When it comes to small businesses, Vice President Kamala Harris has shown a clear commitment to supporting entrepreneurs. With her sights set on the 2024 presidential election, Harris has outlined several policies aimed at promoting small business creation, removing financial barriers, and fostering a climate where businesses can thrive.

For small business owners and future entrepreneurs, these proposals could signal a shift in how they can navigate startup costs, taxes, and regulatory hurdles. Let’s break down Harris’ promises and what they could mean for small businesses in the years ahead.

Expanding the Small Business Startup Credit to $50,000

One of the standout points in Harris’ proposal is her plan to expand the small business startup credit tenfold, from $5,000 to $50,000. This would be a game-changer for entrepreneurs facing the typical $40,000 cost of launching a small business.

Currently, small businesses can claim a $5,000 deduction for startup expenses, but that doesn’t come close to covering the average costs associated with getting a business off the ground. Increasing the credit to $50,000 means that Harris is offering entrepreneurs significant financial relief that would make it easier to handle the initial overhead, whether it’s for marketing, legal fees, or securing a physical space. This could also make entrepreneurship more accessible to people from diverse economic backgrounds, potentially spurring innovation and growth across the country.

Claiming Startup Credit After Turning a Profit

Another crucial aspect of Harris’ proposal is her suggestion that businesses should be allowed to wait until they turn a profit before claiming their startup credit. This is particularly appealing for small businesses that typically operate at a loss in the early years as they reinvest their earnings back into growth. Instead of claiming the startup credit in the first year, when it may not provide much of a tax benefit, entrepreneurs could hold off and claim it once their business becomes profitable, significantly reducing their tax liability when they need it the most.

This flexibility acknowledges the long runway many small businesses face before reaching profitability. It empowers founders to strategically plan their taxes around their business’s actual financial trajectory. For entrepreneurs who are focused on growth, this policy could prove to be an invaluable tool for managing cash flow and reinvesting into their operations.

Setting a Goal for 25 Million Small Business Applications

Harris has also set an ambitious goal of 25 million new small business applications during her first term. By comparison, the Biden-Harris administration saw a record 19 million small business applications.

This goal aligns with her broader vision of an economy fueled by small businesses, which are often referred to as the backbone of the U.S. economy. Small businesses drive local economies, create jobs, and spur innovation. Harris’ goal reflects a belief in the potential of small businesses to strengthen the U.S. economy, especially after the disruptions caused by the COVID-19 pandemic.

Streamlining Regulatory Processes

For many small businesses, government regulations and red tape can be one of the biggest obstacles. Harris aims to cut through these barriers by reducing the bureaucracy that often makes starting and running a small business difficult.

Her plan includes developing a standard tax deduction for small businesses, which would simplify the tax filing process. This would be particularly helpful for entrepreneurs who often struggle with the complexity of tax compliance and may not have the resources to hire professional help. The proposal would reduce the time and money spent on tax preparation, allowing small business owners to focus on growing their operations.

Additionally, Harris is advocating for making it easier for businesses to obtain occupational licenses, which can be a major roadblock for entrepreneurs trying to expand into new markets. Her plan encourages state and local governments to relax these regulations, creating a more entrepreneur-friendly environment.

A Lower Capital Gains Tax

Another significant component of Harris’ small business agenda is her stance on capital gains taxes. Unlike President Biden’s proposal for a 39.6% capital gains tax rate for those earning over $1 million, Harris is advocating for a lower 28% rate. While this is still an increase from the current 23.8% rate, it’s a more moderate approach that reflects Harris’ belief that encouraging investment leads to economic growth and job creation.

For small business owners, this could have a direct impact. A lower capital gains tax rate would incentivize investors to put money into startups and small businesses. Therefore, striking a balance between generating government revenue and encouraging private investment supports the growth of small businesses while ensuring that wealthy individuals still pay a fair share in taxes.

Incentivizing State and Local Governments to Support Small Businesses

Harris also plans to incentivize state and local governments to relax regulations that can stifle small business growth. While federal policies can create a supportive environment, many of the rules that small businesses must follow come from local or state governments. Occupational licenses, zoning laws, and other regulations can vary widely across the country, sometimes making it difficult for businesses to expand or even get started.

With these incentives to states and local governments, Harris aims to create a more uniform and less restrictive landscape for small businesses. This would allow entrepreneurs to navigate regulations with greater ease and reduce the barriers to scaling their operations across different regions.

Other Policies to Support Small Businesses

In addition to her small business-specific proposals, Harris has outlined several other policies that could benefit entrepreneurs indirectly. These include: 

• Building more affordable housing, which could reduce living expenses for entrepreneurs and their employees.
• Banning price gouging in the food industry, which could benefit food-related businesses and small restaurants by keeping ingredient costs in check.
• Cutting taxes for most Americans, which could put more money in the pockets of consumers, boosting spending at small businesses.

Conclusion: A Promising Future for Small Businesses

For instance, a tech startup could use the expanded startup credit to invest in research and development, while a small restaurant could benefit from the ban on food industry price gouging. These policies could create a more favorable environment for small businesses to start and succeed.

While some of her policies, such as the capital gains tax increase, may raise concerns for wealthier investors, the overall impact of her proposals would likely be positive for small business owners across the country. However, it’s important to note that some critics argue that the proposed tax increases could discourage investment and potentially slow economic growth. For entrepreneurs, Harris’ plan represents a shift towards a more supportive and flexible framework that could help them navigate the challenges of starting and growing a business in today’s economy.

