The Right Way to File Your Business and Personal Taxes

woman planning budget for her business and working on taxes

woman planning budget for her business and working on taxes

Filing your business and personal taxes can be daunting, but it’s an important part of being a responsible business owner and citizen. By following the right steps and keeping organized records, you can ensure you’re paying the correct amount of taxes and avoid any potential penalties or issues with the IRS.

By ensuring you take the right steps in filing your taxes, you can count on the smooth operation of your business and compliance with IRS rules. This post guides you through some key steps to follow when filing your business and personal taxes.

Learn the process and best practices you can use to make the tax filing process as smooth and stress-free as possible.

Determine Your Tax Filing Status

One of the most important things you can do to file your business and personal taxes the right way is to determine your tax filing status. Your tax filing status will determine the tax rate and deductions you’re eligible for.

The five main tax filing statuses are:

  1. Single
  2. Married filing jointly
  3. Married filing separately
  4. Head of household
  5. Qualifying widow(er) with dependent child

Depending on the type of business you have and your location, you may be required to pay federal, state, and local taxes. Some common taxes that businesses may be required to pay include:

  • Income tax: This is a tax on the profits your business generates. Your income tax rate will depend on the size of your business and the tax bracket you fall into.
  • Sales tax: If your business sells goods and services, you may be required to collect and remit sales tax to the government. Your sales tax rate will depend on the location of your business and the type of goods or services you sell.
  • Payroll tax: If you have employees, you may be required to pay payroll taxes, which include Social Security, Medicare, and unemployment insurance taxes.
  • Property tax: If you own a business property, you may be required to pay property taxes to the local government.

In addition to these business taxes, you may also be required to pay personal taxes on any income you receive, including your salary or profits from your business.

Establish Diligent Record Keeping

looking for files in the folder

In order to file your taxes accurately, you’ll need to gather all necessary documents and information. Having necessary documents on hand means you have to keep on track with meticulous record keeping throughout the year.

Good recordkeeping includes keeping track of all income and expenses, as well as any deduction you are eligible for. Keeping good records makes it easier to file your taxes and will also help you claim all the deductions and credits you are entitled to.

If you aren’t diligent about record keeping, challenge yourself to keep the following documents organized next year:

  • W-2 form (if you’re an employee)
  • 1099 forms (if you’re an independent contractor)
  • Receipts for business expenses
  • Other important financial documents

Determine Your Business Structure

Your business structure will determine how you file your business taxes. If you’re a sole proprietor or single-member LLC, you’ll report your business income and expenses on your personal tax return.

On the other hand, if you have a partnership or multi-member LLC, you’ll need to file a separate business tax return (Form 1065) and issue K-1 forms to each of your partners.

If you have a corporation, you will need to file a corporate tax return through Form 1120 or Form 1120-S.

For more detailed information about filing business taxes, read our article here.

Choose the Right Tax Forms

wooden box with cross and check marks

There are many different tax forms you may need to file, depending on your business structure and the type of income you receive.

Some common forms for small businesses include:

  • Form 1040 – This is the main personal tax form most taxpayers use to report their income and claim deductions.
  • Schedule C (Form 1040) – This form is used by sole proprietors and single-member LLCs to report business income and expenses.
  • Schedule E (Form 1040) – This form is used to report income or loss from rental properties, partnerships, and S corporations.
  • Form 1120 or Form 1120-S – Corporations use these forms to report their income and expenses.
  • Form 1065 – This form is used by partnerships and multi-member LLCs to report their income and expenses.

Claim Deductions and Credits

As a business owner, you may be eligible for certain deductions and credits that can reduce your tax liability. Some common deductions include business expenses such as office supplies, travel and transportation costs, and employee benefits.

You may also be eligible for credits for things like hiring employees from certain disadvantaged groups or investing in renewable energy.

Click here for a list of lesser-known tax deductions.

File Your Taxes On Time

The deadline for filing your business and personal taxes is typically April 15th of each year. If you’re unable to file by the deadline, you can request an extension using Form 4868.

However, keep in mind that an extension only gives you more time to file your taxes – it does not give you more time to pay any taxes that you owe.

Pay Any Taxes Owed

If you owe any taxes, you’ll need to pay them by the deadline to avoid late fees and penalties. You can pay your taxes online, by mail, or in person at a local IRS office. By following these steps and working with Cook CPA Group, you can ensure that you’re filing your business and personal taxes correctly and avoiding any potential issues with the IRS.

What Size Company Needs a CFO?

three balls from largest to smalles on red background

three balls from largest to smalles on red background

Hiring a Chief Financial Officer (CFO) is an important decision for any business. But you may be wondering what size company needs a CFO. Considering the size of your business is a pivotal aspect of deciding to hire a CFO or an outsourced CFO to help you keep up with the financial side of the business.

If you run a small business, you may not need a full-time CFO, but you may benefit from the expertise of an outsourced CFO. For medium-to-large businesses, the decision to hire a CFO becomes imperative to the successful operation of the company.

The financial and tax experts at Cook CPA Group are well-versed in the financial operations of businesses big and small. We created this blog post to help you explore when it’s time to hire an outsourced CFO and what you should know before making the decision.

Hiring a CFO for a Small Business

For a small business, hiring an outsourced CFO can provide the financial guidance and advice needed to make informed decisions about your company. While hiring an in-house CFO seems like the conventional next step, consider the cost-saving advantages of hiring an outsourced CFO.

Your small business can benefit from the expertise of an outsourced CFO to create a budget, manage cash flow, and provide financial analysis to help you make the best decisions for your business.

