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November 23, 2016 By Larry L. Bertsch, CPA and Associates

Do I Have to Pay Nevada State Business Income Tax?

Do I Have to Pay Nevada State Income Tax?

Whether you have recently opened up a business in Nevada or you are looking to, the issue of corporate income tax is an important consideration. Brand-new business owners or those coming from other states may not know the ins and outs of tax accounting in Nevada. So, do you need to pay Nevada state business income tax?

Do you need a Nevada accountant to manage your small business finances?
Get FREE consultation today when you call (702) 471-7223

Is there a Nevada State Corporate Income Tax?

The state of Nevada does not levy state income tax to businesses, individuals, or corporate bodies. However, the state sales tax in Nevada is at 6.85%. Other optional taxes can be levied on businesses, which brings the taxes to 8.1%.

Related: What Are the Best Small Business Tax Deductions for 2016?

Without levying taxes, the state ensures that there is rapid growth in the business sector as well as the economy. The business owners who are coming into Nevada enjoy the perks of the state not dipping into their hard-earned profit. In addition, there are states where such state income tax stifles business growth. Therefore, Nevada is a place where no state income tax payment attracts a lot of businesses to the area.

The Pros and Cons of Doing Business in a State with No Income Tax

Naturally, when there is no state income tax, there are advantages and disadvantages. Taxes are necessary in our system as the government makes use of the money to provide public services and improve infrastructure as well as welfare programs.

Pros

  • Many claim that the absence of a state income tax improves business growth and thus the local economy.
  • There is the opportunity for more job creation, and the young and educated typically remain in such states when employment is stable.
  • States that do not levy income tax on businesses sometimes outperform those that do.

Cons

Because the state needs to pay for public services and must get this capital somewhere, sales taxes are often higher in states with no income tax in order to make up the difference. Unlike income tax, sales taxes do not vary based on the consumer’s income level. This means that:

  • The cost of living and doing business in these areas may increase.
  • More pressure is placed on lower income individuals who struggle to make ends meet.

From a business standpoint, operations are streamlined with the absence of an income tax, but you will have to price goods and services differently to adjust for that sales tax.

Related: 5 Bookkeeping Mistakes Made by Small Businesses

Federal Income Tax Rate for Small Businesses in Nevada

The federal income tax rate for Nevada is rather high. It has a marginal tax rate of 25% and an effective tax rate of 17.99% presently. One may not need to pay state taxes on income as a teacher, business owner, or real estate mogul. However, you have to pay federal tax.

Levying income tax by the Nevada state may seem advantageous. Nonetheless, the government still has a way of gaining this tax through sales tax on goods bought and federal taxes as well. When it comes time to do your taxes for the year and all of this still seems confusing, a small business accountant can help you with all of your tax preparation and bookkeeping needs. Give us a call at (702) 471-7223.

Filed Under: Larry Bertsch CPA

October 18, 2016 By Larry L. Bertsch, CPA and Associates

Can I Deduct Accounting Fees?

can i deduct accounting fees

As 2016 is drawing to an end, it’s normal to start thinking about questions pertaining to your business’s tax returns. Larry L. Bertsch, CPA & Associates, your small business accountant in Las Vegas, is ready to answer all of your questions. We all want to save money by getting portions of our tax return deducted or waived off, and you may be wondering if you can deduct accounting fees. This is covered in Schedule A of the tax code under miscellaneous itemized deductions.

Keep in mind that a cost is only deductible if it’s recognized as ordinary in the course of business. All accounting fees for any tax preparation is able to be deducted for the same year in which the fee was paid.

When Can You Deduct Accounting Fees?

The short answer to this question is yes: You can write off accounting fees in many cases. Business owners are able to deduct fees paid to consultants, lawyers, and accountants.

