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Tax Talk: What School Expenses Are Tax-Deductible?

February 28, 2020 By AA Tax Accounting Services Leave a Comment

Tax Talk - What School Expenses Are Tax-Deductible
College students are faced with seemingly endless school expenses associated with higher education, from paying tuition to paying for campus parking permits. A question that often comes up around tax season is which of these school expenses are tax-deductible, and how can students receive the best tax return possible?

As your local Cedar City, UT accounting firm, we have helped plenty of Southern Utah University students as well as other college students—and parents who claim them as dependents—with their tax preparations. Below is a breakdown of what college expenses can be deducted from taxes, what tax credits and tax deductions students are eligible for, and other college-related tax answers.

What School Expenses College Students Can Deduct From Taxes?

When it comes to saving on your college-related expenses, you might be surprised how much can be deducted from your owed taxes to help you have a better tax return.

Educational supplies – There are qualified educational expenses that you can deduct from your taxes, ranging from your textbooks to necessary equipment like your transportation.
Student loan interest – For those who have an adjusted gross income under $80,000 for single filers—AGI of $160,000 for married filing jointly—you can deduct the interest you have paid on your student loans.
Room and board – In some cases, the amount you spend on room and board for college can be deducted from your taxes.
529 plans – Adding money to a 529 saving plan is tax-free, so you can pay for your college expenses with your 529 plan to help save on taxes.

Some professions require continuing education, even after you are finished with your college days. Depending on your expenses, you may be eligible for an employer-required education tax deduction.

Tax Credits College Students Should Use

There are a couple of tax credits that are available to college students that allow you to save on your taxes.

American Opportunity Tax Credit (AOTC) – In the first four years of college, you can claim the American Opportunity tax credit. This credit provides you with a $2,500 credit, and if your tax liability goes to zero dollars thanks to this credit, the IRS will refund 40% of the credit, up to $1,000. You will need to have at least $4,000 in college expenses claimed to receive the full AOTC credit.
Lifetime Learning Tax Credit (LLTC) – Once the time limit on the AOTC has run out, you can still claim the Lifetime Learning tax credit. For this educational credit, there is no limit on the years you can claim it. With the LLTC, you can reduce your taxes by $2,000.

There are other eligibility criteria that may apply to you, such as if your parents are claiming you as a dependent, and other concerns. Utilizing our accounting services to prepare your taxes can help ensure that you are receiving the correct deductions and tax credits.

When College Students Should File A Nonresident Tax Return

While some college students stay in-state for their higher education, plenty of other students take the opportunity to start their adult lives outside of their home state. This move also usually necessitates at least a part-time job, where the out-of-state student earns income while attending college.

However, in most cases, these out-of-state students are still legal residents of their home state. Because of their state residency status, these students will need to file nonresident state tax returns in the state their university is located as well as file resident state taxes in their home state.

For those who live in states that don’t collect income taxes—i.e., Wyoming, Nevada, Alaska, Washington, Florida, Texas, and South Dakota—you don’t need to file a resident tax return or a nonresident tax return. But for all other out-of-state college students, you will need to file a nonresident tax return, resident tax return, and federal tax return.

Work With AA Tax & Accounting Services To File Your College Taxes

With all these expenses, some college students don’t want to add the expense of paying for quality tax preparation services. However, not all tax returns are that straightforward, which can leave students missing out on deductions that can increase their tax return.

Instead of gambling that one-size-fits-all tax software can prepare your taxes properly, you can use an experienced accountant who knows what questions to ask and information that is needed to help you save on your taxes and boost your return amount.

When you are ready to take care of your taxes with an experienced tax professional, feel free to contact us today to set up your appointment.

Why Every Business Owner Needs To Think About Succession Planning

October 18, 2019 By AA Tax Accounting Services Leave a Comment

When business is booming, most business owners aren’t thinking about succession planning. Most owners are focused on the nearer future.