For small businesses, it may be time to hire an outsourced CFO when the business is growing and you can no longer keep up with the finances on your own. An outsourced CFO can help you manage the finances, provide you with financial forecasting for better margins, and help you meet your financial goals.

Quick Tip: Are you a Sacramento-based small business? Check out 18 financial tips we compiled to help small business owners in the Sacramento area plan for a financially successful year.

Hiring a CFO for a Medium-Sized Business

owner of a medium business working on their inventory

For a medium-sized business, hiring a CFO is an immeasurable asset. While they can help with the more routine tasks like budgeting, cash flow management, and reporting, CFOs can also help with strategic goal setting.

Traditional business models suggest hiring an in-house CFO to help with this role. However, your medium-sized business can benefit from hiring an outsourced CFO to take on these responsibilities without impacting your bottom line.

Hiring an outsourced CFO is an effective way to reduce payroll costs, boost productivity, and efficiently achieve business goals and metrics.

In addition to routine financial management, an outsourced CFO can create financial forecasts and robust reporting to help you set and achieve your financial goals faster. They can also help with mergers and acquisitions, capital raising, financial modeling, and investor relations.

As your business reaches new financial heights, it’s important you carefully monitor for any risks. Hiring an outsourced CFO can help your medium-sized company with risk management and regulatory and tax compliance.

Read more about the importance of financial risk management here.

Hiring a CFO for a Large Business

top view of a large industrial distribution warehouse with their working employee

Hiring an outsourced CFO for a large business is crucial. While most large businesses have a full-time CFO, it may be wise to consider switching to outsourced CFO services.

There are numerous benefits to outsourcing your company’s CFO role, including increased financial focus, the ability to reach financial goals faster, and a critical eye to financial bottlenecks and operational risks that may be overlooked.

While an in-house CFO may be a financial expert, they may not know their way around a tax audit. That’s why we recommend hiring an outsourced CFO who can work cross-functionally to provide you with financial expertise while managing your tax obligations.

Need more reasons to hire an outsourced CFO for your business? Check out five ways an outsourced CFO can save your business money.

At Cook CPA Group, we have decades of experience helping businesses of every size manage their finances and prepare business taxes to maximize savings. Hiring a CFO becomes an essential step in growing your business, no matter the size of your company.

Schedule a free consultation with us today to find out how to hire Cook CPA Group as your company’s outsourced CFO.

How to Make Tax-Free Gifts in 2023

rolled one hundred dollar bills tied with red ribbon

rolled one hundred dollar bills tied with red ribbon

The IRS allows individuals to make tax-free gifts to certain recipients under specific circumstances. While you may not believe you are in the financial position to give tax-free gifts in 2022, what you learn may surprise you.

This post guides you on the IRS rules regarding making tax-free gifts and tips to take advantage of this tax benefit to save money on your taxes in 2022.

Annual Exclusion Tax-Free Gift

The IRS allows an annual exclusion that permits individuals to make gifts up to a certain amount to as many individuals as they want, without incurring any gift tax.

For 2022, the annual exclusion is $16,000 per recipient. This means you can give $16,000 to each of your children, grandchildren, friends, or any other individual without paying any gift tax. You can also make joint gifts with your spouse, allowing you to give up to $32,000 per recipient per year without incurring a gift tax.

Tuition and Medical Expenses Gift Exclusion

You can pay tuition or medical expenses for someone else directly to the educational institution or medical provider without incurring gift tax. While this is an incredible opportunity to save money, you should ensure that the payment is made directly to the institution or provider for the benefit of a specific individual.

You cannot gift the money to an individual with the sole purpose of using the money to pay for education or medical expenses. The money must go directly to the educational institution (like a college or university) or a medical provider.

Gifts to a Spouse Tax Exclusion

husband surprise his wife with gift of a new car

Gifts to your spouse are generally tax-free, regardless of the amount. However, if your spouse is not a United States citizen, the annual exclusion for gifts for your spouse is $164,000 in 2022.

This is certainly something to keep in mind around the holidays when expensive gifts are often purchased.

Gifts to Political Organizations Tax Exclusions

If you are involved in local, state, or federal politics, rest assured there is a tax-saving opportunity for you! The IRS allows you to make tax-free gifts to political organizations for use in political campaigns.

Like all gifts, ensure you retain all receipts in case of an audit.

Charitable Gifts Tax Exclusion

You may already be familiar with the charitable gift tax exclusion, as many people take advantage of this tax-saving tip. If this is the first time you’ve heard about charitable gift-giving, you should know that to get the gift-tax exclusion, you should make your gift to a qualified organization and ensure you obtain a receipt for the gift.

Gifts to a Trust Tax Exclusion

The IRS has specific tax allowances for trusts, including making tax-free gifts to a trust as long as certain requirements are met.

Among other things, to make tax-free gifts to a trust, the trust must be irrevocable, and you must not retain any control over the trust or the assets in the trust.

Gifts to Non-Profit Organizations Tax Exclusion

family donating gifts and toys to non profit organization

Similar to gifts made to charitable organizations, you are allowed to make tax-free gifts to a non-profit organization as long as the organization is registered as a 501(c)(3) organization by the IRS.

You can often determine the tax status of an organization by finding the information on its website or contacting them directly.

Gifts to a Tax-Exempt Organization Tax Exclusion

Like charitable and non-profit organizations, the IRS allows individuals to make tax-free gifts to a tax-exempt organization as long as the organization is recognized as tax-exempt by the IRS.

Common tax-exempt organizations include religious, scientific, and literary organizations.

Gifts to Governmental Agencies Tax Exclusion

While this gift-tax exemption may come as a surprise to some, the IRS allows you to make tax-free gifts to governmental agencies (including state or local governments) for public purposes.

