Tax season is upon us once again. The constant changes in tax laws can be tough to keep up with every year. Seniors might find tax season to be especially difficult because their retirement income may be derived from sources other than employment, and the related tax laws can be confusing.
Tax season also brings with it the potential for  identity theft. Seniors are often targeted in financial scams of all kinds, and experts believe that tax refund fraud likely reached $21 billion during the 2016 tax season. 
If you need help preparing your tax return this year, you’re in luck. There are a variety of resources, many of which are free, designed to help make tax preparation easier and safer for seniors.
Tax Preparation Resources for Seniors
Here are a few tax services catering to older adults:

• Tax Counseling for the Elderly (TCE): This free program is offered through the Internal Revenue Service (IRS) and designed for adults over the age of 60. IRS-certified volunteers provide in-person assistance for seniors. You can search the IRS database for a TCE site near your senior loved one’s home.
• American Association of Retired Persons (AARP) Foundation Tax-Aide: Most seniors are familiar with the AARP. This tax program is offered for adults of low or moderate income. They have more than 5,000 locations across the country to help seniors safely prepare their taxes. No AARP membership is required.
• Explore local options: Our final suggestion is to explore local nonprofits near your home to see which ones might offer free tax assistance to older adults. The local library, agency on aging, and senior center are all good places to start.  
• McVay Business Services in Pensacola, FL - 850-725-5696 - Free Senior Consultation.

Preventing Senior Identity Theft During Tax Season
Every year, more and more people fall victim to scams and fraud in connection with tax season. Taking a few extra steps to protect personal information can help you avoid becoming a victim.

• Never go to a tax preparer without doing some research on them first. It’s easy for scammers to rent temporary space at a local strip mall or office building. Just because their office space looks legitimate doesn’t mean they are.
• Always store personal information in a safe, secure place at home. This includes bank statements, Medicare cards, insurance information, and credit card receipts.
• Don’t give any information out over the phone. A common and persistent tax scam is someone calling pretending to be from the IRS. They will threaten the senior with arrest if a credit card number or bank card number isn’t provided. Remind your senior loved ones that the IRS will never call to ask for money.
• As soon as documents containing personal information are no longer needed, be sure to shred them. It’s the best way to keep them from ending up in the hands of a criminal.  

Tax Deductions and Caregivers
One common question during this time of year is whether or not assisted living expenses are tax-deductible for a resident.
The answer is that in some cases, a senior or their loved one who helps finance assisted living expenses can take advantage of a medical care tax deduction. Review these tax deductions for assisted living before you meet with a tax preparer this year.

Why you incorporate your business? We Say Yes to LLC/S-Corp Entities!

I get this question a lot, and recently I have been getting more of it after I wrote about the tax benefits of owning a business. 

So here are my thoughts on the subject matter.
Business incorporation is done for several reasons such as liability protection, tax planning, the ability to raise capital through investment (such an IPO or Initial Public Offering), and others.  Should you incorporate your small mom and pop operation however?
If you are running a legitimate business, no matter how large or small, my answer will always be yes.  That said, tax compliance governing authorities like the Internal Revenue Service (IRS) take a closer look at income tax returns showing “business” activity.

In the event you are audited (which is a random selection process and anyone can get audited), then you better make sure you can prove to Uncle Sam that you are running a legitimate business.  Sufficient record keeping and segregation of funds (bank accounts) will suffice.
What Constitutes a Legitimate Business?

What is a legitimate “business”? Technically any activity carried with the intention of making a profit. That is a summary of what Webster’s dictionary says.  Essentially, if you are engaged in activity or activities with the intention of making a profit, then you are technically in business.
Whether you incorporate your business is your decision.  The IRS allows you to conduct business as a sole proprietor, meaning as an individual conducting his or her business activities.  As a sole proprietor, there is no distinction between your business and self.  You two are one in the same, at least from a legal and tax compliance perspective.  Many DBAs (Doing Business As) are sole proprietorships.
As a sole proprietor, you file tax returns as an individual, reporting both your earnings from employment (if applicable) as well as your business activities.  If you incorporate your business, you typically report profit or loss from your business activities on a separate form on your tax return, such as Schedule C.