It is understandable, as engaging in succession planning is an admission of mortality and that one day, someone else will be running your business once you pass away.

Yet, if you want to ensure that your business continues on after you are no longer there to operate it, you will need to take care of your succession planning, which is best done by working with your trusted Cedar City accountant.

Potential Consequences Of Neglecting Succession Planning

If you aren’t quite sure that leaving succession planning until later is much of an issue, here are some of the potential consequences of not taking your planning seriously.

The company is vulnerable to disaster – Businesses of all sizes can be significantly impacted with a lack of succession planning. As the owner, you are usually the only one privy to important company details, from your accountant’s contact details to banking information. Without this kind of vital information, businesses can end up shuttered.

Business’ brand identity can become compromised – Often, successful businesses develop their branding and identity along with the overall purpose of the business. Yet, without clear succession planning, your successor may take the company in a completely different direction than what you would have hoped.

Lack of management preparation – Often, small business owners take on the majority of management tasks, with maybe one or two supervisors who assist. However, these supervisors likely don’t have all the needed information.

Say that you were preparing an entity restructuring for your business to help your company grow and not be heavily impacted by taxes. If something were to happen to you, there is no way for your supervisors or inheritor to know your plans or the direction you were hoping to move.

The intended heir may be cut out of the business – You may have been planning for one of your children or a trusted partner to take over your business when you pass on. But without clear succession planning, that future can be contested and may end with your intended heir being completely cut out of the business you grew.

Rather than leave your company vulnerable to these potential consequences—and likely other problems—it is best to tackle your succession planning as soon as possible. You can always revise your plan later, but it is better to have it in place.

How AA Tax & Accounting Services Can Assist In Your Succession Planning

It is possible to take care of your business’ succession planning without the help of an experienced accountant. However, it is difficult to plan for every contingency and cover potential gaps without the help of an accountant. Luckily, you don’t have to take care of your succession planning on your own.

Here at AA Tax & Accounting Services, you can work with our accountant to set your business up for future success. He can help identify potential weaknesses and provide financial insights into how you can leave your company in the best shape possible.

If you are ready to take care of your succession planning with our accountant, feel free to contact us today to set up your consultation.

30 Accounting Terms All Business Owners Should Know

September 19, 2019 By AA Tax Accounting Services Leave a Comment

When you go in to meet with your local Cedar City accountant to discuss your business, there are many business-specific accounting terms that will be used. While our accountant is always happy to stop and explain an unknown term, you may feel more comfortable going into a business meeting with a firm understanding of accounting terms that apply to company operations.

While there are industry-specific terms, below are thirty accounting terms that all business owners should know.

General Accounting Terms

To start off, let’s lay the groundwork for other accounting terms by clarifying general accounting terms. Many of these terms are what business owners will encounter even before they start their company, so it is essential to understand what they mean.

1. Accountant

The term accountant often gets thrown around to describe anyone who deals with numbers. However, this loose definition isn’t quite sufficient.

While the exact requirements can vary to state-to-state, an accountant should have a four-year accounting degree from a higher education institute. They can act as bookkeepers, and with the right certifications, certified public accountants.

2. Accounting Period

An accounting period is a defined time span where all of a company’s financial statements—i.e., balance sheet, income statement, statement of cash flow—are included. By having accounting periods to reference, business owners can quickly find information on how the company financially performed during any set time.

3. Cash Flow

To describe the flow of cash in and out of a business, accountants use the term cash flow. The cash flow is tracked from the beginning of an accounting period and ends with the conclusion of the accounting period. A negative cash flow indicates a business had less money comes in than went out, while a positive cash flow shows the opposite.

4. Allocation

Allocation describes how businesses assign funds to different accounting periods or departments within the business.

5. General Ledger

A whole and complete financial record that keeps track of a business’ financial accounts. This ledger should be maintained on a daily basis, and it is used to help create financial statements.

