates on 110 percent of your 2017 tax could cause you to significantly overpay your income tax.

On the other hand, if 2017 was a slow year, but you expect 2018 to be gangbusters, consider using the 100 or 110 percent safe-harbor calculation. This would allow you to pay enough to avoid underpayment interest while potentially deferring payment of the full balance. Keep in mind, however, that this might result in a large balance due in April, for which we can help you plan.

If you’re wondering how the TCJA may have affected your quarterly estimates, your tax advisor can run an end-of-the-year projection to figure it out. The tax advisors at JAK can help you with this and other matters related to your estimated tax payments, so don’t hesitate to contact us.

Benefits of Using a Corporate Trustee

May 23, 2018 By JAK + CO.

By Brenda K. Lowe, CPA, PFS

Naming a trustee to manage your estate can be a difficult decision. Many choose a family member, such as an adult child, a friend, or even a neighbor to assume the role. But naming a loved one as a trustee can cause complications over time. Not only is the role of trustee time-consuming but it can also be emotionally draining, especially if the beneficiaries prove contentious. And if a trustee lacks the financial knowledge and expertise needed to properly administer the estate, there may be tax consequences—or worse.

For these reasons, it’s never a bad idea to consider a corporate trustee, which could be a bank trust department or independent trust company.

Here are four benefits of using a corporate trustee:

Prevent family issues.

Appointing a corporate trustee can help to prevent familial disagreements over your estate. When the beneficiaries aren’t in agreement with the actions of the trustee—even if said actions are in accordance with the grantor’s wishes—they may hold the trustee in contempt now or years later. If the trustee is a family member or loved one, it could lead to painful conflict, even in families where conflict was rarely an issue before.

Protect your estate with the right expertise.

Trust officers have experience in performing these duties. Their expertise ranges from complex tax matters to wealth planning and preservation to even psychology. Furthermore, a corporate trustee follows a process for everything and has an investment committee that oversees all trust investments.

Ensure continuity in the administration of your trust.

Unlike individual trustees, corporate trustees never die. This is especially important if your trust is created as a “dynasty” trust that will continue for years.

Avoid placing an undue burden on a loved one.

Generally people do not realize the time and anguish serving as a trustee can bring. Often, individuals do not know what to do and when to act, and can quickly become overwhelmed. When this happens, tax deadlines may be missed or assets may be managed unwisely. Think about how time-consuming it is to keep up with your own financial affairs. Can you imagine managing someone else’s, all while keeping beneficiaries happy and adhering to your fiduciary duty?

Or, consider an abridged solution.

Sometimes it may make sense to use both an individual trustee and a corporate trustee. This “co-trustee” solution allows a loved one to be involved in the administration of the trust without being burdened by the full scope of the role’s demands.

Plan ahead to make the best decision for your estate.

Regardless of where you are in your estate planning, it’s important to understand the pros and cons of individual and corporate trustees as they relate to your situation. At JAK, we can help you weigh the benefits of each, so you can make the best decision for you and your family.