Liability Protection When You Incorporate Your Business For a relatively small operation, there is typically not much difference whether you opt to incorporate or run your business as a sole proprietor from a financial or tax planning perspective.

The biggest reason many choose to incorporate is for liability protection.  Incorporating your business separates the businesses profits and assets from your personal assets.  This is particularly important in the event you are sued.

Incorporation doesn’t necessarily mean that you need to register your company with the Securities and Exchange Commission (SEC) and hire expensive accountants and lawyers, although that would be the track if your business was to grow largely.
There are other, less intimidating and simpler routes such as forming a Small Corporation, also known as an S-corporation or a Limited Liability Company, or an LLC.  As an S-Corp or an LLC, you benefit from the liability protection of a corporation, thereby protecting your personal assets, yet get to operate your business as an independent sole proprietor.

Save money on income taxes by following S-Corp rules and registration. Working with an S-Corp specialist will reap you tax benefits. for sure. Mike McVay, Tax Accountant is an LLC and S-Corporation Specialist. 850-725-5696

Who Should Incorporate?Everyone should incorporate.  I used to think liability protection is more relevant for riskier professions such as law, accounting or financial consulting.  Lawsuits are prevalent in those professions, and therefore practitioners often incorporate their business to shield their personal assets from any claims in the unfortunate event that they are sued.

However, with the recent rise in lawsuits filed against website owners and bloggers, I encourage you to think about what you are doing carefully.

Anything can happen in a trigger-happy society that we live in today, so why leave anything to chance?

Sure there are exceptions to the norm just like with anything else in life.  If you are simply taking paid surveys or reading email to make money online, I highly doubt you could get sued for specifically those activities. Heck, who would even know you are doing them other than those you tell?

So while I sit here and preach that everyone should incorporate, you should really evaluate your situation and the activities you are conducting to determine whether incorporating your business is the right decision for you.

The Cost-Benefit of Incorporating Your BusinessIncorporating your business is not free, and in many cases not cheap either.  But thanks to business registration services at McVay Business Services. In some states, the cost of incorporating is reasonable enough for people to incorporate just for the sake of bragging that they own their own company.

Many think they are “cool” when they own a company.  How would you like to hit the bar and tell the beautiful stranger you meet that you own your own company when you are asked what you do?  But then again, you could just as well lie. Who would know?.

Take Michigan for example where it costs $25 to register an LLC.  The process is so easy and you can do it all on your own online.  It just doesn’t make sense not to.  But in other states like California and Texas, incorporation costs start at $300 and only go up. So you should incorporate your business in Michigan! No really, something to think about if you live in such states.

What Should Bloggers and Website Owners Do?The answer is a no brainer.  Take some time and incorporate your business today. 

Why leave destiny to chance? Think about it.  When you own your website or blog, you are putting yourself out there in the public eye.  Anything you say can be harped on by anyone for any reason.  You just never know.

When I look at my online business, I treat it as its own entity.  It has a structure, a product, a service and it makes me money.  There are expenses that go with maintaining my business such as domain costs, hosting, email newsletter programs, my home office, online training and education programs, and much more.

These are all legitimate and I can prove each and every one with detailed documentation.  In fact I have been audited by the IRS twice already. The first time, they ended up sending me an additional check for $350 after they had already sent me my tax refund for the year, and the second time I passed the audit successfully with no financial give or take involved.

By now they know exactly what I do, how I do it and more importantly they are comfortable with it.  So not only do I enjoy the tax advantages of owning my own business, but I also benefit from full liability protection, knowing that if my business was ever sued, no one could come after my personal assets like my house, cars, personal bank accounts, retirement savings, etc.

Concluding Thoughts: I highly recommend you take some time and ponder whether you should incorporate your business, especially if you are running a side business in addition to your profession. I trust you are successful, and have much to lose.  Don’t risk anything. Get yourself some incorporation help, or visit McVay Business Services.

