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Getting notified of an IRS audit is undoubtably a stressful experience for taxpayers. Why was your return selected? What documents will they request? How can you prepare for the scrutiny of your financial records?

By understanding the ins and outs of audits, you can ease your mind and ensure the process is as painless as possible.

How are taxpayers selected for an audit?

The IRS uses a variety of methods to select tax returns for audits, including:

• Random selection. The IRS randomly selects a small percentage of tax returns each year to audit, just to ensure overall compliance.
• Computer screening. The IRS uses computer programs to score tax returns based on a variety of factors. Returns with high scores are more likely to be audited.
• Related examinations. If the IRS is auditing a business or individual, they may also audit related returns, such as those of the business owner or the business itself.

What won’t trigger an audit?

While there’s no way to guarantee you won’t be audited, there are some factors that usually won’t prompt the IRS to take a closer look:

• Math errors (the IRS will usually just correct these)
• Claiming the standard deduction
• Having low to moderate income
• Filing an amended return

How are you notified of an audit?

The IRS will never notify you by telephone. If selected for an audit, you’ll be notified by the IRS via postal mail, outlining the type of audit you’ll be undergoing: a mail audit or an in-person audit. A mail audit can be conducted through postal correspondence, while an in-person audit takes place in an IRS office or at your home or place of business.

How should you respond to an audit?

The audit notice will provide contact information and instructions, including a list of records they to review and a response deadline. If you receive an audit notice from the IRS, be sure to:

• Collect all relevant tax documents, receipts and other records you’ll need to substantiate the items on your return
• Consider hiring a tax professional to help you navigate the audit process and represent you before the IRS
• Respond in a timely manner, meeting all deadlines set by the IRS to avoid additional penalties and interest

How long does an audit take?

Once you’ve provided the requested information, the IRS will review it and make a determination.

But the length of an audit varies depending on various factors, including the type of audit and whether both parties agree with the findings. If you disagree with the IRS, you have the right to file an appeal. The IRS also offers mediation services to help you come to a resolution.

What happens after an audit?

Once the IRS concludes an audit, a few things can happen:

• If no changes are made to your return, the audit is closed
• If the IRS made changes, you’ll receive a notice detailing the adjustments and any additional taxes owed
• You may be subject to future audits, especially if issues were identified in the current audit

Ready to assist

If you or your business receive an audit notification, the CPAs at Magone & Company can offer our honest and objective audit services. Reach out today at (973) 301-2300.

Running an online business comes with its own set of unique challenges. One of the biggest hurdles? Managing the financial side of the company.

From cash flow fluctuations to multi-state sales tax laws, online businessowners must have the accounting strategies in place to navigate daily operations with confidence.

Here are six best practices to ensure your online business is positioned for sustainable success:

1. Monitor your bank accounts and cash flow. Like any business, first and foremost you need to keep a close eye on your bank account, making sure you’re not overspending or simply spending money you don’t have. This proactive measure allows you to quickly identify any discrepancies or errors, and pinpoint areas of your business that may need additional attention, so you can plan for potential changes to your finances. Online businesses should have a system in place for tracking all income and expenses. This includes recording every sale, subscription payment, advertising cost, software subscription and more. Categorizing transactions properly is key, as it will make tax preparation and financial analysis much easier down the line.
2. Leverage accounting software. Investing in a robust accounting software solution is essential for online businesses. Popular desktop options like QuickBooks, Xero and FreshBooks can automate many time-consuming tasks like invoicing, expense tracking and financial reporting. This time saver also helps maintain accurate documentation when it’s time to prepare your tax returns.
3. Utilize cloud-based tools. You may also consider cloud-based accounting software to access your financial data from anywhere, collaborate with your tax professional and take advantage of features like automated backups and real-time reporting. The rise of cloud-based accounting, invoicing and productivity tools has been a game-changer for online businesses, allowing for real-time financial visibility, remote collaboration and automatic data backups — all crucial for managing an online operation. 
4. Manage sales tax compliance. Online businesses must navigate different tax rates across states, counties and cities, as well as varying product categorizations and exemptions. Depending on the states and countries in which your online business operates, you may be required to collect and remit sales tax. Proper sales tax management is not just about collecting the right amount — it’s about maintaining your business’s reputation, avoiding costly penalties and achieving sustainable growth. Regular review and updates of your sales tax compliance processes can keep your business current with changing regulations while maintaining proficient operations.
5. Prepare for quarterly tax payments. Unlike traditional businesses that make annual tax payments, online entrepreneurs often need to make quarterly estimated tax payments to the IRS. This includes self-employment tax, as well as income tax. Making timely quarterly payments helps you stay on top of your tax liability and avoid penalties, and demonstrates to authorities that you’re a responsible, compliant business owner.
6. Document everything. When transactions happen at the click of a button, meticulous record-keeping is a critical task. Online business owners should keep detailed records of all financial transactions, bank statements, receipts, invoices and other documentation. This will not only help with tax preparation and help reduce the likelihood of financial errors, but it also provides an ironclad paper trail if your business must undergo audit or other financial review.

