• Skip to content
  • Skip to primary sidebar

  • Home
  • About
  • Contact

Archives for July 2021

Self-employed? Showing Proof of Income is Easier Than You Think

July 23, 2021 by Nick Magone, CPA, CGMA, CFP®

You’ve found the home of your dreams. Your credit is excellent, and you’ve saved enough for a generous down payment. But when the loan application asks for proof of income, you start to panic. Fortunately, qualifying for a mortgage doesn’t require a nine to five or a weekly paycheck.

For the 57 million freelance workers in the United States, proving an income can be challenging. But with some extra effort and preparation, you’ll be able to demonstrate a stable financial history — and get that mortgage, apartment lease or car loan approval even without a W-2 form or biweekly pay statements. These strategies can help:

  • Use an online payment service. To document income, an online payment service like com records and tracks who pays you, how much money is disbursed and where the money is coming from, so the information is easily accessible when you need it.
  • Ask your bank for an ACH report. An Automated Clearing House (ACH) report can serve the same purpose as a ledger from an online payment service. The ACH report will show when payments were made, along with the amount of each payment for easy tracking.
  • Hold on to your past tax returns. Once your taxes have been filed, keep copies of your returns for at least three years (preferably 7-10). This will help ensure that your income is reported accurately year in and year out.
  • Save your 1099 forms. You may have dozens of clients over the course of a year. To make your life easier, set up a filing system for all those 1099 forms. Take it a step further and scan each form as it’s received, keeping electronic versions on file as well.
  • Average your monthly income. It’s not uncommon for freelancers to have peaks and valleys in income. Over time, you may detect an earning pattern despite the variations. If you hope to qualify for a loan, track your monthly income carefully, averaging out the numbers to reflect your true annual earnings.

Freelance work offers a unique freedom and flexibility, while still affording you the opportunity to make a comfortable living. And if you check all the boxes of meeting a loan’s requirements, proving your self-employment income doesn’t have to be a daunting process. The expert CPAs at Magone & Company assist self-employed workers with our extensive tax and business knowledge. Contact us today (973) 301-2300 for more information.

 

Filed Under: Finances, Small Business, Tax Tips for Individuals

Tax Return Errors — And How to Fix Them Before it’s Too Late

July 9, 2021 by Nick Magone, CPA, CGMA, CFP®

Mistakes happen — even when it comes to tax returns. But very often, errors aren’t caught until after your return is submitted to the IRS.

To avoid raising any red flags, it’s important to know what to look for and how to right any wrongs.

What not to do
Here are the three most common mistakes that taxpayers make:

  1. Not reporting all your income. No matter how much or little you make, report it all. Unless you run a strictly cash business (which may also raise suspicion), the IRS knows exactly what you’re bringing in. Copies of every W2, 1099 or other forms you receive are sent to the IRS to ensure that your numbers match theirs.
  2. Overstating business expenses. If you’re a business owner, you’ll most likely have legitimate deductions. But don’t try to claim deductions that are way outside the norm. Consult with your tax professional and stay current with tax laws, so you’re not padding your tax return with write-offs that are shaky at best.
  3. Bad math. If things don’t add up — even an honest mistake inputting numbers — the IRS will catch it. Make sure to double check your returns and have a qualified tax professional assist you. A math error won’t necessarily get you an audit, but it might get you some unwanted attention.

Filing an amended return
Luckily, the IRS routinely processes a significant number of amended returns each year.

Individual income tax returns may be amended up to three years after the due date of the original return by filing an IRS Form 1040X. Even if you always e-file, a 1040X must be filed physically as a paper form. Keep in mind:

  • A separate 1040X is required for every year that you’re correcting. Be sure to mail each form in its own envelope.
  • On the back of the form, explain the changes you’ve made and reasons for making them.
  • Schedules, forms or any other documentation that’s affected by your changes should also be mailed in.
  • If the corrections made to your federal form affect your state taxes, send in a corrected return for that as well.

Save yourself the trouble, literally
The longer you wait to fix a mistake, the more it will potentially cost you. One small misstep could leave you on the hook for significant interest and penalties. The CPAs at NJ accounting firm Magone & Company can help keep you in good standing with the IRS. To schedule a no-obligation confidential consultation, give us a call today at (973) 301-2300.

Filed Under: Tax Tips for Individuals

Primary Sidebar

Search

Archives

  • June 2025
  • May 2025
  • April 2025
  • March 2025
  • February 2025
  • January 2025
  • December 2024
  • November 2024
  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018

Categories

  • Business Taxes
  • Business Technology
  • CFO Roundup
  • Company Culture
  • Coronavirus
  • Finances
  • Firm News
  • IRS woes
  • Nonprofits
  • Paycheck Protection Program
  • Small Business
  • Tax Tips for Individuals
  • Uncategorized

Copyright © 2021 · https://www.magonecpas.com/blog