May 20, 2015
The chilly spring days are in the rear view mirror and summer weather is rolling in. That can only mean one thing, garage sale season is finally here. After a festive holiday season of receiving shiny new toys and a long winter of piling up old, outdated and unwanted things, it’s time to clear out your house and turn your junk into another’s treasure.
Hosting a garage sale seems like it should be easy. Step 1: Put your junk in the garage; Step 2: Put out a sign; Step 3: Watch your junk disappear and get paid for it! Is it really this easy, or are there some steps missing?
Are there tax consequences to hosting a garage sale?
Per the IRS website, if you have infrequent garage sales you generally do not have to report the sales on your income tax return. This is because you are reselling items you purchased to use personally rather than purchasing with the intent to resell the items for a profit. For items that are sold for less than you originally paid for them, the sales are not reportable, but the losses are not deductible either. However, if you are lucky enough to sell an item for more than you paid for it, you will generally be required to report this gain as taxable income. Some examples of items that commonly increase in value are art, antiques, and collectibles.
Another tax to be aware of is sales tax. Sales tax regulations for garage sales can vary from state to state, so you should check with the state you live in to confirm its regulations. In Ohio and Michigan, garage sales are referred to as “casual sales” and are typically not subject to sales tax. Per the Ohio Department of Taxation, “casual sales are not taxable transactions, as sales tax was paid on these items the first time they were purchased.”
However, items sold at a garage sale may occasionally be subject to sales tax. This typically occurs if an item is purchased very inexpensively, with the intention of reselling the item at your own sale with a significant price markup. Since the item was not originally purchased for personal use, it is considered a retail sale rather than a casual sale. Thus, sales tax should be charged on the transaction. To remit the sales tax, you will need to register with the state and file a sales tax return.
There are a few other items to keep in mind when you decide to have a garage sale. This includes checking with the local ordinances for where you live to see if a permit is required to have a garage sale, or if there are other regulations you are required to follow. If permits are required, they are typically very inexpensive to acquire. Additionally, the Consumer Product Safety Improvement Act of 2008 has made it illegal to sell children’s items that have been recalled or are considered dangerous. If this law is violated, you could be subject to fines of up to $100,000 per violation up to a maximum of $15 million. These large fines are intended to defer large corporations, but even individuals running a garage sale are subject to the same rules. You can check the Consumer Production Safety Commission website for information regarding products that cannot be sold.
So garage sales are fairly easy to set up and are a good way to rid your house of some clutter, but there is some planning required beforehand to ensure that your garage sale is in compliance with all laws and regulations. The good news is that you will typically not have to worry about tax consequences and will be able to keep all that extra cash for some summer fun in the sun.
By: Mark Sawyer, CPA
May 14, 2015
The entrepreneurial spirit that compels people to start their own business does not necessarily translate into them being good business managers and this can lead to a stumbling block for many small business owners.
One of the most troubling aspects of running a small business can be learning how to manage cash flow. Understanding the basics of cash flow can help owners plan for large and small upcoming events in their business.
Cash is what you have at any given time to meet your daily expenses. The cash that you spend to buy inventory or business equipment is cash that is an asset on your balance sheet, but that cannot be easily converted to pay monthly expenses. Profit on an income statement does not equate to cash in the bank if you have accounts receivables waiting to be paid. You cannot spend profit. A profit on the income statement does not always indicate financial health unless the company also has a positive cash flow that correlate to those profits.
Many business owners use a cash flow statement to help them understand the movement of cash in their business. A cash flow statement will tell them the sources and uses of their cash. A typical statement has three areas:
Operating Cash Flow – The cash generated from the day-to-day operations of the business including the sales of products, the collection of accounts receivable, and the payments of vendors.
Investing Cash Flow – The cash that is used to purchase equipment.
Financing cash flow – The cash from outside normal business operations, money from lenders or shareholders. A new loan or the repayment of a loan creates the cash inflow or outflow.
Good cash flow management requires the business owner to be forward thinking – when and how will cash be needed. How will I acquire the cash needed? Through better accounts receivable collection or from a bank in the form of a loan?
Adapting to cash flow management could mean the difference the success or failure of a business.William Vaughan Company has the skills and expertise to help our clients with all aspects of their business management. Contact us today to find out more about how cash flow management can help your business.
By: Christine Schultz, Accountant
May 07, 2015
Selecting the right outsourced accounting firm can be a daunting task. Not all providers are created equal and the myriad of options can be overwhelming. A wrong decision can ultimately impact the overall financial well-being of business or organization. Here are few guidelines to consider when selecting the perfect outsourcing partner.