The only requirement is that the fees that you pay are for work-related business. If the fees you paid were for personal purposes only, then they are generally not able to be deducted. Let’s look at a few examples:

  • If you’re just starting a business, any accounting fees are deductible solely as start-up expenses for your business. In the first year of business, you’ll be able to deduct $5,000 of your start-up expenses for any accounting or legal fees. Any amounts paid in excess of $5,000 can be deducted over a 180-month period.
  • Accounting fees are deductible business expenses. They might include fees that you pay an accountant to either set up or keep the business’s books, prepare a business tax return, or for business tax advice. If you’re an independent contractor, you can deduct the expense of hiring an accountant to complete the business section of your tax returns. This includes Schedule C or other business tax forms.

What Types of Tax Deductions for Accounting Expenses Are There?

  • All expenses including bookkeeping expenses, auditing expenses, and accounting expenses fall under accounting fees deductions.
  • Fees charged by a professional accountant or financial advisor for reviewing any financial statements or accounting books can be deducted. Remember, though, that this includes only tax processes which are carried out for your business, not for you as an individual.
  • Any bookkeeping charges, including accounting software, can be deducted.
  • You can write off any CPA services and accounting fees. Every business should hire a CPA (Certified Public Accountant) for their help with strategy and tax preparation. CPAs can help with the submission or filling out of forms.

Check out the IRS’s Publication 529, which will explain exactly how a tax preparation fee must be recorded in a tax return for the most savings on your part.

Contact Larry L. Bertsch, CPA and Associates at (702) 471-7223 for the best information on tax deductible business fees. As a practice in business since 1964, our company offers a complete range of accounting, small business bookkeeper services, tax preparation and more at affordable fees.

Filed Under: Tax Services

August 23, 2016 By Larry L. Bertsch, CPA and Associates

What Is Trust Accounting?

image of happy trust accountanting professional in front of calculator

A trust is the transfer of assets to a trustee to manage during or after the death of the maker. The trustee must manage the property to reap the most benefits for the named beneficiaries or heirs within the control of the trust. Just like a will, the trust must be created during one’s lifetime. However, unlike a will, a trust can be effective during the lifetime of the maker. A trust that is effective during life is called an inter vivos trust while a trust that is effective only afterlife is a testamentary trust.

An individual or a corporation can be a trustee. Not only must the trustee work in the best interests of the beneficiaries, but the trustee must also conform to tax and legal requirements. If you need help creating or managing your trust, you may want to think about paying for trust accounting. Here is some basic information about trust accounting.

What is Trust Accounting?

Trust accounting involves separating the expenses of a trust into different categories. This separation of expenses will help determine the proper treatment for tax and accounting purposes. If there are business expenses carried on by a trust, these expenses must be identified and offset against income when it comes to the calculation of overall business profits. Expenses that are related to a certain type of income need to be recorded separately as well. For example, expenses related to owned or rental property in a trust must be recorded separately. The expenses will be offset against the rent received from the property to calculate the net income.

Expenses for trust management must also be recorded carefully. Some of these include legal, audit, accountancy, and insurance expenses related to management of the trust. The trustee needs to be able to identify the purpose of each incurred expense to ensure these expenses remain separate from business and property expenses. Unlike trust management expenses, the business and property expenses are incurred from earning an income.

What Are the Responsibilities of a Trustee?

Law and the maker of a trust dictate the duties of the trustee. The trustee is responsible for making investments on behalf of the maker and beneficiaries. When making these investments, the trustee should show reasonable care to prevent the loss of assets. In order to carry out these duties sufficiently, a trustee should know the basics of trust accounting so that he or she can record the expenses and income of a trust.

Some of the many responsibilities of a trustee include:

  • Administration of the trust prudently and in good faith when it comes to the needs of the heirs or beneficiaries.
  • Proper handling of all tax matters related to the trust.
  • Keeping of accurate and true accounts of all transactions with receipts, vouchers, and proof of payment as support.
  • Ensuring that the trust account is always available to be inspected by the heirs or beneficiaries.

While the trustee must not profit from the trust or deal or buy in the trust property with a personal account, the trustee is entitled to fair compensation for fulfilling their duties as a trustee. Either the law or the trust deed will dictate remuneration for the trustee.

