Whether you have clients who are brand new to your network or your clients have been a part of your business for years, you want them to feel loved, appreciated, and valued. One common way business owners do that is through gifts. However, there are certain tax rules for client gifts that you should be aware of. Here’s your guide to client gifts for this year.  

Under $25 Per Person 

When sending gifts to a client, the value must be under $25 per person. That doesn’t seem like a lot, but let’s discuss your options. At $25 per person, you can buy a gift that’s more expensive than that, as long as it’s for more than one person and the value doesn’t exceed $25 per person. So, for two people, you can write off a $50 gift. Additionally, the IRS says you can write off incidental costs that don’t add to the value of the gift. One example of that is shipping. So, even though the rule states the value must be under $25 per person, there’s some flexibility to that.  

Spouses Can’t Give Multiple Gifts to the Same Client 

This one is a bummer especially if you and your spouse run two different businesses. Since you’re married, you count as one taxpayer. So, even though you operate two different companies, you can’t each give a client a $25 gift. The total value would be $50, and you’d only be able to write off $25. Even though you both want to give gifts, your client will know the rules and understand both of your companies value them, you just can’t give them two separate gifts, so don’t worry too much about it! 

Gifts Under $4 are Exempt 

For small items that contain your company information and are handed out on a regular basis, the IRS has made an exception. These small gifts are valued under $4 each, so the IRS has exempted them from the gift rules and they can be written off. Items that qualify include things like pens, koozies, buttons, and basically anything that acts as a virtual business card. So, make sure you always count these things as write-offs when preparing for your tax return.  

Client gifts are a great way to show your appreciation and make your clients feel valued, so don’t worry too much about the tax rules! If you need any additional help with client gifts, BaCo Group can help you. You can fill out the contact form on our website, and one of our employees will get back to you as soon as we can. 

The IRS letter 6419 should be coming in the mail soon if it hasn’t already. This is a letter from the IRS containing information about the advance child tax credit payments you would have received in 2021. It will help you report the amounts correctly, claim the other half of your child tax credit, and avoid delays in processing your return and refund. We’re going to walk through exactly what the letter 6419 is and what to do if you don’t have yours.

What is Letter 6419?

Essentially, this letter from the IRS acts as a tax form. It is the official document containing the information you need to report your advance Child Tax Credit (CTC) payments. More specifically, the letter will tell you the total amount of advance CTC payments you received for 2021 and the number of qualifying children counted in determining the advance CTC. Additionally, the letter explains how the amount was calculated and the conditions for repayment.

Can I use my bank statement instead of the letter to file?

It is strongly recommended that you use letter 6419 to file your taxes. Reporting the wrong amount on your return could result in a manual review of your return thereby delaying your refund.

We don’t suggest using your bank statements to verify the amount you received in advance CTC payments because the amounts may have been adjusted for various reasons. For example, the amounts may have changed from one payment to the next as you made changes in the IRS Child Tax Credit portal.

How do I know if I had received a letter 6419?

If you received even one advance CTC payment between July and December 2021, you should have received a letter 6419. If you are married, each parent will receive their own letter. You’ll need both to file your return and claim the second half of your credit.

What if I lost my letter 6419?

Don’t worry! If you lost your letter 6419, there’s another resource you can use to file. With an ID.me account, you can use the IRS Child Tax Credit portal to verify details from the letter. The steps to check your advance CTC payments are as follows:

1. Create an ID.me account if you don’t already have one. Follow this link to do so: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
2. Click Manage Advance Payments.
3. Click ID.me Create new account
4. Follow the instructions on-screen and provide the necessary information to set up your account. It’s important to note that users might be required to upload a live video of themselves and/or photo identification. Go to the ID.me help page if you need assistance.

Once your account is created, you can access the portal from the link above.

Get help reporting your advance CTC payments

If you would like additional help reporting your CTC payments and filing your taxes, our CPAs at BaCo Group can help you! With your letter 6419, we can report your 2021 advance payments and help you claim the second half of your credit. Contact our office today for help reporting your advance CTC payments!

We’re already almost through December, which means the new year is quickly approaching! Don’t let that scare you for tax season, though. BaCo Group has a handful of tax tips for you to keep in mind as the new year rolls around. These tips will help you get a head start in tax season, stay organized, and make sure you have all of the right things prepared for your CPA to finish your tax return. Keep reading to find out what BaCo’s top tips are for the new year!  