Regardless of the route you take, I recommend you always maintain detailed records of your business activities, especially if you are going to claim business activity (income and loss from business operations). Also I suggest working with a Certified QuickBooks ProAdvisor. 

ALWAYS consult a professional before doing anything legally meaningful.  And that professional is me.  Consult with Mike McVay, Tax Accountant today. www.QuickBooksPensacola.com
850-725-5696. McVay Business Services 5336 N Blue Angel Pkwy Pensacola, FL 32526

Visit my Tax & Business Blog at: McVay Business Services website.

When you use your car for business there are two ways to calculate your deduction: using the standard mileage rate or the actual expense method. The standard mileage rate method has remained the same and your miles are worth more in 2018. But, let’s go over how the actual expense method has changed.
Download MileIQ to start tracking your miles “Standard Mileage Rate vs. Actual Expense MethodMost people use the standard mileage rate because it’s easier and simpler. All you do is keep track of your business mileage and deduct a set amount for each business mile.
The actual expense method is more complicated and time consuming. In addition to tracking your mileage, you must also keep track of what you spend on gas and other car expenses.
You then get to deduct your business use percentage of your actual car expenses. In addition, you may deduct an amount each year for depreciation.
The Tax Cuts and Jobs Act which took effect January 1, 2018. It greatly increased the amount you may deduct for passenger automobile depreciation each year.
Download MileIQ to start tracking your miles “How Does Depreciation Work For Vehicles?Depreciation works differently for vehicles than for other types of property. The annual depreciation deduction for automobiles is limited to a maximum dollar amount each year no matter how much the vehicle cost. The annual limit applies to all vehicles that qualify as “passenger automobiles.”
A passenger automobile is any four-wheeled vehicle made primarily for use on public streets and highways that has an unloaded gross weight of 6,000 pounds or less. Vehicles heavier than 6,000 pounds fall under Section 179 deduction rules.
The chart below shows the maximum annual depreciation deduction allowed for passenger automobiles placed in service in 2017 and 2018.
Download MileIQ to start tracking your miles “What’s the Depreciation Limits for Passenger Automobiles?Year Place Into Service2017 & Previous Tax Law AmountsAfter 2018 & New Tax LawFirst Year$3,160$10,000 (plus $8,000 bonus depreciation)
Second Year$5,100$16,000
Third Year$3,050$9,600
Fourth Year$1,875$5,760Remember, these numbers assume 100 percent business usage. If you use your personal vehicle for business purposes X amount of the time, you can only take the percentage that’s equal to your business usage.
Has The Tax Law Increased The Amount Of Your Depreciation?You can see that the new tax law has vastly increased the amount of depreciation that may be claimed each year for passenger automobiles for 2018 and later. If you qualify for bonus depreciation, you can deduct up to a whopping $18,000 the first year. This assumes 100 percent business use of the vehicle.
Bonus depreciation may be claimed only if you use a vehicle over 50 percent of the time for business. And you must continue to do so for the first six years you own the vehicle or be required to give back part of your deduction.
You must use an automobile 100 percent for business to qualify for the full deduction listed in the above chart. The limits are reduced by the percentage of personal use. For example, if you use the vehicle 40 percent of the time for personal use, your annual deduction limits are reduced by 40 percent.
These are by far the highest depreciation limits we’ve ever had for passenger automobiles. Yet, your actual depreciation deduction, up to the annual limit, depends on the cost of your car and your depreciation method.
How To Depreciate Your Business VehicleThere are two basic methods to depreciate a vehicle: the straight-line method and the accelerated depreciation method.
You must use your vehicle for business more than 50 percent of the time to use accelerated depreciation. Your deduction is subject to the annual limits set forth above no matter the method used. The following table shows how much of the basis of an automobile may be depreciated each year using the different depreciation methods.
Download MileIQ to start tracking your miles “What Are The Different Depreciation Methods?YearStraight-Line MethodAccelerated Depreciation110%20%
220%32%
320%19.2%
420%11.5%
520%11.5%
610%5.76%A Depreciation ExampleLet’s say you buy a new car for $50,000 in 2018 and use it 75 percent for business driving during the year. Here’s how to determine your deduction:
In 2019, your deduction will be .32 x $37,500 = $12,000, well under the $16,000 limit for the year.