If implemented, Harris’ promises could mark a new era of growth and opportunity for small businesses, laying the foundation for an economy driven by innovation and resilience.

Frequently Asked Questions

1: How will Kamala Harris’ proposal to increase the small business startup credit impact new entrepreneurs?

Kamala Harris proposes to expand the small business startup credit from $5,000 to $50,000. This would provide new entrepreneurs with a larger financial cushion to cover initial expenses, such as marketing, legal fees, or securing a workspace. A higher credit makes it easier for people to start businesses, particularly those who may not have access to large amounts of capital. This expansion is designed to encourage innovation and entrepreneurship across diverse economic backgrounds.

2: What is the significance of businesses being able to claim their startup credit after turning a profit?

Under Harris’ proposal, businesses would have the option to wait until they become profitable to claim their startup credit. This is significant because many small businesses operate at a loss in their early years. As such, deferring the credit until they turn a profit helps businesses better manage their tax liability during a time when they’re earning revenue. This flexibility allows entrepreneurs to strategically plan their finances and get the most benefit from the tax credit when it matters most.

3: How will Harris’ plan to lower the capital gains tax affect small businesses and investors?

Harris proposes a capital gains tax rate of 28% for individuals making over $1 million, which is lower than the 39.6% rate in Biden’s plan but still an increase from the current 23.8%. This lower rate would encourage investment in small businesses and startups, as investors would still have favorable tax conditions for supporting growing companies. Striking a balance between increasing revenue for the government and promoting investment aims to provide small businesses with greater access to capital, which is critical for growth.

The post Kamala Harris’ Promises for Small Businesses: A Detailed Look at How Entrepreneurs Stand to Benefit first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

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Hey everyone! 🌴

Let’s talk about something that might not be as glamorous as your latest influencer campaign or viral TikTok dance, but it’s just as crucial—financial management. Recently, Democratic Nominee Kamala Harris broke the internet with her “coconut tree” speech, and it got me thinking. Generational wealth doesn’t just fall from a “coconut tree.” If you’re a content creator, influencer, or business owner, you need a solid plan to build and sustain wealth for yourself and future generations.

The Coconut Tree Myth: Why Wealth Isn’t Just Falling from the Sky

Imagine sitting under a coconut tree, waiting for coconuts (wealth) to fall into your lap. Sounds dreamy, right? But in reality, creating and maintaining wealth requires more than just waiting for opportunities to drop. It’s about planting seeds, nurturing them, and cultivating a financial ecosystem that will bear fruit for years to come.

The Reality Check: Why Financial Management Matters

Financial management might not be as thrilling as hitting a million followers or launching a new product, but it’s the foundation that will keep your empire standing. Here are some reasons why sound financial management is non-negotiable:

1. Sustainability: Without proper financial planning, your income can be as fleeting as a trending hashtag. Smart budgeting, saving, and investing ensure that your wealth grows steadily over time.

2. Tax Efficiency: Uncle Sam loves to get his share, but with the right strategies, you can minimize your tax burden and keep more of your hard-earned money. Knowing what deductions and write-offs you can claim as a content creator or business owner is a game-changer.

3. Risk Management: The digital world is full of uncertainties—algorithms change, platforms evolve, and trends come and go. Sound financial management helps you build a safety net to weather any storm.

4. Generational Wealth: If you’re thinking long-term, financial planning isn’t just about you. It’s about creating a legacy for your family and ensuring they have the resources to thrive.

Steps to Achieving Sound Financial Management

 1. Create a Budget and Stick to It

Your budget is your financial blueprint. Track your income and expenses, set financial goals, and allocate funds accordingly. Remember, a budget isn’t a restriction—it’s a plan to help you achieve financial freedom.

 2. Save and Invest Wisely

Saving is great, but investing is where the magic happens. Explore different investment options like stocks, real estate, or retirement accounts. Diversifying your investments can maximize returns and mitigate risks.

 3. Understand Your Taxes

Taxes can be tricky, but they don’t have to be overwhelming. As a content creator or business owner, you have unique tax considerations. Educate yourself on tax deductions and credits you qualify for, and keep meticulous records to simplify tax season.

 4. Seek Professional Advice

Sometimes, DIY isn’t the best approach. Consulting with a financial advisor or accountant can provide personalized insights and strategies tailored to your situation.

Ready to Take Control of Your Finances?

If you’re serious about building generational wealth and mastering financial management, I’ve got just the thing for you. Join my course, “Tax Write-Offs for Content Creators + Business Owners & Influencers,” and get the first-hand knowledge you need to succeed.

 Course Details:

• Price: $147 (increasing to $197 as we draw closer to August 15, 2024)
• Launch Date: August 15, 2024
• Enrollment: Sign up here

This course will cover everything from tax deductions and credits to advanced financial strategies, ensuring you have the tools to manage your wealth effectively.

Don’t Wait for Coconuts to Fall—Start Building Your Financial Future Today!

Taking control of your finances is one of the most empowering things you can do as a content creator or influencer. Generational wealth might not fall from a coconut tree, but with the right strategies and knowledge, you can grow your own financial forest. 🌴🌟

Therefore, by adopting these financial management strategies, you’re not just securing your present—you’re investing in a prosperous future for yourself and your loved ones. Join the course, take the first step, and watch your financial dreams take root and flourish!

