Do You Qualify for the Earned Income Tax Credit?

There are many requirements you must meet in order to qualify, but it may lower your tax bill.

Supporting a family can be difficult, not to mention expensive.  Working families  whose income is fairly low need all the help they can get with their income taxes.

TaxPlan1214image_zps60d91ccdThe Earned Income Tax Credit (EITC)  was put in place by Congress to provide relief for low-income families who may have trouble paying their tax bills.

Qualifying for the Credit You may be eligible for the EITC if you have earned income, are not filing as married filing separate, and  are claiming adjusted gross income within certain limits. Earned income would consist of:

  1. Any wages, salaries, tips, and other taxable pay from an employer,
  2. Any union strike benefit payments,
  3. Long-term disability benefits paid to you before you reached minimum retirement age (between 55 and 57, depending on when you were born), and
  4. Net earnings from self-employment if you own a business, run a farm, are a minister or member of a religious order (these will have some special rules), or have income as a statutory employee.

In addition to earned income, any investment income you received must be $3,350 or less for the year to qualify for the EITC.

Taking the Credit If You Have Children

The EITC was put in place to help those with children, so the amount of the credit will depend on the number of children you have.  You can receive a credit if you do not have a qualifying child, but the credit is greater if you do.  A qualifying child would be one who:

  1. Is related to you in any way, except for someone who is a cousin,
  2. Lives with you for more than half the year,
  3. Did not file a joint return except for the sole purpose of getting a refund, and
  4. Is younger than you, and is either younger than 19, or younger than 24 and a full-time student. Permanently and totally-disabled individuals do not have to meet the age standard.

Taking the Credit If You Don’t Have Children

If you do not have a qualifying child, you can still get the credit. However, in addition to the rules mentioned previously, you will have had to have lived in the U.S. for over half the year, be between 25 and 65 years of age, and cannot be claimed as a dependent on someone else’s return.

The Form

In order to claim the credit you will need to file Schedule EIC.  There are a few pieces of information we will need to complete this schedule, such as Social Security cards, birth dates, the previous year’s federal and state returns, and documentation of income (W-2s and 1099s, income and expense records, etc.).

That may sound like a lot of paperwork, but you’d need most of it to file your taxes anyway. If you think you may be eligible for the EITC, contact us at to discuss your situation, and we will be glad to help you.

Going into business with a franchise

Have you ever wanted to be your own boss, but didn’t want to start a business from scratch? If so, buying a franchise might be the right choice for you.

When you purchase a successful franchise, you’re buying the right to sell a product or service using a system developed by the franchisor. You usually receive the right to use a trademarked name, training in profitably operating the business, advertising support, and other needed assistance. In exchange for these benefits, you’ll generally need to pay an initial fee and a royalty based on a percentage of sales.

After researching which franchises might be a good fit for you, ask each franchisor to send you its Uniform Franchise Offering Circular. This federally required document contains a wealth of important information, such as a sample franchise agreement, start-up costs, annual fees, and other key elements of your franchise investment. Take this information to your accountant and attorney for their review. Also plan on talking to other franchisees to see what their experiences have been. Ask them if they’re profitable. How long did it take to become profitable? Are they satisfied with the support they receive from the franchisor?

Once you’ve selected the best franchise for you, you’ll probably need to obtain financing. The bank will typically ask for a forecasted set of financial statements detailing your expected income, expenses, and cash flow for the first few years of business. These statements not only will help you qualify for the loan, but also they’ll give you a good feel for how profitable your new venture might be.

If you’re considering buying a franchise, please call us. We can review the financial concerns with you.

Sticking to budgets and diets

Budgets, like diets, are short lived for most of us. You do a proper job of planning by looking over the past and determining where you need to make changes to meet your goals. And, you live by your plan for a few days, maybe even a few weeks. But, then all the detail of keeping track of what comes and goes gets to be more than you are willing to put up with.

If you can plan a budget and live with it, more power to you. This should put you with the 5% of people who can retire without financial assistance from family or the government.

For those of us who can’t live with the detail of tracking budget numbers, here is a simple way to make sure you don’t retire totally broke. Take a fixed percentage of every dollar that comes into the household and set it aside for retirement investing. Say, for example, that you decide to save 10% of your $100,000 income. Here are some rough numbers for those aged 35 who would like to retire in 30 years. $10,000 invested each year will accumulate to $697,000 in 30 years at a 5% annual return. The earlier you start, the greater the retirement benefits. If you started at age 25, the accumulated value at age 65 would be over $1,268,000.

You may think it is impossible to save 10% of your current income. Let’s assume that you lose your current job. The next job you find pays 10% less than your current job. The chances are that you will figure out where to cut the spending to make it work. So, why not discipline yourself and your family in order to make your current income provide both a current living and an investment in your retirement.

