How angel investors can help your small business succeed

Angel investors can provide funding for small businses owners.

1800Accountant.com explains how using an angel investor can provide a substantial financial benefit to a small business. (Image credit: Flickr Creative Commons)

In the small business world, there are various options on how to fund a business initially and continuously over time. These include using personal funds, taking out a loan, and crowdfunding. However, one very advantageous funding method is to utilize an “angel investor.”

An angel investor, also called an informal investor or a business angel, is essentially an individual who has a substantial amount of money and is willing to provide financial support for a startup company. Most angel investors don’t simply offer this capital for nothing, though. They often provide it in exchange for either some equity ownership in the business or for convertible debt. Even though many angel investors personally fund businesses out of their own bank accounts, funding from one of these individuals could instead come from business entities, trusts, or investment plans in which an angel investor’s finances are stored. Research has indicated that startups funded by angel investors have a higher chance of succeeding than those that are funded through other capital-raising methods.

While the majority of angel investors operate individually, there are some instances in which these funders come together to form an angel group. In these cases, they can conduct like-minded research, share resources, and put their money together to offer a more significant funding option for a startup business.  They can also give financial advice to the small business owners they are assisting financially. This is similar to crowdfunding, but angel investors tend to have more money at their disposal.

The amount of funding an angel investor can provide to a business varies significantly. An investor could provide anywhere from a few thousand dollars to more than a million dollars in initial funding, depending largely on the financial ability of the investor and the potential profitability of the business itself. The industries in which angel-funded startups exist also run the gamut, but research has indicated that companies in the medical industry have been funded more frequently than others in recent years.

The best way for small business owners to find an angel investor is to do research online. Directories provide lists of possible investors who may be able to assist in funding your startup. Learn more about your small business funding options by working the accounting experts at 1800Accountant.com. Call 1-888-749-0117 or visit www.1800accountant.com for more information.

What life changes can affect your taxes?

A new baby can certainly impact your taxes, 1800Accountant.com says.

According to 1800Accountant.com, having a new baby can affect your taxes, as can many other life-changing events. (Image courtesy of Flickr Creative Commons)

Life can be like a rollercoaster ride. We all go through different experiences, some of which are exciting and others that are difficult. No matter what your life story turns out to be, there will likely be one or more occurrences in it that have a significant impact on your taxes. These include:

– Getting married/divorced
Wedding bells and divorce papers are about as opposite as you can get. However, these two subjects have one thing in common – they affect your tax status. When you get married, your tax-filing status will change from “single” status to “married filing jointly” or “married filing separately.” In many cases, joint filers enjoy more tax benefits, so be sure to choose which status to use carefully. A divorce can flip this status in the other direction, such as going from “married filing jointly” to “single” or “head of household” if there are children involved.

– Having children
When a couple has a child, they can immediately claim this youngster as a dependent on their tax return. They may also qualify for the child tax credit, education credits, and other tax-saving benefits as the child grows up. Additionally, parents can qualify for the “head of household” filing status in certain cases, which can also cut down on your tax bill.

– Changes in job status
If you’re lucky enough to land a new job, or you endure the challenging process of losing one, there’s a good chance your taxes will be impacted. By taking a new job, there’s a chance your income bracket could be bumped up to a higher level. Alternatively, losing a job can affect your annual income in the year in which you lost it, especially if there’s a gap between jobs. Moving expenses for the purposes of accepting a new employment opportunity can be deducted as well.

– Starting a small business
Although many individuals never start up a business, millions of entrepreneurs have given it a shot. This is why launching a small business should be considered a life-changing event. Business taxes will be added to your tax-filing obligations when setting up a company. This means you’ll have to file a separate business tax return. Business taxes are different in that they may be levied on a separate business entity like a corporation. They could, however, pass through to your personal taxes under other business structures. Plus, small business taxes tend to require quarterly filings throughout the year instead of the regular April 15th deadline for individual taxpayers.

Learn more about how life changes can affect your tax situation by working with the accounting experts at 1800Accountant.com. Call 1-888-749-0117 or click over to www.1800accountant.com for more information.

 

Does the cost of a new computer qualify as a tax deduction?

laptop

1800Accountant.com explains how buying a new computer can qualify as a tax deduction in some cases. (Image credit: Flickr Creative Commons)

From desktops to laptops to tablets, computers and electronic devices of all types make up a huge part of our personal and professional lives on a daily basis. Homes used to have only one computer, but today you may find one or more in the hands of each member of a household. So this begs the question: does the cost of a new computer qualify as a tax deduction?

It’s always nice to get a simple “yes” or “no” answer to a tax question to make the tax-filing process a little easier. In the case of deducting computer costs, though, there is some gray area when answering this question. In general, buying a computer is viewed as a personal expense in the eyes of the IRS, meaning it would not qualify as a deduction. However, there are some exceptions. If you buy a computer and use it more than half of the time you spend on it doing business-related activities, the cost of this machine would qualify as a tax deduction. If you strictly use the computer for personal reasons, such as for playing games, downloading music, or making photo albums, its cost would not qualify for a tax break. This means purchasing a computer should fall under the business expense category for the IRS to let you claim it as a deduction, even if you use it at home rather than in a traditional office setting. Hardware, software, and other electronic items may also qualify as a tax write-off, but again, they’d have to be classified as business costs.