Gifts to Reduce Estate Taxes

Finally, the IRS allows individuals to make tax-free gifts to reduce the value of their estate for tax purposes. The maximum amount you can gift without incurring any gift tax is the lifetime exemption amount.

For 2022, the lifetime exemption amount is $12.06 million for individuals and $24.12 million for couples.

It’s important to note that if you make gifts that exceed the annual exclusion amount or the lifetime exemption amount, you may have to pay gift tax. You may also have to file a gift tax return even if you do not owe any gif tax.

If you’re unsure if your gift qualifies for a gift tax exemption, reach out to Cook CPA Group today. We’ll help you consider the tax implications of gifts you make and answer any questions you may have.

7 Tax Tips for 2023 to Save Your Family Money

couple consulting financial advisor about tax tips

couple consulting financial advisor about tax tips

The new year is just around the corner, and it’s time to start thinking about taxes and saving your family money. Tax season can be overwhelming, but with the right strategy, it doesn’t have to be.

With a few smart moves, you can save your family money in 2022 and keep more of your hard-earned cash. At Cook CPA Group, we ensure our clients never pay more in tax than they have to. That’s why we’ve put together this post with seven tax tips you can leverage to save your family money this upcoming tax season.

Read on to learn the seven tax tips you must know to save money this year:

1. Take Advantage of Tax Credits

Tax credits are one of the best ways to save money on taxes. There are various tax credits available for families with children, low-income households, and new homeowner tax credits. It’s important to familiarize yourself with the different tax credits available and take advantage of those that apply to you.

For example, if you qualify for certain credits, such as the Earned Income Credit, you can reduce your tax bill significantly. Here are a few tax credits available for families to get you started:

2. Contribute to a Retirement Plan

Contributing to a retirement plan is a great way to save money on taxes. Most retirement plans have tax-deferred contributions, meaning you don’t have to pay taxes on the money you contribute until you start withdrawing it. This can help you save money in the long run.

Contributing to a 401k (if your employer provides such a benefit) or a traditional or Roth IRA can help lower your taxable income and reduce the amount of taxes you owe. While it may be daunting to open up a retirement account with all the options available to investors, you should know that the earlier you start contributing to a retirement plan, the more you’ll be able to save.

If you need additional guidance on contributing to your employer-sponsored 401k or setting up an IRA account for you or a member of your household, don’t hesitate to reach out to us. We can help inform you of the tax advantages of setting up these financial accounts.

3. Take Advantage of Deductions

calculator on one hundred dollar banknotes

Deductions are another great way to save money on your taxes this year. Deductions reduce your taxable income, which can help decrease the amount of taxes you owe. There are a variety of deductions available, including deductions for medical expenses, charitable donations, and business expenses.

It’s important to do your research and determine which deductions you may qualify for. Here are a few articles to help you get started on researching tax-saving deductions:

4. Set Up a 529 Plan

A 529 plan is a college savings plan that allows you to save money for your child’s college education on a tax-deferred basis. Contributions to a 529 plan are tax-deductible, and the money can be used for a variety of college expenses, including costly books and materials.

Setting up a 529 plan is a great way to save for your child’s future. If you have children in college or have a college-bound child, check out this article to learn more ways you can save money:

5. Make Charitable Donations

volunteer preparing donation to charity

Donating to a charity can help you save money on your taxes. Any donations you make to a qualified charity are tax-deductible, meaning you can deduct them from your taxable income.

You can use the money you save through your charitable donations to invest in other tax-saving strategies like retirement plan contributions or tax-deductible gifts to your children.

6. Invest in a Tax-Advantaged Savings Account

Tax-advantaged savings accounts can help you save money on your taxes. These accounts, including Roth IRAs and Health Savings Accounts (HSAs), allow you to save money while earning interest. The money you contribute to these accounts is not taxed, meaning you can save more money for your family over time.

To learn more about setting up an HSA or Roth IRA, contact us today. We will explain the differences between these tax-advantaged savings accounts to help you decide which plan makes the most sense for your current and future financial goals.

7. File Your Taxes Early

Filing your taxes early can help you save money on your taxes. And no, we aren’t just saying that because we’re expert tax professionals! By filing your taxes early, you ensure you receive any potential refund sooner while avoiding any late filing penalties.

Every penny counts when your goal is to save money during tax time. The tax professionals at Cook CPA Group are committed to ensuring you never pay more taxes than you have to.

Filing your taxes with the right accounting firm means you are always financially prepared. Planning your tax filing ahead of the deadline guarantees you won’t be surprised by any last-minute filings.

Schedule a free consultation with the tax experts at Cook CPA Group to maximize your family’s tax savings.

Frequently Asked Questions About Filing Business Taxes For the First Time

business owner filing their first business tax

business owner filing their first business tax

Starting a business is an exciting time in any entrepreneur’s life. However, the elation you may feel in seeing your vision come to life can quickly dissipate once tax season comes around. Filing business taxes for the first time can be a daunting experience.

In my over 20 years of experience as a professional accountant, I have found that business owners ask the same accounting and tax questions when first getting started. In an effort to help our clients, my team has put together this guide answering the most frequently asked questions about filing business taxes for the first time, including:

  1. How much does my business have to make before I’m required to pay taxes?
  2. How much should I put away to pay my business taxes?
  3. Will my business get a tax refund?
  4. Do I have to file taxes for my business if it made no money this year?

How much does a business have to make before paying taxes?

This is one of the first questions new business owners have about filing business taxes for the first time. Fortunately, the answer is straightforward. According to IRS tax laws, you must pay the Self-Employment tax (SE tax) if you work for yourself. This tax funds social security and Medicare, providing you with retirement, disability, and hospital insurance benefits.