Sales Transactions in QuickBooks Online: An Overview

Your first transaction in QuickBooks Online was probably an invoice. But there are many others that you’ll want to know how to use.

You probably process more invoices than any other kind of sales transaction in QuickBooks Online. And it’s usually with a great deal of satisfaction that you create these forms, since it means that you’ll be getting paid for providing services or selling products.

But there are numerous other sales transaction forms available on the site. Maybe your business is simple enough that you don’t have occasion to use them, but you should still understand what they are and when you should create them.

The easiest way to locate these forms is by clicking the “+” sign that appears at the top of many screens. By default, this opens a short list of the most commonly-used transactions. Click Show more to see the entire list.

Let’s look at the eight entries under Customers. They are:

Invoice. Use an invoice form if you want to bill a customer for a product or service for which you expect to be paid for at a future date. You can either print and send these through the U.S. Mail or email them.

Receive Payment. This is the enjoyable part: recording a payment – via cash, check, or credit card – that you’ve received from a customer. It’s critical that you deposit these funds to the correct account. If there’s any question, or if you want to start accepting credit cards (merchant accounts are complicated), contact us.

Estimate. These are often used for larger – or multi-part – jobs, although, depending on the type of business you operate, you may create them on a regular basis for simpler transactions. When you send an estimate, you’re not asking the customer for money; you’re simply presenting an approximation (or in some cases, an absolute dollar amount) of the costs anticipated. QuickBooks Online reminds you of open estimates when you start to create a new invoice for a customer who’s received an estimate.



Figure 1: An estimate is not a bill or invoice. It tells your customer how much you anticipate charging for a requested product or service.

Credit memo. This can get tricky. There are several situations in which you’d issue a credit memo, including a pricing dispute, returned products, or overbilling. If a customer has not yet paid, the credit memo will reduce what’s owed. If payment has already been made, the customer can either apply the credit to future purchases or request a refund.

Sales receipt. This one’s easy. You create a sales receipt when you receive payment at the same time a customer receives goods or services. Obviously, no invoice will be necessary.

Refund receipt. This type of sales transaction records a refund issued to a customer. But there are many reasons why a customer would receive a refund from you. What was the original transaction type? What account should the refund come from? We can go over with you the various possible scenarios when you begin issuing refunds.

Delayed credit. If you know a customer is returning a product but you haven’t yet received it, for example, you would complete this transaction form. QuickBooks Online displays this credit in the right vertical pane of the next invoice you create for the customer.

Delayed charge. If a customer will owe you money for a product or service or fee at a future date but you don’t want QuickBooks Online to record it yet, you can use this form to track it. When you do create an invoice for the customer, any delayed charges will appear in the right vertical pane.


Figure 2: Boxes like these will appear in the right vertical pane of new invoices for the affected customers, and you can automatically add them or open the original form. They do not affect the balances of any of your accounts in QuickBooks Online until they’re included in an invoice.

There are so many ways a sales transaction can go, so many variables. But it’s important that you record them using the tools that QuickBooks Online has designed for your financial accounts. It’s difficult and time consuming to fix a transaction that was entered incorrectly at the start. We’ll be happy to go over these sales transaction types in depth or to consult with you on any confusing situations you come across. Visit for more information.






Some questions and answers about reverse mortgages

A reverse mortgage is a loan against your property. But, instead of you making payments to the lender as you do on a regular mortgage, the lender is paying you. The repayment of this mortgage takes place after you no longer live in your home. Here are some answers to common questions about reverse mortgages.

  • How can a reverse mortgage benefit me?

The proceeds from this type of loan can be used for any purpose you want. You can use it to pay monthly bills, travel, improve your home or anything else you care to. And since it is a loan, it is not subject to income tax.

  • Do I qualify for a reverse mortgage?

To qualify, you must be 62 years of age or older. You must own your home and use it as your primary residence. If you owe money on a current mortgage, back taxes, or insurance, you must clear these off the property by closing time of your new mortgage.

  • What is the process for getting a reverse mortgage?

First, you will meet with a free reverse mortgage consultant.

Second, you will be counseled by a HUD-approved counselor to make sure you understand how this loan works.

Third, submit your application to the lender.

Fourth, have your home appraised.

Fifth, once all the documents are in order, the lender will issue final approval.

Sixth, funds will be available to you after all documents are signed and the closing is complete.

  • How much money will I receive?

The amount of your loan proceeds will depend on you and your spouse’s ages and the value of the equity in your home.

  • How much cash do I need to come up with?