Education-related tax deduction opportunities

Computers are also a big part of education and are used by students of all ages to type up research papers or to do research on the “information superhighway.” If you purchase a computer and use it for educational purposes, it may qualify as an itemized tax deduction if it’s not already covered by an education-related tax credit you may also be claiming on your tax return. One example is the American Opportunity Tax Credit.

Even though desktop computer prices have come down considerably in recent years, buying one of these high-powered machines can still take a bite out of any budget. This is why you should take full advantage of deducting this cost if you use a computer for work or education reasons. To learn about additional tax deductions that can reduce how much you pay in taxes every year, consider working with the tax professionals at 1800Accountant.com. Call 1-888-749-0117 or visit www.1800accountant.com to help you stay in compliance with IRS rules and to help you save more when filing your tax return.

Does the IRS consider buying furniture to be a tax deduction?

The IRS states that office furniture for a small business can be tax deductible.

According to the IRS, certain types of furniture can be written off as a tax deduction. (Image credit: Flickr Creative Commons)

If you operate a home-based business or a small business in an office or retail location, you’ll likely need some larger items to furnish these spaces with to properly conduct business every day. Fortunately, the IRS allows certain pieces of furniture to be tax deductible. Claiming these business-related deductions can lower your tax bill to help you keep more of what you earn.

In general, a variety of furniture pieces can be written off when the time comes to file your taxes with the IRS. The main qualification for these deduction opportunities is that the furniture you buy has to be necessary for you to run your business. In other words, furniture would be classified as a business expense, much like office supplies and other tangible items or services are. For example, you may be able to write off the money you spend on chairs, tables, desks, shelving, and electronics. The IRS typically allows these pieces of furniture to be used in both home offices and in separate locations to qualify, such as retail stores or office space that you own or rent. Since good quality furniture that will last for some time can take a bite out of your budget, this chance for a tax deduction should be a priority for you if you spend any reasonable amount on furniture for your small business. Keep in mind, though, that any personal furniture items you buy that aren’t necessary for you to run your business cannot be deducted as a business expense.

How the IRS Allows Furniture to be Deducted

There are two basic paths you can take to deduct furniture. One option is to deduct all or a portion of the cost of the furniture for the year in which you purchased it. Your other choice is to claim the deduction over the course of several years based on depreciation. In most instances, your deduction will likely be determined by the cost of the furniture. If you opt to deduct part or the entire cost of furniture that you bought in a particular year, this is known as the Section 179 deduction, as it is defined in this section of the Internal Revenue Code. This deduction may come with amount limits on how much you can actually write off. To claim these tax deductions for furniture, be sure to use Form 4562: Depreciation and Amortization to record the amount you’re deducting, and then include this information with Form 1040.

Learn more about additional IRS tax deductions that you can claim to reduce your taxes by working with the tax and accounting experts at 1800Accountant.com. Call 1-888-749-0117 or click on www.1800accountant.com.

What is an Individual Taxpayer Identification Number (ITIN) and Who Needs One for IRS Tax-Filing Purposes?

IRS tax returns

1800Accountant.com explains what an IRS Individual Taxpayer Identification Number (ITIN), who needs one, and what it represents. (Photo courtesy of Flickr Creative Commons)

The Internal Revenue Service requires individuals and businesses who pay taxes to have various identification numbers for processing purposes. One of these identifiers is the Individual Taxpayer Identification Number, which is geared toward individual taxpayers as its name suggests.

An Individual Taxpayer Identification Number, or ITIN for short, is a 9-digit number issued by the IRS. It starts with “9” and takes the form of 9XX-XX-XXXX. This number is issued to individuals who have a Taxpayer Identification Number, but they do not have a Social Security Number. ITINs are generally issued to both U.S. resident and nonresident aliens, which means immigration status does not influence who receives one of these identifiers. This is because these individuals may be on the hook for filing federal income taxes in many cases. The ITIN program was originally created in 1996 as a way of identifying individuals who don’t have a Social Security Number. Although this number is granted to people for tax-filing purposes, it doesn’t automatically give them the right to work and earn income in the U.S.

In general, obtaining an ITIN cannot be done electronically. Filers should complete an ITIN application, attach it to their federal income tax returns, and then submit it to the IRS by mail. An ITIN can be obtained by completing Form W-7-ITIN. Starting in 2013, the IRS put a five-year limit on ITINs, meaning taxpayers who need to maintain their ITINs must reapply for them when they expire. This is different from other types of identification numbers, many of which are good for indefinite periods of time, such as a Social Security Number.

Much like other Taxpayer Identification Numbers, it’s necessary to have an identifier like an ITIN for several reasons related to filing your tax returns. The IRS has to know who is eligible and required to pay taxes. In the case of resident and nonresident aliens, the government must identify these individuals, and using an ITIN to do so is an effective way of keeping track of taxpayers in this particular group. In addition, one of the reasons the IRS put a five-year cap on ITINs is to cut down on identity theft and tax fraud, which have become major issues in recent years.

If you need assistance acquiring an ITIN or handling any obligations related to filing your taxes, contact 1800Accountant.com at 1-888-749-0117 or at www.1800accountant.com.