Frequently Asked Questions

1. Why is financial management important for content creators and influencers?

Financial management ensures sustainability, helps minimize taxes, manages risks, and builds generational wealth. Without it, your income can be unpredictable, and you might miss out on opportunities to grow and protect your wealth.

2. What are some key steps to achieve sound financial management?

Start by creating a budget, saving and investing wisely, understanding your taxes, and seeking professional advice. These steps provide a strong foundation for managing and growing your wealth.

3. How can I learn more about managing my finances as a content creator or influencer?

Enroll in my course, “Tax Write-Offs for Content Creators, Business Owners, and Influencers.” It covers everything from tax strategies to advanced financial planning. The course is $147 until a few days before August 15, 2024, when it increases to $197. Sign up here.

The post Generational Wealth Doesn’t Just Fall from a Coconut Tree: Why Sound Financial Management is Essential for Content Creators and Influencers first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

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The post Dissecting the New Treasury NFT Risk Assessment: Essential Tax Advice for Digital Asset Holders first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

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Hey there, fellow go-getters! Folasade here, your friendly neighborhood accountant (and yes, IRS Enrolled Agent, too!) with over a decade of experience navigating the wonderful world of self-employment taxes.

Let’s face it: tax season can be a daunting beast, especially when you’re your own boss. You wear all the hats, juggle all the tasks, and come tax time, it might feel like there’s a whole new language to decipher. But fear not, independent entrepreneurs! This guide is here to equip you with the knowledge and tips you need to tackle your self-employment taxes with confidence.

Understanding the Self-Employment Tax: Your Social Security and Medicare Contribution

As a self-employed individual, you’re responsible for paying both the employer and employee portions of Social Security and Medicare taxes. This is known as the self-employment tax, and it currently sits at 15.3%. That breaks down to 12.4% for Social Security and 2.9% for Medicare.

There’s a good reason for this though! By paying self-employment tax, you’re contributing to your future Social Security benefits and Medicare coverage, just like traditional employees.

The Social Security portion of the tax only applies up to a certain income limit, which gets adjusted each year. In 2024, that limit is $168,600. Any earnings above that amount are not subject to the Social Security tax.

There’s also an additional Medicare tax of 0.9% that might apply to your self-employment income if it exceeds $200,000 for single filers or $250,000 for married couples filing jointly.

The Beauty of Being Your Own Boss: Deductions, Deductions, Deductions!

Okay, tax season isn’t all about giving to Uncle Sam. The good news is that there are a whole bunch of business expenses you can deduct from your self-employment income, which significantly reduces your tax bill.

Here are some common deductible expenses to keep in mind:

• Home office expenses: A portion of your rent, utilities, and internet can be deducted if you have a dedicated workspace in your home.
• Business supplies: Office supplies, equipment, software, and even your phone bill if you use it primarily for business.
• Travel expenses: Mileage driven for business purposes, flights, and even meals while traveling for work can be deducted.
• Health insurance premiums: If you pay for your own health insurance, you can deduct the premiums on your tax return.

 Pro Tip: Keep all your receipts throughout the year! These are your golden tickets to deduction land.

Estimated Taxes: Pay as You Earn (and Avoid Penalties!)

Since you don’t have an employer withholding taxes from your paycheck, you’re responsible for making estimated tax payments throughout the year. This helps ensure you don’t end up with a hefty tax bill come April.

There are four estimated tax deadlines each year: April 15th, June 15th, September 15th, and January 15th of the following year.

The IRS website has a handy tool for calculating your estimated taxes. It is always wise to calculate your estimated taxes before blindly paying each quarter. For maximum safety, you ought to work with a tax professional like me throughout the year.

Remember, there are penalties for underpaying estimated taxes, so it’s important to stay on top of these payments.

Tax Filing Essentials: Forms and Deadlines

Now, let’s get down to the nitty-gritty of filing your tax return. Here are the key things to remember:

• The Form You Need: For most self-employed individuals, you’ll be filing Schedule C along with your Form 1040 to report your self-employment income and expenses.
• The Filing Deadline: The tax filing deadline for individuals is typically April 15th of each year. However, you can file an extension for an additional six months if you need more time.

 Bonus Tip: If you’re expecting a tax refund, consider filing electronically. It’s faster and more secure.

Seeking Help: When to Call in the (Tax) Professionals

While this guide equips you with the basics, tax laws can be complex, and situations can get specific. Don’t be afraid to seek help from a qualified tax professional, like yours truly! An experienced accountant can help you navigate the intricacies of self-employment taxes, ensure you’re claiming all the deductions you deserve, and ultimately, save you money and peace of mind.

Remember, each tax season doesn’t have to be a nightmare, you can speak to me now, become my client, and start breezing through every tax season without any challenges or penalties! Contact me now.

Frequently Asked Questions

        1. What counts as self-employment income?

Self-employment income includes any earnings you receive from work where you’re not an employee. This can include income from freelancing, running a business, consulting, gig work, and more. It’s important to report all income, regardless of how small, to stay compliant with tax regulations.

         2. How do I know if I qualify for the home office deduction?

To qualify for the home office deduction, you must use part of your home regularly and exclusively for your business. This space can be a dedicated room or a separately identifiable area. Additionally, your home must be your principal place of business, meaning you conduct substantial administrative or management activities there.

         3. What are the consequences of not paying estimated taxes quarterly?

If you don’t pay your estimated taxes quarterly, you may incur penalties and interest charges from the IRS. The penalties can add up quickly, so it’s crucial to calculate and make these payments on time. Setting aside funds regularly can help you meet these obligations without financial strain.