If you own your own business, you are required to pay the SE tax if one of the following applies:

  1. Your net earnings from the business were $400 or more.
  2. You work for a church or a qualified church-controlled organization that elects to be exempt from social security and Medicare taxes. In this case, you must pay SE tax if you receive $108.28 or more in wages.

If either of the above points applies to you, you should also confirm you do not fall under any special rule or exception. Generally, the IRS allows exemptions to this rule for public officials like notary public fees, state and local government employees, etc.

For more information on the Self-Employment Tax, visit the IRS website here.

How much should a business put away for taxes?

magnifying glass one hundred dollar bills and percentage sign

How much you pay in tax in your first year in business (and every year after) depends on your business entity type and where you live. If you live in any of the following states, you don’t have to worry about saving money to pay state income tax:

  • Alaska
  • Florida
  • Indiana
  • Montana
  • Nevada
  • New Hampshire
  • South Dakota
  • Wyoming

On the other hand, if you live in a state with a high-income tax rate, like California or New York, you want to consider putting away a few extra dollars to pay your state income tax.

Another consideration is your business entity structure. If you structured your business as an LLC, S corp, or sole proprietorship, expect to pay the same tax rate as your own personal income tax rate. If you have a C corporation, you will pay a flat rate of 21% in taxes.

To account for the differences in business structure and state-based income tax variations, we recommend saving around 30% of your business income after expenses and deductions. That should be plenty of savings to pay both federal taxes and any applicable state taxes.

Do I have to file taxes during my first year in business?

The short answer to this question is yes. If your business made more than $400 in income this year, you are required to pay taxes your first year in business. The main thing to consider when filing taxes in your first year in business is the business tax payment deadlines.

If you expect to owe more than $1,000 or more in tax, and you operate your business as a sole proprietor, partner, or S corporation shareholder, expect to make quarterly estimated payments rather than the annual payments made as a personal filer. If your business is a C corporation and you anticipate owing tax of $500 or more, you must also make quarterly estimated tax payments.

Check out the IRS guide on Estimated Taxes to learn more about their requirements.

Do businesses get a tax refund?

judge gavel calculator and gold scale on dark background

Many business owners wonder if they can expect to see a tax refund in their mailbox after filing their taxes. While not as common for businesses as for personal tax filers, your small business can receive a tax refund in a few cases.

Since most business tax entities are considered pass-through, the business owner pays their federal income taxes on their individual tax return. So, if you own an LLC, sole proprietorship, or S corp, and your tax payments exceed the tax due, you can expect a tax refund just as you would with a personal tax return.

A benefit of structuring your business as a C corporation is the expectation of receiving a business tax refund. Because C corporations pay income taxes directly as a business (instead of passing through to the owner(s) personal return), they are the only entities that receive a refund to the business itself. Corporations can expect to receive a tax return only if it has paid more in estimated taxes than the tax it owes.

Do I have to file taxes if my business made no money this year?

There are several instances where a business has formed under a business entity (LLC, sole proprietorship, S corp, or C corp) but has not generated any income for the year. Whether you set up your business entity before formally opening or have ceased business operations for the year, you may still be required to file taxes even if you made no money.

Here are the specific rules for each business entity structure:

  • Single-Member LLC – there is no need to file taxes if you have no income or qualifying expenses.
  • Multi-Member LLC (partnership) – there is no need to file taxes if you have no income or qualifying expenses.
  • Sole Proprietorship – there is no need to file taxes if you have no income or qualifying expenses.
  • C Corporation – you must file an income tax return on annual taxable income unless you are exempt under section 501.
  • S Corporation – you must file an income tax return on annual taxable income unless you are exempt under Section 501.

Still, have questions about filing taxes in your first year in business? Schedule a free consultation today to speak with an expert team member. Cook CPA Group offers an array of tax preparation and planning services to help you through the business tax filing process.

6 Medical Expenses You Didn’t Know Were Deductible

stethoscope calculator and pen on medical expense report

stethoscope calculator and pen on medical expense report

With the cost of US healthcare sharply rising, you may wonder if you can deduct medical expenses to save money on your taxes this year. The short answer is yes. The IRS allows taxpayers to deduct qualified medical and dental expenses exceeding 7.5% of a taxpayer’s annual adjusted gross income (AGI).

While you may be familiar with some common qualified medical expenses like doctor’s visits, diagnostic tests, and hospital visits, there are many other deductions you should know. The following list outlines six lesser-known medical expenses you can deduct from your taxes this year.

Deductible Medical Expenses

1. Alternative Medical Expenses

Alternative medical practices are quickly becoming a helpful source of medical intervention. From naturopathic doctor visits, chiropractic care, and acupuncture appointments to Christian Science practices, there is a robust list of deductible alternative medical expenses.

Although this is a great tax-saving opportunity, be careful about writing off non-prescription supplements or treatments. These are non-eligible expenses that are expressly forbidden to be deducted from your tax bill. Read this IRS guide for a full list of eligible and non-eligible alternative medical expenses.

2. Infant Care Expenses

family managing budget for their children hospital expenses

It’s no secret that preparing for a baby’s arrival is costly. Luckily, there are several infant-related care expenses you can deduct to save money for other childcare expenses in the future. If you or your spouse has decided to breastfeed, any breast pumps or other lactation aides are deductible medical expenses. This includes the pump, accessories, nursing pads, topical creams and ointments, and breastmilk storage bags.

Alternatively, if your doctor has prescribed prescription-grade infant formula for your baby, you can also deduct those expenses from your taxes. While over-the-counter baby formula is not considered tax-deductible, it may be worth speaking to your provider about prescription formulas that may fit your baby’s needs while reducing your overall tax bill.