Keep Your Records Organized  

Staying organized before tax season might not change your tax bill, but it helps in other ways. For example, many people find themselves struggling to come up with or find all of their documents in the stressful time of tax season. If you’re organized ahead of time and keep everything together, you’ll be prepared to file your return when the deadline rolls around.   

One way to stay organized is by making a checklist. Your checklist should include all the tax documents you’ll need to complete your return. Another tip for staying organized is don’t throw away any documents from the mail that could be tax-related. Even if something doesn’t seem like it will be very important, you should keep it. If you don’t want to stockpile a bunch of papers that you don’t need, talk to your CPA about what you should keep and what you shouldn’t.   

Home Office Deduction  

We are all aware that the pandemic has changed the dynamics of work environments, one of those changes being that people work from home more often these days. This means that if there is a portion of your home or apartment that is used exclusively for business, you are eligible for the home office deduction. Additionally, other house costs that go towards operating your home office are part of that deduction as well, such as the percentage of the rent for that space, insurance, etc. However, there are some stipulations for claiming this deduction, so get in touch with your CPA to ensure you’re claiming that deduction properly.   

Add Dependent Taxpayer IDs to Your Return  

There are certain dependent credits you might be eligible for, but you can’t receive those if you don’t claim your dependents. Be sure to plug in your children’s social security numbers/taxpayer-identification numbers in your return before you submit it. If you are divorced, make sure you talk with each other about who is claiming the dependents on their return. You can’t put dependents on both of your returns, and the IRS has become more adamant about checking for this.  

File and Pay on Time  

You should watch the calendar and make sure you can get your return filed on time and that you can pay on time as well. If you can’t, you should file Form 4868 by April 18th, 2022. This form will give you an extension of the filing deadline until October 15th, 2022. Failing to turn in this form or your return on time will result in hefty fines that you don’t want to run into. These include a 4.5% late-filing penalty per month of the tax owed and a 0.5% late-payment penalty a month of the tax due. That’s why staying organized is very important as the new year begins because you don’t want to get to April 15th unprepared and scrambling to avoid these fees and then being stuck with them anyway.   

If you need assistance preparing for the next tax season, call the BaCo Group! Our CPAs can give you more tips on how to start tax preparing for the new year and guide you through the process to make sure you stay organized and ahead of schedule. We want to avoid tax season stress just as much as you do, so call us today to set up a meeting with us! 

The holidays can be a really fun time for your business! Oftentimes, there are holiday parties, gift-giving, gift-receiving, and lots of celebration! However, it can get confusing categorizing all of these holiday expenses and making sure you’re taking care of your business with these added expenses. So, we’ve put together a short guide to help you manage your accounting during this fun time of year! Keep reading to find out more.  

Write Off Your Party 

The number one tip we have for you is that your annual holiday party can be written off! The expenses are 100% deductible, but don’t get too crazy. Extravagant expenses can put the IRS on high alert. Additionally, don’t exclude anyone! Not only is it kind to include everyone but making the party exclusive can result in HR violations. Invite everyone! We all want to have a good time and enjoy the holidays together! 

Inviting Clients to the Party Helps 

Sometimes, people invite their clients, potential clients, other owners, or business associates to their holiday parties. This is an added expense that you can write off as well, but there are a couple of limitations. These added expenses are only 50% deductible, and a substantial business discussion must take place at the party. Keeping this in mind with your budget and all, consider inviting some of your clients or potential clients to your holiday parties! 

Gifts 

The holidays are also a time of gift-giving, and gifts are another thing that you can write off to some extent. It depends on who the gift is for, so let’s talk about the different kinds of gifts and the limits to writing them off.  

Gifts to a business or an individual 

If you’re giving an individual a gift directly or indirectly, there’s a $25 limit. If you have the opportunity to give a gift to the company as a whole, you should because the limit goes up to $100. Both of these things can still be written off within the limit. 

Limited Direct Costs 

What it costs you to make a gift if not subject to the limits. For example, if you get a bracelet and want it engraved and shipped, the engraving and shipping are 100% deductible. However, the cost of the bracelet would be subject to the $25 limit.  

Entertainment Expenses 

Entertainment expenses like tickets for a sporting event or concert are 50% deductible. They’re not limited to the $25 limit. Therefore, for more expensive things like $250 tickets, classifying them as an entertainment expense is more beneficial.  