What Is Trust Accounting Income?

Trust accounting income (TAI) refers to all of the income a trust fund generates that’s available for distribution to a trust’s beneficiaries. Trustees need to know a trust fund’s sources of income, so they can distribute the proper amount to its beneficiaries. They have a legal, fiduciary duty to responsibly manage the fund, and failure to do so could bring legal sanctions. It could also cause them to miss out on incentives that may have been available for successful management of the fund.

How to Calculate Trust Accounting Income

To calculate TAI, simply add all sources of income for the trust and subtract all costs associated with running it. According to the Uniform Principal and Income Act (UPIA), a set of guidelines many states have adopted or use as a basis for their own laws regarding income from trusts, trust accounting income consists of the following:

  • Operating income and expenses
  • Interest
  • Dividends and royalties
  • Taxes
  • Rents
  • Depreciation

Basics of Trust Accounting

Trust accounting requires you to engage in rigorous record-keeping and observance of established processes for monitoring the trust and disbursing its funds.

  1. Follow regulations: Each state bar has a different set of rules governing trust funds. Keep up with any changes to maintain compliance with your obligations.
  2. Keep all trust funds separate from business funds: The money inside a trust fund should be firewalled and only used to pay its beneficiaries and the expenses to run the fund itself. Even though trustees might oversee large amounts of money in multiple trust funds, these must be recorded as liabilities. Businesses cannot use them as assets to improve their own balance sheets.
  3. Don’t treat a trust like a piggy bank: Trustees must not withdraw money from a trust fund to cover their own expenses or those arising from other trust funds. You can’t borrow, lend, or take from a trust fund to pay for unrelated expenses.
  4. Keep records and make them accessible: Every financial transaction made with a trust fund needs to be recorded for transparency. A trust fund’s beneficiaries should also be able to access records of it at any time.
  5. Make it hard to steal: Trust funds are an attractive target for theft or fraud, and the chance that this occurs increases as more people get involved with one. Break up responsibilities for managing the fund so no one person can deposit, withdraw, or reconcile funds.
  6. Donate interest to an IOLTA program: Trust funds can generate interest, but lawyers cannot collect this for themselves. Instead, it should be donated to an Interest on Lawyer Trust Accounts (IOLTA) organization that supports a charitable cause.

How to Know if You’ll Need a Trust Accountant

As you can see, the duties of a trustee are extensive. Therefore, as the maker of a trust, it is important that you choose a trustworthy person as a trustee. Not only should you consider personal integrity when choosing a trustee, but you must also consider knowledge of trust accounting. If you are having a hard time finding someone who is both trustworthy and knowledgeable about trust accounting, you should hire a trust accountant.

Larry Bertsch is a Las Vegas CPA practicing in both the private and public fields since 1964. We offer a full range of accounting (including forensic accounting), tax preparation, and small business bookkeeping services at affordable fees. For more information about trust accounting, don’t hesitate to contact us.

Call Us at (702) 471-7223 for a Free Consultation
Offering a full range of small business accounting and financial management services.

Filed Under: Larry Bertsch CPA

August 11, 2016 By Larry L. Bertsch, CPA and Associates

The Role of a CPA in Estate Planning

illustration of house, calculator, and notated book of estate planning advice

Undoubtedly, just about every individual should create an estate plan as soon as feasibly possible. Many people harbor the misconception that an estate plan is only necessary for the rich or individuals with significant assets. As a result of this misconception, many people end up overlooking the assets they actually do possess because they believe that they don’t have an estate. All people, with very few exceptions, possess an estate and accordingly need an estate plan. If you’re creating an estate plan, here is some information about the role of a CPA in the estate planning process.

What Is a CPA?

A “Certified Public Accountant” or CPA is the title of qualified accountants in the United States. In order to become a CPA, an individual must pass the Uniform Certified Public Accountant Examination and meet state experience and education requirements. CPAs are responsible for consulting individuals, businesses, government agencies, financial institutions, and nonprofit organizations. While CPAs mostly act as advisors when it comes to taxes and financial goals, they can also provide help and advice related to the estate planning process.