3. Disability Accommodations & Home Improvements

As we noted in a recent article about home improvement write-offs, some home improvements to accommodate disabilities or chronic illness are deductible medical expenses. If you, your spouse, or your dependent(s) require permanent home improvements to provide daily medical-related care, you can likely deduct such expenses from your tax bill.

The following are some examples of deductible medical-related improvements you should know:

  • Installing entrance and exit ramps for wheelchair accessibility or ease of mobility
  • Costs of widening hallways and interior and exterior doorways
  • Adding support bars and railings to extra stability and safety around your home and property
  • Modifying kitchen counters and cabinets

Read this helpful IRS publication here, for a full list of medical-related home accommodations and improvements.

4. Medical Conferences

It’s often said that you are your best advocate when it comes to your health and well-being. It’s natural for people to invest in learning about their medical conditions to better advocate for themselves in the doctor’s office. Fortunately, certain informational-related costs are tax deductible.

You can deduct several fees if you register for a medical conference that is directly related to a medical condition or chronic illness of you, your spouse, or your dependent(s). For example, registration fees and transportation costs are considered tax-deductible expenses. However, lodging and any meals for you and/or your family are not considered eligible medical deductions.

5. Smoking Cessation Programs

man in black t-shirt breaking cigarette

If you’re looking for other reasons to quit smoking, consider the tax-saving opportunities! If you decide to stop smoking through the help of a smoking cessation program, you can deduct any program costs and doctor-prescribed treatments from your tax filing this year.

Having said this, pay careful attention to expenses that are not eligible for deductions. For example, non-prescribed treatments like the popular nicotine patches or chewables are not eligible for deductions.

6. Reproductive Health Treatments

Reproductive health treatment expenses are eligible medical deductions that you may not have known to claim on your tax return. Any costs associated with birth control pills or procedures, including vasectomies, are deductible medical expenses.

Similarly, pregnancy-related costs and treatments, including pregnancy test kits, IVF treatment, other fertility treatments, lab fees associated with these treatments, and storage of eggs or sperm are tax deductible. Additionally, any legal abortion-related costs are also tax deductible.

How To Claim Medical Expense Deductions

gavel with medicine and syringe

Deducting medical expenses is not a difficult process, but it does involve careful planning. If you decide to deduct these or other medical and/or dental costs, you must ensure those costs exceed 7.5% of your AGI.

You can determine your adjusted gross income by adding your wages, capital gains, business income, retirement distributions, dividends, and other income and then subtracting any deductions. Common deductions for individual taxpayers include retirement contributions, health saving account contributions, education expenses, business expenses, and dependent-related expenses.

You can refer to the IRS 1040 Form instructions for more information on calculating your AGI.

The second thing to remember is that you cannot file a standard deduction if you want to deduct any medical-related expenses. Instead, you must file an itemized deduction using Schedule A Form 1040 or 1040-SR.

Additionally, if you’re self-employed, you may be eligible for the self-employed health insurance deduction for payments on insurance policies for you, your spouse, and any dependents.

To confirm whether your medical expenses are eligible for a deduction, reach out to us today. We will help you determine eligibility and ensure you file your deductions correctly.

5 Signs It’s Time to Hire an Outsourced CFO

business team talking to an outsource cfo

business team talking to an outsource cfo

As a business owner, finding time to get your finances in order while keeping up with the demands of daily operations quickly becomes impossible. Between maintaining your books to managing cash flow and expenses, there is just too much to keep up with. Because of this, you may be considering whether it’s time to hire a full-time CFO to manage your bookkeeping, accounting, and financial reporting.

While an in-house CFO makes sense for some large-scale enterprises, an outsourced CFO is often a much better fit for mid-sized businesses. This post outlines the five signs it’s time to hire an outsourced CFO rather than an in-house CFO for your business. Keep reading to see if any of the five signs resonate with you.

1. You Need a Clear Financial Picture

In business, cash flow is king. Understanding the differences in cash flow and revenue on a monthly basis can help you determine your next business move. You can’t expect to take risks or scale your business without knowing the total amount of money coming in each month.

If you find struggle to keep up with invoicing and expenses, it may be time to hire an outsourced CFO. An outsourced CFO can help you determine gaps between your cash flow and expenses, and ensure you stay financially solvent. Additionally, an outsourced CFO isn’t bogged down by daily operations, meaning they can provide clarity around your financial objectives.

2. You Need Help Maintaining Your Books

Along those same lines, it may be time to hire an outsourced CFO if you struggle to keep your financial books in order. Maintaining proper accounting practices and bookkeeping techniques is a significant pain for many business owners. Starting out, you may have felt confident doing your own bookkeeping and accounting, but over time, keeping up with the invoices and monthly expenses became overwhelming.

Finding an outsourced CFO who is also a certified public accountant (like our team at Cook CPA Group) can help you set up or better utilize accounting software. From there, an outsourced CFO can help maintain the accuracy of those books and prepare your quarterly tax filings.

3. You Need Regular and Custom Reporting

cfo having a regular and custom reporting

A benefit of having a CFO, whether in-house or outsourced, is the ability to get custom and regular financial reports. While many automated accounting software plans offer a reporting function, they’re often lacking in the customization department.

Having a financial pro provide you with detailed financial reporting can go a long way in scaling your business. Hiring an outsourced CFO means getting expert financial advice and detailed reporting to navigate difficult business decisions. Custom reports can include:

  • Balance sheet
  • Income statement
  • Cash flow statement

While your accounting software may provide these reports, the likelihood is that you’re not getting actionable advice on the appropriate steps your business should take. Hiring an outsourced CFO can help you analyze these reports and develop an implementation plan to keep you on the right track to pivot your business for growth.