Documenting is Important 

Whether you’re giving away sports tickets or gifting a bracelet, you should document it. You need to keep track of the gift’s cost and a description of it, the date it was acquired, the purpose for the gift, and the business relationship with the taxpayer of the person receiving the gift.  

Talk with Your Accountant 

There are better ways to classify these expenses than even what we listed above. If you are going to be hosting holiday parties, inviting clients, and giving presents to both clients and employees call your accountant and ask them what’s the best way to document this to limit your tax liability and maximize your savings. There is plenty of case law documenting how much of these activities can be deductible through promotional expenses or benefits for employees! Getting ahead of this now will allow you to be better prepared for your income taxes in the year to come. 

At BaCo Group we have automated tools we use with our clients that flag us of this activity and allow us to reach out to you directly to ensure that we are getting ahead of this with you and helping you run cleaner accounting for tax purposes in real-time. 

The holidays are a great time of the year for celebrating and gift-giving, and it’s an added plus that you can write off all and/or some of the expenses! If you need help with your holiday expenses, contact BaCo Group today. Our CPAs and tax experts would love to meet with you to discuss your options this holiday season.  

As a small business owner of two companies myself, I can say that owning a small business is no easy task. Taxes are sometimes said to be the worst part of the process. However, it doesn’t have to be. I’m here as a professional accountant to let you know some not-so-secret tax tips that you can utilize as a small business owner. Even before tax season rolls around, consider these tips as you go about your year, so you can get ahead for next tax season.  

Benefits vs. Raises 

Although not all, some employee benefits are considered non-taxable by the IRS, so you may want to incorporate some of these in your payroll strategy. Considering benefits and raises is a tricky thing, but your employees will thank you when fewer taxes are taken out of their paychecks. Some benefits that don’t incur taxes by the IRS are: 

• Company cell phone 

• Up to $50,000 in life insurance coverage 
• Some meals 
• And occasionally tickets to sporting or music events. 

Keep in mind that gift cards are considered taxable income, so a small present like a fruit basket might be worth choosing over an easy-to-get gift card. Other benefits that are considered too minor to merit consideration carry no tax burden. Be sure to speak with a tax professional like those at BaCo Group about how additional benefits can count as expenses without triggering payroll or income tax liability.  

However, don’t get hung up on using benefits over monetary compensation. Benefits should be useful and beneficial to your employees. If they’re not, you might be wasting resources and making your employees unhappy.  

Hiring Family 

If you own a sole proprietorship or a partnership where two parents are the owners, you can reduce your tax liability when you employ your children. Your children should be old enough to contribute to the business. You would hire them as legitimate employees including W-2s and state taxes. Then, money is being kept in the family, and you, as parents, don’t have to give up money for FICA or FUTA. However, federal and state taxes still apply.  

Consider Keeping Receipts 

Collecting receipts can be a pain, but it can benefit you later should you be audited. See, you’re not required to provide proof for every business purchase according to the IRS’s expensing rules, but it will protect you in an audit. Plus, it will keep you from missing an expense when tax season rolls around and you’re trying to remember what you bought for your business.  

The good news is, with technology, you don’t have to keep every paper receipt that you get. One solution to this is purchasing a scanner where you can digitally record and file your expenses and then toss the paper receipts out. There are also plenty of applications that make tracking receipts easier and most plug into your accounting solutions like Quickbooks, Sage, and Xero. By filing and naming the receipts in an organized manner, evaluating your business purchases later will be more efficient as well.  

Get Mid-Year Estimates 

Just because you work with a tax professional or CPA, doesn’t mean you can’t use tax software too! As you go about the year, you can utilize free tax software to estimate your taxes. This will help you make big decisions before you file your return such as purchasing equipment or stashing more money in your retirement account.  

Additionally, consult your accountant about what you could deduct from your taxes as well or what opportunities you have throughout the year. This is why it’s important to tax plan and work with a CPA year-round, so you can make smart tax decisions that will benefit you during tax season. 

How Can BaCo Group Help You? 

The BaCo Group is a fully equipped accounting firm that is prepared to help you plan for your taxes year-round. We are able to do that because of our unique technology that allows us to work on your taxes in real-time. We can provide you with tax estimates and tax advice all year, so you are not stressed about your return and you can have the lowest possible taxable income. If you’re ready to see how these tips and the services we offer can improve your tax strategy as a small business owner, contact BaCo Group today! Our professionals would be happy to help you with your small business tax needs.