What Is the Role of a CPA in Estate Planning?

Without a doubt, estate planning is best done with the help of a team of professionals working together. Some key players for an estate planning team include attorneys, investment advisors, insurance agents, bank trust officers, and CPAs.

Tax Knowledge

A CPA can bring his or her knowledge of taxes to the table to ensure you create a proper estate plan. Thanks to this intricate knowledge of taxes, a CPA will be able to tell you the tax implications of every decision you make. This will help you ensure that your estate plan minimizes the taxes and maximizes the portion of your estate that will be passed down to your beneficiaries.

Due to the incredibly high rates of taxation and inflation, it is now more important than ever to have a CPA by your side to make preserving your estate as simple as possible. You need sound estate planning to preserve the estate and wealth you worked so hard to attain. Even if you are young, you need to start planning the disposition of property as soon as possible so that your heirs receive everything entitled to them when the time comes.

Future Expectations

Another way a CPA will be able to help you with the estate planning process is giving you reasonable future expectations for your estate. As stated above, many people don’t see the need of creating an estate plan because they don’t believe they have a sizable estate. However, it is possible that an estate of modest value today could become very significant by the time you die. A CPA can use their knowledge of market trends and finances to predict whether the value of your estate will increase, decrease, or stay the same a few decades down the line.

Of course, you can’t expect the predictions of a CPA to be 100 percent accurate. However, in many cases, these predictions will be very close. Thanks to these predictions, you will be able to make informed decisions now and when you make modifications to your estate plan in the future.

An estate plan is one of those things that you should do sooner rather than later. The fact that an individual can die at any time is a sobering but true fact. If you want to learn more about the importance of CPA estate planning, contact us here at Larry Bertsch. We offer a full range of accounting (including  forensic accounting), tax preparation, and small business bookkeeping services at affordable fees.

Filed Under: Accounting

June 27, 2016 By Larry L. Bertsch, CPA and Associates

How to Survive a Small Business IRS Audit in 5 Steps

IRS tax audit

It should have been a normal day, but when you open your mailbox, you received an official letter from the IRS. They want to audit you thoroughly. The algorithm that the Internal Revenue Service uses to choose the next review has been shown to choose small business owners over individuals because the unreported income from these firms causes a $125 billion tax gap.

Did you keep all of your receipts? Because just being a small business is a red flag for the agency. Other red flags include making over $200,000 – $1 million in a fiscal year, reporting large charitable donations, landowners with rental losses, and failing to report foreign bank accounts. When the IRS audits you, they will review and examine all of your records, including income, expenses, and profit to make sure it lines up with your tax returns. Even so, only 0.8% of tax returns were audited in 2015.

There are often misconceptions about being audited that can make it difficult for you to prepare. Let us debunk a few.

5 Myths About Tax Audits

The tax agency is looking anything out of the ordinary so if you pride yourself on your honesty then do not fear the tax audit. Don’t get lost the anxiety that these myths create.

Filing an extension results in an audit

The IRS makes it so easy for you to file an extension. All you have to do is click the link on their website. If you are living abroad, military personnel in a combat zone, or a person afflicted with a natural disaster, you automatically get an extension. If you filed an extension, then chances are you were careful and thorough, so the secret algorithm doesn’t flag this.

It’s better to have less audits overall

The agency has undergone about $1 billion in budget cuts, which means there are less personnel and fewer inspections. While this may make tax evaders happy, it costs the government about billions in revenue. That translates to seeing higher taxes and budget cuts like the one school programs are currently facing.

The more deductions, the more audits

The deduction must make sense. It’s the $30,000 for three months of business meals, flights, and hotel accommodations for a sole proprietorship that raises eyebrows. Home office deductions are legitimate, and if financial hardship comes your way, all you need is an explanation of your circumstances.