4. You Don’t Have Time To Do It All Yourself

As a budding business owner, you may have had time to pore over your financial statements and cash flow spreadsheets. But as an established business, you may feel like you need to tack on an extra day or two each week to tackle all your tasks. If this sounds familiar, it’s time to hire an outsourced CFO.

Outsourced CFOs take your tedious financial tasks to give you the time you need to focus on daily operations. Imagine never thinking about bookkeeping or keeping up with cash flow issues again! Now that’s a benefit all business owners can agree on.

5. You Don’t Have the Budget to Hire a Full-Time CFO

One of the biggest signs it’s time to hire an outsourced CFO is if you don’t think you have the budget to hire someone in-house. The benefit of hiring an outsourced CFO is that many offer services at an hourly or set monthly price. Because they aren’t stuck dealing with employees or daily operations, outsourced CFOs focus on just the numbers. Say goodbye to paying for benefits, sick leave, and vacation time!

Hiring an outsourced CFO saves you money without skimping on the results. With curated and tailored reporting and expert advice, hiring an outsourced CFO is the best of both worlds: cost-effective and custom to your business.

Outsource Your CFO Function To Cook CPA Group

outsourced cfo presenting reports with her clients

If any of the above signs resonate with you, it’s time to hire an outsourced CFO. At Cook CPA Group, we have decades of experience helping businesses like yours increase cash flow, grow revenue streams, and set strategic financial goals.

When it comes to our outsourced CFO services, we leave no rock left unturned. We dig through the financial weeds of your business to identify gaps and opportunities to scale. Our founder, Evelyn Cook, is an expert accountant and finance professional with the strategic smarts to help your business be successful.

If you’re ready to hire an expert outsourced CFO, schedule a free consultation call with Evelyn. You’ll discover how Cook CPA Group will help you save on operational costs while making decisions that positively impact your business finances.

4 Question You Must Ask Yourself Before Doing Own Business Accounting

woman thinking about doing her own business accounting

woman thinking about doing her own business accounting

Ensuring your business operations run smoothly is an overwhelming responsibility as a business owner. While some processes can come more easily to you than others, accounting practices are often weak points in many businesses.

You may think doing your own business accounting will save you much-needed cash flow, but if you don’t have a clear understanding of accounting practices, you could waste precious time and energy doing your own accounting.

Business accounting is one of the most important aspects of running a successful business. Before deciding to do your own business accounting, you should ask yourself the following four questions. These questions may help shape your perspective on some more technical aspects of business accounting.

In the end, you may find hiring an expert CPA saves you time, money, and energy.

How many monthly transactions do you expect?

An essential question to ask yourself before doing your own business accounting is how many transactions you expect to make each month. Keeping track of monthly transactions may be easy if you’re in the early stages of establishing your business. However, as your business grows, it becomes more important to ensure you track every transaction accurately.

There are many options to consider in the world of accounting software, with QuickBooks being a common choice among small business owners. Before you begin researching all your accounting software options, keep the following considerations in mind:

  • Accounting software typically comes with a monthly or annual cost. Run the numbers to determine whether it may be more cost-effective to work with a CPA instead.
  • Setting up your accounting software profile takes time. Consider the amount of free time you have to set up your account and learn the ins and outs of an accounting software program.
  • Accounting software can have many features that go unused by your business. While offering shiny bells and whistles is a great way to attract new buyers, the truth is you may be paying for features you don’t need.

Can someone else validate your calculations?

businessman asking help to an outsource cfo about his business accounting

Ensuring your financials are accurate is vital to the health of your business. Before deciding to do your own business accounting, ask yourself whether you feel confident making all the calculations yourself.

While accounting software can help you, it’s critical to manually review your calculations before filing your taxes. Many Cook CPA Group clients use their own accounting software but send us their account reports to ensure everything is up to snuff before filing their taxes.

Everyone makes mistakes, and it’s essential to recognize that business accounting is complex. Having a second pair of eyes to validate your calculations and confirm your accounts are in order is a huge step in ensuring you file your taxes accurately and timely. Doing your own business accounting may not be a wise decision for you if you don’t have someone you trust to double-check your financials.

Do you have separate business and personal accounts?

Maintaining separate business and personal accounts can go a long way in ensuring your accounting process is seamless. And, if your goal is to make paying taxes as easy as possible, separating your business accounting function from your personal accounts is critical.

Before deciding to do your own business accounting, review your current process. If you currently mix your business accounting with your personal accounting, it may be wise to separate them. While an experienced CPA has the know-how to wade through mountains of transactions, the process may prove too time-consuming for you.

Opening a separate business account is the best piece of advice I can give any business owner interested in doing their own business accounting. Doing so can save you unnecessary headaches during tax season.

Are you familiar with business-related tax deductions?

businessman computing business related tax deduction

One of the main arguments against doing your own business accounting is missing out on business-related tax deductions. With the potential to save hundreds if not thousands of dollars on your tax bill with business-related deductions, you must know the opportunities you can take to pay less in taxes.

Business deductions are an important component of any tax filing, and accurate accounting plays a major role in claiming the appropriate tax savings. No matter the size or years in business, every business can and should leverage deductions. But researching eligibility requirements and ensuring you can legally claim the deduction can become a complex process.

Many people who opt to do their own business accounting also prefer to file their own taxes. While this can streamline the tax filing process, you could potentially be leaving money on the table. We strongly recommend you consult with a trusted CPA for guidance.

Cook CPA Group has decades of business accounting experience. We encourage you to schedule a free consultation with us if you’re debating whether to do your own business accounting. We can guide you through the important steps you should consider and serve as a resource for any business accounting questions you may have.