         4. Can I deduct personal expenses related to my business?

No, personal expenses cannot be deducted as business expenses. Only expenses that are ordinary and necessary for your business can be deducted. Mixing personal and business expenses can lead to complications and potential issues during an IRS audit. Always keep your finances separate to ensure clear and accurate record-keeping.

         5. What should I do if I’m unsure about my tax situation?

If you’re uncertain about any aspect of your tax situation, it’s wise to consult with a tax professional. As an IRS Enrolled Agent, I can provide personalized advice, help you navigate complex tax issues, and ensure you’re maximizing your deductions. Seeking professional guidance can save you time, money, and stress in the long run.

The post Self-Employment Tax: A Survival Guide from Your Friendly Accountant first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Self-Employment Tax: A Survival Guide from Your Friendly Accountant appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

Happy New Year! It’s been a while since we caught up, and I’ve got some exciting updates for you regarding major tax changes that will affect all of us in 2024. As we dive into the details, I want to emphasize the importance of staying informed about these changes, especially with the ongoing developments in tax policies. So, grab a seat, and let’s break down the key updates.

Check out the Live Stream: 

1. Background on Tax Changes

• The government has been working behind the scenes to prevent a potential shutdown, addressing various tax-related issues.
• Recently, a bipartisan deal was reached, resulting in the Tax Relief for American Families and Workers Act of 2024.

2. Child Tax Credit Expansion

• The Child Tax Credit is set to see significant changes.
• The refundable portion is increasing from $1,600 to $1,800 for the current tax year, 2024 sees it rise to $1,900, and by 2025, it hits $2,000.
• This move aims to provide additional financial support to families, especially during these challenging times.

3. Changes to Employer Retention Credit (ERC)

• The ERC, a program aiding businesses during the pandemic, is undergoing alterations.
• The deal proposes an end to the ERC funding by January 31, 2024, aiming to curb potential abuse and fraudulent applications.
• Penalties are being increased for promoters and beneficiaries involved in false ERC applications.

4. Reporting Threshold for 1099 Forms

• Reporting requirements for 1099 forms are evolving.
• The reporting threshold for payments made by businesses for services performed by independent contractors is set to increase to $1,000.
• It’s crucial to stay vigilant, as these changes will impact how income is reported and tracked.

5. Bonus Depreciation and Expensing

• Businesses will benefit from an extension of 100% bonus depreciation for qualified property placed in service until January 26, 2026.
• There’s an increased limitation on expensing depreciable business assets, allowing for greater deductions.

6. Additional Considerations

• A deeper look into the legislation reveals various intricacies, such as tax relief for cross-border investments with Taiwan.

In conclusion, it’s evident that the tax landscape is evolving rapidly. As we navigate these changes, it’s essential to stay informed, especially with regards to the proposed tax legislation. The impact on families and businesses is significant, and understanding these adjustments can help individuals make informed decisions when it comes to financial planning and tax filing.

Remember to stay tuned for further updates and analysis on my YouTube, where we strive to provide you with the latest information to empower you in navigating the complex world of taxes. Until next time, take care and stay informed!

The post Breaking News! Tax Credit Changes first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Breaking News! Tax Credit Changes appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

Building generational wealth is an important mission for any individual. This is because it has something to do with acquiring assets and cash for the sake of leaving your loved ones living comfortably without having to worry about money. 

However, this crucial journey is not easy for many people to embark on. The major reason is that many of us already have pressing issues on which we spend most of our time. Such issues include paying off your credit cards, mortgage, or car loan. We are so consumed by these things that we think we do not have time to start building generational wealth. But, in this article, you will learn five ways to help you build generational wealth even in the middle of all the noise and ‘pressing issues’ we mentioned above.

Therefore, what are the five ways or strategies to build generational wealth?

Bulk up on savings

Many of us fear building generational wealth because we look into our bank accounts and see nothing. However, if you create a savings plan, you can start building a cash reserve. To do this, you will need financial discipline and a budget where you allocate a specific amount of your earnings towards saving.

You could be asking how you will save if you are not employed. The truth is that almost all of us get our hands on cash from time to time. This could be pocket money from our parents or spouses or a general cash flow frequently coming from well-wishers that you know. You can use this money to save because no rule says you can only save money from wages or salaries. Once savings build up, you will be ready to take things to another level.

Insure your assets and your family

The next step you should take before investing is to protect the money you already have. How do you do this? You must get insurance for your family and assets. If you already own a home, ensure that it is insured; the same goes for everything you own. The reason for doing this is to protect the money you have already saved as you get ready to start investing.

Imagine, after saving $100K, you ignore getting house insurance, and boom, a tornado strikes, leaving your house in the ground? This means you would have lost a home, and no insurance money is going to pay for it. The next step is you will dig into your savings to try and replace that house, which leaves you back to where you started – with zero money, zero savings, and zero investments. The same applies to health insurance; it ensures that your saved money is protected in case one of your family members gets sick.

Invest in index funds and government bonds

Index funds are low-risk investments that protect investors through investing in various companies. This reduces risk because those many companies in an index can dilute each other’s risk until it is almost zero. These, together with government bonds, are the safest assets to invest in. They should be the first you must invest in as soon as your savings are enough to embark on this journey and you have finished insuring your family and assets.