With the right systems and mindset in place, there’s no limit to what your online business can accomplish. At Magone & Company, we can work together to ensure the financial side of your operations runs efficiently, while maintaining good standing with the IRS. Reach out to us today at (973) 301-2300.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

 

After a 42-month hiatus, federal student loan payments resumed in October 2023. Impacted employees are now dealing with a new bill factored into their monthly budgets, leaving many stressed and worried.

As employers strive to support their workforce, offering benefits that help employees manage their student loan debt has become increasingly important.

More than just a paycheck

Whether you’re running an organization or working for one, most people would agree that employee financial wellness is a hot topic. A comprehensive benefits package — one that focuses on financial wellness — can help cultivate a happier, more focused and more engaged workforce that’s better prepared for retirement.

The pause on payments afforded borrowers over $260 billion in waived costs. However, the resurgence has added stress to employees’ financial situations, affecting their job performance, overall well-being and ability to make major life decisions. Younger workers, in particular, find themselves torn between repaying student loans and saving for retirement.

According to a recent study by the ADP Research Institute, about half of workers are in the process of leaving their workplace. Among workers with student loan debt, that number increases to nearly 60%.Turnover is costly, and offering the right benefits can encourage workers to stay.

Benefits for employees — and employers

By offering a retirement plan with a student loan matching program, employers can demonstrate their commitment to supporting employees in making sound financial decisions, ultimately enhancing employee retention and satisfaction.

Under the SECURE 2.0 Act, employers are enabled to match student loan payments as contributions to retirement plans, so employees can tackle debt while saving for the future. For every qualified student loan payment made by an employee, the employer may make a matching contribution to their 401(k) plan based on the amount of the loan payment.

The results?

• Reduced student loan debt
• A retirement savings increase (even if they’re not making contributions)
• Compound interest as 401(k) account grows

Plus, employers get a tax benefit for their matching contributions. If certain requirements are met, employers can deduct contributions made to a qualified retirement plan on behalf of its employees. The deduction reduces an employer’s taxable income — while helping more people achieve a secure financial future.

If you have a question about retirement benefits or their tax implications, reach out to the tax experts at Magone & Company.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

Once the calendar flips to a new year (and you’ve barely had a chance to recover from the busy holiday season), Uncle Sam will come knocking at your door to get his share of your taxable income.

Tax season will be here before you know it. But unless you’re a mathematical savant who revels in the joy of crunching numbers and interpreting tax laws, chances are you lean on the sturdy shoulders of a tax professional.

While both Certified Public Accountants (CPAs) and tax preparers are professionals authorized to prepare and file tax returns, their training, certifications, expertise and scope of services vary greatly. So who’s the right candidate?

Here’s a quick rundown to help you hire the ideal tax professional:

Tax preparer

Tax preparers have no college degree requirement, and many lack tax-specific training. In fact, the only pre-requisite for obtaining the required (PTIN) to file taxes on your behalf is the completion of a simple form — one that takes about 15 minutes to fill out.

Why choose a tax preparer? If you or your small business only need assistance filing simple tax returns, they’ll typically apply the most common deductions and tax credits to your return — things like deductions for educational expenses and health care costs, as well as earned income or retirement tax credits. But what they may not do is research more unusual tax credits and deductions.