Quality of Service Quality comes at a price. Take the time to find an experienced provider that is accurate and reliable. A reputable provider will offer personalization and a commitment to meeting the unique needs of each business or organization.
Communication Communication is the key to a successful outsourcing transition. Many hours will be spent interfacing with the provider team and it will become one of the most important business relationships. Make sure to meet with the team to establish clear and open lines of communication. Having a trusted relationship with the provider and knowing they care about the organization to make recommendations is priceless.
Domain Expertise Advanced knowledge of accounting should be a requirement. A provider that does not have a background in the industry may lack the ability to fully recognize the issues surrounding the organization and ultimately leave the organization seeking additional guidance. Asking for references is recommended. Hearing from current clients will provide additional insight into the process and the result of engagement.
Leading Technology The technology implemented should be the most up-to-date, secure and ensure a paperless experience. Seamless tracking, billing and invoicing and access to real-time data is essential. Choosing a provider that not only leverages advanced software, but also provides functionality from a tablet, smartphone or other internet-based electronics.
Finding the right outsourced accounting partner is essential. It is, after all, a partnership, one that will be long-term and will require fluid communication in order to be successful. To find out more about WVC RubixCloud and how we provide high-level, accurate and efficient outsourced accounting, visit our “What We Do” page. Take control of your accounting and contact us to discover how we are the right outsourced partner for your organization.
Apr 24, 2015
The IRS has been dealing with an increasing wave of tax scams this year in which fraudsters have been leaving messages on taxpayers’ phones claiming to be from the IRS demanding payment, and have been sending phishing emails to taxpayers purporting to come from the IRS. On Thursday, IRS Commissioner John Koskinen met with leaders of several of the major tax software companies, tax preparation chains, state tax commissioners and other officials to coordinate an approach to deal with identity theft. In an effort to protect taxpayers from identity theft, the IRS is releasing the Identity Letter 5071C to taxpayers whose return is deemed “suspicious” upon filing.
The letter asks taxpayers to verify their identity in order to complete processing of their return if the taxpayer did file it or reject the return if the taxpayer did not file it. The letter gives taxpayers two options to contact the IRS and confirm whether or not they filed the return. Taxpayers may use the idverify.irs.gov site or call the toll-free number provided in the letter. Due to the high-volume on the toll-free numbers, the IRS-sponsored website, idverify.irs.gov, is the safest, fastest option for taxpayers with web access.
The website will ask a series of questions that only the real taxpayer can answer. Taxpayers should have available their prior year tax return and their current year tax return; if they filed one, including supporting documents, such as Forms W-2 and 1099 and Schedules A and C.
Please note that the IRS does not request such information via email, nor will the IRS call a taxpayer directly to ask this information without you receiving a letter first. The letter-number can be found in the upper corner of the page. If you have questions regarding your letter, please visit the IRS website.
Apr 22, 2015
If you’re approaching retirement, it may seem like your hard work is almost done. You’re probably getting ready to relax and enjoy yourself. However, there are still a few more things you should do to complete your retirement planning. Doing them now, before you retire, can help you transition from saving to spending your savings. Here are a few ways to get the ball rolling.
Review Your Investments
First, look at your investment portfolio’s asset allocation. Your ability to recover from market downturns is generally reduced when retirement is getting closer. You may decide to shift a larger portion of your portfolio out of stocks. But keep in mind that inflation can reduce the buying power of your retirement assets. You’ll probably want to keep some stock investments in your portfolio since they have the potential to generate returns that outpace inflation.
Consider Your Distribution Options
Next, take some time to learn about your plan distribution options. If you cash out your account balance, you’ll owe income taxes in the year you receive the distribution, leaving you with less money to spend or reinvest.* Instead, you may have the option of keeping the funds tax deferred in your plan account and taking periodic payments. Or you can arrange for the distribution to be transferred directly into a tax-deferred individual retirement account (IRA). With either option, you can spread out your tax liability by withdrawing the money over time.
Finally, continue contributing to your plan. Even if retirement is only a short time away, continuing to save can make a difference in your account value at retirement. If you’re age 50 or over, your employer’s plan may allow you to make “catch-up” contributions. If possible, take advantage of this opportunity so you can accumulate even more money for your retirement.
- Qualified distributions from a Roth account are not subject to federal income taxes.
Don’t Stop Saving
Continuing to save even as you near retirement can help your account grow.
Still Saving Stopped Saving
Account Value at Age 57 $100,000 $100,000
Average Annual Total Return 6% 6%
Annual Amount Contributed
from Age 57 to Age 67 $3,600 $0
Account Value at Age 67 $226,536 $179,085
This is a hypothetical example used for illustrative purposes only and does not represent any specific investment product. Annual compounding is assumed. Your investment performance will be different.