5 Child and Dependent Expenses You Can Deduct From Your Taxes This Year

couple with their children consulting lawyer about tax deduction

couple with their children consulting lawyer about tax deduction

The rising cost of living is a significant burden for many U.S. families. While you can’t deduct grocery bills or utilities from your tax bill, other family-related expenses can reduce your overall tax bill this year. From child care and adoption fees to education-related expenses, there are several tax credits you should leverage.

This post outlines the five child and dependent expenses that may just earn you a deduction this tax season, including:

  • The Child Tax Credit
  • The Child and Dependent Care Tax Credit
  • The Adoption Tax Credit
  • The American Opportunity Tax Credit
  • The Lifetime Learning Tax Credit

Keep reading to see if you qualify for any or all of the five tax credits.

Child Tax Credit

You may have heard the buzz around the Child Tax Credit (CTC) in recent years. First introduced in 1997 by President Clinton, the Child Tax Credit is a fully refundable tax credit for children under 17. In 2021, the Biden-Harris Administration expanded the Child Tax Credit to $3,600 per child under the age of 6 and $3,000 for other qualifying children under 18.

However, that expansion ended in 2022, and the credit will return to the original $2,000 per qualifying child under the age of 18.

How to Qualify for the Child Tax Credit

There are two factors to qualify for the Child Tax Credit: qualifications for you as the filer and qualifications for the child or dependant.

To qualify for the full CTC for each child, you must ensure you have a qualifying child and that the child has a valid Social Security number. Additionally, your annual income cannot be more than:

  • $150,000 for married filing jointly, or if you are filing as a qualifying widower
  • $112,500 for head of household filers
  • $75,000 for single filers or married filing separately

Your child or dependent must meet the following criteria to be eligible to file for the CTC on your tax filing:

  • Be under 18 at the end of the year
  • Be your child, stepchild, eligible foster child, sibling, stepsibling, half-sibling, or descendant (e.g., grandchild, niece, or nephew)
  • Provide no more than 50% of their own financial support during the tax year
  • Live with you for more than half the year
  • Be claimed as a dependant on your return
  • Not file a joint return with a spouse
  • Be a U.S. citizen, national, or resident alien

If you and your child or dependent meet the eligibility criteria, you can claim the Child Tax Credit on your tax return by filling out Form 1040 and submitting your Individual Income Tax Return with Schedule 8812 attached.

Child and Dependent Care Tax Credit

single mother working on her application for tax deduction

Another potential money saver for your family is the Child and Dependent Care Tax Credit. This credit provides cost savings for families who paid for care for their child or dependent. Child care can include care provided at a center, daycare facility, camps, or relative. At this time, state-based care does not qualify for the credit.

How to Qualify for the Child and Dependent Care Tax Credit

To qualify for this cost-saving credit, you:

  • Paid for care for a qualifying child or dependent under the age of 13
  • Paid for care for a qualifying child or dependent to look for employment
  • Paid less for care than your total yearly income

If you meet the eligibility criteria, you can claim the Child and Dependent Care Tax Credit on your tax return by filling out Form 2441 with your Individual Income Tax Return.

Adoption Tax Credit

happy family after the approval of the adoption

If you adopted a child or are in the process of adopting a child, you may qualify for the Adoption Tax Credit. It’s well-known the adoption process is lengthy and expensive. Luckily, the Adoption Tax Credit can help you save up to $14,440 per eligible child. Though there are some income limits and other eligibility factors, it may be worth your time and effort to consider filing for this tax credit.

How to Qualify for the Adoption Tax Credit

To qualify for the Adoption Tax Credit, the child you are adopting must be under the age of 18 or, if over the age of 18, must be unable to care for themselves. Additionally, the adoption credit is based on your modified adjusted gross income (MAGI), and you should check the IRS website or reach out to us to confirm the MAGI amount for 2022.

Qualified expenses include adoption fees, legal fees, adoption-related travel expenses, and other directly related expenses. To research other related expenses such as home study or same-sex parent adoption credits, read this article published by the IRS.

If you meet the eligibility criteria, you can claim the Adoption Tax Credit on your tax return by filling out Form 8839 with your Individual Income Tax Return.

American Opportunity Credit

mother and her college student daughter doing application for aoc

If your child or dependent is a student at an eligible higher education institution, you may be eligible for an annual credit of $2,500 per student through the American Opportunity Tax Credit (AOTC).

AOTC provides tax credits for qualified education expenses paid for during the first four years of higher education, including tuition, fees, books, supplies, equipment, and other related student expenses.

How to Qualify for the American Opportunity Tax Credit

Similar to the Child Tax Credit, there are two categories of eligibility: one to determine student eligibility and the other to determine if you can claim the credit on your tax return.

To be eligible for AOTC, a student must:

  • Earning a degree or education credential
  • Be enrolled at least part-time for at least one academic period beginning in the current tax year
  • Not have claimed the credit for more than four tax years
  • Not have a felony drug conviction

To claim AOTC on your return, you must have a MAGI of $80,000 or less or $160,000 for married couples filing jointly. You may be eligible for partial credit if your MAGI is over $80,000 but less than $90,000 or over $160,000 but under $180,000 for married filing jointly.

If you meet the eligibility criteria, you can claim the American Opportunity Tax Credit on your tax return by filling out Form 8863 with your Individual Income Tax Return.

Lifetime Learning Tax Credit

graduating student doing documents for llc

In addition to the ATOC education tax credit, you may be eligible to save up to $2,000 on your tax bill by claiming the Lifetime Learning Credit (LLC). The LLC covers qualified tuition and related expenses. Unlike the AOTC, the LLC helps students pay for undergraduate, graduate, and professional degree courses and other related expenses.