You can count on them to:

• Collect relevant financial records and input applicable tax data
• Determine basic deductions, refunds and payments using federal state and local tax laws
• File documents with the IRS
• Offer best steps to take to reduce your tax liability for the coming year

CPA

CPAs, on the other hand, must undergo extensive education and ongoing training to obtain their certification and ensure they’re responsible fiduciaries:

• Completion of bachelor’s degree program, including 150 credit hours with a concentration on accounting, business and general ed
• Passing of the AICPA (American Institution of Certified Public Accountants) exam, covering business concepts; accounting and reporting; auditing and attestation and regulations, within 18 months of completing their undergrad degree
• Licensure by their individual state(s)
• Annual completion of 40 hours of continued education

Because they have advanced training, CPAs are authorized to represent their clients before the IRS. They also tend to have greater insight into complex tax positions and are well-equipped to assist clients well beyond the tax return, with investments, audits and financial planning.

In addition, CPAs can provide the following services:

For individuals:

• Estate planning expertise
• Wealth preservation
• Budget management and analyses
• Investment strategy and asset allocation
• Charitable giving strategies

For businesses:

• Bookkeeping duties
• Forensic accounting
• Cost segregation analyses
• Financial reporting
• Audit and assurance services

The choice between a CPA and a tax preparer depends on your unique financial circumstances. Whether you’re a self-employed individual seeking comprehensive financial guidance, a growing business that could benefit from tax planning, or a salaried executive with stock options, there is a professional who can meet your needs.

If you’re looking for a trusted CPA, the professionals at Magone & Company will consider every deduction, break and incentive in preparing your return. Call us today at (973) 301-2300 to schedule a confidential consultation.

On March 18, 2023, Magone & Company Managing Partner Nick Magone will be honored as Man of the Year by the Milan Soccer Club of New Jersey. 

This nonprofit organization provides youth soccer development programs that foster teamwork, social development and respect. As a first-generation American, Nick is proud to be recognized for his contributions to the Italian-American community. 

Funds raised during the March event will support the club’s youth development efforts. Please consider supporting this worthy goal by attending the March 18 dinner or becoming a sponsor.

Gold Level: $500 

• 4 email blasts to 6,000+ Milan Club subscribers with a link to your website
• Company name/logo displayed on the Milan Club home page for 12 months with a link to your website

Silver Level: $300 

• 2 email blasts to 6,000+ Milan Club subscribers with a link to your website
• Company name/logo displayed on the Milan Club sponsors page for 12 months with a link to your website

More details can be found here. Thank you for your consideration.

Most business leaders expect revenues to rise throughout 2022, despite serious challenges.

The COVID-19 pandemic is winding down, but still interrupting supply chains. Energy prices are increasing, partially because of the Russian-Ukrainian War. Inflation is rising, and taming it may involve some economic pain for everyone.

Yet despite all this, there is good news.

Growth is expected to continue. In fact, 95% of business leaders expect their revenues to increase or hold steady, while 88% expect profits to grow or hold steady, according to JP Morgan Chase & Co. economists. The best bet for small and midsize business owners is to focus on the following:

• Take a look at a new talent strategy. Many small and midsize companies are struggling to find and retain people. You may need a combination of outsourcing some business processes, engaging 1099 contractors or upgrading a benefits and salary strategy to attract high-quality talent.
• Stay optimistic. Economists expect the U.S. economy to grow 2.4% through the third and fourth quarters of 2022 — and they expect growth to continue (albeit slower) throughout 2023, around 1-4%. They key thing to remember is you’ll be operating in a growing economy.
• Supply chain problems continue to be rough, so you’ll need a risk mitigation strategy. The silver lining is this is an opportunity to see where you are vulnerable and where you need to source additional suppliers. (And on the business-growth side, where you can provide added value to your customers.)
• Monitor costs closely, especially the impact of inflation. Energy costs are skyrocketing, affecting the entire supply chain. The federal government is looking to raise interest rates to tame inflation, and they expect it will cause economic pain. Devise a plan to protect your margins.

The good news: Despite a lot of vivid rhetoric in the headlines (i.e., “shattered” supply chains), supply chains are operating and the economy is expected to continue growing. And rest assured, there are plenty of options in talent, cost control, supply chains and growth.

Enlist the experts at Magone & Co

With our forward-looking Business Advisory services, we can help you identify the levers that will most impact your growth and success. Contact us for a free consultation.