These investments are first in line because, as a rookie investor, you may have less knowledge about the markets, hence exposed to so much risk. However, you can protect your money by simply targeting these low-risk assets. As such, invest in them at this stage and wait.

Invest in equities

After some time, your investments in index funds and government bonds would have resulted in two things. First, you could have earned more money or returns. Secondly, you would have gained valuable information about investing and protecting your investments. Armed with more money and this knowledge, you may be able to start investing in more targeted listed companies that present high risk and high rewards.

You may also target dividend-paying companies known as dividend stocks. By doing this, you increase your total investments in the market. This can result in more of your money building up, increasing your net worth to some exciting levels. But remember, this all has to work as planned, and you must not withdraw your investments prematurely. Instead, invest with a long-term view because you want to build generational wealth, not withdraw your investments to buy an expensive Gucci bag.

Invest in real estate and REIT

The final play in this game is buying real estate properties or putting money in a Real Estate Investment Trust (REIT). Many generational wealth builders love real estate because buildings provide the safest protection for your money. When inflation rises, so does the value of properties. Therefore, if you own them, you would have protected your money in the long run. More so, owning buildings provides constant cash flow because you can rent them to individuals or businesses, depending on the types of properties you own.

In conclusion, building generational wealth is an intentional process. You should decide and commit yourself before starting. Many people fail to get off the ground because they think too little about their incomes. But no one can excuse themselves from saving merely because you earn less; you can always make a plan; you can always draw up a budget and start saving. However, if you need help or an assessment of your situation and how you can start building generational wealth, contact my team to book an appointment with me. I will help you figure it out.

Frequently Asked Questions

1. How do we generate generational wealth?

Generational wealth is created in various ways. But one major way to do so is to create various income streams and consistently maintain them until your income is enough to buy expensive assets such as rental buildings or shares in major companies.

2. What is generational wealth?

Generational wealth is wealth that can be passed down from one generation to another. It is also known as legacy wealth.

3. Why is generational wealth significant?

Generational wealth gives your family members a good start in life. They will have advantages such as not having student loans or waiting until they are 40 to buy their first house. More so, generational wealth creates a family culture of making money that can be passed down from generation to generation.

4. How can I build wealth fast?

There is no way of building wealth fast. People who believe in building wealth fast take shortcuts that sometimes end them in jail. So, to build wealth, learn the ropes, be patient, and steadily apply financial discipline as you build upon what you already earn or have.

The post 5 Investment Strategies to Build Generational Wealth first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post 5 Investment Strategies to Build Generational Wealth appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

Inflation is the general increase in the level of prices. We have been experiencing it for the better part of last year and this year so far. As this happens, the purchasing power of our incomes is gravely affected, leading to poverty and unrest among us. However, when there is inflation, the onus is on us to protect ourselves from its effects. One of the ways of protecting us against inflation is to budget. A personal or household budget is a spending plan showing how much you earn and how much you expect to spend on various items. It shows you whether your income is enough to cover your expenses or you may need to find other means to fund your life.

A budget provides details about your money that help you plan for tomorrow. Planning protects you from future shocks and surprises when suddenly, you run out of money when you are in dire need of it. This could distract your life. Based on this, you need a budget, especially in an inflationary environment. Without it, you are in danger of facing the effects of not having a budget when there is inflation. Below are some of these dangers.

1. Your savings will be affected.

Inflation impacts your savings in two ways. One of these ways is what you may call a ‘technical’ impact and happens in the financial system, while the other one is real and happens on your side. On the technical side, when the Consumer Price Index (CPI) rises, also known as inflation, it usually is above the interest rate you earn for the money saved in the bank. In other words, even as your savings account earns interest, the real value of your money will be depreciating. A simple way to explain this is picturing your saved money buying a certain model of a car when you save it. Next month, before inflation starts rising, and you have earned interest on it, it still can but that car plus a couple of spares. But six months into a rapid inflationary environment, the price of the car has increased far more than the interest rates you earn on your saved money, and your saved money can no longer buy that, even with the interest. So, this is how inflation technically affects your savings.

Secondly, when there is inflation, your wages may start to not be enough to buy household goods for the month and pay bills at the same time. When that happens, you tend to tap into your savings to cover the gap. That is how savings are effected on your side. This second reason is the reason you need a budget when there is inflation. A budget protects you from doing this because you will always know how much you will earn in the month, and how much your groceries and bills will cost you. If your budget tells you that the expenses will be more than the income, you will immediately adjust it by removing certain luxuries from it in order to protect your savings. So, this is why you need a budget when there is inflation. Inflation comes and goes. Yes, even this round of inflation will eventually go, but you still need to have your savings intact when it does.

2. You could owe more debt

Above, I explained how inflation affects your savings if you don’t have a budget, but what happens if you do not have savings at all? Without a budget and savings, you are living on a cash basis, perhaps a paycheck-to-paycheck lifestyle. This is even more dangerous because rapid inflation sinks your buying power faster, and you won’t even know how it is affecting your income. And, from my experience, you cannot plan for what you do not know. This failure to budget or plan leads to more debt, and this is how.

So, let’s say you earn $4,000 each month, and your fixed bills (rent/mortgage, water, electricity, refuse, etc.) are about $2,400. This means you are left with at most $1,600 to pay for your groceries and leisure. Remember, this is without factoring in bank and transaction charges that definitely reduce that money below $1,600. If you do not budget, you will not know when the prices of your household goods have increased. You will also not know by how much they have affected your monthly buying power. Right now, gas prices are rising rapidly, and so are other basics we use every day. You may find that you cannot buy the same things you bought two months ago using the same amount.