Amendments equal an automatic audit

Correcting your mistakes on an e-filed tax return is a good thing. The IRS just treats it like a new tax return and scans for anything out of the ordinary. Give thorough explanations that make sense, and the stress ends there.

Being audited means an empty bank account

The IRS can only take what is legally owed. If you cooperate with them, then they will work with you. They are not the government’s gangsters who will burn the house and take all of the insurance money, your grandma’s heirlooms, and your grandpa’s pension for all the trouble you caused. In 1998, the Taxpayer’s Bill of Rights (IRS Restructure and Reform Act) was passed to ensure that if you owe, they will treat you fairly.

The Truth About the IRS Tax Audit Process

Take a deep breath and calm the anxiety because this process is not a horrible one.

  • The agency is looking for anything out of the ordinary that doesn’t make sense. The official word is the selection process is random and uses statistical norms to scan for comparison of an individual’s tax return.
  • The IRS can go back as far as three years for a standard audit. If there are irreconcilable errors, then they will add on more years to their investigation.
  • They take as long as they need too to complete their audit. There have been reports of an audit lasting about seven months, but the IRS does not give an official timeframe.
  • The IRS uses snail mail for initial contact. Emails or phone calls claiming to be the IRS are more than likely a scam. Keep your address up to date because not receiving the notices from the agency does not exempt you from being audited. Ignore these notices and you will see wage garnishments or property seizure.

The Types of Audits Your Business May Face

There are three types of audits. They include:

  • Correspondence audits – usually done strictly through the mail and are the most common one that small business will see. You can request an in-person examination if you so choose to.
  • Field audit – usually happens at a person’s place of business. They are there to do a thorough inspection of everything you have claimed.
  • Office audit – when you are asked to bring your records to the closest office.

5 Steps to Take When Facing a Tax Audit

To help ease some stress, we would like to share some steps you can take immediately when facing an IRS tax audit.

  1. Learn what an IRS tax audit means. Basically, an audit means that the IRS is going to review your files and compare them with your tax records. They do this to make sure the information on your tax forms has been accurately documented. It is your right to ask exactly why you’re being audited. Sometimes people are randomly selected; other times there are red flags on their returns.
  2. Verify that the request came from the IRS. There are many tax scams out there trying to bully people into sending money. Unless you’ve received a verified letter from a documented IRS address, it’s very possible that you’re dealing with a scheme, especially if you a phone call or email was the first method of contact.
  3. Find out how you or your business will be audited. There are multiple ways to audit someone. You may be asked to compile information and mail it to an IRS office, or you may be asked to deliver the information personally during a meeting with an auditor. In other cases, a field auditor will come to your home or business. Read what is being requested and understand what is expected of you before going through the audit process itself.
  4. Meet with your bookkeeper, accountant and/or tax preparer. If you’re confused by why you’re being audited or you generally have someone else take care of your finances and taxes, it’s important to meet with a company that offers small business tax services. They will be able to give you more insight into why this is happening and what you can do about it to thoroughly prepare. They may also need to provide documentation of their own.
  5. Make sure your documents are in order. Once you’ve found out why you’re being audited and how the audit is going to be carried out, the next step is to get the appropriate documents together. If you’re asked to send in some documentation, make sure to send copies and keep the originals. Try to provide as detailed a paper trail as possible in the effort of making the process go as smoothly as possible.

Contact Us for IRS Tax Audit Help

Are you facing an IRS tax audit? Consider getting LLB CPA and Associates on your side. This can be a scary situation to find yourself in. We understand this and have years of experience providing IRS tax audit help. Contact us today to find out more about what we do.

Filed Under: Tax Services

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Larry L. Bertsch, CPA & Associates, LLP
265 E Warm Springs Rd, #104, Las Vegas, NV 89119
Phone: (702) 471-7223

Larry L. Bertsch, CPA & Associates, LLP

265 E Warm Springs Rd, #104, Las Vegas, NV 89119

Phone: (702) 471-7223

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