With the merriment of the holiday season behind us, the start of a new year brings less festive realities for businesses and individuals, including tax preparation and planning.
     Lorne Meinershagen, CPA, Managing Member of Meinershagen & Co., brought some practical advice and levity regarding business tax issues to the Grain Valley Partnership’s January luncheon.
     Meinershagen reviewed how the structuring of a business (sole proprietorship, partnership, corporations, etc.) can impact a business owner’s liability as well as issues related to taxes. Meinershagen emphasized the importance of reaching out to and establishing a relationship with  a trusted tax advisor, preferably prior to setting up a business, to ensure the business is structured in a way to best protect the owner from liability and ensure proper tax planning.
     Meinershagen & Co. provides tax planning and preparation for businesses and individuals, preparation of financial statements, consulting on business start-up needs, payroll services, accounting software support, and assistance with business and personal tax problems.   
     To schedule an appointment, call 816-847-0536 or visit www.floydmeinershagenandco.com.
     The Partnership’s February luncheon will be held Tuesday, February 4th. For more information about the Grain Valley Partnership and their upcoming events, visit www.growgrainvalley.org.
 

     Nobody looks forward to estimated tax payments, but paying more than necessary is even worse. When freelancers and business owners miss or underestimate their tax liability, the IRS charges them interest and penalties.
     The penalty for estimated tax underpayment is calculated and assessed separately for each payment period. Therefore, taxpayers may owe a penalty for a previous period even if they later pay enough estimated tax to make up for the previous underpayment.
     As a reminder, estimated tax is the method used to pay tax on income that is not subject to withholding. This income includes earnings from self-employment, interest, dividends, pensions and alimony.  Estimated taxes are required when your total year-end liability is greater than $1,000. To avoid IRS penalties, most self-employed taxpayers must ensure all four estimated tax payments add up to the lesser of these two amounts:

• 90 percent of the tax they estimate they will owe for the current year, or
• 100 percent of the tax they owed last year.

 
     Understanding your tax liability can be complicated, since you have to take into account fluctuating income, peak business seasons, planned equipment purchases, employee bonuses, new benefits plans and other variables that affect taxes.
     Tax experts recommend reassessing your finances in the third quarter before making the last two estimated payments for the year – due September 15, 2019, and January 15, 2020 – to gauge any income variations since your last payment or changes that could affect the amount of taxes you will owe for 2019.
     If your CPA or tax advisor has not contacted you about a tax-planning session, be proactive and schedule time to discuss how to minimize the amount of taxes you will owe on April 15.
     A good accountant can help you determine whether the best way to achieve your financial goals is to accelerate, defer or reduce your taxable income for this year. Keep these tips in mind as you prepare to make the last two estimated tax payments for 2019:

• Update your financials so you know both your year-to-date income and year-end projections.
• If your income is up, look for opportunities to shelter some money. Your CPA or tax advisor can provide guidance on various strategies, including equipment purchases, bonuses through your business, health savings accounts, retirement accounts, college savings, itemized deductions and other ways to help reduce your personal taxable income.
• If cash is tight, consider a bank loan or line of credit so that you can continue to pay taxes as you go and avoid IRS penalties associated with missed, delayed or inadequate quarterly payments. Remember it is financially ill-advised to use the IRS as a financing tool.

 
For expert advice on how to lower your tax liability in a free initial consultation, please contact Floyd, Meinershagen & Co. in Grain Valley at 816-847-0536, or visit www.floydmeinershagenandco.com to schedule an appointment.