Although the AOTC provides a slightly higher return, there is no limit on the number of years you can claim the tax return. To claim the LLC on your tax return this year you, your dependent, or a third party must have paid for qualified education expenses for higher education and paid the education expenses for an eligible student enrolled at an eligible education institution. Additionally, the eligible student must be yourself, your spouse, or the dependent listed on your tax return.

How to Qualify for the Lifetime Learning Tax Credit

To be considered an eligible student and claim the LLC, the student must be enrolled or taking courses for at least one academic period at an eligible education institution to get a degree or credential or improve job skills.

If you meet the eligibility criteria, you can claim the Lifetime Learning Tax Credit on your tax return by filling out Form 8863 with your Individual Income Tax Return.

There are many ways to save money on your tax return, especially if you have a child or dependent. While these five tax credits are a good place to start, the best way to get the lowest tax bill is by reaching out to a professional accountant to walk you through tailored solutions.

Schedule a free consultation with Cook CPA Group today to leverage these tax credits on this year’s tax return. Our team of expert and approachable accountants make sure you don’t pay more than you have to.

Tricks Your CFO Should Be Using To Be More Effective

senior cfo having a meeting with other employee

senior cfo having a meeting with other employee

Hiring a CFO is an essential step in ensuring your company’s financial health. However, many CFOs get so bogged down with competing priorities that they struggle with the time management skills necessary to complete the job effectively.

While we are champions of the outsourced CFO model (check out our outsourced CFO service here), we also recognize the CFO on your team is always looking for effective tricks that can make their job easier. Plus, having a successful CFO means your business can run on autopilot.

Share the following six effective tricks with your CFO to improve their effectiveness and streamline your business processes.

Optimize Cross-Team Documents

CFOs have a lot on their plate. Working from a cross-functional perspective, CFOs often have a hand in many of your business operations. While this is an excellent perspective when defining your business strategy, dealing with multiple sources of information can slow down even the savviest financial pros.

Implementing a business-wide policy of data version control is a time-saving trick your business CFO should understand and leverage. Instead of wasting time sorting through different versions of data, encourage your teams to work from one source of truth – a single financial spreadsheet. Creating a model document you can use to collect data across your organization saves your CFO time and costly mistakes.

Leverage Business-Grade Financial Software

cfo leveraging business grade financial software of their company

Investing in your team is one of the most important things you can do to maintain a healthy business. According to Continuum Cloud’s 2019 State of Workforce Management Report, 73% of CFOs report a significant return on investment in implementing digital tools.

Leveraging business-grade software enhances the efficiency and efficacy of your business while making it easy for your team to do their job. Financial software helps CFOs save time on routine tasks that are traditionally unconsolidated. Aggregating data from multiple sources and automating several financial functions helps your financial team work more effectively with other business operation teams.

If you want your CFO to give you more effective strategic advice, take advantage of the wide-ranging software options available.

Automate Financial Processes

In a similar vein to leveraging business-grade financial software, implementing automation in your business process can help your CFO save time. Keeping up with growing business demands is a primary struggle for most CFOs.

Automating data collection and reporting functions can go a long way in helping alleviate the overwhelm. You can help your CFO automate by offering to implement strict internal controls and cross-functional dashboards. Many financial software programs integrate seamlessly with your existing financial processes and offer these automation features.

Support your CFO and financial team by investing in automation software that fits their unique needs.

Focus On Strategic Reporting

a cfo discussing his report about financial growth

An important function of any CFO role is reporting. But financial reporting can quickly become a time-wasting activity. Taking time to collect, analyze, and create a report on financial information provides valuable insight, but the key is to spend that time on strategic reporting.

If your company invests in business-grade financial automation software, much of the weekly or monthly reporting functions your CFO typically reports on can be automatically created. Distributing these reports through mid-level staff allows your time-strapped CFO the opportunity to think strategically.

Encouraging your CFO to move away from day-to-day reporting and take a higher-level approach to the business strategy can be the catalyst for the growth your business needs. While your CFO is well-versed in daily operations, it may be necessary to outline operational expectations beyond monthly models.

Give your CFO the tools and guidelines to spend more of their time on strategic reporting for the foreseeable future so they can hand the reigns of daily operation to their executive team.

Create Internal Risk Management Protocols

The responsibility for risk management often falls to the CFO in small to mid-sized companies. Collaborating with an in-house or outsourced legal team on risk management issues can be a time and energy drain.

A time-saving trick for your CFO is to implement a strategic company-wide risk assessment. With the help of a legal team, your CFO’s team can quickly develop a risk management process that protects your business in the event company standards are compromised.

While this takes upfront work, having risk protocols in place ensures a huge return on time in the future.

Build Proactive Strategies

cfo giving task to their staff

It’s no secret that CFOs wear many hats. From financial analysis to risk management and goal setting, CFOs have plenty of work to keep them busy the whole day. However, getting trapped in endless work cycles without taking the time to anticipate problems can be a risk for your business.

An effective CFO can save time and energy by delegating daily operations to their staff. In turn, they can spend the freed-up time anticipating potential problems in the business and developing proactive strategies to mitigate them.

Your CFO is an integral part of the decision-making process of your business. You must encourage them to make space in their day to look out for solutions for any potential problems that may arise.

It may be wise to outsource your CFO functions if you believe your CFO is struggling to be as effective as they could be. At Cook CPA Group, we’ve worked with hundreds of business clients and seen how the best businesses have scaled their operations. Schedule a free consultation today to find out how we can help your CFO and your business achieve financial goals.