Because you don’t know all these price movements, your money may eventually run out before your next salary. The next thing you do is to borrow to cover the gap. When your next salary comes, guess what you will do first? Yes, you will pay the debt first, which further reduces your monthly disposable income. A continuous repeat of this round will shrink your disposable income to almost nothing because you are now deep in debt.

The more you rely on debt to spend on household goods, the more you are in danger of damaging your credit score. And that will reduce your chances of accessing meaningful debt when you need it, for example, a car loan or mortgage. This is how deep not saving during inflation can affect you. You must budget to counter future price increases and keep your income in line with what you spend and even leave some to save.

In conclusion, you should also add financial discipline to the list of things you need to do now to protect your income from inflation. Without it, you cannot start saving. If you need help preparing your first savings template, download the one I have prepared for you. It is customizable and only costs you $19.99. if you get it once, you will never need another budget template because you can always renew the copy of that spreadsheet. Go and buy it now.

Frequently Asked Questions

1. What are the positive and negative impacts of inflation?

Positive effects of inflation include the increasing value of assets and properties. More so, inflation is better than deflation, because the latter results in low growth, which affects businesses. However, negative effects of inflation include the reduction of real income or the buying power of your money, which leads to more inequality as the rich get richer while the poor suffer the most because of a lack of savings and investments that can appreciate with inflation.

2. What are the three main effects of inflation?

Three main effects of inflation are reduction in savings, reduction of the buying power of money, and increase in debt levels, especially among the low-income earners.

3. How does inflation hurt the economy?

Inflation distorts savings and investments in an economy. But an economy runs or grows on the level of savings and fixed capital formation (investment). But as inflation rises, savers’ buying power reduces, leading to reduced savings which can lead to low economic growth in the middle to long term.

4. What is inflation affecting the most?

Inflation is mostly affecting the buying power of low and middle-income earners. Most of these people do not have investments that can protect them from inflation. They only have their earnings and more debt which they have to pay back with interest, which by the way, increases during inflation.

The post Two Biggest Dangers of Not Budgeting When There is Inflation. first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Two Biggest Dangers of Not Budgeting When There is Inflation. appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

Understanding financial statements is something that many small business owners think is of less value. Many who run small businesses do not take the time to understand financial statements. But as you do, you miss out on important aspects of your business. Examples of the things you miss out on include how much each of your services or products is making you and how much it is costing you to do so. Such information leads to many benefits, some of which we will discuss in this article.

What are the benefits of understanding your financial statements?

Financial statements consist of three individual statements that a business produces for each quarter or financial year. These are the Income Statement, Balance Sheet, and Statement of Cash Flows or simply the Cash Flow Statement. I will be using these three to describe the benefits of understanding your company’s financial statement.

Why understand a company’s income statement?

An income statement, in summary, asks you this simple question: Is your business profitable? It asks you if you have profited in any given period, which could be a quarter, six months, or a full financial year. You may be wondering how an income statement does this. Well, it takes your revenue for the period and subtracts expenses for the same period. Here is the formula below.

Revenue – Expenses = Profits.

Profit is also called net profit, net income, or the bottom line. So, when you hear financial industry experts talking about these terms, they simply mean profit.

So, how does understanding this statement help you? We already mentioned the net profit as the last line on the financial statement. Well, arriving at this takes a few steps – these steps are the ones that reveal some crucial details about your business. For example, at the top of your financial statement is your gross revenue for the period. This figure could really be exciting. But when you eventually arrive at the last line – the net income, you may find that you actually made losses. How? This is when the entire statement comes in.

By investigating other steps, such as subtracting operating costs and the costs you incurred to sell your products – such as transportation and storage – you will find your problems. It could not be only the cost of goods sold killing your profits because below them, you will also find operating costs such as rentals and payrolls as well as interest costs and taxes. They also affect your revenue. So, by studying all these line items, you will find your biggest culprit that needs adjustments. By doing so, you increase your profits without creating a new line of products.

Why understand a company’s balance sheet?

Balance is an English word that is straightforward. If someone asks you, are you balanced? They probably want to know if you will not fall when they throw extra weight on you. In the same manner, our businesses go through various stresses each period. A balance sheet indicates whether the business will keep standing after going through various shocks. In a nutshell, it asks if your business is healthy or has enough financial strength and muscle to fight off economic pressures or headwinds. For example, during a recession, and many customers just stopped buying your product or service, will your business have enough financial resources to keep financing itself during the entire recession?

So, if you do not know about this, your business might go under, just as what happened to many small businesses during the COVID-19 pandemic.

The balance sheet helps you see your company’s financial strength through your assets, the money you owe (liabilities), and how much your company is worth on paper (equity). If your assets are lower than the total liabilities you owe, it means your company already has less financial muscle. Therefore, you will need to conjure a plan to lessen borrowing, pay off what you already owe, and grow your assets.

Assets you can own include cash in the bank, the money that customers owe you (accounts receivables), products you have but not yet sold (inventory), and assets such as buildings or equipment and vehicles your company owns as well as intangible assets such as software licenses. All this information is important. It is what banks use to determine whether they should give you a loan or not. Remember, when you get a loan, it becomes an obligation to pay up installments as soon as next month. Therefore, the balance sheet will also show you whether you can meet your business’ short-term obligations or not.

Why understand a company’s statement of cash flows?