6. Business Entity

The term business entity refers to the legal structure of your company. For most small business owners, these company formations are usually sole proprietor, limited liability corporation (LLC), or partnership. There are also s-corporations and corporations. Depending on what business entity applies to your company, there are different laws, compliance requirements, and tax ramifications.

7. GAAP

Generally Accepted Accounting Principles (GAAP) refers to the basic rules that all accountants follow as they perform their duties. These principals guide accountants so that it is easier for other financial experts to review a business’ financial records.

8. Fixed Cost

Businesses have fixed costs, which are costs which do not change no matter how many sales are made. An example of this would be the rent of a business’ location, which would be a recurring fixed cost. While the rent could be raised over time, it will remain fixed throughout the length of the rental contract.

9. Variable Cost

Opposite of fixed costs are variable costs, which are business operation costs that change with how many sales are made. An example of this would be something like the cost of deliveries. With fewer sales, the amount of business funds dedicated to delivering goods is lower, though costs will go up as more sales are made.

10. Overhead

A business’ overhead refers to the expense of operating a business and is often a fixed cost. That means that overhead often refers to things like business rent, employee salaries, inventory storage costs, and fixed costs.

11. Liquidity

For businesses, when it comes to liquidity, it is a measure of how quickly a business can absorb short-term and immediate financial obligations and debts.

12. Return On Investment

The strict definition of this term refers to the overall profit that a business makes—the return—which is divided by the business’ investment. However, ROI can also be used a bit more loosely to describe how successful short-term projects and objectives have been.

Profit And Loss Statement Terms

When it comes to your company’s profit and loss statement terms—also called income statement terms—you will likely encounter more of these words when using accounting services. To help you stay in the loop when discussing your business’ financial status, here are some of the most common profit and loss statement terms.

13. Income Statement

Let’s start by defining what an income statement is when applied to your business. This financial statement will cover the expenses, revenue, and business profits for a set period of time.

It starts by displaying the company revenue at the top of the statement, then the expenses are displayed to show how much was subtracted. That way, you have a clear idea of where the money was spent. Finally, the income statement displays the net income at the bottom of the report.

14. COGS

COGS—costs of goods sold—is used to refer to the expenses that relate to the creation of your business’ service or product. This term does not describe operating costs; rather, the labor involved in your business’ provided service or the cost of the materials used to make your product.

15. Gross Profit

The profitability of your business in terms of dollars is described by gross profit. This number is reached without taking into account the overhead costs but is subtracted the COGS from the revenue.

16. Gross Margin

After the gross profit has been assessed, the gross margin is next. The gross margin is a percentage of the gross profit. You find this percentage by taking the gross profit and dividing it by the revenue to find the gross margin.

17. Depreciation

This term describes the loss of asset value over time. It does not describe low-dollar value items. An example of a depreciable business asset would be a company van. A depreciating asset is often shown on an income statement as a non-cash expense as it doesn’t directly affect your business’ cash.

18. Net Income

The net income (NI) is the actual dollar amount of profit your business earned. You can find the net income by subtracting the expenses from the revenue for a set period. These expenses should include your taxes, overhead, depreciation, and COGS for that given period.

19. Net Margin

Another term for the profit of your business, the net margin is the percentage of profit as it relates to the revenue. The net margin is found by having the net income divided by the revenue for a set earning period.

20. Expense

When your company incurs a cost, the term for this is an expense.

21. Revenue

Simply put, any money that is earned by your company is considered revenue.

Bookkeeping Terms

Some of the accounting terms that you will run into regularly as a business owner are bookkeeping terms. Many of these terms describe financial matters that concern the day-to-day operations of your company, so it is critical that you understand them.

22. Balance Sheet

A balance sheet is a term that encompasses your business’ financial report that shows all the liabilities, equity, and assets your business has currently. This report shows the balance of this equation: Assets = (Liabilities + Equity).

