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Summertime tax planning

Paul Dion CPA
Paul Dion CPA

MILLBURY, MA and NEWPORT, RI…

Most self-employed people or small business owners would never list tax planning as a favorite summertime activity. Yet for those small business owners looking to enjoy a vacation in the next year and some tax-deductible outings during the summer, it makes the most sense.

“Many small business owners don’t even think about their taxes until it’s time to meet with their accountants and file,” said Paul Dion, owner of Paul Dion CPA. “It is to the small business owner’s benefit to meet at least quarterly to analyze how you can take full advantage of the provisions, credits and deductions that are legally available to you. What better time than summertime when things tend to quiet down a bit for many small businesses.”

When it comes to tax planning, Dion cites several overlapping goals that the small business owner should strive for: reducing the amount of taxable income; lowering your tax rate; controlling the time when the tax must be paid; claiming any available tax credits; and controlling the effects of the Alternative Minimum Tax; and avoiding the most common tax planning mistakes.

“Lowering taxable income is the most obvious place to start because if you can accomplish that, you can possibly lower your tax rate,” said Dion. “Three of the better areas to find additional deductions are business entertainment expenses, business auto expenses and the home office expenses.”

One often overlooked deduction for business entertainment is that the IRS allows up to 50 percent deduction of meals. Business must be discussed during that meal and a receipt of the dinner will be needed for tabs greater than $75.

Another is use of more than one personal vehicle for business use. While the 2015 mileage rate of .575 applies, you can deduct business miles from more than one automobile should you use both for business. To figure business use, divide the business miles driven by the total miles driven. This strategy can result in significant deductions.

One last key deduction is the home office, particularly if you need to buy new equipment. Section 179 expensing for tax year 2015 allows you to immediately deduct, rather than depreciate over time, up to $25,000, with a cap of $200,000 (down from $500,000 and $2,000,000, respectively, in 2014) worth of qualified business property that you purchase during the year. The key word is “purchase”. Equipment can be new or used and includes certain software. All home office depreciable equipment meets the qualifications.

For more information on tax planning and small business deductions, you can call Paul Dion CPA at (508) 853-3292 or visit www.pauldioncpa.com.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For a free book, more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527.

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There’s no place like ‘away from home’ for self-employed deductions

Paul Dion CPA
Paul Dion CPA

MILLBURY, MA and NEWPORT, RI…

It’s never been easier for small business owners and self-employed individuals to work remotely. Yet the benefits from working at home extend beyond a very, very short commute. There are also tax deductions that can make working from home beneficial even when you’re not there.

“Tax law allows you to deduct two types of travel expenses related to your business, local and what the IRS calls “away from home,” said Paul Dion, owner of Paul Dion, CPA in Millbury, MA and Newport, RI. “You can deduct local transportation expenses incurred for business purposes such as the cost of getting from one location to another via public transportation, rental car, or your own automobile. Meals and incidentals are not deductible as travel expenses, but you can deduct meals as an entertainment expense as long as certain conditions are met.”

Self-employed and small business owners can deduct one-half of the cost of meals (50 percent) and all of the expenses of lodging incurred while traveling away from home. The IRS also allows you to deduct 100 percent of your transportation expenses–as long as business is the primary reason for your trip.

“Many self-employed people don’t take advantage of many of these deductions. For example, deducting 50 percent of a meal they were going to eat anyway,” said Dion. “But these deductions are part of the tax law and taking advantage of these deductions is really just a matter of proper documentation.”

Adds Dion, “Expenses are directly related if you can show there was more than a general expectation of gaining some business benefit other than goodwill.”

To that end, he advises keeping a tax diary of your expenses to audit-proof your records. Adequate documentation includes amount, date, place of meeting, business purpose for the expense and business relationship.

For more information on deductible small business travel expenses, you can call Paul Dion CPA at (508) 853-3292 or visit www.pauldioncpa.com.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For a free book, more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527.