A cash flow statement reveals how money has been spent over a certain period. It also shows you the total cash you have or had at the end of the same period. This is done through the following formula.

Net Increase/Decrease of cash during period + Cash at the beginning of period = Cash at the end of the period.

Your net increase or decrease is valued using these three factors:

• Operating activities – how much cash did you receive from sales versus money paid to make the sales?
• Investing activities – how much went into buying new equipment or selling any?
• Financing activities – did you pay out any debt or receive capital? How much was it?

The above becomes a basis for measuring or comparing whether you neglected your operations by funding them less, or whether all your income is going towards debt payments. Such information helps you to realign your business and start making meaningful profits.

Conclusion

You cannot understand financial statements unless you have them. The role of accounting in your business is fulfilled when you actually have the accounting. And the important role that accounting plays in a business is a reason for every business owner and sole proprietor to start taking it seriously. So, do you already prepare financial reports for your business? If not, you need an accountant ASAP. Contact me now for your accounting services. I will take care of your business. Go to my Link Tree and click, “Want me to be your accountant?”

Frequently Asked Questions

1. What are the advantages of understanding financial statements?

Financial statements help you understand how your business makes money and where you are spending it.

2. What is the most important financial statement?

All financial statements are essential. That is why every business has a statement of financial position, a balance sheet, and a cash flow statement. They all work together.

3. What are the three main financial statements?

The three main financial statements are the statement of financial position, a balance sheet, and a cash flow statement.

4. Why is it important to understand basic financial statements?

Every business owner must understand the basics of financial statements so that they plan and implement informed business decisions.

5. How do you prepare financial statements?

Preparing financial statements begins with bookkeeping, where all receipts and payments are accurately recorded. However, other processes leading to financial statements are long, and their sequence depends on the accountant preparing the statements as well as the nature of the business. But generally, all receipts and invoices are verified, wages (unpaid) are also accrued while cash in the banks is verified, together with the dollar amount of inventories. All this is done up to a certain period; hence, accountants preparing the statements will close accounts of the business for the period being reported and open them for the next season.

The post Benefits of Understanding Financial Statements first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Benefits of Understanding Financial Statements appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The truth is many people, including you and me, don’t want to pay taxes. And in recent times, the biggest question, from my team and I (to you), has been, “Are you willing to do what it takes to not pay?”

If you are willing, you should be looking into passive income and how it helps you build generational wealth. In this article, I provide a deeper look into passive income and its connection to taxes. Passive income is also taxed by the IRS – but not the same way as earned income. They are taxed differently – in a good way. And the end result is you pay less taxes than you could have without passive income. Therefore, converting your earned income to passive income is another tax strategy you can use.

Earned Income vs. Passive Income – A comparison

Earned Income

Earned income is what you get paid after doing some work. This, according to the IRS, includes wages, salaries, bonuses, commissions, tips, and net earnings from self-employment. Earned income also includes long-term disability and union strike benefits. Payments from certain deferred retirement compensation arrangements can also be counted as earned income.

So, according to the above, earned income can be viewed in two ways. These are: You work for someone who pays you: You own or run a business or farm that earns you some income.

All your earnings from these sources are subject to maximum taxes.

Passive Income

Passive income defines earnings you gain without putting much effort. Sometimes you don’t put any effort at all – resulting in the moniker, “Making money while you sleep.” Examples of passive income include rental earnings from your property or real estate and earnings from adverts that run on your website or YouTube channel. Dividends from stocks you own are also forms of passive income.

The passive income you earn is received automatically. There is no need to keep maintaining it. Whereas active income requires you to work to earn, passive income earns you money without clocking in the hours.

Why passive income?

Have you ever considered why we all have 24 hours a day, yet some people make more money than others? We say that time is the greatest equalizer – and it’s true. But we find ourselves living differently over the years even as we share the same 24 hours a day.

I will be honest – if you want to also make a difference in your life, start thinking of how to make more money using passive income. In other words, think about how to earn away from your usual workplace. You could be stuck in some office wherever in the world, passive income must be trickling in from other places. You could be sleeping in your mansion, cave, or one-roomed house or basement, whatever. Still, passive income can be earned as you enjoy your sleep. You just got to devise means of doing so as we shall explore.

Besides just adding to your net worth, passive income is not taxed the same as earned income. There are real tax savings you gain from passive income. In other words, making more passive income accelerates your journey to building generational wealth. It increases the amount of money you save to invest at a later stage.

Finally, passive income helps you pay the bills. It saves you from living on paycheck-to-paycheck. The more you no longer depend on your salary for everything, the more you can save. And the more you save, the more you can invest and build generational wealth. That is what passive income gives you!

Ways to convert earned income to passive income

To gain immediately from passive income, push all your profits/earnings into investments that earn you passive income. As such, the ways below must be pursued using your earned income so that when profits come from these investments, they are passive income.