The only expense you need to pay for is the property appraisal. All other fees can be paid for out of the loan proceeds. You should never pay anyone a fee to apply for a reverse mortgage, not beforehand and not at closing.

  • What payments do I need to make during the life of this loan?

You are not required to make loan payments. However, as per your agreement, you must keep the real estate taxes and home insurance current. You must also pay for home repairs.

  • How is this loan different from a regular mortgage?

On this loan, there are no monthly principal and interest payments. There are no credit scores or income requirements to secure this loan. And at the end of the loan, you are not liable for any loan amount over the value of the home.

  • How long does it take before my funds will be available?

There is no fixed time table. In part, it will depend on the appraisal, the title report, and on other paperwork considerations. A typical loan should be done in less than two months.

  • When do I need to pay this loan back?

As long as you meet the contract terms, nothing is due until you no longer live in the home. The home can then be sold and any money in excess of what the lender has coming is refunded to you or your estate. If the sales proceeds do not pay the lender in full, you are not required to pay the difference.

  • How do I know if a reverse mortgage is a good idea?

Reverse mortgages are not for everyone. Your counselor will inform you of all the pluses and minuses. You should have enough information at that time to make a knowledgeable decision. You should compare all aspects of the reverse mortgage against a conventional home equity loan.

Can a business grow too fast?

Most businesses hope to grow. They consider themselves successful if growth is taking place, and the faster the growth the better. Can too much business growth be bad for a company? It can be if the growth is not adequately planned.

For example, an established company that doubles its sales volume in a year may find itself strapped for cash, for working space, and for trained personnel.

For most established companies, a 12% to 15% annual growth rate would probably be manageable. The ideal growth rate for your company depends on the unique circumstances in your firm and industry.

A new company (starting with zero sales) must obviously grow more rapidly than an established one. Some new businesses may double their sales each year for the first five years or so before reaching the level where a 15% annual rate is healthy.

Rapid growth often requires more inventory and more space. And it may require money to fund additional work-in-process or accounts receivable. Who will fund the growth? A 15% growth rate can probably be funded by retained earnings. A more rapid rate may require an injection of outside capital. If the owners can’t provide the money, will it be the suppliers (increasing the accounts payable) or a banker (new short-term debt)?

Every business should have a written business plan with its growth projections clearly identified. The plan should include provisions for the finances, space, equipment, and personnel that such growth will require.

Your company’s growth should be both workable and profitable. Please contact us for assistance with your business planning.

Are You Eligible for Health Insurance Tax Credits?

The Affordable Care Act (ACA) can save your small business money through its tax credits.

If your small business has employees, you’ve undoubtedly been paying attention to the news coming out of Washington, D.C., about the Affordable Care Act (ACA). This law was designed to be implemented in waves, rather than all at once, and there have been major changes since it was passed and signed.

TaxPlan1114image1_zps412b19e3Some elements of the ACA have already been incorporated into the health care industry. One of these benefits is a tax credit for the health insurance costs you pay for your employees. For the years 2010-2013, small businesses could take a tax credit of 35 percent of the premiums paid for health insurance.  Small tax-exempt businesses got a credit of 25 percent.

Starting in 2014, small business owners can take a tax credit up to 50 percent of the premiums they paid for health insurance. Tax-exempt small business owners’ credit will be 35 percent. This credit can be claimed for two consecutive tax years.

To be eligible for this credit, you will have to meet the following requirements:

  • You must pay at least 50 percent of the cost of employee-onlyTaxPlan1114image2_zps1cde9694 health care coverage for each of your employees.
  • You must also have fewer than 25 full-time equivalent employees. This means the average number of hours worked by your employees is greater than or equal to 40 hours a week.
  • The average wage of the employees covered must be less than $50,000 per year. This amount will be adjusted for inflation every year.
  • You will have had to pay premiums on behalf of your employees who are enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace. However, if you qualify for an exception to the requirement to buy health insurance through a SHOP Marketplace, you can still take this credit.

This credit is refundable.  This means that if you are a small business employer and did not owe tax during the year, you can get a refund on your return, which can be carried back or forward to other tax years. In addition, if you are an eligible small business, you can claim a business expense deduction for the premiums that are in excess of the credit.

In other words, not only do you get to take a credit for these costs, but you can also take a deduction for employee premium payments.

However, keep in mind that you are eligible to receive the credit and have it be refundable as long as it does not exceed your income tax withholding and Medicare tax liability. Further, if you are a small tax-exempt employer, any refund payments you receive are subject to sequestration.

If you’ve been working with us on tax planning for next year’s filing, you probably know all of this. If not, we encourage you to make an appointment to talk with us about your ACA-related issues – or any other tax questions you may have.

If you need additional information, please visit