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Work combined with play help small business owners get away

Paul Dion CPA
Paul Dion CPA

MILLBURY, MA and NEWPORT, RI…

The approaching Memorial Day weekend has left many small business owners wondering how they can afford to go away for vacation this summer. If they choose to include some business, it’s possible to turn a five-day excursion to the Cape, a retreat to the mountains or some other trip into a tax deduction and vacation.

“Many small business owners are unclear as to what is business travel and what is not. A simple definition is that if a trip for business causes you to leave your place of business overnight, it’s a business trip and deductible,” said Paul Dion, CPA. “There are some parameters business trips must adhere to. Done correctly, an entire ‘business trip’ can be written off as a business expense.”

The IRS states that travel expenses are 100 percent deductible as long as your trip is business-related and you are traveling away from your regular place of business longer than an ordinary day’s work and you need to sleep or rest to meet the demands of your work while away from home. If the trip meets that definition, you can deduct 100 percent of lodging, tips, car rentals, and 50 percent of your food.

For example, let’s say a small business owner from Millbury spends two days meeting with prospects on the Cape. The first meeting is on Friday morning and the second meeting isn’t until Monday. According to IRS regulations, both days can be deducted as business expenses, even if after the meeting on Friday morning the small business owner spent the rest of the day at the beach.

“The beauty of this deduction is that not only are Friday and Monday deductible, but so are Saturday and Sunday,” said Dion.

Though the IRS does not require receipts for travel expenses under $75 per expense—with the exception of lodging—Dion advises keeping a tax diary of your expenses while you’re away. A good tax diary is essential in order to audit-proof your records. Adequate documentation includes amount, date, place of meeting, and business reason for the expense.

When planning an extended business trip, Dion advises consulting with your tax preparer or accountant.

Adds Dion, “Better yet, pay a visit in person. It’s tax-deductible.”

For more information, call Paul Dion CPA at (508) 853-3292 or visit www.pauldioncpa.com.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For a free book, more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527.

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Small businesses beware: Bartering income is taxable.

Paul Dion CPA
Paul Dion CPA

MILLBURY, MA and NEWPORT, RI…

For small businesses starting out, bartering services can be a way to get your foot in the door, generate some positive word-of-mouth advertising and get some needed services without cash out of your pocket. It can also be a way to get into hot water with the IRS if you do not declare what you received for your product or services as taxable income.

“According to the government, barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return,” said Paul Dion, owner of Millbury, MA-based Paul Dion CPA. “So, if a plumber does $1200 worth of work for a dentist in exchange for dental work, he/she must declare the $1200 as income on their tax return. The dentist must do the same for his/her return.”

Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

How small business owners report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.

The need for reporting has also grown in recent years with the advent of barter exchanges and organized bartering. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.

“I’m sure more traditional bartering still goes on where one person provides a product or service in exchange for another and nobody needs to be the wiser,” said Dion. “In this age of heightened attention to small business filings and audits, it’s better to be safe than sorry and declare your barter properly.”

For a free consultation on how to claim barter income, please call Paul Dion CPA at (508) 853-3292. For more information, you can also visit www.pauldioncpa.com.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For a free book, more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527.

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How to reduce the biggest tax bill of your life

Paul Dion PHOTOMILLBURY, MA and NEWPORT, RI…

Selling your home or business represents two of the largest monetary transactions most people will be a part of. It also represents their largest capital gains bill they will ever pay as well. Or will it?

“The top rate on capital gains is up to 20 percent; the new “net investment income tax” is 3.8 percent, and state taxes can eat up 13.3 percent more. Depending on where you live, that means the government confiscates up to a third or more of your hard-earned gain,” said Paul Dion, a CPA with offices in Millbury, MA and Newport, RI. “Charitable trusts avoid tax on that gain, but that means giving away the principal or the income from the proceeds. Section 1031 exchanges defer tax on real estate gains, but that forces you to re-invest the proceeds into a ‘like-kind’ property and impose tight deadlines for identifying and closing on a replacement.”

Dion recommends a little-known strategy to cut the effective cost of selling your asset valued at $500,000 or more to as little as 6.5 percent. It’s a monetized installment sale, and it uses a third- party dealer in capital assets to defer receiving sale proceeds (and the tax on those proceeds) for up to 30 years. It’s based on tax code rules dating back to 1913 and supported by a 2012 IRS memorandum.