23. Accounts Payable

This term describes all of the business’ expenses that have not been paid yet. On a balance sheet, account payable is listed as a liability, since the business owes others.

24. Accounts Receivable

To describe the revenue of a business has but hasn’t received the payment, you would use the term accounts receivable. On a balance sheet, accounts receivable is listed as an asset that should become cash soon.

25. Payroll

Considered a standard business liability, payroll is an account that displays the payment of employee wages, salaries, deductions, and bonuses. On the balance sheet, you may see if there are any unpaid wages or accrued paid vacation time.

26. Inventory

A business asset that is meant to be sold to customers is considered inventory. Once inventory items are sold, the account tracking the inventory assets will lower so that businesses can track when they need to restock.

27. Asset

An asset is a term used to define the things owned by the company which hold monetary value. When you see your assets listed, they will be in order of liquidity, with assets like cash as the most liquid, to difficult to dispose of assets like a building being one of the least liquid.

28. Book Value

While you may have depreciating assets—like the example company van—there is a term to describe the original value of that asset, which is when the term book value is used.

29. Liability

A business financial liability refers to the unpaid debts that a company has accrued. Often, your business liabilities will be things like business loans, accounts payable, and payroll.

30. Equity

After the liabilities have been subtracted from the assets of your business, the leftover value is called the equity.

To start working with our accountant concerning your business accounting needs, contact us today to set up a consultation. He will provide you with a tailored accounting plan that will suit the unique needs of your business.

For One-Time, Or Continual Use, Here’s Why You Need A Cedar City Accountant

August 29, 2019 By AA Tax & Accounting Leave a Comment

When most people think about accounting services, what usually comes to mind is taxes and maybe things like basic bookkeeping tasks like payroll. While these things definitely fall under an accountant’s purview, there are many other reasons why you need an accountant.

Also, not just any old accountant. By working with a Cedar City Accountant—like our accountant here at AA Tax & Accounting Services—you can receive area-specific accounting.

With this kind of help, whether you need an accountant for a one-time issue or for continual work, you can tackle a range of financial matters. Below, we have covered some of the top things our accountant works on to give you an idea of some of the issues you may want a Cedar City accountant to help you resolve.

More Familiar With Your Local Tax Laws

By working with a local tax consultant like our accountant, you work with someone that is highly familiar with the tax laws that apply to you. For small business owners, having someone with a deep understanding of what local, state, and federal taxes will apply to your company can make a significant difference in your taxes.

Also, by working with a local tax consultant, you can plan for future tax filings as part of your overall business plan, as our accountant can consult with you concerning upcoming business ventures.

If you are an individual or married filer, you can also benefit from working with a local tax consultant. Ones like our accountant will know if there is a local or state benefit that a box-store or online tax preparer may not know about.

Can Help Maximize Your Tax Return

With the right Cedar City accountant, you can enjoy a fully maximized tax return. With personalized help, your tax return will be reviewed to ensure all of the proper tax credits and deductions have been applied to your taxes.

Many people have come in with their less-than-stellar tax return from another tax preparer to get our accountant’s opinion. More often than not, it has turned out that the other preparer did not maximize the client’s tax return, and we are able to help them save more than expected.

Able To Assist With Financial Aspects Of Divorce

Even when a divorce is amicable, untangling finances can be difficult. Our accountant can provide forensic accounting to assist with a fair division of marital assets. With forensic accounting, he will determine the value of the shared assets, help with equitable alimony payment recommendations, child support payments, and other financial assets which can be difficult to split.

Also, when a party in the divorce is fighting against making support payments or hiding assets, working with your local Cedar City accountant can help you find the information you need.

Work With An Accountant On Long-Term Financial Planning

There are many long-term financial commitments that can be difficult to make as they require a significant investment of your time and money. Rather than taking a gamble on your own, you can work with our accountant to help you optimize your long-term financial planning.