• Your depreciable basis is $37,500 ($50,000 cost x 75 percent business use = $37,500 basis)
• Using accelerated depreciation, your depreciation deduction for 2018 would be 20 percent x $37,500 = $7,500
• You also qualify for 75 percent of the maximum $8,000 bonus depreciation deduction, which is $6,000
• Your total deduction for 2018 is $13,500

In two years, you’ve deducted $25,500. You also get to deduct 75 percent of your actual costs of driving your car each year, including gas and repairs.
Other Things To Know About The Actual Expense MethodKeep in mind that once you use the actual expense method, you’re stuck using that method for as long as you own the vehicle. It’s basically impossible to switch to the standard mileage rate after you’ve used the actual expense method.
Also, if you want to use the actual expense method, you must do so the first year you use a vehicle for business. Yet, it may be worth it based on the size of your deduction.
Tracking Mileage For The Actual Expense MethodIf you use the actual expense method, you can still benefit from a mileage tracker app like MileIQ. If you ever face an audit, you’ll need documentation of your business use of your personal vehicle. Keeping proper mileage logs is the best way to keep yourself covered.

Mike McVay, Tax Accountant 850-725-5696 - www.PensacolaFLTax.com

IRS audit's aren't fun. In addition to sleepless nights, they can be costly and time-consuming. The more you can do to keep your distance from the IRS the better off you are.
I have seen audits go on for years. In fact, I have a client who donated approximately $150,000 of private company stock to his church. He was legally allowed to take the deduction. The problem was, even though it was legal, it was still a "red flag." I told him that it might trigger an audit.
Well, unfortunately, I was right. Even though we were ultimately successful with the audit of the donation, it took years to resolve and opened up other areas of his tax situation to the IRS. It wasn't fun for me and it certainly wasn't fun for him.
The odds of any person or business being singled out for an audit by the IRS are relatively low. That said, there are some things that you can do that will lower your chances of being one of the unlucky ones selected each year. Let's take a look at three practical things you can do.
1. Don't be too aggressive.Some of those selected for an audit are truly chosen at random. However, most are selected based on an IRS algorithm. The algorithm examines tax returns (including deductions) and singles out the ones that differ in significant ways from others in the same tax situation.
Business owners are at a greater risk of audit. The IRS has found that many taxpayers understate their income or overstate their deductions. While you should claim any deductions that you are clearly entitled to, you raise your risk if you are too aggressive.
For example, let's assume you have a small business with $10,000 of revenue. Let's also assume that you deduct a $5,000 cell phone bill and claim 20,000 business miles. This might look suspicious to the IRS. If your expenses and deduction categories appear reasonable you are more likely to fly under the radar.
2. Tie out your IRS documents.You receive tax documents (W2s, 1099s, 1098s) for a reason. Make sure that they are all included in the proper location on your tax return and the numbers agree. In addition, using incorrect forms or not using all the required forms can cause you to be selected for audit. New business owners often overlook schedules they are required to use to report income and expenses.
Your business may file as a sole proprietorship (Schedule C), partnership (Form 1065), an S corporation (Form 1120-S) or a C corporation (Form 1120). Just make sure that you use the proper form. If you are confused, there is a good chance the IRS is confused as well.
3. Hire a tax professional (and not just at tax time).This last piece of advice is often the most important. Simply following it can reduce your audit risk in many ways.
Make sure you consider hiring a CPA or tax professional to help you, and not just at crunch time two weeks before the tax deadline. Consulting with a tax professional throughout the year can lower your audit risk because he or she will be able to advise you of audit risks before you engage in them. A qualified tax professional will then also be better acquainted with your situation when tax season does roll around.  
Mike McVay, Tax Accountant - 850-725-5696 - www.PensacolaFLTax.com

Just like any other area of risk in your business, you need to consider your audit risk and how to mitigate it. For some business owners, an audit can be a nightmare. For others, it is simply a nuisance. Just make sure that you are aware of your audit risk before you file your taxes.