• Invest in real estate – Income you earn from your property portfolio is viewed as passive income by the IRS. And this income is reduced by depreciation and amortization. Therefore, the effective tax rate on these is lower. There are many ways to invest in real estate. You can contribute to a savings account for years and buy a property. Or you can invest in a property fund or portfolio.
• Invest in listed companies (the stock market) – Dividends you earn from the stock market are also viewed as passive income. As such, this becomes the profits you make (tax-free).
• Invest in another business – If you put in your $500,000 in a business and not actively participate in it, you can earn passive income from it. If the agreement with the owners is that you earn a certain percentage of the earnings, that’s passive income. Only make sure you have nothing to do with the everyday running of the businesses you invest in.
• If you are a techie, invent a product or an app – The royalties you earn from these are considered as passive income. Investments into such inventions are small amounts. So, you can easily use your earned income to invest in, for example, an App and earn royalties from it.
• Buy government bonds – The interest you earn from your investment in bonds is passive income. Bonds are a great idea because some of them have a 30-year lifespan. So, instead of contributing to a retirement account, you can buy government bonds. They do have better interest and can increase over the years.
• Write books – An investment of your earned income into a book can result in tax-free royalties earned from the book’s sales. If you become popular as an author, you will be looking at several thousands of untaxed dollars.
• Build a website/blog – Targeting a specific market with news and other relevant content earns well on adverts. This usually requires small amounts that even an individual can afford.

All the above methods are used to convert your earned income into passive income. To note is the fact that making passive income requires capital. In this case, that is your earned income that you will invest. If you are a small business, your investment lowers your profits, thereby lowering your taxable earned income. The overall effect is that it reduces the taxes you pay but also increases your long-term income.

In the end, targeting passive income results in building generational wealth. Make this your priority for next year. If you need any help on how to do any of the above, get hold of any of our team members. We will be glad to help you build generational wealth. This and other tax strategies we offer are always winners!

The post Convert Your Earned Income To Passive Income And Build Generational Wealth first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Convert Your Earned Income To Passive Income And Build Generational Wealth appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

• Do something different this upcoming tax season and hire a tax professional
• Save your company thousands of dollars through taxes
• Maximize deductions and grow your business through hiring a tax professional

I support the fact that everybody must be working with a tax professional for this and upcoming tax seasons. I do support this because taxes are one way to save your business thousands of dollars. They also help with the legal side of taxes, saving you from tax troubles with your state or the IRS. Therefore, everybody must hire a seasoned tax professional to take care of their taxes.

According to the Government Accountability Office study, 77% of Americans believe they benefit more by having a qualified tax professional prepare their tax return. If you are to grow your business, you can also join these people and hire a tax professional.

Like death, taxes are inevitable. The only way to beat them is to prepare adequately. With a tax professional on your side, nothing but perfection defines your tax filing.

A tax professional helps you with the following:

• Prepare you, and your business

Filing taxes is a process that starts long before the official filing day. Many people spend months preparing for this day. A tax professional knows this process in and out. They have been doing this for several businesses and will know what to do with your exact business. Therefore, they are best suited to prepare you for the filing day. They make sure that when that day comes, you do not miss the deadline because of something missing.

• Untangle the jargon in the tax code on your behalf

When the IRS communicates with taxpayers, many words are difficult to understand. Every time I see names for different forms, for example, Form 1040, I think of how many taxpayers know which is for what, and how do they complete it? A tax professional explains everything for you, so you fully understand how you are filing your returns.

• Help maximize your tax deductions

This is the most important reason you should hire a tax professional. Deductions can help your business save tens of thousands of dollars every year and expand your operations. I know many of you may think you can identify the itemized deductions on your own, but there are several you can easily miss.

The tax code is a couple of thousands of pages long. In it are many purchases and payments that qualify for itemized deductions, some you have not heard of your entire life. A tax professional has an eye for all those. You will find that deductions you had been ignoring for years apply to you.

• Helps you build generational wealth

The aim of a tax professional is not to take you through the current tax season. But is there to take your wealth-building to another level. Therefore, having one in your corner is what you need to be worth millions a few years down the line. This is the reason I encourage businesses not to change tax planners every year. Keep one so they grow your business consistently.

With that being said, here are more advantages of working with a tax professional.

1. Beyond what you already have, a tax professional can suggest useful ways to use your money and save more on taxes.
2. A tax planner or preparer is a real human being; therefore, is different from a program you use online. As such, tax professionals can represent you in an audit and remove all the burden from you.
3. Working with a tax professional gives you a peace of mind, knowing that all the IRS’ business is taken care of.
4. A tax professional helps you avoid making costly mistakes.
5. You prevent working more hours on taxes – and use the gained hours to build your business.

It’s all worth it!

Many people that argue against hiring a tax professional site the issue of costs of hiring them. But looking at the above advantages, they must motivate you to find one. More so, the money that a tax professional saves you exceed what you pay them by far. In many cases, you only pay them a fraction of what they save you annually.

Therefore, if I may have to choose, I will choose a tax professional all day long. My reason is that I want to have a peace of mind as they work on my taxes. And, I want to build generational wealth for my family. I wouldn’t mind paying them a small amount of what they help me save.

As the year comes to an end, you can also make the right decision for your business. You can choose to follow the path that rich people take a sing a different song altogether. Stop following the crowd that says tax professionals are expensive to hire. That is a lie! They actually help you make more money.

Making the rightful choice here is easy, follow the link below and contact us. We will come back to you and help you with the journey of tax planning. Note that I used the word ‘journey’ because it is not going to be a once-off event. But just like your cashier, your tax planner is someone you will always be with. Working with them every month is what makes you save more on taxes. Get in touch and find out more about this journey! To find out more tax strategies, get our 101 tax strategies today; they are free of charge!

The post Everybody Must Hire a Tax Professional to Build Generational Wealth. first appeared on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.

The post Everybody Must Hire a Tax Professional to Build Generational Wealth. appeared first on Suncrest Financial Services | Tax Preparer in Upper Marlboro Md.