Whether you are concerned about your financial portfolio or you have multiple mortgage options you would like a second opinion on, our accountant can help. You can also set up other future financial plans with our accountant, whether you are setting up a trust or senior care planning.

Access Business Consulting With An Accountant

No matter what stage your business is currently at, working with our Cedar City accountant can help. Our accountant has helped startup businesses that wanted a solid financial plan before launch as well as established local businesses who are considering entity restructuring.

Business owners can highly benefit from third-party advice from a local accountant, as the advice is tailored to the area the business is located in, rather than vague projections. Also, the impartial advice that our accountant can provide will be in the business owner’s benefit, while an in-house advisor may promote risky ventures to further their own ends.

Navigate Day-To-Day Business Details

Even if you aren’t looking to make waves and alter your business structure, a working relationship with a local accountant can help to take care of the day-to-day of running your company. Addressing the financial minutiae of your business—from maintaining the general ledger to bank reconciliations and more—can eat into your precious time.

Rather than chasing stray decimal points in your accounts receivable and accounts payable, you can leave that work to our accountant. We can offer tailored bookkeeping and accounting services depending on your business’ needs.

If you are interested in working with our accountant and would like a consultation, please feel free to contact us today.

Are Tax Consultants Accountants?

July 22, 2019 By AA Tax Accounting Services Leave a Comment

To maximize your tax return and lower your overall tax liability, having a tax consultant is a critical part of your financial team. By working with a tax consultant, you can enjoy having an expert guide you through the ever-changing tax laws, advise you on investments that minimize your tax liability, and assist you in making financial decisions which can have far-reaching impacts on your finances.

While all this sounds good, not all tax consultants are equally qualified to help you, as not all tax consultants are accountants. If you are on the fence about whether you really need a tax consultant accountant, AA Tax & Accounting Services is here to help you determine your needs.

Why Choose A Tax Consultant That Is An Accountant

First, you should understand that there are actually no strict educational requirements associated with the job of a tax consultant. Some people approach tax consultancy from a work experience angle, and while this isn’t necessarily a bad thing, as these individuals lack the formal education in tax law, finances, and other matters, their advice may not be as encompassing as you would hope.

In many cases, tax consultants are college-educated, with at least a 4-year degree under their belt. Some of the educational paths that some tax consultants take are business, finance, pre-law, and of course, accounting. Depending on your consulting needs, one of these educational emphasizes may be more useful to you.

However, a well-rounded accountant who also has a master’s degree in accounting—such as our accountant here at AA Tax & Accounting Services—can provide more comprehensive services. With our accountant’s greater educational background paired with his experience helping others reach their financial goals allows our accounting firm to provide excellent accounting services here in Cedar City, UT.

What To Look For In Your Tax Consultant

When you are ready to find a tax consultant to help you with your tax liability and future financial decisions, it’s time to be picky. Some of the things you should look for in your tax consultant are:

Ensure education and experience – As there are no stringent requirements for claiming the title of a tax consultant, you will want to be sure that your tax consultant has their accounting degree or other educational and work experience you are looking for before committing to working with them.
Maximized services – Along with using their tax consultant services, it can be incredibly helpful to have a tax consultant that can work with you on other matters. From financial planning, business entity restructuring, tax filing, and more, working with a tax consultant accountant for all your financial needs can ensure that your financial needs are appropriately taken care of.
Clarified fee structure – There are multiple fee structures when it comes to tax consultant work. To ensure that you aren’t surprised by the bill later, be sure you know if your consultant accountant will be charging by the hour, lump sum, completed tax return, or other variations.
Check reviews – No matter how flashy the website, what will really tell you the most about an accountant are the reviews from former and current clients. Check to see what people are saying about working with your prospective tax consultant to help you see if they are the professional for you.

Whether you are looking for an ongoing partnership with a tax consultant or have a one-time need to consult, it is critical that you choose a tax consultant who is also an accountant. If you would like to work with our tax accounting consultant, contact us today to set up your appointment.