While deferring tax is great, how does that help you if you want the proceeds from your sale now?  With this strategy, a third-party financial institution can lend you a non-taxable amount equal to 95 percent of the sale price (93.5 percent after loan-related costs). You can re-invest those proceeds or spend them however you like.

At the end of the installment period, the dealer will pay you the agreed selling price that will provide you the money to repay the loan, and you’ll pay the tax with significantly discounted dollars.

“The beauty of this strategy is that it offers significant estate-tax advantages,” said Dion.

How? The seller transfers the asset to the dealer in exchange for lump sum payment of the purchase price payable in 30 years. The dealer simultaneously transfers asset to the buyer in exchange for agreed-upon price. Then, the third-party lender extends nontaxable cash equal to 93.5 percent of sale amount to seller. After 30 years, the dealer pays the agreed sale price, the seller uses that money to repay the loan, and the seller pays tax with discounted dollars.

Adds Dion, “While this strategy may seem fairly straightforward, for most if will require the assistance of a tax professional.”

For more information on this strategy, please contact Paul Dion CPA at (508) 853-3292. You can also visit www.pauldioncpa.com.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292 in Massachusetts; 401-490-3193 in Rhode Island.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527 and 580 Thames Street, Newport, Rhode Island.

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Paul Dion CPA opens Newport, Rhode Island office

Paul Dion CPA
Paul Dion CPA

DATELINE: NEWPORT, RI and MILLBURY, MA…

Millbury, MA-based CPA Paul C. Dion recently opened a Newport, Rhode Island office located at 580 Thames Street. The new office opened for business on January 1, 2015.

“Even though our primary office is based in Millbury, Massachusetts, it is close enough to Rhode Island that we have worked with a number of Ocean State businesses over the years,” said Dion, who also owns a home in Middletown, Rhode Island. “With the growth of our Rhode Island book of business, plus me living there most of the time, it just made sense to open a formal office here.”

For more than 20 years, Paul Dion CPA has provided tax preparation and tax planning services to both individuals and small to mid-size business—a client list totaling more than 800. He also has more than 25 years experience managing financial operations of several multimillion dollar companies ranging from $5 million to $100 million in sales.

During the course of his career, Dion has identified profit improvements and cost savings totaling more than $4 million. Firms Paul Dion CPA has worked with over the years include paper makers, high tech electronics, capital equipment manufacturers, and consulting firms providing services to the pharmaceutical industry. Dion has also authored three books—The Ten Most Expensive Tax Mistakes…that cost Real Estate Agents Thousands, The Ten Most Expensive Tax Mistakes…that cost Dentists Thousands and The Ten Most Expensive Tax Mistakes…that cost Chiropractors Thousands.

Dion received a Bachelor of Science Degree in Accounting from Northeastern University and an MBA from Babson College. He is a veteran of the US Army and has been awarded a Bronze star for Valor, Purple Heart and a second Bronze star for Meritorious Service.

For more information on Paul Dion CPA, visit www.pauldioncpa.com. For a free consultation, please call Paul Dion at (401) 490-3193.

ABOUT PAUL DION, CPA

Beyond simple “bean counting”, Paul Dion, CPA and associates work side by side and speak in common English to help clients fully understand their tax situation and take proactive steps to pay the least amount of tax legally allowed while minimizing the risk of an audit.  Clients save money and sleep well as night.

Business services include small business accounting, payroll, cash flow management, strategic business planning, new business formation, internet controls, QuickBooks, part-time CFO, bank financing, succession planning and non-profit organization direction.

For more information or a complimentary consultation, please visit www.PaulDionCPA.com or contact Paul Dion CPA, via Info@PaulDionCPA.com or (508) 853-3292 in Massachusetts; 401-490-3193 in Rhode Island.  Offices are conveniently located at 22 West Street, #6, (Felter’s Mill), Millbury, MA  01527 and 580 Thames Street, Newport, Rhode Island.

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